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Item 1. Financial Statements

2026-04-24 compared with 2025-10-24 · 390 added, 958 removed, 782 unchanged (63% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Nine Months Ended September 30,

Net revenues 1 & 2 (Note 13)

$ 30,286 $ 28,172

Cost of sales 9,806 9,906

Gross profit 20,480 18,266

Marketing, administration and research costs (Notes 8, 9 & 16) 8,920 8,123

Impairment of goodwill (Note 5) 41 —

Operating income 11,519 10,143

Interest expense, net 748 817

Pension and other employee benefit costs (Note 4) 37 44

Earnings before income taxes 10,734 9,282

Provision for income taxes 2,062 2,145

Equity investments and securities (income)/loss, net (Note 13) ( 926 ) ( 852 )

Net earnings $ 9,598 $ 7,989

Net earnings attributable to noncontrolling interests 391 353

Net earnings attributable to PMI $ 9,207 $ 7,636

Per share data (Note 7):

Basic earnings per share $ 5.90 $ 4.90

Diluted earnings per share $ 5.89 $ 4.89

(1) Includes net revenues from related parties of $ 3,387 million and $ 2,866 million for the nine months ended September 30, 2025 and 2024, respectively.

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

For the nine months ended September 30, 2025 and 2024, excise tax on products was $ 39,495 million and $ 38,535 million, respectively.

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Net revenues 1 & 2 (Note 13)

$ 10,146 $ 9,301

Cost of sales 3,487 3,366

Cost of sales (Note 1) 3,241 3,031

Gross profit 6,905 6,270

Marketing, administration and research costs (Notes 1 & 15) 2,857 2,428

Corporate expenses and other (Note 1) 155 298

Operating income 3,893 3,544

Interest expense, net 237 241

Pension and other employee benefit costs (Note 4) 14 15

Pension and other employee benefit (income) costs (Note 4) ( 5 ) 12

Earnings before income taxes 3,661 3,291

7 unchanged sentences

Diluted earnings per share $ 1.56 $ 1.72

(1) Includes net revenues from related parties of $ 1,307 million and $ 1,045 million for the three months ended September 30, 2025 and 2024, respectively.

(1) Includes net revenues from related parties of $ 1,185 million and $ 937 million for the three months ended March 31, 2026 and 2025, respectively.

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

For the three months ended September 30, 2025 and 2024, excise tax on products was $ 14,221 million and $ 13,773 million, respectively.

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Nine Months Ended September 30,

Net earnings $ 9,598 $ 7,989

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

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $ 410 in 2025 and $ 14 in 2024

( 1,917 ) ( 365 )

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

Change in net loss and prior service cost:

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

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 36 ) in 2025 and $( 26 ) in 2024

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $ 31 in 2025 and $( 28 ) in 2024

(Gains) losses transferred to earnings, net of income taxes of $ 13 in 2025 and $ 30 in 2024

( 69 ) ( 137 )

Total other comprehensive earnings (losses) ( 2,002 ) ( 118 )

Total comprehensive earnings 7,596 7,871

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests 395 312

Comprehensive earnings attributable to PMI $ 7,201 $ 7,559

For the three months ended March 31, 2026 and 2025, excise tax on products was $ 12,853 million and $ 12,002 million, respectively.

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Net earnings $ 2,582 $ 2,837

2 unchanged sentences

Unrealized gains (losses), net of income taxes of $( 122 ) in 2026 and $ 94 in 2025

( 291 ) ( 730 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2026 and 2025

Change in net loss and prior service cost:

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

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 7 ) in 2026 and $( 14 ) in 2025

13 unchanged sentences

(in millions of dollars)

September 30,

2026 December 31,

5 unchanged sentences

Finished product 6,354 6,830

11,392 11,478

Other current assets 2,370 2,203

8 unchanged sentences

TOTAL ASSETS $ 68,913 $ 69,185

(1) Includes trade receivables from related parties of $ 905 million and $ 691 million as of September 30, 2025, and December 31, 2024, respectively.

(1) Includes trade receivables from related parties of $ 996 million and $ 839 million as of March 31, 2026, and December 31, 2025, respectively.

For further details, see Note 13.

5 unchanged sentences

(in millions of dollars, except share data)

September 30,

2026 December 31,

35 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization expense 510 480

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

Loss on sale of Vectura Group (Notes 2 & 8)

Deferred income tax (benefit) provision ( 67 ) ( 67 )

11 unchanged sentences

Capital expenditures ( 353 ) ( 404 )

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

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

Purchases of debt securities ( 5 ) ( 58 )

Sales and maturities of debt securities 95 24

Equity investments ( 35 ) ( 10 )

7 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

14 unchanged sentences

Balance at end of period $ 5,470 $ 4,476

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 24 million and $ 43 million as of September 30, 2025 and 2024, respectively, and $ 38 million and $ 86 million as of December 31, 2024 and 2023, respectively, which were included in other current assets in the condensed consolidated balance sheets.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 20 million and $ 33 million as of March 31, 2026 and 2025, respectively, and $ 20 million and $ 38 million as of December 31, 2025 and 2024, respectively, which were included in other current assets in the condensed consolidated balance sheets.

See notes to condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Nine Months Ended September 30, 2025 and 2024

For the Three Months Ended March 31, 2026 and 2025

(in millions of dollars, except per share amounts)

14 unchanged sentences

Dividends paid to noncontrolling interests ( 54 ) ( 54 )

Acquisitions (Note 2) 159 159

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 91 91

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

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

Balances, January 1, 2026 $ — $ 2,453 $ 35,400 $ ( 12,296 ) $ ( 35,551 ) $ 1,966 $ ( 8,028 )

5 unchanged sentences

Dividends paid to noncontrolling interests ( 98 ) ( 98 )

Balances, September 30, 2025 $ — $ 2,400 $ 35,557 $ ( 13,320 ) $ ( 35,551 ) $ 1,930 $ ( 8,984 )

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended September 30, 2025 and 2024

(in millions of dollars, except per share amounts)

PMI Stockholders’ (Deficit) Equity

Stock Additional

Capital Earnings

Reinvested in

Business Accumulated

Comprehensive Losses Cost of

Stock Noncontrolling

Interests Total

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

Net earnings 3,082 133 3,215

Other comprehensive earnings (losses), net of income taxes ( 962 ) 65 ( 897 )

Issuance of stock awards 34 4 38

Dividends declared ($ 1.35 per share)

( 2,108 ) ( 2,108 )

Dividends paid to noncontrolling interests ( 98 ) ( 98 )

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

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

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

Net earnings 3,478 135 3,613

Other comprehensive earnings (losses), net of income taxes ( 167 ) ( 29 ) ( 196 )

Issuance of stock awards 36 2 38

Dividends declared ($ 1.47 per share)

( 2,297 ) ( 2,297 )

Dividends paid to noncontrolling interests ( 130 ) ( 130 )

Balances, September 30, 2025 $ — $ 2,400 $ 35,557 $ ( 13,320 ) $ ( 35,551 ) $ 1,930 $ ( 8,984 )

Balances, March 31, 2026 $ — $ 2,433 $ 35,538 $ ( 11,788 ) $ ( 35,462 ) $ 1,979 $ ( 7,300 )

See notes to condensed consolidated financial statements.

7 unchanged sentences

Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc.

and its subsidiaries.

and its affiliates.

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.

8 unchanged sentences

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

Following the sale of Vectura Group Ltd.

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

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

Acquisitions and Divestitures .

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

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

With PMI's smoke-free business now operating at scale across its regions, including growth from its U.S.

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

International and U.S.

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 the following three new reportable segments:

• International Smoke-Free;

• International Combustibles;

(including the wellness business unit, Aspeya).

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

The consolidated statement of earnings includes a new caption for "Corporate expenses and other." "Other" includes foreign currency gains/losses and compensation expense related to restricted share units and performance share units awards, which were reclassified from "Cost of sales" and "Marketing, Administration and Research" costs.

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

Goodwill and Other Intangible Assets, net and Note 8.

Segment Reporting for further details.

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

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2025.

Acquisitions and Divestitures:

Sale of Vectura Group Ltd.

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

(formerly, Vectura Group plc, and hereinafter referred to as “Vectura” or "Vectura Group") to Molex Asia Holdings Ltd ("Molex"), subject to customary regulatory approval and other completion conditions.

On December 31, 2024, PMI completed the sale of Vectura for an upfront cash consideration of GBP 152 million (approximately $ 191 million at exchange rate on sale completion date) and a short-term receivable of GBP 24 million (approximately $ 30 million at exchange rate on sale completion date) which was collected in the second quarter of 2025, reflecting certain customary completion account adjustments, with additional deferred payments of up to GBP 148 million (approximately $ 186 million at exchange rate on sale completion date), contingent on achievement of certain milestones over periods up to and through 2039.

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

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

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

United Tobacco Company

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

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

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

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

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

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

The total purchase price for the incremental equity interest of $ 316 million included cash consideration of $ 31 million, contingent consideration of $ 22 million and $ 263 million of assumed bank loan liabilities.

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

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

Current assets, including receivables and inventories 11 — 11

Other intangible assets - Tobacco manufacturing license 211 25 236

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

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.

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.

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

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Altria Group, Inc.

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

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

as of April 30, 2024.

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

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

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 September 30, 2025, the reacquired rights were classified as Other intangible assets, net in PMI's consolidated balance sheets, and are being amortized over their useful life of 5 years.

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 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.

As of March 31, 2026, $ 149 million of the disposal group assets and $ 61 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.

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

2 unchanged sentences

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

At September 30, 2025, shares available for grant under the 2022 Plan were 16,941,945 .

At March 31, 2026, shares available for grant under the 2022 Plan were 15,080,666 .

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

2 unchanged sentences

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

At September 30, 2025, shares available for grant under the plan were 845,900 .

At March 31, 2026, shares available for grant under the plan were 845,900 .

Restricted share unit (RSU) awards

During the nine months ended September 30, 2025 and 2024, shares granted to eligible employees and the weighted-average grant date fair value per share related to RSU awards were as follows:

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

2025 1,516,940 $ 145.46

2024 2,005,920 $ 89.58

Compensation expense related to RSU awards was as follows:

Compensation Expense Related to RSU Awards

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

PMI may grant RSU awards to eligible employees;

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

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

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

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

The fair value of the RSU awards at the date of grant 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 three months ended March 31, 2026 and 2025, the recorded compensation expense related to RSU awards and the respective tax benefit (charge) were as follows:

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

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

2026 $ 72 $ 32

2025 $ 63 $ 20

As of September 30, 2025, PMI had $ 219 million of total unrecognized compensation cost related to non-vested RSU awards.

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

During the nine months ended September 30, 2025, 1,381,994 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 145 million.

The total fair value of RSU awards that vested during the nine months ended September 30, 2025 was approximately $ 209 million.

The compensation expense was recorded in corporate expenses and other costs.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

During the three months ended March 31, 2026 and 2025, shares granted to eligible employees and the weighted-average grant date fair value per share were as follows:

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

2026 1,274,800 $ 182.61

2025 1,502,150 $ 145.16

During the three months ended March 31, 2026, 1,327,466 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 136 million.

The total fair value of RSU awards that vested during the three months ended March 31, 2026, was approximately $ 242 million.

As of March 31, 2026, PMI had $ 338 million of total unrecognized compensation cost related to non-vested RSU awards, which is expected to be recognized over the performance cycle of the awards of approximately three years .

Performance share unit (PSU) awards

During the nine months ended September 30, 2025 and 2024, PMI granted PSU awards to certain executives.

PMI may grant PSU awards to certain executives;

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 the nine months ended September 30, 2025 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and a Sustainability Index, which consists of two drivers:

• Product Sustainability ( 20 % weight):

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

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

• Operational Sustainability ( 10 % weight):

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

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

The performance metrics, targets and relative weights for the PSU’s granted during the nine months ended September 30, 2025 were the same as the PSU’s granted during the nine months ended September 30, 2024, with the exception of the annual growth rate of adjusted diluted EPS metric goals, which was increased, and for changes to certain components of the Sustainability Index.

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

The performance metrics for such PSU's granted during the three months ended March 31, 2026, 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 VALUE Index, which consists of two drivers:

• Product impact ( 20 % weight):

aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's products, focused on two strategic priorities:

consumers and circularity;

• Operational impact ( 10 % weight):

aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's business activities, focused on four strategic priorities:

PMI’s workforce, workers in the value chain, climate, and nature.

The performance metrics, targets and relative weights for the PSU’s granted during the three months ended March 31, 2026, were the same as the PSU’s granted during the three months ended March 31, 2025, with the exception of changes made to certain components of the Sustainability Index, which was replaced with the VALUE Index.

The VALUE Index, built on the foundation of the Sustainability Index, continues to follow the same guiding principles, structure and governance while reflecting a more focused approach to incentivizing progress on key transformation matters.

The division and relative weight of product and operational KPIs remain the same.

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

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

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

The fair value of the PSU awards at the date of 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 .

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

During the three months ended March 31, 2026 and 2025, the recorded compensation expense related to PSU awards, and the respective tax benefit (charge) were as follows:

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

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

2026 $ 46 $ 22

2025 $ 51 $ 16

The compensation expense was recorded in corporate expenses and other costs.

During the three months ended March 31, 2026 and 2025, shares granted to eligible employees and the weighted-average grant date fair value per share related to PSU awards were as follows:

Number of Shares Granted 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)

2026 327,880 $ 182.81 $ 236.97

2025 395,810 $ 145.32 $ 213.72

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.

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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Average risk-free interest rate (a)

4 unchanged sentences

(b) Determined using the observed historical volatility.

Compensation expense related to PSU awards was as follows:

Compensation Expense Related to PSU Awards

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

2025 $ 66 $ 6

2024 $ 58 $ 9

As of September 30, 2025, PMI had $ 50 million of total unrecognized compensation cost related to non-vested PSU awards.

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

During the nine months ended September 30, 2025, 686,052 PSU awards vested.

During the three months ended March 31, 2026, 816,829 PSU awards vested.

The grant date fair value of all the vested awards was approximately $ 94 million.

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

The total fair value of PSU awards that vested during the three months ended March 31, 2026, was approximately $ 149 million.

As of March 31, 2026, PMI had $ 77 million of total unrecognized compensation cost related to non-vested PSU awards, which is expected to be recognized over the performance cycle of the awards of approximately three years .

Benefit Plans:

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retired employees are covered through local government plans.

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

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

Pension and other employee benefit (income) costs per the condensed consolidated statements of earnings consisted of the

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31,

(in millions) 2026 2025

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Net postretirement costs 4 3

Total pension and other employee benefit costs $ 37 $ 44 $ 14 $ 15

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Total pension and other employee benefit (income) costs $ ( 5 ) $ 12

Pension Plans

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Net periodic pension cost consisted of the following:

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

For the Three Months Ended March 31,

(in millions) 2026 2025

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

Employer contributions of $ 91 million were made to the pension plans during the nine months ended September 30, 2025.

Employer contributions of $ 30 million were made to the pension plans during the three months ended March 31, 2026.

Currently, PMI anticipates making additional contributions during the remainder of 2026 of approximately $ 115 million to its pension plans, based on current tax and benefit laws.

However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest and currency rates.

Goodwill and Other Intangible Assets, net:

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

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

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

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

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

As of September 30, 2025, our Russian operations had approximately $ 4.5 billion in total assets, excluding intercompany balances, of which approximately $ 2.0 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

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

For further details, see Note 13.

Related Parties – Equity Investments and Other .

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

Goodwill and Other Intangible Assets, net:

The movements in goodwill were as follows:

(in millions) Europe SSEA, CIS & MEA

EA, AU & PMI GTR

Americas Total

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

(in millions) International Smoke-Free International Combustibles

Balances, December 31, 2025 $ 3,913 $ 4,862 $ 8,489 $ 17,264

Changes due to:

Impairment ( 41 ) — — — ( 41 )

Measurement period adjustments ( 7 ) — — ( 7 )

Currency ( 97 ) ( 90 ) ( 8 ) ( 195 )

Balances, September 30, 2025 $ 4,697 $ 3,212 $ 465 $ 8,807 $ 17,181

Balances, March 31, 2026 $ 3,816 $ 4,772 $ 8,481 $ 17,069

g oodwill balance is net of accumulated impairment losses of $ 556 million at March 31, 2026, and December 31, 2025.

These accumulated losses, which relate to PMI's wellness unit Aspeya, 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 , following the sale of Vectura Group Ltd.

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

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

At September 30, 2025, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB and Fertin Pharma A/S, as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia.

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

For further details, see Note 2.

Acquisitions and Divestitures.

Background and Basis of Presentation , PMI has implemented an evolved organizational model effective January 1, 2026, and realigned its reportable segments accordingly.

This reorganization resulted in changes to the composition of certain reporting units.

Consequently, PMI reassigned assets and liabilities to the applicable reporting units and reallocated goodwill using the relative fair value approach.

PMI performed a review of goodwill for potential impairment of the impacted reporting units immediately before and after the reorganization.

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

The table above reflects the reclassification as a result of the realignment.

At March 31, 2026, 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

Details of other intangible assets were as follows:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

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

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Total other intangible assets $ 13,870 $ 3,358 $ 10,512 $ 14,011 $ 3,127 $ 10,884

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

Acquisitions and Divestitures for further details).

The increase since December 31, 2024, was mainly due to currency movements of $ 263 million and measurement period adjustments related to the final purchase price allocation of UTC acquisition in Egypt of $ 25 million.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2024, was primarily due to currency movements of $ 361 million.

The change in the accumulated amortization from December 31, 2024, was mainly due to the 2025 amortization of $ 746 million, combined with currency movements of $ 84 million.

The amortization of intangibles for the nine months ended September 30, 2025 was recorded in cost of sales ($ 16 million) and in marketing, administration and research costs ($ 730 million) on PMI's condensed consolidated statements of earnings.

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

Changes Due To:

December 31, 2025 Amortization & Impairment Acquisitions & Divestitures Currency & Other March 31, 2026

Non-amortizable intangible assets $ 4,776 $ — $ — $ ( 65 ) $ 4,711

Amortizable intangible assets:

6,108 ( 251 ) — ( 56 ) 5,801

Gross book value 9,235 — ( 76 ) 9,159

Accumulated amortization ( 3,127 ) ( 251 ) — 20 ( 3,358 )

Total Intangibles, net $ 10,884 $ ( 251 ) $ — $ ( 121 ) $ 10,512

Amortization expense for each of the next five years is estimated to be approximately $ 1,006 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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

Acquisitions and Divestitures ).

Financial Instruments:

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

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

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

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

(in millions) At March 31, 2026 At December 31, 2025

Derivative contracts designated as hedging instruments:

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Notes to Condensed Consolidated Financial Statements

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

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

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

(in millions) Balance Sheet Classification March 31, 2026 December 31, 2025 Balance Sheet Classification March 31, 2026 December 31, 2025

Derivative contracts designated as hedging instruments:

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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.

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

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 March 31, 2026 and December 31, 2025.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

For the nine months ended September 30, 2025 and 2024, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

For the three months ended March 31, 2026 and 2025, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

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

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Interest rate contracts Interest expense, net (a)

Net investment hedges (b) :

Foreign exchange contracts ( 1,940 ) ( 52 ) Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 278 214

Marketing, administration and research costs (d)

Total $ ( 2,139 ) $ 102 $ 82 $ 167 $ ( 792 ) $ 441

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

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

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the three months ended September 30, 2025 and 2024, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

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

Classification of Gain/(Loss)

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

$ ( 37 ) $ 47

Derivative contracts designated as hedging instruments:

Cash flow hedges:

Foreign exchange contracts $ 78 $ ( 184 ) Net revenues $ 16 $ 43

Cost of sales — —

Marketing, administration and research costs ( 4 ) ( 3 )

Interest expense, net — ( 2 )

Interest rate contracts 1 ( 3 ) Interest expense, net 13 12

Commodity contracts — — Cost of sales ( 2 ) —

Fair value hedges:

Interest rate contracts Interest expense, net (a)

Net investment hedges (b) :

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Marketing, administration and research costs (d)

( 9 ) ( 419 )

Total $ 667 $ ( 583 ) $ 39 $ 23 $ 377 $ ( 32 )

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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 condensed consolidated statements of earnings.

As of September 30, 2025, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028.

As of March 31, 2026, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through December 2028.

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

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

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of September 30, 2025 was $ 5,124 million, of which $ 640 million was recorded in current portion of long-term debt and $ 4,484 million was recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $( 55 ) million as of September 30, 2025.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of March 31, 2026 was $ 5,096 million, including $ 401 million related to discontinued hedges, of which $ 649 million was recorded in current portion of long-term debt and $ 4,447 million was recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $( 21 ) million as of March 31, 2026.

Hedges of Net Investments in Foreign Operations

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

For the nine months ended September 30, 2025 and 2024, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $ 2 million and $( 18 ) million, respectively.

For the three months ended September 30, 2025 and 2024, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $ 2 million and $( 23 ) million, respectively.

For the three months ended March 31, 2026 and 2025, 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 $ 13 million and nil , respectively.

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

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

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

2025 2024 2025 2024

Gain as of beginning of period, $ 467 $ 241 $ 182 $ 433

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

Gain/(loss) as of beginning of period, $ 284 $ 467

Derivative (gains)/losses transferred to earnings ( 32 ) ( 21 )

Change in fair value 94 ( 122 )

Gain as of September 30, $ 230 $ 230 $ 230 $ 230

At September 30, 2025, PMI expects $ 49 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

Gain/(loss) as of March 31, $ 346 $ 324

At March 31, 2026, PMI expects $ 159 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

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

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PMI’s derivative instruments do not contain contingent features.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Credit Exposure and Credit Risk

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While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments less any cash collateral received or pledged.

PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Other Investments

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

dollar denominated bonds in Argentina, have been classified within Level 1 and had a fair value of $ 292 million at September 30, 2025.

For the nine months and three months ended September 30, 2025, the gross unrealized pre-tax gains (losses) on these investments were immaterial.

At March 31, 2026, the fair values of PMI's certain other investments were as follows:

(in millions)

March 31, 2026

Level 1, U.S.

dollar denominated bonds in Argentina $ 103

Level 2, Indonesian rupiah denominated bonds in Indonesia 26

For the three months ended March 31, 2026, the gross unrealized pre-tax losses on these investments were immaterial.

Earnings Per Share:

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

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

2025 2024 2025 2024

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

Net earnings attributable to PMI $ 2,438 $ 2,690

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

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 2025, PMI updated its segment reporting by including the former Wellness & Healthcare segment results in the Europe segment.

The four geographical segments are as follows:

Europe Region;

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

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

and Americas Region.

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

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

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

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

Effective January 1, 2026, PMI reorganized its segments to reflect the manner in which the Chief Executive Officer, who is the chief operating decision maker (“CODM”), manages the business and reviews the results of its operations.

Based on changes to PMI’s organizational structure, including restructuring of roles and responsibilities of the executive management layer reporting directly to the CODM as of January 2026, PMI’s reportable segments are organized by product groupings and geographical region as follows:

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

The results of PMI’s Wellness unit, Aspeya, are included within the U.S.

reportable segment.

In conjunction with the organizational changes discussed above, the primary profitability measure based on which the CODM evaluates performance of and allocates resources to the reportable segments has changed from regional operating income to segment gross profit.

Segment net revenues and segment gross profit are the primary financial measures used by the CODM to review short-term and long-term trends, forecasts, and budget-to-actual variances in order to assess the performance of PMI’s reportable segments and to allocate resources in response to changing market conditions and organizational priorities.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Marketing, administration and research costs, including restructuring charges, are not allocated to segments to determine the primary measure of segment profitability.

Additionally, interest expense, net, corporate expenses and other, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measures 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 5.

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Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2025.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

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

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

For the Nine Months Ended September 30, 2025

Net revenues $ 12,513 $ 8,942 $ 5,207 $ 3,624 $ 30,286

Cost of sales 3,286 3,800 1,512 1,208 9,806

Marketing, administration and research costs 3,931 1,987 1,083 1,919 8,920

Impairment of goodwill 41 — — — 41

Operating income $ 5,255 $ 3,155 $ 2,612 $ 497 $ 11,519

For the Nine Months Ended September 30, 2024

Net revenues $ 11,547 $ 8,393 $ 4,959 $ 3,273 $ 28,172

Cost of sales 3,318 3,909 1,573 1,106 9,906

Marketing, administration and research costs 3,432 1,861 1,082 1,748 8,123

Operating income $ 4,797 $ 2,623 $ 2,304 $ 419 $ 10,143

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

For the Three Months Ended September 30, 2025

Net revenues, cost of sales and gross profit by segment were as follows:

(in millions) International Smoke-Free International Combustibles U.S.

For the Three Months Ended March 31, 2026

Net revenues $ 3,836 $ 5,688 $ 622 $ 10,146

Cost of sales 1,152 1,847 242 3,241

Marketing, administration and research costs 1,394 679 387 635 3,095

Operating income $ 2,150 $ 1,235 $ 846 $ 32 $ 4,263

For the Three Months Ended September 30, 2024

Gross profit 2,684 3,842 380 6,905

For the Three Months Ended March 31, 2025

Net revenues $ 3,076 $ 5,326 $ 899 $ 9,301

Cost of sales 990 1,827 215 3,031

Marketing, administration and research costs 1,263 643 346 639 2,891

Operating income $ 1,769 $ 960 $ 788 $ 137 $ 3,654

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Gross profit 2,087 3,499 685 6,270

Amounts may not foot due to rounding

PMI disaggregates its net revenues from contracts with customers by product category for each reportable segment.

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

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

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

2025 2024 2025 2024

Net revenues:

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

International Smoke-Free $ 3,836 $ 3,076

of which, Wellness 62 51

Total Smoke-free 4,379 3,895

Combustible tobacco:

Europe $ 6,713 $ 6,467 $ 2,478 $ 2,322

SSEA, CIS & MEA

7,670 7,390 2,753 2,612

EA, AU & PMI GTR

1,851 1,889 649 673

Americas 1,551 1,653 520 527

International Combustibles 5,688 5,326

Total Combustible tobacco 5,767 5,407

Europe 5,800 5,080 2,241 1,875

of which, Wellness & Healthcare 166 246 57 76

SSEA, CIS & MEA

1,272 1,003 520 352

EA, AU & PMI GTR

3,356 3,070 1,119 929

Americas 2,073 1,620 565 621

Total Smoke-free 12,500 10,773 4,445 3,777

Total PMI net revenues $ 10,146 $ 9,301

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

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

• Restructuring charges - See Note 16.

Restructuring Activities for a breakdown of these costs by segment for the nine months ended September 30, 2025 and 2024.

• Impairment of goodwill – See Note 5.

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

• Germany excise tax classification litigation charge – See Note 9.

Contingencies for details of the $ 176 million pre-tax charge recorded in the Europe segment for the nine months and three months ended September 30, 2025.

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

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

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the nine months and three months ended September 30, 2024, and was included in the Europe segment results.

On December 31, 2024, PMI completed the sale.

For further details, see Note 2.

Acquisitions and Divestitures .

• 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.

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

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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.

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

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

Net revenues related to smoke-free, excluding wellness and healthcare, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and 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 refer to the operating revenues generated from the sale of product, primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems.

Other segment data were as follows:

(in millions)

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

2025 2024 2025 2024

For the Three Months Ended March 31,

Depreciation and amortization expense:

Europe $ 402 $ 434 $ 142 $ 139

SSEA, CIS & MEA 216 227 78 75

EA, AU & PMI GTR 150 131 49 43

Americas 707 518 236 241

International Smoke-Free $ 90 $ 78

International Combustibles 67 71

Total depreciation and amortization expense by segment 184 172

Total depreciation and amortization expense

$ 1,475 $ 1,310 $ 505 $ 498

(in millions)

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

2025 2024 2025 2024

Capital expenditures:

Europe $ 541 $ 713 $ 147 $ 213

SSEA, CIS & MEA 147 212 36 42

EA, AU & PMI GTR 11 16 2 4

Americas 426 225 180 120

Total capital expenditures

$ 1,125 $ 1,166 $ 365 $ 379

(1) Included in marketing, administration and research costs, and corporate expenses and other in PMI's condensed consolidated statements of earnings

Contingencies:

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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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

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Legal defense costs are expensed as incurred.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

Approval and Implementation of CCAA Plan

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 authorized 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.

During the CCAA proceedings, there was a comprehensive stay 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 ” and have now been released under the CCAA Plan (as discussed further herein).

Ernst & Young Inc.

served as monitor of RBH in the CCAA proceedings.

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

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

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

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

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

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

The RBH Objection argued that the Proposed Plan could not be approved because it failed to resolve the Allocation Issue.

The RBH Objection also stated that,

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Notes to Condensed Consolidated Financial Statements

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

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

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

Following a judicial hearing on the Sanction Motion, RBH, JTIM and ITL reached a consensual resolution of all outstanding objections to the Proposed Plan filed by RBH, JTIM and ITL, including the RBH Objection, that resulted in amendments to the Proposed Plan that, among other things, permitted RBH to retain CAD 750 million (approximately $ 536 million) in accumulated cash.

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

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

The Plan was implemented and became effective on August 29, 2025 (the "Effective Date").

Under the resolution contemplated by the Plan, as approved by the CCAA Court and implemented on the Effective Date, RBH, JTIM, and ITL will pay an aggregate global settlement amount of CAD 32.5 billion (approximately $ 23.1 billion).

This amount will be funded by an upfront payment equal to the companies’ cash and cash equivalents on hand plus court deposits, less the CAD 750 million that RBH was permitted to retain ("Upfront Contribution"), as well as annual payments based on a percentage of the companies’ aggregate net income after taxes (excluding that generated by alternative products such as heat-not-burn, nicotine pouches, and e-vapor) until the global settlement amount is paid in full.

The companies, including RBH, made the Upfront Contribution on the Effective Date.

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

Annual contributions are contingent on positive NATI of RBH.

Such payment obligations concern only RBH and not PMI.

Moreover, the Plan, as implemented, releases RBH and its affiliates, including PMI and its indemnitees, from 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.

Related litigation will be dismissed—including those actions described in the section below entitled “ Stayed Litigation – Canada .” Alternative product businesses (including heat-not-burn, e-vapor, and nicotine pouches) will be transferred to an RBH affiliate, consistent with the terms of the Plan.

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

For additional information concerning the fair value of PMI’s continuing investment in RBH, see Note 13.

Related Parties – Equity Investments and Other .

Stayed Litigation — Canada

Under the Plan, as ordered by the CCAA Court and implemented, the claims set forth in the sections entitled “ Smoking and Health Litigation — Canada ” and “ Health Care Cost Recovery Litigation — Canada ” have been released, and the related cases must be dismissed.

We expect these cases to be dismissed in due course.

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 $ 11.0 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 $ 2.2 billion) including pre-judgment interest).

In addition, the trial court awarded CAD 90,000 (approximately $ 64,000 ) in punitive damages, allocating CAD 30,000 (approximately $ 21,400 ) 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 $ 161 million) to cover both the Létourneau and Blais cases, which RBH paid

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in installments through March 2017.

The Court of Appeal ordered Imperial Tobacco Canada Ltd.

to furnish security totaling CAD 758 million (approximately $ 540 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 $ 9.6 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 $ 783 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 reflected PMI’s assessment of the portion of the judgment that represented probable and estimable loss prior to the deconsolidation of RBH and corresponded 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 $ 93 million) in punitive damages, allocating CAD 46 million (approximately $ 33 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 $ 41 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.

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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

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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.

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Combustible tobacco products litigation

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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 nine proposed class actions (all of which have been released and will be dismissed pursuant to the CCAA Plan), seventeen health care cost recovery cases ( ten of which have been released and will be dismissed pursuant to the CCAA Plan), one public civil action, and individual cases.

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, three were initially decided in favor of plaintiffs.

These three cases include the Blais Class Action and the Létourneau Class Action, which are described above under the caption " Smoking and Health Litigation — Canada, " and will be dismissed pursuant to the CCAA Plan, and one individual case that remains on appeal, 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 September 30, 2025, there were nine cases brought on behalf of classes of individual plaintiffs pending against us, our subsidiaries or indemnitees, compared with nine such cases on September 30, 2024.

Such cases are described above under the caption “ Smoking and Health Litigation — Canada, ” have been released under the CCAA Plan and will be formally dismissed.

Health Care Cost Recovery Litigation:

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

As of September 30, 2025, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), from 17 such cases on September 30, 2024.

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

” These cases have been released under the CCAA Plan, and will be formally dismissed.

As of March 31, 2026, 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 March 31, 2025.

In the health care cost recovery case in Brazil, The Attorney General of Brazil v.

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Defendants filed answers to the complaint in May 2020.

On March 13, 2026, the trial court issued a procedural order directing the parties to submit closing arguments.

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

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.

We are in the process of making challenges to 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.

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

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injunctive relief, plus punitive damages.

We are in the process of making challenges to 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.

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

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 service and the court's jurisdiction.

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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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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 would take place in stages:

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

The parties filed final appellate submissions in August 2025.

The appellate court may issue a decision in the coming months.

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

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

As of March 31, 2026, there was one public civil action pending against our subsidiary in Venezuela ( 1 ), compared with one such case on March 31, 2025.

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

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The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health.

The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products.

In addition, the plaintiffs ask the court to order companies involved in the tobacco

The claim asks the court to order the government to enact stricter regulations on the

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Notes to Condensed Consolidated Financial Statements

industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases.

manufacture and sale of tobacco products.

In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases.

In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements.

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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 defendants filed their answers to plaintiff's amended complaint on April 2, 2025, and the case moved to the discovery phase and was 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 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.

Plaintiffs Griffin Dykes and Zachary Kelly decided not to proceed with their claims and the Court approved stipulations dismissing their claims with prejudice on February 24 and March 24, 2026, respectively.

The case remains open as to plaintiff Darryl Maultsby.

On April 6, 2026, plaintiff Darryl Maultsby filed a motion seeking to certify one class and one subclass.

The class is defined as “[a]ll persons who purchased, in Florida, ZYN products.” For this class, plaintiff seeks certification as to the FDUTPA claim and “liability only” issues as to the strict liability design defect and failure to warn claims, excluding causation and damages.

The subclass is defined as “[a]ll persons who procured and used, in Florida, ZYN products while under the age of 21.” The subclass is sought for the FDUTPA claim only.

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

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

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

Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN

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products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products.

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

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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.

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 the motion recently filed by plaintiff Maultsby to certify a class.

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

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

Philip Morris International Inc., et al.

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

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

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

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

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

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 negligence and fraud claims, and sought compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring.

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

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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 defendants filed their answers to plaintiff’s amended complaint on April 2, 2025, and the case moved to the discovery phase and was 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.

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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.

Plaintiff has decided not to proceed with his claims, and the Court approved a stipulation dismissing his claims with prejudice on February 24, 2026.

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

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

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

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

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

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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.

The defendants filed their answers to plaintiff’s amended

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complaint on April 2, 2025, and the case moved to the discovery phase and was consolidated with the other Florida cases ( Kelly, Palmer, and Friedman ) for purposes of pre-trial discovery.

The Court 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").

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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.

Plaintiff has decided not to proceed with his claims, and the Court approved a stipulation dismissing his claims with prejudice on March 23, 2026.

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

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

Plaintiff alleges, among other things, that defendants

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made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products.

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

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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 April 11, 2025, PMI filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on the motion recently filed by plaintiff Maultsby to certify a class.

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.

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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.

, filed April 2, 2025, before United States District Court for the Southern 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 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.

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.

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

The Court 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").

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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.

Plaintiff has decided not to proceed with her claims, and the Court approved a stipulation dismissing her claims with prejudice on March 23, 2026.

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

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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 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.

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

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.

That motion is now fully briefed but resolution of the motion has been stayed pending an appellate court's disposition of a similar remand issue in an unrelated case.

Defendants have not yet

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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 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.

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

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.

In the tenth case, Austin Siegert v.

answered or otherwise responded to the complaint.

In the eighth case, Austin Siegert v.

Philip Morris International Inc.

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Plaintiff seeks compensatory, statutory and punitive damages, attorney’s fees and expenses, prejudgment interest, and declaratory and injunctive relief.

Defendants have not yet been served with the complaint.

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 the motion recently filed by plaintiff Maultsby to certify a class.

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

nicotine pouch market.

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

Plaintiff sought 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 sought 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 was unlawful and must result in divestiture or be enjoined).

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

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

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

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

On September 18, 2025, the Court granted defendants' motion to dismiss the Amended Complaint in its entirety, with prejudice.

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 $ 606 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

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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 $ 4 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 was 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 appealed the decision to the Supreme Court of Thailand.

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

On October 9, 2025, the Supreme Court of Thailand issued its decision.

The Supreme Court determined that the majority of imports at issue had not been under-declared, affirmed the findings of under-declaration of import prices of cigarettes with respect to certain imports, and further reduced the fine imposed to THB 20 million (approximately $ 0.6 million).

The Supreme Court also affirmed the acquittal of the individual defendant.

Thailand is required to refund the payment made by our subsidiary in 2020 in excess of the THB 20 million (approximately $ 0.6 million) fine ultimately assessed by the Supreme Court.

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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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 started on September 25, 2023, and is expected to continue through 2025.

After various postponements, the trial before the court of first instance started on September 25, 2023.

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.

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 ($ 26 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 ($ 40 million).

On March 4, 2026, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2022 and 2023 fiscal years, for approximately BRL 369 million (approximately $ 76 million).

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

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

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

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

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

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

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

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

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

Following the hearing, on July 22, 2025, PM Germany was notified of the Fiscal Court Düsseldorf’s decision to make a limited referral to the European General Court.

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

On September 22, 2025, the FC Düsseldorf decided to discontinue the proceedings with immediate effect, and to withdraw the referral to the European General Court.

As a result, the amount of the tax assessment, $ 176 million was recorded

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in marketing, administration and research costs in the condensed consolidated statements of earnings for the nine months and three months ended September 30, 2025.

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 patent infringement of JP7299432.

(“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 a patent.

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

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

PMJL entered an appearance in the proceeding as an interested party and filed its response to FTKK's application on January 31, 2024.

The Customs hearing was held on May 28, 2024.

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

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

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.

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 asserted a claim for damages in these two actions.

PMJL was obligated to indemnify Sojitz for damages and intervened in these matters.

After receiving in August 2025 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 March 2025, FTKK filed nine additional patent infringement actions against Sojitz for alleged infringement of nine new FTKK patents by TEREA and SENTIA consumables.

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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.

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

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

Between February 2025 and July 2025, FTKK also filed eight patent infringement actions against Sojitz seeking a preliminary injunction.

The patents FTKK asserted in each of these preliminary injunction actions were previously asserted by FTKK in the earlier filed actions seeking monetary damages.

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

Merits proceedings in these matters are at various stages.

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

On December 18, 2025, FTKK filed a notice indicating that it was withdrawing its claim in one of the damages actions following an indicative opinion by the Court that FTKK was not entitled to a preliminary injunction in the related preliminary injunction action.

On January 21, 2026, the Court then issued a written decision rejecting FTKK's preliminary injunction petition in the preliminary injunction matter on the basis that the accused products do not infringe FTKK's patent.

On February 19, 2026, FTKK filed a notice indicating that it was withdrawing its claim in another preliminary injunction action following an indicative opinion in PMJ’s and Sojitz’s favor in that matter and the related damages action on the basis that FTKK’s patent was invalid.

FTKK did not withdraw its claim in the damages action, and a final written decision in this damages action is expected in the coming months.

On March 26, 2026, FTKK filed a notice indicating that it was withdrawing its claim in another preliminary injunction action following an indicative opinion in PMJ's and Sojitz's favor in that matter and the related damages action on the basis that accused products do not infringe FTKK's patent.

FTKK did not withdraw its claim in the damages action, and a final written decision in this damages action is expected in the coming months.

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.

FTKK did not seek any monetary damages or costs.

PMJL entered an appearance in the proceeding as an interested party and filed its opposition to FTKK’s application on January 9, 2025.

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

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

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

On June 5, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, PMJL’s importer and distributor, on the basis of alleged infringement of another FTKK patent.

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.

PMJ submitted a response on February 19, 2026.

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 entered an appearance in the proceeding as an interested party and filed its opposition to FTKK’s application on July 9, 2025.

A hearing before Customs officials was held on September 18, 2025.

On October 14, 2025, expert advisors to Tokyo Customs provided their opinion that the patent at issue in the Customs matter is not infringed.

PMJL entered an appearance in the proceeding as an interested party and filed an opposition to FTKK’s application on January 27, 2026.

A hearing was held on March 31, 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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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.

While PMI is still evaluating the full extent of the Act’s impact, PMI does not expect these provisions and modifications to have a material impact on its 2025 consolidated financial statements.

PMI’s effective tax rates for the nine months and three months ended September 30, 2025 were 19.2 % and 18.7 %, respectively.

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

The effective tax rate for the nine months ended September 30, 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 condensed consolidated statements of earnings ($ 369 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity, (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 ($ 143 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 ($ 46 million).

For further details on the RBH (Canada) Plan Implementation, see Note 9.

Contingencies and Note 13.

Related Parties - Equity Investments and Other .

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

(i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 185 million) and (ii) an impairment loss related to the sale of Vectura Group, partially offset by (i) a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 9 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity;

and (ii) a U.S.

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

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

For further details on the impairment loss related to the sale of Vectura Group and PMI's ceased operations in Venezuela, see Note 2.

Acquisitions and Divestitures and Note 16.

Restructuring Activities, respectively.

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

PMI’s effective tax rates for the three months ended March 31, 2026 and 2025 were 18.5 % and 20.0 %, respectively.

The effective tax rate for the three months ended March 31, 2026 was favorably impacted by a decrease in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 95 million), partly offset by deferred tax expense for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 75 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity.

The effective tax rate for the three months ended March 31, 2025 was favorably impacted by a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 93 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity, partially offset by an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 40 million).

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.

PMI has determined that Pillar Two did not have a material impact on its 2025 consolidated financial statements and should not be expected to have a material impact on its 2026 consolidated financial statements.

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

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

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 2.9 trillion Indonesian rupiah (approximately $ 176 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2017 to 2022.

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk, have recorded income tax receivables in the amount of 3.6 trillion Indonesian rupiah (approximately $ 214 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 condensed consolidated balance sheets at September 30, 2025.

These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at March 31, 2026 and 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.

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

It is reasonably possible that within the next 12 months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties.

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

Indebtedness:

Short-term Borrowings:

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

September 30, 2025 December 31, 2024

At March 31, 2026 and December 31, 2025, PMI’s short-term borrowings and related average interest rates consisted of the following:

March 31, 2026 December 31, 2025

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

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$ 5,693 $ 168

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.

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

The fair values of PMI’s short-term borrowings at March 31, 2026 and December 31, 2025, based on current market interest rates, approximate carrying value.

Long-term Debt:

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

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

At March 31, 2026 and December 31, 2025, PMI’s long-term debt consisted of the following:

(in millions) March 31, 2026 December 31, 2025

dollar notes, 0.875 % to 6.375 % (average interest rate 4.653 %), due through 2044

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Euro credit facility borrowing related to Swedish Match AB acquisition, (interest rate 2.597 %), due 2027

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

Other (average interest rate 4.981 %), due through 2032 (a)

Swedish krona note, (interest rate 2.190 %), due 2029

Finance leases (average interest rate 4.223 %), due through 2037

Carrying value of long-term debt 46,255 48,667

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$ 43,808 $ 45,134

(a) Includes long-term bank loans at subsidiaries, as well as $ 92 million and $ 67 million in finance leases at September 30, 2025 and December 31, 2024, respectively.

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

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

At March 31, 2026, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

September 30, 2025

March 31, 2026

Level 1 $ 42,513

Level 2 2,903

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2025.

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

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

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

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

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

Debt Issuances

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

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a)

$ 400 Floating April 2025 April 2028

dollar notes (b)

$ 750 4.125 % April 2025 April 2028

dollar notes (b)

$ 750 4.375 % April 2025 April 2030

dollar notes (b)

$ 600 4.875 % April 2025 April 2035

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

2.750 % June 2025 June 2029

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

3.250 % June 2025 June 2032

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

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

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

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper and to refinance certain of our outstanding notes due in 2025.

Revolving Credit Facilities:

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

At March 31, 2026, PMI's total committed revolving credit facilities were as follows:

(in billions)

Revolving Credit

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

Multi-year $ 2.0 billion revolving credit, expiring January 29, 2031

Multi-year $ 2.5 billion revolving credit, expiring September 29, 2026 (1) (2)

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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) 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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

At March 31, 2026, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

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

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

Borrowings under these arrangements and other bank loans amounted to $ 195 million at September 30, 2025, and $ 137 million at December 31, 2024.

These credit arrangements amounted to approximately $ 3.7 billion at March 31, 2026, and approximately $ 3.9 billion at December 31, 2025.

Borrowings under these arrangements and other bank loans amounted to $ 216 million at March 31, 2026, and $ 168 million at December 31, 2025.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

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

(in millions) March 31, 2026 December 31, 2025 March 31, 2025

Currency translation adjustments $ ( 10,754 ) $ ( 11,175 ) $ ( 9,026 )

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Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, are shown on the condensed consolidated statements of comprehensive earnings for the nine months and three months ended September 30, 2025 and 2024.

For additional information, see Note 4.

Acquisitions and Divestitures and Note 16.

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

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

Financial Instruments for disclosures related to derivative financial instruments.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Related Parties - Equity Investments and Other:

Equity Method Investments:

At September 30, 2025 and December 31, 2024, PMI had total equity method investments of $ 977 million and $ 1,005 million, respectively.

At March 31, 2026 and December 31, 2025, PMI had total equity method investments of $ 1,001 million and $ 1,019 million, respectively.

Equity method investments are initially recorded at cost.

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

The carrying value of our equity method investments at September 30, 2025 and December 31, 2024, exceeded our share of the investees' book value by $ 1,022 million and $ 1,060 million, respectively.

The carrying value of our equity method investments at March 31, 2026 and December 31, 2025, exceeded our share of the investees' book value by $ 1,026 million and $ 1,033 million, respectively.

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

The difference related to the definite-lived intangibles and other assets at September 30, 2025 and December 31, 2024 of $ 161 million and $ 152 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At September 30, 2025 and December 31, 2024, PMI received year-to-date dividends from equity method investees of $ 162 million and $ 151 million, respectively.

PMI holds a 23 % equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of September 30, 2025 had a carrying value of $ 305 million.

Additionally, there was approximately $ 538 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of September 30, 2025.

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

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

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

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

As a result, MDBV’s shares in TKM were

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 September 30, 2025, there are risks related to this investment as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.

The difference related to the definite-lived intangibles and other assets at March 31, 2026 and December 31, 2025 of $ 160 million and $ 161 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At March 31, 2026 and December 31, 2025, PMI received year-to-date dividends from equity method investees of $ 2 million and $ 203 million, respectively.

PMI holds a 23 % equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia, which as of March 31, 2026 had a carrying value of $ 307 million.

Additionally, there was approximately $ 531 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of March 31, 2026.

There are risks related to this investment as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.

PMI holds a 49 % equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”).

PMI holds an approximate 25 % economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture that is 51 % owned by EITA and 49 % by the Algerian state-owned enterprise Management et Développement des Actifs et des Ressources Holding ("MADAR Holding"), which manufactures and distributes under license some of PMI’s brands (SSEA, CIS & MEA segment).

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

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

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

For further details, see Note 2.

Acquisitions and Divestitures .

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

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

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

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

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

In relation to its investment in Eastern, PMI also guarantees certain credit facilities and repayment of certain bank loan liabilities.

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

Additionally, as part of its Wellness and Healthcare business strategy, PMI holds non-controlling equity interests in certain companies, which as of September 30, 2025 had a carrying value of $ 27 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 condensed consolidated statements of earnings for the nine months and three months ended September 30, 2025.

The initial investments in Megapolis Distribution BV, EITA, Eastern, Wellness and Healthcare 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 condensed consolidated balance sheets.

Additionally, as part of its Wellness business strategy, PMI holds non-controlling equity interests in certain companies.

The initial investments in TKM, EITA, Eastern and Wellness business related investments have been recorded at cost and are included in equity investments on the condensed 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.

Equity securities:

On March 22, 2019, PMI’s wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc.

(“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, 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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 $ 23.1 billion).

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

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

Contingencies ).

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

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

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

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

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

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

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

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

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

On March 22, 2019, PMI deconsolidated its wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc.

(“RBH”) following 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.

On March 6, 2025, the CCAA court issued a decision approving the plan of compromise and arrangement (the "Plan") setting forth certain terms of a proposed comprehensive resolution of Canadian tobacco claims and related litigation, including the global settlement amount.

The Plan 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.

PMI evaluated the terms of the Plan and concluded that powers provided under the Plan to RBH’s CCAA Plan Administrator and to the Claimants (as these terms are 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.

For further details regarding the terms of the Plan, see Note 9.

Contingencies .

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 1,578 million at September 30, 2025.

Unrealized pre-tax gain (loss) of $ 656 million ($ 513 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the nine months ended September 30, 2025.

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 global settlement amount has been paid and the operating covenants that govern RBH’s business are lifted.

As of March 31, 2026 and December 31, 2025, the carrying

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

value of PMI's investment in RBH was $ 555 million and $ 569 million, respectively, including the cumulative amount of impairments and downward adjustments of $ 2,549 million in both periods.

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

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 859 million and $ 1,291 million at March 31, 2026 and December 31, 2025, respectively.

Unrealized pre-tax gain (loss) of $( 433 ) million ($( 338 ) million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the three months ended March 31, 2026.

Other related parties:

United Arab Emirates-based Trans-Emirates Trading and Investments (FZC) ("TTI") holds a 33 % non-controlling interest in Philip Morris Misr LLC ("PMM"), an entity incorporated in Egypt which is consolidated in PMI’s financial statements in the SSEA, CIS & MEA segment.

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

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

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

Godfrey Phillips India Ltd ("GPI") is one of the non-controlling interest holders in Philip Morris India Trading Private Ltd ("PM India") (formerly IPM India), which is a 56.3 % owned PMI consolidated subsidiary.

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

Financial activity with the above related parties:

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

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

For the Three Months Ended March 31,

(in millions) 2026 2025

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

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

(in millions) At March 31, 2026 At December 31, 2025

Megapolis Group $ 636 $ 568

1 unchanged sentence

Receivables $ 996 $ 839

Other assets:

Other $ 82 $ —

Other assets $ 82 $ —

Other $ 43 $ 37

Payables $ 43 $ 37

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The activities with the above related parties are in the ordinary course of business, and are primarily for distribution, service fees, contract manufacturing and license agreements.

6 unchanged sentences

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

When applicable, a servicing liability is recorded for the estimated fair value of the servicing.

The amounts associated with the servicing liability were not material as of September 30, 2025 and September 30, 2024.

The amounts associated with the servicing liability were not material as of March 31, 2026 and 2025.

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

Cumulative trade receivables sold, including excise taxes, for the nine months ended September 30, 2025 and 2024, were $ 8.6 billion and $ 8.8 billion, respectively.

Cumulative trade receivables sold, including excise taxes, for the three months ended March 31, 2026 and 2025, were $ 2.5 billion and $ 2.4 billion, respectively.

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

The trade receivables sold that remained outstanding under these arrangements as of September 30, 2025 and September 30, 2024, were $ 0.6 billion for both periods.

The trade receivables sold that remained outstanding under these arrangements as of March 31, 2026 and 2025, were $ 0.6 billion for both periods.

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

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

The loss on sale of trade receivables was as follows:

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

2025 $ 26 $ 9

2024 $ 33 $ 11

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

(in millions) As of and For the Nine Months Ended September 30, 2025 As of and For the Year Ended December 31, 2024

Balance at beginning of period $ 76 $ 80

Changes due to:

Warranties issued 54 76

Settlements ( 64 ) ( 77 )

Currency/Other 5 ( 3 )

Balance at end of period $ 71 $ 76

For the three months ended March 31, 2026 and 2025, the loss on sale of trade receivables was $ 7 million and $ 8 million, respectively.

Restructuring Activities:

For the nine months ended September 30, 2025, PMI recorded total pre-tax restructuring charges of $ 243 million.

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

For the three months ended September 30, 2025 and 2024, PMI did not record any charges related to restructuring activities.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 $ 243 million in the second quarter of 2025.

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

IQOS products sourcing for the U.S.

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

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

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

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

For further details on IQOS commercialization in the U.S.

and the related agreement with Altria Group, Inc (“Altria”), see Note 2.

Acquisitions and Divestitures .

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

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

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

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

The amount primarily included non-cash charges related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses of $ 38 million and asset impairment charge of $ 5 million related to land and buildings.

This amount also included contract termination, severance and other related costs of $ 4 million, which were paid in cash.

For details on the income tax impact of the transaction, see Note 10.

Income Taxes .

For the three months ended March 31, 2026, PMI recorded total pre-tax restructuring charges of $ 24 million.

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

The 2026 pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings.

As discussed in Note 8.

Segment Reporting , marketing, administration and research costs, including restructuring charges, are not allocated to segments to determine the primary measure of segment profitability.

Reorganization

In the first quarter of 2026, the PMI U.S.

organization announced a series of footprint optimization initiatives under the Further Integration Program (“FIP”).

These initiatives include the planned closure of the Richmond office and the transition of certain roles and capabilities to strategic U.S.

locations, primarily the newly established Business Solutions Center (“BSC”) in Tampa, Florida, and the PMI U.S.

headquarters in Stamford, Connecticut.

The program also includes the closure of the cigar manufacturing facility in Dothan, Alabama and the consolidation of its cigar production operations into PMI’s manufacturing footprint in the Dominican Republic.

As a result of these actions, PMI recorded pre‑tax restructuring charges of $ 24 million during the first quarter of 2026.

These charges primarily consist of employee separation and other employee related costs of $ 19 million, and asset impairment charges of $ 5 million.

For the full year 2026, PMI expects total pre‑tax restructuring charges associated with the FIP program to be approximately $ 55 million.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Restructuring Charges by Segment

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

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

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

Americas $ — $ 38

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

Separation programs:

Total separation programs 127 —

Contract termination and other charges:

Americas — 65

Total contract termination and other charges 24 65

Asset impairment charges:

Americas — 65

Total asset impairment charges 92 65

Restructuring charges $ 243 $ 168

Movement in Restructuring Related Liabilities

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

The movement in restructuring related liabilities for the three months ended March 31, 2026 was as follows:

(in millions)

3 unchanged sentences

Currency/other ( 5 )

Liability balance, September 30, 2025 $ 124

Liability balance, March 31, 2026 $ 102

Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2027.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

The components of PMI’s lease cost were as follows for the three months ended March 31, 2026 and 2025:

For the Three Months Ended March 31,

(in millions) 2026 2025

16 unchanged sentences

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

As of September 30, 2025 and December 31, 2024, the total amount due to suppliers participating in the SCF program was $ 1.0 billion for both periods.

As of March 31, 2026 and December 31, 2025, the total amount due to suppliers participating in the SCF program was $ 1.0 billion and $ 1.1 billion, respectively.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

New Accounting Standards:

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 will adopt the additional disclosure requirements on the specified effective date within its annual reporting for the year ending December 31, 2025, on a prospective basis.

On November 4, 2024, the FASB issued Accounting Standards Update ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“ASU 2024-03”).

ASU 2024-03 requires disclosure of more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

PMI is currently evaluating the impact of ASU 2024-03 on its disclosures.

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

What changed 10-Q

Item 1. Financial Statements