Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

Consolidated Statements of Earnings

(in millions of dollars, except per share data)

for the years ended December 31,202520242023
Net revenues 1 & 2 (Notes 5 & 11)$40,648$37,878$35,174
Cost of sales13,36613,32912,893
Gross profit27,28224,54922,281
Marketing, administration and research costs (Notes 3, 4, 11 & 18)12,34911,14710,060
Impairment of goodwill (Note 4)41—665
Operating income14,89213,40211,556
Interest expense, net (Note 13)9661,1431,061
Pension and other employee benefit costs (Note 12)466045
Earnings before income taxes13,88012,19910,450
Provision for income taxes (Note 10)2,7373,0172,339
Impairment related to the RBH equity investment (Note 5)—2,316—
Equity investments and securities (income)/loss, net(705)(637)(157)
Net earnings11,8487,5038,268
Net earnings attributable to noncontrolling interests500446455
Net earnings attributable to PMI$11,348$7,057$7,813
Per share data (Note 9):
Basic earnings per share$7.27$4.53$5.02
Diluted earnings per share$7.26$4.52$5.02

(1) Includes net revenues from related parties of $4,582 million, $3,876 million and $3,553 million for the years ended December 31, 2025, 2024 and 2023, respectively

(2) Net revenues are shown net of excise tax on products. For the years ended December 31, 2025, 2024 and 2023, excise tax on products was $53,211 million, $51,563 million and $49,404 million, respectively

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

for the years ended December 31,202520242023
Net earnings$11,848$7,503$8,268
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $349 in 2025, $(208) in 2024 and $156 in 2023(1,864)(122)(1,643)
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2025, $7 in 2024 and $0 in 2023 (Notes 3, 15 & 18)317112
Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $(176) in 2025, $8 in 2024 and $182 in 2023884(10)(861)
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(46) in 2025, $(36) in 2024 and $(28) in 202317513587
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $19 in 2025, $(88) in 2024 and $(30) in 2023(89)439195
(Gains) losses transferred to earnings, net of income taxes of $18 in 2025, $45 in 2024 and $32 in 2023(94)(213)(220)
Total other comprehensive earnings (losses)(985)400(2,430)
Total comprehensive earnings10,8637,9035,838
Less comprehensive earnings attributable to:
Noncontrolling interests497345281
Comprehensive earnings attributable to PMI$10,366$7,558$5,557

See notes to consolidated financial statements.

Consolidated Balance Sheets

(in millions of dollars, except share data)

at December 31,20252024
Assets
Cash and cash equivalents$4,872$4,216
Trade receivables (less allowances of $23 in 2025 and $47 in 2024) (1)4,5723,789
Other receivables (less allowances of $24 in 2025 and $22 in 2024)1,238886
Inventories:
Leaf tobacco2,4252,080
Other raw materials2,2232,261
Finished product6,8305,112
11,4789,453
Other current assets2,2031,826
Total current assets24,36320,170
Property, plant and equipment, at cost:
Land and land improvements562581
Buildings and building equipment5,0504,391
Machinery and equipment12,53310,632
Construction in progress1,4711,081
19,61616,685
Less: accumulated depreciation11,2199,375
8,3977,310
Goodwill (Note 4)17,26416,600
Other intangible assets, net (Note 4)10,88411,327
Equity investments (Note 5)2,8912,654
Deferred income taxes (Note 10)1,247940
Other assets (less allowances of $12 in 2025 and $26 in 2024)4,1392,783
Total Assets$69,185$61,784

(1) Includes trade receivables from related parties of $839 million and $691 million as of December 31, 2025, and 2024, respectively. For further details, see Note 5. Related Parties - Equity Investments and Other.

See notes to consolidated financial statements.

at December 31,20252024
Liabilities
Short-term borrowings (Note 6)$168$137
Current portion of long-term debt (Note 6)3,5333,392
Accounts payable4,4073,952
Accrued liabilities:
Marketing and selling1,3541,015
Taxes, except income taxes7,5556,904
Employment costs1,5451,305
Dividends payable2,3122,120
Other3,2982,832
Income taxes1,2551,258
Total current liabilities25,42722,915
Long-term debt (Note 6)45,13442,166
Deferred income taxes (Note 10)2,0652,517
Employment costs2,4062,940
Other liabilities2,1811,116
Total liabilities77,21371,654
Contingencies (Note 16)
Stockholders’ (Deficit) Equity
Common stock, no par value (2,109,316,331 shares issued in 2025 and 2024) (Note 7)——
Additional paid-in capital2,4532,335
Earnings reinvested in the business35,40032,869
Accumulated other comprehensive losses (Note 15)(12,296)(11,314)
25,55723,890
Less: cost of repurchased stock (552,659,642 and 554,470,731 shares in 2025 and 2024, respectively)35,55135,640
Total PMI stockholders’ deficit(9,994)(11,750)
Noncontrolling interests1,9661,880
Total stockholders’ deficit(8,028)(9,870)
Total Liabilities and Stockholders’ (Deficit) Equity$69,185$61,784

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

(in millions of dollars)

for the years ended December 31,202520242023
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings$11,848$7,503$8,268
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization expense1,9961,7871,398
Impairment of goodwill and other intangibles (Note 4)4127680
Losses on sales of businesses (including held-for-sale) (Note 3)94206—
Impairment related to the RBH equity investment (Note 5)—2,316—
Deferred income tax (benefit) provision(847)(123)(330)
Restructuring charges, net of cash paid (Note 18)20612230
Cash effects of changes, net of the effects from acquired and divested companies:
Receivables, net(448)(738)314
Inventories(1,201)552(862)
Accounts payable258297(288)
Accrued liabilities and other current assets(151)628(232)
Income taxes(266)(62)(232)
Pension plan contributions (Note 12)(139)(110)(21)
Other842(188)479
Net cash provided by (used in) operating activities12,23312,2179,204
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures(1,569)(1,444)(1,321)
Other acquisitions, net of acquired cash (Note 3)—43—
Altria Group, Inc. agreement (Note 3)——(1,775)
Proceeds from sales of businesses, net of cash disposed (Note 3)30136191
Purchases of debt securities(202)(132)—
Sales and maturities of debt securities116——
Equity investments(63)(124)(111)
Collateral posted/settlements for derivatives, (paid)/returned (Note 14)(2,274)351(660)
Other(5)7878
Net cash provided by (used in) investing activities(3,967)(1,092)(3,598)

See notes to consolidated financial statements.

for the years ended December 31,202520242023
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less$19$(1,461)$530
Issuances - maturities longer than 90 days1701001,366
Repayments - maturities longer than 90 days(170)(433)(1,172)
Repayments under credit facilities related to Swedish Match AB acquisition—(3,168)(4,430)
Long-term debt proceeds7,0558,1429,959
Long-term debt repaid(5,368)(4,803)(2,551)
Dividends paid(8,624)(8,197)(7,964)
Collateral received/settlements for derivatives, received/(returned)(693)828(62)
Payments to acquire Swedish Match AB noncontrolling interests——(883)
Noncontrolling interests activity and Other(521)(489)(375)
Net cash provided by (used in) financing activities(8,132)(9,481)(5,582)
Effect of exchange rate changes on cash, cash equivalents and restricted cash504(536)(95)
Cash, cash equivalents and restricted cash(1):
Increase (Decrease)6381,108(71)
Balance at beginning of year4,2543,1463,217
Balance at end of year$4,892$4,254$3,146
Cash Paid:
Interest$1,688$1,559$1,342
Income taxes$3,852$3,178$2,952

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $20 million, $38 million and $86 million as of December 31, 2025, 2024 and 2023, respectively, which were included in other current assets in the consolidated balance sheets.

See notes to consolidated financial statements.

Consolidated Statements of Stockholders' (Deficit) Equity

(in millions of dollars, except per share data)

PMI Stockholders’ (Deficit) Equity
Common StockAdditional Paid-in CapitalEarnings Reinvested in the BusinessAccumulated Other Comprehensive LossesCost of Repurchased StockNoncontrolling InterestsTotal
Balances, January 1, 2023$—$2,230$34,289$(9,559)$(35,917)$2,646$(6,311)
Net earnings7,8134558,268
Other comprehensive earnings (losses), net of income taxes(2,436)6(2,430)
Issuance of stock awards (Note 8)61132193
Dividends declared ($5.14 per share)(8,012)(8,012)
Dividends paid to noncontrolling interests(497)(497)
Sale (purchases) of subsidiary shares to/(from) noncontrolling interests(6)180(831)(657)
Balances, December 31, 2023—2,28534,090(11,815)(35,785)1,779(9,446)
Net earnings7,0574467,503
Other comprehensive earnings (losses), net of income taxes501(101)400
Issuance of stock awards (Note 8)50145195
Dividends declared ($5.30 per share)(8,278)(8,278)
Dividends paid to noncontrolling interests(494)(494)
Acquisitions (Note 3)160160
Sale (purchases) of subsidiary shares to/(from) noncontrolling interests9090
Balances, December 31, 2024—2,33532,869(11,314)(35,640)1,880(9,870)
Net earnings11,34850011,848
Other comprehensive earnings (losses), net of income taxes(982)(3)(985)
Issuance of stock awards (Note 8)11989208
Dividends declared ($5.64 per share)(8,817)(8,817)
Dividends paid to noncontrolling interests(430)(430)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests(1)1918
Balances, December 31, 2025$—$2,453$35,400$(12,296)$(35,551)$1,966$(8,028)

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

Note 1.

Background and Basis of Presentation:

Background

Philip Morris International Inc. is a holding company incorporated in Virginia, U.S.A. (also referred to herein as the U.S., the United States or the United States of America), whose subsidiaries and affiliates and their licensees are primarily engaged in the manufacture and sale of cigarettes and smoke-free products. Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc. and its subsidiaries.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products. SFB also includes wellness products, as well as consumer accessories, such as lighters and matches.

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

Basis of presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and expenses during the reporting periods. Significant estimates and assumptions include, among other things: pension and benefit plan assumptions; useful lives and valuation assumptions of goodwill and other intangible assets; valuation assumptions for non-marketable equity securities; marketing programs, and income taxes. Actual results could differ from those estimates.

The consolidated financial statements include PMI, as well as its wholly owned and majority-owned subsidiaries. Investments in which PMI exercises significant influence (generally 20%-50% ownership interest) are accounted for under the equity method of accounting. Investments not accounted for under the equity method of accounting are measured at fair value, if it is readily determinable, with changes in fair value recognized in net income. Investments without readily determinable fair values, non-marketable equity securities, are measured and recorded using a measurement alternative that values the security at cost minus any impairment. All intercompany transactions and balances have been eliminated.

Following the sale of Vectura Group Ltd. on December 31, 2024, PMI updated in January 2025 its segment reporting by including the ongoing Wellness results (previously referred to as Wellness & Healthcare) in the Europe segment. For further details on the sale of Vectura Group Ltd., see Note 3. Acquisitions and Divestitures. In addition, PMI renamed its “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025. As a result of this change, PMI's segment that includes its duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

Certain prior years' amounts have been reclassified to conform with the current year's presentation as a result of the segment structure change discussed above. For further details, see Note 4. Goodwill and Other Intangible Assets, net and Note 11. Segment Reporting. These reclassifications did not impact PMI's consolidated financial position, results of operations or cash flows in any of the periods presented.

As communicated in the fourth quarter of 2025, with PMI's smoke-free business now operating at scale across its regions, including substantial growth from its U.S. business, PMI has implemented an evolved organizational model with two primary business units: International and U.S. The updated organizational structure is designed to enhance PMI's agility and to support its journey to become a smoke-free company under the leadership of Jacek Olczak, Group CEO of PMI. This change was implemented effective January 1, 2026, and as a result PMI realigned its reportable segments accordingly. The four geographic segments have been replaced with three new reportable segments: International Smoke-Free, International Combustibles, and U.S. As of the first quarter of 2026, our reporting will reflect these changes.

Note 2.

Summary of Significant Accounting Policies:

Acquisitions

PMI uses the acquisition method of accounting for acquired businesses. Under the acquisition method, PMI’s consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition. PMI allocates the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. Any residual purchase price is recorded as goodwill. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. Contingent consideration liabilities are recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration are recognized in marketing, administration and research costs in the consolidated statement of earnings. Transaction costs are expensed as incurred.

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

Cash and cash equivalents

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

Contingencies

PMI records provisions in the consolidated financial statements for pending litigation when it is determined that an unfavorable outcome is probable, and the amount of the loss can be reasonably estimated. Legal defense costs are expensed as incurred. For further details, see Note 16. Contingencies.

Depreciation and Amortization

Property, plant and equipment are stated at historical cost and depreciated primarily using the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated primarily over periods ranging from 3 to 15 years, and buildings and building improvements primarily over periods up to 40 years.

Definite-lived intangible assets are amortized over their useful lives. For further details, see Note 4. Goodwill and Other Intangible Assets, net.

Employee benefit plans

PMI provides a range of benefits to its employees and retired employees, including pensions, postretirement health care and postemployment benefits (primarily severance). PMI records annual amounts relating to these plans based on calculations specified under U.S. GAAP. PMI recognizes the funded status of its defined pension and postretirement plans on the consolidated balance sheets. The funded status is measured as the difference between the fair value of the plans assets and the benefit obligation. PMI measures the plan assets and liabilities at the end of the fiscal year. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. For the postretirement health care plans, the benefit obligation is the accumulated postretirement benefit obligation. Any plan with an overfunded status is recognized as an asset, and any plan with an underfunded status is recognized as a liability. Any gains or losses and prior service costs or credits that have not been recognized as a component of net periodic benefit costs are recorded as a component of other comprehensive earnings (losses), net of deferred taxes. PMI elects to recognize actuarial gains/(losses) using the corridor approach.

Fair value measurements

PMI follows ASC 820, Fair Value Measurements and Disclosures with respect to assets and liabilities that are measured at fair value. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of input that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs

include quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Foreign currency translation

PMI translates the results of operations of its subsidiaries and affiliates, except those operating in highly inflationary economies, using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the end of each period. Currency translation adjustments are recorded as a component of stockholders’ (deficit) equity. In addition, some of PMI’s subsidiaries have assets and liabilities denominated in currencies other than their functional currencies, and to the extent those are not designated as net investment hedges, these assets and liabilities generate transaction gains and losses when translated into their respective functional currencies.

PMI applies highly inflationary accounting if the cumulative inflation rate in an economy for a three-year period meets or exceeds 100%. Subsidiaries operating in highly inflationary economies use the U.S. dollar as the functional currency. Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date while non-monetary assets and liabilities are translated at historical exchange rates. Exchange gains and losses resulting from remeasurement adjustments are recorded within marketing, administration and research costs in the consolidated statements of earnings.

Goodwill and non-amortizable intangible assets valuation

PMI tests goodwill and non-amortizable intangible assets for impairment annually or more frequently if events occur that would warrant such review. PMI performs its annual impairment analysis in the second quarter of each year. The impairment analysis involves comparing the fair value of each reporting unit or non-amortizable intangible asset to the carrying value. If the carrying value exceeds the fair value, goodwill or a non-amortizable intangible asset is considered impaired.

Hedging instruments

Derivative financial instruments are recorded at fair value on the consolidated balance sheets as either assets or liabilities. Changes in the fair value of derivatives are recorded each period either in accumulated other comprehensive losses on the consolidated balance sheet or in earnings, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive losses are reclassified to the consolidated statements of earnings, into the same line item as the impact of the underlying transaction, in the periods in which operating results are affected by the hedged item. Cash flows from hedging instruments are classified in the same manner as the affected hedged item in the consolidated statements of cash flows.

Impairment of long-lived assets

PMI reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. PMI performs undiscounted operating cash flow analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, PMI groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the lower of carrying value or estimated proceeds to be received less costs of disposal.

Investment in non-marketable equity securities

Non-marketable equity securities are subject to periodic impairment reviews during which PMI considers both qualitative and quantitative factors that may have a significant impact on the investees' fair value. Upon determining that an impairment may exist, the security’s fair value is calculated and compared to its carrying value, and an impairment is recognized immediately if the carrying value exceeds the fair value. For further details, see Note 5. Related Parties - Equity Investments and Other.

Impairment of equity method investments

Equity method investments are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. An impairment loss would be recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other than temporary. PMI determines whether a loss is other than temporary by considering the length of time and extent to which the fair value of the equity investment has been less than the carrying amount, the financial condition of the equity investment, and the intent to retain the investment for a period of time is sufficient to allow for any anticipated recovery in market value.

Income taxes

Income taxes are provided on all earnings for jurisdictions outside the United States. These provisions, as well as state and local income tax provisions, are determined on a separate company basis, and the related assets and liabilities are recorded in PMI’s consolidated balance sheets. Significant judgment is required in determining income tax provisions and in evaluating tax positions. PMI recognizes accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes on the consolidated statements of earnings. PMI recognizes income taxes associated with Global Intangible Low-Taxed Income ("GILTI") taxes as current period expense rather than including these amounts in the measurement of deferred taxes.

Inventories

Inventories are stated at the lower of cost or net realizable value. The first-in, first-out and average cost methods are used to cost substantially all inventories. It is a generally recognized industry practice to classify leaf tobacco inventory as a current asset, although part of such inventory, because of the duration of the aging process, ordinarily would not be utilized within one year.

Leases

PMI determines that a contract contains a lease if the contract conveys a right to control the use of the identified asset for a period of time in exchange for consideration. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease expense is amortized based on production activity or the lease term. Lease expense is recorded in cost of sales or marketing, administration and research costs depending on the nature of the leased item. At lease commencement, PMI recognizes lease liabilities and the corresponding right-of-use assets (at the present value of future payments) for predominately all of its leases. The recognition of the right-of-use asset and lease liability includes renewal options when it is reasonably certain that they will be exercised. Certain of PMI’s leases include payments that are based on changes to an index or on actual usage. These lease payments are adjusted periodically and are included within variable lease costs. PMI accounts for lease and nonlease components as a single-lease component with the exception of its vehicle leases, of which PMI accounts for the lease components separately from the nonlease components. Additionally, leases with an initial term of 12 months or less are not included in the right-of-use asset or lease liability on the consolidated statement of financial position.

Marketing costs

PMI supports its products with advertising, adult consumer engagement and trade promotions. Such programs include, but are not limited to, discounts, rebates, in-store display incentives, e-commerce, mobile and other digital platforms, adult consumer activation and promotion activities, as well as costs associated with adult consumer experience outlets and other adult consumer touchpoints and volume-based incentives. Advertising, as well as certain consumer engagement and trade activities costs, are expensed as incurred. Trade promotions are recorded as a reduction of revenues based on amounts estimated as being due to customers at the end of a period, based principally on historical utilization. For interim reporting purposes, advertising and certain consumer engagement expenses are charged to earnings based on estimated sales and related expenses for the full year.

Revenue recognition

PMI recognizes revenue primarily through the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, vapor and oral nicotine products. The revenue recorded is reported net of excise taxes, consumer and trade promotions, sales returns and includes shipping and handling charges billed to customers. The majority of PMI revenues are generated by sales through direct and indirect distribution networks with short-term payment conditions and where control is typically transferred to the customer either upon shipment or delivery of goods. PMI evaluates the transfer of control through evidence of the customer’s receipt and acceptance, transfer of title, PMI’s right to payment for those products and the customer’s ability to direct the use of those products upon receipt. Typically, PMI’s performance obligations are satisfied and revenue is recognized either upon shipment or delivery of goods.

In certain instances, PMI facilitates shipping and handling activities after control has transferred to the customer. PMI has elected to record all shipping and handling activities as costs to fulfill a contract. The shipping and handling costs that have not been incurred at

the time revenue is recognized are accrued. PMI is a principal for majority of its arrangements and recognizes revenue at the transaction price, with the associated costs recorded in cost of sales. The transaction price is typically based on the amount billed to the customer and includes estimated variable consideration, where applicable. Such variable consideration is typically not constrained and is estimated based on the most likely amount that PMI expects to be entitled to under the terms of the contracts with customers, historical experience of discount or rebate redemption, where relevant, and the terms of any underlying discount or rebate programs, which may change from time to time as the business and product categories evolve. For arrangements where PMI acts as an agent, the net commission earned is recognized as revenue. PMI has elected to exclude excise taxes collected from customers from the measurement of the transaction price, thereby presenting revenues net of excise taxes. Estimated costs associated with warranty programs are generally provided for in cost of sales in the period the related revenues are recognized.

Research and Development and Acquired In-Process Research and Development ("IPR&D")

Research and development costs are expensed as incurred.

In a business combination, the fair value of IPR&D acquired is initially capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the projects. Upon completion, a determination as to the useful life is performed and the intangible asset is accounted for as a definite-lived intangible asset. Both the indefinite and definite-lived intangible assets are subject to impairment testing annually or more frequently if indicators exist. In an asset acquisition, the initial cost to acquire the IPR&D is expensed in the consolidated statements of earnings when the project has no alternative future use. PMI records these costs within marketing, administration and research costs in its consolidated statements of earnings.

Stock-based compensation

PMI measures compensation cost for all stock-based awards at fair value on date of grant and recognizes the compensation costs over the service periods for awards expected to vest. PMI’s accounting policy is to estimate the number of awards expected to be forfeited and adjust the expense when it is no longer probable that the employee will fulfill the service condition. For further details, see Note 8. Stock Plans.

Note 3.

Acquisitions and Divestitures:

Sale of certain other businesses

During the fourth quarter of 2025, PMI completed the sale of one business and classified as held-for-sale net assets of certain other businesses (disposal group), primarily related to its consumer accessories products acquired as part of the Swedish Match AB acquisition in 2022. $142 million of the disposal group assets and $59 million of the disposal group liabilities were classified as held-for-sale and were included within other current assets and other accrued liabilities, respectively, in PMI’s consolidated balance sheet as of December 31, 2025. As a result, PMI recorded a pre-tax loss of $94 million, primarily related to the impairment charge to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell and the loss on the completed sale, of which $3 million related to the reclassification of currency translation losses from other comprehensive losses for the completed sale. The loss on sale has been recorded in marketing, administration and research costs in the Europe segment in PMI’s consolidated statement of earnings for the year ended December 31, 2025. The estimated fair value of the disposal group less costs to sell was determined using a market approach, based upon the expected net sales proceeds of the disposal group.

Sale of Vectura Group Ltd.

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 at December 31, 2025 of up to GBP 101 million (approximately $127 million at exchange rate on sale completion date), contingent on achievement of certain milestones over periods up to and through 2039. In addition, PMI agreed to indemnify Molex for certain claims related to the pre-completion period. As of December 31, 2025 and 2024, the liability related to the indemnity was not material.

As of September 17, 2024, and through the completion date, Vectura's net assets and liabilities were classified as held-for-sale in PMI’s consolidated balance sheet. For the year ended December 31, 2024, sale resulted in a pre-tax loss of $199 million ($206 million including the tax costs), of which $198 million of loss related to the impairment charge recognized in the third quarter of 2024, to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell. This amount also included reclassification of currency translation losses from other comprehensive losses of $16 million. The loss on sale of Vectura has been recorded in marketing, administration and research costs under the Europe segment in PMI's consolidated statement of earnings for the year ended December 31, 2024.

Altria Group, Inc. Agreement

On October 20, 2022, PMI announced that it had reached an agreement with Altria Group, Inc. ("Altria") to end the companies' relationship regarding the IQOS commercialization rights in the U.S. as of April 30, 2024. As a result of PMI reacquiring these rights, effective May 1, 2024 ("acquisition date"), PMI holds the full rights to commercialize IQOS in the U.S. As part of the agreement, PMI agreed to pay a total cash consideration of $2.8 billion, including interest, of which $1.0 billion was paid at the inception of the agreement and the remaining $1.8 billion was paid on July 14, 2023. Prior to the acquisition date, the cash consideration paid was accounted for within Other assets in PMI's consolidated balance sheets.

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

Business Combinations

United Tobacco Company – In April 2023, PMI acquired 66.73% of Egyptian Investment Holding (“EIH”), a United Arab Emirates based company and as a result, acquired an approximate economic interest of 25% in United Tobacco Company ("UTC"), which was accounted for using the equity method of accounting. In May 2024, PMI increased its indirect economic interest and acquired a controlling interest of 54.25% in UTC. UTC is an entity incorporated in Egypt and manufactures products under license for Philip Morris Misr LLC (“PMM”), PMI’s Egyptian subsidiary. The acquisition builds on PMI’s existing investments in Egypt and increases the manufacturing synergies between PMM and UTC.

As a result of PMI obtaining control over UTC, PMI’s previously held 25% economic interest in UTC was remeasured to its fair value by applying the guideline transaction method adjusted for a discount for lack of control. The difference between the book value of $312 million, including related cumulative translation losses balance of $112 million, which was reclassified from accumulated other comprehensive losses and the fair value of PMI’s previously held interest in UTC was not material.

The total purchase price for the incremental equity interest of $316 million included cash consideration of $31 million, contingent consideration of $22 million and $263 million of assumed bank loan liabilities. During the third quarter of 2024, PMI paid the contingent consideration of $22 million and $240 million of assumed bank loans. The remaining assumed bank loan was repaid in the fourth quarter of 2025.

In May 2025, PMI finalized all measurement period adjustments related to the UTC acquisition. The following table summarizes the final purchase price allocation for the fair value of assets acquired and liabilities assumed as of the date of the acquisition, which includes previously held interest:

(in millions)Preliminary Purchase Price Allocation Recognized in the second quarter 2024Measurement Period AdjustmentsFinal Purchase Price Allocation
Cash and cash equivalent$74$—$74
Current assets, including receivables and inventories11—11
Other intangible assets - Tobacco manufacturing license21125236
Other non-current assets, including property, plant and equipment16—16
Current liabilities(8)—(8)
Non-Current liabilities—(18)(18)
Identifiable net assets acquired3047311
Noncontrolling interest(159)(1)(160)
Goodwill510(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.

Note 4.

Goodwill and Other Intangible Assets, net:

Goodwill

The movements in goodwill were as follows:

(in millions)Europe(a)SSEA, CIS & MEAEA, AU & PMI GTRAmericasTotal
Balances, December 31, 2023$4,563$2,877$492$8,847$16,779
Changes due to:
Acquisitions and divestitures(65)512——447
Currency(368)(138)(22)(98)(626)
Balances, December 31, 20244,1303,2514708,74916,600
Changes due to:
Impairment(41)———(41)
Measurement period adjustments—(7)——(7)
Currency690(43)(9)74712
Balances, December 31, 2025$4,779$3,201$461$8,823$17,264

(a) Europe goodwill balance is net of accumulated impairment losses of $556 million at December 31, 2025, and 2024. These accumulated losses exclude amounts related to businesses which were subsequently sold or reclassified as held-for-sale.

As discussed in Note 1. Background and Basis of Presentation, following the sale of Vectura Group Ltd. on December 31, 2024, we updated our segment reporting in January 2025 by including the Wellness balance in the Europe segment. As a result, the December 31, 2023 and December 31, 2024 goodwill balances for the Europe segment in the table above included the reclassification of the former Wellness segment.

The decrease in goodwill in 2024 was due to currency movements and goodwill allocated to disposal group in relation to Vectura Group' sale, partially offset by the preliminary purchase price allocation of PMI's acquisition in Egypt of United Tobacco Company in the second quarter of 2024. For further details on the acquisition in Egypt and Vectura Group's sale, see Note 3. Acquisitions and Divestitures.

In the second quarter of 2025, PMI finalized the measurement period adjustments related to its acquisition in Egypt of United Tobacco Company (UTC). For further details, see Note 3. Acquisitions and Divestitures.

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

Other Intangible Assets

Details of other intangible assets were as follows:

December 31, 2025December 31, 2024
(in millions)Weighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNet
Non-amortizable intangible assets$4,776$4,776$4,446$4,446
Amortizable intangible assets:
Trademarks14 years2,227$9841,2432,134$8501,284
Reacquired commercialization rights for IQOS in the U.S.3 years2,7779261,8512,7773702,407
Developed technology, including patents6 years358160198320121199
Customer relationships and other10 years3,8731,0572,8163,7127212,991
Total other intangible assets$14,011$3,127$10,884$13,389$2,062$11,327

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

Changes Due To:
(in millions)December 31, 2023Amortization & ImpairmentAcquisitions & DivestituresCurrency & OtherDecember 31, 2024
Non-amortizable intangible assets$4,543$(27)$211$(281)$4,446
Amortizable intangible assets:5,321(835)(187)2,5826,881
Gross book value6,884(454)2,5138,943
Accumulated amortization(1,563)(835)26769(2,062)
Total Intangibles, net$9,864$(862)$24$2,301$11,327
Changes Due To:
December 31, 2024Amortization & ImpairmentAcquisitions & DivestituresCurrency & OtherDecember 31, 2025
Non-amortizable intangible assets$4,446$—$25$305$4,776
Amortizable intangible assets:6,881(1,003)(94)3246,108
Gross book value8,943(128)4209,235
Accumulated amortization(2,062)(1,003)34(96)(3,127)
Total Intangibles, net$11,327$(1,003)$(69)$629$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 PMI's acquisition in Egypt. A pre-tax impairment charge in the first quarter of 2024 of $27 million for the in-process research and development project in the Wellness business was recorded in marketing, administration and research costs on PMI's consolidated statements of earnings for the year ended December 31, 2024.

Changes due to acquisitions and divestitures reflect the acquisition in Egypt of United Tobacco Company and the sale of Vectura Group and certain other businesses. For further details, see Note 3. Acquisitions and Divestitures.

Changes in currency and other in 2024 included the classification of $2.8 billion of the IQOS commercialization rights in the U.S. on the acquisition date (May 1, 2024) as Other intangible assets, net (see Note 3. Acquisitions and Divestitures).

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

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 reporting unit as any changes in assumptions and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals and authorizations, and other market factors could result in future goodwill and other intangible asset impairments. In addition, there are risks related to PMI’s Russian reporting unit’s assets as the fair value of these assets is difficult to predict due to the current economic, political, regulatory and social conditions as well as the foreign currency volatility. As of December 31, 2025, our Russian operations had approximately $4.8 billion in total assets, excluding intercompany balances, of which approximately $2.3 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles). Additionally, we hold a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia. For further details, see Note 5. Related Parties – Equity Investments and Other.

During the second quarter of 2024, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment. As a result of this review, no impairment charges were required.

During the second quarter of 2023, as a result of the completion of PMI's annual review of goodwill and non-amortizable intangible assets for potential impairment, it was determined that the estimated fair value of the Wellness reporting unit (previously referred to as Wellness & Healthcare reporting unit) was lower than its carrying value. Consequently, PMI recorded a goodwill impairment charge of $665 million in the consolidated statements of earnings for the year ended December 31, 2023, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to unfavorable clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness business. Additionally, as a result of the impairment test of non-amortizable intangible assets, PMI recorded a pre-tax impairment charge of $15 million for an in-process research and development project related to one of PMI's 2021 acquisitions. This pre-tax impairment charge of $15 million was recorded within marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2023.

Note 5.

Related Parties - Equity Investments and Other:

Equity Method Investments:

At December 31, 2025 and 2024, PMI had total equity method investments of $1,019 million and $1,005 million, respectively. Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses, dividends, capital contributions, changes in ownership interests and movements in currency translation adjustments. The carrying value of our equity method investments at December 31, 2025 and 2024, exceeded our share of the investees' book value by $1,033 million and $1,060 million, respectively. The difference between the investment carrying value and the amount of underlying equity in net assets is mainly attributable to equity method goodwill, convertible debt instruments, and definite-lived intangible assets and other assets. The difference related to the definite-lived intangibles and other assets at December 31, 2025 and 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 consolidated statements of earnings. At December 31, 2025 and 2024, PMI received year-to-date dividends from equity method investees of $203 million and $151 million, respectively.

PMI holds a 23% equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of December 31, 2025 had a carrying value of $303 million. Additionally, there was approximately $523 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2025. Previously TKM was a subsidiary of Megapolis Distribution B.V. ("MDBV"), a Dutch holding company in which PMI held a 23% equity interest. In June 2024, the Russian government included TKM in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which referred to the

mandatory removal of a foreign holding company from the shareholding structure. On August 8, 2024, the Arbitrazh Court of the Moscow Region granted the forced localization of MDBV as requested by the Ministry of Industry and Trade on July 18, 2024. As a result, MDBV’s shares in TKM were transferred to TKM and subsequently transferred to the Russian subsidiaries of its indirect shareholders during the fourth quarter of 2024. As a result of the transfer of shares, PMI recorded a tax charge of $77 million in the fourth quarter of 2024, primarily reflecting additional deferred withholding taxes related to the TKM pre-localization earnings and other adjustments of accumulated earnings of the Russian subsidiary. As of December 31, 2025, there are risks related to this investment as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.

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 3. Acquisitions and Divestitures.

In May 2024, PMI acquired an indirect economic interest of 14.7% in Eastern Company (“Eastern"), Egypt’s largest cigarette manufacturer which also includes cigars and pipe tobacco, among others, in its portfolio. PMI accounted for its investment in Eastern under the equity method of accounting as it has the indirect ability to participate in Eastern's policy making processes. In relation to the acquisition, PMI subsequently entered into an agreement in August 2024 to guarantee certain credit facilities and repayment of certain bank loan liabilities. The maximum amount of these guarantee obligations is $385 million and they will be in effect until 2034.

Additionally, as part of its Wellness business strategy, PMI holds non-controlling equity interests in certain companies, which as of December 31, 2025 had a carrying value of $41 million. During the third quarter of 2025, PMI recorded a non-cash charge of $146 million, primarily representing other-than-temporary impairment of one equity method investment following a reassessment of its estimated fair value triggered by the amendment of existing transaction agreements in the third quarter of 2025. The decline in the estimated fair value was primarily driven by the determination of a lower likelihood of success of certain projects in development. The impairment charge was recorded within equity investments and securities (income)/loss, net, in the consolidated statements of earnings in 2025.

The initial investments in Megapolis Distribution BV, EITA, Eastern, Wellness business related investments and UTC (up to the acquisition of controlling interest in UTC on May 16, 2024) have been recorded at cost and are included in equity investments on the consolidated balance sheets. Transactions between these equity method investees and PMI subsidiaries are considered to be related-party transactions and are included in the tables below.

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.

On October 17, 2024, the court-appointed mediator and monitor in the CCAA proceedings filed a proposed plan of compromise and arrangement (“Proposed Plan”) setting forth, among other things, certain terms of a proposed comprehensive resolution of Canadian tobacco claims and related litigation. Under the resolution contemplated by the Proposed Plan, RBH, Imperial Tobacco Canada Limited ("ITL") and JTI Macdonald Corp ("JTIM") would pay an aggregate global settlement amount of CAD 32.5 billion (approximately $23.7 billion as of December 31, 2025). 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. 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 at that time represented the estimated fair value of the underlying business, net of PMI’s best estimate of the share of the aggregate global settlement amount that could be allocated to RBH, and was determined based on an income approach using a discounted cash flow analysis.

In determining the fair value of PMI’s investment in RBH, PMI made various judgements, estimates and assumptions, the most significant of which were the discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada. In addition, significant estimates were made with respect to the allocation amount of the aggregate global settlement amount among RBH, ITL and JTIM, as well as the deductibility of the settlement amount payment for income tax purposes in Canada. All significant inputs used in the valuation are classified in Level 3 of fair value hierarchy. Transactions between PMI and RBH are considered to be related-party transactions from the date of deconsolidation and are included in the tables below.

On March 6, 2025, the CCAA court issued a decision approving the Proposed Plan as amended (the "Plan"). The Plan reflected a settlement resolving the dispute among the parties with respect to allocation of aggregate settlement amount, and it became effective on August 29, 2025. On September 24, 2025, as permitted by the Plan, RBH paid a dividend of CAD $750 million (approximately $536 million) to PMI. The dividend distribution triggered a re-assessment of the carrying value of the investment in RBH and resulted in a downward adjustment, decreasing the carrying value of PMI’s investment in RBH to $567 million. Consequently, in the third quarter of 2025, PMI recorded pre-tax income of $303 million within equity investments and securities (income)/loss, net, in PMI’s consolidated statement of earnings, reflecting the dividend income net of the corresponding decrease in the carrying value of the investment.

PMI evaluated the terms of the Plan and concluded that powers provided under the Plan to RBH’s CCAA Plan Administrator (as that term is defined in the Plan) and to the Claimants (as that term is defined in the Plan) continue to remove certain elements of control of the business from PMI and RBH. As a result, PMI has determined that RBH will remain deconsolidated as it does not have a controlling financial interest over RBH as defined in ASC 810 (Consolidation). PMI also does not exert "significant influence" over RBH as that term is defined in ASC 323 (Investments-Equity Method and Joint Ventures). Therefore, PMI will continue to account for its investment in RBH in accordance with ASC 321 (Investments-Equity Securities) as an equity security, without readily determinable fair value, until the aggregate global settlement amount has been paid and the operating covenants that govern RBH’s business are lifted.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $1,291 million and $921 million for the years ended December 31, 2025 and 2024, respectively. Unrealized pre-tax gains (losses) of $370 million and $546 million ($289 million and $418 million net of tax) on these equity securities were recorded in equity investments and securities (income)/loss, net on the consolidated statements of earnings for the years ended December 31, 2025 and 2024, respectively. For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Note 2. Summary of Significant Accounting Policies.

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.

Financial activity with the above related parties:

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

For the Years Ended December 31,
(in millions)202520242023
Net revenues:
Megapolis Group$2,805$2,393$2,267
Other1,7771,4831,286
Net revenues (a)$4,582$3,876$3,553
Expenses:
Other$210$101$186
Expenses$210$101$186

(a) Net revenues exclude excise taxes and VAT billed to customers.

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

At December 31,
(in millions)20252024
Receivables:
Megapolis Group$568$405
Other271286
Receivables$839$691
Payables:
Other$37$60
Payables$37$60

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

Note 6.

Indebtedness:

Short-Term Borrowings

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

December 31, 2025December 31, 2024
(in millions)Amount OutstandingAverage Year-End RateAmount OutstandingAverage Year-End Rate
Commercial paper$——%$——%
Bank loans16810.31378.6
$168$137

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 at December 31, 2025 and 2024, based on current market interest rates, approximate carrying value.

Long-Term Debt

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

December 31,
(in millions)20252024
U.S. dollar notes, 0.875% to 6.375% (average interest rate 4.623%), due through 2044$37,430$35,297
Foreign currency obligations:
Euro notes, 0.125% to 3.750% (average interest rate 2.162%), due through 20397,9427,082
Euro credit facility borrowing related to Swedish Match AB acquisition, (interest rate 2.553%), due 20272,9442,610
Swedish krona notes, 1.395% to 2.710% (average interest rate 2.016%), due through 2029267218
Other (average interest rate 4.050%), due through 2032 (a)84351
Carrying value of long-term debt48,66745,558
Less current portion of long-term debt3,5333,392
$45,134$42,166

(a) At December 31, 2025, represents $84 million in finance leases; at December 31, 2024 represents long-term bank loans at subsidiaries, as well as $67 million in finance leases.

The fair value of PMI’s outstanding long-term debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. At December 31, 2025 and 2024 the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

December 31,
(in millions)20252024
Level 1$45,288$41,431
Level 23,0853,011

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Note 2*. Summary of Significant Accounting Policies*.

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 December 31, 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.

Notes Outstanding:

PMI’s notes outstanding at December 31, 2025, were as follows:

(in millions)
TypeFace ValueInterest RateIssuanceMaturity
U.S. dollar notes$7502.750%February 2016February 2026
U.S. dollar notes$7500.875%November 2020May 2026
U.S. dollar notes$7504.750%February 2024February 2027
U.S. dollar notes$5003.125%August 2017August 2027
U.S. dollar notes$7504.375%November 2024November 2027
U.S. dollar notes$1,5005.125%November 2022November 2027
U.S. dollar notes$1,0004.875%February 2023February 2028
U.S. dollar notes(a)$5504.875%May 2023February 2028
U.S. dollar notes$5003.125%November 2017March 2028
U.S. dollar notes$400FloatingApril 2025April 2028
U.S. dollar notes$7504.125%April 2025April 2028
U.S. dollar notes(b)$504.000%May 2013May 2028
U.S. dollar notes$6505.250%September 2023September 2028
U.S. dollar notes$300FloatingOctober 2025October 2028
U.S. dollar notes$7503.875%October 2025October 2028
U.S. dollar notes$1,0004.875%February 2024February 2029
U.S. dollar notes$7503.375%May 2019August 2029
U.S. dollar notes$7504.625%November 2024November 2029
U.S. dollar notes$1,2505.625%November 2022November 2029
U.S. dollar notes$1,5005.125%February 2023February 2030
U.S. dollar notes(c)$7005.125%May 2023February 2030
U.S. dollar notes$7504.375%April 2025April 2030
U.S. dollar notes$7502.100%May 2020May 2030
U.S. dollar notes$7005.500%September 2023September 2030
U.S. dollar notes$7504.000%October 2025October 2030
U.S. dollar notes$7501.750%November 2020November 2030
U.S. dollar notes$1,2505.125%February 2024February 2031
U.S. dollar notes$7504.750%November 2024November 2031
U.S. dollar notes$8504.250%October 2025October 2032
U.S. dollar notes$1,5005.750%November 2022November 2032
U.S. dollar notes$1,5005.375%February 2023February 2033
U.S. dollar notes(d)$7505.375%May 2023February 2033
U.S. dollar notes$1,0005.625%September 2023September 2033
U.S. dollar notes$1,7505.250%February 2024February 2034
U.S. dollar notes$7504.900%November 2024November 2034
U.S. dollar notes$6004.875%April 2025April 2035
U.S. dollar notes$8504.625%October 2025October 2035
U.S. dollar notes$1,5006.375%May 2008May 2038
U.S. dollar notes$7504.375%November 2011November 2041
U.S. dollar notes$7004.500%March 2012March 2042
U.S. dollar notes$7503.875%August 2012August 2042
U.S. dollar notes$8504.125%March 2013March 2043
U.S. dollar notes$7504.875%November 2013November 2043
(in millions)
TypeFace ValueInterest RateIssuanceMaturity
U.S. dollar notes$7504.250%November 2014November 2044
U.S. dollar notes(e)$5004.250%May 2016November 2044
EURO notes(f)€1,000 (approximately $1,372)2.875%March 2014March 2026
EURO notes(f)€500 (approximately $557)0.125%August 2019August 2026
EURO notes(b)€300 (approximately $308)0.875%February 2020February 2027
EURO notes(f)€500 (approximately $697)2.875%May 2014May 2029
EURO notes(f)€500 (approximately $569)2.750%June 2025June 2029
EURO notes(f)€500 (approximately $543)3.750%June 2024January 2031
EURO notes(f)€750 (approximately $835)0.800%August 2019August 2031
EURO notes(f)€500 (approximately $569)3.250%June 2025June 2032
EURO notes(f)€500 (approximately $648)3.125%June 2013June 2033
EURO notes(f)€500 (approximately $578)2.000%May 2016May 2036
EURO notes(f)€500 (approximately $582)1.875%November 2017November 2037
EURO notes(f)€750 (approximately $835)1.450%August 2019August 2039
Swedish krona notes(b)SEK1,000 (approximately $95)2.710%January 2019January 2026
Swedish krona notes(b)SEK700 (approximately $67)1.395%February 2021February 2026
Swedish krona notes(b)SEK100 (approximately $10)1.395%March 2021February 2026
Swedish krona notes(b)SEK200 (approximately $19)1.395%September 2021February 2026
Swedish krona notes(b)SEK200 (approximately $19)1.395%January 2022February 2026
Swedish krona notes(b)SEK300 (approximately $29)2.190%April 2021April 2029

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

(b) Notes issued by Swedish Match AB. USD equivalents for foreign currency notes were calculated based on exchange rates on the date of acquisition.

(c) These notes are a further issuance of the 5.125% notes issued in February 2023.

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

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

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

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper, and to refinance certain of our outstanding notes due in 2026.

Debt Extinguishment

On December 4, 2025, PMI redeemed all of its outstanding 4.875% U.S. dollar notes due February 13, 2026. As of this date (prior to the redemption), $1.7 billion aggregate principal amount of the U.S. dollar notes were outstanding. The pre-tax loss related to this debt extinguishment, which was not material, was included in Interest expense, net on PMI’s consolidated statements of earnings in 2025.

Aggregate maturities:

Aggregate maturities of long-term debt are as follows:

(in millions)
2026$3,540
20276,816
20284,968
20294,968
20305,903
2031-203514,199
2036-20403,561
Thereafter5,050
49,005
Debt discounts and fair value adjustments(338)
Total long-term debt$48,667

Revolving Credit Facilities

At December 31, 2025, PMI’s total committed revolving credit facilities were as follows:

Type (in billions)Committed Revolving Credit Facilities
Multi-year $2.0 billion revolving credit, expiring February 10, 2026 (1)$2.0
Multi-year $2.5 billion revolving credit, expiring September 29, 2026 (2) (3)2.5
Multi-year €1.5 billion revolving credit, expiring January 29, 20281.8
Total facilities$6.3

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

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

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

(3) On September 20, 2022, PMI entered into an agreement, effective September 29, 2022, to amend and extend the term of its $2.5 billion multi-year revolving credit facility, for an additional year covering the period September 30, 2026 to September 29, 2027, in the amount of $2.3 billion. 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 December 31, 2025, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

On December 11, 2025, PMI entered into a credit agreement, effective as of January 29, 2026, relating to a senior unsecured revolving credit facility with borrowings up to an aggregate principal amount of $2.0 billion expiring on January 29, 2031. This credit agreement replaces PMI’s existing multi-year revolving credit facility, which was to expire on February 10, 2027. PMI provided notice of termination of the existing multi-year $2.0 billion revolving credit facility on December 11, 2025, with termination effective as of January 29, 2026.

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

In addition to the committed revolving credit facilities discussed above, PMI maintains certain short-term credit arrangements, including uncommitted credit lines, to primarily meet working capital needs. These credit arrangements amounted to approximately $3.9 billion at December 31, 2025, and approximately $2.1 billion at December 31, 2024. Borrowings under these arrangements and other bank loans amounted to $168 million at December 31, 2025, and $137 million at December 31, 2024.

Note 7.

Capital Stock:

Shares of authorized common stock are 6.0 billion; issued, repurchased and outstanding shares were as follows:

Shares IssuedShares RepurchasedShares Outstanding
Balances, January 1, 20232,109,316,331(559,098,620)1,550,217,711
Issuance of stock awards2,206,8202,206,820
Balances, December 31, 20232,109,316,331(556,891,800)1,552,424,531
Issuance of stock awards2,421,0692,421,069
Balances, December 31, 20242,109,316,331(554,470,731)1,554,845,600
Issuance of stock awards1,811,0891,811,089
Balances, December 31, 20252,109,316,331(552,659,642)1,556,656,689

At December 31, 2025, 24,866,555 shares of common stock were reserved for stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued. PMI currently has no plans to issue any shares of preferred stock.

Note 8.

Stock Plans:

In May 2022, PMI’s shareholders approved the Philip Morris International Inc. 2022 Performance Incentive Plan (the “2022 Plan”). Under the 2022 Plan, PMI may grant to eligible employees restricted shares and restricted share units, performance-based cash incentive awards and performance-based equity awards. Up to 25 million shares of PMI’s common stock may be issued under the 2022 Plan. At December 31, 2025, shares available for grant under the 2022 Plan were 16,951,135.

In May 2017, PMI’s shareholders approved the Philip Morris International Inc. 2017 Stock Compensation Plan for Non-Employee Directors (the “2017 Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the 2017 Non-Employee Directors Plan. At December 31, 2025, shares available for grant under the plan were 845,900.

Restricted share unit (RSU) awards

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

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

(in millions)Compensation Expense Related to RSU AwardsTax Benefit/(Charge) Related to RSU Awards
2025$175$41
2024$157$29
2023$153$26

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

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

Number of SharesWeighted- Average Grant Date Fair Value Per ShareTotal Grant Date Fair Value of RSU Awards (in millions)Total Fair Value of RSU Awards that Vested (in millions)
Balances, January 1, 20234,519,470$91.26
Granted1,756,750$101.96$179
Vested(1,483,356)$87.30$(129)$(148)
Forfeited(189,543)$96.96$(18)
Balances, December 31, 20234,603,321$96.38
Granted2,013,350$89.71$181
Vested(1,849,088)$85.57$(158)$(171)
Forfeited(224,929)$97.43$(22)
Balances, December 31, 20244,542,654$97.78
Granted1,526,970$145.53$222
Vested(1,431,108)$104.85$(150)$(216)
Forfeited(177,756)$108.39$(19)
Balance at December 31, 20254,460,760$111.43

As of December 31, 2025, PMI had $180 million of total unrecognized compensation costs related to non-vested RSU awards. These costs are expected to be recognized over a weighted-average period of approximately seventeen months, or upon death, disability or reaching the age of 58.

Performance share unit (PSU) awards

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 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; and

  • Operational Sustainability (10% weight): aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's business activities; measuring progress on PMI's efforts to benefit PMI and its stakeholders by tackling climate change, preserving nature, improving the quality of life of people in its supply chain, and fostering an empowered, and inclusive workplace.

The performance metrics, targets and relative weights for the PSU’s granted during 2025 were the same as the PSU’s granted during 2024, with the exception of the annual growth rate of adjusted diluted EPS metric goals, which was increased, and for changes to certain components of the Sustainability Index. In the Sustainability Index, certain KPIs were adjusted to reflect PMI’s developing sustainability strategy and the number of individual KPIs was reduced, both in acknowledgment of the maturity of certain programs measured by removed KPIs and to further focus management performance on the remaining Sustainability Index metrics.

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

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

The aggregate of the weighted performance factors for the three metrics in each such PSU award determines the percentage of PSUs that will vest at the end of the three-year performance cycle. The minimum percentage of such PSUs that can vest is zero, with a target percentage of 100 and a maximum percentage of 200. Each such vested PSU entitles the participant to one share of common stock. An aggregate weighted PSU performance factor of 100 will result in the targeted number of PSUs being vested. 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. PSU awards do not carry voting rights.

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

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

(in millions)Compensation Expense related to PSU AwardsTax Benefit/(Charge) Related to PSU Awards
2025$79$20
2024$70$15
2023$59$13

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

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

Number of SharesWeighted- Average PSU Grant Date Fair Value Subject to Other Performance Factors (Per Share)Weighted- Average PSU Grant Date Fair Value Subject to TSR Performance Factors (Per Share)Total Grant Date Fair Value of PSU Awards (in millions)Total Fair Value of PSU Awards that Vested (in millions)
Balances, January 1, 20231,507,190$90.31$115.45
Granted482,360$102.02$133.54$55
Vested(902,232)$85.99$98.45$(83)$(91)
Adjustments for performance achievement400,992$85.99$98.45$37
Forfeited(61,030)$98.24$131.39$(7)
Balances, December 31, 20231,427,280$95.45$126.86
Granted543,560$89.01$85.72$48
Vested(916,452)$82.28$107.69$(86)$(83)
Adjustments for performance achievement374,402$82.17$107.70$36
Forfeited(78,630)$97.42$117.24$(8)
Balances, December 31, 20241,350,160$98.00$118.55
Granted396,400$145.35$213.72$68
Vested(686,052)$104.97$143.64$(84)$(102)
Adjustments for performance achievement282,492$104.97$143.64$36
Forfeited(38,620)$105.55$127.27$(4)
Balance at December 31, 20251,304,380$110.02$139.46

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the closing market price of PMI’s stock on the date of the grant. The grant date fair value of the PSU market-based awards subject to the TSR performance factor was determined by using the Monte Carlo simulation model. The following assumptions were used to determine the grant date fair value of the PSU awards subject to the TSR performance factor for the years ended December 31, 2025, 2024 and 2023:

For the Years Ended December 31,
202520242023
Average risk-free interest rate (a)4.1%4.2%4.1%
Average expected volatility (b)21.0%19.9%24.3%

(a) Based on the U.S. Treasury yield curve.

(b) Determined using the observed historical volatility.

As of December 31, 2025, PMI had $40 million of total unrecognized compensation cost related to non-vested PSU awards. This cost is recognized over a weighted-average performance cycle period of approximately eighteen months, or upon death, disability or reaching the age of 58.

Note 9.

Earnings per Share:

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

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

For the Years Ended December 31,
(in millions)202520242023
Net earnings attributable to PMI$11,348$7,057$7,813
Less distributed and undistributed earnings attributable to share-based payment awards (1)322322
Net earnings for basic and diluted EPS$11,316$7,034$7,791
Weighted-average shares for basic EPS1,5561,5541,552
Plus contingently issuable performance stock units (PSUs) (1)221
Weighted-average shares for diluted EPS1,5581,5561,553

(1) Including rounding adjustment

For the 2025, 2024 and 2023 computations, there were no antidilutive stock awards.

Note 10.

Income Taxes:

PMI adopted Accounting Standards Update ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”) on a prospective basis within its annual reporting for the year ended December 31, 2025. For further details, see Note 21. New Accounting Standards.

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

(in millions)2025
Earnings before income taxes
United States$870
Foreign13,010
Total earnings before income taxes$13,880
Provision for income taxes:
Current tax expense (benefit)
U.S. Federal$371
U.S. State and Local31
Foreign3,182
Total current tax expense (benefit)3,584
Deferred tax expense (benefit)
U.S. Federal(817)
U.S. State and Local(40)
Foreign10
Total deferred tax expense (benefit)(847)
Total provision for income taxes$2,737

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

(in millions)20242023
Earnings before income taxes$12,199$10,450
Provision for income taxes:
United States federal and state:
Current$465$201
Deferred(81)(368)
Total United States384(167)
Outside United States:
Current2,6682,468
Deferred(35)38
Total outside United States2,6332,506
Total provision for income taxes$3,017$2,339

On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was signed into law in the U.S. The Act contains several provisions related to corporate income taxes, including the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The provisions and modifications included in the Act did not have a material impact on PMI’s 2025 consolidated financial statements.

Changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which recommended changes to numerous long-standing tax principles. Many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for

taxable years beginning after December 31, 2023. PMI has determined that Pillar Two did not have a material impact on its 2024 or 2025 consolidated financial statements.

At December 31, 2025, U.S. federal and foreign deferred income taxes have been provided on all accumulated earnings of PMI's foreign subsidiaries.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2019 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years after the filing of a return. Years still open to examination by foreign tax authorities in major jurisdictions include Indonesia (2020 onward), Italy (2020 onward), Russia (2023 onward) and Switzerland (2021 onward).

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 4.5 trillion Indonesian rupiah (approximately $269 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2017 to 2023. Objection letters have been filed with the Tax Office and these assessments are being challenged at various levels in court. These income tax receivables are included in other assets in PMI’s consolidated balance sheets at December 31, 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.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

(in millions)202520242023
Balance at January 1,$56$55$72
Additions based on tax positions related to the current year4067
Additions for tax positions of previous years4211
Reductions for tax positions of prior years(34)—(23)
Reductions due to lapse of statute of limitations(4)(2)(3)
Other5(4)1
Balance at December 31,$105$56$55

Unrecognized tax benefits and PMI’s liability for contingent income taxes, interest and penalties were as follows:

(in millions)December 31, 2025December 31, 2024December 31, 2023
Unrecognized tax benefits$105$56$55
Accrued interest and penalties25119
Tax credits and other indirect benefits(1)(1)(1)
Liability for tax contingencies$129$66$63

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $108 million at December 31, 2025. The remainder, if recognized, would principally affect deferred taxes.

For the years ended December 31, 2025, 2024 and 2023, PMI recognized income (expense) in its consolidated statements of earnings of $(14) million, $(2) million and $5 million, respectively, related to interest and penalties associated with uncertain tax positions.

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the year ended December 31, 2025:

(in millions)
Pretax income$13,880
AmountPercentage
Provision Computed at Statutory U.S. Tax Rate$2,91521.0%
State and Local Income Taxes, Net of Federal Income Tax Effects*(12)(0.1)
Foreign Tax Effects:
Switzerland:
Swiss Federal Rate Differential(920)(6.6)
Cantonal Taxes - Vaud2481.8
Cantonal Taxes - Neuchatel2551.8
Other(10)(0.1)
Russia:2631.9
Other Foreign Jurisdictions3882.8
Effect of Cross-Border Tax Laws670.5
Nontaxable/Nondeductible Items(17)(0.1)
Valuation Allowances5193.8
Other
Foreign Exchange(384)(2.8)
Deferred Taxes on Canadian Equity Investment(343)(2.5)
Other(232)(1.7)
Consolidated tax expense / effective tax rate$2,73719.7%

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

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2024 and 2023:

20242023
U.S. federal statutory rate21.0%21.0%
Increase (decrease) resulting from:
Foreign rate differences(1.6)(1.0)
Dividend repatriation cost0.60.7
Global intangible low-taxed income1.72.0
U.S. state taxes0.6(0.1)
Foreign derived intangible income(0.7)(0.9)
Foreign exchange1.7(1.6)
Non-deductible goodwill impairment—1.3
Unremitted earnings of Russian subsidiaries0.61.7
Fair value adjustment of equity securities1.10.1
Other(0.3)(0.8)
Effective tax rate24.7%22.4%

The 2025 effective tax rate decreased 5.0 percentage points to 19.7%. The effective tax rate for 2025 was favorably impacted by: (i) a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings ($384 million), while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, (ii) benefits related to an interest expense election primarily driven by a reduction in tax costs

associated with global intangible low-taxed income (including $174 million for 2024) and (iii) refunds expected on amended tax returns filed in Germany ($89 million); partially offset by: (i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($81 million), (ii) tax impacts of the RBH (Canada) Plan Implementation ($166 million), (iii) valuation allowances recorded on deferred tax assets related to U.S. foreign tax credits ($50 million), and (iv) the recognition of current tax expense related to the potential disallowance of intercompany transactions in Indonesia ($39 million). For further details on the RBH (Canada) Plan Implementation, see Note 5. Related Parties - Equity Investments and Other.

The 2024 effective tax rate increased 2.3 percentage points to 24.7%. The effective tax rate for 2024 was unfavorably impacted by: (i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI; (ii) U.S. state taxes; and (iii) a deferred tax charge for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, partially offset by: (i) a lower deferred tax charge in 2024 related to the unremitted earnings of PMI's Russian subsidiaries as compared to the 2023 charge following the suspension of certain double tax treaties; (ii) the non-deductible Wellness goodwill impairment charge recorded in 2023; and (iii) a U.S. tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI's investment in C.A. Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela. For further details on PMI's ceased operations in Venezuela and the impairment loss related to the sale of Vectura Group, see Note 18. Restructuring Activities and Note 3. Acquisitions and Divestitures, respectively.

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

At December 31,
(in millions)20252024
Deferred income tax assets:
Accrued postretirement and postemployment benefits$227$208
Accrued pension costs189384
Inventory4740
Accrued liabilities212213
Net operating loss, tax credit, and other carryforwards1,542912
Investments in equity interests810507
Foreign exchange451—
Other32562
Total deferred income tax assets3,8032,326
Less: valuation allowance(1,709)(1,130)
Deferred income tax assets, net of valuation allowance2,0941,196
Deferred income tax liabilities:
Intangible assets(1,936)(1,862)
Property, plant and equipment(165)(152)
Unremitted earnings(811)(495)
Foreign exchange—(264)
Other——
Total deferred income tax liabilities(2,912)(2,773)
Net deferred income tax assets (liabilities)$(818)$(1,577)

At December 31, 2025, PMI recorded deferred tax assets for net operating loss, tax credit, and other carryforwards of $1,542 million, with varying dates of expiration, primarily after 2031, including $961 million with an unlimited carryforward period. At December 31, 2025, PMI has recorded a valuation allowance of $1,709 million against deferred tax assets that do not meet the more-likely-than not recognition threshold.

At December 31, 2024, PMI recorded deferred tax assets for net operating loss, tax credit, and other carryforwards of $912 million, with varying dates of expiration, primarily after 2029, including $381 million with an unlimited carryforward period. At December 31, 2024, PMI has recorded a valuation allowance of $1,130 million against deferred tax assets that do not meet the more-likely-than-not recognition threshold.

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

(in millions)2025
Income tax payments (net of refunds):
United States:
U.S. Federal$797
U.S. State and Local107
Total United States904
Foreign:
Switzerland929
Russia348
Italy301
Other1,370
Total Foreign2,948
Total$3,852
Note 11.

Segment Reporting:

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

The Group CEO PMI, who is the chief operating decision maker ("CODM") evaluates geographical segment performance based on the regional operating income, which includes results from all product categories sold in each region. The CODM reviews short-term and long-term trends, forecasts, and budget-to-actual variances to assess geographical segment performance and to allocate resources. Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets and capital expenditures by segment is not disclosed because such information is not reported to or used by PMI’s CODM. Segment goodwill and other intangible assets, net, are disclosed in Note 4. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.

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)EuropeSSEA, CIS & MEAEA, AU & PMI GTRAmericasTotal
For the Year Ended December 31, 2025
Net revenues$17,111$12,051$6,632$4,854$40,648
Less:
Cost of sales4,5015,1901,9611,71413,366
Marketing, administration and research costs5,4042,7651,5452,63512,349
Impairment of goodwill41———41
Operating income$7,165$4,096$3,126$505$14,892
For the Year Ended December 31, 2024
Net revenues$15,690$11,261$6,393$4,534$37,878
Less:
Cost of sales4,4745,3132,0111,53113,329
Marketing, administration and research costs4,6692,5191,5042,45511,147
Operating income$6,547$3,429$2,878$548$13,402
For the Year Ended December 31, 2023
Net revenues$14,537$10,629$6,201$3,807$35,174
Less:
Cost of sales4,3215,1091,9781,48512,893
Marketing, administration and research costs4,2522,3841,6841,74010,060
Impairment of goodwill665———665
Operating income$5,299$3,136$2,539$582$11,556

Total net revenues attributable to customers located in Japan, PMI's largest market in terms of net revenues, were $4.2 billion, $4.1 billion and $3.9 billion in 2025, 2024 and 2023, respectively. PMI had one customer in the EA, AU & PMI GTR segment that accounted for 10%, 11% and 11% of PMI’s consolidated net revenues, and one customer in the Europe segment that accounted for 12%, 11% and 12% of PMI’s consolidated net revenues in 2025, 2024 and 2023, respectively.

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

For the Years Ended December 31,
(in millions)202520242023
Combustible tobacco:
Europe$8,984$8,599$8,037
SSEA, CIS & MEA10,2339,8489,321
EA, AU & PMI GTR2,4152,5162,676
Americas2,1632,2552,299
Total combustible tobacco23,79423,21822,334
Smoke-free:
Europe8,1277,0916,500
of which, Wellness238333306
SSEA, CIS & MEA1,8181,4131,308
EA, AU & PMI GTR4,2173,8773,525
Americas2,6912,2791,508
Total Smoke-free16,85414,66012,840
Total PMI net revenues$40,648$37,878$35,174

Note: 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 18. Restructuring Activities for details of the $241 million, $180 million and $109 million pre-tax charges for the year ended December 31, 2025, 2024 and 2023, respectively, as well as a breakdown of these costs by segment.

  • Impairment of goodwill and other intangibles – For the year ended December 31, 2025, PMI recorded a goodwill impairment charge of $41 million that was included in the Europe segment. For the year ended December 31, 2023, PMI recorded $680 million of goodwill and non-amortizable intangible assets impairment charges that was included in the Europe segment. For further details, see Note 4. Goodwill and Other Intangible Assets, net.

  • Germany excise tax classification litigation charge – In August 2024, the German Main Custom Office (“MCO”) notified Philip Morris (Germany) GmbH (“PM Germany”) of its decision to classify TEREA consumables as a cigarette for excise tax purposes with the associated tax assessment totaling EUR 151 million (approximately $176 million) covering the period of February 15, 2023, through August 1, 2024. In April 2025, PM Germany paid the outstanding amount, which was recorded in Other assets on the consolidated balance sheets, while it challenged the MCO’s decision in court. On September 17, 2025, PM Germany filed a request to withdraw the proceedings. As a result, the tax assessment amount of $176 million was recorded in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2025, and was included in the Europe segment results.

  • Loss on expected sale of consumer accessories and other businesses – See Note 3. Acquisitions and Divestitures for details of the pre-tax loss of $94 million recorded in the Europe segment for the year ended year ended December 31, 2025.

  • Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, PMI concluded that an adverse outcome was probable and recorded a pre-tax charge of $45 million in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016. This pre-tax charge was recorded in marketing, administration and research costs in the consolidated statement of earnings for the year ended December 31, 2024, and was included in the SSEA, CIS & MEA segment results.

  • Loss on sale of Vectura Group – In September 2024, PMI announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd. On December 31, 2024, we completed the sale. The sale resulted in a pre-tax loss of $199 million. This pre-tax loss was recorded in marketing, administration and research costs in the consolidated statement of earnings for the year ended December 31, 2024, and was included in the Europe segment results. For further details, see Note 3. Acquisitions and Divestitures.

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

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

  • South Korea indirect tax charge – On July 13, 2023, PMI's South Korean subsidiary, PM Korea, received an adverse ruling from the Supreme Court of South Korea related to cases alleging underpayment of excise taxes in connection with a 2015 excise tax increase and subsequent audit by the South Korean Board of Audit and Inspection. The Supreme Court ruling reversed previous decisions that were in PM Korea’s favor at the trial and appellate levels. As a result of the ruling, we concluded that an adverse outcome was probable. Consequently, we recorded a non-cash pre-tax charge of $204 million in marketing, administration and research costs in the consolidated statements of earning, reflecting the full amount previously paid by PM Korea, which was included in the EA, AU & PMI GTR segment for the year ended December 31, 2023.

  • Termination of agreement with Foundation for a Smoke-Free World – On September 29, 2023, PMI and the Foundation for a Smoke-Free World (the "Foundation") entered into the Final Grant Agreement and Termination of the Second Amended and Restated Pledge Agreement ("Agreement"). Under the terms of the agreement, PMI paid $140 million in the third quarter of 2023 in return for the termination of the pledge agreement between the parties. As a result, in the third quarter of 2023, PMI recorded a pre-tax charge of $140 million commensurate with the early termination of the pledge agreement. The pre-tax charge was recorded in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2023 and was included in the operating results of the following segments: Europe ($60 million); SSEA, CIS & MEA ($41 million); EA, AU & PMI GTR ($24 million); and Americas ($15 million).

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

Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products that are combusted. Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include smoke-free products.

Net revenues related to smoke-free, excluding wellness, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable. These net revenue amounts consist of the sale of PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories. Net revenues related to wellness refer to the operating revenues generated from the sale of product, primarily associated with oral and intra-oral delivery systems.

Other segment data were as follows:

For the Years Ended December 31,
(in millions)202520242023
Depreciation and amortization expense:
Europe$558$562$563
SSEA, CIS & MEA294304304
EA, AU & PMI GTR194173144
Americas950748387
Total depreciation and amortization expense$1,996$1,787$1,398

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

At December 31,
(in millions)202520242023
Long-lived assets:
Europe$6,619$5,540$5,697
SSEA, CIS & MEA2,2092,1602,197
East Asia and Australia405378481
Americas1,9971,5591,310
Total long-lived assets11,2309,6379,685
Altria Group, Inc. agreement——2,777
Financial instruments1,306456701
Total property, plant and equipment, net and Other assets$12,536$10,093$13,163

Long-lived assets consist of non-current assets other than goodwill; other intangible assets, net; deferred tax assets, equity investments, financial instruments and payment under the agreement with Altria Group, Inc., see Note 3, Acquisitions and Divestitures. PMI's largest markets in terms of long-lived assets are Switzerland, Indonesia and Italy, as well as the U.S. Total long-lived assets located in Switzerland, which is reflected in the Europe segment above, were $1.7 billion, $1.4 billion and $1.6 billion at December 31, 2025, 2024 and 2023, respectively. Total long-lived assets located in Indonesia, which is reflected in the SSEA, CIS & MEA segment above, were $1.0 billion, $1.0 billion and $1.1 billion at December 31, 2025, 2024 and 2023, respectively. Total long-lived assets located in Italy, which is reflected in the Europe segment above, were $1.1 billion, $1.0 billion and $1.0 billion at December 31, 2025, 2024 and 2023, respectively. Total long-lived assets located in the U.S., which is reflected in the Americas segment above, were $1.6 billion at December 31, 2025.

Note 12.

Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to certain U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

Pension and other employee benefit costs per the consolidated statements of earnings consisted of the following for December 31, 2025, 2024 and 2023:

(in millions)202520242023
Net pension costs (income)$(88)$(76)$(84)
Net postemployment costs118123117
Net postretirement costs161312
Total pension and other employee benefit costs$46$60$45

Pension and Postretirement Benefit Plans

Obligations and Funded Status

The projected benefit obligations, plan assets and funded status of PMI’s pension plans, and the accumulated benefit obligation, plan assets and net amount accrued for PMI's postretirement health care plans, at December 31, 2025 and 2024, were as follows:

Pension**(1)**Postretirement
(in millions)2025202420252024
Benefit obligation at January 1$10,456$10,567$248$246
Service cost24021843
Interest cost2092341213
Benefits paid(567)(434)(13)(14)
Employee contributions168157——
Settlement, curtailment and plan amendment(32)(12)—(1)
Actuarial losses (gains)(640)460112
Currency1,317(708)45
Other(17)(26)(3)(6)
Benefit obligation at December 31,11,13410,456263248
Fair value of plan assets at January 1,9,0308,85133
Actual return on plan assets882973——
Employer contributions, net of refunds1391101314
Employee contributions168157——
Benefits paid(567)(434)(13)(14)
Settlement(18)(10)—(1)
Currency1,182(600)—1
Other—(17)——
Fair value of plan assets at December 31,10,8169,03033
Net pension and postretirement liability recognized at December 31,$(318)$(1,426)$(260)$(245)

(1) Primarily non-U.S. based defined benefit retirement plans.

At December 31, 2025, actuarial losses (gains) consisted primarily of gains for assumption changes related to higher discount rates year-over-year for the Swiss, German and Dutch plans. At December 31, 2024, actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for the Swiss plan.

At December 31, 2025 and 2024, the Swiss pension plan represented 71% and 69% of the benefit obligation, respectively, and approximately 65% and 63% of the fair value of plan assets at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, the U.S. pension plans represented 5% and 6% of the benefit obligation, respectively, and approximately 5% and 6% of the fair value of plan assets at December 31, 2025 and 2024, respectively.

At December 31, 2025 and 2024, the amounts recognized on PMI's consolidated balance sheets for the pension and postretirement plans were as follows:

PensionPostretirement
(in millions)2025202420252024
Other assets$926$490
Accrued liabilities — employment costs(29)(33)$(16)$(14)
Long-term employment costs(1,215)(1,883)(244)(231)
$(318)$(1,426)$(260)$(245)

The accumulated benefit obligation, which represents benefits earned to date, for the pension plans was $10.6 billion and $9.9 billion at December 31, 2025 and 2024, respectively.

For pension plans with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $8.4 billion and $7.6 billion, respectively, as of December 31, 2025. The accumulated benefit obligation and fair value of plan assets were $7.7 billion and $6.2 billion, respectively, as of December 31, 2024.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $8.8 billion and $7.6 billion, respectively, as of December 31, 2025. The projected benefit obligation and fair value of plan assets were $8.2 billion and $6.2 billion, respectively, as of December 31, 2024.

The following weighted-average assumptions were used to determine PMI’s pension and postretirement benefit obligations at December 31:

PensionPostretirement
2025202420252024
Discount rate2.42%2.07%5.56%5.35%
Rate of compensation increase1.851.89
Interest crediting rate3.163.05
Health care cost trend rate assumed for next year6.676.82
Ultimate trend rate4.604.71
Year that rate reaches the ultimate trend rate20502048

The discount rate for the largest pension plans is based on a yield curve constructed from a portfolio of high quality corporate bonds that produces a cash flow pattern equivalent to each plan’s expected benefit payments. The discount rate for the remaining plans is developed from local bond indices that match local benefit obligations as closely as possible.

Components of Net Periodic Benefit Cost

Net periodic pension and postretirement health care costs consisted of the following for the years ended December 31, 2025, 2024 and 2023:

PensionPostretirement
(in millions)202520242023202520242023
Service cost$240$218$174$4$3$4
Interest cost209234258121312
Expected return on plan assets(437)(403)(365)———
Amortization:
Net losses14593183(1)(1)
Prior service cost (credit)(2)(2)(2)———
Settlement and curtailment(3)27111
Net periodic pension and postretirement costs$152$142$90$20$16$16

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

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

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

PensionPostretirement
202520242023202520242023
Discount rate - service cost2.39%2.68%3.27%5.35%5.19%5.89%
Discount rate - interest cost1.972.343.035.355.195.89
Expected rate of return on plan assets4.654.634.42
Rate of compensation increase1.892.051.98
Interest crediting rate3.052.992.97
Health care cost trend rate6.826.546.14

PMI’s expected rate of return on pension plan assets is determined by the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

PMI and certain of its subsidiaries sponsor defined contribution plans. Amounts charged to expense for defined contribution plans totaled $158 million, $123 million and $111 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Plan Assets

PMI’s investment strategy for pension plans is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the target allocation of PMI’s plan assets is broadly characterized as approximately 55% in equity securities and approximately 45% in debt securities and other assets. The strategy primarily utilizes indexed U.S. equity securities, international equity securities and investment-grade debt securities. PMI attempts to mitigate investment risk by rebalancing between equity and debt asset classes once a year or as PMI’s contributions and benefit payments are made.

The fair value of PMI’s pension plan assets at December 31, 2025 and 2024, by asset category was as follows:

Asset Category (in millions)At December 31, 2025Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Cash and cash equivalents$10$10
Equity securities:
U.S. securities155155
International securities632632
Investment funds(a)8,8766,407$2,469
Government bonds29320786
Corporate bonds501501
Other72—468(c)
Total assets in the fair value hierarchy$10,539$7,912$2,559$68
Investment funds measured at net asset value(b)277
Total assets$10,816

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI - Europe, Switzerland, North America, Asia Pacific, Japan, Emerging Markets and Small Cap for equities / Bloomberg Core Euro Government Bonds Long Duration, FTSE Non-EGBI EuroBIG, Bloomberg Global Aggr. Corp. ex-CHF and JP Morgan EMBI for bonds / SXI Real Estate and KGAST for real estate), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 59% were invested in U.S. and international equities; 11% were invested in U.S. and international government bonds; 14% were invested in corporate bonds and 16% were invested in real estate.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

(c) Amount relates to annuity policies of which the fair value is calculated using an actuarial model.

Asset Category (in millions)At December 31, 2024Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Cash and cash equivalents$83$83
Equity securities:
U.S. securities144144
International securities525525
Investment funds(a)7,3175,245$2,072
Government bonds23816672
Corporate bonds409409
Other31—328(c)
Total assets in the fair value hierarchy$8,747$6,572$2,147$28
Investment funds measured at net asset value(b)283
Total assets$9,030

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan, Emerging Markets and Small Cap for equities / FTSE EMU, FTSE Non-EGBI EuroBIG, SBI AAA-BBB and JP Morgan EMBI for bonds / SXI Real Estate and KGAST for real estate), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 57% were invested in U.S. and international equities; 13% were invested in U.S. and international government bonds; 14% were invested in corporate bonds, and 16% were invested in real estate.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

(c) Amount relates to annuity policies of which the fair value is calculated using an actuarial model.

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Note 2*. Summary of Significant Accounting Policies*.

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. Currently, PMI anticipates making contributions of approximately $164 million in 2026 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.

The estimated future benefit payments from PMI pension plans at December 31, 2025, are as follows:

(in millions)
2026$496
2027522
2028531
2029531
2030562
2031 - 20352,967

PMI's expected future annual benefit payments for its postretirement health care plans are estimated to be not material through 2035.

Postemployment Benefit Plans

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering certain designated salaried and hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Net postemployment costs were $250 million, $238 million and $213 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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

The accrued postemployment costs were determined using a weighted-average discount rate of 4.9% in 2025 and 2024; an assumed ultimate annual weighted-average turnover rate of 2.9% in 2025 and 2024; assumed compensation cost increases of 2.2% in 2025 and 2.3% in 2024, and assumed benefits as defined in the respective plans. In accordance with local regulations, certain postemployment plans are funded. As a result, the accrued postemployment costs disclosed above are presented net of the related assets of $30 million at December 31, 2025 and 2024. Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

Comprehensive Earnings (Losses)

The amounts recorded in accumulated other comprehensive losses at December 31, 2025, consisted of the following:

(in millions)PensionPost- retirementPost- employmentTotal
Net (losses) gains$(888)$(43)$(757)$(1,688)
Prior service (cost) credit681(21)48
Net transition (obligation) asset(3)——(3)
Deferred income taxes3621181238
Losses to be amortized$(787)$(21)$(597)$(1,405)

The amounts recorded in accumulated other comprehensive losses at December 31, 2024, consisted of the following:

(in millions)PensionPost- retirementPost- employmentTotal
Net (losses) gains$(2,122)$(36)$(815)$(2,973)
Prior service (cost) credit751(21)55
Net transition (obligation) asset(3)——(3)
Deferred income taxes24619195460
Losses to be amortized$(1,804)$(16)$(641)$(2,461)

The amounts recorded in accumulated other comprehensive losses at December 31, 2023, consisted of the following:

(in millions)PensionPost- retirementPost- employmentTotal
Net (losses) gains$(2,325)$(36)$(770)$(3,131)
Prior service (cost) credit771(21)57
Net transition (obligation) asset(3)——(3)
Deferred income taxes28319186488
Losses to be amortized$(1,968)$(16)$(605)$(2,589)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2025, were as follows:

(in millions)PensionPost- retirementPost- employmentTotal
Amounts transferred to earnings:
Amortization:
Net losses (gains)$145$3$79$227
Prior service cost (credit)(6)——(6)
Other income/expense:
Net losses (gains)21(1)2
Prior service cost (credit)(2)——(2)
Deferred income taxes(26)(1)(19)(46)
113359175
Other movements during the year:
Net (losses) gains1,087(11)(20)1,056
Prior service (cost) credit1——1
Deferred income taxes(184)35(176)
904(8)(15)881
Total movements in other comprehensive earnings (losses)$1,017$(5)$44$1,056

The movements in other comprehensive earnings (losses) during the year ended December 31, 2024, were as follows:

(in millions)PensionPost- retirementPost- employmentTotal
Amounts transferred to earnings:
Amortization:
Net losses (gains)$88$1$86$175
Prior service cost (credit)(6)——(6)
Other income/expense:
Net losses (gains)11—2
Deferred income taxes(13)(2)(21)(36)
70—65135
Other movements during the year:
Net (losses) gains114(2)(131)(19)
Prior service (cost) credit4——4
Deferred income taxes(24)2308
94—(101)(7)
Total movements in other comprehensive earnings (losses)$164$—$(36)$128

The movements in other comprehensive earnings (losses) during the year ended December 31, 2023, were as follows:

(in millions)PensionPost- retirementPost- employmentTotal
Amounts transferred to earnings:
Amortization:
Net losses (gains)$19$1$76$96
Prior service cost (credit)7——7
Other income/expense:
Net losses (gains)111—12
Deferred income taxes(9)(1)(18)(28)
2815887
Other movements during the year:
Net (losses) gains(918)(24)(93)(1,035)
Deferred income taxes154621181
(764)(18)(72)(854)
Total movements in other comprehensive earnings (losses)$(736)$(17)$(14)$(767)
Note 13.

Additional Information:

For the Years Ended December 31,
(in millions)202520242023
Depreciation expense$993$952$901
Research and development expense$756$759$709
Advertising expense$1,355$1,069$965
Foreign currency net transaction (gains)/losses$178$302$305
Interest expense$1,587$1,763$1,526
Interest income(621)(620)(465)
Interest expense, net$966$1,143$1,061
Note 14.

Financial Instruments:

Overview

PMI operates globally with manufacturing and sales facilities in various locations around the world and is exposed to risks such as changes in foreign currency exchange rates and interest rates. As a result, PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, (collectively referred to as "foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in foreign currency exchange and interest rates related to net investments in foreign operations, as well as third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Indian rupee, Indonesian rupiah, Japanese yen, Russian ruble and Swiss franc.

Additionally, certain materials that PMI uses in the manufacturing of its products are exposed to market price risks. PMI uses commodity derivative contracts (“commodity contracts") to manage its exposure to the market price volatility of certain commodity components of these materials.

These foreign exchange contracts, interest rate contracts and commodity contracts are collectively referred to as "derivative contracts". PMI is not a party to leveraged derivatives and, by policy, does not use derivative financial instruments for speculative purposes. Substantially all of PMI's derivative financial instruments are subject to master netting arrangements, whereby the right to offset occurs in the event of default by a participating party. While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the consolidated balance sheets. Collateral associated with these arrangements is in the form of cash and is unrestricted. Changes in collateral posted are included in cash flows from investing activities and changes in collateral received are included in cash flows from financing activities. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. PMI formally documents the nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of the forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it were deemed probable that the forecasted transaction would not occur, the gain or loss would be recognized in earnings.

The gross notional amounts for outstanding derivatives as of December 31, 2025 and 2024, were as follows:

(in millions)20252024
Derivative contracts designated as hedging instruments:
Foreign exchange contracts$29,062$25,149
Interest rate contracts4,7003,000
Commodity contracts39
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts16,27815,942
Total$50,043$44,100

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

Derivative AssetsDerivative Liabilities
Fair ValueFair Value
(in millions)Balance Sheet Classification20252024Balance Sheet Classification20252024
Derivative contracts designated as hedging instruments:
Foreign exchange contractsOther current assets$378$772Other accrued liabilities$499$7
Other assets107299Other liabilities85360
Interest rate contractsOther current assets——Other accrued liabilities2750
Other assets774Other liabilities—3
Commodity contractsOther current assets——Other accrued liabilities1—
Other assets——Other liabilities——
Derivative contracts not designated as hedging instruments:
Foreign exchange contractsOther current assets91331Other accrued liabilities31969
Other assets—12Other liabilities27658
Total gross amount derivatives contracts presented in the consolidated balance sheets$653$1,418$1,975$247
Gross amounts not offset in the consolidated balance sheets
Financial instruments(444)(218)(444)(218)
Cash collateral received/pledged(183)(863)(1,374)(18)
Net amount$26$337$157$11

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 derivatives is determined using prevailing spot and forward foreign exchange rates, spot and forward interest rates, and the instruments’ respective maturity dates. The fair value of currency options is estimated using a Black‑Scholes valuation model that incorporates foreign

exchange spot rates, interest rate differentials, currency volatilities, strike rates and maturity dates. The fair value of PMI’s commodity contracts is determined using prevailing market spot and futures prices and the corresponding maturity dates. PMI’s derivative contracts have been classified within Level 2 at December 31, 2025 and 2024.

For the years ended December 31, 2025, 2024 and 2023, PMI's derivative contracts impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)For the Years Ended December 31,
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on DerivativesStatement of Earnings Classification of Gain/(Loss) on DerivativesAmount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into EarningsAmount of Gain/(Loss) Recognized in Earnings
202520242023202520242023202520242023
Derivative contracts designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts$(93)$433$195
Net revenues$108$186$194
Cost of sales———
Marketing, administration and research costs(42)2027
Interest expense, net(1)2(15)
Interest rate contracts(14)9537Interest expense, net545146
Commodity contracts(1)(1)(7)Cost of sales(7)(1)—
Fair value hedges:
Interest rate contractsInterest expense, net (a)$65$(32)$(14)
Net investment hedges (b):
Foreign exchange contracts(1,989)867(788)Interest expense, net (c)301293268
Marketing, administration and research costs—35—
Derivative contracts not designated as hedging instruments:
Foreign exchange contractsInterest expense, net367219301
Marketing, administration and research costs (d)(1,515)523(575)
Total$(2,097)$1,394$(563)$112$293$252$(782)$1,003$(20)

(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. dollar

(c) Represent the gains for amounts excluded from the effectiveness testing

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

Cash Flow Hedges

PMI has entered into derivative contracts to hedge the foreign currency exchange, interest rate and commodity price risks related to certain forecasted transactions. Gains and losses associated with qualifying cash flow hedge contracts are deferred as components of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s consolidated statements of earnings. As of December 31, 2025, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through June 2028. Premiums paid for, and settlements of, the derivative contracts designated as cash flow hedges are included primarily in cash flows from operating activities on PMI’s consolidated statements of cash flows.

Fair Value Hedges

PMI has entered into fixed-to-floating interest rate contracts, designated as fair value hedges to minimize exposure to changes in the fair value of fixed rate U.S. dollar-denominated debt that results from fluctuations in benchmark interest rates. For derivative contracts that are designated and qualify as fair value hedges the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged items attributable to the hedged risk, is recognized in current earnings. The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2025 was $5,129 million, including $402 million related to discontinued hedges, of which $645 million was recorded in current portion of long-term debt and $4,484 million was recorded in long-term debt in the consolidated balance sheets. The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $(56) million as of December 31, 2025.

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. The amount of pre-tax gain related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was nil, $99 million and $48 million, for the years ended December 31, 2025, 2024 and 2023, respectively. Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities on PMI’s consolidated statements of cash flows.

Other Derivatives

PMI has entered into derivative contracts to hedge the foreign currency exchange and interest rate risks related to intercompany loans between certain subsidiaries and third-party loans. While effective as economic hedges, no hedge accounting is applied for these contracts; therefore, the gains (losses) relating to these contracts are reported in PMI’s consolidated statements of earnings. Settlements of other derivative contracts are included primarily in cash flows from investing activities on PMI's consolidated statements of cash flows.

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

Derivative gains or losses reported in accumulated other comprehensive losses are a result of qualifying hedging activity. Transfers of these gains or losses to earnings are offset by the corresponding gains or losses on the underlying hedged item. Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:

For the Years Ended December 31,
(in millions)202520242023
Gain/(loss) as of January 1,$467$241$266
Derivative (gains)/losses transferred to earnings(94)(213)(220)
Change in fair value(89)439195
Gain/(loss) as of December 31,$284$467$241

At December 31, 2025, PMI expects $109 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the consolidated statement of earnings within the next 12 months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.

Contingent Features

PMI’s derivative instruments do not contain contingent features.

Credit Exposure and Credit Risk

PMI is exposed to credit loss in the event of non-performance by counterparties. 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.

Other Investments

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

December 31,
(in millions)20252024
Level 1, U.S. dollar denominated bonds in Argentina$189$125
Level 2, Indonesian rupiah denominated bonds in Indonesia27—

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

Note 15.

Accumulated Other Comprehensive Losses:

PMI's accumulated other comprehensive losses, net of taxes, consisted of the following:

(Losses) EarningsAt December 31,
(in millions)202520242023
Currency translation adjustments$(11,175)$(9,320)$(9,467)
Pension and other benefits(1,405)(2,461)(2,589)
Derivatives accounted for as hedges284467241
Total accumulated other comprehensive losses$(12,296)$(11,314)$(11,815)

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 consolidated statements of comprehensive earnings for the years ended December 31, 2025, 2024, and 2023. For additional information, see Note 3. Acquisitions and Divestitures and Note 18 Restructuring Activities for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses, Note 12. Benefit Plans for disclosures related to PMI's pension and other benefits and Note 14. Financial Instruments for disclosures related to derivative financial instruments.

Note 16.

Contingencies:

Tobacco and/or Nicotine-Related Litigation

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. Our indemnitees include distributors, licensees, and others that have been named as parties in certain cases and that we have agreed to defend, as well as to pay costs and some or all of judgments, if any, that may be entered against them. Pursuant to the terms of the Distribution Agreement between Altria Group, Inc. ("Altria") and PMI, PMI will indemnify Altria and Philip Morris USA Inc. ("PM USA"), a U.S. tobacco subsidiary of Altria, for tobacco product claims based in substantial part on products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for tobacco product claims based in substantial part on products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

It is possible that there could be adverse developments in pending cases against us and our subsidiaries. An unfavorable outcome or settlement of pending tobacco or nicotine-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in the case of the "Health Care Cost Recovery Litigation" described below, could range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. While, as discussed below, we have to date been largely successful in defending tobacco-related litigation, litigation is subject to uncertainty. Additionally, as reported further below, beginning in March 2024, litigation related to oral nicotine products was filed against us and our subsidiaries before certain courts in the United States.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, except as stated otherwise in this Note 16. Contingencies, it is reasonably possible that an unfavorable outcome in a case may occur. Legal defense costs are expensed as incurred.

It is possible that our consolidated financial statements, including our results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

After assessing the information available to it, except as stated otherwise in this Note 16. Contingencies, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending cases mentioned in this Note 16. Contingencies; (ii) management is unable to estimate the possible loss or range of loss for any of these cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.

Combustible tobacco products litigation

Since 1995, more than 600 combustible tobacco product-related cases, including smoking and health, label-related, health care cost recovery, and public civil actions, have been filed by governmental entities or individual plaintiffs, or on behalf of a class or purported class of individual plaintiffs against a PMI entity. All cases resolved by final and non-appealable liability judgment have been terminated in our favor and only a small number of cases remain pending. The pending cases include seven health care cost recovery cases, one public civil action, and individual cases. These do not include nine proposed class actions and ten health care cost recovery cases that have been released pursuant to the CCAA Plan of PMI's wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc., that will be formally dismissed in due course, and are no longer reported here. The amounts at issue in the pending individual cases would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position. Of the pending combustible tobacco product-related cases, 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:

Health Care Cost Recovery Litigation: These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices. 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 lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of December 31, 2025, excluding the cases that will be dismissed pursuant to the CCAA Plan described above, there were 7 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil (1), Korea (1) and Nigeria (5), compared with 17 such cases on December 31, 2024 and 17 such cases on December 31, 2023.

In the health care cost recovery case in Brazil, The Attorney General of Brazil v. Souza Cruz Ltda., et al., Federal Trial Court, Porto Alegre, Rio Grande do Sul, Brazil, filed May 21, 2019, we, our subsidiaries, and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases in certain prior years, payment of anticipated costs of treating future alleged smoking-related diseases, and moral damages. Defendants filed answers to the complaint in May 2020.

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 over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. 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. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. We are in the process of challenging service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v. 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*.* Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us. As a result of this ruling, plaintiff must re-serve its claim. We have not yet been re-served.

In the fourth health care cost recovery case in Nigeria, The Attorney General of Oyo State, et al., v. 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 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. In June 2010, the court ruled that plaintiffs did not have leave to serve the writ of summons on the defendants and that they must re-serve the writ. We have not yet been re-served.

In the fifth health care cost recovery case in Nigeria, The Attorney General of Ogun State v. 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. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. In May 2010, the trial court rejected our objections to the court's jurisdiction. We have appealed. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the health care cost recovery case in Korea, the National Health Insurance Service v. KT&G, et. al., filed April 14, 2014, our subsidiary and other Korean manufacturers are defendants. Plaintiff alleges, among other things, that defendants concealed the health hazards of smoking, marketed to youth, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes. The National Health Insurance Service seeks to recover damages allegedly incurred in treating 3,484 patients with small cell lung cancer, squamous cell lung cancer, and squamous cell laryngeal

cancer from 2003 to 2012. The trial court dismissed the case in its entirety on November 20, 2020. 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: Claims have been filed either by an individual, or a public or private entity, seeking to protect collective or individual rights, such as the right to health, the right to information or the right to safety. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including product defect, concealment, and misrepresentation. Plaintiffs in these cases seek various forms of relief including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

As of December 31, 2025, there was one public civil action pending against our subsidiary in Venezuela (1), compared with one such case on December 31, 2024, and one such case on December 31, 2023.

In a public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. 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 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. In December 2012, the court admitted our subsidiary and a subsidiary of British American Tobacco plc as interested third parties. In February 2013, our subsidiary answered the complaint. On February 27, 2024, the Attorney General of Venezuela filed, on behalf of defendants, a motion to dismiss the case for lack of prosecution.

Smoke-Free Products-Related Litigation

Claims have been filed against PMI and one or more subsidiaries related to ZYN nicotine pouches. These cases were filed either on behalf of an individual plaintiff, on behalf of a purported class of individuals, or on behalf of a municipal entity. Plaintiffs assert a variety of common law and statutory claims, and seek various forms of relief, including monetary and equitable relief.

In the first case, a putative class action, Kelly v. Philip Morris International Inc., et al., filed on March 19, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches (the "Kelly class action"). The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN products in the United States, (ii) all residents of Florida who purchased ZYN products, and (iii) all residents of Florida who, at the time of their use of ZYN products, were under the age of 21, and who procured and used ZYN products. Plaintiff alleges, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring. On May 6, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice. On August 20, 2024, the court granted Swedish Match North America LLC’s motion to dismiss the fraud claim and plaintiff’s request for medical monitoring, but denied the motion to dismiss other claims, denied PMI’s motion to dismiss without prejudice, and granted plaintiff’s request to conduct jurisdictional discovery. On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants: Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc., filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim. On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiff’s fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc. The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction. The defendants filed their answers to plaintiff's amended complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases (Palmer, Lendinara, and Friedman) for purposes of pre-trial discovery. The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial. On September 15, 2025, Plaintiff filed a motion to amend his complaint to add two additional named plaintiffs. Darryl Maultsby and Griffin Dykes, as well as a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA"). On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint. On October 22, 2025, defendants filed a motion to dismiss the FDUTPA claim. On December 12, 2025, the Court denied defendants' motion to dismiss the FDUTPA claim. On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

In the second case, a putative class action, Bates-Ferreira v. Philip Morris International Inc., et al., filed March 29, 2024, before United States District Court for the Eastern District of California, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who used ZYN products in the United States, (ii) all persons who used ZYN products in the United States while under the age of 18, (iii) all residents of California who used ZYN products, and (iv) all residents of California who used ZYN products while under the age of 18. Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products. Plaintiff asserts fraud, unjust enrichment, breach of implied warranty, and breach of consumer protection, unfair competition and advertising statutes claims and is seeking compensatory and punitive damages, disgorgement of profits, attorney’s fees and expenses, interest and other applicable injunctive relief. On June 7, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and Swedish Match North America LLC also filed a motion to stay the proceedings pending resolution of the Kelly class action. On August 5, 2024, plaintiff voluntarily dismissed his claim against PMI without prejudice. 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. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the third case, an individual complaint, Palmer v. Philip Morris International Inc., et al., filed April 3, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff alleges, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims, and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring. On June 3, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice. On August 20, 2024, the court granted Swedish Match North America LLC’s motion to dismiss the fraud claim and plaintiff’s request for medical monitoring, but denied the motion to dismiss other claims, denied PMI’s motion to dismiss without prejudice, and granted plaintiff’s request to conduct jurisdictional discovery. On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants: Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc., filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim. On March 19, 2025, the Court granted defendants’ motion to dismiss the fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc. The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction. The defendants filed their answers to plaintiff’s amended complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases (Kelly, Lendinara, and Friedman) for purposes of pre-trial discovery. The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial. On September 15, 2025, Plaintiff filed a motion to amend his complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA"). On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint. On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim. On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim. On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

In the fourth case, an individual complaint, Lendinara v. Philip Morris International Inc., et al., filed July 30, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff alleges, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims, and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring. On September 19, 2024, the court granted the parties’ joint motion to apply its decisions on the motions to dismiss in Palmer to the Lendinara matter, including granting plaintiff’s request to conduct jurisdictional discovery and setting the same timeline for plaintiff to amend his complaint. On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants: Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc., filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim. On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiffs’ fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc. The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction. The defendants filed their answers to plaintiff’s amended

complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases (Kelly, Palmer, and Friedman) for purposes of pre-trial discovery. The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial. On September 15, 2025, Plaintiff filed a motion to amend his complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA"). On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint. On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim. On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim. On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

In the fifth case, a putative class action, Norris v. Philip Morris International Inc., et al., filed July 30, 2024, before United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who used ZYN products in the United States, (ii) all persons who used ZYN products in the United States while under the age of 18, (iii) all residents of Florida who used ZYN products, and (iv) all residents of Florida who used ZYN products while under the age of 18. Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products. Plaintiff asserts unjust enrichment, and breach of consumer protection, unfair trade and advertising statutes claims and is seeking compensatory and punitive damages, disgorgement of profits, attorney’s fees and expenses, interest and other applicable injunctive relief. On September 24, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and a motion to stay discovery. On October 2, 2024, Plaintiff filed a notice of voluntary dismissal without prejudice as to Swedish Match North America LLC, which the Court ordered on October 3, 2024. On April 11, 2025, PMI filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on any motion for class certification that the plaintiff in that case might bring. On June 13, 2025, the Court granted PMI's motion to stay until the court in the Kelly case issues a ruling on class certification. In light of the ruling on the motion to stay, the Court denied PMI's motion to dismiss without prejudice. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the sixth case, an individual complaint, Friedman v. Philip Morris International Inc., et al., filed April 2, 2025, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. as defendants. Plaintiff 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 a negligence claim, and is seeking compensatory and punitive damages, attorney’s fees and costs, and interest. The defendants filed their answers to Plaintiffs’ complaint on May 5, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases (Kelly, Palmer, Lendinara, and Friedman) for purposes of pre-trial discovery. The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial. On September 15, 2025, Plaintiff filed a motion to amend her complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA"). On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint. On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim. On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim. On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

In the seventh case, Mayor and City Council of Baltimore v. Philip Morris International Inc. et al, filed May 7, 2025, before the Circuit Court for Baltimore City, Maryland, the City of Baltimore alleges that the defendants have violated the City of Baltimore’s Consumer Protection Ordinance by, among other things, marketing ZYN products in a deceptive manner. The complaint names PMI, Swedish Match North America LLC, and Swedish Match USA Inc. as defendants. Plaintiff alleges, among other things, that defendants marketed ZYN products to minors and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts that defendants’ actions violate the prohibition on “unfair, abusive, or deceptive trade practices” in the Consumer Protection Ordinance and seeks monetary and injunctive relief. The Complaint was served on Defendants on June 9, 2025. On July 7, 2025, Defendants removed the case to the United States District Court for the District of Maryland. On August 6, 2025, Plaintiff filed a motion to remand the case back to state court. That motion is now fully briefed and remains pending. Defendants have not yet answered or otherwise responded to the complaint. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the eighth case, an individual complaint, Maultsby v. Philip Morris International Inc., et al, filed August 5, 2025, before United States District Court for the Middle District of Florida, plaintiff alleged, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. as defendants. Plaintiff alleged, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and

misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserted strict liability design defect and failure to warn claims, as well as a negligence claim, and sought compensatory and punitive damages, attorney’s fees and costs, and interest. On September 15, 2025, Plaintiff in the Kelly case moved to amend the complaint in that matter to add Darryl Maultsby as a named plaintiff in the class action proceeding. On October 24, 2025, plaintiff voluntarily dismissed this lawsuit without prejudice.

In the ninth case, an individual complaint, Dykes v. Philip Morris International Inc., et al, filed August 5, 2025, before United States District Court for the Northern District of Florida, plaintiff alleged, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. as defendants. Plaintiff alleged, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserted strict liability design defect and failure to warn claims, as well as a negligence claim, and sought compensatory and punitive damages, attorney’s fees and costs, and interest. On September 15, 2025, Plaintiff in the Kelly case moved to amend the complaint in that matter to add Griffin Dykes as a named plaintiff in the class action proceeding. On October 24, 2025, plaintiff voluntarily dismissed this lawsuit without prejudice.

In the tenth case, Austin Siegert v. Philip Morris International Inc. et al, filed September 26, 2025, before the United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN in the United States and (ii) a subclass of persons who purchased ZYN in New York. Plaintiff alleges, among other things, that defendants misrepresented that ZYN is tobacco-free; misled consumers regarding ZYN’s nicotine strength and addictive potential; and deployed misleading advertisements geared towards those under the legal age. Plaintiff asserts claims for violations of New York General Business Law § 349 (deceptive and unfair trade practices); violations of New York General Business Law § 350 (misleading advertising); violations of state consumer protection statutes; and breaches of the implied warranty of merchantability. Plaintiff seeks compensatory, statutory and punitive damages, attorney’s fees and expenses, prejudgment interest, and declaratory and injunctive relief. On October 30, 2025, defendants filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on any motion for class certification that the plaintiff in that case might bring. On November 3, 2025, the Court granted the motion to stay until the court in the Kelly case issues a ruling on class certification. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding, and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

Other Litigation

In July 2020, the Public Prosecutor’s office of Rome, Italy, notified our Italian subsidiary, Philip Morris Italia S.r.l. (“PM Italia”), as well as three former or current employees and a former external consultant of PM Italia in July and March 2020, respectively, that it concluded a preliminary investigation against them for alleged contravention of anti-corruption laws and related disruption of trade freedom. The Public Prosecutor alleges that the individuals involved promised certain personal favors to government officials from January to July of 2018 in exchange for favorable treatment for PM Italia, and that PM Italia lacked appropriate organizational controls to prevent the alleged actions by the individuals. On September 21, 2020, the Public Prosecutor issued his indictment and referred the matter to the court. At the preliminary hearing held on May 11, 2021, the judge decided to refer all charges/defendants (including our affiliate) to trial. The first trial hearing took place on September 22, 2021. British American Tobacco Italia S.p.a. has filed a civil claim against PM Italia claiming vicarious liability for the alleged wrongdoings of its former or current employees and seeking EUR50 million (approximately $59 million) in damages. After various postponements, the trial before the court of first instance started on September 25, 2023, and will continue into 2026. The judge has scheduled a final hearing for April 29, 2026, with a decision expected thereafter. PM Italia believes it has strong defenses to the charges against it and will defend them vigorously.

Following an October 2020 final decision by the highest court in Brazil in tax litigation pertaining to overpayments of certain indirect taxes, our affiliate modified the methodology for calculation of the deduction applicable to the indirect taxes at issue. The Brazilian Tax Authority objected to such methodology and, on December 3, 2024, served our affiliate with notice of an assessment alleging underpayments of these indirect taxes during the 2020 fiscal year, for approximately BRL 137 million ($27 million). On March 31, 2025, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2021 fiscal year, for approximately BRL 211 million ($41 million). Our affiliate believes it is probable that the Brazilian Tax Authority will issue assessments alleging underpayment of indirect taxes for subsequent fiscal years. We disagree with the position of the Brazilian Tax Authority and will defend vigorously.

On December 21, 2023, we were informed that Future Technology K.K. (“FTKK”) filed an application with Tokyo Customs against Sojitz Corporation (“Sojitz”), Philip Morris Japan Limited’s (“PMJL”) importer and distributor, due to alleged patent infringement of JP7299432. FTKK sought an order to stop the importation of TEREA consumables. FTKK withdrew its Customs application

following the issuance of an opinion from expert advisors to Customs that the patent at issue was not infringed. The proceeding is now concluded.

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 asserted in each of these actions were previously asserted by FTKK in earlier filed (and still pending) actions seeking monetary damages. PMJL is obligated to indemnify Sojitz for damages and has intervened in all of these matters. On November 24, 2025, the Court provided its indicative opinion that FTKK was not entitled to a preliminary injunction in one of the pending actions, and on January 21, 2026, the Court issued a written decision rejecting FTKK's preliminary injunction petition on the basis that the accused products do not infringe FTKK's patent. On December 18, 2025, FTKK filed a notice indicating that it was withdrawing its claim in the related damages action, and the action was terminated on December 25, 2025. Merits proceedings in the remaining matters are at various stages.

On November 27, 2024, we were informed that FTKK filed another application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK sought an order to stop the importation of TEREA and SENTIA consumables. In April 2025, Tokyo Customs issued a formal notification rejecting FTKK's request for an import injunction on the basis that the accused products do not infringe FTKK's patent. On June 5, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK sought an order to stop the importation of TEREA and SENTIA consumables. On November 4, 2025, Tokyo Customs issued a formal notification rejecting FTKK's request for an import injunction on the basis that the accused products do not infringe FTKK's patent. We were informed on January 22, 2026, that FTKK has filed a request for re-investigation of the matter with Tokyo Customs. On December 16, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK is seeking an order to stop the importation of TEREA and SENTIA consumables. At this time, FTKK is not seeking any monetary damages or costs. PMJL entered an appearance in the proceeding as an interested party and filed an opposition to FTKK’s application on January 27, 2026.

PMJL intends to vigorously defend the matters commenced by FTKK and take steps to mitigate disruption, if any, that could result from FTKK’s claims.

Other patent challenges are pending in various jurisdictions.

We are also involved in additional litigation arising in the ordinary course of our business. While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

Note 17.

Sale of Accounts Receivable:

To mitigate risk and enhance cash and liquidity management PMI sells trade receivables to unaffiliated financial institutions. These arrangements allow PMI to sell, on an ongoing basis, certain trade receivables without recourse. The trade receivables sold are generally short-term in nature and are removed from the consolidated balance sheets. PMI sells trade receivables under two types of arrangements, servicing and non-servicing. For servicing arrangements, PMI continues to service the sold trade receivables on an administrative basis and does not act on behalf of the unaffiliated financial institutions. When applicable, a servicing liability is recorded for the estimated fair value of the servicing. The amounts associated with the servicing liability were not material for the years ended December 31, 2025 and 2024. Under the non-servicing arrangements, PMI does not provide any administrative support or servicing after the trade receivables have been sold to the unaffiliated financial institutions.

Cumulative trade receivables sold, including excise taxes, for the years ended December 31, 2025 and 2024, were $11.7 billion and $11.9 billion, respectively. PMI’s operating cash flows were positively impacted by the amount of the trade receivables sold and derecognized from the consolidated balance sheets, which remained outstanding with the unaffiliated financial institutions. The trade receivables sold that remained outstanding under these arrangements as of December 31, 2025, 2024 and 2023, were $1.0 billion, $0.9 billion and $1.6 billion, respectively. The net proceeds received are included in cash provided by operating activities in the

consolidated statements of cash flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of trade receivables within marketing, administration and research costs in the consolidated statements of earnings. For the years ended December 31, 2025, 2024 and 2023 the loss on sale of trade receivables was $33 million, $42 million and $49 million, respectively.

Note 18.

Restructuring Activities:

For the years ended December 31, 2025, 2024 and 2023, PMI recorded total pre-tax restructuring charges of $241 million, $180 million and $109 million, respectively. These pre-tax charges were included in marketing, administration and research costs on the consolidated statements of earnings.

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other combustible tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co. KG, initiated consultations with employee representatives on October 29, 2024, on a proposal to end production in the factories located in Berlin and in Dresden by the end of the second quarter of 2025, and to seek to agree on fair solutions for any impacted employees.

The consultation processes for both of these factories were concluded in April 2025, and as a result of the closure PMI recorded pre-tax restructuring charges of $241 million in 2025. This amount included pension and employee separation costs of $125 million and contract termination and other costs of $24 million, which will be paid in cash, as well as asset impairment costs of $92 million, primarily related to property lease, and machinery and equipment, which are non-cash charges.

IQOS products sourcing for the U.S. market

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. (“BAT”). 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 3. Acquisitions and Divestitures.

In 2024, PMI recorded pre-tax restructuring charges of $133 million related to this restructuring activity. This amount included contract termination costs with suppliers of $73 million, including prepaid commitments of $20 million. The amount also included asset impairment costs of $60 million, primarily related to machinery and equipment and other assets, which were non-cash charges.

Venezuela

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.

E-Vapor Products Manufacturing Optimization

In the first quarter of 2023, PMI initiated a project to fully outsource and restructure the manufacturing of e-vapor devices and consumables. As a result, PMI recorded pre-tax restructuring charges of $109 million. This amount included contract termination costs for suppliers of $78 million, including $21 million of embedded finance lease terminations, payable in cash. This amount also included asset impairment costs of $31 million, primarily related to machinery and equipment, which were non-cash charges.

Restructuring Charges by Segment

During 2025, 2024 and 2023, PMI recorded the following pre-tax restructuring charges by segment:

(in millions)202520242023
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:
Europe125——
Total separation programs125——
Contract termination charges: (1)
Europe24—34
SSEA, CIS & MEA——23
EA, AU & PMI GTR——14
Americas—777
Total contract termination and other charges247778
Asset impairment charges (1)
Europe92—13
SSEA, CIS & MEA——9
EA, AU & PMI GTR——5
Americas—654
Total asset impairment charges926531
Restructuring charges$241$180$109

(1) E-vapor products manufacturing optimization charges in 2023 were allocated across all geographical segments.

Movement in Restructuring Related Liabilities

The movement in restructuring related liabilities for the year ended December 31, 2025 was as follows:

(in millions)
Liability balance, January 1, 2025$28
Charges, net149
Cash spent(35)
Currency/other(27)
Liability balance, December 31, 2025$115

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

Note 19.

Leases:

PMI has operating and finance leases that are principally for real estate (office space, warehouses and retail store space), machinery and equipment, and vehicles. Lease terms range from 1 year to 68 years, some of which include options to renew, which are reasonably certain to be renewed. Lease terms may also include options to terminate the lease. The exercise of a lease renewal or termination option is at PMI’s discretion.

PMI’s operating and finance leases at December 31, 2025 and 2024, were as follows:

At December 31,
(in millions)20252024
Operating LeasesFinance LeasesOperating LeasesFinance Leases
Assets:
Machinery and equipment$—$165$—$126
Other assets679—585—
Total lease assets$679$165$585$126
Liabilities:
Current
Current portion of long-term debt$—$35$—$37
Accrued liabilities - Other207—177—
Noncurrent
Long-term debt—49—30
Other liabilities526—427—
Total lease liabilities$733$84$604$67

The components of PMI’s lease cost were as follows for the years ended December 31, 2025, 2024 and 2023:

For the Years Ended December 31,
(in millions)202520242023
Operating lease cost$313$283$266
Finance lease cost:
Amortization of right-of-use assets587249
Interest on lease liabilities221
Short-term lease cost636359
Variable lease cost322828
Total lease cost$468$448$403

Maturity of PMI’s lease liabilities, on an undiscounted basis, as of December 31, 2025, were as follows:

(in millions)Operating LeasesFinance Leases
2026$244$38
202717721
202812516
20298011
2030533
Thereafter204—
Total lease payments88389
Less: Interest1505
Present value of lease liabilities$733$84

Other information related to PMI’s leases was as follows for the years ended December 31, 2025, 2024 and 2023:

December 31,
(in millions)202520242023
Operating LeasesFinance LeasesOperating LeasesFinance LeasesOperating LeasesFinance Leases
Cash paid for amounts included in the measurement of lease liabilities in operating cash flows (1)$309$—$281$—$265$—
Cash paid for amounts included in the measurement of lease liabilities in financing cash flows$—$41$—$29$—$27
Leased assets obtained in exchange for new lease liabilities$277$91$214$73$205$55
Weighted-average remaining lease term (years)10.03.010.42.610.22.6
Weighted-average discount rate(2) (3)6.0%4.2%5.9%4.4%5.1%4.9%

(1) Cash paid included in the operating cash flows for finance leases is not material.

(2) PMI’s weighted-average discount rate for operating leases is based on its estimated pre-tax cost of debt adjusted for country-specific risk.

(3) PMI’s weighted-average discount rate for finance leases, excluding embedded leases, is based on its estimated pre-tax cost of debt adjusted for country-specific risk and where applicable the interest rate explicit in lease contracts.

Note 20.

Supply Chain Financing:

PMI has engaged with unaffiliated global financial institutions that offer a voluntary supply chain financing ("SCF") program to some of our suppliers. Under the SCF program, the suppliers may elect, at their sole discretion, to sell PMI's payment obligations to these financial institutions. The suppliers independently negotiate the sale arrangements directly with these financial institutions. PMI does not participate in these negotiations, nor does it have any economic interest in these agreements, or in the designated suppliers’ voluntary decision to sell PMI's payment obligations to these financial institutions. No guarantees or securities are provided by PMI or any of its subsidiaries under the SCF programs. PMI's obligations to its suppliers, including amounts due and scheduled payment terms are not impacted by the suppliers’ decision to sell amounts under the SCF program. The payment terms of PMI’s suppliers generally do not exceed 120 days. All outstanding payable amounts related to suppliers that are participating in the SCF program are recorded in accounts payable in PMI's consolidated balance sheets. The associated payments are included in cash flows from operating activities within PMI's consolidated statement of cash flows.

The rollforward of PMI's outstanding obligations under its SCF program for the years ended December 31, 2025 and 2024 were as follows:

(in millions)20252024
Amount due to suppliers participating in the SCF program as of January 1,$1,014$864
Invoices added during the year3,4823,405
Invoices paid during the year(3,456)(3,207)
Currency/Other72(48)
Amount due to suppliers participating in the SCF program as of December 31,$1,112$1,014
Note 21.

New Accounting Standards:

Recently adopted

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 taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. PMI adopted the additional disclosure requirements on the specified effective date within its annual reporting for the year ended December 31, 2025, on a prospective basis.

Recently issued

On November 4, 2024, the FASB issued Accounting Standards Update ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires disclosure of more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. PMI is currently evaluating the impact of ASU 2024-03 on its disclosures.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Philip Morris International Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Philip Morris International Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Tobacco-Related Litigation for Smoking and Health Class Actions and Health Care Cost Recovery Cases

As described in Note 16 to the consolidated financial statements, the Company has seven health care cost recovery cases pending. The Company records provisions in the consolidated financial statements for pending litigation when management determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Except as stated otherwise in Note 16, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending smoking and health class actions and health care cost recovery cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending smoking and health class actions and health care cost recovery cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.

The principal considerations for our determination that performing procedures relating to tobacco-related litigation for smoking and health class actions and health care cost recovery actions is a critical audit matter are (i) the significant judgment by management when assessing the probability of a loss being incurred and determining whether the amount or range of the potential loss for each case can be reasonably estimated and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assessment of the loss contingencies associated with smoking and health class actions and health care cost recovery actions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of smoking and health class actions and health care cost recovery cases, including controls over determining whether the probability and range of loss can be reasonably estimated, as well as controls over financial statement disclosures. These procedures also included, among others (i) confirming with external and internal legal counsel the possibility or probability of an unfavorable outcome and the extent to which the loss or range of loss is reasonably estimable; (ii) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable; and (iii) evaluating the sufficiency of the Company’s smoking and health class actions and health care cost recovery cases contingencies disclosures.

/S/ PRICEWATERHOUSECOOPERS SA
PricewaterhouseCoopers SA
Lausanne, Switzerland
February 6, 2026

We have served as the Company’s auditor since 2008.

Report of Management on Internal Control Over Financial Reporting

Management of Philip Morris International Inc. (“PMI” or "we") is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. PMI’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those written policies and procedures that:

  • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of PMI;

  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;

  • provide reasonable assurance that receipts and expenditures of PMI are being made only in accordance with the authorization of management and directors of PMI; and

  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of PMI’s internal control over financial reporting as of December 31, 2025. Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of PMI’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit & Risk Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2025, PMI maintained effective internal control over financial reporting.

PricewaterhouseCoopers SA, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of PMI included in this report, has audited the effectiveness of PMI’s internal control over financial reporting as of December 31, 2025, as stated in their report herein.

February 6, 2026

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