filings.toolsItem 1. Financial Statements.
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Item 1. Financial Statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net revenues 1 & 2 (Note 13) | $ | 9,301 | $ | 8,793 | |||||||
| Cost of sales | 3,040 | 3,195 | |||||||||
| Gross profit | 6,261 | 5,598 | |||||||||
| Marketing, administration and research costs (Note 16) | 2,717 | 2,553 | |||||||||
| Operating income | 3,544 | 3,045 | |||||||||
| Interest expense, net | 241 | 299 | |||||||||
| Pension and other employee benefit costs (Note 4) | 12 | 15 | |||||||||
| Earnings before income taxes | 3,291 | 2,731 | |||||||||
| Provision for income taxes | 659 | 676 | |||||||||
| Equity investments and securities (income)/loss, net | (205) | (191) | |||||||||
| Net earnings | 2,837 | 2,246 | |||||||||
| Net earnings attributable to noncontrolling interests | 147 | 98 | |||||||||
| Net earnings attributable to PMI | $ | 2,690 | $ | 2,148 | |||||||
| Per share data (Note 7): | |||||||||||
| Basic earnings per share | $ | 1.72 | $ | 1.38 | |||||||
| Diluted earnings per share | $ | 1.72 | $ | 1.38 | |||||||
(1) Includes net revenues from related parties of $937 million and $860 million for the three months ended March 31, 2025 and 2024, respectively.
(2) Net revenues are shown net of excise tax on products. For the three months ended March 31, 2025 and 2024, excise tax on products was $12,002 million and $11,839 million, respectively.
See notes to condensed consolidated financial statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)
| For the Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net earnings | $ | 2,837 | $ | 2,246 | ||||||||||
| Other comprehensive earnings (losses), net of income taxes: | ||||||||||||||
| Change in currency translation adjustments: | ||||||||||||||
| Unrealized gains (losses), net of income taxes of $94 in 2025 and $(102) in 2024 | 296 | 488 | ||||||||||||
| (Gains)/losses transferred to earnings, net of income taxes of $0 in 2025 and 2024 (Note 16) | — | 42 | ||||||||||||
| Change in net loss and prior service cost: | ||||||||||||||
| Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(14) in 2025 and $(9) in 2024 | 46 | 34 | ||||||||||||
| Change in fair value of derivatives accounted for as hedges: | ||||||||||||||
| Gains (losses) recognized, net of income taxes of $24 in 2025 and $(39) in 2024 | (122) | 178 | ||||||||||||
| (Gains) losses transferred to earnings, net of income taxes of $2 in 2025 and $16 in 2024 | (21) | (46) | ||||||||||||
| Total other comprehensive earnings (losses) | 199 | 696 | ||||||||||||
| Total comprehensive earnings | 3,036 | 2,942 | ||||||||||||
| Less comprehensive earnings (losses) attributable to: | ||||||||||||||
| Noncontrolling interests | 149 | 44 | ||||||||||||
| Comprehensive earnings attributable to PMI | $ | 2,887 | $ | 2,898 |
See notes to condensed consolidated financial statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
| March 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 4,443 | $ | 4,216 | |||||||
| Trade receivables (less allowances of $42 in 2025 and $47 in 2024) (1) | 4,880 | 3,789 | |||||||||
| Other receivables (less allowances of $22 in 2025 and $22 in 2024) | 913 | 886 | |||||||||
| Inventories: | |||||||||||
| Leaf tobacco | 2,166 | 2,080 | |||||||||
| Other raw materials | 2,631 | 2,261 | |||||||||
| Finished product | 5,330 | 5,112 | |||||||||
| 10,127 | 9,453 | ||||||||||
| Other current assets | 1,833 | 1,826 | |||||||||
| Total current assets | 22,196 | 20,170 | |||||||||
| Property, plant and equipment, at cost | 17,428 | 16,685 | |||||||||
| Less: accumulated depreciation | 9,896 | 9,375 | |||||||||
| 7,532 | 7,310 | ||||||||||
| Goodwill (Note 5) | 16,864 | 16,600 | |||||||||
| Other intangible assets, net (Note 5) | 11,345 | 11,327 | |||||||||
| Equity investments (Note 13) | 2,972 | 2,654 | |||||||||
| Deferred income taxes | 1,287 | 940 | |||||||||
| Other assets (less allowances of $27 in 2025 and $26 in 2024) | 2,883 | 2,783 | |||||||||
| TOTAL ASSETS | $ | 65,079 | $ | 61,784 |
(1) Includes trade receivables from related parties of $891 million and $691 million as of March 31, 2025, and December 31, 2024, respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.
See notes to condensed consolidated financial statements.
Continued
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share data)
(Unaudited)
| March 31, 2025 | December 31, 2024 | ||||||||||
| LIABILITIES | |||||||||||
| Short-term borrowings (Note 11) | $ | 4,438 | $ | 137 | |||||||
| Current portion of long-term debt (Note 11) | 6,360 | 3,392 | |||||||||
| Accounts payable | 3,749 | 3,952 | |||||||||
| Accrued liabilities: | |||||||||||
| Marketing and selling | 949 | 1,015 | |||||||||
| Taxes, except income taxes | 5,640 | 6,904 | |||||||||
| Employment costs | 1,016 | 1,305 | |||||||||
| Dividends payable | 2,121 | 2,120 | |||||||||
| Other | 2,491 | 2,832 | |||||||||
| Income taxes | 1,323 | 1,258 | |||||||||
| Total current liabilities | 28,087 | 22,915 | |||||||||
| Long-term debt (Note 11) | 38,781 | 42,166 | |||||||||
| Deferred income taxes | 2,817 | 2,517 | |||||||||
| Employment costs | 2,991 | 2,940 | |||||||||
| Other liabilities | 1,329 | 1,116 | |||||||||
| Total liabilities | 74,005 | 71,654 | |||||||||
| Contingencies (Note 9) | |||||||||||
| STOCKHOLDERS’ (DEFICIT) EQUITY | |||||||||||
| Common stock, no par value (2,109,316,331 shares issued in 2025 and 2024) | — | — | |||||||||
| Additional paid-in capital | 2,326 | 2,335 | |||||||||
| Earnings reinvested in the business | 33,447 | 32,869 | |||||||||
| Accumulated other comprehensive losses (Note 12) | (11,117) | (11,314) | |||||||||
| 24,656 | 23,890 | ||||||||||
| Less: cost of repurchased stock (552,827,233 and 554,470,731 shares in 2025 and 2024, respectively) | 35,557 | 35,640 | |||||||||
| Total PMI stockholders’ deficit | (10,901) | (11,750) | |||||||||
| Noncontrolling interests | 1,975 | 1,880 | |||||||||
| Total stockholders’ deficit | (8,926) | (9,870) | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | 65,079 | $ | 61,784 |
See notes to condensed consolidated financial statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)
| For the Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ||||||||||||||
| Net earnings | $ | 2,837 | $ | 2,246 | ||||||||||
| Adjustments to reconcile net earnings to operating cash flows: | ||||||||||||||
| Depreciation and amortization expense | 480 | 367 | ||||||||||||
| Impairment of other intangibles (Note 5) | — | 27 | ||||||||||||
| Deferred income tax (benefit) provision | (67) | 76 | ||||||||||||
| Restructuring charges, net of cash paid (Note 16) | (1) | 148 | ||||||||||||
| Cash effects of changes, net of the effects from acquired and divested companies: | ||||||||||||||
| Receivables, net | (882) | (890) | ||||||||||||
| Inventories | (325) | 527 | ||||||||||||
| Accounts payable | (127) | (181) | ||||||||||||
| Accrued liabilities and other current assets | (2,437) | (1,797) | ||||||||||||
| Income taxes | (20) | (79) | ||||||||||||
| Pension plan contributions (Note 4) | (37) | (34) | ||||||||||||
| Other | 229 | (169) | ||||||||||||
| Net cash provided by (used in) operating activities | (350) | 241 | ||||||||||||
| CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ||||||||||||||
| Capital expenditures | (404) | (417) | ||||||||||||
| Equity investments | (10) | (20) | ||||||||||||
| Collateral posted/settlements for derivatives, (paid)/returned (Note 6) | 6 | 310 | ||||||||||||
| Other | (26) | (66) | ||||||||||||
| Net cash provided by (used in) investing activities | (434) | (193) |
See notes to condensed consolidated financial statements.
Continued
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | |||||||||||
| Short-term borrowing activity by original maturity: | |||||||||||
| Net issuances (repayments) - maturities of 90 days or less | $ | 4,231 | $ | (1,475) | |||||||
| Issuances - maturities longer than 90 days | 70 | 100 | |||||||||
| Repayments - maturities longer than 90 days | — | (284) | |||||||||
| Long-term debt proceeds | — | 4,659 | |||||||||
| Long-term debt repaid | (822) | — | |||||||||
| Dividends paid | (2,116) | (2,037) | |||||||||
| Collateral received/settlements for derivatives, received/(returned) | (606) | 260 | |||||||||
| Noncontrolling interests activity and Other | (86) | (88) | |||||||||
| Net cash provided by (used in) financing activities | 671 | 1,135 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 335 | (230) | |||||||||
| Cash, cash equivalents and restricted cash (1): | |||||||||||
| Increase (Decrease) | 222 | 953 | |||||||||
| Balance at beginning of period | 4,254 | 3,146 | |||||||||
| Balance at end of period | $ | 4,476 | $ | 4,099 |
(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $33 million and $131 million as of March 31, 2025 and 2024, respectively, and $38 million and $86 million as of December 31, 2024 and 2023, respectively, which were included in other current assets in the condensed consolidated balance sheets.
See notes to condensed consolidated financial statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended March 31, 2025 and 2024
(in millions of dollars, except per share amounts)
(Unaudited)
| PMI Stockholders’ (Deficit) Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Earnings Reinvested in the Business | Accumulated Other Comprehensive Losses | Cost of Repurchased Stock | Noncontrolling Interests | Total | |||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2024 | $ | — | $ | 2,285 | $ | 34,090 | $ | (11,815) | $ | (35,785) | $ | 1,779 | $ | (9,446) | |||||||||||||||||||||||||||||||||
| Net earnings | 2,148 | 98 | 2,246 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (losses), net of income taxes | 750 | (54) | 696 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock awards | (80) | 128 | 48 | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.30 per share) | (2,030) | (2,030) | |||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid to noncontrolling interests | (76) | (76) | |||||||||||||||||||||||||||||||||||||||||||||
| Sale (purchase) of subsidiary shares to/(from) noncontrolling interests | (1) | (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2024 | $ | — | $ | 2,205 | $ | 34,208 | $ | (11,065) | $ | (35,657) | $ | 1,746 | $ | (8,563) | |||||||||||||||||||||||||||||||||
| Balances, January 1, 2025 | $ | — | $ | 2,335 | $ | 32,869 | $ | (11,314) | $ | (35,640) | $ | 1,880 | $ | (9,870) | |||||||||||||||||||||||||||||||||
| Net earnings | 2,690 | 147 | 2,837 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings (losses), net of income taxes | 197 | 2 | 199 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock awards | (9) | 83 | 74 | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.35 per share) | (2,112) | (2,112) | |||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid to noncontrolling interests | (54) | (54) | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2025 | $ | — | $ | 2,326 | $ | 33,447 | $ | (11,117) | $ | (35,557) | $ | 1,975 | $ | (8,926) |
See notes to condensed consolidated financial statements.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 and healthcare 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 interim condensed consolidated financial statements of PMI are unaudited. These interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and such principles are applied on a consistent basis. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.GAAP have been omitted. It is the opinion of PMI’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings attributable to PMI for any interim period are not necessarily indicative of results that may be expected for the entire year.
Following the sale of Vectura Group Ltd. on December 31, 2024, PMI updated in January 2025 its segment reporting by including the ongoing Wellness & Healthcare results in the Europe segment. For further details on the sale of Vectura Group Ltd., see Note 2. Acquisitions and Divestitures. In addition, PMI renamed its “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025. As a result of this change, PMI's segment that includes its duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).
Certain prior year amounts have been reclassified to conform with the current year's presentation as a result of the new segment structure discussed above. See Note 5. Goodwill and Other Intangible Assets, net and Note 8. Segment Reporting for further details. These reclassifications did not impact PMI’s consolidated financial position, results of operations or cash flows in any of the periods presented.
These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2024.
Note 2. Acquisitions and Divestitures:
Sale of Vectura Group Ltd.
On September 17, 2024, PMI announced the execution of a definitive agreement pursuant to which PMI’s direct, wholly-owned subsidiary, Vectura Fertin Pharma Inc., agreed to sell Vectura Group Ltd. (formerly, Vectura Group plc, and hereinafter referred to as “Vectura” or "Vectura Group") to Molex Asia Holdings Ltd ("Molex"), subject to customary regulatory approval and other completion conditions. On December 31, 2024, PMI completed the sale of Vectura for an upfront cash consideration of GBP 152 million (approximately $191 million at exchange rate on sale completion date) and a short-term receivable of GBP 24 million (approximately $30 million at exchange rate on sale completion date), reflecting certain customary completion account adjustments, with additional deferred payments of up to GBP 148 million (approximately $186 million at exchange rate on sale completion date), contingent on achievement of certain milestones over periods up to and through 2039. In addition, PMI agreed to indemnify Molex for certain claims related to the pre-completion period. As of March 31, 2025 and December 31, 2024, the liability related to the indemnity was not material.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of September 17, 2024, and through the completion date, Vectura's net assets and liabilities were classified as held-for-sale in PMI’s consolidated balance sheet. For the year ended December 31, 2024, the sale resulted in a pre-tax loss of $199 million ($206 million including the tax costs), of which $198 million of loss related to the impairment charge recognized in the third quarter of 2024, to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell. This amount also included reclassification of currency translation losses from other comprehensive losses of $16 million.
United Tobacco Company
In April 2023, PMI acquired 66.73% of Egyptian Investment Holding (“EIH”), a United Arab Emirates based company and as a result, acquired an approximate economic interest of 25% in United Tobacco Company ("UTC"), which was accounted for using the equity method of accounting. In May 2024, PMI increased its indirect economic interest and acquired a controlling interest of 54.25% in UTC. UTC is an entity incorporated in Egypt and manufactures products under license for Philip Morris Misr LLC (“PMM”), PMI’s Egyptian subsidiary. The acquisition builds on PMI’s existing investments in Egypt and increases the manufacturing synergies between PMM and UTC.
As a result of PMI obtaining control over UTC, PMI’s previously held 25% economic interest in UTC was remeasured to its fair value by applying the guideline transaction method adjusted for a discount for lack of control. The difference between the book value of $312 million, including related cumulative translation losses balance of $112 million, which was reclassified from accumulated other comprehensive losses and the fair value of PMI’s previously held interest in UTC was not material.
The total purchase price for the incremental equity interest of $316 million included cash consideration of $31 million, contingent consideration of $22 million and $263 million of assumed bank loan liabilities. During the third quarter of 2024, PMI paid the contingent consideration of $22 million and $240 million of assumed bank loans.
The following table summarizes the preliminary purchase price allocation for the fair value of assets acquired and liabilities assumed as of the date of the acquisition, which includes previously held interest:
| (in millions) | |||||
| Cash and cash equivalent | $ | 74 | |||
| Current assets, including receivables and inventories | 11 | ||||
| Other intangible assets - Tobacco manufacturing license | 211 | ||||
| Other non-current assets, including property, plant and equipment | 16 | ||||
| Current liabilities | (8) | ||||
| Identifiable net assets acquired | 304 | ||||
| Noncontrolling interest | (160) | ||||
| Goodwill | 512 | ||||
| Acquisition fair value | $ | 656 |
Goodwill is primarily attributable to future growth opportunities, anticipated synergies in the manufacturing processes and intangible assets that did not qualify for separate recognition. The fair value of the noncontrolling interest was estimated based on the enterprise value of UTC, adjusted for a discount for lack of control. The manufacturing license, which relates to the manufacturing of both smoke-free and combustible tobacco products, was valued using the multi-period excess earnings method and has been determined to have an indefinite life.
The purchase price allocation is preliminary and continues to be subject to refinement. PMI is evaluating the deductibility of goodwill for income tax purposes. UTC's results of operations from May 16, 2024, through March 31, 2025, were included in PMI's consolidated statements of earnings and were not material. Pro forma results of operations for the business combination have not been presented as the aggregate impact is not material to PMI's consolidated statements of earnings.
Altria Group, Inc. 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
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
agreement, PMI agreed to pay a total cash consideration of approximately $2.8 billion, including interest, of which $1.0 billion was paid at the inception of the agreement and the remaining $1.8 billion was paid on July 14, 2023. Prior to the acquisition date, the cash consideration paid was accounted for within Other assets in PMI's condensed consolidated balance sheets.
On the acquisition date and as of December 31, 2024 and March 31, 2025, the reacquired rights were classified as Other intangible assets, net in PMI's condensed consolidated balance sheets, and are being amortized over their useful life of 5 years.
Note 3. 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 March 31, 2025, shares available for grant under the 2022 Plan were 16,903,895.
In May 2017, PMI’s shareholders approved the Philip Morris International Inc. 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 March 31, 2025, shares available for grant under the plan were 855,920.
Restricted share unit (RSU) awards
During the three months ended March 31, 2025 and 2024, shares granted to eligible employees, the weighted-average grant date fair value per share and the recorded compensation expense related to RSU awards were as follows:
| Number of Shares Granted | Weighted-Average Grant Date Fair Value Per RSU Award Granted | Compensation Expense Related to RSU Awards (in millions) | |||||||||||||||
| 2025 | 1,502,150 | $ 145.16 | $ | 63 | |||||||||||||
| 2024 | 1,975,480 | $ 89.04 | $ | 47 |
As of March 31, 2025, PMI had $303 million of total unrecognized compensation cost related to non-vested RSU awards. The cost is recognized over the original restriction period of the awards, which is typically three years after the date of the award, or upon death, disability or reaching the age of 58.
During the three months ended March 31, 2025, 1,227,693 RSU awards vested. The grant date fair value of all the vested awards was approximately $129 million. The total fair value of RSU awards that vested during the three months ended March 31, 2025 was approximately $182 million.
Performance share unit (PSU) awards
During the three months ended March 31, 2025 and 2024, PMI granted PSU awards to certain executives. The PSU awards require the achievement of certain performance metrics, which are predetermined at the time of grant, typically over a three-year performance cycle.
The performance metrics for such PSU's granted during the three months ended March 31, 2025 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis (40% weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate (30% weight), and a Sustainability Index, which consists of two drivers:
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
-
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 the three months ended March 31, 2025 were the same as the PSU’s granted during the three months ended March 31, 2024, with the exception of the annual growth rate of adjusted diluted EPS metric goals, which was increased, and for changes to certain components of the Sustainability Index. In the Sustainability Index, certain KPIs were adjusted to reflect PMI’s developing sustainability strategy and the number of individual KPIs was reduced, both in acknowledgment of the maturity of certain programs measured by removed KPIs and to further focus management performance on the remaining Sustainability Index metrics.
The PSU performance metrics may be adjusted if appropriate to reflect the impact of unusual or infrequently occurring events, including, to the extent significant, corporate transactions, accounting or tax law changes, asset write-downs, litigation or claim adjustments, foreign exchange gains and losses, unbudgeted capital expenditures and other such events.
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.
During the three months ended March 31, 2025 and 2024, shares granted to eligible employees, the grant date fair value per share and the recorded compensation expense related to PSU awards were as follows:
| Number of Shares Granted | Weighted- Average PSU Grant Date Fair Value Subject to Other Performance Factors | Weighted- Average PSU Grant Date Fair Value Subject to TSR Performance Factors | Compensation Expense Related to PSU Awards (in millions) | |||||||||||
| (Per Share) | (Per Share) | |||||||||||||
| 2025 | 395,810 | $ 145.32 | $ 213.72 | $ | 51 | |||||||||
| 2024 | 543,560 | $ 89.01 | $ 85.72 | $ | 31 |
The grant date fair value of the PSU awards subject to the other performance factors was determined by using the market price of PMI’s stock on the date of the grant. The grant date fair value of the PSU 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:
| 2025 | 2024 | |||||||||||||
| Average risk-free interest rate (a) | 4.1 | % | 4.2 | % | ||||||||||
| Average expected volatility (b) | 21.0 | % | 19.9 | % |
(a) Based on the U.S. Treasury yield curve.
(b) Determined using the observed historical volatility.
As of March 31, 2025, PMI had $71 million of total unrecognized compensation cost related to non-vested PSU awards. The cost is recognized over the performance cycle of the awards, or upon death, disability or reaching the age of 58.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the three months ended March 31, 2025, 686,052 PSU awards vested. The grant date fair value of all the vested awards was approximately $84 million. The total fair value of PSU awards that vested during the three months ended March 31, 2025 was approximately $102 million.
Note 4. 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 condensed consolidated statements of earnings consisted of the following:
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||||||||
| Net pension costs (income) | $ | (20) | $ | (19) | |||||||||||||||||||
| Net postemployment costs | 29 | 31 | |||||||||||||||||||||
| Net postretirement costs | 3 | 3 | |||||||||||||||||||||
| Total pension and other employee benefit costs | $ | 12 | $ | 15 |
Pension Plans
Components of Net Periodic Benefit Cost
Net periodic pension cost consisted of the following:
| Pension (1) | |||||||||||||||||||||||
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||||||||
| Service cost | $ | 57 | $ | 55 | |||||||||||||||||||
| Interest cost | 50 | 59 | |||||||||||||||||||||
| Expected return on plan assets | (102) | (101) | |||||||||||||||||||||
| Amortization: | |||||||||||||||||||||||
| Net loss | 33 | 23 | |||||||||||||||||||||
| Prior service cost (credit) | (1) | — | |||||||||||||||||||||
| Net periodic pension cost | $ | 37 | $ | 36 |
(1) Primarily non-U.S. based defined benefit retirement plans.
All of the amounts in the table above, other than service cost, are recognized in pension and other employee benefit costs in the condensed consolidated statement of earnings.
Employer Contributions
PMI makes, and plans to make, contributions, to the extent that they are tax deductible and meet specific funding requirements of its funded pension plans. Employer contributions of $37 million were made to the pension plans during the three months ended March 31, 2025. Currently, PMI anticipates making additional contributions during the remainder of 2025 of approximately $121 million to its pension plans, based on current tax and benefit laws. 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.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5. Goodwill and Other Intangible Assets, net:
Goodwill
The movements in goodwill were as follows:
| (in millions) | Europe | SSEA, CIS & MEA | EA, AU & PMI GTR | Americas | Total | |||||||||||||||
| Balances at December 31, 2024 | $ | 4,130 | $ | 3,251 | $ | 470 | $ | 8,749 | $ | 16,600 | ||||||||||
| Changes due to: | ||||||||||||||||||||
| Currency | 290 | (32) | (3) | 9 | 264 | |||||||||||||||
| Balances, March 31, 2025 | $ | 4,420 | $ | 3,219 | $ | 467 | $ | 8,758 | $ | 16,864 |
As discussed in Note 1. Background and Basis of Presentation, following the sale of Vectura Group Ltd. on December 31, 2024, we updated our segment reporting in January 2025 by including the Wellness & Healthcare balance in the Europe segment. As a result, the December 31, 2024 goodwill balance for the Europe segment in the table above includes the reclassification of the former Wellness & Healthcare segment.
At March 31, 2025, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB and Fertin Pharma A/S, as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia.
Other Intangible Assets
Details of other intangible assets were as follows:
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (in millions) | Weighted-Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||
| Non-amortizable intangible assets | $ | 4,563 | $ | 4,563 | $ | 4,446 | $ | 4,446 | ||||||||||||||||||
| Amortizable intangible assets: | ||||||||||||||||||||||||||
| Trademarks | 15 years | 2,217 | $ | 891 | 1,326 | 2,134 | $ | 850 | 1,284 | |||||||||||||||||
| Reacquired commercialization rights for IQOS in the U.S. | 4 years | 2,777 | 509 | 2,268 | 2,777 | 370 | 2,407 | |||||||||||||||||||
| Developed technology, including patents | 7 years | 334 | 131 | 203 | 320 | 121 | 199 | |||||||||||||||||||
| Customer relationships and other | 10 years | 3,801 | 816 | 2,985 | 3,712 | 721 | 2,991 | |||||||||||||||||||
| Total other intangible assets | $ | 13,692 | $ | 2,347 | $ | 11,345 | $ | 13,389 | $ | 2,062 | $ | 11,327 |
Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico, as well as the tobacco manufacturing license associated with the preliminary purchase price allocation of PMI's acquisition in Egypt in the second quarter of 2024 (see Note 2. Acquisitions and Divestitures for further details). The increase since December 31, 2024, was mainly due to currency movements of $117 million.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The increase in the gross carrying amount of amortizable intangible assets from December 31, 2024, was primarily due to currency movements of $186 million.
The change in the accumulated amortization from December 31, 2024, was mainly due to the 2025 amortization of $246 million, combined with currency movements of $39 million. The amortization of intangibles for the three months ended March 31, 2025 was recorded in cost of sales ($5 million) and in marketing, administration and research costs ($241 million) on PMI's condensed consolidated statements of earnings.
Amortization expense for each of the next five years is estimated to be approximately $994 million or less, assuming no additional transactions occur that require the amortization of intangible assets. This amount includes amortization of IQOS commercialization rights in the U.S. (see Note 2. Acquisitions and Divestitures).
Note 6. 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, third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Egyptian pound, Indonesian rupiah, Japanese yen, Mexican peso, Philippine peso, Polish zloty, Russian ruble and Swiss franc.
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 condensed 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 at the end of each period were as follows:
| (in millions) | At March 31, 2025 | At December 31, 2024 | ||||||
| Derivative contracts designated as hedging instruments: | ||||||||
| Foreign exchange contracts | $ | 24,025 | $ | 25,149 | ||||
| Interest rate contracts | 5,950 | 3,000 | ||||||
| Commodity contracts | 10 | 9 | ||||||
| Derivative contracts not designated as hedging instruments: | ||||||||
| Foreign exchange contracts | 18,698 | 15,942 | ||||||
| Total | $ | 48,683 | $ | 44,100 |
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, were as follows:
| Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||||||||||||
| Fair Value | Fair Value | ||||||||||||||||||||||||||||||||||
| At | At | At | At | ||||||||||||||||||||||||||||||||
| (in millions) | Balance Sheet Classification | March 31, 2025 | December 31, 2024 | Balance Sheet Classification | March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||
| Derivative contracts designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | Other current assets | $ | 413 | $ | 772 | Other accrued liabilities | $ | 58 | $ | 7 | |||||||||||||||||||||||||
| Other assets | 161 | 299 | Other liabilities | 247 | 60 | ||||||||||||||||||||||||||||||
| Interest rate contracts | Other current assets | — | — | Other accrued liabilities | 54 | 50 | |||||||||||||||||||||||||||||
| Other assets | 52 | 4 | Other liabilities | — | 3 | ||||||||||||||||||||||||||||||
| Commodity contracts | Other current assets | 1 | — | Other accrued liabilities | 1 | — | |||||||||||||||||||||||||||||
| Other assets | — | — | Other liabilities | — | — | ||||||||||||||||||||||||||||||
| Derivative contracts not designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | Other current assets | 228 | 331 | Other accrued liabilities | 91 | 69 | |||||||||||||||||||||||||||||
| Other assets | — | 12 | Other liabilities | 107 | 58 | ||||||||||||||||||||||||||||||
| Total gross amount derivatives contracts presented in the condensed consolidated balance sheets | $ | 855 | $ | 1,418 | $ | 558 | $ | 247 | |||||||||||||||||||||||||||
| Gross amounts not offset in the condensed consolidated balance sheets | |||||||||||||||||||||||||||||||||||
| Financial instruments | (452) | (218) | (452) | (218) | |||||||||||||||||||||||||||||||
| Cash collateral received/pledged | (288) | (863) | (92) | (18) | |||||||||||||||||||||||||||||||
| Net amount | $ | 115 | $ | 337 | $ | 14 | $ | 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 contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. The fair value of PMI’s commodity contracts is determined by using the prevailing market spot and futures prices and the respective maturity dates of the instruments. PMI’s derivative contracts have been classified within Level 2 at March 31, 2025 and December 31, 2024.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended March 31, 2025 and 2024, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:
| (pre-tax, in millions) | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives | Statement of Earnings Classification of Gain/(Loss) on Derivatives | Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings | Amount of Gain/(Loss) Recognized in Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative contracts designated as hedging instruments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | (146) | $ | 166 | Net revenues | $ | 52 | $ | 29 | ||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing, administration and research costs | (41) | 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | — | (3) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | (1) | 54 | Interest expense, net | 14 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commodity contracts | 1 | (3) | Cost of sales | (2) | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate contracts | Interest expense, net (a) | $ | 47 | $ | (11) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment hedges (b): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | (437) | 453 | Interest expense, net (c) | 70 | 72 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative contracts not designated as hedging instruments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | Interest expense, net | 93 | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing, administration and research costs (d) | (242) | 512 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | (583) | $ | 670 | $ | 23 | $ | 62 | $ | (32) | $ | 617 |
(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 partially offset by the (losses) and gains generated by the underlying intercompany and third-party loans being hedged
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Cash Flow Hedges
PMI has entered into derivative contracts to hedge the foreign currency exchange, interest rate and commodity price risks related to certain forecasted transactions. Gains and losses associated with qualifying cash flow hedge contracts are deferred as components of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s condensed consolidated statements of earnings. As of March 31, 2025, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028. Premiums paid for, and settlements of, the derivative contracts designated as cash flow hedges are included primarily in cash flows from operating activities on PMI’s condensed consolidated statements of cash flows.
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 March 31, 2025 was $4,436 million, of which $349 million was recorded in current portion of long-term debt and $4,087 million was recorded in long-term debt in the condensed consolidated balance sheets. The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $(16) million as of March 31, 2025.
Hedges of Net Investments in Foreign Operations
PMI designates derivative contracts and certain foreign currency denominated debt and other financial instruments as net investment hedges, primarily of its Euro net assets. For the three months ended March 31, 2025 and 2024, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was nil and $5 million, respectively. Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities on PMI’s condensed consolidated statements of cash flows.
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 condensed consolidated statements of earnings. Settlements of other derivative contracts are included primarily in cash flows from investing activities on PMI's condensed 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:
| (in millions) | For the Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Gain/(loss) as of January 1, | $ | 467 | $ | 241 | |||||||||||||
| Derivative (gains)/losses transferred to earnings | (21) | (46) | |||||||||||||||
| Change in fair value | (122) | 178 | |||||||||||||||
| Gain/(loss) as of March 31, | $ | 324 | $ | 373 |
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
At March 31, 2025, PMI expects $134 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.
Contingent Features
PMI’s derivative instruments do not contain contingent features.
Credit Exposure and Credit Risk
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
Certain PMI investments, which are comprised primarily of U.S. dollar denominated bonds in Argentina, have been classified within Level 1 and had a fair value of $193 million at March 31, 2025. For the three months ended March 31, 2025, the gross unrealized pre-tax gains (losses) on these investments were immaterial.
Note 7. Earnings Per Share:
Basic and diluted earnings per share (“EPS”) were calculated using the following:
| (in millions) | For the Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net earnings attributable to PMI | $ | 2,690 | $ | 2,148 | |||||||||||||
| Less distributed and undistributed earnings attributable to share-based payment awards (1) | 8 | 6 | |||||||||||||||
| Net earnings for basic and diluted EPS | $ | 2,682 | $ | 2,142 | |||||||||||||
| Weighted-average shares for basic EPS | 1,556 | 1,553 | |||||||||||||||
| Plus contingently issuable performance stock units (PSUs) (1) | 1 | 2 | |||||||||||||||
| Weighted-average shares for diluted EPS | 1,557 | 1,555 |
(1) Including rounding adjustment
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.
For the 2025 and 2024 computations, there were no antidilutive stock awards.
Note 8. 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 former Wellness & Healthcare segment results in the Europe segment. The four geographical segments are as follows: Europe Region; South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA"); East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”); and Americas Region.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
PMI’s Chief Executive Officer, who is the chief operating decision maker ("CODM") evaluates geographical segment performance based on the regional operating income, which includes results from all product categories sold in each region. The CODM reviews short-term and long-term trends, forecasts, and budget-to-actual variances to assess geographical segment performance and to allocate resources. Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s CODM. Segment goodwill and other intangible assets, net, are disclosed in Note 5. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Item 8, Note 2. Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2024.
PMI disaggregates its net revenues from contracts with customers by product category for each of PMI's geographical segments. PMI believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.
Net revenues, significant expenses, and operating income by segment were as follows:
| (in millions) | Europe | SSEA, CIS & MEA | EA, AU & PMI GTR | Americas | Total | ||||||||||||
| For the Three Months Ended March 31, 2025 | |||||||||||||||||
| Net revenues | $ | 3,560 | $ | 2,743 | $ | 1,731 | $ | 1,267 | $ | 9,301 | |||||||
| Less: | |||||||||||||||||
| Cost of sales | 982 | 1,200 | 488 | 370 | 3,040 | ||||||||||||
| Marketing, administration and research costs | 1,141 | 623 | 330 | 623 | 2,717 | ||||||||||||
| Operating income | $ | 1,437 | $ | 920 | $ | 913 | $ | 274 | $ | 3,544 | |||||||
| For the Three Months Ended March 31, 2024 | |||||||||||||||||
| Net revenues | $ | 3,455 | $ | 2,658 | $ | 1,684 | $ | 996 | $ | 8,793 | |||||||
| Less: | |||||||||||||||||
| Cost of sales | 1,027 | 1,237 | 577 | 354 | 3,195 | ||||||||||||
| Marketing, administration and research costs | 1,017 | 649 | 344 | 543 | 2,553 | ||||||||||||
| Operating income | $ | 1,411 | $ | 772 | $ | 763 | $ | 99 | $ | 3,045 |
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
PMI's net revenues by product category were as follows:
| (in millions) | For the Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net revenues: | |||||||||||||||||
| Combustible tobacco: | |||||||||||||||||
| Europe | $ | 1,907 | $ | 1,931 | |||||||||||||
| SSEA, CIS & MEA | 2,413 | 2,346 | |||||||||||||||
| EA, AU & PMI GTR | 603 | 597 | |||||||||||||||
| Americas | 484 | 534 | |||||||||||||||
| Total Combustible tobacco | 5,406 | 5,407 | |||||||||||||||
| Smoke-free: | |||||||||||||||||
| Europe | 1,653 | 1,524 | |||||||||||||||
| of which, Wellness & Healthcare | 51 | 90 | |||||||||||||||
| SSEA, CIS & MEA | 330 | 312 | |||||||||||||||
| EA, AU & PMI GTR | 1,128 | 1,087 | |||||||||||||||
| Americas | 783 | 462 | |||||||||||||||
| Total Smoke-free | 3,895 | 3,386 | |||||||||||||||
| Total PMI net revenues | $ | 9,301 | $ | 8,793 |
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 16. Restructuring Activities for a breakdown of these costs by segment for the three months ended March 31, 2024.
Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products that are combusted. Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and do not include smoke-free products.
Net revenues related to smoke-free, excluding wellness and healthcare, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable. These net revenue amounts consist of the sale of PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories. Net revenues related to wellness and healthcare refer to the operating revenues generated from the sale of product, primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems.
Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Other segment data were as follows:
| (in millions) | For the Three Months Ended March 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Depreciation and amortization expense: | ||||||||||||||
| Europe | $ | 124 | $ | 146 | ||||||||||
| SSEA, CIS & MEA | 68 | 76 | ||||||||||||
| EA, AU & PMI GTR | 51 | 47 | ||||||||||||
| Americas | 237 | 98 | ||||||||||||
| Total depreciation and amortization expense | $ | 480 | $ | 367 |
| (in millions) | For the Three Months Ended March 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Capital expenditures: | ||||||||||||||
| Europe | $ | 229 | $ | 280 | ||||||||||
| SSEA, CIS & MEA | 64 | 90 | ||||||||||||
| EA, AU & PMI GTR | 6 | 6 | ||||||||||||
| Americas | 105 | 41 | ||||||||||||
| Total capital expenditures | $ | 404 | $ | 417 |
Note 9. 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 9. 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
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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 9. Contingencies, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending combustible tobacco product-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending combustible tobacco product-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.
Approval of CCAA Plan and Stay of Combustible Tobacco Product-Related Cases Pending in Canada
As a result of the Court of Appeal of Quebec’s decision in both the Létourneau and Blais cases described below, our subsidiary, Rothmans, Benson & Hedges Inc. (“RBH”), and the other defendants, JTI Macdonald Corp. ("JTIM"), and Imperial Tobacco Canada Limited ("ITL"), sought protection in the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) on March 22, March 8, and March 12, 2019, respectively. CCAA is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course. The initial CCAA order made by the Ontario Superior Court on March 22, 2019 authorizes RBH to pay all expenses incurred in carrying on its business in the ordinary course after the CCAA filing, including obligations to employees, vendors, and suppliers. RBH's financial results have been deconsolidated from our consolidated financial statements since March 22, 2019.
As part of the CCAA proceedings, there is currently a comprehensive stay up to and including the Effective Date (defined below) of all combustible tobacco product-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions. These proceedings are presented below under the caption “Stayed Litigation — Canada.” Ernst & Young Inc. has been appointed as monitor of RBH in the CCAA proceedings.
While RBH believes that the findings of liability and damages in both Létourneau and the Blais cases were incorrect, the CCAA proceedings provided a forum for RBH to seek resolution through a plan of arrangement or compromise of all combustible tobacco product-related litigation pending in Canada. On October 17, 2024, the court-appointed mediator and monitor in the CCAA proceedings filed a proposed plan of compromise and arrangement (“Proposed Plan”) setting forth, among other things, certain terms of a proposed comprehensive resolution of Canadian tobacco claims and related litigation against RBH, its affiliates, and its affiliates’ indemnitees. The court-appointed mediator and monitors also filed substantially similar proposed plans for ITL and JTIM. The issue of allocation of the CAD 32.5 billion aggregate settlement amount among RBH, ITL, and JTIM ("Allocation Issue") was unresolved in the Proposed Plan.
On January 15, 2025, RBH’s court-appointed mediator and monitor filed a motion seeking an order by the CCAA court approving and sanctioning the Proposed Plan and authorizing and directing the monitor, among others, to take all steps and actions necessary and appropriate to implement the Proposed Plan (“Sanction Motion” and the requested order, the “Proposed Sanction Order”).
On January 24, 2025, RBH filed an objection to the Sanction Motion (“RBH Objection”). The RBH Objection argued that the Proposed Plan could not be approved because it failed to resolve the Allocation Issue. The RBH Objection also stated that, without an appropriate, fair and reasonable resolution of the Allocation Issue, RBH could not consent to implementation of the Proposed Plan. To address the Allocation Issue, the RBH Objection sought to amend the Proposed Sanction Order to include provisions (the “Proposed Allocation Provisions”) requiring that ITL and JTIM make payments to RBH from their retained working capital and net income after taxes over a period of years. ITL, JTIM, and certain claimant groups opposed the Proposed Allocation Provisions set forth in the RBH Objection.
Following a judicial hearing on the Sanction Motion, RBH, JTIM and ITL reached a consensual resolution of all outstanding objections to the Proposed Plan filed by RBH, JTIM and ITL, including the RBH Objection, that resulted in amendments to the Proposed Plan that, among other things, would permit RBH to retain CAD 750 million (approximately $544 million) in accumulated cash.
On March 6, 2025, the CCAA court issued a decision approving the Proposed Plan as amended (the "Plan").
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Under the resolution contemplated by the Plan, as approved by the CCAA Court, RBH, JTIM, and ITL will pay an aggregate global settlement amount of CAD 32.5 billion (approximately $23.6 billion). This amount will be funded by an upfront payment equal to the companies’ cash and cash equivalents on hand plus court deposits, less the CAD 750 million that RBH will be permitted to retain, as well as annual payments based on a percentage of the companies’ aggregate net income after taxes (excluding that generated by alternative products such as heat-not-burn, nicotine pouches, and e-vapor) until the global settlement amount is paid in full. Annual contributions start at 85% of net after-tax income ("NATI"), with a five-percentage point reduction in NATI every five years until reaching 70%. Annual contributions are contingent on positive NATI of RBH. Such payment obligations concern only RBH and not PMI. RBH and its affiliates, including PMI and its indemnitees, will obtain a release of claims relating to the manufacture, marketing, sale, or use of or exposure to, RBH’s combustible and traditional smokeless tobacco products based on conduct prior to the effective date of the Plan; related litigation will also be dismissed—including those actions described in the section below entitled “Stayed Litigation – Canada.” Alternative product businesses (including heat-not-burn, e-vapor, and nicotine pouches) will be transferred to an RBH affiliate or otherwise maintained separately from RBH's combustible business. The Plan also contains a number of operating covenants that would govern RBH’s business going forward until the settlement amount has been paid.
Implementation of the Plan is subject to certain conditions precedent, including execution and delivery of definitive documentation, such as execution of contractual releases. Subject to satisfaction of the conditions precedent, it is expected that the Plan will be implemented and become effective sometime in 2025 ("Effective Date").
For additional information concerning the fair value of PMI’s continuing investment in RBH and the impairment charge recorded in the Company’s consolidated statement of earnings for the year ended December 31, 2024, as a recognized subsequent event, see Note 13. Related Parties – Equity Investments and Other.
Stayed Litigation — Canada
Smoking and Health Litigation — Canada
In the first class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, RBH and other Canadian cigarette manufacturers (Imperial Tobacco Canada Ltd. and JTI-Macdonald Corp.) are defendants (the "Blais Class Action"). The plaintiffs, an anti-smoking organization and an individual smoker, sought compensatory and punitive damages for each member of the class who suffers allegedly from certain smoking-related diseases. The class was certified in 2005. The trial court issued its judgment on May 27, 2015. The trial court found RBH and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.2 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion (approximately $2.2 billion) including pre-judgment interest). In addition, the trial court awarded CAD 90,000 (approximately $65,000) in punitive damages, allocating CAD 30,000 (approximately $22,000) to RBH. The trial court estimated the disease class at 99,957 members. RBH appealed to the Court of Appeal of Quebec. In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $164 million) to cover both the Létourneau and Blais cases, which RBH has paid in installments through March 2017. The Court of Appeal ordered Imperial Tobacco Canada Ltd. to furnish security totaling CAD 758 million (approximately $549 million) in installments through June 2017. JTI Macdonald Corp. was not required to furnish security in accordance with plaintiffs’ motion. The Court of Appeal ordered that the security is payable upon a final judgment of the Court of Appeal affirming the trial court’s judgment or upon further order of the Court of Appeal.
On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the compensatory and punitive damages award while reducing the total amount of compensatory damages to approximately CAD 13.5 billion (approximately $9.8 billion), including interest due to the trial court’s error in the calculation of interest. The compensatory damages award is on a joint and several basis with an allocation of 20% to RBH (approximately CAD 2.7 billion (approximately $2 billion), including pre-judgment interest). The Court of Appeal upheld the trial court’s findings that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking and by conspiring to prevent consumers from learning of the dangers of smoking. The Court of Appeal further held that the plaintiffs either need not prove, or had adequately proven, that these faults were a cause of the class members’ injuries. In accordance with the judgment, defendants were required to deposit their respective portions of the damages awarded in both the Létourneau case described below and the Blais case,
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approximately CAD 1.1 billion (approximately $797 million), into trust accounts within 60 days. RBH’s share of the deposit was approximately CAD 257 million (approximately $194 million). PMI recorded a pre-tax charge of $194 million in its consolidated results, representing $142 million net of tax, as tobacco litigation-related expense, in the first quarter of 2019. The charge reflects PMI’s assessment of the portion of the judgment that represents probable and estimable loss prior to the deconsolidation of RBH and corresponds to the trust account deposit required by the judgment.
In the second class action pending in Canada, Cecilia Létourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, RBH and other Canadian cigarette manufacturers (Imperial Tobacco Canada Ltd. and JTI-Macdonald Corp.) are defendants (the "Létourneau Class Action"). The plaintiff, an individual smoker, sought compensatory and punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005. The trial court issued its judgment on May 27, 2015. The trial court found RBH and two other Canadian manufacturers liable and awarded a total of CAD 131 million (approximately $95 million) in punitive damages, allocating CAD 46 million (approximately $33 million) to RBH. The trial court estimated the size of the addiction class at 918,000 members but declined to award compensatory damages to the addiction class because the evidence did not establish the claims with sufficient accuracy. The trial court found that a claims process to allocate the awarded punitive damages to individual class members would be too expensive and difficult to administer. On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the total amount of punitive damages awarded allocating CAD 57 million (approximately $41 million), including interest to RBH. See the Blais description above for further detail concerning the security order pertaining to both Létourneau and Blais cases and the impact of the decision on PMI’s financial statements.
RBH and PMI believe the findings of liability and damages in both Létourneau and the Blais cases were incorrect and in contravention of applicable law on several grounds including, the following: (i) defendants had no obligation to warn class members who knew, or should have known, of the risks of smoking; (ii) defendants cannot be liable to class members who would have smoked regardless of what warnings were given; and (iii) defendants cannot be liable to all class members given the individual differences among class members.
In the third class action pending in Canada, Kunta v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada, filed June 12, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma, and mild reversible lung disease resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.
In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits.
In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al., The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.
In the sixth class action pending in Canada, Dorion v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint.
In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada, filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the
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industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.
In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada, filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed. In December 2014, plaintiff filed an amended statement of claim.
In the ninth class action pending in Canada, Suzanne Jacklin v. Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits.
Health Care Cost Recovery Litigation — Canada
In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.”
In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v. Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of New Brunswick based on legislation enacted in the province. This legislation is similar to the law introduced in British Columbia that authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v. Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada, filed September 29, 2009, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Ontario based on legislation enacted in the province. This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v. Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St. Johns, Canada, filed February 8, 2011, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
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In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v. Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada, filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Alberta based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the tenth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Nova Scotia v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Nova Scotia, Canada, filed January 2, 2015, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Nova Scotia based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
Combustible tobacco products litigation
Since 1995, more than 600 combustible tobacco product-related cases, including smoking and health, label-related, health care cost recovery, and public civil actions, have been filed by governmental entities or individual plaintiffs, or on behalf of a class or purported class of individual plaintiffs against a PMI entity. All resolved cases have been terminated in our favor and only a small number of cases remain pending. The pending cases include nine proposed class actions, seventeen health care cost recovery cases, one public civil action, and individual cases. The amounts at issue in the pending individual cases would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position. Of the pending combustible tobacco product-related cases, four were initially decided in favor of plaintiffs and remain on appeal, or are subject to an appeal. These four cases include the Blais Class Action and the Létourneau Class Action, described above under the caption "Smoking and Health Litigation — Canada," and two individual cases where final resolution in the amount of the verdict would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.
Pending claims related to combustible tobacco products generally fall within the following categories:
Smoking and Health Proposed Class Actions: These cases primarily allege personal injury and are brought by individual plaintiffs on behalf of a class or purported class of individual plaintiffs. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and
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equitable relief. Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.
As of March 31, 2025, there were nine cases brought on behalf of classes of individual plaintiffs pending against us, our subsidiaries or indemnitees, compared with nine such cases on March 31, 2024, and such cases are described above under the caption “Smoking and Health Litigation — Canada.”
Health Care Cost Recovery Litigation: 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 March 31, 2025, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil (1), Canada (10), Korea (1) and Nigeria (5), compared with 17 such cases on March 31, 2024.
The health care cost recovery actions pending in Canada are described above under the caption “Health Care Cost Recovery Litigation — Canada.”
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 for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.
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 for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of challenging 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 for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. 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 for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We 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.
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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 for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. 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 the Plaintiff a de novo appeal in 2021 and determined that the appellate proceedings will take place in stages: wrongful conduct/product defect allegations first, then causation and finally issues such as standing/direct action. The plaintiff's appeal remains pending.
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 March 31, 2025, there was one public civil action pending against our subsidiary in Venezuela (1), compared with one such case on March 31, 2024.
In a public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. 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, or on behalf of a purported class of individuals. 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,
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interest, and medical monitoring. On May 6, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice. On August 20, 2024, the court granted Swedish Match North America LLC’s motion to dismiss the fraud claim and plaintiff’s request for medical monitoring, but denied the motion to dismiss other claims, denied PMI’s motion to dismiss without prejudice, and granted plaintiff’s request to conduct jurisdictional discovery. On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants: Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc., filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim. On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiffs’ fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc. The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction. The case will now move to the discovery phase.
In the second case, a putative class action, Bates-Ferreira v. 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 case will now move to the discovery phase.
In the fourth case, an individual complaint, Lendinara v. Philip Morris International Inc., et al., filed July 30, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The 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
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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 case will now move to the discovery phase.
In the fifth case, a putative class action, Norris v. Philip Morris International Inc., et al., filed July 30, 2024, before United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The 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, 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. 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. Defendants have not yet answered or otherwise responded to the complaint.
Other Litigation
On November 18, 2024, a putative class action, Neumark v. Swedish Match North America LLC, was filed before United States District Court for the Eastern District of Virginia. The complaint named Swedish Match North America LLC as the defendant. Plaintiff alleged that Swedish Match North America LLC violated federal and state antitrust laws by, among other things, driving a competitor from the market through purportedly baseless litigation and entering into an allegedly anticompetitive agreement with PMI whereby PMI, through an indirect subsidiary, acquired Swedish Match North America LLC and eliminated itself as a competitor in the U.S. nicotine pouch market. Plaintiff asserts claims under the Sherman Antitrust Act, the Clayton Antitrust Act, state antitrust law, and for unjust enrichment. Plaintiff seeks to represent (i) all natural persons, businesses, entities, and corporations in the United States who purchased ZYN at retail during the class period; and (ii) all natural persons, businesses, entities, and corporations in the United States who live in states that have certain antitrust statutes who purchase ZYN at retail during the class period. Plaintiff is seeking damages (including treble damages as available under antitrust laws), costs, attorneys’ fees, disgorgement of profit, pre- and post-judgment interest, and declaratory and injunctive relief (including a declaration that the acquisition of Swedish Match North America LLC by PMI is unlawful and must result in divestiture or be enjoined). On January 15, 2025, Swedish Match North America LLC filed a motion to dismiss the complaint with prejudice. Rather than respond to the motion, Plaintiff filed an amended complaint ("Amended Complaint") on February 10, 2025. The Amended Complaint dropped Plaintiff's baseless litigation theory and named PMI as a defendant in its merger challenge claim. Swedish Match North America and PMI filed a motion to dismiss on March 3, 2025. Briefing is completed
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and we are awaiting a decision from the court. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.
The Department of Special Investigations of the government of Thailand ("DSI") conducted an investigation into alleged underpayment by Philip Morris (Thailand) Limited ("PM Thailand") of customs duties and excise taxes relating to imports from Indonesia covering the period 2000-2003. On January 26, 2017, the Public Prosecutor filed charges against PM Thailand and its former Thai employee in the Bangkok Criminal Court alleging that PM Thailand and its former employee jointly and with the intention to defraud the Thai government under-declared import prices of cigarettes to avoid full payment of taxes and duties in connection with import entries during the period from January 2002 to July 2003. The government sought a fine of approximately THB 19.8 billion (approximately $600 million). In May 2017, Thailand enacted a new customs act. The new act, which took effect in November 2017, substantially limits the amount of fines that Thailand could seek in these proceedings. PM Thailand believes that its declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization and Thai law, and that the allegations of the Public Prosecutor are inconsistent with several decisions already taken by Thai Customs and a Thai court. Trial in the case began in November 2018 and concluded in December 2019. In March 2020, the trial court found our subsidiary guilty of under-declaration of the prices and imposed a fine of approximately THB 130 million (approximately $3.9 million). The trial court dismissed all charges against the individual defendant. In April 2020, as required by Thai law, our subsidiary paid the fine. This payment is included in other assets on the consolidated balance sheets and negatively impacted net cash provided by operating activities in the consolidated statements of cash flows in the period of payment. Our subsidiary filed an appeal of the trial court's decision. In addition, the Public Prosecutor filed an appeal of the trial court's decision challenging the dismissal of charges against the individual defendant and the amount of the fine imposed. The appellate court issued its decision on the appeals on January 31, 2023. The appellate court affirmed the findings of under-declaration of import prices of cigarettes but reduced the fine imposed by the trial court. The appellate court directed the Public Prosecutor to coordinate with customs officials to calculate such reduced fine in accordance with the appellate court’s decision. The appellate court affirmed the acquittal of the individual defendant. Our subsidiary has appealed the decision to the Supreme Court of Thailand. The Public Prosecutor has filed an appeal to the Supreme Court of Thailand challenging the dismissal of charges against the individual defendant and the amount of the fine. Thailand is required to refund any payment made by our subsidiary in excess of any fine assessed by the courts.
In July 2020, the Public Prosecutor’s office of Rome, Italy, notified our Italian subsidiary, Philip Morris Italia S.r.l. (“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 $57 million) in damages. After various postponements, the trial started on September 25, 2023, and is expected to continue in 2025 through a series of evidentiary hearings. PM Italia believes it has strong defenses to the charges against it and will defend them vigorously.
Following an October 2020 final decision by the highest court in Brazil in tax litigation pertaining to overpayments of certain indirect taxes, our affiliate modified the methodology for calculation of the deduction applicable to the indirect taxes at issue. The Brazilian Tax Authority objected to such methodology and, on December 3, 2024, served our affiliate with notice of an assessment alleging underpayments of these indirect taxes during the 2020 fiscal year, for approximately BRL 137 million ($24 million). On March 31, 2025, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2021 fiscal year, for approximately BRL 211 million ($38 million). Our affiliate believes it is probable that the Brazilian Tax Authority will issue assessments alleging underpayment of indirect taxes for subsequent fiscal years. We disagree with the position of the Brazilian Tax Authority, and will defend vigorously.
On December 21, 2023, we were informed that Future Technology K.K. (“FTKK”) filed an application with Tokyo Customs against Sojitz Corporation (“Sojitz”), Philip Morris Japan Limited’s (“PMJL”) importer and distributor, due to alleged patent infringement of JP7299432. FTKK sought an order to stop the importation of TEREA consumables. FTKK did not seek in its application any monetary damages or costs. PMJL entered an appearance in the proceeding as an interested party and filed its response to FTKK's application on January 31, 2024. The Customs hearing was held on May 28, 2024. On June 27, 2024 expert
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advisors to Customs provided their opinion that the patent at issue was not infringed. On June 28, 2024, FTKK withdrew its Customs application. The proceeding is now concluded. On January 26, 2024, PMJL filed a declaratory judgment action in Tokyo District Court seeking a declaration that JP7299432 is invalid and/or not infringed. The declaratory judgment action has now concluded following FTKK's waiver of its right to seek relief from PMJL for infringement of JP7299432, which effectively resolved PMJL's request for a declaration of no liability for infringement of that patent.
In July and August 2024, respectively, FTKK filed two patent infringement actions against Sojitz, PMJL’s importer and distributor, for alleged infringement of two patents by TEREA consumables. FTKK asserts a claim for damages. PMJL is obligated to indemnify Sojitz for damages and intervened in the matters. Merits briefing in the matters commenced in December 2024. Between November 2024 and March 2025, FTKK filed nine additional patent infringement actions against Sojitz for alleged infringement of nine new FTKK patents by TEREA and SENTIA consumables. FTKK asserts a claim for damages in these actions. Between February 2025 and March 2025, FTKK filed four patent infringement actions against Sojitz seeking a preliminary injunction. The patents FTKK has asserted in each of these actions were previously asserted by FTKK in earlier filed (and still pending) actions seeking monetary damages. PMJL is obligated to indemnify Sojitz for damages and has intervened, or will intervene, in all of these matters. Merits briefing in these matters either has commenced or is expected to commence in the first half of 2025. On November 27, 2024, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, PMJL’s importer and distributor, on the basis of alleged infringement of another FTKK patent. FTKK is seeking an order to stop the importation of TEREA and SENTIA consumables. At this time, FTKK is not seeking any monetary damages or costs. PMJL has entered an appearance in the proceeding as an interested party and filed its opposition to FTKK’s application on January 9, 2025. A hearing before Customs officials was held on March 31, 2025. On January 9, 2025, PMJL and Sojitz filed a declaratory judgment action against FTKK in Tokyo District Court with respect to the patent at issue in the pending Tokyo Customs matter seeking a declaration that FTKK is not entitled to damages on the basis that the relevant patent is not infringed or is invalid. On April 16, 2025, expert advisors to Tokyo Customs provided their opinion that the patent at issue in the Customs matter is not infringed. Tokyo Customs is expected to issue a formal ruling on the matter in late April or May 2025. PMJL intends to vigorously defend the matters commenced by FTKK and take steps to mitigate disruption, if any, that could result from FTKK’s claims.
Other patent challenges are pending in various jurisdictions.
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 10. Income Taxes:
Income tax provisions for jurisdictions outside the United States of America, as well as state and local income tax provisions, were determined on a separate company basis, and the related assets and liabilities were recorded in PMI’s condensed consolidated balance sheets.
PMI’s effective tax rates for the three months ended March 31, 2025 and 2024 were 20.0% and 24.8%, respectively.
The effective tax rate for the three months ended March 31, 2025 was favorably impacted by a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($93 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity; partially offset by an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($40 million).
The effective tax rate for the three months ended March 31, 2024 was unfavorably impacted by: (i) a deferred tax charge for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($111 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity; and (ii) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($43 million); partially offset by a U.S. tax benefit for a worthless stock
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deduction under section 165(g) of the Internal Revenue Code related to PMI's investment in C.A. Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela ($47 million). For further details on PMI's ceased operations in Venezuela, see Note 16. Restructuring Activities.
Changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which recommended changes to numerous long-standing tax principles. Many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023. PMI has determined that Pillar Two did not have a material impact on its 2024 consolidated financial statements.
PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. 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.
Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 3.8 trillion Indonesian rupiah (approximately $231 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2015 to 2022. Objection letters have been filed with the Tax Office and these assessments are being challenged at various levels in court. These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at March 31, 2025 and December 31, 2024.
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.
Note 11. Indebtedness:
Short-term Borrowings:
At March 31, 2025 and December 31, 2024, PMI’s short-term borrowings and related average interest rates consisted of the following:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (in millions) | Amount Outstanding | Average Rate | Amount Outstanding | Average Rate | |||||||||||||||||||
| Commercial paper | $ | 4,169 | 4.4 | % | $ | — | — | % | |||||||||||||||
| Bank loans | 269 | 10.0 | 137 | 8.6 | |||||||||||||||||||
| $ | 4,438 | $ | 137 |
Given the mix of PMI's legal entities and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.
The fair values of PMI’s short-term borrowings, based on current market interest rates, approximate carrying value.
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Long-term Debt:
At March 31, 2025 and December 31, 2024, PMI’s long-term debt consisted of the following:
| (in millions) | March 31, 2025 | December 31, 2024 | |||||||||
| U.S. dollar notes, 0.875% to 6.375% (average interest rate 4.592%), due through 2044 | $ | 35,368 | $ | 35,297 | |||||||
| Foreign currency obligations: | |||||||||||
| Euro notes, 0.125% to 3.750% (average interest rate 1.977%), due through 2039 | 6,503 | 7,082 | |||||||||
| Euro credit facility borrowings related to Swedish Match AB acquisition, (average interest rate 3.023%), due 2027 | 2,692 | 2,610 | |||||||||
| Swedish krona notes, 1.395% to 2.710% (average interest rate 2.016%), due through 2029 | 240 | 218 | |||||||||
| Other (average interest rate 5.348%), due through 2032 (a) | 338 | 351 | |||||||||
| Carrying value of long-term debt | 45,141 | 45,558 | |||||||||
| Less current portion of long-term debt | 6,360 | 3,392 | |||||||||
| $ | 38,781 | $ | 42,166 |
(a) Includes long-term bank loans at subsidiaries, as well as $64 million and $67 million in finance leases at March 31, 2025 and December 31, 2024, respectively.
The fair value of PMI’s outstanding long-term debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. At March 31, 2025, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:
| (in millions) | March 31, 2025 | ||||||||||
| Level 1 | $ | 41,294 | |||||||||
| Level 2 | 3,094 |
For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Item 8, Note 2. Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2024.
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 March 31, 2025, borrowings in the amount of €2.5 billion (approximately $2.7 billion) under the 5-year tranche of the term loan facility remained outstanding.
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Revolving Credit Facilities:
At March 31, 2025, PMI's total committed revolving credit facilities were as follows:
| (in billions) | |||||||||||
| Type | 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, 2028 | 1.6 | ||||||||||
| Total facilities | $ | 6.1 | |||||||||
(1) On January 28, 2022, PMI entered into an agreement, effective February 10, 2022, to amend and extend the term of its $2.0 billion multi-year revolving credit facility, for an additional year covering the period February 11, 2026 to February 10, 2027, in the amount of $1.9 billion.
(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 March 31, 2025, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.
In addition to the committed revolving credit facilities discussed above, PMI maintains certain short-term credit arrangements, including uncommitted credit lines, to primarily meet working capital needs. These credit arrangements amounted to approximately $3.4 billion at March 31, 2025, and approximately $2.1 billion at December 31, 2024. Borrowings under these arrangements and other bank loans amounted to $269 million at March 31, 2025, and $137 million at December 31, 2024.
Note 12. Accumulated Other Comprehensive Losses:
PMI’s accumulated other comprehensive losses, net of taxes, consisted of the following:
| (Losses) Earnings | At | At | At | |||||||||||||||||
| (in millions) | March 31, 2025 | December 31, 2024 | March 31, 2024 | |||||||||||||||||
| Currency translation adjustments | $ | (9,026) | $ | (9,320) | $ | (8,883) | ||||||||||||||
| Pension and other benefits | (2,415) | (2,461) | (2,555) | |||||||||||||||||
| Derivatives accounted for as hedges | 324 | 467 | 373 | |||||||||||||||||
| Total accumulated other comprehensive losses | $ | (11,117) | $ | (11,314) | $ | (11,065) |
Reclassifications from Other Comprehensive Earnings
The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, are shown on the condensed consolidated statements of comprehensive earnings for the three months ended March 31, 2025 and 2024. For additional information, see Note 2. Acquisitions and Divestitures and Note 16. Restructuring Activities for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses, Note 4. Benefit Plans for disclosures related
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to PMI's pension and other benefits and Note 6. Financial Instruments for disclosures related to derivative financial instruments.
Note 13. Related Parties - Equity Investments and Other:
Equity Method Investments:
At March 31, 2025 and December 31, 2024, PMI had total equity method investments of $1,117 million and $1,005 million, respectively. Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses, dividends, capital contributions, changes in ownership interests and movements in currency translation adjustments. The carrying value of our equity method investments at March 31, 2025 and December 31, 2024, exceeded our share of the investees' book value by $1,149 million and $1,060 million, respectively. The difference between the investment carrying value and the amount of underlying equity in net assets is mainly attributable to equity method goodwill, convertible debt instruments, and definite-lived intangible assets and other assets. The difference related to the definite-lived intangibles and other assets at March 31, 2025 and December 31, 2024 of $151 million and $152 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings. At March 31, 2025 and December 31, 2024, PMI received year-to-date dividends from equity method investees of $15 million and $151 million, respectively.
PMI holds a 23% equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of March 31, 2025 had a carrying value of $353 million. Additionally, there was approximately $543 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of March 31, 2025. Previously TKM was a subsidiary of Megapolis Distribution B.V. ("MDBV"), Dutch holding company in which PMI holds 23% equity interest. In June 2024, the Russian government included TKM in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which referred to the mandatory removal of a foreign holding company from the shareholding structure. On August 8, 2024, the Arbitrazh Court of the Moscow Region granted the forced localization of MDBV as requested by the Ministry of Industry and Trade on July 18, 2024. As a result, MDBV’s shares in TKM were transferred to TKM and subsequently transferred to the Russian subsidiaries of its indirect shareholders during the fourth quarter of 2024. As a result of the transfer of shares, PMI recorded a tax charge of $77 million in the fourth quarter of 2024, primarily reflecting additional deferred withholding taxes related to the TKM pre-localization earnings and other adjustments of accumulated earnings of the Russian subsidiary. As of March 31, 2025, there are risks related to this investment as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.
PMI holds a 49% equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”). PMI holds an approximate 25% economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture that is 51% owned by EITA and 49% by the Algerian state-owned enterprise Management et Développement des Actifs et des Ressources Holding ("MADAR Holding"), which manufactures and distributes under license some of PMI’s brands (SSEA, CIS & MEA segment).
In April 2023, PMI acquired an approximate economic interest of 25% in United Tobacco Company ("UTC"). UTC is an entity incorporated in Egypt which manufactures products under license for PMI’s Egyptian subsidiary. On May 16, 2024, PMI acquired a controlling interest in UTC. For further details, see Note 2. Acquisitions and Divestitures.
In May 2024, PMI acquired an indirect economic interest of 14.7% in Eastern Company (“Eastern"), Egypt’s largest cigarette manufacturer which also includes cigars and pipe tobacco, among others, in its portfolio. PMI accounted for its investment in Eastern under the equity method of accounting as it has the indirect ability to participate in Eastern's policy making processes. In relation to the acquisition, PMI subsequently entered into an agreement in August 2024 to guarantee certain credit facilities and repayment of certain bank loan liabilities. The maximum amount of these guarantee obligations is $385 million and they will be in effect until 2034. As of March 31, 2025, PMI has not finalized the basis difference allocation resulting from the investment.
The initial investments in Megapolis Distribution BV, EITA, Eastern and UTC (up to the acquisition of controlling interest in UTC on May 16, 2024) have been recorded at cost and are included in equity investments on the condensed consolidated
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balance sheets. 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 $23.6 billion). A significant determinative factor in the analysis of impairment indicators was the issue of allocation of CAD 32.5 billion aggregate settlement amount among RBH, ITL, and JTIM which remained unresolved at the time of filing.
On January 24, 2025, RBH filed an objection to approval of the Proposed Plan with the CCAA court (for further details, see Note 9. Contingencies). Developments, including the positions taken by RBH in this objection and the positions taken by other parties in related filings narrowed the range of possible outcomes with respect to the allocation of the aggregate settlement amount of CAD 32.5 billion among RBH, ITL, and JTIM, which was determined to be an indicator that PMI’s investment in RBH may be impaired. Although there remained some uncertainty as to the final terms of the Proposed plan, PMI evaluated its investment in RBH for potential impairment and concluded that the estimated fair value of its investment in RBH was lower than its carrying value. As a result, PMI performed a quantitative valuation of its investment in RBH as of December 31, 2024, and recorded a non-cash impairment charge of $2,316 million in the consolidated statement of earnings in the fourth quarter and for the year ended December 31, 2024, as a recognized subsequent event. The fair value of PMI’s continuing investment in RBH of $714 million represented the estimated fair value of the underlying business, net of PMI’s best estimate of the share of the aggregate global settlement amount that could be allocated to RBH, and was determined based on an income approach using a discounted cash flow analysis.
In determining the fair value of PMI’s investment in RBH, PMI made various judgements, estimates and assumptions, the most significant of which were the discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada. In addition, significant estimates were made with respect to the allocation amount of the aggregate global settlement amount among RBH, ITL and JTIM, as well as the deductibility of the settlement amount payment for income tax purposes in Canada. All significant inputs used in the valuation are classified in Level 3 of fair value hierarchy. Transactions between PMI and RBH are considered to be related-party transactions from the date of deconsolidation and are included in the tables below.
On March 6, 2025, the CCAA court issued a decision approving the Proposed Plan as amended (the "Plan"), for further details, see Note 9. Contingencies. PMI evaluated the terms of the Plan, and no indicators of further impairment were identified as a result of this evaluation. PMI records its continuing investment in RBH at its fair value determined as of December 31, 2024, adjusted for currency translation adjustments.
The fair value of PMI’s other equity securities, which have been classified within Level 1, was $1,104 million at March 31, 2025. Unrealized pre-tax gain (loss) of $183 million ($143 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the three months ended
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March 31, 2025.
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 Three Months Ended March 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Net revenues: | |||||||||||||||||
| Megapolis Group | $ | 549 | $ | 520 | |||||||||||||
| Other | 388 | 340 | |||||||||||||||
| Net revenues (a) | $ | 937 | $ | 860 | |||||||||||||
| Expenses: | |||||||||||||||||
| Other | $ | 37 | $ | 40 | |||||||||||||
| Expenses | $ | 37 | $ | 40 |
(a) Net revenues exclude excise taxes and VAT billed to customers.
PMI’s balance sheet activity with the above related parties was as follows:
| (in millions) | At March 31, 2025 | At December 31, 2024 | ||||||
| Receivables: | ||||||||
| Megapolis Group | $ | 562 | $ | 405 | ||||
| Other | 329 | 286 | ||||||
| Receivables | $ | 891 | $ | 691 | ||||
| Payables: | ||||||||
| Other | $ | 83 | $ | 60 | ||||
| Payables | $ | 83 | $ | 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 14. 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 condensed consolidated balance sheets. PMI sells trade receivables under two types of arrangements, servicing and non-servicing. For servicing arrangements, PMI continues to
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service the sold trade receivables on an administrative basis and does not act on behalf of the unaffiliated financial institutions. When applicable, a servicing liability is recorded for the estimated fair value of the servicing. The amounts associated with the servicing liability were not material as of March 31, 2025 and March 31, 2024. Under the non-servicing arrangements, PMI does not provide any administrative support or servicing after the trade receivables have been sold to the unaffiliated financial institutions.
Cumulative trade receivables sold, including excise taxes, for the three months ended March 31, 2025 and 2024, were $2.4 billion and $2.7 billion, respectively. PMI’s operating cash flows were positively impacted by the amount of the trade receivables sold and derecognized from the condensed consolidated balance sheets, which remained outstanding with the unaffiliated financial institutions. The trade receivables sold that remained outstanding under these arrangements as of March 31, 2025 and March 31, 2024, were $0.6 billion and $0.7 billion, respectively. The net proceeds received are included in cash provided by operating activities in the condensed consolidated statements of cash flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of trade receivables within marketing, administration and research costs in the condensed consolidated statements of earnings. For the three months ended March 31, 2025 and 2024, the loss on sale of trade receivables was $8 million and $12 million, respectively.
Note 15. Product Warranty:
PMI's heat-not-burn devices and e-vapor products are subject to standard product warranties generally for a period of 12 months from the date of purchase or such other periods as required by law. PMI generally provides in cost of sales for the estimated cost of warranty in the period the related revenue is recognized. PMI assesses the adequacy of its accrued product warranties and adjusts the amounts as necessary based on actual experience and changes in future estimates. Factors that affect product warranties may vary across markets but typically include device version mix, product failure rates, logistics and service delivery costs, and warranty policies. PMI accounts for its product warranties within other accrued liabilities. At March 31, 2025 and December 31, 2024, these amounts were as follows:
| (in millions) | As of and For the Three Months Ended March 31, 2025 | As of and For the Year Ended December 31, 2024 | |||||||||
| Balance at beginning of period | $ | 76 | $ | 80 | |||||||
| Changes due to: | |||||||||||
| Warranties issued | 20 | 76 | |||||||||
| Settlements | (21) | (77) | |||||||||
| Currency/Other | 4 | (3) | |||||||||
| Balance at end of period | $ | 79 | $ | 76 |
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Note 16. Restructuring Activities:
For the three months ended March 31, 2025, PMI did not record any charges for restructuring activities. For the three months ended March 31, 2024, PMI recorded total pre-tax restructuring charges of $168 million. The 2024 pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings.
Manufacturing Footprint Optimization - Germany
As a result of declining demand for cigarettes and other combustible tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co. KG, initiated consultations with employee representatives on October 29, 2024, on a proposal to end production in the factories located in Berlin and in Dresden by the end of the second quarter of 2025, and to seek to agree on fair solutions for any impacted employees.
The consultation processes for both of these factories were concluded in April 2025, and PMI estimated that it will incur future pre-tax charges of at least approximately EUR 200 million (approximately $230 million) (primarily in the second quarter of 2025) as a result of the closure, including employee severance, contract termination and asset impairment costs. The final amount of the charges, as well as the timing of payments, will depend on the separation options selected by impacted employees under the agreement and the evaluation of the potential future use of assets.
IQOS products sourcing for the U.S. 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 (for further details of the Settlement Agreement, ITC order and its rescission, see Note 9. Contingencies). As a result, PMI has initiated a project in the first quarter of 2024 to restructure the sourcing of IQOS products to commercialize them in the United States. For further details on IQOS commercialization in the U.S. and the related agreement with Altria Group, Inc (“Altria”), see Note 2. Acquisitions and Divestitures.
In the first quarter of 2024, PMI recorded pre-tax restructuring charges of $121 million related to this restructuring activity. This amount included contract termination costs with suppliers of $61 million, including prepaid commitments of $20 million. The amount also included asset impairment costs of $60 million, primarily related to machinery and equipment and other assets, which were non-cash charges.
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.
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Restructuring Charges by Segment
PMI recorded the following pre-tax restructuring charges by segment:
| (in millions) | For the Three Months Ended March 31, | ||||||||||||||||
| 2024 | |||||||||||||||||
| 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 | ||||||||||||||||
| Contract termination charges: | |||||||||||||||||
| Americas | 65 | ||||||||||||||||
| Total contract termination charges | 65 | ||||||||||||||||
| Asset impairment charges: | |||||||||||||||||
| Americas | 65 | ||||||||||||||||
| Total asset impairment charges | 65 | ||||||||||||||||
| Restructuring charges | $ | 168 |
Movement in Restructuring Related Liabilities
The movement in restructuring related liabilities for the three months ended March 31, 2025 was as follows:
| (in millions) | |||||
| Liability balance, January 1, 2025 | $ | 28 | |||
| Charges, net | — | ||||
| Cash spent | (1) | ||||
| Prepaid commitments | — | ||||
| Currency/other | (1) | ||||
| Liability balance, March 31, 2025 | $ | 26 |
Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2025.
Note 17. Leases:
The components of PMI’s lease cost were as follows for the three months ended March 31, 2025 and 2024:
| For the Three Months Ended March 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||
| Operating lease cost | $ | 72 | $ | 66 | |||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | 15 | 25 | |||||||||||||||
| Short-term lease cost | 14 | 16 | |||||||||||||||
| Variable lease cost | 7 | 7 | |||||||||||||||
| Total lease cost | $ | 108 | $ | 114 |
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Note 18. 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 condensed consolidated balance sheets. The associated payments are included in cash flows from operating activities within PMI's condensed consolidated statement of cash flows. As of March 31, 2025 and December 31, 2024, the total amount due to suppliers participating in the SCF program was $0.9 billion and $1.0 billion, respectively.
Note 19. New Accounting Standards:
On December 14, 2023, the FASB issued Accounting Standards Update ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 enhances the transparency of income tax disclosures, primarily by requiring public business entities to disclose specific categories in the rate reconciliation tabular presentation, as well as by providing additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 also requires disaggregated disclosures of federal, state and foreign income tax taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The amendments are applicable on a prospective basis, although retrospective basis is also permitted. PMI is currently evaluating the impact of ASU 2023-09 on its disclosures.
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