Financial Analysis

"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 th …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Indebtedness: Short-term Borrowings: At June 30, 2026 and December 31, 2025, PMIs short-term borrowings and related average interest rates consisted of the following: June 30, 2026 December 31, 2025 (in millions) Amount Outstanding Average Rate Amount Outstanding Average Rate Commercial paper $ 2,652 3.7 % $ % Bank loans 689 5.4 168 10.3 $ 3,341 $ 168 PMI continues to have access to liquidity in the commercial paper market through programs in place in the U.S. and in Europe having an aggregate issuance capacity of $8.0 billion. Given the mix of PMI's legal entities and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country. The fair values of PMIs short-term borrowings at June 30, 2026 and December 31, 2025, based on current market interest rates, approximate carrying value. Long-term Debt: At June 30, 2026 and December 31, 2025, PMIs long-term debt consisted of the following: (in millions) June 30, 2026 December 31, 2025 U.S. dollar notes, 1.750% to 6.375% (average interest rate 4.719%), due through 2044 $ 37,371 $ 37,430 Foreign currency obligations: Euro notes, 0.125% to 3.750% (average interest rate 2.039%), due through 2039 6,563 7,942 Euro credit facility borrowing related to Swedish Match AB acquisition, (interest rate 2.859%), due 2027 1,711 2,944 Swedish krona note, (interest rate 2.190%), due 2029 28 267 Finance leases (average interest rate 4.552%), due through 2037 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"Stock Plans: In May 2022, PMIs 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 PMIs common stock may be issued under the 2022 Plan. At June 30, 2026, shares available for grant under the 2022 Plan were 15,097,356. In May 2017, PMIs 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 June 30, 2026, shares available for grant under the plan were 836,062. Restricted share unit (RSU) awards PMI may grant RSU awards to eligible employees; recipients may not sell, assign, pledge or otherwise encumber such awards. Such awards are subject to forfeiture if certain employment conditions are not met. RSU awards do not carry voting rights, although they do earn dividend equivalents. RSU awa …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Goodwill and Other Intangible Assets, net: Goodwill The movements in goodwill were as follows: (in millions) International Smoke-Free International Combustibles U.S. (a) Total Balances, December 31, 2025 $ 3,913 $ 4,862 $ 8,489 $ 17,264 Changes due to: Currency (186) (152) (9) (347) Balances, June 30, 2026 $ 3,727 $ 4,710 $ 8,480 $ 16,917 (a) U.S. g oodwill balance is net of accumulated impairment losses of $556 million at June 30, 2026, and December 31, 2025. These accumulated losses, which relate to PMI's wellness unit Aspeya, exclude amounts related to businesses which were subsequently sold or reclassified as held-for-sale. At June 30, 2026, goodwill primarily reflects PMIs acquisitions of Swedish Match AB, as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia. As discussed in Note 1. Background and Basis of Presentation , PMI has implemented an evolved organizational model effective January 1, 2026, and realigned its reportable segments accordingly. This reorganization resulted in changes to the composition of certain reporting units. Consequently, PMI reassigned assets and liabilities to the applicable reporting units and reallocated goodwill using the relative fair value approach. PMI performed a review of goodwill for potential impairment of the impacted reporting units immediately before and after the reorganization. As a result of this review, no impairment charges were required. The table above reflects the reclassification as a r …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

"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 PMIs condensed consolidated balance sheets. On July 4, 2025, the One Big Beautiful Bill Act (""the Act"") was signed into law in the U.S. The Act contains several provisions related to corporate income taxes, including the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The provisions and modifications included in the Act did not have a material impact on PMIs 2025 consolidated financial statements. PMIs effective tax rates for the six months and three months ended June 30, 2026 were 20.5% and 22.3%, respectively. PMIs effective tax rates for the six months and three months ended June 30, 2025 were 19.5% and 19.0%, respectively. The effective tax rate for the six months ended June 30, 2026 was unfavorably impacted by deferred tax expense for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($97 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency transl …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases: The components of PMIs lease cost were as follows for the six months and three months ended June 30, 2026 and 2025: For the Six Months Ended June 30, For the Three Months Ended June 30, (in millions) 2026 2025 2026 2025 Operating lease cost $ 171 $ 150 $ 86 $ 78 Finance lease cost: Amortization of right-of-use assets 30 26 16 11 Interest on lease liabilities 2 1 1 1 Short-term lease cost 35 29 18 15 Variable lease cost 20 16 11 9 Total lease cost $ 258 $ 222 $ 132 $ 114 …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

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

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Benefit Plans: Pension coverage for employees of PMIs 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 (income) costs per the condensed consolidated statements of earnings consisted of the following: For the Six Months Ended June 30, For the Three Months Ended June 30, (in millions) 2026 2025 2026 2025 Net pension costs (income) $ (81) $ (42) $ (40) $ (22) Net postemployment costs 63 58 31 29 Net postretirement costs 8 7 4 4 Total pension and other employee benefit (income) costs $ (10) $ 23 $ (5) $ 11 Pension Plans Components of Net Periodic Benefit Cost Net periodic pension cost consisted of the following: Pension (1) For the Six Months Ended June 30, For the Three Months Ended June 30, (in millions) 2026 2025 2026 2025 Service cost $ 111 $ 116 $ 55 $ 59 Interest cost 118 102 59 52 Expected return on plan assets (244) (210) (122) (108) Amortization: Net loss 46 67 23 34 Prior service cost (credit) (1) (1) Net periodic pension cost $ 30 $ 74 $ 15 $ 37 (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 e …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Restructuring Activities: For the six months and three months ended June 30, 2026, PMI recorded total pre-tax restructuring charges of $30 million and $6 million, respectively. For the six months and three months ended June 30, 2025, PMI recorded total pre-tax restructuring charges of $243 million. The pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings. As discussed in Note 8. Segment Reporting , marketing, administration and research costs, including restructuring charges, are not allocated to segments to determine the primary measure of segment profitability. U.S. Reorganization In the first quarter of 2026, the PMI U.S. organization announced a series of footprint optimization initiatives under the Further Integration Program (FIP). These initiatives include the planned closure of the Richmond office and the transition of certain roles and capabilities to strategic U.S. locations, primarily the newly established Business Solutions Center (BSC) in Tampa, Florida, and the PMI U.S. headquarters in Stamford, Connecticut. The program also includes the closure of the cigar manufacturing facility in Dothan, Alabama and the consolidation of its cigar production operations into PMIs manufacturing footprint in the Dominican Republic. As a result of these actions, PMI recorded pre-tax restructuring charges of $30 million for the six months ended June 30, 2026. These charges primarily included employee sep …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

Segment Reporting: PMIs 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. Effective January 1, 2026, PMI reorganized its segments to reflect the manner in which the Chief Executive Officer, who is the chief operating decision maker (CODM), manages the business and reviews the results of its operations. Based on changes to PMIs organizational structure, including restructuring of roles and responsibilities of the executive management layer reporting directly to the CODM as of January 2026, PMIs reportable segments are organized by product groupings and geographical region as follows: International Smoke-Free, International Combustibles and the U.S. The results of PMIs Wellness unit, Aspeya, are included within the U.S. reportable segment. In conjunction with the organizational changes discussed above, the primary profitability measure based on which the CODM evaluates performance of and allocates resources to the reportable segments has changed from regional operating income to segment gross profit. Segment net revenues and segment gross profit are the primary financial measures used by the CODM to review short-term and long-term trends, forecasts, and budget-to-actual variances in order to assess the performance of PMIs reportable segments and to allocate resources in response to changing market conditions and organizational priorities. Marketing, ad …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing