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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) 
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33708
Philip Morris International Inc.
(Exact name of registrant as specified in its charter)
Virginia13-3435103
(State or other jurisdiction of
    incorporation or organization)		(I.R.S. Employer
    Identification No.)
120 Park AvenueNew YorkNew York10017
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code(917)663-2000
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:
Title of each class                    Trading Symbol(s)Name of each exchange on which registered
Common Stock, no par valuePMNew York Stock Exchange
2.500% Notes due 2022PM22CNew York Stock Exchange
2.625% Notes due 2023PM23New York Stock Exchange
2.125% Notes due 2023PM23BNew York Stock Exchange
3.600% Notes due 2023PM23ANew York Stock Exchange
2.875% Notes due 2024PM24New York Stock Exchange
2.875% Notes due 2024PM24CNew York Stock Exchange
0.625% Notes due 2024PM24BNew York Stock Exchange
3.250% Notes due 2024PM24ANew York Stock Exchange
2.750% Notes due 2025PM25New York Stock Exchange
3.375% Notes due 2025PM25ANew York Stock Exchange
2.750% Notes due 2026PM26ANew York Stock Exchange
2.875% Notes due 2026PM26New York Stock Exchange
0.125% Notes due 2026PM26BNew York Stock Exchange
3.125% Notes due 2027PM27New York Stock Exchange
3.125% Notes due 2028PM28New York Stock Exchange
Title of each class                    Trading Symbol(s)Name of each exchange on which registered
2.875% Notes due 2029PM29New York Stock Exchange
3.375% Notes due 2029PM29ANew York Stock Exchange
0.800% Notes due 2031PM31New York Stock Exchange
3.125% Notes due 2033PM33New York Stock Exchange
2.000% Notes due 2036PM36New York Stock Exchange
1.875% Notes due 2037PM37ANew York Stock Exchange
6.375% Notes due 2038PM38New York Stock Exchange
1.450% Notes due 2039PM39New York Stock Exchange
4.375% Notes due 2041PM41New York Stock Exchange
4.500% Notes due 2042PM42New York Stock Exchange
3.875% Notes due 2042PM42ANew York Stock Exchange
4.125% Notes due 2043PM43New York Stock Exchange
4.875% Notes due 2043PM43ANew York Stock Exchange
4.250% Notes due 2044PM44New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ        No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ        No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer    þ                        Accelerated filer            ☐  
Non-accelerated filer    ☐                         Smaller reporting company    ☐
                                    Emerging growth company    ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  þ
At October 21, 2022, there were 1,550,202,305 shares outstanding of the registrant’s common stock, no par value per share.
1
Table of Contents

PHILIP MORRIS INTERNATIONAL INC.
TABLE OF CONTENTS
 
  Page No.
PART I -
Item 1.
Condensed Consolidated Statements of Earnings for the
Nine Months Ended September 30, 2022 and 2021
Three Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Comprehensive Earnings for the
Nine Months Ended September 30, 2022 and 2021
Three Months Ended September 30, 2022 and 2021
Condensed Consolidated Balance Sheets at
September 30, 2022 and December 31, 2021
7 – 8
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2022 and 2021
9 – 10
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
Nine Months Ended September 30, 2022 and 2021
Three Months Ended September 30, 2022 and 2021
13 – 50
Item 2.
51 – 116
Item 4.
PART II -
Item 1.
Item 1A.
Item 2.
Item 6.

In this report, “PMI,” “we,” “us” and “our” refer to Philip Morris International Inc. and its subsidiaries.

Trademarks and service marks in this report are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc. and are italicized.
2
Table of Contents

PART I – FINANCIAL INFORMATION
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 Nine Months Ended September 30,
 20222021
Revenues including excise taxes$60,638 $61,393 
Excise taxes on products37,028 38,092 
Net revenues (Note 10)23,610 23,301 
Cost of sales (Notes 3 & 6)8,191 7,223 
Gross profit15,419 16,078 
Marketing, administration and research costs (Notes 3 & 17)6,097 6,050 
Operating income9,322 10,028 
Interest expense, net418 482 
Pension and other employee benefit costs (Note 5)16 82 
Earnings before income taxes8,888 9,464 
Provision for income taxes1,835 2,078 
Equity investments and securities (income)/loss, net20 (95)
Net earnings$7,033 $7,481 
Net earnings attributable to noncontrolling interests382 465 
Net earnings attributable to PMI$6,651 $7,016 

Per share data (Note 8):
Basic earnings per share$4.28 $4.49 
Diluted earnings per share$4.27 $4.48 









See notes to condensed consolidated financial statements.




3
Table of Contents


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 September 30,
 20222021
Revenues including excise taxes$20,888 $21,617 
Excise taxes on products12,856 13,495 
Net revenues 8,032 8,122 
Cost of sales (Notes 3 & 6)2,935 2,596 
Gross profit5,097 5,526 
Marketing, administration and research costs (Notes 3 & 17)2,129 2,071 
Operating income2,968 3,455 
Interest expense, net138 154 
Pension and other employee benefit costs (Note 5)7 27 
Earnings before income taxes2,823 3,274 
Provision for income taxes622 735 
Equity investments and securities (income)/loss, net(21)(49)
Net earnings2,222 2,588 
Net earnings attributable to noncontrolling interests135 162 
Net earnings attributable to PMI$2,087 $2,426 

Per share data (Note 8):
Basic earnings per share$1.34 $1.55 
Diluted earnings per share$1.34 $1.55 








See notes to condensed consolidated financial statements.
4
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)

For the Nine Months Ended September 30,
20222021
Net earnings$7,033 $7,481 
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $(340) in 2022 and $(34) in 2021
(352)245 

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $29 in 2022 and $(7) in 2021
63 27 
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(37) in 2022 and $(54) in 2021
164 241 

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(106) in 2022 and $(15) in 2021
523 85 
(Gains) losses transferred to earnings, net of income taxes of $18 in 2022 and $3 in 2021
(106)(4)
Total other comprehensive earnings (losses)292 594 
Total comprehensive earnings7,325 8,075 
Less comprehensive earnings attributable to:
Noncontrolling interests385 398 
Comprehensive earnings attributable to PMI$6,940 $7,677 


















See notes to condensed consolidated financial statements.
5
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)
For the Three Months Ended September 30,
20222021
Net earnings$2,222 $2,588 
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $(158) in 2022 and $(9) in 2021
(571)18 

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $(7) in 2022 and $(2) in 2021
27 7 
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(15) in 2022 and $(18) in 2021
54 79 

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(52) in 2022 and $(3) in 2021
222 8 
(Gains) losses transferred to earnings, net of income taxes of $9 in 2022 and $3 in 2021
(51)(6)
Total other comprehensive earnings (losses)(319)106 
Total comprehensive earnings
1,903 2,694 
Less comprehensive earnings attributable to:
Noncontrolling interests61 123 
Comprehensive earnings attributable to PMI$1,842 $2,571 
















See notes to condensed consolidated financial statements.
6
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
 
September 30,
2022		December 31,
2021
ASSETS
Cash and cash equivalents$5,368 $4,496 
Trade receivables (less allowances of $45 in 2022 and $70 in 2021)
3,862 3,123 
Other receivables (less allowances of $33 in 2022 and $36 in 2021)
749 817 

Inventories:
Leaf tobacco1,440 1,642 
Other raw materials1,712 1,652 
Finished product4,001 5,426 
7,153 8,720 
Other current assets1,903 561 

Total current assets		19,035 17,717 

Property, plant and equipment, at cost		13,845 14,732 
Less: accumulated depreciation8,235 8,564 
5,610 6,168 
Goodwill (Note 6)6,127 6,680 
Other intangible assets, net (Note 6)2,224 2,818 
Equity investments (Note 14)4,087 4,463 
Deferred income taxes682 895 
Other assets (less allowances of $19 in 2022 and $21 in 2021)
2,952 2,549 
TOTAL ASSETS$40,717 $41,290 









See notes to condensed consolidated financial statements.
Continued
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share data)
(Unaudited)
 
September 30,
2022		December 31,
2021
LIABILITIES
Short-term borrowings (Note 12)$2,818 $225 
Current portion of long-term debt (Note 12)2,641 2,798 
Accounts payable3,342 3,331 
Accrued liabilities:
Marketing and selling700 811 
Taxes, except income taxes5,001 6,324 
Employment costs968 1,146 
Dividends payable1,990 1,958 
Other2,268 1,637 
Income taxes1,044 1,025 
Total current liabilities20,772 19,255 

Long-term debt (Note 12)		21,762 24,783 
Deferred income taxes923 726 
Employment costs2,597 2,968 
Income taxes and other liabilities2,066 1,766 
Total liabilities48,120 49,498 

Contingencies (Note 10)

STOCKHOLDERS’ (DEFICIT) EQUITY

Common stock, no par value
   (2,109,316,331 shares issued in 2022 and 2021)
— — 
Additional paid-in capital2,204 2,225 
Earnings reinvested in the business33,865 33,082 
Accumulated other comprehensive losses(9,288)(9,577)
26,781 25,730 
Less: cost of repurchased stock
   (559,123,183 and 559,146,338 shares in 2022 and 2021, respectively)
35,918 35,836 
Total PMI stockholders’ deficit(9,137)(10,106)
Noncontrolling interests1,734 1,898 
Total stockholders’ deficit(7,403)(8,208)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY$40,717 $41,290 





See notes to condensed consolidated financial statements.
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)
 
 For the Nine Months Ended September 30,
 20222021
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings$7,033 $7,481 
Adjustments to reconcile net earnings to operating cash flows:
Depreciation, amortization and impairment of intangibles898 719 
Deferred income tax (benefit) provision(146)(18)
Asset impairment and exit costs, net of cash paid (Note 17)(79)(34)
Cash effects of changes, net of the effects from acquired companies:
Receivables, net(963)(354)
Inventories793 1,235 
Accounts payable275 165 
Accrued liabilities and other current assets(326)(1,020)
Income taxes(190)(264)
Pension plan contributions, net of refunds (Note 5)38 (219)
Other377 244 
Net cash provided by operating activities7,710 7,935 
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures(730)(459)
Acquisitions, net of acquired cash (Note 2)— (1,869)
Equity investments(20)(26)
Net investment hedges and other derivatives (Note 7)634 278 
Other(35)58 
Net cash used in investing activities(151)(2,018)
 















See notes to condensed consolidated financial statements.

Continued
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
(Unaudited)
 
 For the Nine Months Ended September 30,
 20222021
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
    Net issuances (repayments) - maturities of 90 days or less$2,619 $(18)
    Issuances - maturities longer than 90 days795 — 
    Repayments - maturities longer than 90 days(795)— 
Long-term debt repaid(1,979)(1,979)
Repurchases of common stock(209)(94)
Dividends paid(5,839)(5,628)
Payments to noncontrolling interests and Other (Note 2)
(663)(457)
Net cash used in financing activities(6,071)(8,176)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(614)(226)
Cash, cash equivalents and restricted cash (1):
Increase (Decrease)874 (2,485)
Balance at beginning of period4,500 7,285 
Balance at end of period$5,374 $4,800 

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $6 million and $309 million as of September 30, 2022 and 2021, respectively, and $4 million and $5 million as of December 31, 2021 and 2020, respectively, which were included in other current assets in the condensed consolidated balance sheets. As of September 30, 2021, the restricted cash was primarily related to the remaining funding of PMI’s acquisition of Vectura Group plc (“Vectura"). For further details on the acquisition of Vectura, see Note 2. Acquisitions.







See notes to condensed consolidated financial statements.
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Nine Months Ended September 30, 2022 and 2021
(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, 2021$— $2,105 $31,638 $(11,181)$(35,129)$1,936 $(10,631)
Net earnings7,016 465 7,481 
Other comprehensive earnings (losses), net of income taxes661 (67)594 
Issuance of stock awards 76 76 152 
Dividends declared ($3.65 per share)
(5,719)(5,719)
Payments to noncontrolling interests(459)(459)
Common stock repurchased(94)(94)
Acquisitions44 44 
Balances, September 30, 2021$— $2,181 $32,935 $(10,520)$(35,147)$1,919 $(8,632)
Balances, January 1, 2022$— $2,225 $33,082 $(9,577)$(35,836)$1,898 $(8,208)
Net earnings6,651 382 7,033 
Other comprehensive earnings (losses), net of income taxes460 (168)292 
Issuance of stock awards 9 117 126 
Dividends declared ($3.77 per share)
(5,868)(5,868)
Payments to noncontrolling interests(368)(368)
Common stock repurchased(199)(199)
Other (Note 2)(30)(171)(10)(211)
Balances, September 30, 2022$— $2,204 $33,865 $(9,288)$(35,918)$1,734 $(7,403)




See notes to condensed consolidated financial statements.
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Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended September 30, 2022 and 2021
(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, July 1, 2021$— $2,143 $32,465 $(10,665)$(35,056)$1,913 $(9,200)
Net earnings  2,426   162 2,588 
Other comprehensive earnings (losses), net of income taxes   145  (39)106 
Issuance of stock awards 38   3  41 
Dividends declared ($1.25 per share)
  (1,956)   (1,956)
Payments to noncontrolling interests     (161)(161)
Common stock repurchased    (94) (94)
Acquisitions44 44 
Balances, September 30, 2021$— $2,181 $32,935 $(10,520)$(35,147)$1,919 $(8,632)
Balances, July 1, 2022$— $2,165 $33,755 $(9,043)$(35,921)$1,784 $(7,260)
Net earnings  2,087   135 2,222 
Other comprehensive earnings (losses), net of income taxes   (245) (74)(319)
Issuance of stock awards 39   3  42 
Dividends declared ($1.27 per share)
  (1,977)   (1,977)
Payments to noncontrolling interests     (111)(111)
Balances, September 30, 2022$— $2,204 $33,865 $(9,288)$(35,918)$1,734 $(7,403)


See notes to condensed consolidated financial statements.
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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 reduced-risk products including heat-not-burn, vapor and oral nicotine products, in markets outside of the United States of America. Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc. and its subsidiaries.

Reduced-risk products ("RRPs") is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continuing smoking. PMI has a range of RRPs in various stages of development, scientific assessment and commercialization.

"Platform 1" is the term PMI uses to refer to PMI’s reduced-risk product that uses a precisely controlled heating device into which a specially designed and proprietary tobacco unit is inserted and heated to generate an aerosol.

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. 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.

In the third quarter of 2021, PMI acquired Fertin Pharma A/S, Vectura Group plc. and OtiTopic, Inc. On March 31, 2022, PMI launched a new Wellness and Healthcare business consolidating these entities, Vectura Fertin Pharma. The operating results of this business are reported in the Wellness and Healthcare segment (formerly the Other category). For further details, see Note 2. Acquisitions and Note 9. Segment Reporting.

Certain prior years' amounts have been reclassified to conform with the current year's presentation. During the first quarter of 2022, one of Fertin Pharma's product lines was moved from the Wellness and Healthcare segment to the European Union segment (reduced-risk product category). For further details, see Note 6. Goodwill and Other Intangible Assets, net. The change did not have a material impact on 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, 2021.


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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 2. Acquisitions:

Purchase of Noncontrolling Interests

Turkey – In the first quarter of 2022, PMI acquired the remaining 25% stake of its holding in Philip Morris Tütün Mamulleri Sanayi ve Ticaret A.Ş. (formerly Philsa Philip Morris Sabancı Sigara ve Tütüncülük Sanayi ve Ticaret A.Ş.) and 24.75% stake in Philip Morris Pazarlama ve Satış A.Ş. (formerly Philip Morris SA, Philip Morris Sabancı Pazarlama ve Satış A.Ş.) from its Turkish partners, Sabanci Holding for a total acquisition price including transaction costs and remaining dividend entitlements of approximately $223 million. As a result of this acquisition, PMI now owns 100% of these Turkish subsidiaries. The purchase of the remaining stakes in these holdings resulted in a decrease to PMI's additional paid-in capital of $30 million and an increase to accumulated other comprehensive losses of $171 million primarily following the reclassification of accumulated currency translation losses from noncontrolling interests to PMI’s accumulated other comprehensive losses during the first quarter of 2022.

Business Combinations

AG Snus - On May 6, 2021, PMI acquired 100% of AG Snus Aktieselskab ("AG Snus"), a company based in Denmark, and its Swedish subsidiary Tobacco House of Sweden AB fully owned by AG Snus, which operates in the oral tobacco (i.e. snus) and modern oral (i.e. nicotine pouches) product categories. The purchase price was $28 million in cash, net of cash acquired, with additional contingent payments of up to $10 million, primarily relating to product development and performance targets over a less than two-year period. The operating results of AG Snus are included in the European Union segment, and were not material.

Fertin Pharma – On September 15, 2021, PMI acquired 100% of Fertin Pharma A/S (“Fertin Pharma”), a company based in Denmark. Fertin Pharma is a developer and manufacturer of pharmaceutical and well-being products based on oral and intra-oral delivery systems. The acquisition was funded with existing cash. The total consideration of $821 million (DKK 5.2 billion) included cash of $580 million and the payment of $241 million related to the settlement of Fertin Pharma’s indebtedness. The purchase price of $821 million was allocated to cash ($24 million), current assets including receivables and inventories ($69 million), non-current assets including property, plant and equipment ($228 million), goodwill ($378 million), and other intangible assets ($245 million, which primarily consisted of customer relationships, developed technology, and in process research and development ("IPR&D")), partially offset by current liabilities ($44 million, which primarily consisted of accrued liabilities and accounts payable) and non-current liabilities ($79 million, primarily deferred income tax). Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition. The goodwill is not deductible for income tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives of 8 to 19 years. During the nine months ended September 30, 2022, PMI did not record any measurement period adjustments to the purchase price allocation. The final purchase price allocation was reflected in the condensed consolidated balance sheets as of September 30, 2022.

Vectura – During the third quarter and up to September 15, 2021, PMI acquired a controlling interest of 74.77% of the total issued shares in Vectura Group plc (“Vectura”), an inhaled therapeutics company based in the United Kingdom. The shares were acquired through a series of open market purchases and acceptances of the tender offer at a price of 165 pence per share. As a result of additional acceptances of the offer and the exercise of the right to acquire compulsorily the Vectura shares, in accordance with the applicable English law, PMI completed the acquisition of 100% of Vectura in the fourth quarter of 2021. The acquisition was funded with existing cash from a designated account operated solely for the purpose of funding this acquisition.

The total purchase price of $1,384 million (GBP 1.0 billion) for 100% of the Vectura shares was allocated to cash ($136 million), current assets including receivables and inventories ($89 million), non-current assets including property, plant and equipment ($67 million), goodwill ($780 million), and other intangible assets ($486 million, which primarily consisted of developed technology, and IPR&D), partially offset by current liabilities ($100 million, primarily accrued liabilities), and non-current liabilities ($74 million, primarily deferred income tax). Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition. The goodwill is not deductible for income tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives of 3 to 13 years. During the third quarter of 2022, PMI made certain measurement period adjustments to the purchase price allocation to reflect facts and circumstances in existence as of the acquisition date, which resulted in an increase to goodwill of $190 million. The increase was primarily due to a decrease in other intangible assets ($233 million), and a decrease in deferred
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