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 June 30, 2023

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)

Virginia	13-3435103
(State or other jurisdiction of     incorporation or organization)	(I.R.S. Employer     Identification No.)

677 Washington Blvd, Suite 1100	Stamford	Connecticut	06901
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code (203) 905-2410

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 value	PM	New York Stock Exchange
3.600% Notes due 2023	PM23A	New York Stock Exchange
2.875% Notes due 2024	PM24	New York Stock Exchange
2.875% Notes due 2024	PM24C	New York Stock Exchange
0.625% Notes due 2024	PM24B	New York Stock Exchange
3.250% Notes due 2024	PM24A	New York Stock Exchange
2.750% Notes due 2025	PM25	New York Stock Exchange
3.375% Notes due 2025	PM25A	New York Stock Exchange
2.750% Notes due 2026	PM26A	New York Stock Exchange
2.875% Notes due 2026	PM26	New York Stock Exchange
0.125% Notes due 2026	PM26B	New York Stock Exchange
3.125% Notes due 2027	PM27	New York Stock Exchange
3.125% Notes due 2028	PM28	New York Stock Exchange
2.875% Notes due 2029	PM29	New York Stock Exchange
3.375% Notes due 2029	PM29A	New York Stock Exchange

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
0.800% Notes due 2031	PM31	New York Stock Exchange
3.125% Notes due 2033	PM33	New York Stock Exchange
2.000% Notes due 2036	PM36	New York Stock Exchange
1.875% Notes due 2037	PM37A	New York Stock Exchange
6.375% Notes due 2038	PM38	New York Stock Exchange
1.450% Notes due 2039	PM39	New York Stock Exchange
4.375% Notes due 2041	PM41	New York Stock Exchange
4.500% Notes due 2042	PM42	New York Stock Exchange
3.875% Notes due 2042	PM42A	New York Stock Exchange
4.125% Notes due 2043	PM43	New York Stock Exchange
4.875% Notes due 2043	PM43A	New York Stock Exchange
4.250% Notes due 2044	PM44	New 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 July 21, 2023, there were 1,552,345,193 shares outstanding of the registrant’s common stock, no par value per share.

1

PHILIP MORRIS INTERNATIONAL INC.

TABLE OF CONTENTS

		Page No.
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings for the
	Six Months Ended June 30, 2023 and 2022	3
	Three Months Ended June 30, 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Earnings for the
	Six Months Ended June 30, 2023 and 2022	5
	Three Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Balance Sheets at
	June 30, 2023 and December 31, 2022	7 – 8
	Condensed Consolidated Statements of Cash Flows for the
	Six Months Ended June 30, 2023 and 2022	9 – 10
	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
	Six Months Ended June 30, 2023 and 2022	11
	Three Months Ended June 30, 2023 and 2022	12
	Notes to Condensed Consolidated Financial Statements	13 – 56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57 – 118
Item 4.	Controls and Procedures	119
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	120
Item 1A.	Risk Factors	120
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	121
Item 6.	Exhibits	123
Signature		124

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

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 Six Months Ended June 30,
	2023		2022
Net revenues 1 & 2 (Note 14)	16,986		15,578
Cost of sales (Note 3)	6,266		5,256
Gross profit	10,720		10,322
Marketing, administration and research costs 3 (Notes 3, 6, 10 & 17)	5,423		3,968
Operating income	5,297		6,354
Interest expense, net	527		280
Pension and other employee benefit costs (Note 5)	28		9
Earnings before income taxes	4,742		6,065
Provision for income taxes	988		1,213
Equity investments and securities (income)/loss, net	(30)		41
Net earnings	$	3,784	$	4,811
Net earnings attributable to noncontrolling interests	221		247
Net earnings attributable to PMI	$	3,563	$	4,564
Per share data (Note 8):
Basic earnings per share	$	2.29	$	2.94
Diluted earnings per share	$	2.29	$	2.93

(1) Includes net revenues from related parties of $1,774 million and $1,547 million for the six months ended June 30, 2023 and 2022, respectively

(2) Net of excise tax on products of $24,048 million and $24,172 million for the six months ended June 30, 2023 and 2022, respectively

(3) Includes an impairment charge for goodwill and other intangibles of $680 million and a charge of $204 million for the South Korea indirect tax charge for the six months ended June 30, 2023, respectively. For further details, see Note 6. Goodwill and Other Intangible Assets, net and Note 10. Contingencies.

See notes to condensed consolidated financial statements.

3

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 June 30,
	2023		2022
Net revenues 1 & 2 (Note 14)	8,967		7,832
Cost of sales (Note 3)	3,228		2,648
Gross profit	5,739		5,184
Marketing, administration and research costs 3 (Notes 3, 6 & 10)	3,173		2,128
Operating income	2,566		3,056
Interest expense, net	297		126
Pension and other employee benefit costs (Note 5)	6		5
Earnings before income taxes	2,263		2,925
Provision for income taxes	560		594
Equity investments and securities (income)/loss, net	21		(15)
Net earnings	1,682		2,346
Net earnings attributable to noncontrolling interests	114		113
Net earnings attributable to PMI	$	1,568	$	2,233
Per share data (Note 8):
Basic earnings per share	$	1.01	$	1.44
Diluted earnings per share	$	1.01	$	1.43

(1) Includes net revenues from related parties of $901 million and $869 million for the three months ended June 30, 2023 and 2022, respectively

(2) Net of excise taxes of $12,749 million and $12,577 million for the three months ended June 30, 2023 and 2022, respectively

(3) Includes an impairment charge for goodwill and other intangibles of $680 million and a charge of $204 million for the South Korea indirect tax charge for the three months ended June 30, 2023, respectively. For further details, see Note 6. Goodwill and Other Intangible Assets, net and Note 10. Contingencies.

See notes to condensed consolidated financial statements.

4

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2023		2022
Net earnings	$	3,784	$	4,811
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $83 in 2023 and $(182) in 2022	(827)		219
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2023 and 2022	2		—
Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2023 and $36 in 2022	—		36
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(14) in 2023 and $(22) in 2022	41		110
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(48) in 2023 and $(54) in 2022	246		301
(Gains) losses transferred to earnings, net of income taxes of $22 in 2023 and $9 in 2022	(104)		(55)
Total other comprehensive earnings (losses)	(642)		611
Total comprehensive earnings	3,142		5,422
Less comprehensive earnings (losses) attributable to:
Noncontrolling interests	65		324
Comprehensive earnings attributable to PMI	$	3,077	$	5,098

See notes to condensed consolidated financial statements.

5

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)

	For the Three Months Ended June 30,
	2023		2022
Net earnings	$	1,682	$	2,346
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $31 in 2023 and $(151) in 2022	(572)		413
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2023 and 2022	2		—
Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $1 in 2023 and $36 in 2022	(2)		36
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(7) in 2023 and $(9) in 2022	16		55
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(32) in 2023 and $(34) in 2022	187		191
(Gains) losses transferred to earnings, net of income taxes of $16 in 2023 and $7 in 2022	(75)		(46)
Total other comprehensive earnings (losses)	(444)		649
Total comprehensive earnings	1,238		2,995
Less comprehensive earnings (losses) attributable to:
Noncontrolling interests	101		45
Comprehensive earnings attributable to PMI	$	1,137	$	2,950

See notes to condensed consolidated financial statements.

6

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)

	June 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	3,492	$	3,207
Trade receivables (less allowances of $65 in 2023 and $42 in 2022) (1)	4,110		3,850
Other receivables (less allowances of $34 in 2023 and $32 in 2022)	902		906
Inventories:
Leaf tobacco	2,010		1,674
Other raw materials	2,367		2,028
Finished product	5,523		6,184
	9,900		9,886
Other current assets	1,432		1,770
Total current assets	19,836		19,619
Property, plant and equipment, at cost	16,195		15,443
Less: accumulated depreciation	9,204		8,733
	6,991		6,710
Goodwill (Note 6)	19,236		19,655
Other intangible assets, net (Note 6)	6,630		6,732
Equity investments (Note 14)	4,747		4,431
Deferred income taxes	574		603
Other assets (less allowances of $25 in 2023 and $20 in 2022) (Note 2)	3,854		3,931
TOTAL ASSETS	$	61,868	$	61,681

(1) Includes trade receivables from related parties of $709 million and $688 million as of June 30, 2023, and December 31, 2022, respectively (less allowances of $29 million as of June 30, 2023 and $7 million as of December 31, 2022). For further details, see Note 14. Related Parties - Equity Investments and Other.

See notes to condensed consolidated financial statements.

Continued

7

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

(in millions of dollars, except share data)

(Unaudited)

	June 30, 2023		December 31, 2022
LIABILITIES
Short-term borrowings (Note 12)	$	4,121	$	5,637
Current portion of long-term debt (Note 12)	2,372		2,611
Accounts payable	3,786		4,076
Accrued liabilities:
Marketing and selling	820		695
Taxes, except income taxes	5,939		7,440
Employment costs	1,023		1,168
Dividends payable	1,992		1,990
Other	2,348		2,679
Income taxes	844		1,040
Total current liabilities	23,245		27,336
Long-term debt (Note 12)	41,400		34,875
Deferred income taxes	1,710		1,956
Employment costs	1,984		1,984
Income taxes and other liabilities	1,489		1,841
Total liabilities	69,828		67,992
Contingencies (Note 10)
STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, no par value    (2,109,316,331 shares issued in 2023 and 2022)	—		—
Additional paid-in capital	2,240		2,230
Earnings reinvested in the business	33,893		34,289
Accumulated other comprehensive losses (Note 13)	(10,045)		(9,559)
	26,088		26,960
Less: cost of repurchased stock    (557,003,561 and 559,098,620 shares in 2023 and 2022, respectively)	35,791		35,917
Total PMI stockholders’ deficit	(9,703)		(8,957)
Noncontrolling interests	1,743		2,646
Total stockholders’ deficit	(7,960)		(6,311)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	61,868	$	61,681

See notes to condensed consolidated financial statements.

8

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2023		2022
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings	$	3,784	$	4,811
Adjustments to reconcile net earnings to operating cash flows:
Depreciation, amortization and impairment of goodwill and other intangibles	1,280		540
Deferred income tax (benefit) provision	(211)		(88)
Asset impairment and exit costs, net of cash paid (Note 17)	85		(47)
Cash effects of changes, net of the effects from acquired companies:
Receivables, net (1)	(292)		(627)
Inventories	(74)		867
Accounts payable	(414)		174
Accrued liabilities and other current assets	(1,603)		(869)
Income taxes	(509)		(424)
Pension plan contributions, net of refunds (Note 5)	(72)		63
Other	513		242
Net cash provided by operating activities	2,487		4,642
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures	(639)		(478)
Equity investments	(91)		(20)
Net investment hedges and other derivatives (Note 7)	(342)		514
Other	(2)		(71)
Net cash used in investing activities	(1,074)		(55)

(1) Includes amounts from related parties of $(134) million and $(242) million for June 30, 2023 and 2022, respectively

See notes to condensed consolidated financial statements.

Continued

9

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2023		2022
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less	$	2,356	$	565
Issuances - maturities longer than 90 days	712		795
Repayments - maturities longer than 90 days	(180)		(15)
Repayments under credit facilities related to Swedish Match AB acquisition	(4,430)		—
Long-term debt proceeds	7,652		—
Long-term debt repaid	(2,034)		(497)
Repurchases of common stock	—		(209)
Dividends paid	(3,964)		(3,897)
Payments to acquire Swedish Match AB noncontrolling interests (Note 2)	(883)		—
Noncontrolling interests activity and Other (Note 2)	(149)		(542)
Net cash used in financing activities	(920)		(3,800)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(198)		(244)
Cash, cash equivalents and restricted cash (1):
Increase (Decrease)	295		543
Balance at beginning of period	3,217		4,500
Balance at end of period	$	3,512	$	5,043

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $20 million and $7 million as of June 30, 2023 and 2022, respectively, and $10 million and $4 million as of December 31, 2022 and 2021, respectively, which were included in other current assets in the condensed consolidated balance sheets.

See notes to condensed consolidated financial statements.

10

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Six Months Ended June 30, 2023 and 2022

(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, 2022	$	—	$	2,225	$	33,082	$	(9,577)	$	(35,836)	$	1,898	$	(8,208)
Net earnings					4,564						247		4,811
Other comprehensive earnings (losses), net of income taxes							705				(94)		611
Issuance of stock awards			(30)						114				84
Dividends declared ($2.50 per share)					(3,891)								(3,891)
Dividends paid to noncontrolling interests											(257)		(257)
Common stock repurchased									(199)				(199)
Purchase of subsidiary shares from noncontrolling interests (Note 2)			(30)				(171)				(10)		(211)
Balances, June 30, 2022	$	—	$	2,165	$	33,755	$	(9,043)	$	(35,921)	$	1,784	$	(7,260)
Balances, January 1, 2023	$	—	$	2,230	$	34,289	$	(9,559)	$	(35,917)	$	2,646	$	(6,311)
Net earnings					3,563						221		3,784
Other comprehensive earnings (losses), net of income taxes							(665)				23		(642)
Issuance of stock awards			(11)						126				115
Dividends declared ($2.54 per share)					(3,959)								(3,959)
Dividends paid to noncontrolling interests											(318)		(318)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 2)			21				179				(829)		(629)
Balances, June 30, 2023	$	—	$	2,240	$	33,893	$	(10,045)	$	(35,791)	$	1,743	$	(7,960)

See notes to condensed consolidated financial statements.

11

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended June 30, 2023 and 2022

(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, April 1, 2022	$	—	$	2,118	$	33,468	$	(9,760)	$	(35,924)	$	1,895	$	(8,203)
Net earnings					2,233						113		2,346
Other comprehensive earnings (losses), net of income taxes							717				(68)		649
Issuance of stock awards			47						3				50
Dividends declared ($1.25 per share)					(1,946)								(1,946)
Dividends paid to noncontrolling interests											(156)		(156)
Balances, June 30, 2022	$	—	$	2,165	$	33,755	$	(9,043)	$	(35,921)	$	1,784	$	(7,260)
Balances, April 1, 2023	$	—	$	2,188	$	34,303	$	(9,614)	$	(35,801)	$	1,871	$	(7,053)
Net earnings					1,568						114		1,682
Other comprehensive earnings (losses), net of income taxes							(431)				(13)		(444)
Issuance of stock awards			52						10				62
Dividends declared ($1.27 per share)					(1,978)								(1,978)
Dividends paid to noncontrolling interests											(225)		(225)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests											(4)		(4)
Balances, June 30, 2023	$	—	$	2,240	$	33,893	$	(10,045)	$	(35,791)	$	1,743	$	(7,960)

See notes to condensed consolidated financial statements.

12

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 products ("SFPs") is the term PMI primarily uses to refer to all of its products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral nicotine. In addition, SFPs include wellness and healthcare products, as well as consumer accessories such as lighters and matches.

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. PMI's RRPs are smoke-free products that contain and/or generate far lower quantities of harmful and potentially harmful constituents than found in cigarette smoke.

"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. 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.

In the fourth quarter of 2022, PMI acquired a controlling interest of the total issued shares in Swedish Match AB (“Swedish Match”). The operating results of Swedish Match are included in a separate segment. For further details, see Note 2. Acquisitions and Note 9. Segment Reporting.

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 Wellness and Healthcare business consolidating these entities, Vectura Fertin Pharma. The operating results of this business are reported in the Wellness and Healthcare segment. For further details, see Note 9. Segment Reporting.

To further support the growth of PMI's smoke-free business, reinforce consumer centricity, and increase the speed of innovation and deployment, in January 2023, PMI began managing its business in four geographical segments, down from six previously, in addition to its continuing Swedish Match and Wellness and Healthcare segments. 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, and PMI Duty Free Region ("EA, AU & PMI DF"); and Americas Region.

Certain prior years' amounts have been reclassified to conform with the current year's presentation. As a result of the new regional structure discussed above, certain goodwill amounts under the former six geographical segments were reallocated to the four geographical segments under the new structure. For further details, see Note 6. Goodwill and Other Intangible Assets, net. Following the Swedish Match acquisition and a review of PMI and Swedish Match’s combined product portfolio, PMI reclassified certain of its own products previously reported under its combustible tobacco product category to the newly created smoke-free product category to better reflect the characteristics of these products. For further details, see Note 9. Segment Reporting. 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, 2022.

13

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 2. Acquisitions:

Transactions With 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. ("PMTM") (formerly Philsa Philip Morris Sabanci Sigara ve Tütüncülük Sanayi ve Ticaret A.Ş.) and 24.75% stake in Philip Morris Pazarlama ve Satiş A.Ş. ("PMPS") (formerly Philip Morris SA, Philip Morris Sabanci Pazarlama ve Satiş 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 owned 100% of these Turkish subsidiaries as of December 31, 2022. 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.

In January 2023, PMI sold the acquired stakes of its holdings in PMTM and PMPS to Pioneers Tutun Yatirim Anonim Sirketi (“Pioneers”) for a consideration of approximately $258 million, including transaction costs and dividend entitlements. The sale resulted in an increase to PMI's additional paid-in capital of $36 million and a decrease to accumulated other comprehensive losses of $179 million, following the reclassification of accumulated other comprehensive losses from PMI’s accumulated other comprehensive losses to noncontrolling interests.

Business Combinations

Swedish Match AB – On November 11, 2022 (the acquisition date), Philip Morris Holland Holdings B.V. (“PMHH”), a wholly owned subsidiary of PMI, acquired a controlling interest of 85.87% of the total issued shares in Swedish Match AB (“Swedish Match”) and acquired 94.81% of its outstanding shares as of December 31, 2022. The shares were acquired through acceptances of the tender offer and a series of open market and over-the-counter purchases. PMI funded the acquisition through cash on-hand and debt proceeds, as described in Note 12. Indebtedness. The aggregate cash paid as of the acquisition date was $14,460 million (or $13,976 million net of cash acquired), which was included in investing activities in the consolidated statements of cash flows for the year ended December 31, 2022. The cash paid in connection with the additional purchases of the noncontrolling interests after the acquisition date and through December 31, 2022 amounted to $1,495 million and was included in financing activities in the consolidated statements of cash flows for the year ended December 31, 2022.

In accordance with the Swedish Companies Act, PMI subsequently exercised its right to compulsorily redeem the remaining shares for which acceptances were not received and obtained legal title to 100% of the shares in Swedish Match on February 17, 2023. Cash paid in connection with such legal title, together with an immaterial amount attributable to open market purchases that were executed in December 2022 but settled in January 2023, amounted to $883 million and was included in financing activities in the condensed consolidated statements of cash flows for the six months ended June 30, 2023. While we have paid the referenced amounts and have acquired legal title to the shares, the redemption process will not be complete under the Swedish Companies Act until a final redemption price is determined by an arbitral tribunal. This process may take 6 to 12 months to complete, but we believe the likelihood it will result in additional payments to be remote.

Swedish Match is a market leader in oral nicotine delivery with a significant presence in the United States market. The acquisition will accelerate PMI’s transformation to become a smoke-free company with a comprehensive global smoke-free portfolio with leadership positions in heat-not-burn, and the fastest growing category of oral nicotine, with the potential for accelerated international expansion.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Due to the timing of the acquisition, and limited access to detailed and disaggregated financial information of Swedish Match, the purchase price allocation is preliminary and it is likely subject to change, including the valuation of property, plant and equipment, intangible assets, income taxes and legal contingencies among other items. During the second quarter of 2023, 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 in goodwill of $109 million. The increase was due to a decrease in other current assets of $109 million. PMI is still assessing information received, as of the acquisition date, and expects to complete this process by the end of the measurement period in November 2023. The following table summarizes the preliminary purchase price allocation for the fair value of assets acquired and liabilities assumed as of the acquisition date:

(in millions)
Cash and cash equivalents	$	484
Trade receivables	135
Other receivables	53
Inventories	444
Other current assets	415
Property, plant and equipment	627
Other intangible assets	4,512
Other non-current assets	214
Current portion of long-term debt	224
Accounts payable	120
Other current liabilities	531
Income taxes	14
Long-term debt	1,126
Deferred income taxes	1,253
Other non-current liabilities	187
Identifiable net assets acquired	3,429
Noncontrolling interest	2,379
Goodwill	13,410
Total consideration transferred	$	14,460

The total fair value step-up adjustment for inventories was $146 million, of which $125 million was recognized in cost of sales in the fourth quarter of 2022 and the remaining balance in the first quarter of 2023.

The fair value of long-term debt was determined using readily available market prices as of the acquisition date and the total purchase price adjustment of $(102) million is being amortized as an increase to interest expense, net over the lives of the related debt.

Goodwill is primarily attributable to future growth opportunities, anticipated synergies in the U.S. and intangible assets that did not qualify for separate recognition. The goodwill is not deductible for income tax purposes.

Identifiable intangible assets of Swedish Match consist of:

	Type	Useful Life	Estimated Fair Value (in millions)
Trademarks	Non-amortizable		$	2,077
Trademarks	Amortizable	20 years	904
Developed technology, including patents		10 years	367
Customer relationships		10 years	1,164
Total identifiable intangible assets			$	4,512

15

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included royalty rates, revenue growth rates, profit margins, customer attrition rate and discount rates.

Trademarks primarily relate to $2,077 million for the ZYN trademark, which has been determined to have an indefinite life due to the fast growth and the leading position of the brand in the U.S. market. All other trademarks have been preliminarily determined to have a 20 years useful life. The preliminary fair values of the trademarks have been determined using the relief from royalty method supported by revenue growth rates assumptions and royalty rates benchmarking analysis at product category level (smoke-free brands, including ZYN, cigar brands and lights). In 2023, during the measurement period, the useful life, revenue growth rate and the royalty rate of each individual trademark will be reassessed to determine its final purchase price.

Developed technology, including patents, relates to the nicotine pouch technology of $367 million. The patent has been assigned a useful life of 10 years, which is in line with the patent's protection. The preliminary fair value of the patent has been determined using the relief from royalty method.

Customer relationships have been valued separately by geographic locations, namely for the U.S. market, Scandinavia, and other markets using the multiple periods excess earnings method, preliminarily reflecting a general market attrition rate for retail and revenue allocation and profit margin assumptions by customer type, which will be further assessed during the measurement period.

PMI consolidated statements of earnings for the year ended December 31, 2022, include $316 million of net revenues and $(26) million of net losses associated with the results of operations of Swedish Match from the acquisition date to December 31, 2022. The operating results of Swedish Match are included in a separate segment.

Acquisition related transaction costs, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $59 million for the year ended December 31, 2022, and were included in marketing, administration and research costs in the consolidated statements of earnings. Bridge and term loan credit agreement related fees associated with the issuance of debt amounted to $54 million, of which $37 million were capitalized at the acquisition date. The fair value of the noncontrolling interest was based on the tender offer as of the acquisition date.

Under the EU Merger Regulation, approval by the European Commission of PMI's acquisition of Swedish Match was conditional on PMHH's divestiture of Swedish Match's subsidiary, SMD Logistics AB ("SMDL"), following the completion of the offer to tender all shares in Swedish Match to PMHH. As a result, these assets were accounted for as assets held for sale and included within other current assets and other accrued liabilities in PMI’s condensed consolidated balance sheets at March 31, 2023 and December 31, 2022. PMI subsequently sold SMDL on June 30, 2023 and the transaction did not have a material impact on the condensed consolidated statements of earnings for the six months and three months ended June 30, 2023.

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of PMI and Swedish Match. In order to reflect the occurrence of the acquisition on January 1, 2021, as required, the unaudited pro forma financial information includes adjustments to reflect the following:

•incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired;

•incremental cost of products sold related to the fair value adjustments associated with acquisition date inventory;

•additional interest expense associated with the issuance of debt to finance the acquisition, including the effects of the related derivative financial instruments designated to hedge interest rate risks as well as economic hedges;

•reclassification of non-recurring acquisition-related costs incurred during the year ended December 31, 2022, to the year ended December 31, 2021;

•impact of a deferred tax cost of $430 million in 2022 and $321 million in 2021 related to the theoretical unrealized foreign currency gains on intercompany loans related to the acquisition financing. These theoretical unrealized pre-tax foreign currency movements were fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in PMI's consolidated statements of stockholders' (deficit) equity, while the corresponding deferred tax impacts were reflected in PMI's consolidated statements of earnings; and

•other immaterial items (i.e., the alignment of accounting policies from IFRS to US GAAP.)

16

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2021. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

The unaudited pro forma financial information is as follows:

	For the Years Ended December 31,
(in millions)	2022		2021
Net revenues	$	33,690	$	33,577
Net earnings attributable to PMI	$	8,875	$	8,610

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, PMI will have the full rights to commercialize IQOS in the U.S. As part of the agreement, PMI agreed to pay a total cash consideration of $2.7 billion, with $1.0 billion paid at the inception of the agreement and the remaining $1.7 billion (plus interest, at a per annum rate equal to six percent (6%)), to be paid by July 2023 at the latest. The cash consideration paid at the inception of the agreement of $1.0 billion has been accounted for within other assets in PMI’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022. The remaining consideration of $1.7 billion plus interest was paid to Altria on July 14, 2023 and will be accounted for within other assets in PMI's condensed consolidated balance sheets as of September 30, 2023. PMI will finalize the accounting for this transaction by assigning the consideration to the respective assets in May 2024, when PMI can exercise its ability to commercialize IQOS in the U.S.

Note 3. War in Ukraine:

Since the onset of the war in Ukraine in February 2022, PMI's main priority has been the safety and security of its more than 1,300 employees and their families in the country.

Ukraine

PMI temporarily suspended its commercial and manufacturing operations in Ukraine, including the closing of its factory in Kharkiv at the end of February 2022, in order to preserve the safety of its employees. PMI subsequently resumed some retail activities where safety allowed, in order to provide product availability and service to adult consumers, and began to supply the market from production centers outside Ukraine, as well as through a contract manufacturing arrangement. Production at the factory in Kharkiv remains suspended. While the effects of the war are unpredictable and could trigger impairment reviews for long-lived assets, as of June 30, 2023, PMI is unable to estimate the information required to perform impairment analyses (i.e., forecast of revenues, manufacturing and commercial plans). PMI is not aware of any major damage to its production facilities, inventories or other assets in Ukraine. As a result, PMI has not recorded an impairment of long-lived assets. As of June 30, 2023, PMI’s Ukrainian operations had approximately $497 million in total assets, excluding intercompany balances. These total assets included $75 million, $305 million and $29 million in receivables, inventories and property, plant and equipment, respectively.

Russia

PMI has suspended its planned investments in the Russian Federation including all new product launches and commercial, innovation, and manufacturing investments. PMI has also taken steps to scale down its manufacturing operations in Russia amid ongoing supply chain disruptions and the evolving regulatory environment. PMI is continuously assessing the evolving situation in Russia, including recent regulatory constraints in the market that entail very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations. As a result of PMI continuing operations within Russia as of June 30, 2023, it has not recorded an impairment of long-lived and other assets. However, PMI recorded specific asset write downs as referred to in the table below. PMI’s

17

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Russian operations as of June 30, 2023 had approximately $2.4 billion in total assets, excluding intercompany balances. These total assets included $561 million, $465 million, $932 million, $272 million and $164 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively. In addition, there was approximately $1,132 million of cumulative foreign currency translation losses reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of June 30, 2023.

During the six months and three months ended June 30, 2023, PMI did not record any material charges related to the war in Ukraine. During the six months and three months ended June 30, 2022, PMI recorded in its condensed consolidated statements of earnings pre-tax charges related to circumstances driven by the war as follows:

(in millions)	For the Six Months Ended June 30, 2022						For the Three Months Ended June 30, 2022
	Cost of sales		Marketing, administration and research costs		Total		Cost of sales		Marketing, administration and research costs		Total
Ukraine 1	$	25	$	26	$	51	$	14	$	10	$	24
Russia 2	21		50		71		6		50		56
Total	$	46	$	76	$	122	$	20	$	60	$	80

1 The pre-tax charges were primarily due to an inventory write down, additional allowance for receivables and the cost of PMI’s humanitarian efforts, which includes salary continuation for its employees.

2 The pre-tax charges were primarily due to machinery and inventory write downs related to the commercial decisions noted above.

PMI will continue to monitor the situation as it evolves and will determine if further charges are needed.

Note 4. 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 June 30, 2023, shares available for grant under the 2022 Plan were 22,146,010.

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 June 30, 2023, shares available for grant under the plan were 876,226.

Restricted share unit (RSU) awards

During the six months ended June 30, 2023 and 2022, shares granted to eligible employees and the weighted-average grant date fair value per share related to RSU awards were as follows:

	Number of Shares Granted	Weighted-Average Grant Date Fair Value Per RSU Award Granted
2023	1,752,050	$ 101.98
2022	1,575,500	$  104.99

18

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Compensation expense related to RSU awards was as follows:

	Compensation Expense Related to RSU Awards
(in millions)	For the Six Months Ended June 30,	For the Three Months Ended June 30,
2023	$ 86	$ 36
2022	$ 74	$ 35

As of June 30, 2023, PMI had $240 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 six months ended June 30, 2023, 1,346,307 RSU awards vested. The grant date fair value of all the vested awards was approximately $117 million. The total fair value of RSU awards that vested during the six months ended June 30, 2023 was approximately $135 million.

Performance share unit (PSU) awards

During the six months ended June 30, 2023 and 2022, 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 six months ended June 30, 2023 and 2022 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis (40% weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate (30% weight), and a Sustainability Index, which consists of two drivers:

•Product Sustainability (20% weight) measuring progress on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, seek net positive impact in wellness and healthcare, and reduce post-consumer waste; and

•Operational Sustainability (10% weight) measuring progress on PMI's efforts to tackle climate change, preserve nature, improve the quality of life of people in its supply chain, and foster an empowered, and inclusive workplace.

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 six months ended June 30, 2023 and 2022, shares granted to eligible employees and the grant date fair value per share related to PSU awards were as follows:

	Number of Shares Granted	Weighted- Average PSU Grant Date  Fair Value Subject to Other Performance Factors	Weighted- Average PSU Grant Date  Fair Value Subject to TSR Performance Factors
		(Per Share)	(Per Share)
2023	482,360	$ 102.02	$ 133.54
2022	451,790	$  105.07	$ 143.94

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

19

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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:

	2023		2022
Average risk-free interest rate (a)	4.1	%	1.6	%
Average expected volatility (b)	24.3	%	28.6	%

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

(b) Determined using the observed historical volatility.

Compensation expense related to PSU awards was as follows:

	Compensation Expense Related to PSU Awards
(in millions)	For the Six Months Ended June 30,	For the Three Months Ended June 30,
2023	$ 45	$ 18
2022	$  31	$  10

As of June 30, 2023, PMI had $60 million of total unrecognized compensation cost related to non-vested PSU awards. The cost is recognized over the performance cycle of the awards, or upon death, disability or reaching the age of 58.

During the six months ended June 30, 2023, 902,232 PSU awards vested. The grant date fair value of all the vested awards was approximately $83 million. The total fair value of PSU awards that vested during the six months ended June 30, 2023 was approximately $91 million.

Note 5. 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 Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2023		2022		2023		2022
Net pension costs (income)	$	(37)	$	(49)	$	(25)	$	(24)
Net postemployment costs	59		54		29		27
Net postretirement costs	6		4		2		2
Total pension and other employee benefit costs	$	28	$	9	$	6	$	5

20

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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)	2023		2022		2023		2022
Service cost	$	85	$	119	$	42	$	59
Interest cost	129		38		63		18
Expected return on plan assets	(181)		(180)		(91)		(88)
Amortization:
Net loss	16		94		4		46
Prior service cost (credit)	(1)		(1)		(1)		—
Net periodic pension cost	$	48	$	70	$	17	$	35

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

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 $72 million were made to the pension plans during the six months ended June 30, 2023. Currently, PMI anticipates making additional contributions during the remainder of 2023 of approximately $56 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.

Employer contributions of $60 million, were made to the pension plans during the six months ended June 30, 2022. During the second quarter of 2022, PMI received a cash refund of $123 million from one of its pension plans due to a change in discount rate and value of assets that resulted in the overfunding of the plan.

21

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6. Goodwill and Other Intangible Assets, net:

Annual impairment review of goodwill and non-amortizable intangible assets

During the second quarter of 2023, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment. Based on this review, it was determined that the estimated fair value of the Wellness and Healthcare reporting unit was lower than its carrying value. Consequently, PMI recorded a goodwill impairment charge of $665 million, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness and Healthcare business. While it was observed that the experimental product had a rapid onset of effect, which is the key medical advantage sought, there was significant variability in inhaled dose among subjects. The study was therefore deemed unsuccessful and, as a result, product design improvements are required. PMI had planned to file a new drug application for this product with the U.S. Food and Drug Administration later this year. However, additional time is now required to evaluate design improvements and the corresponding less certain outcome. The cash flow estimates were also adversely impacted by slower-than-anticipated development of the contract development and manufacturing organization ("CDMO") business, including challenges associated with increased cost related to certain key products. Additionally, as a result of the impairment test of non-amortizable intangible assets, PMI recorded a pre-tax impairment charge of $15 million for an in-process research and development project related to one of PMI's 2021 acquisitions. These impairment charges were recorded within marketing, administration and research costs in the consolidated statements of earnings for the six months and three months ended June 30, 2023. The goodwill impairment charge is not deductible for income tax purposes.

The Wellness and Healthcare reporting unit's fair value was determined using the discounted cash flow model. PMI will continue to monitor this reporting unit as any changes in assumptions and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals or other market factors could result in additional future goodwill and other intangible asset impairments. Certain Wellness and Healthcare products include components or gases which may be subject to enhanced climate change regulations that could impact the related product development and market strategies. This may also lead to supply disruptions that could result in additional future impairments.

While PMI’s remaining reporting units have fair values substantially in excess of their carrying values, there are still risks related to PMI’s Russian reporting unit’s assets as the fair value of these assets is difficult to predict due to the volatility in foreign currency and commodity markets, supply chain, and current economic, political and social conditions. For more information see Note 3. War in Ukraine. PMI has performed a quantitative impairment assessment for all of its reporting units and non-amortizable intangible assets with the exception of the Swedish Match segment. As the purchase price allocation for the acquisition of Swedish Match is preliminary, PMI has performed a qualitative impairment assessment and concluded that it was not more likely than not that the fair value of the Swedish Match reporting units and its non-amortizable intangible assets were less than the respective carrying amounts.

Goodwill

The movements in goodwill were as follows:

(in millions)	Europe		SSEA, CIS & MEA		EA, AU & PMI DF		Americas		Swedish Match		Wellness & Healthcare		Total
Balances at December 31, 2022	$	1,370	$	2,869	$	493	$	615	$	13,296	$	1,012	$	19,655
Changes due to:
Impairment	—		—		—		—		—		(665)		(665)
Currency	48		68		6		71		(94)		38		137
Other	—		—		—		—		109		—		109
Balances, June 30, 2023	$	1,418	$	2,937	$	499	$	686	$	13,311	$	385	$	19,236

As discussed in Note 1. Background and Basis of Presentation, in January 2023, PMI began managing its business in four geographical segments, Swedish Match segment and Wellness and Healthcare segment. As a result, the December 31, 2022 goodwill balance in the table above included the reclassifications from the former six geographical segments to the four geographical segments under the new structure.

22

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The decrease in goodwill was primarily due to the impairment discussed above, partially offset by currency movements and the measurement period adjustment to the Swedish Match preliminary purchase price allocation. For further details on the Swedish Match acquisition, see Note 2, Acquisitions