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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 March 31, 2024
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.)
677 Washington Blvd, Suite 1100StamfordConnecticut06901
(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 valuePMNew 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
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
Title of each class                    Trading Symbol(s)Name of each exchange on which registered
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 April 19, 2024, there were 1,554,556,966 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 -
Item 1.
Condensed Consolidated Statements of Earnings for the
Three Months Ended March 31, 2024 and 2023
Condensed Consolidated Statements of Comprehensive Earnings for the
Three Months Ended March 31, 2024 and 2023
Condensed Consolidated Balance Sheets at
March 31, 2024 and December 31, 2023
56
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2024 and 2023
7 – 8
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
Three Months Ended March 31, 2024 and 2023
1043
Item 2.
4494
Item 4.
PART II -
Item 1.
Item 1A.
Item 2.
Item 5.
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

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 Three Months Ended March 31,
 20242023
Net revenues 1 & 2 (Notes 7 & 12)
$8,793 $8,019 
Cost of sales 3,195 3,038 
Gross profit5,598 4,981 
Marketing, administration and research costs (Note 15)
2,553 2,250 
Operating income3,045 2,731 
Interest expense, net299 230 
Pension and other employee benefit costs (Note 3)15 22 
Earnings before income taxes2,731 2,479 
Provision for income taxes676 428 
Equity investments and securities (income)/loss, net(191)(51)
Net earnings2,246 2,102 
Net earnings attributable to noncontrolling interests98 107 
Net earnings attributable to PMI$2,148 $1,995 

Per share data (Note 6):
Basic earnings per share$1.38 $1.28 
Diluted earnings per share$1.38 $1.28 
(1) Includes net revenues from related parties of $860 million and $873 million for the three months ended March 31, 2024 and 2023, respectively
(2) Net of excise taxes of $11,839 million and $11,299 million for the three months ended March 31, 2024 and 2023, respectively




See notes to condensed consolidated financial statements.
3

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)
For the Three Months Ended March 31,
20242023
Net earnings$2,246 $2,102 
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $(102) in 2024 and $52 in 2023
488 (255)
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2024 and 2023 (Notes 11 &15)
42  

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2024 and $(1) in 2023
 2 
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(9) in 2024 and $(7) in 2023
34 25 

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(39) in 2024 and $(16) in 2023
178 59 
(Gains) losses transferred to earnings, net of income taxes of $16 in 2024 and $6 in 2023
(46)(29)
Total other comprehensive earnings (losses)696 (198)
Total comprehensive earnings
2,942 1,904 
Less comprehensive earnings (losses) attributable to:
Noncontrolling interests44 (36)
Comprehensive earnings attributable to PMI$2,898 $1,940 
















See notes to condensed consolidated financial statements.
4

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
 
March 31,
2024
December 31,
2023
ASSETS
Cash and cash equivalents$3,968 $3,060 
Trade receivables (less allowances of $72 in 2024 and $79 in 2023) (1)
4,188 3,461 
Other receivables (less allowances of $32 in 2024 and $35 in 2023)
864 930 

Inventories:
Leaf tobacco1,959 1,942 
Other raw materials2,162 2,293 
Finished product5,849 6,539 
9,970 10,774 
Other current assets1,884 1,530 

Total current assets
20,874 19,755 

Property, plant and equipment, at cost
16,545 17,080 
Less: accumulated depreciation9,344 9,564 
7,201 7,516 
Goodwill (Note 4)16,458 16,779 
Other intangible assets, net (Note 4)9,448 9,864 
Equity investments (Note 12)4,918 4,929 
Deferred income taxes950 814 
Other assets (less allowances of $24 in 2024 and $25 in 2023) (Note 18)
5,466 5,647 
TOTAL ASSETS$65,315 $65,304 

(1) Includes trade receivables from related parties of $702 million and $710 million as of March 31, 2024, and December 31, 2023, respectively. For further details, see Note 12. Related Parties - Equity Investments and Other.






See notes to condensed consolidated financial statements.
Continued
5

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share data)
(Unaudited)
 
March 31,
2024
December 31,
2023
LIABILITIES
Short-term borrowings (Note 10)$279 $1,968 
Current portion of long-term debt (Note 10)5,425 4,698 
Accounts payable3,648 4,143 
Accrued liabilities:
Marketing and selling823 862 
Taxes, except income taxes5,799 7,514 
Employment costs925 1,262 
Dividends payable2,038 2,041 
Other2,409 2,737 
Income taxes822 1,158 
Total current liabilities22,168 26,383 

Long-term debt (Note 10)
44,683 41,243 
Deferred income taxes2,664 2,335 
Employment costs2,824 3,046 
Income taxes and other liabilities1,539 1,743 
Total liabilities73,878 74,750 

Contingencies (Note 8)

STOCKHOLDERS’ (DEFICIT) EQUITY

Common stock, no par value
   (2,109,316,331 shares issued in 2024 and 2023)
  
Additional paid-in capital2,205 2,285 
Earnings reinvested in the business34,208 34,090 
Accumulated other comprehensive losses (Note 11)(11,065)(11,815)
25,348 24,560 
Less: cost of repurchased stock
   (554,763,523 and 556,891,800 shares in 2024 and 2023, respectively)
35,657 35,785 
Total PMI stockholders’ deficit(10,309)(11,225)
Noncontrolling interests1,746 1,779 
Total stockholders’ deficit(8,563)(9,446)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY$65,315 $65,304 





See notes to condensed consolidated financial statements.
6

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)
 
 For the Three Months Ended March 31,
 20242023
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings$2,246 $2,102 
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization expense367 299 
Impairment of other intangibles (Note 4)27  
Deferred income tax (benefit) provision76 (96)
Asset impairment and exit costs, net of cash paid (Note 15)148 102 
Cash effects of changes, net of the effects from acquired companies:
Receivables, net (1)
(890)245 
Inventories527 (783)
Accounts payable(181)(145)
Accrued liabilities and other current assets(1,797)(2,705)
Income taxes(79)(88)
Pension plan contributions (Note 3)(34)(45)
Other(169)159 
Net cash provided by (used in) operating activities241 (955)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures(417)(279)
Equity investments(20)(8)
Collateral posted/settlements for derivatives, (paid)/returned (Note 5)310 (164)
Other(66)(140)
Net cash provided by (used in) investing activities(193)(591)
 
(1) Includes amounts from related parties of $(45) million and $(76) million for March 31, 2024 and 2023, respectively













See notes to condensed consolidated financial statements.

Continued
7

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
(Unaudited)
 
 For the Three Months Ended March 31,
 20242023
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
    Net issuances (repayments) - maturities of 90 days or less$(1,475)$3,361 
    Issuances - maturities longer than 90 days100 358 
    Repayments - maturities longer than 90 days(284)(138)
Repayments under credit facilities related to Swedish Match AB acquisition (4,430)
Long-term debt proceeds4,659 5,203 
Long-term debt repaid (682)
Dividends paid(2,037)(1,987)
Collateral received/settlements for derivatives, received/(returned)260 (2)
Payments to acquire Swedish Match AB noncontrolling interests  (883)
Noncontrolling interests activity and Other (Note 18)
(88)64 
Net cash provided by (used in) financing activities1,135 864 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(230)(89)
Cash, cash equivalents and restricted cash (1):
Increase (Decrease)953 (771)
Balance at beginning of period3,146 3,217 
Balance at end of period$4,099 $2,446 

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $131 million and $18 million as of March 31, 2024 and 2023, respectively, and $86 million and $10 million as of December 31, 2023 and 2022, respectively, which were included in other current assets in the condensed consolidated balance sheets.







See notes to condensed consolidated financial statements.
8

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended March 31, 2024 and 2023
(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, 2023$ $2,230 $34,289 $(9,559)$(35,917)$2,646 $(6,311)
Net earnings1,995 107 2,102 
Other comprehensive earnings (losses), net of income taxes(234)36 (198)
Issuance of stock awards (63)116 53 
Dividends declared ($1.27 per share)
(1,981)(1,981)
Dividends paid to noncontrolling interests(93)(93)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 18)21 179 (825)(625)
Balances, March 31, 2023$ $2,188 $34,303 $(9,614)$(35,801)$1,871 $(7,053)
Balances, January 1, 2024$ $2,285 $34,090 $(11,815)$(35,785)$1,779 $(9,446)
Net earnings2,148 98 2,246 
Other comprehensive earnings (losses), net of income taxes750 (54)696 
Issuance of stock awards (80)128 48 
Dividends declared ($1.30 per share)
(2,030)(2,030)
Dividends paid to noncontrolling interests(76)(76)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests — — (1)(1)
Balances, March 31, 2024$ $2,205 $34,208 $(11,065)$(35,657)$1,746 $(8,563)




See notes to condensed consolidated financial statements.
9

Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
Note 1. Background and Basis of Presentation:

Background

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

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

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

"Platform 1" is the term PMI uses to refer to PMI’s smoke-free products that use 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.

Following the combination and the progress in 2023 toward the integration of the Swedish Match business into PMI's existing regional structure, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments. The four existing 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. The Wellness and Healthcare ("W&H") segment remained unchanged.

Certain prior years' amounts have been reclassified to conform with the current year's presentation as a result of the new segment structure discussed above. See Note 4. Goodwill and Other Intangible Assets, net, Note 7. Segment Reporting and Note 15. Asset Impairment and Exit Costs for further details. These reclassifications did not impact PMI’s consolidated financial position, results of operations or cash flows in any of the periods presented.

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2023.

Note 2. Stock Plans:
In May 2022, PMI’s shareholders approved the Philip Morris International Inc. 2022 Performance Incentive Plan (the “2022 Plan”). Under the 2022 Plan, PMI may grant to eligible employees restricted shares and restricted share units, performance-based cash incentive awards and performance-based equity awards. Up to 25 million shares of PMI’s common stock may be issued under the 2022 Plan. At March 31, 2024, shares available for grant under the 2022 Plan were 19,114,716.

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
10

Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the 2017 Non-Employee Directors Plan. At March 31, 2024, shares available for grant under the plan were 876,226.

Restricted share unit (RSU) awards

During the three months ended March 31, 2024 and 2023, shares granted to eligible employees, the weighted-average grant date fair value per share and the recorded compensation expense related to RSU awards were as follows:
Number of
Shares
Granted
Weighted-Average Grant Date Fair Value Per RSU Award GrantedCompensation Expense Related to RSU Awards
(in millions)
20241,975,480 89.04 $47 
20231,732,910 $  102.01 $50 
As of March 31, 2024, PMI had $274 million of total unrecognized compensation cost related to non-vested RSU awards. The cost is recognized over the original restriction period of the awards, which is typically three years after the date of the award, or upon death, disability or reaching the age of 58.

During the three months ended March 31, 2024, 1,546,406 RSU awards vested. The grant date fair value of all the vested awards was approximately $128 million. The total fair value of RSU awards that vested during the three months ended March 31, 2024 was approximately $139 million.

Performance share unit (PSU) awards

During the three months ended March 31, 2024 and 2023, PMI granted PSU awards to certain executives. The PSU awards require the achievement of certain performance metrics, which are predetermined at the time of grant, typically over a three-year performance cycle.

The performance metrics for such PSU's granted during the three months ended March 31, 2023 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 primarily on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, and reduce post-consumer waste; and

Operational Sustainability (10% weight) 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 performance metrics, targets and relative weights for the PSU’s granted during the three months ended March 31, 2024 were the same as the PSU’s granted during the three months ended March 31, 2023, with the exception of adjustments made to certain components of the Sustainability Index intended to address PMI's developing sustainability strategy and reporting.

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

The aggregate of the weighted performance factors for the three metrics in each such PSU award determines the percentage of PSUs that will vest at the end of the three-year performance cycle. The minimum percentage of such PSUs that can vest is zero, with a target percentage of 100 and a maximum percentage of 200. Each such vested PSU entitles the participant to one share of common stock. An aggregate weighted PSU performance factor of 100 will result in the targeted number of PSUs being vested. At the end of the performance cycle, participants are entitled to an amount equivalent to the accumulated dividends paid on common stock during the performance cycle for the number of shares earned.

11

Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the three months ended March 31, 2024 and 2023, shares granted to eligible employees, the grant date fair value per share and the recorded compensation expense related to PSU awards were as follows:
Number of Shares GrantedWeighted-
Average PSU Grant Date 
Fair Value Subject to Other Performance Factors
Weighted-
Average PSU Grant Date 
Fair Value Subject to TSR Performance Factors
Compensation Expense Related to PSU Awards (in millions)
(Per Share)(Per Share)
2024543,560 89.01 85.72 $31 
2023482,360 $  102.02 133.54 $27 

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the market price of PMI’s stock on the date of the grant. The grant date fair value of the PSU market-based awards subject to the TSR performance factor was determined by using the Monte Carlo simulation model. The following assumptions were used to determine the grant date fair value of the PSU awards subject to the TSR performance factor:
20242023
Average risk-free interest rate (a)
4.2 %4.1 %
Average expected volatility (b)
19.9 %24.3 %
(a) Based on the U.S. Treasury yield curve.
(b) Determined using the observed historical volatility.

As of March 31, 2024, PMI had $62 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 three months ended March 31, 2024, 909,262 PSU awards vested. The grant date fair value of all the vested awards was approximately $86 million. The total fair value of PSU awards that vested during the three months ended March 31, 2024 was approximately $82 million.

Note 3. Benefit Plans:

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

Pension and other employee benefit costs per the condensed consolidated statements of earnings consisted of the following:
 For the Three Months Ended March 31,
(in millions)20242023
Net pension costs (income)$(19)$(12)
Net postemployment costs31 30 
Net postretirement costs3 4 
Total pension and other employee benefit costs$15 $22 

12

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 Three Months Ended March 31,
(in millions)20242023
Service cost$55 $43 
Interest cost59 66 
Expected return on plan assets(101)(90)
Amortization:
Net loss23 12 
Net periodic pension cost$36 $31 
(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 $34 million were made to the pension plans during the three months ended March 31, 2024. Currently, PMI anticipates making additional contributions during the remainder of 2024 of approximately $88 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.


Note 4. Goodwill and Other Intangible Assets, net:

Goodwill

The movements in goodwill were as follows:
(in millions)Europe
SSEA, CIS & MEA
EA, AU & PMI DF
AmericasWellness & HealthcareTotal
Balances at December 31, 2023$4,173 $2,877 $492 $8,847 $390 $16,779 
Changes due to:
Currency(247)(61)(12)6 (7)(321)
Balances, March 31, 2024$3,926 $2,816 $480 $8,853 $383 $16,458 

As discussed in Note 1. Background and Basis of Presentation, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into its geographical segments. As a result, the December 31, 2023 goodwill balance in the table above included the reclassification of the former Swedish Match segment to the Europe and Americas segments.

At March 31, 2024, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB, Fertin Pharma A/S and Vectura Group plc., as well as acquisitions in Greece, Indonesia, Mexico, the Philippines and Serbia.
13

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

Other Intangible Assets

Details of other intangible assets were as follows:
March 31, 2024December 31, 2023
(in millions)Weighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNet
Non-amortizable intangible assets$4,392 $4,392 $4,543 $4,543 
Amortizable intangible assets:
Trademarks16 years2,185 $794 1,391 2,267 $784 1,483 
Developed technology, including patents7 years747 330 417 774 329 445 
Customer relationships and other11 years3,753 505 3,248 3,843 450 3,393 
Total other intangible assets$11,077 $1,629 $9,448 $11,427 $1,563 $9,864 

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico. The decrease since December 31, 2023 was mainly due to currency movements of $119 million and a pre-tax impairment charge of $27 million primarily for an in-process research and development project in the Wellness and Healthcare segment. The pre-tax impairment charge during the three months ended March 31, 2024 was recorded in marketing, administration and research costs on PMI's condensed consolidated statements of earnings.

The decrease in the gross carrying amount of amortizable intangible assets from December 31, 2023, was primarily due to currency movements of $204 million.

The change in the accumulated amortization from December 31, 2023, was mainly due to the 2024 amortization of $120 million, partially offset by currency movements of $54 million. The amortization of intangibles for the three months ended March 31, 2024 was recorded in cost of sales ($16 million) and in marketing, administration and research costs ($104 million) on PMI's condensed consolidated statements of earnings.
Amortization expense for each of the next five years is estimated to be approximately $479 million or less, assuming no additional transactions occur that require the amortization of intangible assets. Additionally, the estimated future amortization expense could significantly increase following the reacquisition of IQOS commercialization rights in the U.S. from Altria Group, Inc., (see Note 18, Acquisitions) the accounting for which will depend on the facts and circumstances effective May 1, 2024, when PMI will hold the full rights.


Note 5. Financial Instruments:

Overview

PMI operates globally with manufacturing and sales facilities in various locations around the world and is exposed to risks such as changes in foreign currency exchange rates and interest rates. As a result, PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, (collectively referred to as "foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in foreign currency exchange and interest rates related to net investments in foreign operations, third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Egyptian pound, Indonesian rupiah, Japanese yen, Mexican peso, Philippine peso, Russian ruble and Swiss franc.
14

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

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

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

The gross notional amounts for outstanding derivatives at the end of each period were as follows:
(in millions)At March 31, 2024At December 31, 2023
Derivative contracts designated as hedging instruments:
Foreign exchange contracts$22,910 $21,987 
Interest rate contracts1,000 3,600 
Commodity contracts17 20 
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts16,185 17,658 
Total$40,112 $43,265 

15

Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, were as follows:
 Derivative AssetsDerivative Liabilities
 Fair ValueFair Value
AtAtAtAt
(in millions)Balance Sheet ClassificationMarch 31, 2024December 31, 2023Balance Sheet ClassificationMarch 31, 2024December 31, 2023
Derivative contracts designated as hedging instruments:
Foreign exchange contractsOther current assets$488 $345 Other accrued liabilities$79 $249 
Other assets264 153 Income taxes and other liabilities236 449 
Interest rate contractsOther current assets 1 Other accrued liabilities42 78 
Other assets  Income taxes and other liabilities29 18 
Commodity contractsOther current assets  Other accrued liabilities8 5 
Other assets  Income taxes and other liabilities2 1 
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts
Other current assets 
236 85 Other accrued liabilities72 425 
Other assets1  Income taxes and other liabilities61 143 
Total gross amount derivatives contracts presented in the condensed consolidated balance sheets $989 $584  $529 $1,368 
Gross amounts not offset in the condensed consolidated balance sheets
Financial instruments(377)(374)(377)(374)
Cash collateral received/pledged(380)(109)(102)(551)
Net amount$232 $101 $50 $443 

PMI assesses the fair value of its derivative contracts using standard valuation models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts, foreign currency swaps and interest rate contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. The fair value of PMI’s commodity contracts is determined by using the prevailing market spot and futures prices and the respective maturity dates of the instruments. PMI’s derivative contracts have been classified within Level 2 at March 31, 2024 and December 31, 2023.

16

Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended March 31, 2024 and 2023, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:
(pre-tax, in millions)For the Three Months Ended March 31,
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on DerivativesStatement of Earnings
Classification of Gain/(Loss)
on Derivatives
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into EarningsAmount of Gain/(Loss) Recognized in Earnings
202420232024202320242023
Derivative contracts designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts$166 $10 Net revenues$29 $12 
Cost of sales  
Marketing, administration and research costs24 16 
Interest expense, net(3)(3)
Interest rate contracts54 65 Interest expense, net12 10 
Commodity contracts(3) Cost of sales  
Fair value hedges:
Interest rate contracts
Interest expense, net (a)
$(11)$3 
Net investment hedges (b):
Foreign exchange contracts453 (258)
Interest expense, net (c)
72 63 
Derivative contracts not designated as hedging instruments:
Foreign exchange contractsInterest expense, net44 90 
Marketing, administration and research costs (d)
512 (16)
Total$670 $(183)$62 $35 $617 $140 
(a) The gains (losses) from these contracts are offset by the changes in the fair value of the hedged item
(b) Amount of gains (losses) on hedges of net investments principally related to changes in foreign currency exchange and interest rates between the Euro and U.S. dollar
(c) Represent the gains for amounts excluded from the effectiveness testing
(d) The gains (losses) from these contracts attributable to changes in foreign currency exchange rates are partially offset by the (losses) and gains generated by the underlying intercompany and third-party loans being hedged

Cash Flow Hedges

PMI has entered into derivative contracts to hedge the foreign currency exchange, interest rate and commodity price risks related to certain forecasted transactions. Gains and losses associated with qualifying cash flow hedge contracts are deferred as components of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s condensed consolidated statements of earnings. As of March 31, 2024, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028. Premiums paid for, and settlements of, the derivative contracts designated as cash flow hedges are included primarily in cash flows from operating activities on PMI’s condensed consolidated statements of cash flows.
17

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

Fair Value Hedges

PMI has entered into fixed-to-floating interest rate contracts, designated as fair value hedges to minimize exposure to changes in the fair value of fixed rate U.S. dollar-denominated debt that results from fluctuations in benchmark interest rates. For derivative contracts that are designated and qualify as fair value hedges, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged items attributable to the hedged risk, is recognized in current earnings. The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of March 31, 2024 was $926 million, and is recorded in long-term debt in the condensed consolidated balance sheets. The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $71 million as of March 31, 2024.

Hedges of Net Investments in Foreign Operations

PMI designates derivative contracts and certain foreign currency denominated debt and other financial instruments as net investment hedges, primarily of its Euro net assets. For the three months ended March 31, 2024 and 2023, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $5 million and $1 million, respectively. Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities on PMI’s condensed consolidated statements of cash flows.

Other Derivatives

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

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

Derivative gains or losses reported in accumulated other comprehensive losses are a result of qualifying hedging activity. Transfers of these gains or losses to earnings are offset by the corresponding gains or losses on the underlying hedged item. Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:
(in millions)For the Three Months Ended March 31,
 20242023
Gain/(loss) as of January 1,$241 $266 
Derivative (gains)/losses transferred to earnings(46)(29)
Change in fair value178 59 
Gain/(loss) as of March 31,$373 $296 

At March 31, 2024, PMI expects $157 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.
Contingent Features
PMI’s derivative instruments do not contain contingent features.
Credit Exposure and Credit Risk
PMI is exposed to credit loss in the event of non-performance by counterparties. While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments less any cash collateral received or pledged. PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.
18

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

A certain PMI investment, which is comprised primarily of money market funds, has been classified within Level 1 and had a fair value of $117 million at March 31, 2024. For the three months ended March 31, 2024, the unrealized pre-tax gains (losses) on these investments were immaterial.

Note 6. Earnings Per Share:
Basic and diluted earnings per share (“EPS”) were calculated using the following:
(in millions)For the Three Months Ended March 31,
 20242023
Net earnings attributable to PMI$2,148 $1,995 
Less distributed and undistributed earnings attributable to share-based payment awards
6 6 
Net earnings for basic and diluted EPS$2,142 $1,989 
Weighted-average shares for basic EPS1,553 1,552 
Plus contingently issuable performance stock units (PSUs)(1)
2 1 
Weighted-average shares for diluted EPS1,555 1,553 
(1) Including rounding adjustment

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

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

Note 7. Segment Reporting:

PMI’s subsidiaries and affiliates are primarily engaged in the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, e-vapor and oral nicotine products. Excluding the Wellness and Healthcare segment, PMI's segments are generally organized by geographic region and managed by segment managers who are responsible for the operating and financial results of the regions inclusive of combustible tobacco and smoke-free product categories sold in the region. As discussed in Note 1. Background and Basis of Presentation, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments. The four existing 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. The Wellness and Healthcare segment remained unchanged.

PMI’s chief operating decision maker evaluates geographical segment performance and allocates resources based on regional operating income, which includes results from all product categories sold in each region, excluding Wellness and Healthcare products. Business operations in the Wellness and Healthcare segment are evaluated separately.

PMI disaggregates its net revenues from contracts with customers by product category for each of PMI's four geographical segments. For the Wellness and Healthcare business, Vectura Fertin Pharma, net revenues from contracts with customers are included in the Wellness and Healthcare segment. PMI believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Segment data were as follows:
(in millions)For the Three Months Ended March 31,
20242023
Net revenues:
Europe$3,365 $3,068 
SSEA, CIS & MEA
2,658 2,477 
EA, AU & PMI DF
1,684 1,520 
Americas996 868 
Wellness and Healthcare90 86 
Net revenues$8,793 $8,019 
Operating income (loss):
Europe$1,456 $1,215 
SSEA, CIS & MEA
772 734 
EA, AU & PMI DF
763 637 
Americas99 183 
Wellness and Healthcare(45)(38)
Operating income$3,045 $2,731 

PMI's net revenues by product category were as follows:
(in millions)For the Three Months Ended March 31,
20242023
Net revenues:
Combustible tobacco:
Europe$1,931 $1,815 
SSEA, CIS & MEA
2,346 2,154 
EA, AU & PMI DF
597 689 
Americas534 566 
Total combustible tobacco5,407 5,223 
Smoke-free:
Smoke-free excluding Wellness and Healthcare:
Europe1,434 1,253 
SSEA, CIS & MEA
312 323 
EA, AU & PMI DF
1,087 831 
Americas462 302 
Total Smoke-free excluding Wellness and Healthcare3,296 2,710 
Wellness and Healthcare90 86 
Total Smoke-free3,386 2,796 
Total PMI net revenues$8,793 $8,019 
Note: Sum of product categories or Regions might not foot to total PMI due to roundings.

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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Items affecting the comparability of results from operations were as follows:

Asset impairment and exit costs See Note 15. Asset Impairment and Exit Costs for a breakdown of these costs by segment for the three months ended March 31, 2024 and 2023.
Termination of distribution arrangement in the Middle East In the first quarter of 2023, PMI recorded a pre-tax charge of $80 million following the termination of a distribution arrangement in the Middle East. This pre-tax charge was recorded as a reduction of net revenues in the condensed consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the three months ended March 31, 2023.
Swedish Match AB acquisition accounting related items In the first quarter of 2023, PMI recorded $18 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value included in the Americas segment.

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

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

Net revenues related to wellness and healthcare consist of operating revenues generated from the sale of products primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems that are included in the operating results of PMI's Wellness and Healthcare business, Vectura Fertin Pharma.


Note 8. 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 certain cases in Canada and Nigeria, range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. While, as discussed below, we have to date been largely successful in defending tobacco-related litigation, litigation is subject to uncertainty. Additionally, as reported further below, beginning in March 2024, litigation related to oral nicotine products was filed against us and our subsidiary before certain courts in the United States.
We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, except as
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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
stated otherwise in this Note 8. Contingencies, it is reasonably possible that an unfavorable outcome in a case may occur. Legal defense costs are expensed as incurred.
It is possible that our consolidated financial statements, including our results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.
After assessing the information available to it, except as stated otherwise in this Note 8. Contingencies, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending combustible tobacco product-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending combustible tobacco product-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.
CCAA Proceedings and Stay of Combustible Tobacco Product-Related Cases Pending in Canada
As a result of the Court of Appeal of Quebec’s decision in both the Létourneau and Blais cases described below, our subsidiary, Rothmans, Benson & Hedges Inc. (“RBH”), and the other defendants, JTI Macdonald Corp., and Imperial Tobacco Canada Limited, sought protection in the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) on March 22, March 8, and March 12, 2019, respectively. CCAA is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course. The initial CCAA order made by the Ontario Superior Court on March 22, 2019 authorizes RBH to pay all expenses incurred in carrying on its business in the ordinary course after the CCAA filing, including obligations to employees, vendors, and suppliers. RBH's financial results have been deconsolidated from our consolidated financial statements since March 22, 2019. As part of the CCAA proceedings, there is currently a comprehensive stay up to and including September 30, 2024 of all combustible tobacco product-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions. These proceedings are presented below under the caption “Stayed Litigation — Canada.” Ernst & Young Inc. has been appointed as monitor of RBH in the CCAA proceedings. In accordance with the CCAA process, as the parties work towards a plan of arrangement or compromise in a confidential mediation, it is anticipated that the court will set additional hearings and further extend the stay of proceedings. On April 17, 2019, the Ontario Superior Court ruled that RBH and the other defendants will not be allowed to file an application to the Supreme Court of Canada for leave to appeal the Court of Appeal’s decision in the Létourneau and the Blais cases so long as the comprehensive stay of all combustible tobacco product-related litigation in Canada remains in effect and that the time period to file the application would be extended by the stay period. While RBH believes that the findings of liability and damages in both Létourneau and the Blais cases were incorrect, the CCAA proceedings will provide a forum for RBH to seek resolution through a plan of arrangement or compromise of all combustible tobacco product-related litigation pending in Canada. It is not possible to predict the resolution of the underlying legal proceedings or the length of the CCAA process.

Stayed Litigation — Canada

Smoking and Health Litigation — Canada

In the first class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, RBH and other Canadian cigarette manufacturers (Imperial Tobacco Canada Ltd. and JTI-Macdonald Corp.) are defendants (the "Blais Class Action"). The plaintiffs, an anti-smoking organization and an individual smoker, sought compensatory and punitive damages for each member of the class who suffers allegedly from certain smoking-related diseases. The class was certified in 2005. The trial court issued its judgment on May 27, 2015. The trial court found RBH and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.3 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion (approximately $2.3 billion) including pre-judgment interest). In addition, the trial court awarded CAD 90,000 (approximately $66,000) in punitive damages, allocating CAD 30,000 (approximately $22,000) to RBH. The trial court estimated the disease class at 99,957 members. RBH appealed to the Court of Appeal of Quebec. In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $165 million) to cover both the Létourneau and Blais cases, which RBH has
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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
paid in installments through March 2017. The Court of Appeal ordered Imperial Tobacco Canada Ltd. to furnish security totaling CAD 758 million (approximately $552 million) in installments through June 2017. JTI Macdonald Corp. was not required to furnish security in accordance with plaintiffs’ motion. The Court of Appeal ordered that the security is payable upon a final judgment of the Court of Appeal affirming the trial court’s judgment or upon further order of the Court of Appeal.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the compensatory and punitive damages award while reducing the total amount of compensatory damages to approximately CAD 13.5 billion (approximately $9.8 billion), including interest due to the trial court’s error in the calculation of interest. The compensatory damages award is on a joint and several basis with an allocation of 20% to RBH (approximately CAD 2.7 billion (approximately $2.0 billion), including pre-judgment interest). The Court of Appeal upheld the trial court’s findings that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking and by conspiring to prevent consumers from learning of the dangers of smoking. The Court of Appeal further held that the plaintiffs either need not prove, or had adequately proven, that these faults were a cause of the class members’ injuries. In accordance with the judgment, defendants were required to deposit their respective portions of the damages awarded in both the Létourneau case described below and the Blais case, approximately CAD 1.1 billion (approximately $801 million), into trust accounts within 60 days. RBH’s share of the deposit was approximately CAD 257 million (approximately $194 million). PMI recorded a pre-tax charge of $194 million in its consolidated results, representing $142 million net of tax, as tobacco litigation-related expense, in the first quarter of 2019. The charge reflects PMI’s assessment of the portion of the judgment that represents probable and estimable loss prior to the deconsolidation of RBH and corresponds to the trust account deposit required by the judgment.

In the second class action pending in Canada, Cecilia Létourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, RBH and other Canadian cigarette manufacturers (Imperial Tobacco Canada Ltd. and JTI-Macdonald Corp.) are defendants (the "Létourneau Class Action").  The plaintiff, an individual smoker, sought compensatory and punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005. The trial court issued its judgment on May 27, 2015. The trial court found RBH and two other Canadian manufacturers liable and awarded a total of CAD 131 million (approximately $95 million) in punitive damages, allocating CAD 46 million (approximately $34 million) to RBH. The trial court estimated the size of the addiction class at 918,000 members but declined to award compensatory damages to the addiction class because the evidence did not establish the claims with sufficient accuracy. The trial court found that a claims process to allocate the awarded punitive damages to individual class members would be too expensive and difficult to administer. On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the total amount of punitive damages awarded allocating CAD 57 million (approximately $42 million), including interest to RBH. See the Blais description above for further detail concerning the security order pertaining to both Létourneau and Blais cases and the impact of the decision on PMI’s financial statements.

RBH and PMI believe the findings of liability and damages in both Létourneau and the Blais cases were incorrect and in contravention of applicable law on several grounds including, the following: (i) defendants had no obligation to warn class members who knew, or should have known, of the risks of smoking; (ii) defendants cannot be liable to class members who would have smoked regardless of what warnings were given; and (iii) defendants cannot be liable to all class members given the individual differences among class members.

In the third class action pending in Canada, Kunta v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada, filed June 12, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma, and mild reversible lung disease resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits.

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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al., The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

In the sixth class action pending in Canada, Dorion v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint.
In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada, filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada, filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed. In December 2014, plaintiff filed an amended statement of claim.

In the ninth class action pending in Canada, Suzanne Jacklin v. Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits.

Health Care Cost Recovery Litigation — Canada
In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.”
In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v. Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of New Brunswick based on legislation enacted in the province. This legislation is similar to the law introduced in British Columbia that authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v. Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada, filed September 29, 2009, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Ontario
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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
based on legislation enacted in the province. This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v. Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St. Johns, Canada, filed February 8, 2011, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v. Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada, filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Alberta based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”
In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the tenth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Nova Scotia v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Nova Scotia, Canada, filed January 2, 2015, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Nova Scotia based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

Combustible tobacco products litigation

Since 1995, 622 combustible tobacco product-related cases, including Smoking and Health, Label-Related, Health Care Cost Recovery, and Public Civil Actions, have been filed against a PMI entity, 547 of those cases have been terminated in our favor,
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Philip Morris International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
and the balance of 75 remains pending. Of those pending cases, four were initially decided in favor of plaintiffs and remain on appeal, or are subject to an appeal. These four cases include the Blais Class Action and the Létourneau Class Action, described above under the caption "Smoking and Health Litigation — Canada," and two individual cases where final resolution in the amount of the verdict would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.

Pending claims related to combustible tobacco products generally fall within the following categories:
Smoking and Health Litigation: These cases primarily allege personal injury and are brought by individual plaintiffs or on behalf of a class or purported class of individual plaintiffs. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.
As of March 31, 2024, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

44 cases brought by individual plaintiffs in Argentina (29), Canada (2), Chile (12), and Turkey (1), compared with 46 such cases on March 31, 2023; and
9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on March 31, 2023.

The class actions pending in Canada are described above under the caption “Smoking and Health Litigation — Canada.

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