Sentences and paragraphs of PM's Risk Factors and MD&A, 10-K 2026-02-06 against 10-K 2025-02-06.
Each links to the text at sec.gov.
AddedRisk Factors
Our business is subject to changes in adult consumer preferences and if we do not accurately assess market trends, are unable to adapt our product offerings to evolving consumer demands, or face challenges in product development, we could experience missed opportunities, supply chain challenges, reduced competitiveness, inefficient expenditures, and potential impacts on our customer base and brand reputation. Furthermore, restrictions pertaining to packaging, labeling, or promotional and advertising activities may limit our ability to effectively communicate product innovations intended to address changing adult consumer preferences. Any of these factors could have a material adverse effect on our results of operations, revenues, cash flows, profitability, and prospects for growth.
Read it in 10-K 2026-02-06 at sec.gov ↗
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AddedRisk Factors
Additionally, we source the vast majority of our tobacco from a global network of farmers across multiple countries, rather than through commodity markets, which helps ensure the consistency, quality, and traceability of our tobacco supply. However, this model also means that disruptions to farmer livelihoods, if not actively mitigated, could lead to supply chain disruption through farmer exit, reduced crop quality, unsustainable farming practices, increased regulatory scrutiny, and reputational risks.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedRisk Factors
We increasingly use artificial intelligence-based solutions in our business, which could result in reputational harm, legal liability, and adversely affect our operating results.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedRisk Factors
We and our business partners are increasingly incorporating artificial intelligence ("AI")-based solutions in our ways of working and operations, but this process involves uncertainty and risks, which may or may not yield corresponding benefits. Artificial intelligence technologies are complex, and there are technical and organizational challenges associated with achieving optimal levels of accuracy, efficiency, safety, explicability, reliability, and use for their intended purposes. Flaws, biases, data sourcing issues, limitations, errors, misconfiguration, or malfunctions in these systems could result in operational disruptions, including data loss and corruption. There is a risk of artificial intelligence system failures, disruptions, or vulnerabilities that could compromise PMI’s information technology
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedRisk Factors
networks and systems and the integrity, availability, security, or privacy of PMI data processed by or through such systems. The emergence of AI and other technologies may also exacerbate other risks, including those related to regulation, litigation, compliance issues, ethical concerns, confidentiality, intellectual property ownership and infringement, and data privacy or security. Separately, AI presents a new attack surface that cybercriminals will attempt to exploit as well as providing means to scale and automate targeted attacks. Ineffective or inadequate artificial intelligence development, adoption, or deployment practices, including any use, reliance, or dependence on AI generated outputs, could result in unintended, unexpected, or otherwise unforeseen adverse consequences. These risks could have a material adverse effect on our business, reputation, financial condition, or operating results.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
As communicated in the fourth quarter of 2025, with our smoke-free business now operating at scale across our regions, including substantial growth from our U.S. business, we have implemented an evolved organizational model with two primary business units: International and U.S. The updated organizational structure is designed to enhance our agility and to support our journey to become a smoke-free company under the leadership of Jacek Olczak, Group CEO of PMI. This change was implemented effective January 1, 2026, and as a result we realigned our reportable segments accordingly. The four geographic segments have been replaced with three new reportable segments: International Smoke-Free, International Combustibles, and U.S. As of the first quarter of 2026, our reporting will reflect these changes.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
Germany excise tax classification litigation charge – In August 2024, the German Main Custom Office (“MCO”) notified Philip Morris (Germany) GmbH (“PM Germany”) of its decision to classify TEREA consumables as a cigarette for excise tax purposes with the associated tax assessment totaling EUR 151 million (approximately $176 million) covering the period of February 15, 2023, through August 1, 2024. In April 2025, PM Germany paid the outstanding amount, which was recorded in Other assets on the consolidated balance sheets, while it challenged the MCO’s decision in court. On September 17, 2025, PM Germany filed a request to withdraw the proceedings. As a result, the tax assessment amount of $176 million (representing $150 million net of income tax and a diluted EPS charge of $0.10 per share) was recorded as a pre-tax charge in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2025, and was included in the Europe segment results.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
RBH (Canada) Plan implementation, including dividend income, net – On August 29, 2025, the plan of compromise and arrangement (the “Plan”) setting forth the terms of a resolution of Canadian tobacco claims and related litigation became effective. In the third quarter of 2025, we recorded after-tax income of $156 million ($0.10 per share increase in diluted EPS) following the Plan implementation, including $303 million of dividend income net of the corresponding decrease in the carrying value of the RBH investment, $19 million of other income and the related income tax charge of $166 million. For further details regarding the Plan, see Item 8, Note 5. Related Parties - Equity Investments and Other, and Note 10. Income Taxes.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
The 2025 tax items that increased our 2025 diluted EPS by $0.11 per share in the table above were due to benefits related to an interest expense election primarily driven by a reduction in prior year tax costs associated with global intangible low-taxed income and refunds expected on amended tax returns filed in Germany; partially offset by valuation allowances recorded on deferred tax assets related to U.S. foreign tax credits and the recognition of current tax expense related to the potential disallowance of deductions for certain intercompany transactions in Indonesia. For further details, see Item 8, Note 10. Income Taxes.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
Revenue Recognition - We recognize revenue as performance obligations are satisfied. Our primary performance obligation is the distribution and sales of cigarettes and smoke-free products, including heat-not-burn, e-vapor and oral nicotine products. Our
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
As discussed in Item 8, Note 4.Goodwill and Other Intangible Assets, net, PMI recorded impairment losses related to goodwill and non-amortizable intangible assets during the second quarter of 2025 and 2023, where certain reporting units and non-amortizable intangible assets were written down to their respective fair values as of the date of the annual impairment review. During 2024, PMI’s annual impairment review of goodwill and non-amortizable intangible assets resulted in no impairment charges. At December 31, 2025, the carrying value of our goodwill was $17.3 billion. The estimated fair value of each of our eleven reporting units, excluding the held-for-sale businesses, and non-amortizable intangible assets exceeded the carrying value as of December 31, 2025. All assumptions used in the impairment assessments for goodwill and non-amortizable intangible assets are based on the best available market information and are consistent with PMI’s internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
The valuation of derivative contracts includes the market inputs and estimates listed above, which are subject to changes in business conditions. Changes to the fair value of the derivative financial instruments could adversely impact PMI’s results.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
•Germany excise tax classification litigation charge – In August 2024, the German Main Custom Office (“MCO”) notified Philip Morris (Germany) GmbH (“PM Germany”) of its decision to classify TEREA consumables as a cigarette for excise tax purposes with the associated tax assessment totaling EUR 151 million (approximately $176 million) covering the period of February 15, 2023, through August 1, 2024. In April 2025, PM Germany paid the outstanding amount, which was recorded in Other assets on the consolidated balance sheets, while it challenged the MCO’s decision in court. On September 17, 2025, PM
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
Our shipment volume for cigarettes, HTUs and Oral SFP is shown in the table below:
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
Consumer offtake or offtake is the term PMI uses to refer to an approximation of purchases by consumers based on various market specific sources.
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the United States,
Read it in 10-K 2026-02-06 at sec.gov ↗
AddedMD&A
E-vapor products conversion: one milliliter of e-vapor liquid equivalent to 10 units.
Read it in 10-K 2026-02-06 at sec.gov ↗