PMPhilip Morris International

On November 18, 2024, a putative class action, Neumark In the tenth case, Austin Siegert v. Swedish Match North America LLC, was Philip Morris International Inc. et al, filed September 26, 2025, before the United States District Court for the Eastern District of Virginia. Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as the defendant. defendants. Plaintiff alleges that Swedish Match North America LLC violated federal and state antitrust laws by, among other things, driving a competitor from the market through purportedly baseless litigation and entering into an allegedly anticompetitive agreement with PMI whereby PMI, through an indirect subsidiary, acquired Swedish Match North America LLC and eliminated itself as a competitor in the U.S. nicotine pouch market. Plaintiff asserts claims under the Sherman Antitrust Act, the Clayton Antitrust Act, state antitrust law, and for unjust enrichment. Plaintiff seeks purports to represent classes comprised of (i) all natural persons, businesses, entities, and corporations persons who purchased ZYN in the United States and (ii) a subclass of persons who purchased ZYN at retail during in New York. Plaintiff alleges, among other things, that defendants misrepresented that ZYN is tobacco-free; misled consumers regarding ZYN’s nicotine strength and addictive potential; and deployed misleading advertisements geared towards those under the class period; legal age. Plaintiff asserts claims for violations of New York General Business Law § 349 (deceptive and (ii) all natural persons, businesses, entities, unfair trade practices); violations of New York General Business Law § 350 (misleading advertising); violations of state consumer protection statutes; and corporations in breaches of the United States who live in states that have certain antitrust statutes who purchase ZYN at retail during the class period. implied warranty of merchantability. Plaintiff is seeking damages (including treble damages as available under antitrust laws), costs, attorneys’ fees, disgorgement of profit, pre- seeks compensatory, statutory and post-judgment punitive damages, attorney’s fees and expenses, prejudgment interest, and declaratory and injunctive relief (including a declaration that the acquisition of Swedish Match North America LLC by PMI is unlawful and must result in divestiture or be enjoined). relief. On January 15, October 30, 2025, Swedish Match North America LLC defendants filed a motion to dismiss stay the complaint with prejudice. Subsequently thereto, Plaintiff informed Swedish Match North America LLC proceedings until the court in the Kelly case, described above, issues a ruling on any motion for class certification that he will file an amended complaint, which is due the plaintiff in that case might bring. On November 3, 2025, the Court granted the motion to stay until the court in the Kelly case issues a ruling on February 10, 2025 class certification. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding proceeding, and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

Some of the countries in which we operate face the threat of civil unrest and can be subject to regime changes. In others, nationalization, terrorism, conflict and the threats of war or acts of war may have a significant impact on the business environment. Factors beyond our control, such as, without limitation, natural disasters, disasters; extreme weather events, pandemics (including COVID-19), events; pandemics; adverse economic, political, regulatory, political or regulatory events; acts of war or threats of war war; formal or informal bans or boycotts or changes in consumer preferences resulting from geopolitical developments; geopolitical instability affecting international trade; or other developments developments, could disrupt or increase the expenses related to our supply chain, manufacturing capabilities, distribution capabilities, or the energy and other utility services required to operate our factories, warehouses, and other premises. Our business continuity plans and other safeguards might not always be effective to fully mitigate their impact. For example, Additionally, while we do not now expect that the recent and currently anticipated trade tariffs imposed by the U.S. and other countries will materially impact our business, the global pandemic outbreak tariff environment is volatile and further tariff or trade related developments could result in risks to PMI’s business, including increased production costs; limited market access; supplier financial condition degradation resulting in reduced or interrupted supplies; and price increases or other economic impacts that could reduce consumer demand. Any of the COVID-19 virus in 2020 created significant societal and economic disruption and the closure of stores, factories and offices, restrictions on manufacturing, distribution and travel, and supply chain disruptions, among other impacts. Additionally, while the supply chains our operations rely on are generally self-contained within their respective trade regions and have limited inflexible trade connections to markets that represent a high tariff risk, a broader increase in tariffs could disrupt our supply chains and increase our costs. Such these developments – including the impact of geopolitical disruptions resulting from the conflict in the Middle East and the impact on energy prices and availability in the EU and elsewhere resulting from the invasion of Ukraine by Russia – could cause significant volume declines in our duty-free Global Travel Retail business and certain other key markets; disrupt or delay our distribution, manufacturing or supply chain; increase currency volatility; increase costs of our materials and operations and lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, all of which could have a material adverse effect on our business, operations, volumes, revenues, cash flows, financial position, net earnings and profitability. We discuss additional risks associated with Russia's invasion of Ukraine and climate change, above.

The lower higher working capital requirements in 2024 2025 as compared with 2023 2024 were primarily due to more cash provided by used in inventories, coupled with more cash provided by used in accrued liabilities and other current assets, mainly reflecting the timing of excise tax-paid inventory movements primarily related to excise tax increases and the timing of the corresponding excise tax payments. Excise tax payments and less included the disputed supplemental tax surcharge on heated tobacco products in Germany of approximately $0.8 billion as PMI elected to pay the supplemental tax surcharge in January 2025 to avoid the future addition of interest (for further details refer to the MD&A Europe segment section where we describe the case). In addition, more cash used in accounts payable in 2024 income taxes primarily due to comparison with 2023 payment for higher IQOS ILUMA device purchases in the fourth quarter of 2022 to meet the needs of ILUMA launches. The favorable 2024 working capital comparison to 2023 is also impacted by higher 2023 working capital requirements following reflected the higher cost of tobacco leaf final 2017 U.S. Tax Cuts and other direct materials due to inflationary pressures (for further details, see “Impact of Inflation on Our Business and Mitigation Efforts” section of this MD&A), as well as tactical stock increases for certain direct materials. Jobs Act transition tax installment payment. These changes in the working capital requirements unfavorable movements were partly partially offset by more less cash used in accounts receivable mainly reflecting lower higher usage of our factoring arrangements to sell trade receivables, as well as the timing of sales and cash collections. For collections (for further detail on our factoring arrangements, details, see Item 8, Note 19. 17. Sale of Accounts Receivable. Receivable).

In certain instances, PMI facilitates shipping and handling activities after control has transferred to the customer. PMI has elected to record all shipping and handling activities as costs to fulfill a contract. The shipping and handling costs that have not been incurred at the time revenue is recognized are accrued. PMI is a principal for majority of its arrangements and recognizes revenue at the transaction price, with the associated costs recorded in cost of sales. The transaction price is typically based on the amount billed to the customer and includes estimated variable consideration, where applicable. Such variable consideration is typically not constrained and is estimated based on the most likely amount that PMI expects to be entitled to under the terms of the contracts with customers, historical experience of discount or rebate redemption, where relevant, and the terms of any underlying discount or rebate programs, which may change from time to time as the business and product categories evolve. For arrangements where PMI acts as an agent, the net commission earned is recognized as revenue. PMI has elected to exclude excise taxes collected from customers from the measurement of the transaction price, thereby presenting revenues net of excise taxes. Estimated costs associated with warranty programs are generally provided for in cost of sales in the period the related revenues are recognized.