Security posted for appeal of judgments

[Table of](#i56e1b64ac11b4f908f713ce45f591ccd_10) [Contents](#i56e1b64ac11b4f908f713ce45f591ccd_10)We have achieved substantial success in managing litigation. Nevertheless, litigation is subject to uncertainty and significant challenges remain. It is possible that our consolidated 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. We believe, and have 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. We have defended, and will continue to defend, vigorously against litigation challenges. However, we may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.Judgments Paid and Provisions for Tobacco and Health (Including Engle Progeny Litigation) and Certain Other Litigation Items: The changes in our accrued liability for tobacco and health and certain other litigation items, including related interest costs, for the periods specified below are as follows:

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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|  | For the Nine Months Ended September 30, |  | For the Three Months Ended September 30, |  |  |
| (in millions) | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |
| Accrued liability for tobacco and health and certain other litigation items at beginning of period | $ | 91  |  |  | $ | 9  |  |  | $ | 25  |  |  | $ | —  |  |  |  |
| Pre-tax charges for: |  |  |  |  |  |  |  |  |  |
| Tobacco and health and certain other litigation (1) | 98  |  |  | 142  |  |  | 41  |  |  | 99  |  |  |  |
| Related interest costs | 3  |  |  | 6  |  |  | 2  |  |  | 6  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |
| Payments | (137) |  |  | (60) |  |  | (13) |  |  | (8) |  |  |  |
| Accrued liability for tobacco and health and certain other litigation items at end of period | $ | 55  |  |  | $ | 97  |  |  | $ | 55  |  |  | $ | 97  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |

(1) Includes judgments, settlements and fee disputes associated with tobacco and health and certain other litigation. See Shareholder Class Action and Shareholder Derivative Lawsuits below for discussions of the shareholder class action case and related settlement and the proposed settlement of the federal and state shareholder derivative lawsuits.The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities on our condensed consolidated balance sheets. Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs on our condensed consolidated statements of earnings (losses). Pre-tax charges for related interest costs were included in interest and other debt expense, net on our condensed consolidated statements of earnings (losses).After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $941 million and interest totaling approximately $230 million as of September 30, 2022. These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $432 million and related interest totaling approximately $59 million.Security for Judgments: To obtain stays of judgments pending appeal, PM USA has posted various forms of security. As of October 24, 2022, PM USA has posted appeal bonds totaling approximately $42 million, which have been collateralized with restricted cash that are included in assets on our condensed consolidated balance sheets.Overview of Tobacco-Related LitigationTypes and Number of U.S. Cases: Claims related to tobacco products generally fall within the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs; (ii) health care cost recovery cases brought by governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits; (iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust and unfair trade practices; and (iv) other tobacco-related litigation described below. Plaintiffs’ theories of recovery and the defenses raised in tobacco-related litigation are discussed below.26
