(X)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
( )
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Philip Morris International Inc.
|
||||
|
|
|
|
|
Virginia
|
13-3435103
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
120 Park Avenue
New York, New York
|
10017
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code
|
(917) 663-2000
|
|
|
|
|
|
|
|
Page No.
|
|
|
|
PART I -
|
|
|
|
|
|
Item 1.
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets at
|
|
|
||
|
|
|
|
Condensed Consolidated Statements of Earnings for the
|
|
|
||
|
||
|
|
|
|
Condensed Consolidated Statements of Comprehensive Earnings for the
|
|
|
||
|
||
|
|
|
|
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
|
|
|
||
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the
|
|
|
||
|
|
|
|
Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
Item 2.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II -
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
June 30,
2012 |
|
December 31,
2011 |
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,846
|
|
|
$
|
2,550
|
|
Receivables (less allowances of
$49 in 2012 and $45 in 2011) |
3,553
|
|
|
3,201
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
3,583
|
|
|
3,463
|
|
||
Other raw materials
|
1,102
|
|
|
1,185
|
|
||
Finished product
|
2,627
|
|
|
3,472
|
|
||
|
7,312
|
|
|
8,120
|
|
||
Deferred income taxes
|
415
|
|
|
397
|
|
||
Other current assets
|
435
|
|
|
591
|
|
||
Total current assets
|
15,561
|
|
|
14,859
|
|
||
Property, plant and equipment, at cost
|
12,954
|
|
|
12,913
|
|
||
Less: accumulated depreciation
|
6,793
|
|
|
6,663
|
|
||
|
6,161
|
|
|
6,250
|
|
||
Goodwill
|
9,737
|
|
|
9,928
|
|
||
Other intangible assets, net
|
3,614
|
|
|
3,697
|
|
||
Other assets
|
725
|
|
|
754
|
|
||
TOTAL ASSETS
|
$
|
35,798
|
|
|
$
|
35,488
|
|
|
June 30,
2012 |
|
December 31,
2011 |
||||
LIABILITIES
|
|
|
|
||||
Short-term borrowings
|
$
|
2,694
|
|
|
$
|
1,511
|
|
Current portion of long-term debt
|
3,284
|
|
|
2,206
|
|
||
Accounts payable
|
1,019
|
|
|
1,031
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
477
|
|
|
519
|
|
||
Taxes, except income taxes
|
5,344
|
|
|
5,346
|
|
||
Employment costs
|
769
|
|
|
894
|
|
||
Dividends payable
|
1,314
|
|
|
1,341
|
|
||
Other
|
833
|
|
|
873
|
|
||
Income taxes
|
968
|
|
|
897
|
|
||
Deferred income taxes
|
128
|
|
|
176
|
|
||
Total current liabilities
|
16,830
|
|
|
14,794
|
|
||
Long-term debt
|
14,824
|
|
|
14,828
|
|
||
Deferred income taxes
|
1,964
|
|
|
1,976
|
|
||
Employment costs
|
1,601
|
|
|
1,665
|
|
||
Other liabilities
|
433
|
|
|
462
|
|
||
Total liabilities
|
35,652
|
|
|
33,725
|
|
||
Contingencies (Note 10)
|
|
|
|
||||
Redeemable noncontrolling interest (Note 7)
|
1,262
|
|
|
1,212
|
|
||
STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
||||
Common stock, no par value
(2,109,316,331 shares issued in 2012 and 2011) |
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,233
|
|
|
1,235
|
|
||
Earnings reinvested in the business
|
23,599
|
|
|
21,757
|
|
||
Accumulated other comprehensive losses
|
(3,376
|
)
|
|
(2,863
|
)
|
||
|
21,456
|
|
|
20,129
|
|
||
Less: cost of repurchased stock
(416,738,735 and 383,407,665 shares in 2012 and 2011, respectively) |
22,822
|
|
|
19,900
|
|
||
Total PMI stockholders’ (deficit) equity
|
(1,366
|
)
|
|
229
|
|
||
Noncontrolling interests
|
250
|
|
|
322
|
|
||
Total stockholders’ (deficit) equity
|
(1,116
|
)
|
|
551
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$
|
35,798
|
|
|
$
|
35,488
|
|
|
For the Six Months Ended
June 30, |
||||||
|
2012
|
|
2011
|
||||
Net revenues
|
$
|
38,059
|
|
|
$
|
36,764
|
|
Cost of sales
|
5,108
|
|
|
5,139
|
|
||
Excise taxes on products
|
22,491
|
|
|
21,700
|
|
||
Gross profit
|
10,460
|
|
|
9,925
|
|
||
Marketing, administration and research costs
|
3,388
|
|
|
3,141
|
|
||
Asset impairment and exit costs
|
16
|
|
|
17
|
|
||
Amortization of intangibles
|
49
|
|
|
48
|
|
||
Operating income
|
7,007
|
|
|
6,719
|
|
||
Interest expense, net
|
422
|
|
|
421
|
|
||
Earnings before income taxes
|
6,585
|
|
|
6,298
|
|
||
Provision for income taxes
|
1,946
|
|
|
1,826
|
|
||
Net earnings
|
4,639
|
|
|
4,472
|
|
||
Net earnings attributable to noncontrolling interests
|
161
|
|
|
144
|
|
||
Net earnings attributable to PMI
|
$
|
4,478
|
|
|
$
|
4,328
|
|
Per share data (Note 8):
|
|
|
|
||||
Basic earnings per share
|
$
|
2.60
|
|
|
$
|
2.42
|
|
Diluted earnings per share
|
$
|
2.60
|
|
|
$
|
2.42
|
|
Dividends declared
|
$
|
1.54
|
|
|
$
|
1.28
|
|
|
For the Three Months Ended
June 30, |
||||||
|
2012
|
|
2011
|
||||
Net revenues
|
$
|
20,037
|
|
|
$
|
20,234
|
|
Cost of sales
|
2,666
|
|
|
2,844
|
|
||
Excise taxes on products
|
11,917
|
|
|
11,961
|
|
||
Gross profit
|
5,454
|
|
|
5,429
|
|
||
Marketing, administration and research costs
|
1,817
|
|
|
1,692
|
|
||
Asset impairment and exit costs
|
8
|
|
|
1
|
|
||
Amortization of intangibles
|
25
|
|
|
24
|
|
||
Operating income
|
3,604
|
|
|
3,712
|
|
||
Interest expense, net
|
209
|
|
|
208
|
|
||
Earnings before income taxes
|
3,395
|
|
|
3,504
|
|
||
Provision for income taxes
|
988
|
|
|
1,019
|
|
||
Net earnings
|
2,407
|
|
|
2,485
|
|
||
Net earnings attributable to noncontrolling interests
|
90
|
|
|
76
|
|
||
Net earnings attributable to PMI
|
$
|
2,317
|
|
|
$
|
2,409
|
|
Per share data (Note 8):
|
|
|
|
||||
Basic earnings per share
|
$
|
1.36
|
|
|
$
|
1.35
|
|
Diluted earnings per share
|
$
|
1.36
|
|
|
$
|
1.35
|
|
Dividends declared
|
$
|
0.77
|
|
|
$
|
0.64
|
|
|
|
For the Six Months Ended
June 30, |
||||||
|
|
2012
|
|
2011
|
||||
Net earnings
|
|
$
|
4,639
|
|
|
$
|
4,472
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
|
|
||
Currency translation adjustments, net of income taxes of ($33) in 2012 and $93 in 2011
|
|
(566
|
)
|
|
828
|
|
||
Change in net loss and prior service cost:
|
|
|
|
|
||||
Net losses and prior service costs, net of income taxes of $- in 2012 and ($2) in 2011
|
|
(1
|
)
|
|
8
|
|
||
Less amortization of net losses, prior service costs and net transition costs, net of income taxes of ($21) in 2012 and ($12) in 2011
|
|
78
|
|
|
44
|
|
||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
||||
(Gains)/losses transferred to earnings, net of income taxes of $1 in 2012 and ($2) in 2011
|
|
(12
|
)
|
|
14
|
|
||
Gains recognized, net of income taxes of ($1) in 2012 and $- in 2011
|
|
12
|
|
|
5
|
|
||
Change in fair value of equity securities
|
|
—
|
|
|
(1
|
)
|
||
Total other comprehensive (losses) earnings
|
|
(489
|
)
|
|
898
|
|
||
Total comprehensive earnings
|
|
4,150
|
|
|
5,370
|
|
||
Less comprehensive earnings attributable to:
|
|
|
|
|
||||
Noncontrolling interests
|
|
86
|
|
|
112
|
|
||
Redeemable noncontrolling interest
|
|
99
|
|
|
52
|
|
||
Comprehensive earnings attributable to PMI
|
|
$
|
3,965
|
|
|
$
|
5,206
|
|
|
|
For the Three Months Ended
June 30, |
||||||
|
|
2012
|
|
2011
|
||||
Net earnings
|
|
$
|
2,407
|
|
|
$
|
2,485
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
||||
Currency translation adjustments, net of income taxes of ($55) in 2012 and ($20) in 2011
|
|
(1,027
|
)
|
|
(135
|
)
|
||
Change in net loss and prior service cost:
|
|
|
|
|
||||
Net losses and prior service costs, net of income taxes of $- in 2012 and ($2) in 2011
|
|
(1
|
)
|
|
8
|
|
||
Less amortization of net losses, prior service costs and net transition costs, net of income taxes of ($9) in 2012 and ($5) in 2011
|
|
40
|
|
|
22
|
|
||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
||||
(Gains)/losses transferred to earnings, net of income taxes of $- in 2012 and ($1) in 2011
|
|
(2
|
)
|
|
7
|
|
||
Losses recognized, net of income taxes of $4 in 2012 and $2 in 2011
|
|
(34
|
)
|
|
(17
|
)
|
||
Change in fair value of equity securities
|
|
—
|
|
|
(1
|
)
|
||
Total other comprehensive losses
|
|
(1,024
|
)
|
|
(116
|
)
|
||
Total comprehensive earnings
|
|
1,383
|
|
|
2,369
|
|
||
Less comprehensive earnings attributable to:
|
|
|
|
|
||||
Noncontrolling interests
|
|
25
|
|
|
51
|
|
||
Redeemable noncontrolling interest
|
|
50
|
|
|
25
|
|
||
Comprehensive earnings attributable to PMI
|
|
$
|
1,308
|
|
|
$
|
2,293
|
|
|
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, 2011
|
$
|
—
|
|
|
$
|
1,225
|
|
|
$
|
18,133
|
|
|
$
|
(1,140
|
)
|
|
$
|
(14,712
|
)
|
|
$
|
427
|
|
|
|
$
|
3,933
|
|
|
Net earnings
|
|
|
|
|
4,328
|
|
|
|
|
|
|
94
|
|
(a)
|
|
4,422
|
|
(a)
|
|||||||||||
Other comprehensive earnings,
net of income taxes |
|
|
|
|
|
|
878
|
|
|
|
|
18
|
|
(a)
|
|
896
|
|
(a)
|
|||||||||||
Exercise of stock options and issuance of other stock awards
|
|
|
(65
|
)
|
|
|
|
|
|
210
|
|
|
|
|
|
145
|
|
|
|||||||||||
Dividends declared ($1.28 per share)
|
|
|
|
|
(2,283
|
)
|
|
|
|
|
|
|
|
|
(2,283
|
)
|
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
(231
|
)
|
|
||||||||||||
Purchase of subsidiary shares from noncontrolling interests
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|||||||||||
Common stock repurchased
|
|
|
|
|
|
|
|
|
(2,904
|
)
|
|
|
|
|
(2,904
|
)
|
|
||||||||||||
Balances, June 30, 2011
|
$
|
—
|
|
|
$
|
1,159
|
|
|
$
|
20,178
|
|
|
$
|
(262
|
)
|
|
$
|
(17,406
|
)
|
|
$
|
307
|
|
|
|
$
|
3,976
|
|
|
Balances, January 1, 2012
|
$
|
—
|
|
|
$
|
1,235
|
|
|
$
|
21,757
|
|
|
$
|
(2,863
|
)
|
|
$
|
(19,900
|
)
|
|
$
|
322
|
|
|
|
$
|
551
|
|
|
Net earnings
|
|
|
|
|
4,478
|
|
|
|
|
|
|
74
|
|
(a)
|
|
4,552
|
|
(a)
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(513
|
)
|
|
|
|
12
|
|
(a)
|
|
(501
|
)
|
(a)
|
|||||||||||
Exercise of stock options and issuance of other stock awards
|
|
|
(2
|
)
|
|
|
|
|
|
113
|
|
|
|
|
|
111
|
|
|
|||||||||||
Dividends declared ($1.54 per share)
|
|
|
|
|
(2,636
|
)
|
|
|
|
|
|
|
|
|
(2,636
|
)
|
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(158
|
)
|
|
|
(158
|
)
|
|
||||||||||||
Common stock repurchased
|
|
|
|
|
|
|
|
|
(3,035
|
)
|
|
|
|
|
(3,035
|
)
|
|
||||||||||||
Balances, June 30, 2012
|
$
|
—
|
|
|
$
|
1,233
|
|
|
$
|
23,599
|
|
|
$
|
(3,376
|
)
|
|
$
|
(22,822
|
)
|
|
$
|
250
|
|
|
|
$
|
(1,116
|
)
|
|
|
For the Six Months Ended
June 30, |
||||||
|
2012
|
|
2011
|
||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Net earnings
|
$
|
4,639
|
|
|
$
|
4,472
|
|
|
|
|
|
||||
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
||||
Depreciation and amortization
|
449
|
|
|
488
|
|
||
Deferred income tax benefit
|
(34
|
)
|
|
(30
|
)
|
||
Asset impairment and exit costs, net of cash paid
|
(4
|
)
|
|
(8
|
)
|
||
Cash effects of changes, net of the effects from acquired and divested companies:
|
|
|
|
||||
Receivables, net
|
(413
|
)
|
|
(250
|
)
|
||
Inventories
|
577
|
|
|
996
|
|
||
Accounts payable
|
80
|
|
|
186
|
|
||
Income taxes
|
20
|
|
|
142
|
|
||
Accrued liabilities and other current assets
|
(150
|
)
|
|
426
|
|
||
Pension plan contributions
|
(56
|
)
|
|
(50
|
)
|
||
Other
|
270
|
|
|
143
|
|
||
Net cash provided by operating activities
|
5,378
|
|
|
6,515
|
|
||
|
|
|
|
||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Capital expenditures
|
(476
|
)
|
|
(345
|
)
|
||
Purchases of businesses, net of acquired cash
|
—
|
|
|
(62
|
)
|
||
Other
|
(36
|
)
|
|
(14
|
)
|
||
Net cash used in investing activities
|
(512
|
)
|
|
(421
|
)
|
|
For the Six Months Ended
June 30, |
||||||
|
2012
|
|
2011
|
||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Short-term borrowing activity by original maturity:
|
|
|
|
||||
Net issuances (repayments) - maturities of 90 days or less
|
$
|
1,930
|
|
|
$
|
(1,206
|
)
|
Issuances - maturities longer than 90 days
|
478
|
|
|
—
|
|
||
Repayments - maturities longer than 90 days
|
(1,215
|
)
|
|
—
|
|
||
Long-term debt proceeds
|
2,981
|
|
|
990
|
|
||
Long-term debt repaid
|
(1,725
|
)
|
|
(35
|
)
|
||
Repurchases of common stock
|
(3,059
|
)
|
|
(2,922
|
)
|
||
Issuance of common stock
|
—
|
|
|
75
|
|
||
Dividends paid
|
(2,663
|
)
|
|
(2,308
|
)
|
||
Other
|
(215
|
)
|
|
(292
|
)
|
||
Net cash used in financing activities
|
(3,488
|
)
|
|
(5,698
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(82
|
)
|
|
79
|
|
||
|
|
|
|
||||
Cash and cash equivalents:
|
|
|
|
||||
Increase
|
1,296
|
|
|
475
|
|
||
Balance at beginning of period
|
2,550
|
|
|
1,703
|
|
||
Balance at end of period
|
$
|
3,846
|
|
|
$
|
2,178
|
|
(in millions)
|
For the Six Months Ended
June 30,
|
|
For the Three Months Ended
June 30, |
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Separation programs:
|
|
|
|
|
|
|
|
||||||||
European Union
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Eastern Europe, Middle East & Africa
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Asia
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Latin America & Canada
|
16
|
|
|
1
|
|
|
8
|
|
|
—
|
|
||||
Total separation programs
|
16
|
|
|
17
|
|
|
8
|
|
|
1
|
|
||||
Asset impairment and exit costs
|
$
|
16
|
|
|
$
|
17
|
|
|
$
|
8
|
|
|
$
|
1
|
|
(in millions)
|
|
||
Liability balance, January 1, 2012
|
$
|
28
|
|
Charges
|
16
|
|
|
Cash spent
|
(20
|
)
|
|
Currency/other
|
(2
|
)
|
|
Liability balance, June 30, 2012
|
$
|
22
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
|
For the Six Months Ended
June 30, |
|
For the Six Months Ended
June 30, |
||||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Service cost
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
96
|
|
|
$
|
85
|
|
Interest cost
|
|
8
|
|
|
9
|
|
|
96
|
|
|
101
|
|
||||
Expected return on plan assets
|
|
(8
|
)
|
|
(8
|
)
|
|
(162
|
)
|
|
(156
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
5
|
|
|
4
|
|
|
62
|
|
|
28
|
|
||||
Prior service cost
|
|
1
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||
Other
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Net periodic pension cost
|
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
96
|
|
|
$
|
62
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
|
For the Three Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Service cost
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
47
|
|
|
$
|
44
|
|
Interest cost
|
|
4
|
|
|
5
|
|
|
47
|
|
|
52
|
|
||||
Expected return on plan assets
|
|
(4
|
)
|
|
(4
|
)
|
|
(78
|
)
|
|
(80
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
2
|
|
|
2
|
|
|
31
|
|
|
14
|
|
||||
Prior service cost
|
|
1
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
Net periodic pension cost
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
48
|
|
|
$
|
32
|
|
|
|
Goodwill
|
|
Other Intangible Assets, net
|
||||||||||||
(in millions)
|
|
June 30,
2012 |
|
December 31,
2011 |
|
June 30,
2012 |
|
December 31,
2011 |
||||||||
European Union
|
|
$
|
1,351
|
|
|
$
|
1,392
|
|
|
$
|
642
|
|
|
$
|
663
|
|
Eastern Europe, Middle East & Africa
|
|
613
|
|
|
666
|
|
|
243
|
|
|
250
|
|
||||
Asia
|
|
4,836
|
|
|
4,966
|
|
|
1,572
|
|
|
1,633
|
|
||||
Latin America & Canada
|
|
2,937
|
|
|
2,904
|
|
|
1,157
|
|
|
1,151
|
|
||||
Total
|
|
$
|
9,737
|
|
|
$
|
9,928
|
|
|
$
|
3,614
|
|
|
$
|
3,697
|
|
(in millions)
|
|
European
Union |
|
Eastern
Europe, Middle East & Africa |
|
Asia
|
|
Latin
America & Canada |
|
Total
|
||||||||||
Balance at December 31, 2011
|
|
$
|
1,392
|
|
|
$
|
666
|
|
|
$
|
4,966
|
|
|
$
|
2,904
|
|
|
$
|
9,928
|
|
Changes due to:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Acquisitions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Currency
|
|
(41
|
)
|
|
(53
|
)
|
|
(130
|
)
|
|
33
|
|
|
(191
|
)
|
|||||
Balance at June 30, 2012
|
|
$
|
1,351
|
|
|
$
|
613
|
|
|
$
|
4,836
|
|
|
$
|
2,937
|
|
|
$
|
9,737
|
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||||||||||
(in millions)
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
||||||||
Non-amortizable intangible assets
|
|
$
|
2,034
|
|
|
|
|
$
|
2,067
|
|
|
|
||||
Amortizable intangible assets
|
|
1,995
|
|
|
$
|
415
|
|
|
2,001
|
|
|
$
|
371
|
|
||
Total other intangible assets
|
|
$
|
4,029
|
|
|
$
|
415
|
|
|
$
|
4,068
|
|
|
$
|
371
|
|
Description
|
Initial
Estimated Useful Lives |
|
Weighted-Average
Remaining Useful Life |
|
Trademarks
|
2 - 40 years
|
|
26
|
years
|
Distribution networks
|
20 - 30 years
|
|
16
|
years
|
Non-compete agreements
|
3 - 10 years
|
|
3
|
years
|
Other (including farmer
contracts and intellectual property rights) |
12.5 - 17 years
|
|
13
|
years
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
||||||||||||
(in millions)
|
|
Balance Sheet Classification
|
|
At
June 30, 2012 |
|
At
December 31, 2011 |
|
Balance Sheet Classification
|
|
At
June 30, 2012 |
|
At
December 31, 2011 |
||||||||
Foreign exchange contracts designated as hedging instruments
|
|
Other current assets
|
|
$
|
91
|
|
|
$
|
57
|
|
|
Other accrued liabilities
|
|
$
|
6
|
|
|
$
|
4
|
|
|
|
Other assets
|
|
3
|
|
|
—
|
|
|
Other liabilities
|
|
1
|
|
|
—
|
|
||||
Foreign exchange contracts not designated as hedging instruments
|
|
Other current assets
|
|
50
|
|
|
88
|
|
|
Other accrued liabilities
|
|
56
|
|
|
62
|
|
||||
|
|
|
|
|
|
|
|
Other liabilities
|
|
1
|
|
|
—
|
|
||||||
Total derivatives
|
|
|
|
$
|
144
|
|
|
$
|
145
|
|
|
|
|
$
|
64
|
|
|
$
|
66
|
|
(in millions)
|
|
For the Six Months Ended June 30, 2012
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
24
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
24
|
|
||||
Cost of sales
|
|
19
|
|
|
|
|
—
|
|
|
|
|
19
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
43
|
|
|
|
|
—
|
|
|
|
|
43
|
|
|||||||
Interest expense, net
|
|
(30
|
)
|
|
|
|
6
|
|
|
|
|
(24
|
)
|
|||||||
Earnings before income taxes
|
|
13
|
|
|
|
|
6
|
|
|
|
|
19
|
|
|||||||
Provision for income taxes
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|||||||
Net earnings attributable to PMI
|
|
$
|
12
|
|
|
|
|
$
|
6
|
|
|
|
|
$
|
18
|
|
||||
Other Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(13
|
)
|
|
|
|
|
|
$
|
1
|
|
|
$
|
(12
|
)
|
||||
Recognized gains
|
|
13
|
|
|
|
|
|
|
(1
|
)
|
|
12
|
|
|||||||
Net impact on equity
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
||||
Cumulative translation adjustment
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
For the Six Months Ended June 30, 2011
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
||||
Cost of sales
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Interest expense, net
|
|
(16
|
)
|
|
|
|
14
|
|
|
|
|
(2
|
)
|
|||||||
Earnings before income taxes
|
|
(16
|
)
|
|
|
|
14
|
|
|
|
|
(2
|
)
|
|||||||
Provision for income taxes
|
|
2
|
|
|
|
|
(4
|
)
|
|
|
|
(2
|
)
|
|||||||
Net earnings attributable to PMI
|
|
$
|
(14
|
)
|
|
|
|
$
|
10
|
|
|
|
|
$
|
(4
|
)
|
||||
Other Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses transferred to earnings
|
|
$
|
16
|
|
|
|
|
|
|
$
|
(2
|
)
|
|
$
|
14
|
|
||||
Recognized gains
|
|
5
|
|
|
|
|
|
|
—
|
|
|
5
|
|
|||||||
Net impact on equity
|
|
$
|
21
|
|
|
|
|
|
|
$
|
(2
|
)
|
|
$
|
19
|
|
||||
Cumulative translation adjustment
|
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
2
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
For the Three Months Ended June 30, 2012
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
13
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
13
|
|
||||
Cost of sales
|
|
4
|
|
|
|
|
—
|
|
|
|
|
4
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
17
|
|
|
|
|
—
|
|
|
|
|
17
|
|
|||||||
Interest expense, net
|
|
(15
|
)
|
|
|
|
5
|
|
|
|
|
(10
|
)
|
|||||||
Earnings before income taxes
|
|
2
|
|
|
|
|
5
|
|
|
|
|
7
|
|
|||||||
Provision for income taxes
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Net earnings attributable to PMI
|
|
$
|
2
|
|
|
|
|
$
|
5
|
|
|
|
|
$
|
7
|
|
||||
Other Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(2
|
)
|
|
|
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
||||
Recognized losses
|
|
(38
|
)
|
|
|
|
|
|
4
|
|
|
(34
|
)
|
|||||||
Net impact on equity
|
|
$
|
(40
|
)
|
|
|
|
|
|
$
|
4
|
|
|
$
|
(36
|
)
|
||||
Cumulative translation adjustment
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
For the Three Months Ended June 30, 2011
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
||||
Cost of sales
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Interest expense, net
|
|
(8
|
)
|
|
|
|
11
|
|
|
|
|
3
|
|
|||||||
Earnings before income taxes
|
|
(8
|
)
|
|
|
|
11
|
|
|
|
|
3
|
|
|||||||
Provision for income taxes
|
|
1
|
|
|
|
|
(3
|
)
|
|
|
|
(2
|
)
|
|||||||
Net earnings attributable to PMI
|
|
$
|
(7
|
)
|
|
|
|
$
|
8
|
|
|
|
|
$
|
1
|
|
||||
Other Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses transferred to earnings
|
|
$
|
8
|
|
|
|
|
|
|
$
|
(1
|
)
|
|
$
|
7
|
|
||||
Recognized losses
|
|
(19
|
)
|
|
|
|
|
|
2
|
|
|
(17
|
)
|
|||||||
Net impact on equity
|
|
$
|
(11
|
)
|
|
|
|
|
|
$
|
1
|
|
|
$
|
(10
|
)
|
||||
Cumulative translation adjustment
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
$
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
(pre-tax, in millions)
|
|
For the Six Months Ended June 30,
|
||||||||||||||||
Derivatives in
Cash Flow Hedging Relationship |
|
Statement of Earnings
Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings on Derivatives |
||||||||||||
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
13
|
|
|
$
|
5
|
|
||||
|
|
Net revenues
|
|
$
|
24
|
|
|
$
|
—
|
|
|
|
|
|
||||
|
|
Cost of sales
|
|
19
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Marketing, administration
and research costs |
|
—
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Interest expense, net
|
|
(30
|
)
|
|
(16
|
)
|
|
|
|
|
||||||
Total
|
|
|
|
$
|
13
|
|
|
$
|
(16
|
)
|
|
$
|
13
|
|
|
$
|
5
|
|
(pre-tax, in millions)
|
|
For the Three Months Ended June 30,
|
||||||||||||||||
Derivatives in
Cash Flow Hedging Relationship |
|
Statement of Earnings
Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings on Derivatives |
||||||||||||
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
(38
|
)
|
|
$
|
(19
|
)
|
||||
|
|
Net revenues
|
|
$
|
13
|
|
|
$
|
—
|
|
|
|
|
|
||||
|
|
Cost of sales
|
|
4
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Marketing, administration
and research costs |
|
—
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Interest expense, net
|
|
(15
|
)
|
|
(8
|
)
|
|
|
|
|
||||||
Total
|
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
(38
|
)
|
|
$
|
(19
|
)
|
(pre-tax, in millions)
|
|
For the Six Months Ended June 30,
|
||||||||||||||||
Derivatives in Net
Investment Hedging Relationship |
|
Statement of Earnings
Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings on Derivatives |
||||||||||||
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
2
|
|
||||
|
|
Interest expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
(pre-tax, in millions)
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives not Designated
as Hedging Instruments |
|
Statement of Earnings
Classification of Gain/(Loss) |
|
Amount of Gain/(Loss)
Recognized in Earnings |
||||||||||||||
|
|
|
|
For the Six Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Marketing, administration and research costs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Interest expense, net
|
|
6
|
|
|
14
|
|
|
5
|
|
|
11
|
|
||||
|
|
|
|
$
|
6
|
|
|
$
|
14
|
|
|
$
|
5
|
|
|
$
|
11
|
|
(in millions)
|
|
For the Six Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Gain at beginning of period
|
|
$
|
15
|
|
|
$
|
2
|
|
|
$
|
51
|
|
|
$
|
31
|
|
Derivative (gains) losses transferred to earnings
|
|
(12
|
)
|
|
14
|
|
|
(2
|
)
|
|
7
|
|
||||
Change in fair value
|
|
12
|
|
|
5
|
|
|
(34
|
)
|
|
(17
|
)
|
||||
Gain as of June 30
|
|
$
|
15
|
|
|
$
|
21
|
|
|
$
|
15
|
|
|
$
|
21
|
|
(in millions)
|
|
||
Redeemable noncontrolling interest at December 31, 2011
|
$
|
1,212
|
|
Share of net earnings
|
87
|
|
|
Dividend payments
|
(49
|
)
|
|
Currency translation
|
12
|
|
|
Redeemable noncontrolling interest at June 30, 2012
|
$
|
1,262
|
|
(in millions)
|
|
For the Six Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Net earnings attributable to PMI
|
|
$
|
4,478
|
|
|
$
|
4,328
|
|
|
$
|
2,317
|
|
|
$
|
2,409
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
|
24
|
|
|
24
|
|
|
12
|
|
|
14
|
|
||||
Net earnings for basic and diluted EPS
|
|
$
|
4,454
|
|
|
$
|
4,304
|
|
|
$
|
2,305
|
|
|
$
|
2,395
|
|
Weighted-average shares for basic EPS
|
|
1,710
|
|
|
1,782
|
|
|
1,701
|
|
|
1,772
|
|
||||
Plus incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
|
||||||||
Stock options
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted-average shares for diluted EPS
|
|
1,710
|
|
|
1,782
|
|
|
1,701
|
|
|
1,772
|
|
(in millions)
|
|
For the Six Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
13,750
|
|
|
$
|
14,495
|
|
|
$
|
7,280
|
|
|
$
|
8,080
|
|
Eastern Europe, Middle East & Africa
|
|
9,131
|
|
|
8,274
|
|
|
5,062
|
|
|
4,603
|
|
||||
Asia
|
|
10,494
|
|
|
9,434
|
|
|
5,317
|
|
|
5,146
|
|
||||
Latin America & Canada
|
|
4,684
|
|
|
4,561
|
|
|
2,378
|
|
|
2,405
|
|
||||
Net revenues
|
|
$
|
38,059
|
|
|
$
|
36,764
|
|
|
$
|
20,037
|
|
|
$
|
20,234
|
|
Earnings before income taxes:
|
|
|
|
|
|
|
|
|
||||||||
Operating companies income:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
2,147
|
|
|
$
|
2,286
|
|
|
$
|
1,117
|
|
|
$
|
1,280
|
|
Eastern Europe, Middle East & Africa
|
|
1,758
|
|
|
1,557
|
|
|
948
|
|
|
835
|
|
||||
Asia
|
|
2,771
|
|
|
2,491
|
|
|
1,364
|
|
|
1,398
|
|
||||
Latin America & Canada
|
|
486
|
|
|
519
|
|
|
249
|
|
|
268
|
|
||||
Amortization of intangibles
|
|
(49
|
)
|
|
(48
|
)
|
|
(25
|
)
|
|
(24
|
)
|
||||
General corporate expenses
|
|
(106
|
)
|
|
(86
|
)
|
|
(49
|
)
|
|
(45
|
)
|
||||
Operating income
|
|
7,007
|
|
|
6,719
|
|
|
3,604
|
|
|
3,712
|
|
||||
Interest expense, net
|
|
(422
|
)
|
|
(421
|
)
|
|
(209
|
)
|
|
(208
|
)
|
||||
Earnings before income taxes
|
|
$
|
6,585
|
|
|
$
|
6,298
|
|
|
$
|
3,395
|
|
|
$
|
3,504
|
|
Type of Case
|
|
Number of
Cases Pending as of August 1, 2012 |
|
Number of
Cases Pending as of August 1, 2011 |
|
Number of
Cases Pending as of August 1, 2010 |
|||
Individual Smoking and Health Cases
|
|
74
|
|
|
94
|
|
|
116
|
|
Smoking and Health Class Actions
|
|
10
|
|
|
10
|
|
|
11
|
|
Health Care Cost Recovery Actions
|
|
14
|
|
|
11
|
|
|
10
|
|
Lights Class Actions
|
|
2
|
|
|
2
|
|
|
2
|
|
Individual Lights Cases (small claims court)
|
|
7
|
|
|
9
|
|
|
10
|
|
Public Civil Actions
|
|
3
|
|
|
4
|
|
|
9
|
|
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
May 2011
|
|
Brazil/Laszlo
|
|
Individual Smoking and Health
|
|
The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $15,360), plus future costs for cessation and medical treatment of smoking related diseases.
|
|
In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision.
|
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
September 2009
|
|
Brazil/Bernhardt
|
|
Individual Smoking and Health
|
|
The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $6,370) in “moral damages.”
|
|
Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision.
In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $49,000). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending. |
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
February 2004
|
|
Brazil/The Smoker Health Defense Association (“ADESF”)
|
|
Class Action
|
|
The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.
|
|
In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $490) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed.
In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending. |
•
|
74
cases brought by individual plaintiffs in Argentina (
31
), Brazil (
30
), Canada (
2
), Chile (
2
), Greece (
1
), Italy (
5
), the Philippines (
1
), Scotland (
1
) and Turkey (
1
), compared with
94
such cases on
August 1, 2011
, and
116
cases on
August 1, 2010
; and
|
•
|
10
cases brought on behalf of classes of individual plaintiffs in Brazil (
2
) and Canada (
8
), compared with
10
such cases on
August 1, 2011
, and
11
such cases on
August 1, 2010
.
|
•
|
2
cases brought on behalf of overlapping classes of individual plaintiffs in Israel, compared with
2
such cases on
August 1, 2011
and
2
such cases on
August 1, 2010
; and
|
•
|
7
cases brought by individuals in the equivalent of small claims courts in Italy, where the maximum damages are approximately
one thousand
Euros per case, compared with
9
such cases on
August 1, 2011
, and
10
such cases on
August 1, 2010
.
|
(in millions)
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
U.S. dollar notes, 1.625% to 6.875% (average interest rate 4.810%), due through 2042
|
|
$
|
12,493
|
|
|
$
|
11,269
|
|
Foreign currency obligations:
|
|
|
|
|
||||
Euro notes, 2.125% to 5.875% (average interest rate 4.227%), due through 2024
|
|
3,511
|
|
|
3,533
|
|
||
Swiss franc notes, 1.0% to 4.0% (average interest rate 2.801%), due through 2021
|
|
1,679
|
|
|
1,719
|
|
||
Other (average interest rate 3.303%), due through 2024
|
|
425
|
|
|
513
|
|
||
|
|
18,108
|
|
|
17,034
|
|
||
Less current portion of long-term debt
|
|
3,284
|
|
|
2,206
|
|
||
|
|
$
|
14,824
|
|
|
$
|
14,828
|
|
Level 1 -
|
Quoted prices in active markets for identical assets or liabilities;
|
Level 2 -
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
Level 3 -
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
(in millions)
|
|
Fair Value
at June 30, 2012 |
|
Quoted Prices
in Active Markets for Identical Assets/Liabilities (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
|
$
|
144
|
|
|
$
|
—
|
|
|
$
|
144
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
144
|
|
|
$
|
—
|
|
|
$
|
144
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
$
|
20,146
|
|
|
$
|
19,760
|
|
|
$
|
386
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
|
64
|
|
|
—
|
|
|
64
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
20,210
|
|
|
$
|
19,760
|
|
|
$
|
450
|
|
|
$
|
—
|
|
(in millions)
|
|
At
June 30, 2012 |
|
At
December 31, 2011 |
|
At
June 30, 2011 |
||||||
Currency translation adjustments
|
|
$
|
(883
|
)
|
|
$
|
(293
|
)
|
|
$
|
1,315
|
|
Pension and other benefits
|
|
(2,508
|
)
|
|
(2,585
|
)
|
|
(1,598
|
)
|
|||
Derivatives accounted for as hedges
|
|
15
|
|
|
15
|
|
|
21
|
|
|||
Total accumulated other comprehensive losses
|
|
$
|
(3,376
|
)
|
|
$
|
(2,863
|
)
|
|
$
|
(262
|
)
|
•
|
European Union;
|
•
|
Eastern Europe, Middle East & Africa (“EEMA”);
|
•
|
Asia; and
|
•
|
Latin America & Canada.
|
|
|
Diluted EPS
|
|
% Growth
|
|||
For the six months ended June 30, 2011
|
|
$
|
2.42
|
|
|
|
|
2012 Asset impairment and exit costs
|
|
(0.01
|
)
|
|
|
||
2012 Tax items
|
|
—
|
|
|
|
||
Subtotal of 2012 items
|
|
(0.01
|
)
|
|
|
||
2011 Asset impairment and exit costs
|
|
0.01
|
|
|
|
||
2011 Tax items
|
|
(0.02
|
)
|
|
|
||
Subtotal of 2011 items
|
|
(0.01
|
)
|
|
|
||
Currency
|
|
(0.12
|
)
|
|
|
||
Impact of lower shares outstanding and share-based payments
|
|
0.11
|
|
|
|
||
Operations
|
|
0.21
|
|
|
|
||
For the six months ended June 30, 2012
|
|
$
|
2.60
|
|
|
7.4
|
%
|
•
|
EEMA: Higher pricing and favorable volume/mix, partially offset by higher marketing, administration and research costs; and
|
•
|
Asia: Higher pricing and lower manufacturing costs, partially offset by higher marketing, administration and research costs.
|
|
|
Diluted EPS
|
|
% Growth
|
|||
For the three months ended June 30, 2011
|
|
$
|
1.35
|
|
|
|
|
2011 Tax items
|
|
(0.01
|
)
|
|
|
||
Currency
|
|
(0.10
|
)
|
|
|
||
Change in tax rate
|
|
0.01
|
|
|
|
||
Impact of lower shares outstanding and share-based payments
|
|
0.06
|
|
|
|
||
Operations
|
|
0.05
|
|
|
|
||
For the three months ended June 30, 2012
|
|
$
|
1.36
|
|
|
0.7
|
%
|
•
|
EEMA: Higher pricing and favorable volume/mix, partially offset by higher marketing, administration and research costs; partially offset by
|
•
|
Asia: Unfavorable volume/mix (mainly due to the additional sales generated in Japan during 2011 in response to in-market shortages of competitors' products) and higher marketing administration and research costs, partially offset by higher pricing and lower manufacturing costs; and
|
•
|
European Union: Unfavorable volume/mix, higher manufacturing costs (mainly related to the conversion to reduced cigarette ignition propensity paper that began in the fourth quarter of 2011) and higher marketing, administration and research costs (principally reflecting marketing expenditures behind
Marlboro
in Germany and Switzerland), partially offset by higher pricing.
|
|
|
For the Six Months Ended
June 30, |
|
For the Three Months Ended
June 30, |
||||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Cigarette volume:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
99,593
|
|
|
105,715
|
|
|
51,804
|
|
|
57,193
|
|
||||
Eastern Europe, Middle East & Africa
|
|
145,084
|
|
|
138,979
|
|
|
79,156
|
|
|
75,336
|
|
||||
Asia
|
|
164,502
|
|
|
156,134
|
|
|
83,472
|
|
|
84,042
|
|
||||
Latin America & Canada
|
|
48,207
|
|
|
48,269
|
|
|
23,864
|
|
|
24,606
|
|
||||
Total cigarette volume
|
|
457,386
|
|
|
449,097
|
|
|
238,296
|
|
|
241,177
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
13,750
|
|
|
$
|
14,495
|
|
|
$
|
7,280
|
|
|
$
|
8,080
|
|
Eastern Europe, Middle East & Africa
|
|
9,131
|
|
|
8,274
|
|
|
5,062
|
|
|
4,603
|
|
||||
Asia
|
|
10,494
|
|
|
9,434
|
|
|
5,317
|
|
|
5,146
|
|
||||
Latin America & Canada
|
|
4,684
|
|
|
4,561
|
|
|
2,378
|
|
|
2,405
|
|
||||
Net revenues
|
|
$
|
38,059
|
|
|
$
|
36,764
|
|
|
$
|
20,037
|
|
|
$
|
20,234
|
|
Excise taxes on products:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
9,412
|
|
|
$
|
9,997
|
|
|
$
|
4,995
|
|
|
$
|
5,583
|
|
Eastern Europe, Middle East & Africa
|
|
5,145
|
|
|
4,575
|
|
|
2,911
|
|
|
2,591
|
|
||||
Asia
|
|
4,862
|
|
|
4,175
|
|
|
2,462
|
|
|
2,210
|
|
||||
Latin America & Canada
|
|
3,072
|
|
|
2,953
|
|
|
1,549
|
|
|
1,577
|
|
||||
Excise taxes on products
|
|
$
|
22,491
|
|
|
$
|
21,700
|
|
|
$
|
11,917
|
|
|
$
|
11,961
|
|
Operating income:
|
|
|
|
|
|
|
|
|
||||||||
Operating companies income:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
2,147
|
|
|
$
|
2,286
|
|
|
$
|
1,117
|
|
|
$
|
1,280
|
|
Eastern Europe, Middle East & Africa
|
|
1,758
|
|
|
1,557
|
|
|
948
|
|
|
835
|
|
||||
Asia
|
|
2,771
|
|
|
2,491
|
|
|
1,364
|
|
|
1,398
|
|
||||
Latin America & Canada
|
|
486
|
|
|
519
|
|
|
249
|
|
|
268
|
|
||||
Amortization of intangibles
|
|
(49
|
)
|
|
(48
|
)
|
|
(25
|
)
|
|
(24
|
)
|
||||
General corporate expenses
|
|
(106
|
)
|
|
(86
|
)
|
|
(49
|
)
|
|
(45
|
)
|
||||
Operating income
|
|
$
|
7,007
|
|
|
$
|
6,719
|
|
|
$
|
3,604
|
|
|
$
|
3,712
|
|
•
|
Asia, primarily driven by a higher total market and share in Indonesia, Korea, Thailand and Vietnam; and
|
•
|
EEMA, primarily due to a higher total market and share in Turkey, a higher total market in Algeria and Saudi Arabia, and higher share in Russia, partly offset by a lower total market and share in Egypt, due primarily to a surge in the incidence of illicit trade.
|
•
|
the European Union, primarily due to a lower total market, notably in southern Europe, and a lower total market and share in the Czech Republic and France, partly offset by a higher total market and share in Austria.
|
|
|
For the Six Months Ended
June 30, |
|
|
|||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
Variance
|
|
%
|
|||||||
Net revenues
|
|
$
|
38,059
|
|
|
$
|
36,764
|
|
|
$
|
1,295
|
|
|
3.5
|
%
|
Excise taxes on products
|
|
22,491
|
|
|
21,700
|
|
|
791
|
|
|
3.6
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
15,568
|
|
|
$
|
15,064
|
|
|
$
|
504
|
|
|
3.3
|
%
|
•
|
price increases ($832 million),
|
•
|
favorable volume/mix ($145 million) and
|
•
|
the impact of acquisitions ($21 million), partly offset by
|
•
|
unfavorable currency ($494 million).
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates ($1,951 million) and
|
•
|
volume/mix ($327 million), partly offset by
|
•
|
favorable currency ($1,487 million).
|
|
|
For the Six Months Ended
June 30, |
|
|
|||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
Variance
|
|
%
|
|||||||
Cost of sales
|
|
$
|
5,108
|
|
|
$
|
5,139
|
|
|
$
|
(31
|
)
|
|
(0.6
|
)%
|
Marketing, administration and research costs
|
|
3,388
|
|
|
3,141
|
|
|
247
|
|
|
7.9
|
%
|
|||
Operating income
|
|
7,007
|
|
|
6,719
|
|
|
288
|
|
|
4.3
|
%
|
•
|
favorable currency ($215 million), partly offset by
|
•
|
volume/mix ($166 million) and
|
•
|
the impact of acquisitions ($12 million).
|
•
|
higher expenses ($254 million, principally related to increased marketing expenditures, notably in Germany and Russia, increased headcount and business infrastructure in Russia and expenditures incurred to combat illicit trade in cigarettes) and
|
•
|
the impact of acquisitions ($7 million), partly offset by
|
•
|
favorable currency ($14 million).
|
•
|
price increases ($832 million), partly offset by
|
•
|
unfavorable currency ($264 million),
|
•
|
higher marketing, administration and research costs ($254 million) and
|
•
|
unfavorable volume/mix ($21 million).
|
•
|
the European Union, primarily due to a lower total market, particularly in southern Europe;
|
•
|
Latin America & Canada, mainly due to a lower total market, and the unfavorable impact of trade inventory movements, in Mexico. This decline was partly offset by growth in Brazil, reflecting a favorable comparison with the second quarter of 2011, which was negatively impacted by higher trade purchases in the first quarter of 2011 ahead of retail price increases in early April 2011; and
|
•
|
Asia, primarily due to an unfavorable comparison related to the Japan hurdle and a lower total market and share in the Philippines, largely offset by a higher total market and share in Indonesia, Thailand and Vietnam.
|
•
|
EEMA, driven mainly by a higher total market and share in Turkey and a higher share in Russia, partly offset by a lower total market in Egypt due primarily to a high incidence of illicit trade.
|
|
|
For the Three Months Ended
June 30, |
|
|
|||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
Variance
|
|
%
|
|||||||
Net revenues
|
|
$
|
20,037
|
|
|
$
|
20,234
|
|
|
$
|
(197
|
)
|
|
(1.0
|
)%
|
Excise taxes on products
|
|
11,917
|
|
|
11,961
|
|
|
(44
|
)
|
|
(0.4
|
)%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
8,120
|
|
|
$
|
8,273
|
|
|
$
|
(153
|
)
|
|
(1.8
|
)%
|
•
|
unfavorable currency ($402 million) and
|
•
|
unfavorable volume/mix ($225 million), partly offset by
|
•
|
price increases ($463 million) and
|
•
|
the impact of acquisitions ($11 million).
|
•
|
favorable currency ($992 million) and
|
•
|
volume/mix ($103 million), partly offset by
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates ($1,051 million).
|
|
|
For the Three Months Ended
June 30, |
|
|
|||||||||||
(in millions)
|
|
2012
|
|
2011
|
|
Variance
|
|
%
|
|||||||
Cost of sales
|
|
$
|
2,666
|
|
|
$
|
2,844
|
|
|
$
|
(178
|
)
|
|
(6.3
|
)%
|
Marketing, administration and research costs
|
|
1,817
|
|
|
1,692
|
|
|
125
|
|
|
7.4
|
%
|
|||
Operating income
|
|
3,604
|
|
|
3,712
|
|
|
(108
|
)
|
|
(2.9
|
)%
|
•
|
favorable currency ($151 million) and
|
•
|
lower manufacturing costs ($53 million), partly offset by
|
•
|
volume/mix ($20 million) and
|
•
|
the impact of acquisitions ($6 million).
|
•
|
higher expenses ($142 million, principally related to increased expenditures behind the new
Marlboro
advertising campaign, notably in Germany and Switzerland, and new
Marlboro
brand launches in Japan and Russia, increased headcount and business infrastructure in Russia and expenditures incurred to combat illicit trade in cigarettes), partly offset by
|
•
|
favorable currency ($20 million).
|
•
|
unfavorable volume/mix ($245 million, primarily reflecting the 2011 benefit of the Japan hurdle),
|
•
|
unfavorable currency ($230 million) and
|
•
|
higher marketing, administration and research costs ($142 million), partly offset by
|
•
|
price increases ($463 million) and
|
•
|
lower manufacturing costs ($53 million).
|
•
|
actual and proposed tobacco legislation and regulation;
|
•
|
actual and proposed excise tax increases, as well as changes in excise tax structures and retail selling price regulations;
|
•
|
price gaps and changes in price gaps between premium and mid-price and low-price brands and between cigarettes and other tobacco products;
|
•
|
illicit trade in cigarettes and other tobacco products, including counterfeit, contraband and so-called "illicit whites";
|
•
|
significant governmental actions aimed at imposing regulatory requirements impacting our ability to communicate with adult consumers and differentiate our products from competitors' products;
|
•
|
increased efforts by tobacco control advocates to “denormalize” smoking and seek the implementation of extreme regulatory measures;
|
•
|
proposed legislation to mandate plain (generic) packaging resulting in the expropriation of our trademarks;
|
•
|
pending and threatened litigation as discussed in Note 10.
Contingencies
;
|
•
|
actual and proposed requirements for the disclosure of cigarette ingredients and other proprietary information without adequate trade secret protection;
|
•
|
disproportionate testing requirements and performance standards;
|
•
|
actual and proposed restrictions on the use of tobacco product ingredients, including a complete ban of tobacco product ingredients;
|
•
|
actual and proposed restrictions on imports in certain jurisdictions;
|
•
|
actual and proposed restrictions affecting tobacco manufacturing, packaging, marketing, advertising, product display and sales;
|
•
|
governmental and private bans and restrictions on smoking;
|
•
|
the outcome of proceedings and investigations, and the potential assertion of claims, and proposed regulation relating to contraband shipments of cigarettes; and
|
•
|
governmental investigations.
|
•
|
establish specific actions to prevent youth smoking;
|
•
|
restrict and/or eliminate all tobacco product advertising, marketing, promotions and sponsorships;
|
•
|
initiate public education campaigns to inform the public about the health consequences of smoking and the benefits of quitting;
|
•
|
implement regulations imposing product testing, disclosure and performance standards;
|
•
|
impose health warning requirements on packaging;
|
•
|
adopt measures aimed at eliminating illicit trade in tobacco products;
|
•
|
restrict smoking in public places;
|
•
|
implement public health-based fiscal policies (tax and price measures);
|
•
|
adopt and implement measures that ensure that packaging and labeling, including descriptive terms, do not create the false impression that one brand of cigarettes is safer than another;
|
•
|
phase out or restrict duty free tobacco sales; and
|
•
|
encourage litigation against tobacco product manufacturers.
|
•
|
to develop a series of products that provides adult smokers the taste, sensory experience and smoking ritual characteristics that are as close as possible to those currently provided by conventional cigarettes;
|
•
|
to substantiate a significant reduction of harm both for the individual adult smoker as well as the population as a whole, based on robust scientific evidence derived from well-established assessment processes; and
|
•
|
to advocate for the development of regulatory frameworks for the assessment, approval and commercialization of NGPs, including the communication of substantiated reductions in harm to consumers.
|
•
|
unfavorable currency ($249 million) and
|
•
|
unfavorable volume/mix ($186 million), partly offset by
|
•
|
price increases ($275 million).
|
•
|
unfavorable volume/mix ($171 million),
|
•
|
unfavorable currency ($155 million),
|
•
|
higher manufacturing costs ($62 million, partly related to the conversion to reduced cigarette ignition propensity paper that began in the fourth quarter of 2011) and
|
•
|
higher marketing, administration and research costs ($38 million, principally reflecting increased marketing expenditures in Germany), partly offset by
|
•
|
price increases ($275 million) and
|
•
|
the 2011 pre-tax charges for asset impairment and exit costs ($12 million).
|
•
|
favorable volume/mix ($251 million) and
|
•
|
price increases ($216 million), partially offset by
|
•
|
unfavorable currency ($200 million).
|
•
|
price increases ($216 million) and
|
•
|
favorable volume/mix ($178 million), partially offset by
|
•
|
unfavorable currency ($124 million) and
|
•
|
higher marketing, administration and research costs ($70 million, principally related to expenditures in marketing and business infrastructure, mainly in Russia).
|
•
|
price increases ($244 million),
|
•
|
favorable volume/mix ($83 million) and
|
•
|
favorable currency ($45 million).
|
•
|
price increases ($244 million),
|
•
|
lower manufacturing costs ($93 million) and
|
•
|
favorable currency ($56 million), partly offset by
|
•
|
higher marketing, administration and research costs ($104 million) and
|
•
|
unfavorable volume/mix ($11 million).
|
•
|
price increases ($97 million), partially offset by
|
•
|
unfavorable currency ($90 million).
|
•
|
unfavorable currency ($42 million),
|
•
|
higher manufacturing costs ($34 million),
|
•
|
higher marketing, administration and research costs ($22 million),
|
•
|
unfavorable volume/mix ($17 million) and
|
•
|
higher pre-tax charges for asset impairment and exit costs ($15 million), partially offset by
|
•
|
price increases ($97 million).
|
•
|
unfavorable currency ($195 million) and
|
•
|
unfavorable volume/mix ($186 million), partially offset by
|
•
|
price increases ($169 million).
|
•
|
unfavorable volume/mix ($159 million),
|
•
|
unfavorable currency ($130 million),
|
•
|
higher manufacturing costs ($25 million, mainly related to the conversion to reduced cigarette ignition propensity paper that began in the fourth quarter of 2011) and
|
•
|
higher marketing, administration and research costs ($19 million, principally reflecting increased marketing expenditures behind
Marlboro
in Germany and Switzerland), partially offset by
|
•
|
price increases ($169 million).
|
•
|
favorable volume/mix ($141 million) and
|
•
|
price increases ($114 million), partially offset by
|
•
|
unfavorable currency ($127 million).
|
•
|
price increases ($114 million) and
|
•
|
favorable volume/mix ($104 million), partially offset by
|
•
|
unfavorable currency ($80 million) and
|
•
|
higher marketing, administration and research costs ($39 million, principally related to marketing expenditures, notably for the launch of
Marlboro ClearTaste
in Russia, and business infrastructure, mainly in Russia).
|
•
|
unfavorable volume/mix ($152 million, primarily due to the Japan hurdle) and
|
•
|
unfavorable currency ($29 million), partially offset by
|
•
|
price increases ($100 million).
|
•
|
unfavorable volume/mix ($164 million) and
|
•
|
higher marketing, administration and research costs ($63 million), partially offset by
|
•
|
price increases ($100 million) and
|
•
|
lower manufacturing costs ($90 million).
|
•
|
price increases ($80 million), partially offset by
|
•
|
unfavorable currency ($51 million) and
|
•
|
unfavorable volume/mix ($28 million).
|
•
|
unfavorable volume/mix ($26 million),
|
•
|
unfavorable currency ($25 million),
|
•
|
higher manufacturing costs ($24 million),
|
•
|
higher marketing, administration and research costs ($16 million) and
|
•
|
the 2012 pre-tax charges for asset impairment and exit costs ($8 million), partially offset by
|
•
|
price increases ($80 million).
|
•
|
more cash used for accrued liabilities and other current assets (
$576 million
), largely due to the timing of payments for excise taxes (primarily related to forestalling in 2011);
|
•
|
less cash provided by inventories (
$419 million
), primarily due to higher finished goods inventories (primarily stock movements related to tax-driven price increases) and higher leaf tobacco purchases;
|
•
|
more cash used for accounts receivable (
$163 million
), primarily due to the timing of sales and collections;
|
•
|
less cash provided by income taxes (
$122 million
), due primarily to the timing of payments; and
|
•
|
less cash provided by accounts payable (
$106 million
), primarily due to the timing of payables for leaf and direct materials.
|
|
|
Short-term
|
|
Long-term
|
|
Outlook
|
Moody’s
|
|
P-1
|
|
A2
|
|
Stable
|
Standard & Poor’s
|
|
A-1
|
|
A
|
|
Stable
|
Fitch
|
|
F1
|
|
A
|
|
Stable
|
(in billions of dollars)
|
|
|
|
|
||||
Type
|
|
Committed
Credit
Facilities
|
|
Commercial
Paper
|
||||
Multi-year revolving credit, expiring March 31, 2015
|
|
$
|
2.5
|
|
|
|
||
Multi-year revolving credit, expiring October 25, 2016
|
|
3.5
|
|
|
|
|
||
Total facilities
|
|
$
|
6.0
|
|
|
|
|
|
Commercial paper outstanding
|
|
|
|
|
$
|
2.4
|
|
•
|
the levying of substantial and increasing tax and duty charges;
|
•
|
restrictions or bans on advertising, marketing and sponsorship;
|
•
|
the display of larger health warnings, graphic health warnings and other labeling requirements;
|
•
|
restrictions on packaging design, including the use of colors, and plain packaging;
|
•
|
restrictions or bans on the display of tobacco product packaging at the point of sale and restrictions or bans on cigarette vending machines;
|
•
|
requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;
|
•
|
disclosure, restrictions, or bans of tobacco product ingredients;
|
•
|
increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;
|
•
|
elimination of duty free sales and duty free allowances for travelers; and
|
•
|
encouraging litigation against tobacco companies.
|
•
|
promote brand equity successfully;
|
•
|
anticipate and respond to new consumer trends;
|
•
|
develop new products and markets and broaden brand portfolios;
|
•
|
improve productivity; and
|
•
|
be able to protect or enhance margins through price increases.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Period
|
|
Total Number
of Shares
Repurchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (2)
|
|
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Plans or
Programs
|
|
April 1, 2012 –
April 30, 2012 (1)
|
|
4,763,867
|
|
|
$88.18
|
|
159,267,785
|
|
$1,726,987,207
|
May 1, 2012 –
May 31, 2012 (1)
|
|
7,608,438
|
|
|
$86.19
|
|
166,876,223
|
|
$1,071,247,743
|
June 1, 2012 –
June 30, 2012 (1)
|
|
5,401,601
|
|
|
$85.01
|
|
172,277,824
|
|
$612,045,751
|
Pursuant to Publicly
Announced Plans
or Programs
|
|
17,773,906
|
|
|
$86.36
|
|
|
|
|
April 1, 2012 –
April 30, 2012 (3)
|
|
1,050
|
|
|
$87.96
|
|
|
|
|
May 1, 2012 –
May 31, 2012 (3)
|
|
3,021
|
|
|
$87.96
|
|
|
|
|
June 1, 2012 –
June 30, 2012 (3)
|
|
799
|
|
|
$87.43
|
|
|
|
|
For the Quarter Ended June 30, 2012
|
|
17,778,776
|
|
|
$86.36
|
|
|
|
|
(1)
|
On February 11, 2010, our Board of Directors authorized a share repurchase program of $12 billion over three years. This program commenced in May 2010, after the completion of our previous two-year $13 billion program. These share repurchases have been made pursuant to the $12 billion program.
|
(2)
|
Aggregate number of shares repurchased under the $12 billion share repurchase program as of the end of the period presented.
|
(3)
|
Shares repurchased represent shares tendered to us by employees who vested in restricted and deferred stock awards, or exercised stock options, and used shares to pay all, or a portion of, the related taxes and/or option exercise price.
|
Item 6.
|
Exhibits.
|
|
|
|
10.1
|
|
Separation Agreement and Release between Philip Morris International Management SA and Hermann Waldemer dated May 7, 2012 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 10, 2012).
|
|
|
|
10.2
|
|
Philip Morris International Inc. 2012 Performance Incentive Plan, effective May 7, 2012 (incorporated by reference to Exhibit A to the Definitive Proxy Statement filed on March 30, 2012).
|
|
|
|
10.3
|
|
Form of Deferred Stock Agreement (April 16, 2012) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2012).
|
|
|
|
10.4
|
|
Employment Agreement with Jacek Olczak.
|
|
|
|
12
|
|
Statement regarding computation of ratios of earnings to fixed charges.
|
|
|
|
31.1
|
|
Certification of the Registrant's Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of the Registrant's Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of the Registrant's Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of the Registrant's Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
PHILIP MORRIS INTERNATIONAL INC.
|
|
/s/ JACEK OLCZAK
|
|
Jacek Olczak
|
Chief Financial Officer
|
|
August 3, 2012
|
|
Target %
(1)
|
|
Incentive Compensation Award
|
from
120 %
of annual base salary
|
to
180 %
of annual base salary
|
Stock Award
|
from
180 %
of annual base salary
|
to
270 %
of annual base salary
|
|
|
|
/s/ Kevin Click
|
/s/ Ralf Zysk
|
Kevin Click
|
Ralf Zysk
|
Senior Vice President
Human Resources PMI
|
Vice President Compensation & Benefits and
International Assignments PMI
|
|
Six Months
Ended June 30, 2012 |
|
Three Months
Ended June 30, 2012 |
||||
Earnings before income taxes
|
$
|
6,585
|
|
|
$
|
3,395
|
|
Add (deduct):
|
|
|
|
||||
Equity in net loss of less than 50% owned affiliates
|
9
|
|
|
5
|
|
||
Dividends from less than 50% owned affiliates
|
—
|
|
|
—
|
|
||
Fixed charges
|
546
|
|
|
268
|
|
||
Interest capitalized, net of amortization
|
3
|
|
|
3
|
|
||
Earnings available for fixed charges
|
$
|
7,143
|
|
|
$
|
3,671
|
|
Fixed charges:
|
|
|
|
||||
Interest incurred
|
$
|
495
|
|
|
$
|
243
|
|
Portion of rent expense deemed to represent interest factor
|
51
|
|
|
25
|
|
||
Fixed charges
|
$
|
546
|
|
|
$
|
268
|
|
Ratio of earnings to fixed charges
|
13.1
|
|
|
13.7
|
|
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
||||||||||
Earnings before income taxes
|
$
|
12,532
|
|
|
$
|
10,324
|
|
|
$
|
9,243
|
|
|
$
|
9,937
|
|
|
$
|
8,884
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity in net loss (earnings) of less
than 50% owned affiliates |
10
|
|
|
8
|
|
|
6
|
|
|
64
|
|
|
(100
|
)
|
|||||
Dividends from less than 50%
owned affiliates |
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
100
|
|
|||||
Fixed charges
|
1,042
|
|
|
1,069
|
|
|
1,006
|
|
|
618
|
|
|
359
|
|
|||||
Interest capitalized, net of
amortization |
(2
|
)
|
|
1
|
|
|
2
|
|
|
(11
|
)
|
|
(8
|
)
|
|||||
Earnings available for fixed charges
|
$
|
13,582
|
|
|
$
|
11,402
|
|
|
$
|
10,257
|
|
|
$
|
10,620
|
|
|
$
|
9,235
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest incurred
|
$
|
940
|
|
|
$
|
976
|
|
|
$
|
920
|
|
|
$
|
543
|
|
|
$
|
280
|
|
Portion of rent expense deemed to
represent interest factor |
102
|
|
|
93
|
|
|
86
|
|
|
75
|
|
|
79
|
|
|||||
Fixed charges
|
$
|
1,042
|
|
|
$
|
1,069
|
|
|
$
|
1,006
|
|
|
$
|
618
|
|
|
$
|
359
|
|
Ratio of earnings to fixed charges
|
13.0
|
|
|
10.7
|
|
|
10.2
|
|
|
17.2
|
|
|
25.7
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Philip Morris International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ LOUIS C. CAMILLERI
|
Louis C. Camilleri
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Philip Morris International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ JACEK OLCZAK
|
Jacek Olczak
|
Chief Financial Officer
|
/s/ LOUIS C. CAMILLERI
|
Louis C. Camilleri
|
Chairman and Chief Executive Officer
|
August 3, 2012
|
/s/ JACEK OLCZAK
|
Jacek Olczak
|
Chief Financial Officer
|
August 3, 2012
|