(X)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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( )
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Philip Morris International Inc.
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||||
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Virginia
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13-3435103
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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120 Park Avenue
New York, New York
|
10017
|
(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code
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(917) 663-2000
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Page No.
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PART I -
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Item 1.
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Condensed Consolidated Balance Sheets at
|
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Condensed Consolidated Statements of Earnings for the
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Condensed Consolidated Statements of Comprehensive Earnings for the
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Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
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Condensed Consolidated Statements of Cash Flows for the
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Notes to Condensed Consolidated Financial Statements
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Item 2.
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Item 4.
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PART II -
|
|
|
|
|
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Item 1.
|
||
|
|
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Item 1A.
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||
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Item 2.
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||
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Item 6.
|
||
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|
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June 30,
2013 |
|
December 31,
2012 |
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,586
|
|
|
$
|
2,983
|
|
Receivables (less allowances of $56 in 2013 and 2012)
|
3,964
|
|
|
3,589
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
3,803
|
|
|
3,548
|
|
||
Other raw materials
|
1,888
|
|
|
1,610
|
|
||
Finished product
|
2,526
|
|
|
3,791
|
|
||
|
8,217
|
|
|
8,949
|
|
||
Deferred income taxes
|
376
|
|
|
450
|
|
||
Other current assets
|
612
|
|
|
619
|
|
||
Total current assets
|
16,755
|
|
|
16,590
|
|
||
Property, plant and equipment, at cost
|
13,479
|
|
|
13,879
|
|
||
Less: accumulated depreciation
|
7,083
|
|
|
7,234
|
|
||
|
6,396
|
|
|
6,645
|
|
||
Goodwill (Note 5)
|
9,529
|
|
|
9,900
|
|
||
Other intangible assets, net (Note 5)
|
3,472
|
|
|
3,619
|
|
||
Other assets
|
988
|
|
|
916
|
|
||
TOTAL ASSETS
|
$
|
37,140
|
|
|
$
|
37,670
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
LIABILITIES
|
|
|
|
||||
Short-term borrowings (Note 12)
|
$
|
2,684
|
|
|
$
|
2,419
|
|
Current portion of long-term debt (Note 12)
|
1,256
|
|
|
2,781
|
|
||
Accounts payable
|
1,045
|
|
|
1,103
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
509
|
|
|
527
|
|
||
Taxes, except income taxes
|
5,228
|
|
|
5,350
|
|
||
Employment costs
|
806
|
|
|
896
|
|
||
Dividends payable
|
1,391
|
|
|
1,418
|
|
||
Other
|
956
|
|
|
952
|
|
||
Income taxes
|
710
|
|
|
1,456
|
|
||
Deferred income taxes
|
121
|
|
|
114
|
|
||
Total current liabilities
|
14,706
|
|
|
17,016
|
|
||
Long-term debt (Note 12)
|
21,559
|
|
|
17,639
|
|
||
Deferred income taxes
|
1,842
|
|
|
1,875
|
|
||
Employment costs
|
2,472
|
|
|
2,574
|
|
||
Other liabilities
|
490
|
|
|
419
|
|
||
Total liabilities
|
41,069
|
|
|
39,523
|
|
||
Contingencies (Note 10)
|
|
|
|
||||
Redeemable noncontrolling interest (Note 7)
|
1,296
|
|
|
1,301
|
|
||
STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
||||
Common stock, no par value
(2,109,316,331 shares issued in 2013 and 2012) |
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,306
|
|
|
1,334
|
|
||
Earnings reinvested in the business
|
26,537
|
|
|
25,076
|
|
||
Accumulated other comprehensive losses
|
(4,115
|
)
|
|
(3,604
|
)
|
||
|
23,728
|
|
|
22,806
|
|
||
Less: cost of repurchased stock
(486,557,135 and 455,703,347 shares in 2013 and 2012, respectively)
|
29,194
|
|
|
26,282
|
|
||
Total PMI stockholders’ deficit
|
(5,466
|
)
|
|
(3,476
|
)
|
||
Noncontrolling interests
|
241
|
|
|
322
|
|
||
Total stockholders’ deficit
|
(5,225
|
)
|
|
(3,154
|
)
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$
|
37,140
|
|
|
$
|
37,670
|
|
|
|
|
|
||||
|
For the Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
Net revenues
|
$
|
39,010
|
|
|
$
|
38,059
|
|
Cost of sales
|
5,190
|
|
|
5,108
|
|
||
Excise taxes on products
|
23,509
|
|
|
22,491
|
|
||
Gross profit
|
10,311
|
|
|
10,460
|
|
||
Marketing, administration and research costs
|
3,536
|
|
|
3,388
|
|
||
Asset impairment and exit costs (Note 2)
|
8
|
|
|
16
|
|
||
Amortization of intangibles
|
48
|
|
|
49
|
|
||
Operating income
|
6,719
|
|
|
7,007
|
|
||
Interest expense, net
|
482
|
|
|
422
|
|
||
Earnings before income taxes
|
6,237
|
|
|
6,585
|
|
||
Provision for income taxes
|
1,825
|
|
|
1,946
|
|
||
Net earnings
|
4,412
|
|
|
4,639
|
|
||
Net earnings attributable to noncontrolling interests
|
163
|
|
|
161
|
|
||
Net earnings attributable to PMI
|
$
|
4,249
|
|
|
$
|
4,478
|
|
Per share data (Note 8):
|
|
|
|
||||
Basic earnings per share
|
$
|
2.58
|
|
|
$
|
2.60
|
|
Diluted earnings per share
|
$
|
2.58
|
|
|
$
|
2.60
|
|
Dividends declared
|
$
|
1.70
|
|
|
$
|
1.54
|
|
|
For the Three Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
Net revenues
|
$
|
20,483
|
|
|
$
|
20,037
|
|
Cost of sales
|
2,701
|
|
|
2,666
|
|
||
Excise taxes on products
|
12,566
|
|
|
11,917
|
|
||
Gross profit
|
5,216
|
|
|
5,454
|
|
||
Marketing, administration and research costs
|
1,855
|
|
|
1,817
|
|
||
Asset impairment and exit costs (Note 2)
|
5
|
|
|
8
|
|
||
Amortization of intangibles
|
24
|
|
|
25
|
|
||
Operating income
|
3,332
|
|
|
3,604
|
|
||
Interest expense, net
|
246
|
|
|
209
|
|
||
Earnings before income taxes
|
3,086
|
|
|
3,395
|
|
||
Provision for income taxes
|
892
|
|
|
988
|
|
||
Net earnings
|
2,194
|
|
|
2,407
|
|
||
Net earnings attributable to noncontrolling interests
|
70
|
|
|
90
|
|
||
Net earnings attributable to PMI
|
$
|
2,124
|
|
|
$
|
2,317
|
|
Per share data (Note 8):
|
|
|
|
||||
Basic earnings per share
|
$
|
1.30
|
|
|
$
|
1.36
|
|
Diluted earnings per share
|
$
|
1.30
|
|
|
$
|
1.36
|
|
Dividends declared
|
$
|
0.85
|
|
|
$
|
0.77
|
|
|
|
|
|
|
||||
|
|
For the Six Months Ended June 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net earnings
|
|
$
|
4,412
|
|
|
$
|
4,639
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
||||
Currency translation adjustments, net of income taxes of $24 in 2013 and ($33) in 2012
|
|
(722
|
)
|
|
(566
|
)
|
||
Change in net loss and prior service cost:
|
|
|
|
|
||||
Net losses and prior service costs, net of income taxes of $- in 2013 and $- in 2012
|
|
—
|
|
|
(1
|
)
|
||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($27) in 2013 and ($21) in 2012
|
|
118
|
|
|
78
|
|
||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
||||
Gains transferred to earnings, net of income taxes of $14 in 2013 and $1 in 2012
|
|
(95
|
)
|
|
(12
|
)
|
||
Gains recognized, net of income taxes of ($23) in 2013 and ($1) in 2012
|
|
156
|
|
|
12
|
|
||
Total other comprehensive losses
|
|
(543
|
)
|
|
(489
|
)
|
||
Total comprehensive earnings
|
|
3,869
|
|
|
4,150
|
|
||
Less comprehensive earnings attributable to:
|
|
|
|
|
||||
Noncontrolling interests
|
|
88
|
|
|
86
|
|
||
Redeemable noncontrolling interest
|
|
43
|
|
|
99
|
|
||
Comprehensive earnings attributable to PMI
|
|
$
|
3,738
|
|
|
$
|
3,965
|
|
|
|
For the Three Months Ended June 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net earnings
|
|
$
|
2,194
|
|
|
$
|
2,407
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
||||
Currency translation adjustments, net of income taxes of $52 in 2013 and ($55) in 2012
|
|
(488
|
)
|
|
(1,027
|
)
|
||
Change in net loss and prior service cost:
|
|
|
|
|
||||
Net losses and prior service costs, net of income taxes of $- in 2013 and $- in 2012
|
|
—
|
|
|
(1
|
)
|
||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($13) in 2013 and ($9) in 2012
|
|
59
|
|
|
40
|
|
||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
||||
Gains transferred to earnings, net of income taxes of $10 in 2013 and $- in 2012
|
|
(64
|
)
|
|
(2
|
)
|
||
Gains (losses) recognized, net of income taxes of ($10) in 2013 and $4 in 2012
|
|
60
|
|
|
(34
|
)
|
||
Total other comprehensive losses
|
|
(433
|
)
|
|
(1,024
|
)
|
||
Total comprehensive earnings
|
|
1,761
|
|
|
1,383
|
|
||
Less comprehensive earnings attributable to:
|
|
|
|
|
||||
Noncontrolling interests
|
|
35
|
|
|
25
|
|
||
Redeemable noncontrolling interest
|
|
(3
|
)
|
|
50
|
|
||
Comprehensive earnings attributable to PMI
|
|
$
|
1,729
|
|
|
$
|
1,308
|
|
|
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, 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)
|
|||||||||||
Issuance of stock awards and exercise of stock options
|
|
|
(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
|
)
|
|
Balances, January 1, 2013
|
$
|
—
|
|
|
$
|
1,334
|
|
|
$
|
25,076
|
|
|
$
|
(3,604
|
)
|
|
$
|
(26,282
|
)
|
|
$
|
322
|
|
|
|
$
|
(3,154
|
)
|
|
Net earnings
|
|
|
|
|
4,249
|
|
|
|
|
|
|
96
|
|
(a)
|
|
4,345
|
|
(a)
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(511
|
)
|
|
|
|
(8
|
)
|
(a)
|
|
(519
|
)
|
(a)
|
|||||||||||
Issuance of stock awards and exercise of stock options
|
|
|
(28
|
)
|
|
|
|
|
|
134
|
|
|
|
|
|
106
|
|
|
|||||||||||
Dividends declared ($1.70 per share)
|
|
|
|
|
(2,788
|
)
|
|
|
|
|
|
|
|
|
(2,788
|
)
|
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(169
|
)
|
|
|
(169
|
)
|
|
||||||||||||
Common stock repurchased
|
|
|
|
|
|
|
|
|
(3,046
|
)
|
|
|
|
|
(3,046
|
)
|
|
||||||||||||
Balances, June 30, 2013
|
$
|
—
|
|
|
$
|
1,306
|
|
|
$
|
26,537
|
|
|
$
|
(4,115
|
)
|
|
$
|
(29,194
|
)
|
|
$
|
241
|
|
|
|
$
|
(5,225
|
)
|
|
|
For the Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Net earnings
|
$
|
4,412
|
|
|
$
|
4,639
|
|
|
|
|
|
||||
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
||||
Depreciation and amortization
|
441
|
|
|
449
|
|
||
Deferred income tax provision (benefit)
|
69
|
|
|
(34
|
)
|
||
Asset impairment and exit costs, net of cash paid
|
(4
|
)
|
|
(4
|
)
|
||
Cash effects of changes, net of the effects from acquired and divested companies:
|
|
|
|
||||
Receivables, net
|
(534
|
)
|
|
(413
|
)
|
||
Inventories
|
472
|
|
|
577
|
|
||
Accounts payable
|
61
|
|
|
80
|
|
||
Income taxes
|
(800
|
)
|
|
20
|
|
||
Accrued liabilities and other current assets
|
154
|
|
|
(150
|
)
|
||
Pension plan contributions
|
(56
|
)
|
|
(56
|
)
|
||
Other
|
285
|
|
|
270
|
|
||
Net cash provided by operating activities
|
4,500
|
|
|
5,378
|
|
||
|
|
|
|
||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Capital expenditures
|
(520
|
)
|
|
(476
|
)
|
||
Other
|
29
|
|
|
(36
|
)
|
||
Net cash used in investing activities
|
(491
|
)
|
|
(512
|
)
|
|
For the Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Short-term borrowing activity by original maturity:
|
|
|
|
||||
Net (repayments) issuances - maturities of 90 days or less
|
$
|
(101
|
)
|
|
$
|
1,930
|
|
Issuances - maturities longer than 90 days
|
535
|
|
|
478
|
|
||
Repayments - maturities longer than 90 days
|
(139
|
)
|
|
(1,215
|
)
|
||
Long-term debt proceeds
|
5,205
|
|
|
2,981
|
|
||
Long-term debt repaid
|
(2,738
|
)
|
|
(1,725
|
)
|
||
Repurchases of common stock
|
(3,028
|
)
|
|
(3,059
|
)
|
||
Dividends paid
|
(2,815
|
)
|
|
(2,663
|
)
|
||
Other
|
(218
|
)
|
|
(215
|
)
|
||
Net cash used in financing activities
|
(3,299
|
)
|
|
(3,488
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(107
|
)
|
|
(82
|
)
|
||
|
|
|
|
||||
Cash and cash equivalents:
|
|
|
|
||||
Increase
|
603
|
|
|
1,296
|
|
||
Balance at beginning of period
|
2,983
|
|
|
2,550
|
|
||
Balance at end of period
|
$
|
3,586
|
|
|
$
|
3,846
|
|
(in millions)
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Separation programs:
|
|
|
|
|
|
|
|
||||||||
Latin America & Canada
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Total separation programs
|
—
|
|
|
16
|
|
|
—
|
|
|
8
|
|
||||
Contract termination charges:
|
|
|
|
|
|
|
|
||||||||
Asia
|
8
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total contract termination charges
|
8
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Asset impairment and exit costs
|
$
|
8
|
|
|
$
|
16
|
|
|
$
|
5
|
|
|
$
|
8
|
|
(in millions)
|
|
||
Liability balance, January 1, 2013
|
$
|
20
|
|
Charges
|
8
|
|
|
Cash spent
|
(12
|
)
|
|
Currency/other
|
—
|
|
|
Liability balance, June 30, 2013
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
|
For the Six Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
(in millions)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Service cost
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
127
|
|
|
$
|
96
|
|
Interest cost
|
|
8
|
|
|
8
|
|
|
84
|
|
|
96
|
|
||||
Expected return on plan assets
|
|
(8
|
)
|
|
(8
|
)
|
|
(173
|
)
|
|
(162
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
6
|
|
|
5
|
|
|
102
|
|
|
62
|
|
||||
Prior service cost
|
|
1
|
|
|
1
|
|
|
5
|
|
|
4
|
|
||||
Net transition obligation
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net periodic pension cost
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
146
|
|
|
$
|
96
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
|
For the Three Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
(in millions)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Service cost
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
62
|
|
|
$
|
47
|
|
Interest cost
|
|
4
|
|
|
4
|
|
|
41
|
|
|
47
|
|
||||
Expected return on plan assets
|
|
(4
|
)
|
|
(4
|
)
|
|
(86
|
)
|
|
(78
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
3
|
|
|
2
|
|
|
51
|
|
|
31
|
|
||||
Prior service cost
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
||||
Net transition obligation
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net periodic pension cost
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
72
|
|
|
$
|
48
|
|
|
|
Goodwill
|
|
Other Intangible Assets, net
|
||||||||||||
(in millions)
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2013 |
|
December 31,
2012 |
||||||||
European Union
|
|
$
|
1,406
|
|
|
$
|
1,448
|
|
|
$
|
613
|
|
|
$
|
647
|
|
Eastern Europe, Middle East & Africa
|
|
606
|
|
|
637
|
|
|
232
|
|
|
242
|
|
||||
Asia
|
|
4,623
|
|
|
4,791
|
|
|
1,477
|
|
|
1,542
|
|
||||
Latin America & Canada
|
|
2,894
|
|
|
3,024
|
|
|
1,150
|
|
|
1,188
|
|
||||
Total
|
|
$
|
9,529
|
|
|
$
|
9,900
|
|
|
$
|
3,472
|
|
|
$
|
3,619
|
|
(in millions)
|
|
European
Union |
|
Eastern
Europe, Middle East & Africa |
|
Asia
|
|
Latin
America & Canada |
|
Total
|
||||||||||
Balances, December 31, 2012
|
|
$
|
1,448
|
|
|
$
|
637
|
|
|
$
|
4,791
|
|
|
$
|
3,024
|
|
|
$
|
9,900
|
|
Changes due to:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency
|
|
(42
|
)
|
|
(31
|
)
|
|
(168
|
)
|
|
(130
|
)
|
|
(371
|
)
|
|||||
Balances, June 30, 2013
|
|
$
|
1,406
|
|
|
$
|
606
|
|
|
$
|
4,623
|
|
|
$
|
2,894
|
|
|
$
|
9,529
|
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||
(in millions)
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
||||||||
Non-amortizable intangible assets
|
|
$
|
2,010
|
|
|
|
|
$
|
2,046
|
|
|
|
||||
Amortizable intangible assets
|
|
1,966
|
|
|
$
|
504
|
|
|
2,046
|
|
|
$
|
473
|
|
||
Total other intangible assets
|
|
$
|
3,976
|
|
|
$
|
504
|
|
|
$
|
4,092
|
|
|
$
|
473
|
|
Description
|
Initial Estimated
Useful Lives |
|
Weighted-Average
Remaining Useful Life |
Trademarks
|
2 - 40 years
|
|
25 years
|
Distribution networks
|
20 - 30 years
|
|
15 years
|
Non-compete agreements
|
3 - 10 years
|
|
2 years
|
Other (including farmer
contracts and intellectual property rights) |
12.5 - 17 years
|
|
12 years
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
||||||||||||
(in millions)
|
|
Balance Sheet Classification
|
|
At June 30, 2013
|
|
At December 31, 2012
|
|
Balance Sheet Classification
|
|
At June 30, 2013
|
|
At December 31, 2012
|
||||||||
Foreign exchange contracts designated as hedging instruments
|
|
Other current assets
|
|
$
|
226
|
|
|
$
|
146
|
|
|
Other accrued liabilities
|
|
$
|
6
|
|
|
$
|
8
|
|
|
|
Other assets
|
|
46
|
|
|
—
|
|
|
Other liabilities
|
|
12
|
|
|
—
|
|
||||
Foreign exchange contracts not designated as hedging instruments
|
|
Other current assets
|
|
32
|
|
|
14
|
|
|
Other accrued liabilities
|
|
51
|
|
|
47
|
|
||||
|
|
Other assets
|
|
4
|
|
|
—
|
|
|
|
|
|
|
|
|
|||||
Total derivatives
|
|
|
|
$
|
308
|
|
|
$
|
160
|
|
|
|
|
$
|
69
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
|
For the Six Months Ended June 30, 2013
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
125
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
125
|
|
||||
Cost of sales
|
|
6
|
|
|
|
|
—
|
|
|
|
|
6
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
131
|
|
|
|
|
—
|
|
|
|
|
131
|
|
|||||||
Interest expense, net
|
|
(22
|
)
|
|
|
|
2
|
|
|
|
|
(20
|
)
|
|||||||
Earnings before income taxes
|
|
109
|
|
|
|
|
2
|
|
|
|
|
111
|
|
|||||||
Provision for income taxes
|
|
(14
|
)
|
|
|
|
1
|
|
|
|
|
(13
|
)
|
|||||||
Net earnings attributable to PMI
|
|
$
|
95
|
|
|
|
|
$
|
3
|
|
|
|
|
$
|
98
|
|
||||
Other Comprehensive Earnings/(Losses):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(109
|
)
|
|
|
|
|
|
$
|
14
|
|
|
$
|
(95
|
)
|
||||
Recognized gains
|
|
179
|
|
|
|
|
|
|
(23
|
)
|
|
156
|
|
|||||||
Net impact on equity
|
|
$
|
70
|
|
|
|
|
|
|
$
|
(9
|
)
|
|
$
|
61
|
|
||||
Currency translation adjustments
|
|
|
|
$
|
16
|
|
|
|
|
$
|
(1
|
)
|
|
$
|
15
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(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/(Losses):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(13
|
)
|
|
|
|
|
|
$
|
1
|
|
|
$
|
(12
|
)
|
||||
Recognized gains
|
|
13
|
|
|
|
|
|
|
(1
|
)
|
|
12
|
|
|||||||
Net impact on equity
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
||||
Currency translation adjustments
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
For the Three Months Ended June 30, 2013
|
||||||||||||||||||
Gain (Loss)
|
|
Cash Flow
Hedges |
|
Net
Investment Hedges |
|
Other
Derivatives |
|
Income
Taxes |
|
Total
|
||||||||||
Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
|
$
|
84
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
84
|
|
||||
Cost of sales
|
|
3
|
|
|
|
|
—
|
|
|
|
|
3
|
|
|||||||
Marketing, administration and research costs
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Operating income
|
|
87
|
|
|
|
|
—
|
|
|
|
|
87
|
|
|||||||
Interest expense, net
|
|
(13
|
)
|
|
|
|
2
|
|
|
|
|
(11
|
)
|
|||||||
Earnings before income taxes
|
|
74
|
|
|
|
|
2
|
|
|
|
|
76
|
|
|||||||
Provision for income taxes
|
|
(10
|
)
|
|
|
|
1
|
|
|
|
|
(9
|
)
|
|||||||
Net earnings attributable to PMI
|
|
$
|
64
|
|
|
|
|
$
|
3
|
|
|
|
|
$
|
67
|
|
||||
Other Comprehensive Earnings/(Losses):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(74
|
)
|
|
|
|
|
|
$
|
10
|
|
|
$
|
(64
|
)
|
||||
Recognized gains
|
|
70
|
|
|
|
|
|
|
(10
|
)
|
|
60
|
|
|||||||
Net impact on equity
|
|
$
|
(4
|
)
|
|
|
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
||||
Currency translation adjustments
|
|
|
|
$
|
13
|
|
|
|
|
(1
|
)
|
|
$
|
12
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
(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/(Losses):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains transferred to earnings
|
|
$
|
(2
|
)
|
|
|
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
||||
Recognized losses
|
|
(38
|
)
|
|
|
|
|
|
4
|
|
|
(34
|
)
|
|||||||
Net impact on equity
|
|
$
|
(40
|
)
|
|
|
|
|
|
$
|
4
|
|
|
$
|
(36
|
)
|
||||
Currency translation adjustments
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
$
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(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/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings/(Losses) on Derivatives |
||||||||||||
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
179
|
|
|
$
|
13
|
|
||||
|
|
Net revenues
|
|
$
|
125
|
|
|
$
|
24
|
|
|
|
|
|
||||
|
|
Cost of sales
|
|
6
|
|
|
19
|
|
|
|
|
|
||||||
|
|
Marketing, administration
and research costs |
|
—
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Interest expense, net
|
|
(22
|
)
|
|
(30
|
)
|
|
|
|
|
||||||
Total
|
|
|
|
$
|
109
|
|
|
$
|
13
|
|
|
$
|
179
|
|
|
$
|
13
|
|
(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/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings/(Losses) on Derivatives |
||||||||||||
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
70
|
|
|
$
|
(38
|
)
|
||||
|
|
Net revenues
|
|
$
|
84
|
|
|
$
|
13
|
|
|
|
|
|
||||
|
|
Cost of sales
|
|
3
|
|
|
4
|
|
|
|
|
|
||||||
|
|
Marketing, administration
and research costs |
|
—
|
|
|
—
|
|
|
|
|
|
||||||
|
|
Interest expense, net
|
|
(13
|
)
|
|
(15
|
)
|
|
|
|
|
||||||
Total
|
|
|
|
$
|
74
|
|
|
$
|
2
|
|
|
$
|
70
|
|
|
$
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(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/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings/(Losses) on Derivatives |
||||||||||||
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
16
|
|
|
$
|
—
|
|
||||
|
|
Interest expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
(pre-tax, in millions)
|
|
For the Three Months Ended June 30,
|
||||||||||||||||
Derivatives in Net
Investment Hedging Relationship |
|
Statement of Earnings
Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Reclassified from Other Comprehensive Earnings/(Losses) into Earnings |
|
Amount of Gain/(Loss)
Recognized in Other Comprehensive Earnings/(Losses) on Derivatives |
||||||||||||
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
$
|
13
|
|
|
$
|
—
|
|
||||
|
|
Interest expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
(in millions)
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Gain at beginning of period
|
|
$
|
92
|
|
|
$
|
15
|
|
|
$
|
157
|
|
|
$
|
51
|
|
Derivative (gains)/losses transferred to earnings
|
|
(95
|
)
|
|
(12
|
)
|
|
(64
|
)
|
|
(2
|
)
|
||||
Change in fair value
|
|
156
|
|
|
12
|
|
|
60
|
|
|
(34
|
)
|
||||
Gain as of June 30,
|
|
$
|
153
|
|
|
$
|
15
|
|
|
$
|
153
|
|
|
$
|
15
|
|
(in millions)
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net earnings attributable to PMI
|
|
$
|
4,249
|
|
|
$
|
4,478
|
|
|
$
|
2,124
|
|
|
$
|
2,317
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
|
23
|
|
|
24
|
|
|
11
|
|
|
12
|
|
||||
Net earnings for basic and diluted EPS
|
|
$
|
4,226
|
|
|
$
|
4,454
|
|
|
$
|
2,113
|
|
|
$
|
2,305
|
|
Weighted-average shares for basic and diluted EPS
|
|
1,639
|
|
|
1,710
|
|
|
1,631
|
|
|
1,701
|
|
(in millions)
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
13,768
|
|
|
$
|
13,750
|
|
|
$
|
7,245
|
|
|
$
|
7,280
|
|
Eastern Europe, Middle East & Africa
|
|
9,800
|
|
|
9,131
|
|
|
5,377
|
|
|
5,062
|
|
||||
Asia
|
|
10,632
|
|
|
10,494
|
|
|
5,381
|
|
|
5,317
|
|
||||
Latin America & Canada
|
|
4,810
|
|
|
4,684
|
|
|
2,480
|
|
|
2,378
|
|
||||
Net revenues
|
|
$
|
39,010
|
|
|
$
|
38,059
|
|
|
$
|
20,483
|
|
|
$
|
20,037
|
|
Earnings before income taxes:
|
|
|
|
|
|
|
|
|
||||||||
Operating companies income:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
2,020
|
|
|
$
|
2,147
|
|
|
$
|
1,082
|
|
|
$
|
1,117
|
|
Eastern Europe, Middle East & Africa
|
|
1,880
|
|
|
1,758
|
|
|
945
|
|
|
948
|
|
||||
Asia
|
|
2,470
|
|
|
2,771
|
|
|
1,128
|
|
|
1,364
|
|
||||
Latin America & Canada
|
|
509
|
|
|
486
|
|
|
255
|
|
|
249
|
|
||||
Amortization of intangibles
|
|
(48
|
)
|
|
(49
|
)
|
|
(24
|
)
|
|
(25
|
)
|
||||
General corporate expenses
|
|
(112
|
)
|
|
(106
|
)
|
|
(54
|
)
|
|
(49
|
)
|
||||
Operating income
|
|
6,719
|
|
|
7,007
|
|
|
3,332
|
|
|
3,604
|
|
||||
Interest expense, net
|
|
(482
|
)
|
|
(422
|
)
|
|
(246
|
)
|
|
(209
|
)
|
||||
Earnings before income taxes
|
|
$
|
6,237
|
|
|
$
|
6,585
|
|
|
$
|
3,086
|
|
|
$
|
3,395
|
|
Type of Case
|
|
Number of
Cases Pending as of August 1, 2013 |
|
Number of
Cases Pending as of August 1, 2012 |
|
Number of
Cases Pending as of August 1, 2011 |
||
Individual Smoking and Health Cases
|
|
63
|
|
74
|
|
|
94
|
|
Smoking and Health Class Actions
|
|
11
|
|
10
|
|
|
10
|
|
Health Care Cost Recovery Actions
|
|
15
|
|
14
|
|
|
11
|
|
Lights Class Actions
|
|
1
|
|
2
|
|
|
2
|
|
Individual Lights Cases (small claims court)
|
|
1
|
|
7
|
|
|
9
|
|
Public Civil Actions
|
|
4
|
|
3
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
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 $5,800) 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 $44,200). Philip Morris Brasil has appealed this decision. |
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
February 2004
|
|
Brazil/The Smoker Health Defense Association
|
|
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 $440) 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.
|
•
|
63
cases brought by individual plaintiffs in Argentina (
24
), Brazil (
25
), Canada (
2
), Chile (
4
), Costa Rica (
2
), Greece (
1
), Italy (
3
), the Philippines (
1
) and Scotland (
1
), compared with
74
such cases on
August 1, 2012
, and
94
cases on
August 1, 2011
; and
|
•
|
11
cases brought on behalf of classes of individual plaintiffs in Brazil (
2
) and Canada (
9
), compared with
10
such cases on
August 1, 2012
, and
10
such cases on
August 1, 2011
.
|
•
|
1
case brought on behalf of individual plaintiffs in Israel, compared with
2
such cases on
August 1, 2012
and
August 1, 2011
; and
|
•
|
1
case brought by an individual in the equivalent of small claims courts in Italy, where the maximum damages are approximately
one thousand
Euros per case, compared with
7
such cases on
August 1, 2012
, and
9
such cases on
August 1, 2011
.
|
(in millions)
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
U.S. dollar notes, 0.323% to 6.875% (average interest rate 4.198%), due through 2043
|
|
$
|
14,515
|
|
|
$
|
14,702
|
|
Foreign currency obligations:
|
|
|
|
|
||||
Euro notes, 1.750% to 5.875% (average interest rate 3.339%), due through 2033
|
|
6,905
|
|
|
3,724
|
|
||
Swiss franc notes, 0.875% to 2.000% (average interest rate 1.240%), due through 2021
|
|
1,214
|
|
|
1,579
|
|
||
Other (average interest rate 3.744%), due through 2024
|
|
181
|
|
|
415
|
|
||
|
|
22,815
|
|
|
20,420
|
|
||
Less current portion of long-term debt
|
|
1,256
|
|
|
2,781
|
|
||
|
|
$
|
21,559
|
|
|
$
|
17,639
|
|
Type
|
|
Committed
Credit
Facilities
|
||
364-day revolving credit, expiring February 11, 2014
|
|
$
|
2.0
|
|
Multi-year revolving credit, expiring March 31, 2015
|
|
2.5
|
|
|
Multi-year revolving credit, expiring October 25, 2016
|
|
3.5
|
|
|
Total facilities
|
|
$
|
8.0
|
|
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, 2013 |
|
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
|
|
$
|
308
|
|
|
$
|
—
|
|
|
$
|
308
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
308
|
|
|
$
|
—
|
|
|
$
|
308
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
$
|
23,728
|
|
|
$
|
23,553
|
|
|
$
|
175
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
|
69
|
|
|
—
|
|
|
69
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
23,797
|
|
|
$
|
23,553
|
|
|
$
|
244
|
|
|
$
|
—
|
|
(in millions)
|
|
At June 30, 2013
|
|
At December 31, 2012
|
|
At June 30, 2012
|
||||||
Currency translation adjustments
|
|
$
|
(1,021
|
)
|
|
$
|
(331
|
)
|
|
$
|
(883
|
)
|
Pension and other benefits
|
|
(3,247
|
)
|
|
(3,365
|
)
|
|
(2,508
|
)
|
|||
Derivatives accounted for as hedges
|
|
153
|
|
|
92
|
|
|
15
|
|
|||
Total accumulated other comprehensive losses
|
|
$
|
(4,115
|
)
|
|
$
|
(3,604
|
)
|
|
$
|
(3,376
|
)
|
(in millions)
|
Gross Amounts Recognized
|
Gross Amount Offset in the Condensed Consolidated Balance Sheet
|
Net Amounts Presented in the Condensed Consolidated Balance Sheet
|
Gross Amounts Not Offset in the
Condensed Consolidated
Balance Sheet
|
|
|||||||||||||
Financial Instruments
|
Cash Collateral Received/Pledged
|
|
||||||||||||||||
Net Amount
|
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||
At June 30, 2013
|
|
|
|
|
|
|
||||||||||||
Assets
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
308
|
|
$
|
—
|
|
$
|
308
|
|
$
|
(29
|
)
|
$
|
(124
|
)
|
$
|
155
|
|
Liabilities
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
69
|
|
$
|
—
|
|
$
|
69
|
|
$
|
(29
|
)
|
$
|
(28
|
)
|
$
|
12
|
|
At December 31, 2012
|
|
|
|
|
|
|
||||||||||||
Assets
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
160
|
|
$
|
—
|
|
$
|
160
|
|
$
|
(24
|
)
|
$
|
—
|
|
$
|
136
|
|
Liabilities
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
55
|
|
$
|
—
|
|
$
|
55
|
|
$
|
(24
|
)
|
$
|
—
|
|
$
|
31
|
|
•
|
European Union;
|
•
|
Eastern Europe, Middle East & Africa (“EEMA”);
|
•
|
Asia; and
|
•
|
Latin America & Canada.
|
|
|
Diluted EPS
|
|
% Growth
|
|||
For the six months ended June 30, 2012
|
|
$
|
2.60
|
|
|
|
|
2012 Asset impairment and exit costs
|
|
0.01
|
|
|
|
||
2012 Tax items
|
|
—
|
|
|
|
||
Subtotal of 2012 items
|
|
0.01
|
|
|
|
||
2013 Asset impairment and exit costs
|
|
—
|
|
|
|
||
2013 Tax items
|
|
(0.01
|
)
|
|
|
||
Subtotal of 2013 items
|
|
(0.01
|
)
|
|
|
||
Currency
|
|
(0.14
|
)
|
|
|
||
Interest
|
|
(0.03
|
)
|
|
|
||
Change in tax rate
|
|
0.01
|
|
|
|
||
Impact of lower shares outstanding and share-based payments
|
|
0.11
|
|
|
|
||
Operations
|
|
0.03
|
|
|
|
||
For the six months ended June 30, 2013
|
|
$
|
2.58
|
|
|
(0.8
|
)%
|
•
|
EEMA: Higher pricing, partially offset by higher marketing, administration and research costs, unfavorable volume/mix and higher manufacturing costs; and
|
•
|
Latin America & Canada: Higher pricing, partially offset by unfavorable volume/mix;
|
•
|
European Union: Unfavorable volume/mix, partially offset by higher pricing; and
|
•
|
Asia: Unfavorable volume/mix, higher manufacturing costs and higher marketing, administration and research costs, partially offset by higher pricing.
|
|
|
Diluted EPS
|
|
% Growth
|
|||
For the three months ended June 30, 2012
|
|
$
|
1.36
|
|
|
|
|
2012 Asset impairment and exit costs
|
|
—
|
|
|
|
||
2012 Tax items
|
|
—
|
|
|
|
||
Subtotal of 2012 items
|
|
—
|
|
|
|
||
2013 Asset impairment and exit costs
|
|
—
|
|
|
|
||
2013 Tax items
|
|
—
|
|
|
|
||
Subtotal of 2013 items
|
|
—
|
|
|
|
||
Currency
|
|
(0.07
|
)
|
|
|
||
Interest
|
|
(0.02
|
)
|
|
|
||
Change in tax rate
|
|
—
|
|
|
|
||
Impact of lower shares outstanding and share-based payments
|
|
0.06
|
|
|
|
||
Operations
|
|
(0.03
|
)
|
|
|
||
For the three months ended June 30, 2013
|
|
$
|
1.30
|
|
|
(4.4
|
)%
|
•
|
Asia: Unfavorable volume/mix, higher manufacturing costs and higher marketing, administration and research costs, partially offset by higher pricing; and
|
•
|
European Union: Unfavorable volume/mix, partially offset by higher pricing;
|
•
|
EEMA: Higher pricing, partially offset by unfavorable volume/mix and higher costs.
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
(in millions)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cigarette volume:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
91,690
|
|
|
99,593
|
|
|
48,723
|
|
|
51,804
|
|
||||
Eastern Europe, Middle East & Africa
|
|
143,132
|
|
|
145,084
|
|
|
76,298
|
|
|
79,156
|
|
||||
Asia
|
|
153,207
|
|
|
164,502
|
|
|
80,588
|
|
|
83,472
|
|
||||
Latin America & Canada
|
|
45,817
|
|
|
48,207
|
|
|
23,290
|
|
|
23,864
|
|
||||
Total cigarette volume
|
|
433,846
|
|
|
457,386
|
|
|
228,899
|
|
|
238,296
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
13,768
|
|
|
$
|
13,750
|
|
|
$
|
7,245
|
|
|
$
|
7,280
|
|
Eastern Europe, Middle East & Africa
|
|
9,800
|
|
|
9,131
|
|
|
5,377
|
|
|
5,062
|
|
||||
Asia
|
|
10,632
|
|
|
10,494
|
|
|
5,381
|
|
|
5,317
|
|
||||
Latin America & Canada
|
|
4,810
|
|
|
4,684
|
|
|
2,480
|
|
|
2,378
|
|
||||
Net revenues
|
|
$
|
39,010
|
|
|
$
|
38,059
|
|
|
$
|
20,483
|
|
|
$
|
20,037
|
|
Excise taxes on products:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
9,592
|
|
|
$
|
9,412
|
|
|
$
|
5,039
|
|
|
$
|
4,995
|
|
Eastern Europe, Middle East & Africa
|
|
5,576
|
|
|
5,145
|
|
|
3,196
|
|
|
2,911
|
|
||||
Asia
|
|
5,150
|
|
|
4,862
|
|
|
2,689
|
|
|
2,462
|
|
||||
Latin America & Canada
|
|
3,191
|
|
|
3,072
|
|
|
1,642
|
|
|
1,549
|
|
||||
Excise taxes on products
|
|
$
|
23,509
|
|
|
$
|
22,491
|
|
|
$
|
12,566
|
|
|
$
|
11,917
|
|
Operating income:
|
|
|
|
|
|
|
|
|
||||||||
Operating companies income:
|
|
|
|
|
|
|
|
|
||||||||
European Union
|
|
$
|
2,020
|
|
|
$
|
2,147
|
|
|
$
|
1,082
|
|
|
$
|
1,117
|
|
Eastern Europe, Middle East & Africa
|
|
1,880
|
|
|
1,758
|
|
|
945
|
|
|
948
|
|
||||
Asia
|
|
2,470
|
|
|
2,771
|
|
|
1,128
|
|
|
1,364
|
|
||||
Latin America & Canada
|
|
509
|
|
|
486
|
|
|
255
|
|
|
249
|
|
||||
Amortization of intangibles
|
|
(48
|
)
|
|
(49
|
)
|
|
(24
|
)
|
|
(25
|
)
|
||||
General corporate expenses
|
|
(112
|
)
|
|
(106
|
)
|
|
(54
|
)
|
|
(49
|
)
|
||||
Operating income
|
|
$
|
6,719
|
|
|
$
|
7,007
|
|
|
$
|
3,332
|
|
|
$
|
3,604
|
|
•
|
in the European Union, the unfavorable impact of excise tax-driven price increases, the weak economic and employment environment, the growth of the other tobacco products ("OTP") category, and the increased prevalence of illicit trade;
|
•
|
in EEMA, the impact of tax-driven price increases and the weakening of the economy in Russia, the reversal of trade inventory movements and an increase in illicit trade in Turkey and Ukraine, partly offset by the Middle East and North Africa;
|
•
|
in Asia, the unfavorable impact of the disruptive January 2013 excise tax increase in the Philippines, which reduced our shipment volume by approximately 13.8 billion units or 29.7%, partly offset by Indonesia; and
|
•
|
in Latin America & Canada, primarily due to a lower total market in Argentina, Brazil and Canada.
|
|
|
For the Six Months Ended June 30,
|
|
|
|||||||||||
(in millions)
|
|
2013
|
|
2012
|
|
Variance
|
|
%
|
|||||||
Net revenues
|
|
$
|
39,010
|
|
|
$
|
38,059
|
|
|
$
|
951
|
|
|
2.5
|
%
|
Excise taxes on products
|
|
23,509
|
|
|
22,491
|
|
|
1,018
|
|
|
4.5
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
15,501
|
|
|
$
|
15,568
|
|
|
$
|
(67
|
)
|
|
(0.4
|
)%
|
•
|
unfavorable volume/mix ($751 million) and
|
•
|
unfavorable currency ($346 million), partly offset by
|
•
|
price increases ($1,030 million).
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates ($2,470 million), partly offset by
|
•
|
volume/mix ($1,213 million) and
|
•
|
favorable currency ($239 million).
|
•
|
higher manufacturing costs ($269 million, principally in Indonesia), partly offset by
|
•
|
volume/mix ($134 million) and
|
•
|
favorable currency ($53 million).
|
•
|
higher expenses ($174 million, including the annualization of business infrastructure investments in Russia), partially offset by
|
•
|
favorable currency ($26 million).
|
•
|
unfavorable volume/mix ($617 million),
|
•
|
higher manufacturing costs ($269 million),
|
•
|
unfavorable currency ($267 million) and
|
•
|
higher marketing, administration and research costs ($174 million), partly offset by
|
•
|
price increases ($1,030 million).
|
•
|
in the European Union, the unfavorable impact of excise tax-driven price increases, the weak economic and employment environment, the share growth of the OTP category, and the increased prevalence of illicit trade, partially offset by higher market share;
|
•
|
in EEMA, the impact of tax-driven price increases and the reversal of favorable distributor inventory movements in Russia in the first quarter of 2013, and in Turkey, the renewed growth in illicit trade, partly offset by the Middle East and North Africa;
|
•
|
in Asia, the unfavorable impact of the disruptive January 2013 excise tax increase in the Philippines and the timing of inventory movements in Japan, partly offset by Indonesia; and
|
•
|
in Latin America & Canada, a lower total market in Argentina and Brazil, partly offset by Mexico.
|
|
|
For the Three Months Ended June 30,
|
|
|
|||||||||||
(in millions)
|
|
2013
|
|
2012
|
|
Variance
|
|
%
|
|||||||
Net revenues
|
|
$
|
20,483
|
|
|
$
|
20,037
|
|
|
$
|
446
|
|
|
2.2
|
%
|
Excise taxes on products
|
|
12,566
|
|
|
11,917
|
|
|
649
|
|
|
5.4
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
7,917
|
|
|
$
|
8,120
|
|
|
$
|
(203
|
)
|
|
(2.5
|
)%
|
•
|
unfavorable volume/mix ($459 million) and
|
•
|
unfavorable currency ($243 million), partly offset by
|
•
|
price increases ($499 million).
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates ($1,408 million), partly offset by
|
•
|
volume/mix ($523 million) and
|
•
|
favorable currency ($236 million).
|
•
|
higher manufacturing costs ($159 million, principally in Indonesia), partly offset by
|
•
|
volume/mix ($73 million) and
|
•
|
favorable currency ($51 million).
|
•
|
higher expenses ($85 million, principally related to the annualization of business infrastructure investments in Russia), partly offset by
|
•
|
favorable currency ($47 million).
|
•
|
unfavorable volume/mix ($386 million),
|
•
|
higher manufacturing costs ($159 million),
|
•
|
unfavorable currency ($145 million) and
|
•
|
higher marketing, administration and research costs ($85 million), partly offset by
|
•
|
price increases ($499 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;
|
•
|
increased efforts by tobacco control advocates and governments to “denormalize” smoking and impose extreme regulatory requirements impacting our ability to communicate with adult consumers and differentiate our products from competitors' products, including legislation to mandate plain (generic) packaging resulting in the expropriation of our brands and trademarks;
|
•
|
actual and proposed extreme regulatory requirements related to the ingredients in tobacco products, including restrictions and complete bans;
|
•
|
other actual and proposed restrictions affecting tobacco manufacturing, testing and performance standards and requirements, packaging, marketing, advertising, product display and sales;
|
•
|
governmental and private bans and restrictions on smoking;
|
•
|
illicit trade in cigarettes and other tobacco products, including counterfeit, contraband and so called "illicit whites," as well as non-tax paid volume by local manufacturers;
|
•
|
actual and proposed restrictions on imports in certain jurisdictions;
|
•
|
pending and threatened litigation as discussed in Note 10.
Contingencies
; 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 tobacco product testing, disclosure and performance standards;
|
•
|
impose health warning requirements on tobacco product 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 tobacco products 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 risk for the individual adult smoker as well as a reduction of harm for 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 reduced-risk products, including the communication of substantiated reductions in risk to consumers.
|
•
|
unfavorable volume/mix ($309 million), partly offset by
|
•
|
price increases ($145 million) and
|
•
|
favorable currency ($2 million).
|
•
|
unfavorable volume/mix ($254 million) and
|
•
|
unfavorable currency ($10 million), partly offset by
|
•
|
price increases ($145 million).
|
•
|
price increases ($370 million), partly offset by
|
•
|
unfavorable volume/mix ($93 million) and
|
•
|
unfavorable currency ($39 million).
|
•
|
price increases ($370 million), partly offset by
|
•
|
higher marketing, administration and research costs ($112 million, principally related to the annualization of expenditures to expand our business infrastructure in Russia),
|
•
|
unfavorable volume/mix ($65 million),
|
•
|
higher manufacturing costs ($40 million) and
|
•
|
unfavorable currency ($31 million).
|
•
|
unfavorable volume/mix ($270 million, primarily due to the Philippines) and
|
•
|
unfavorable currency ($262 million), partly offset by
|
•
|
price increases ($382 million).
|
•
|
unfavorable volume/mix ($223 million),
|
•
|
unfavorable currency ($215 million),
|
•
|
higher manufacturing costs ($177 million, principally in Indonesia) and
|
•
|
higher marketing, administration and research costs ($60 million) and
|
•
|
the 2013 pre-tax charges for asset impairment and exit costs ($8 million), partly offset by
|
•
|
price increases ($382 million).
|
•
|
price increases ($133 million), partly offset by
|
•
|
unfavorable volume/mix ($79 million) and
|
•
|
unfavorable currency ($47 million).
|
•
|
price increases ($133 million) and
|
•
|
the absence of the 2012 pre-tax charges for asset impairment and exit costs ($16 million), partly offset by
|
•
|
unfavorable volume/mix ($75 million),
|
•
|
higher manufacturing costs ($39 million) and
|
•
|
unfavorable currency ($12 million).
|
•
|
unfavorable volume/mix ($131 million) and
|
•
|
unfavorable currency ($25 million), partly offset by
|
•
|
price increases ($77 million).
|
•
|
unfavorable volume/mix ($114 million), partly offset by
|
•
|
price increases ($77 million) and
|
•
|
favorable currency ($2 million).
|
•
|
price increases ($176 million), partly offset by
|
•
|
unfavorable volume/mix ($97 million) and
|
•
|
unfavorable currency ($49 million).
|
•
|
unfavorable volume/mix ($68 million),
|
•
|
higher marketing, administration and research costs ($48 million, principally related to the annualization of investments in business infrastructure in Russia),
|
•
|
higher manufacturing costs ($35 million) and
|
•
|
unfavorable currency ($28 million), partly offset by
|
•
|
price increases ($176 million).
|
•
|
unfavorable volume/mix ($211 million, primarily due to Japan and the Philippines) and
|
•
|
unfavorable currency ($141 million), partly offset by
|
•
|
price increases ($189 million).
|
•
|
unfavorable volume/mix ($180 million),
|
•
|
unfavorable currency ($112 million),
|
•
|
higher manufacturing costs ($101 million, principally in Indonesia) and
|
•
|
higher marketing, administration and research costs ($27 million), partly offset by
|
•
|
price increases ($189 million).
|
•
|
price increases ($57 million), partly offset by
|
•
|
unfavorable currency ($28 million) and
|
•
|
unfavorable volume/mix ($20 million).
|
•
|
price increases ($57 million) and
|
•
|
the absence of the 2012 pre-tax charges for asset impairment and exit costs ($8 million), partly offset by
|
•
|
unfavorable volume/mix ($24 million),
|
•
|
higher marketing, administration and research costs ($14 million),
|
•
|
higher manufacturing costs ($13 million) and
|
•
|
unfavorable currency ($8 million).
|
•
|
more cash used for income taxes (
$820 million
), principally related to the timing of tax payments; and
|
•
|
more cash used for accounts receivable (
$121 million
), primarily due to the timing of cash collections; and
|
•
|
less cash provided by inventories (
$105 million
), primarily due to the timing of excise tax stamp purchases and higher leaf inventories, partially offset by lower finished goods inventories; partly offset by
|
•
|
less cash used for accrued liabilities and other current assets (
$304 million
), largely due to the changes in the fair value of financial instruments, including cash collateral received and lower employment cost payments.
|
|
|
Short-term
|
|
Long-term
|
|
Outlook
|
Moody’s
|
|
P-1
|
|
A2
|
|
Stable
|
Standard & Poor’s
|
|
A-1
|
|
A
|
|
Stable
|
Fitch
|
|
F1
|
|
A
|
|
Stable
|
(in billions)
|
|
|
|
|
||||
Type
|
|
Committed
Credit
Facilities
|
|
Commercial
Paper
|
||||
364-day revolving credit, expiring February 11, 2014
|
|
$
|
2.0
|
|
|
|
||
Multi-year revolving credit, expiring March 31, 2015
|
|
2.5
|
|
|
|
|||
Multi-year revolving credit, expiring October 25, 2016
|
|
3.5
|
|
|
|
|
||
Total facilities
|
|
$
|
8.0
|
|
|
|
|
|
Commercial paper outstanding
|
|
|
|
|
$
|
2.0
|
|
•
|
restrictions on or licensing of outlets permitted to sell cigarettes;
|
•
|
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 on packaging and cigarette formats and dimensions;
|
•
|
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, 2013 –
April 30, 2013 (1)
|
|
3,752,627
|
|
|
$
|
93.77
|
|
|
52,643,536
|
|
|
$
|
13,295,167,641
|
|
May 1, 2013 –
May 31, 2013 (1)
|
|
7,549,412
|
|
|
$
|
93.96
|
|
|
60,192,948
|
|
|
$
|
12,585,833,353
|
|
June 1, 2013 –
June 30, 2013 (1)
|
|
5,363,396
|
|
|
$
|
90.20
|
|
|
65,556,344
|
|
|
$
|
12,102,045,954
|
|
Pursuant to Publicly
Announced Plans
or Programs
|
|
16,665,435
|
|
|
$
|
92.71
|
|
|
|
|
|
|||
April 1, 2013 –
April 30, 2013 (3) |
|
20,283
|
|
|
$
|
92.43
|
|
|
|
|
|
|||
May 1, 2013 –
May 31, 2013 (3) |
|
9,582
|
|
|
$
|
94.94
|
|
|
|
|
|
|||
June 1, 2013 –
June 30, 2013 (3) |
|
1,191
|
|
|
$
|
87.55
|
|
|
|
|
|
|||
For the Quarter Ended June 30, 2013
|
|
16,696,491
|
|
|
$
|
92.71
|
|
|
|
|
|
(1)
|
On June 13, 2012, our Board of Directors authorized a new share repurchase program of $18 billion over three years. The new program commenced on August 1, 2012 after the completion of the three-year $12 billion program in July 2012. These share repurchases have been made pursuant to the $18 billion program.
|
(2)
|
Aggregate number of shares repurchased under the above-mentioned 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
|
|
Time Sharing Agreement between PM Global Services Inc. and André Calantzopoulos, dated May 8, 2013.
|
10.2
|
|
Amendment to Employment Agreement with André Calantzopoulos (incorporated by reference to Exhibit 10.1 to the Current Report on From 8-K/A filed June 13, 2013).
|
10.3
|
|
Philip Morris International 2008 Stock Compensation Plan for Non-Employee Directors (amended and restated as of May 8, 2013).
|
|
|
|
10.4
|
|
Summary of Supplemental Pension Plan of Philip Morris in Switzerland.
|
|
|
|
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 2, 2013
|
(a)
|
Fuel, oil, lubricants and other additives.
|
(b)
|
Travel expenses of the crew, including food, lodging and ground transportation.
|
(c)
|
Hangar and tie down costs away from the Aircrafts’ base of operations.
|
(d)
|
Insurance obtained for the specific flight.
|
(e)
|
Landing fees, airport taxes and similar assessments.
|
(f)
|
Customs, foreign permit and similar fees directly related to the flight.
|
(g)
|
In flight food and beverages.
|
(h)
|
Passenger ground transportation.
|
(i)
|
Flight planning and weather contract services.
|
(j)
|
In addition, User shall pay Operator for each such flight and “deadhead” flight the costs of engine maintenance, aircraft cleaning, and, if applicable, any contracted (temporary) flight crew, which cost shall not exceed 100% of the expenses for fuel, oil, lubricants and other additives.
|
(a)
|
Proposed departure point;
|
(b)
|
Destination;
|
(c)
|
Date and time of flight;
|
(d)
|
The number and names of anticipated passengers;
|
(e)
|
Designation of each passenger’s trip purpose (personal or business);
|
(f)
|
The nature and extent of unusual luggage and/or cargo to be carried;
|
(g)
|
The date and time of a return flight, if any; and
|
(h)
|
Any other information concerning the proposed flight that may be pertinent or required by Operator or Operators flight crew.
|
(a)
|
He will use the Aircraft for and on account of his own personal business or pleasure only, and will not use the Aircraft for the purposes of providing transportation for passengers or cargo in air commerce for compensation or hire; and
|
(b)
|
During the term of this Agreement, he will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a time sharing User.
|
|
|
|
Operator:
|
|
User:
|
|
|
|
PMI GLOBAL SERVICES INC.
|
|
|
|
|
|
By:
|
/s/ JAMES R. WEST
|
/s/ANDRE CALANTZOPOULOS
|
Name:
|
James R. West
|
André Calantzopoulos
|
Title:
|
Vice President
|
|
|
|
|
Registration
Number
|
Serial
Number
|
Aircraft Description
|
N551PM
|
5374
|
Gulfstream Aerospace GV-SP (G550)
|
N552PM
|
5382
|
Gulfstream Aerospace GV-SP (G550)
|
U.S. Department of
|
1200 New Jersey Avenue, S.E.
|
Transportation
|
Washington, D.C. 20590
|
Office of the Secretary
of Transportation |
|
|
|
|
Issue date: December 19, 2012
|
Ms. Joanne Barbera
|
Authority expires: December 31, 2013
|
Counsel for PMI Global Services Inc.
|
|
Barbera & Watkins, LLC
|
|
6701 W. 64
th
Street, Suite 315
|
/s/ ROBERT FINAMORE
|
Overland Park, Kansas 66202
|
Director, Office of International Aviation
|
|
|
U.S. Department of
|
1200 New Jersey Avenue, S.E.
|
Transportation
|
Washington, D.C. 20590
|
Office of the Secretary
of Transportation |
|
|
Issue date: July 18, 2012
|
Ms. Joanne Barbera
|
Authority Expires: December 31, 2012
|
Counsel for PMI Global Services Inc.
|
|
Barbera & Watkins, LLC
|
|
6701 W. 64
th
Street, Suite 315
|
/s/ CATHERINE C. BROWN
|
Overland Park, Kansas 66202
|
Director, Office of International Aviation
|
|
|
U.S. Department of
|
1200 New Jersey Avenue, S.E.
|
Transportation
|
Washington, D.C. 20590
|
Office of the Secretary
of Transportation
|
|
|
Issue date: December 2, 2011
|
|
|
Ms. Joanne Barbera
|
Authority Expires: December 31, 2012
|
Counsel for PMI Global Services Inc.
|
|
Barbera & Watkins, LLC
|
|
6701 W. 64
th
Street, Suite 315
|
/s/ ROBERT FINAMORE
|
Overland Park, Kansas 66202
|
Director, Office of International Aviation
|
|
|
U.S. Department of
|
1200 New Jersey Avenue, S.E.
|
Transportation
|
Washington, D.C. 20590
|
Office of the Secretary
of Transportation
|
|
|
|
|
Issue date: December 22, 2010
|
Ms. Joanne Barbera
|
Authority Expires: December 31, 2011
|
Counsel for PMI Global Services Inc.
|
|
Barbera & Watkins, LLC
|
|
6701 W. 64
th
Street, Suite 315
|
/s/ GEORGE WELLINGTON
|
Overland Park, Kansas 66202
|
Director, Office of International Aviation
|
|
|
|
|
U.S. Department of
|
1200 New Jersey Avenue, S.E.
|
Transportation
|
Washington, D.C. 20590
|
Office of the Secretary
of Transportation
|
|
|
|
|
|
|
Issue date: July 22, 2010
|
Ms. Joanne Barbera
|
Authority Expires: December July 22, 2011
|
Counsel for PMI Global Services Inc.
|
|
Barbera & Watkins, LLC
|
|
6701 W. 64
th
Street, Suite 315
|
/s/ GEORGE WELLINGTON
|
Overland Park, Kansas 66202
|
Director, Office of International Aviation
|
|
|
1.
|
Mail a copy of the Agreement to the following address via certified mail, return receipt requested, immediately upon execution of the agreement (14 C.F.R. 91.23 requires that the copy be sent within twenty-four (24) hours after it is signed):
|
2.
|
Telephone or fax the nearest Flight Standards District Office at least forty-eight (48) hours prior to the first flight of each Aircraft made under this Agreement.
|
3.
|
Carry a copy of the Agreement in the Aircraft at all times when the Aircraft is being operated under the Agreement.
|
Overview:
|
The supplemental plan is a non-qualified plan that provides retirement, disability and death benefits to executives whose benefits would otherwise be limited by the compensation cap under the Swiss social security legislation. The purpose of this plan is to provide an employee with the same benefits the employee would have been entitled to receive from the Philip Morris Pension Fund in Switzerland (Main plan and IC pension plan) without taking into consideration the cap, and it is not intended to otherwise increase the benefits promised under the Pension Fund.
|
|
|
Eligible population:
|
Swiss-based employees either in salary band D or above or with Main plan pensionable earnings in excess of the salary limit described in article 79c of the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (LPP), currently CHF 842’400.- per year.
|
|
|
Benefits:
|
Benefits from the supplemental plan are generally equal to:
- the benefits from the Pension Fund without taking into account the salary cap
- less the benefits entitlement from the Pension Fund
- less the unpaid personal contribution due to the salary cap.
|
|
|
Employee contribution:
|
None.
|
|
|
Company contribution:
|
100% funded by the company under a non-qualified trust arrangement (separate legal entity).
|
|
|
Time and form of payment:
|
Lump sum payment, generally at retirement, disability, death or termination of employment, if the plan’s Board of Trustees determines in its sole discretion that the employee is entitled to benefits from the supplemental plan.
|
|
|
Tax impact:
|
Benefits are taxable to the employee and subject to social security deductions upon distribution. Tax and social security gross-up will be applied.
|
|
Six Months Ended
June 30, 2013
|
|
Three Months Ended
June 30, 2013
|
||||
Earnings before income taxes
|
$
|
6,237
|
|
|
$
|
3,086
|
|
Add (deduct):
|
|
|
|
||||
Equity in net loss of less than 50% owned affiliates
|
9
|
|
|
5
|
|
||
Dividends from less than 50% owned affiliates
|
1
|
|
|
1
|
|
||
Fixed charges
|
592
|
|
|
302
|
|
||
Interest capitalized, net of amortization
|
2
|
|
|
1
|
|
||
Earnings available for fixed charges
|
$
|
6,841
|
|
|
$
|
3,395
|
|
Fixed charges:
|
|
|
|
||||
Interest incurred
|
$
|
539
|
|
|
$
|
276
|
|
Portion of rent expense deemed to represent interest factor
|
53
|
|
|
26
|
|
||
Fixed charges
|
$
|
592
|
|
|
$
|
302
|
|
Ratio of earnings to fixed charges
|
11.6
|
|
|
11.2
|
|
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
Earnings before income taxes
|
$
|
12,987
|
|
|
$
|
12,532
|
|
|
$
|
10,324
|
|
|
$
|
9,243
|
|
|
$
|
9,937
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity in net loss (earnings) of less
than 50% owned affiliates |
17
|
|
|
10
|
|
|
8
|
|
|
6
|
|
|
64
|
|
|||||
Dividends from less than 50%
owned affiliates |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
Fixed charges
|
1,115
|
|
|
1,042
|
|
|
1,069
|
|
|
1,006
|
|
|
618
|
|
|||||
Interest capitalized, net of
amortization |
2
|
|
|
(2
|
)
|
|
1
|
|
|
2
|
|
|
(11
|
)
|
|||||
Earnings available for fixed charges
|
$
|
14,121
|
|
|
$
|
13,582
|
|
|
$
|
11,402
|
|
|
$
|
10,257
|
|
|
$
|
10,620
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest incurred
|
$
|
1,009
|
|
|
$
|
940
|
|
|
$
|
976
|
|
|
$
|
920
|
|
|
$
|
543
|
|
Portion of rent expense deemed to
represent interest factor |
106
|
|
|
102
|
|
|
93
|
|
|
86
|
|
|
75
|
|
|||||
Fixed charges
|
$
|
1,115
|
|
|
$
|
1,042
|
|
|
$
|
1,069
|
|
|
$
|
1,006
|
|
|
$
|
618
|
|
Ratio of earnings to fixed charges
|
12.7
|
|
|
13.0
|
|
|
10.7
|
|
|
10.2
|
|
|
17.2
|
|
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/ ANDRÉ CALANTZOPOULOS
|
André Calantzopoulos
|
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/ ANDRÉ CALANTZOPOULOS
|
André Calantzopoulos
|
Chief Executive Officer
|
August 2, 2013
|
/s/ JACEK OLCZAK
|
Jacek Olczak
|
Chief Financial Officer
|
August 2, 2013
|