ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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
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10017
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, no par value
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New York Stock Exchange
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5.650% Notes due 2018
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New York Stock Exchange
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1.875% Notes due 2019
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New York Stock Exchange
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1.625% Notes due 2019
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New York Stock Exchange
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1.375% Notes due 2019
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New York Stock Exchange
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1.875% Notes due 2019
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New York Stock Exchange
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2.125% Notes due 2019
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New York Stock Exchange
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2.000% Notes due 2020
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New York Stock Exchange
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Floating Notes due 2020
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New York Stock Exchange
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1.750% Notes due 2020
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New York Stock Exchange
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4.500% Notes due 2020
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New York Stock Exchange
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1.875% Notes due 2021
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New York Stock Exchange
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1.875% Notes due 2021
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New York Stock Exchange
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4.125% Notes due 2021
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New York Stock Exchange
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2.900% Notes due 2021
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New York Stock Exchange
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2.625% Notes due 2022
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New York Stock Exchange
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2.375% Notes due 2022
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New York Stock Exchange
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2.500% Notes due 2022
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New York Stock Exchange
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2.500% Notes due 2022
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New York Stock Exchange
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2.625% Notes due 2023
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New York Stock Exchange
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2.125% Notes due 2023
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New York Stock Exchange
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3.600% Notes due 2023
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New York Stock Exchange
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Title of each class
|
|
Name of each exchange on which registered
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2.875% Notes due 2024
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New York Stock Exchange
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0.625% Notes due 2024
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New York Stock Exchange
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3.250% Notes due 2024
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New York Stock Exchange
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2.750% Notes due 2025
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New York Stock Exchange
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3.375% Notes due 2025
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New York Stock Exchange
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2.750% Notes due 2026
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New York Stock Exchange
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2.875% Notes due 2026
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New York Stock Exchange
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3.125% Notes due 2027
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New York Stock Exchange
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3.125% Notes due 2028
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New York Stock Exchange
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2.875% Notes due 2029
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New York Stock Exchange
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3.125% Notes due 2033
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New York Stock Exchange
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2.000% Notes due 2036
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New York Stock Exchange
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1.875% Notes due 2037
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|
New York Stock Exchange
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6.375% Notes due 2038
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New York Stock Exchange
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4.375% Notes due 2041
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|
New York Stock Exchange
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4.500% Notes due 2042
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|
New York Stock Exchange
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3.875% Notes due 2042
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|
New York Stock Exchange
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4.125% Notes due 2043
|
|
New York Stock Exchange
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4.875% Notes due 2043
|
|
New York Stock Exchange
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4.250% Notes due 2044
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New York Stock Exchange
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Emerging growth company
¨
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Class
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Outstanding at
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January 31, 2018
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Common Stock,
no par value
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1,553,229,898
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shares
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Document
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Parts Into Which Incorporated
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Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May 9, 2018, to be filed with the Securities and Exchange Commission (“SEC”) on or about March 29, 2018.
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Part III
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 1.
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Business.
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•
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The European Union (“EU”) Region is headquartered in Lausanne, Switzerland, and covers all the EU countries and also comprises Switzerland, Norway and Iceland, which are linked to the EU through trade agreements;
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•
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The Eastern Europe, Middle East & Africa (“EEMA”) Region is also headquartered in Lausanne and includes Eastern Europe, certain Balkan countries, Turkey, the Middle East and Africa and our international duty free business;
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•
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The Asia Region is headquartered in Hong Kong and covers all other Asian markets as well as Australia, New Zealand and the Pacific Islands; and
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•
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The Latin America & Canada Region is headquartered in New York and covers the South American continent, Central America, Mexico, the Caribbean and Canada.
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2017
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2016
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2015
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|||
European Union
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32.0
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%
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35.8
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%
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32.6
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%
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Eastern Europe, Middle East & Africa
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24.4
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27.1
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31.2
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Asia
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35.1
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28.7
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26.3
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Latin America & Canada
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8.5
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8.4
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9.9
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100.0
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%
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100.0
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%
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100.0
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%
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*
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For all periods presented in this report, our management evaluated segment performance and allocated resources based on operating companies income, which we define as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. The accounting policies of the segments are the same as those described in Note 2.
Summary of Significant Accounting Policies
to the consolidated financial statements in Item 8.
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•
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The European Union Region is headquartered in Lausanne, Switzerland and covers all the European Union countries and also Switzerland, Norway and Iceland, which are linked to the European Union through trade agreements;
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•
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The Eastern Europe Region is also headquartered in Lausanne and includes Southeast Europe, Central Asia, Ukraine, Israel and Russia;
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•
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The Middle East & Africa Region is also headquartered in Lausanne and covers the African continent, the Middle East, Turkey and our international duty free business;
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•
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The South & Southeast Asia Region is headquartered in Hong Kong and includes Indonesia, the Philippines and other markets in this region;
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•
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The East Asia & Australia Region is also headquartered in Hong Kong and includes Australia, Japan, South Korea, the People's Republic of China and other markets in this region, as well as Malaysia and Singapore; and
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•
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The Latin America & Canada Region is headquartered in New York and covers the South American continent, Central America, Mexico, the Caribbean and Canada.
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•
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Direct sales and distribution, where we have set up our own distribution selling directly to the retailers (including gas stations and other key accounts);
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•
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Distribution through independent distributors that often distribute other fast-moving consumer goods and are responsible for distribution in a particular market;
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•
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Exclusive zonified distribution, where the distributors are dedicated to us in tobacco products distribution and assigned to exclusive territories within a market;
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•
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Distribution through national or regional wholesalers that then supply the retail trade; and
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•
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Our own brand retail and e-commerce infrastructures for our RRP products and accessories.
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•
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PMI owns all rights to the jointly funded intellectual property outside the United States, its territories and possessions; and
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•
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PM USA owns all rights to the jointly funded intellectual property in the United States, its territories and possessions.
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•
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Consumption of tax-paid cigarettes continues to decline in many of our markets.
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•
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Cigarettes are subject to substantial taxes. Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions. These tax increases may disproportionately affect our profitability and make us less competitive versus certain of our competitors.
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•
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Our business faces significant governmental action aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco products.
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•
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restrictions on or licensing of outlets permitted to sell cigarettes;
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•
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the levying of substantial and increasing tax and duty charges;
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•
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restrictions or bans on advertising, marketing and sponsorship;
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•
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the display of larger health warnings, graphic health warnings and other labeling requirements;
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•
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restrictions on packaging design, including the use of colors, and plain packaging;
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•
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restrictions on packaging and cigarette formats and dimensions;
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•
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restrictions or bans on the display of tobacco product packaging at the point of sale and restrictions or bans on cigarette vending machines;
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•
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requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;
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•
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disclosure, restrictions, or bans of tobacco product ingredients;
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•
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increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;
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•
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restrictions on the sale of novel tobacco or nicotine-containing products;
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•
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elimination of duty free sales and duty free allowances for travelers; and
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•
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encouraging litigation against tobacco companies.
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•
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Litigation related to tobacco use and exposure to environmental tobacco smoke could substantially reduce our profitability and could severely impair our liquidity.
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•
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We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations.
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•
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Because we have operations in numerous countries, our results may be influenced by economic, regulatory and political developments, natural disasters or conflicts.
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•
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We may be unable to anticipate changes in consumer preferences or to respond to consumer behavior influenced by economic downturns.
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•
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promote brand equity successfully;
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•
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anticipate and respond to new adult consumer trends;
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•
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develop new products and markets and broaden brand portfolios;
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•
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improve productivity;
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•
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convince adult smokers to convert to our RRPs;
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•
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ensure adequate production capacity to meet demand for our products; and
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•
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be able to protect or enhance margins through price increases.
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•
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We lose revenues as a result of counterfeiting, contraband, cross-border purchases, “illicit whites” and non-tax-paid volume produced by local manufacturers.
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•
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From time to time, we are subject to governmental investigations on a range of matters.
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•
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We may be unsuccessful in our attempts to introduce reduced-risk products, and regulators may not permit the commercialization of these products or the communication of scientifically substantiated risk-reduction claims.
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•
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We may be unsuccessful in our efforts to differentiate reduced-risk products and cigarettes with respect to taxation.
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•
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Our reported results could be adversely affected by unfavorable currency exchange rates, and currency devaluations could impair our competitiveness.
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•
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Changes in the earnings mix and changes in tax laws may result in significant variability in our effective tax rates. Our ability to receive payments from foreign subsidiaries or to repatriate royalties and dividends could be restricted by local country currency exchange controls.
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•
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Our ability to grow profitability may be limited by our inability to introduce new products, enter new markets or improve our margins through higher pricing and improvements in our brand and geographic mix.
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•
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We may be unable to expand our brand portfolio through successful acquisitions or the development of strategic business relationships.
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•
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Government mandated prices, production control programs, shifts in crops driven by economic conditions and the impact of climate change may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.
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•
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Our ability to implement our strategy of attracting and retaining the best global talent may be impaired by the decreasing social acceptance of cigarette smoking.
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•
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The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them or our failure to comply with privacy laws and regulations could result in business disruption, litigation and regulatory action, and loss of revenue, assets or personal or other confidential data.
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•
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We may be required to replace third-party contract manufacturers or service providers with our own resources.
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Item 1B.
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Unresolved Staff Comments.
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EU
(1)
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EEMA
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Asia
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Latin
America
&
Canada
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TOTAL
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|||||
Fully integrated
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7
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|
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8
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9
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7
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31
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Make-pack
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3
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—
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1
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|
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2
|
|
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6
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Other
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3
|
|
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1
|
|
|
3
|
|
|
2
|
|
|
9
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Total
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13
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9
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|
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13
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|
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11
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|
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46
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Item 3.
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Legal Proceedings.
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Item 4.
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Mine Safety Disclosures
.
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Date
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PMI
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PMI Peer Group
(1)
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S&P 500 Index
|
December 31, 2012
|
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$100.00
|
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|
$100.00
|
|
$100.00
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December 31, 2013
|
|
$108.50
|
|
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$122.80
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|
$132.40
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December 31, 2014
|
|
$106.20
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|
|
$132.50
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$150.50
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December 31, 2015
|
|
$120.40
|
|
|
$143.50
|
|
$152.60
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December 31, 2016
|
|
$130.80
|
|
|
$145.60
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|
$170.80
|
December 31, 2017
|
|
$156.80
|
|
|
$172.70
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|
$208.10
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Period
|
|
Total
Number of
Shares
Repurchased
|
|
Average
Price Paid
per Share
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Approximate
Dollar Value
of Shares that
May Yet be
Purchased
Under the Plans
or Programs
|
||||||
October 1, 2017 –
October 31, 2017 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
November 1, 2017 –
November 30, 2017 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
December 1, 2017 –
December 31, 2017 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Pursuant to Publicly Announced
Plans or Programs |
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|||
October 1, 2017 –
October 31, 2017 (2) |
|
672
|
|
|
$
|
112.68
|
|
|
|
|
|
|||
November 1, 2017 –
November 30, 2017 (2) |
|
271
|
|
|
$
|
104.73
|
|
|
|
|
|
|||
December 1, 2017 –
December 31, 2017 (2) |
|
497
|
|
|
$
|
102.99
|
|
|
|
|
|
|||
For the Quarter Ended
December 31, 2017 |
|
1,440
|
|
|
$
|
107.84
|
|
|
|
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(1)
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During this reporting period, we did not have an authorized share repurchase program.
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(2)
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Shares repurchased represent shares tendered to us by employees who vested in restricted share unit awards and used shares to pay all, or a portion of, the related taxes.
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
$
|
78,098
|
|
|
$
|
74,953
|
|
|
$
|
73,908
|
|
|
$
|
80,106
|
|
|
$
|
80,029
|
|
Cost of sales
|
10,432
|
|
|
9,391
|
|
|
9,365
|
|
|
10,436
|
|
|
10,410
|
|
|||||
Excise taxes on products
|
49,350
|
|
|
48,268
|
|
|
47,114
|
|
|
50,339
|
|
|
48,812
|
|
|||||
Gross profit
|
18,316
|
|
|
17,294
|
|
|
17,429
|
|
|
19,331
|
|
|
20,807
|
|
|||||
Operating income
|
11,503
|
|
|
10,815
|
|
|
10,623
|
|
|
11,702
|
|
|
13,515
|
|
|||||
Interest expense, net
|
914
|
|
|
891
|
|
|
1,008
|
|
|
1,052
|
|
|
973
|
|
|||||
Earnings before income taxes
|
10,589
|
|
|
9,924
|
|
|
9,615
|
|
|
10,650
|
|
|
12,542
|
|
|||||
Pre-tax profit margin
|
13.6
|
%
|
|
13.2
|
%
|
|
13.0
|
%
|
|
13.3
|
%
|
|
15.7
|
%
|
|||||
Provision for income taxes
|
4,307
|
|
|
2,768
|
|
|
2,688
|
|
|
3,097
|
|
|
3,670
|
|
|||||
Net earnings
|
6,341
|
|
|
7,250
|
|
|
7,032
|
|
|
7,658
|
|
|
8,850
|
|
|||||
Net earnings attributable to noncontrolling interests
|
306
|
|
|
283
|
|
|
159
|
|
|
165
|
|
|
274
|
|
|||||
Net earnings attributable to PMI
|
6,035
|
|
|
6,967
|
|
|
6,873
|
|
|
7,493
|
|
|
8,576
|
|
|||||
Basic earnings per share
|
3.88
|
|
|
4.48
|
|
|
4.42
|
|
|
4.76
|
|
|
5.26
|
|
|||||
Diluted earnings per share
|
3.88
|
|
|
4.48
|
|
|
4.42
|
|
|
4.76
|
|
|
5.26
|
|
|||||
Dividends declared per share
|
4.22
|
|
|
4.12
|
|
|
4.04
|
|
|
3.88
|
|
|
3.58
|
|
|||||
Capital expenditures
|
1,548
|
|
|
1,172
|
|
|
960
|
|
|
1,153
|
|
|
1,200
|
|
|||||
Depreciation and amortization
|
875
|
|
|
743
|
|
|
754
|
|
|
889
|
|
|
882
|
|
|||||
Property, plant and equipment, net
|
7,271
|
|
|
6,064
|
|
|
5,721
|
|
|
6,071
|
|
|
6,755
|
|
|||||
Inventories
|
8,806
|
|
|
9,017
|
|
|
8,473
|
|
|
8,592
|
|
|
9,846
|
|
|||||
Total assets
|
42,968
|
|
|
36,851
|
|
|
33,956
|
|
|
35,187
|
|
|
38,168
|
|
|||||
Long-term debt
|
31,334
|
|
|
25,851
|
|
|
25,250
|
|
|
26,929
|
|
|
24,023
|
|
|||||
Total debt
|
34,339
|
|
|
29,067
|
|
|
28,480
|
|
|
29,455
|
|
|
27,678
|
|
|||||
Stockholders' deficit
|
(10,230
|
)
|
|
(10,900
|
)
|
|
(11,476
|
)
|
|
(11,203
|
)
|
|
(6,274
|
)
|
|||||
Common dividends declared as a % of Diluted EPS
|
108.8
|
%
|
|
92.0
|
%
|
|
91.4
|
%
|
|
81.5
|
%
|
|
68.1
|
%
|
|||||
Market price per common share — high/low
|
123.55-89.97
|
|
|
104.20-84.46
|
|
|
90.27-75.27
|
|
|
91.63-75.28
|
|
|
96.73-82.86
|
|
|||||
Closing price of common share at year end
|
105.65
|
|
|
91.49
|
|
|
87.91
|
|
|
81.45
|
|
|
87.13
|
|
|||||
Price/earnings ratio at year end — Diluted
|
27
|
|
|
20
|
|
|
20
|
|
|
17
|
|
|
17
|
|
|||||
Number of common shares outstanding at year end (millions)
|
1,553
|
|
|
1,551
|
|
|
1,549
|
|
|
1,547
|
|
|
1,589
|
|
|||||
Number of employees
|
80,600
|
|
|
79,500
|
|
|
80,200
|
|
|
82,500
|
|
|
91,100
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
|
|
|
|
|
|
•
|
European Union;
|
•
|
Eastern Europe, Middle East & Africa (“EEMA”);
|
•
|
Asia; and
|
•
|
Latin America & Canada.
|
•
|
European Union - Covers all the European Union countries and also Switzerland, Norway and Iceland, which are linked to the European Union through trade agreements;
|
•
|
Eastern Europe - Includes Southeast Europe, Central Asia, Ukraine, Israel and Russia;
|
•
|
Middle East & Africa - Covers the African continent, the Middle East, Turkey and PMI Duty Free;
|
•
|
South & Southeast Asia - Includes Indonesia, the Philippines and other markets in this region;
|
•
|
East Asia & Australia - Includes Australia, Japan, South Korea, the People's Republic of China and other markets in this region, as well as Malaysia and Singapore; and
|
•
|
Latin America & Canada - Covers the South American continent, Central America, Mexico, the Caribbean and Canada.
|
•
|
Net Revenues and Net Revenues, Excluding Excise Taxes on Products
–
The changes in our net revenues, and net revenues, excluding excise taxes, for the year ended December 31, 2017, from the comparable 2016 amounts, were as follows:
|
|
For the Years Ended December 31,
|
|
Variance
|
|
Variance due to
|
|||||||||||||||||
(in millions)
|
2017
|
2016
|
|
$
|
%
|
|
Currency
|
Volume/Mix
|
Pricing
|
|||||||||||||
Net revenues
|
$
|
78,098
|
|
$
|
74,953
|
|
|
$
|
3,145
|
|
4.2
|
%
|
|
$
|
(2,355
|
)
|
$
|
(439
|
)
|
$
|
5,939
|
|
Excise taxes on products
|
(49,350
|
)
|
(48,268
|
)
|
|
(1,082
|
)
|
(2.2
|
)%
|
|
1,918
|
|
1,553
|
|
(4,553
|
)
|
||||||
Net revenues, excluding excise taxes on products
|
$
|
28,748
|
|
$
|
26,685
|
|
|
$
|
2,063
|
|
7.7
|
%
|
|
$
|
(437
|
)
|
$
|
1,114
|
|
$
|
1,386
|
|
•
|
Diluted Earnings Per Share
–
The changes in our reported diluted earnings per share (“diluted EPS”) for the year ended
December 31, 2017
, from the comparable
2016
amounts, were as follows:
|
|
Diluted EPS
|
% Growth
|
|||
For the year ended December 31, 2016
|
$
|
4.48
|
|
|
|
|
|
|
|||
2016 Asset impairment and exit costs
|
—
|
|
|
||
2016 Tax items
|
—
|
|
|
||
Subtotal of 2016 items
|
—
|
|
|
||
|
|
|
|||
2017 Asset impairment and exit costs
|
—
|
|
|
||
2017 Tax items
|
(0.84
|
)
|
|
||
Subtotal of 2017 items
|
(0.84
|
)
|
|
||
|
|
|
|||
Currency
|
(0.21
|
)
|
|
||
Interest
|
0.01
|
|
|
||
Change in tax rate
|
(0.03
|
)
|
|
||
Operations
|
0.47
|
|
|
||
For the year ended December 31, 2017
|
$
|
3.88
|
|
(13.4
|
)%
|
•
|
The requirement to pay a one-time transition tax on accumulated foreign earnings, including 2017 earnings ("transition tax").
|
•
|
A provisional charge of $1.4 billion, which represents the transition tax of $2.2 billion, net of a reversal of $0.7 billion of previously recorded deferred tax liabilities on part of the accumulated foreign earnings, and other items of $0.1 billion.
|
•
|
Re-measurement of U.S. deferred tax assets and liabilities using a rate of 21%, which, under the Tax Cuts and Jobs Act, is expected to be in place when such deferred assets and liabilities reverse in the future. In connection with this re-measurement, we recorded a provisional charge of $0.2 billion.
|
•
|
Asia: Favorable volume/mix, higher pricing and
lower
manufacturing costs, partially offset by higher marketing, administration and research costs; and
|
•
|
Latin America & Canada: Higher pricing, partially offset by unfavorable volume/mix;
|
•
|
EEMA: Unfavorable volume/mix and higher marketing, administration and research costs, partially offset by higher pricing; and
|
•
|
European Union: Unfavorable volume/mix and higher marketing, administration and research costs, partially offset by higher pricing.
|
•
|
Net revenue growth, excluding excise taxes, of over 8.0%, excluding currency;
|
•
|
Operating cash flow of over $9.0 billion;
|
•
|
Capital expenditures of approximately $1.7 billion; and
|
•
|
No share repurchases.
|
|
2017
|
2016
|
Pension plans
|
1.51%
|
1.52%
|
Postretirement plans
|
3.79%
|
3.68%
|
(in millions)
|
2017
|
2016
|
2015
|
||||||
Net Revenues
|
|
|
|
||||||
European Union
|
$
|
27,580
|
|
$
|
27,129
|
|
$
|
26,563
|
|
Eastern Europe, Middle East & Africa
|
18,045
|
|
18,286
|
|
18,328
|
|
|||
Asia
|
22,635
|
|
20,531
|
|
19,469
|
|
|||
Latin America & Canada
|
9,838
|
|
9,007
|
|
9,548
|
|
|||
Net Revenues
|
$
|
78,098
|
|
$
|
74,953
|
|
$
|
73,908
|
|
|
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Excise Taxes on Products
|
|
|
|
||||||
European Union
|
$
|
19,262
|
|
$
|
18,967
|
|
$
|
18,495
|
|
Eastern Europe, Middle East & Africa
|
11,346
|
|
11,286
|
|
10,964
|
|
|||
Asia
|
11,845
|
|
11,850
|
|
11,266
|
|
|||
Latin America & Canada
|
6,897
|
|
6,165
|
|
6,389
|
|
|||
Excise Taxes on Products
|
$
|
49,350
|
|
$
|
48,268
|
|
$
|
47,114
|
|
(in millions)
|
2017
|
2016
|
2015
|
||||||
Operating Income
|
|
|
|
||||||
Operating companies income:
|
|
|
|
||||||
European Union
|
$
|
3,775
|
|
$
|
3,994
|
|
$
|
3,576
|
|
Eastern Europe, Middle East & Africa
|
2,888
|
|
3,016
|
|
3,425
|
|
|||
Asia
|
4,149
|
|
3,196
|
|
2,886
|
|
|||
Latin America & Canada
|
1,002
|
|
938
|
|
1,085
|
|
|||
Amortization of intangibles
|
(88
|
)
|
(74
|
)
|
(82
|
)
|
|||
General corporate expenses
|
(164
|
)
|
(161
|
)
|
(162
|
)
|
|||
Less:
|
|
|
|
||||||
Equity (income)/loss in unconsolidated subsidiaries, net
|
(59
|
)
|
(94
|
)
|
(105
|
)
|
|||
Operating Income
|
$
|
11,503
|
|
$
|
10,815
|
|
$
|
10,623
|
|
•
|
European Union, notably reflecting lower cigarette shipment volume in Greece, Italy and Spain, partly offset by higher heated tobacco unit shipment volume;
|
•
|
EEMA, notably reflecting lower cigarette shipment volume in Russia, Saudi Arabia - where our cigarette shipment volume declined by 35.8%, impacted by the new excise tax implemented in June 2017 that resulted in the doubling of retail prices - and Ukraine; partly offset by higher cigarette shipment volume in North Africa, notably Algeria, and higher heated tobacco unit shipment volume;
|
•
|
Asia, notably reflecting lower cigarette shipment volume in Indonesia, Japan, Korea, Pakistan - impacted by excise tax-driven price increases and an increase in the prevalence of illicit trade - and the Philippines; fully offset by higher heated tobacco unit shipment volume, mainly in Japan and Korea; and
|
•
|
Latin America & Canada, notably reflecting lower cigarette shipment volume in Argentina, Brazil, Canada, Colombia and Mexico.
|
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
78,098
|
|
|
$
|
74,953
|
|
|
$
|
3,145
|
|
|
4.2
|
%
|
Excise taxes on products
|
|
49,350
|
|
|
48,268
|
|
|
1,082
|
|
|
2.2
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
28,748
|
|
|
$
|
26,685
|
|
|
$
|
2,063
|
|
|
7.7
|
%
|
•
|
price increases (
$1.4 billion
) and
|
•
|
favorable
volume/mix (
$1.1 billion
), partly offset by
|
•
|
unfavorable
currency (
$437 million
).
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates (
$4.6 billion
), partially offset by
|
•
|
favorable currency (
$1.9 billion
) and
|
•
|
lower excise taxes resulting from volume/mix (
$1.6 billion
).
|
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Cost of sales
|
|
$
|
10,432
|
|
|
$
|
9,391
|
|
|
$
|
1,041
|
|
|
11.1
|
%
|
Marketing, administration and research costs
|
|
6,725
|
|
|
6,405
|
|
|
320
|
|
|
5.0
|
%
|
|||
Operating income
|
|
11,503
|
|
|
10,815
|
|
|
688
|
|
|
6.4
|
%
|
•
|
higher
cost of sales resulting from volume/mix (
$1.1 billion
), partly offset by
|
•
|
lower
manufacturing costs (
$36 million
) and
|
•
|
favorable
currency (
$30 million
).
|
•
|
higher
expenses (
$570 million
, largely reflecting increased investment behind reduced-risk products, predominately in the European Union and Asia), partly offset by
|
•
|
favorable
currency (
$250 million
).
|
•
|
price increases (
$1.4 billion
), partly offset by
|
•
|
higher
marketing, administration and research costs (
$570 million
) and
|
•
|
unfavorable currency (
$157 million
).
|
•
|
European Union, principally Italy, Germany and Greece, partly offset by Poland and Spain;
|
•
|
EEMA, mainly North Africa, primarily Algeria, and Russia, partly offset by Saudi Arabia and Ukraine;
|
•
|
Asia, principally Indonesia, Pakistan, the Philippines and Thailand, partly offset by Korea; and
|
•
|
Latin America & Canada, predominantly Argentina, partly offset by Mexico.
|
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
74,953
|
|
|
$
|
73,908
|
|
|
$
|
1,045
|
|
|
1.4
|
%
|
Excise taxes on products
|
|
48,268
|
|
|
47,114
|
|
|
1,154
|
|
|
2.4
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
$
|
26,685
|
|
|
$
|
26,794
|
|
|
$
|
(109
|
)
|
|
(0.4
|
)%
|
•
|
unfavorable currency ($1.3 billion) and
|
•
|
unfavorable volume/mix ($450 million), partly offset by
|
•
|
price increases ($1.6 billion).
|
•
|
higher excise taxes resulting from changes in retail prices and tax rates ($5.3 billion), partly offset by
|
•
|
favorable currency ($3.9 billion) and
|
•
|
lower excise taxes resulting from volume/mix (
$236 million
).
|
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Cost of sales
|
|
$
|
9,391
|
|
|
$
|
9,365
|
|
|
$
|
26
|
|
|
0.3
|
%
|
Marketing, administration and research costs
|
|
6,405
|
|
|
6,656
|
|
(251
|
)
|
|
(3.8
|
)%
|
||||
Operating income
|
|
10,815
|
|
|
10,623
|
|
|
192
|
|
|
1.8
|
%
|
•
|
higher cost of sales resulting from volume/mix ($242 million), partly offset by
|
•
|
favorable currency ($216 million).
|
•
|
lower expenses ($210 million, driven by a favorable comparison to 2015, notably related to cigarette brand building and business optimization initiatives, partly offset by increased support behind Reduced-Risk Products) and
|
•
|
favorable currency ($41 million).
|
•
|
price increases ($1.6 billion),
|
•
|
lower marketing, administration and research costs ($210 million) and
|
•
|
the non-recurrence of the 2015 pre-tax charges for asset impairment and exit costs ($68 million), partly offset by
|
•
|
unfavorable currency ($1.0 billion) and
|
•
|
unfavorable volume/mix ($692 million).
|
•
|
regulatory restrictions on our products, including restrictions on the packaging, marketing, and sale of tobacco or other nicotine-containing products that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or even ban certain of our products;
|
•
|
fiscal challenges, such as excessive excise tax increases and discriminatory tax structures;
|
•
|
illicit trade in cigarettes and other tobacco products, including counterfeit, contraband and so-called “illicit whites”;
|
•
|
intense competition, including from non-tax paid volume by certain local manufacturers;
|
•
|
pending and threatened litigation as discussed in Item 8, Note 18.
Contingencies
; and
|
•
|
governmental investigations.
|
•
|
health warnings covering 65% of the front and back panels of cigarette packs, with an option for Member States to further standardize tobacco packaging, including the introduction of plain packaging;
|
•
|
a ban on characterizing flavors in some tobacco products, with a transition period for menthol expiring in May 2020;
|
•
|
security features and tracking and tracing measures that will become effective on May 20, 2019, and will increase operational expenses; and
|
•
|
a framework for the regulation of novel tobacco products and e-cigarettes, including requirements for health warnings and information leaflets, a prohibition on product packaging text related to reduced risk, and the introduction of notification requirements or authorization procedures in advance of commercialization.
|
•
|
to develop RRPs that adult smokers who would otherwise continue to smoke find to be satisfying alternatives to smoking;
|
•
|
for those adult smokers, our goal is to offer RRPs with a scientifically substantiated risk-reduction profile that approaches as closely as possible that associated with smoking cessation;
|
•
|
to substantiate the reduction of risk for the individual adult smoker and the reduction of harm to the population as a whole, based on scientific evidence of the highest standard that is made available for scrutiny and review by external independent scientists and relevant regulatory bodies; and
|
•
|
to advocate for the development of science-based regulatory frameworks for the development and commercialization of RRPs, including the communication of scientifically substantiated information to enable adult smokers to make better consumer choices.
|
•
|
We currently market our e-vapor products in several markets, including Ireland, Israel, Spain and the U.K. A city test of
MESH
, one of our Platform 4 products, is ongoing in Birmingham, U.K., and we expect to initiate a pilot launch of a next-generation version of this product in 2018.
|
•
|
In December 2017, we initiated a small-scale city test of
TEEPS
, our Platform 2 product, in Santo Domingo, the Dominican Republic.
|
•
|
In 2018, we plan to conduct a consumer test of our Platform 3 product.
|
European Union
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
27,580
|
|
|
$
|
27,129
|
|
|
$
|
451
|
|
|
1.7
|
%
|
Excise taxes on products
|
|
19,262
|
|
|
18,967
|
|
|
295
|
|
|
1.6
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
8,318
|
|
|
8,162
|
|
|
156
|
|
|
1.9
|
%
|
|||
Operating companies income
|
|
3,775
|
|
|
3,994
|
|
|
(219
|
)
|
|
(5.5
|
)%
|
•
|
price increases (
$156 million
) and
|
•
|
favorable
currency (
$45 million
), partially offset by
|
•
|
unfavorable
volume/mix (
$45 million
).
|
•
|
higher
marketing, administration and research costs (
$223 million
, primarily related to increased investment behind reduced-risked products),
|
•
|
unfavorable
volume/mix (
$119 million
) and
|
•
|
unfavorable
currency (
$43 million
), partly offset by
|
•
|
price increases (
$156 million
) and
|
•
|
lower
manufacturing costs (
$14 million
).
|
|
France Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
44.4
|
|
44.9
|
|
(1.2
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
19,264
|
|
19,247
|
|
0.1
|
%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
27.1
|
%
|
26.4
|
%
|
0.7
|
|
Philip Morris
|
10.3
|
%
|
10.2
|
%
|
0.1
|
|
Chesterfield
|
3.0
|
%
|
3.1
|
%
|
(0.1
|
)
|
Others*
|
2.8
|
%
|
2.7
|
%
|
0.1
|
|
Total
|
43.2
|
%
|
42.4
|
%
|
0.8
|
|
|
Germany Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
76.9
|
|
78.1
|
|
(1.6
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
28,575
|
|
28,958
|
|
(1.3
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
22.7
|
%
|
22.5
|
%
|
0.2
|
|
L&M
|
11.5
|
%
|
11.6
|
%
|
(0.1
|
)
|
Chesterfield
|
1.5
|
%
|
1.6
|
%
|
(0.1
|
)
|
Others*
|
1.5
|
%
|
1.4
|
%
|
0.1
|
|
Total
|
37.2
|
%
|
37.1
|
%
|
0.1
|
|
|
Italy Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
69.8
|
|
72.1
|
|
(3.2
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
36,767
|
|
38,744
|
|
(5.1
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
23.9
|
%
|
24.3
|
%
|
(0.4
|
)
|
Chesterfield
|
11.3
|
%
|
11.5
|
%
|
(0.2
|
)
|
Philip Morris
|
7.7
|
%
|
8.5
|
%
|
(0.8
|
)
|
HEETS
|
0.7
|
%
|
0.1
|
%
|
0.6
|
|
Others
|
8.6
|
%
|
8.1
|
%
|
0.5
|
|
Total
|
52.2
|
%
|
52.5
|
%
|
(0.3
|
)
|
|
Poland Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
41.7
|
|
41.3
|
|
0.9
|
%
|
|
|
|
|
|||
PMI Shipments (million units)
|
17,784
|
|
17,485
|
|
1.7
|
%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
10.7
|
%
|
11.6
|
%
|
(0.9
|
)
|
L&M
|
18.4
|
%
|
18.5
|
%
|
(0.1
|
)
|
Chesterfield
|
10.4
|
%
|
9.1
|
%
|
1.3
|
|
HEETS
|
0.2
|
%
|
—
|
%
|
0.2
|
|
Others
|
3.0
|
%
|
3.1
|
%
|
(0.1
|
)
|
Total
|
42.7
|
%
|
42.3
|
%
|
0.4
|
|
|
Spain Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
45.0
|
|
46.7
|
|
(3.5
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
14,456
|
|
16,374
|
|
(11.7
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
16.5
|
%
|
18.0
|
%
|
(1.5
|
)
|
L&M
|
5.3
|
%
|
5.4
|
%
|
(0.1
|
)
|
Chesterfield
|
8.6
|
%
|
8.6
|
%
|
—
|
|
Others*
|
1.9
|
%
|
1.9
|
%
|
—
|
|
Total
|
32.3
|
%
|
33.9
|
%
|
(1.6
|
)
|
Eastern Europe, Middle East & Africa
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
18,045
|
|
|
$
|
18,286
|
|
|
$
|
(241
|
)
|
|
(1.3
|
)%
|
Excise taxes on products
|
|
11,346
|
|
|
11,286
|
|
|
60
|
|
|
0.5
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
6,699
|
|
|
7,000
|
|
|
(301
|
)
|
|
(4.3
|
)%
|
|||
Operating companies income
|
|
2,888
|
|
|
3,016
|
|
|
(128
|
)
|
|
(4.2
|
)%
|
•
|
unfavorable
volume/mix (
$374 million
) and
|
•
|
unfavorable
currency (
$291 million
), partly offset by
|
•
|
price increases (
$364 million
).
|
•
|
unfavorable
volume/mix (
$344 million
) and
|
•
|
higher
marketing, administration and research costs (
$201 million
), partly offset by
|
•
|
price increases (
$364 million
) and
|
•
|
favorable
currency (
$81 million
).
|
EEMA PMI Shipment Volume by Brand (Million Units)
|
||||||
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
|
|
|
|||
Marlboro
|
70,122
|
|
73,818
|
|
(5.0
|
)%
|
L&M
|
46,923
|
|
52,183
|
|
(10.1
|
)%
|
Bond Street
|
36,336
|
|
42,553
|
|
(14.6
|
)%
|
Parliament
|
33,299
|
|
33,940
|
|
(1.9
|
)%
|
Philip Morris
|
19,086
|
|
2,058
|
|
+100.0%
|
|
Others
|
50,391
|
|
66,841
|
|
(24.6
|
)%
|
Total Cigarettes
|
256,157
|
|
271,393
|
|
(5.6
|
)%
|
Heated Tobacco Units
|
1,581
|
|
100
|
|
+100.0%
|
|
Total EEMA
|
257,738
|
|
271,493
|
|
(5.1
|
)%
|
|
North Africa Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
144.9
|
|
142.3
|
|
1.9
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
35,085
|
|
34,035
|
|
3.1
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
9.3
|
%
|
8.3
|
%
|
1.0
|
|
L&M
|
11.8
|
%
|
12.2
|
%
|
(0.4
|
)
|
Others
|
2.9
|
%
|
2.7
|
%
|
0.2
|
|
Total
|
24.0
|
%
|
23.2
|
%
|
0.8
|
|
|
Turkey Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
106.2
|
|
105.5
|
|
0.7
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
49,649
|
|
49,624
|
|
0.1
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
10.2
|
%
|
10.2
|
%
|
—
|
|
Parliament
|
11.5
|
%
|
11.7
|
%
|
(0.2
|
)
|
Lark
|
6.9
|
%
|
7.4
|
%
|
(0.5
|
)
|
Others
|
14.7
|
%
|
15.0
|
%
|
(0.3
|
)
|
Total
|
43.3
|
%
|
44.3
|
%
|
(1.0
|
)
|
Asia
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
22,635
|
|
|
$
|
20,531
|
|
|
$
|
2,104
|
|
|
10.2
|
%
|
Excise taxes on products
|
|
11,845
|
|
|
11,850
|
|
|
(5
|
)
|
|
—
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
10,790
|
|
|
8,681
|
|
|
2,109
|
|
|
24.3
|
%
|
|||
Operating companies income
|
|
4,149
|
|
|
3,196
|
|
|
953
|
|
|
29.8
|
%
|
•
|
favorable
volume/mix (
$1.7 billion
) and
|
•
|
price increases (
$559 million
), partly offset by
|
•
|
unfavorable
currency (
$137 million
).
|
•
|
favorable
volume/mix (
$622 million
),
|
•
|
price increases (
$559 million
) and
|
•
|
lower
manufacturing costs (
$40 million
), partly offset by
|
•
|
higher
marketing, administration and research costs (
$141 million
, principally related to increased investment behind reduced-risk products) and
|
•
|
unfavorable
currency (
$123 million
).
|
Asia PMI Shipment Volume by Brand (Million Units)
|
||||||
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
|
|
|
|||
Marlboro
|
73,446
|
|
76,463
|
|
(3.9
|
)%
|
Lark
|
14,474
|
|
17,600
|
|
(17.8
|
)%
|
Parliament
|
9,224
|
|
10,142
|
|
(9.1
|
)%
|
Others
|
137,109
|
|
155,824
|
|
(12.0
|
)%
|
Total Cigarettes
|
234,253
|
|
260,029
|
|
(9.9
|
)%
|
Heated Tobacco Units
|
32,729
|
|
7,070
|
|
+100.0%
|
|
Total Asia
|
266,982
|
|
267,099
|
|
—
|
%
|
|
Indonesia Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
307.4
|
|
315.6
|
|
(2.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
101,324
|
|
105,524
|
|
(4.0
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Sampoerna A
|
13.8
|
%
|
14.0
|
%
|
(0.2
|
)
|
Dji Sam Soe
|
7.4
|
%
|
6.5
|
%
|
0.9
|
|
Sampoerna U
|
4.1
|
%
|
5.2
|
%
|
(1.1
|
)
|
Others
|
7.7
|
%
|
7.7
|
%
|
—
|
|
Total
|
33.0
|
%
|
33.4
|
%
|
(0.4
|
)
|
|
Indonesia Segmentation Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
p.p.
|
|
Segment % of Total Market
|
|
|
|
|||
Hand-Rolled Kretek (SKT)
|
17.6
|
%
|
18.2
|
%
|
(0.6
|
)
|
Machine-Made Kretek (SKM)
|
77.2
|
%
|
75.8
|
%
|
1.4
|
|
Whites (SPM)
|
5.2
|
%
|
6.0
|
%
|
(0.8
|
)
|
Total
|
100.0
|
%
|
100.0
|
%
|
—
|
|
|
|
|
|
|||
PMI % Share of Segment
|
|
|
|
|||
Hand-Rolled Kretek (SKT)
|
37.5
|
%
|
37.3
|
%
|
0.2
|
|
Machine-Made Kretek (SKM)
|
29.4
|
%
|
28.9
|
%
|
0.5
|
|
Whites (SPM)
|
70.2
|
%
|
79.5
|
%
|
(9.3
|
)
|
|
Japan Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
171.5
|
|
179.0
|
|
(4.2
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
|
|
|
|||
Cigarettes
|
34,853
|
|
43,915
|
|
(20.6
|
)%
|
Heated Tobacco Units
|
31,291
|
|
7,069
|
|
+100%
|
|
Total
|
66,144
|
|
50,985
|
|
29.7
|
%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
9.3
|
%
|
10.6
|
%
|
(1.3
|
)
|
HeatSticks
|
10.8
|
%
|
2.9
|
%
|
7.9
|
|
Parliament
|
2.1
|
%
|
2.3
|
%
|
(0.2
|
)
|
Lark
|
8.6
|
%
|
9.6
|
%
|
(1.0
|
)
|
Others
|
1.3
|
%
|
1.7
|
%
|
(0.4
|
)
|
Total
|
32.1
|
%
|
27.1
|
%
|
5.0
|
|
|
Korea Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
70.6
|
|
73.6
|
|
(4.1
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
|
|
|
|||
Cigarettes
|
13,499
|
|
15,490
|
|
(12.9
|
)%
|
Heated Tobacco Units
|
1,438
|
|
—
|
|
—
|
%
|
Total
|
14,937
|
|
15,490
|
|
(3.6
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
8.7
|
%
|
9.6
|
%
|
(0.9
|
)
|
Parliament
|
8.0
|
%
|
7.9
|
%
|
0.1
|
|
HEETS
|
2.0
|
%
|
—
|
%
|
2.0
|
|
Virginia S.
|
2.0
|
%
|
3.0
|
%
|
(1.0
|
)
|
Others
|
0.5
|
%
|
0.5
|
%
|
—
|
|
Total
|
21.2
|
%
|
21.0
|
%
|
0.2
|
|
|
Philippines Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
74.9
|
|
79.3
|
|
(5.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
50,618
|
|
56,611
|
|
(10.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
33.0
|
%
|
28.4
|
%
|
4.6
|
|
Fortune
|
18.0
|
%
|
23.4
|
%
|
(5.4
|
)
|
Jackpot
|
6.1
|
%
|
7.9
|
%
|
(1.8
|
)
|
Others
|
10.5
|
%
|
11.6
|
%
|
(1.1
|
)
|
Total
|
67.6
|
%
|
71.3
|
%
|
(3.7
|
)
|
Latin America & Canada
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
9,838
|
|
|
$
|
9,007
|
|
|
$
|
831
|
|
|
9.2
|
%
|
Excise taxes on products
|
|
6,897
|
|
|
6,165
|
|
|
732
|
|
|
11.9
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
2,941
|
|
|
2,842
|
|
|
99
|
|
|
3.5
|
%
|
|||
Operating companies income
|
|
1,002
|
|
|
938
|
|
|
64
|
|
|
6.8
|
%
|
•
|
price increases (
$307 million
), partly offset by
|
•
|
unfavorable
volume/mix (
$154 million
) and
|
•
|
unfavorable
currency (
$54 million
).
|
•
|
price increases (
$307 million
), partly offset by
|
•
|
unfavorable
volume/mix (
$152 million
),
|
•
|
unfavorable
currency (
$70 million
) and
|
•
|
higher
manufacturing costs (
$17 million
).
|
Latin America & Canada PMI Shipment Volume by Brand (Million Units)
|
||||||
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
|
|
|
|||
Marlboro
|
33,711
|
|
35,194
|
|
(4.2
|
)%
|
Philip Morris
|
13,320
|
|
16,463
|
|
(19.1
|
)%
|
Chesterfield
|
9,852
|
|
2,626
|
|
+100.0%
|
|
Others
|
27,340
|
|
33,655
|
|
(18.8
|
)%
|
Total Cigarettes
|
84,223
|
|
87,938
|
|
(4.2
|
)%
|
Heated Tobacco Units
|
27
|
|
—
|
|
—
|
%
|
Total Latin America & Canada
|
84,250
|
|
87,938
|
|
(4.2
|
)%
|
|
Argentina Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
36.2
|
|
36.1
|
|
0.2
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
27,002
|
|
27,512
|
|
(1.9
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
20.0
|
%
|
22.4
|
%
|
(2.4
|
)
|
Chesterfield
|
15.9
|
%
|
5.5
|
%
|
10.4
|
|
Philip Morris
|
33.0
|
%
|
41.6
|
%
|
(8.6
|
)
|
Others
|
5.8
|
%
|
6.8
|
%
|
(1.0
|
)
|
Total
|
74.7
|
%
|
76.3
|
%
|
(1.6
|
)
|
|
Canada Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Market (billion units)
|
24.6
|
|
26.3
|
|
(6.3
|
)%
|
|
|
|
|
|||
PMI Shipments (million units)
|
9,259
|
|
10,049
|
|
(7.9
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Belmont
|
4.1
|
%
|
3.7
|
%
|
0.4
|
|
Canadian Classics
|
9.5
|
%
|
10.2
|
%
|
(0.7
|
)
|
Next
|
11.5
|
%
|
11.3
|
%
|
0.2
|
|
Others*
|
12.2
|
%
|
13.2
|
%
|
(1.0
|
)
|
Total
|
37.3
|
%
|
38.4
|
%
|
(1.1
|
)
|
|
Mexico Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
35.8
|
|
36.2
|
|
(1.1
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
24,351
|
|
25,080
|
|
(2.9
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
49.4
|
%
|
49.0
|
%
|
0.4
|
|
Delicados
|
8.3
|
%
|
9.7
|
%
|
(1.4
|
)
|
Benson & Hedges
|
5.0
|
%
|
4.7
|
%
|
0.3
|
|
Others
|
5.4
|
%
|
5.9
|
%
|
(0.5
|
)
|
Total
|
68.1
|
%
|
69.3
|
%
|
(1.2
|
)
|
European Union
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
27,129
|
|
|
$
|
26,563
|
|
|
$
|
566
|
|
|
2.1
|
%
|
Excise taxes on products
|
|
18,967
|
|
|
18,495
|
|
|
472
|
|
|
2.6
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
8,162
|
|
|
8,068
|
|
|
94
|
|
|
1.2
|
%
|
|||
Operating companies income
|
|
3,994
|
|
|
3,576
|
|
|
418
|
|
|
11.7
|
%
|
•
|
price increases ($390 million), partly offset by
|
•
|
unfavorable volume/mix ($149 million) and
|
•
|
unfavorable currency ($147 million).
|
•
|
price increases ($390 million),
|
•
|
the non-recurrence of the 2015 pre-tax charges for asset impairment and exit costs ($68 million),
|
•
|
lower manufacturing costs ($49 million),
|
•
|
lower marketing, administration and research costs ($47 million) and
|
•
|
favorable currency ($34 million), partly offset by
|
•
|
unfavorable volume/mix ($168 million).
|
European Union Cigarette Shipment Volume by Brand (Million Units)
|
||||||
|
Full-Year
|
|||||
|
2016
|
|
2015
|
|
Change
|
|
Marlboro
|
96,245
|
|
95,588
|
|
0.7
|
%
|
L&M
|
34,691
|
|
35,010
|
|
(0.9
|
)%
|
Chesterfield
|
30,140
|
|
28,278
|
|
6.6
|
%
|
Philip Morris
|
16,290
|
|
14,205
|
|
14.7
|
%
|
Others
|
16,220
|
|
21,508
|
|
(24.6
|
)%
|
Total European Union
|
193,586
|
|
194,589
|
|
(0.5
|
)%
|
|
France Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
44.9
|
|
45.5
|
|
(1.2
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
19,243
|
|
18,943
|
|
1.6
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
26.4
|
%
|
25.9
|
%
|
0.5
|
|
Philip Morris
|
10.2
|
%
|
9.5
|
%
|
0.7
|
|
Chesterfield
|
3.1
|
%
|
3.3
|
%
|
(0.2
|
)
|
Others
|
2.7
|
%
|
2.9
|
%
|
(0.2
|
)
|
Total
|
42.4
|
%
|
41.6
|
%
|
0.8
|
|
|
Germany Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
78.1
|
|
80.0
|
|
(2.4
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
28,950
|
|
29,778
|
|
(2.8
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
22.5
|
%
|
22.1
|
%
|
0.4
|
|
L&M
|
11.6
|
%
|
11.9
|
%
|
(0.3
|
)
|
Chesterfield
|
1.6
|
%
|
1.5
|
%
|
0.1
|
|
Others
|
1.4
|
%
|
1.7
|
%
|
(0.3
|
)
|
Total
|
37.1
|
%
|
37.2
|
%
|
(0.1
|
)
|
|
Italy Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
72.1
|
|
73.8
|
|
(2.4
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
38,624
|
|
39,717
|
|
(2.8
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
24.3
|
%
|
24.7
|
%
|
(0.4
|
)
|
Chesterfield
|
11.5
|
%
|
11.0
|
%
|
0.5
|
|
Philip Morris
|
8.5
|
%
|
9.2
|
%
|
(0.7
|
)
|
Others
|
8.1
|
%
|
8.8
|
%
|
(0.7
|
)
|
Total
|
52.4
|
%
|
53.7
|
%
|
(1.3
|
)
|
|
Poland Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
41.3
|
|
41.1
|
|
0.5
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
17,485
|
|
16,763
|
|
4.3
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
11.6
|
%
|
11.4
|
%
|
0.2
|
|
L&M
|
18.5
|
%
|
18.1
|
%
|
0.4
|
|
Chesterfield
|
9.1
|
%
|
8.6
|
%
|
0.5
|
|
Others
|
3.1
|
%
|
2.7
|
%
|
0.4
|
|
Total
|
42.3
|
%
|
40.8
|
%
|
1.5
|
|
|
Spain Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
46.7
|
|
46.7
|
|
(0.1
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
16,365
|
|
15,435
|
|
6.0
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
18.0
|
%
|
17.0
|
%
|
1.0
|
|
Chesterfield
|
8.6
|
%
|
9.1
|
%
|
(0.5
|
)
|
L&M
|
5.4
|
%
|
5.8
|
%
|
(0.4
|
)
|
Others
|
1.9
|
%
|
1.5
|
%
|
0.4
|
|
Total
|
33.9
|
%
|
33.4
|
%
|
0.5
|
|
Eastern Europe, Middle East & Africa
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
18,286
|
|
|
$
|
18,328
|
|
|
$
|
(42
|
)
|
|
(0.2
|
)%
|
Excise taxes on products
|
|
11,286
|
|
|
10,964
|
|
|
322
|
|
|
2.9
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
7,000
|
|
|
7,364
|
|
|
(364
|
)
|
|
(4.9
|
)%
|
|||
Operating companies income
|
|
3,016
|
|
|
3,425
|
|
|
(409
|
)
|
|
(11.9
|
)%
|
•
|
unfavorable currency ($600 million) and
|
•
|
unfavorable volume/mix ($348 million), partly offset by
|
•
|
price increases ($584 million).
|
•
|
unfavorable currency ($839 million) and
|
•
|
unfavorable volume/mix ($333 million), partly offset by
|
•
|
price increases ($584 million) and
|
•
|
lower marketing, administration and research costs ($170 million).
|
|
North Africa Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
142.3
|
|
139.7
|
|
1.9
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
34,035
|
|
38,111
|
|
(10.7
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
8.3
|
%
|
13.6
|
%
|
(5.3
|
)
|
L&M
|
12.2
|
%
|
11.8
|
%
|
0.4
|
|
Others
|
2.7
|
%
|
2.2
|
%
|
0.5
|
|
Total
|
23.2
|
%
|
27.6
|
%
|
(4.4
|
)
|
|
Russia Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
280.0
|
|
294.1
|
|
(4.8
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
79,651
|
|
84,422
|
|
(5.7
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
1.4
|
%
|
1.4
|
%
|
—
|
|
Parliament
|
3.8
|
%
|
3.9
|
%
|
(0.1
|
)
|
Bond Street
|
8.4
|
%
|
8.4
|
%
|
—
|
|
Others
|
13.6
|
%
|
14.7
|
%
|
(1.1
|
)
|
Total
|
27.2
|
%
|
28.4
|
%
|
(1.2
|
)
|
|
Turkey Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
105.5
|
|
103.2
|
|
2.2
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
49,624
|
|
49,014
|
|
1.2
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
10.2
|
%
|
9.5
|
%
|
0.7
|
|
Parliament
|
11.7
|
%
|
11.6
|
%
|
0.1
|
|
Lark
|
7.4
|
%
|
7.6
|
%
|
(0.2
|
)
|
Others
|
15.0
|
%
|
15.1
|
%
|
(0.1
|
)
|
Total
|
44.3
|
%
|
43.8
|
%
|
0.5
|
|
|
Ukraine Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
73.1
|
|
70.6
|
|
3.5
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
22,014
|
|
19,195
|
|
14.7
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
3.1
|
%
|
3.8
|
%
|
(0.7
|
)
|
Parliament
|
2.9
|
%
|
2.8
|
%
|
0.1
|
|
Bond Street
|
10.0
|
%
|
8.2
|
%
|
1.8
|
|
Others
|
13.2
|
%
|
14.9
|
%
|
(1.7
|
)
|
Total
|
29.2
|
%
|
29.7
|
%
|
(0.5
|
)
|
Asia
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
20,531
|
|
|
$
|
19,469
|
|
|
$
|
1,062
|
|
|
5.5
|
%
|
Excise taxes on products
|
|
11,850
|
|
|
11,266
|
|
|
584
|
|
|
5.2
|
%
|
|||
Net revenues, excluding excise taxes on products
|
|
8,681
|
|
|
8,203
|
|
|
478
|
|
|
5.8
|
%
|
|||
Operating companies income
|
|
3,196
|
|
|
2,886
|
|
|
310
|
|
|
10.7
|
%
|
•
|
price increases ($335 million) and
|
•
|
favorable volume/mix ($151 million).
|
•
|
price increases ($335 million),
|
•
|
favorable currency ($52 million) and
|
•
|
lower marketing, administration and research costs ($28 million), partly offset by
|
•
|
unfavorable volume/mix ($106 million).
|
|
Indonesia Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
315.6
|
|
320.0
|
|
(1.4
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
105,524
|
|
109,840
|
|
(3.9
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Sampoerna A
|
14.0
|
%
|
14.6
|
%
|
(0.6
|
)
|
Dji Sam Soe
|
6.5
|
%
|
6.9
|
%
|
(0.4
|
)
|
U Mild
|
4.2
|
%
|
4.7
|
%
|
(0.5
|
)
|
Others
|
8.7
|
%
|
8.1
|
%
|
0.6
|
|
Total
|
33.4
|
%
|
34.3
|
%
|
(0.9
|
)
|
|
Indonesia Segmentation Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
p.p.
|
|
Segment % of Total Market
|
|
|
|
|||
Hand-Rolled Kretek (SKT)
|
18.2
|
%
|
19.1
|
%
|
(0.9
|
)
|
Machine-Made Kretek (SKM)
|
75.8
|
%
|
74.7
|
%
|
1.1
|
|
Whites (SPM)
|
6.0
|
%
|
6.2
|
%
|
(0.2
|
)
|
Total
|
100.0
|
%
|
100.0
|
%
|
—
|
|
|
|
|
|
|||
PMI % Share of Segment
|
|
|
|
|||
Hand-Rolled Kretek (SKT)
|
37.3
|
%
|
37.7
|
%
|
(0.4
|
)
|
Machine-Made Kretek (SKM)
|
28.9
|
%
|
29.7
|
%
|
(0.8
|
)
|
Whites (SPM)
|
79.5
|
%
|
80.3
|
%
|
(0.8
|
)
|
|
Japan Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
173.8
|
|
182.3
|
|
(4.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
43,915
|
|
45,690
|
|
(3.9
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
10.9
|
%
|
11.3
|
%
|
(0.4
|
)
|
Parliament
|
2.4
|
%
|
2.3
|
%
|
0.1
|
|
Lark
|
9.9
|
%
|
9.9
|
%
|
—
|
|
Others
|
1.7
|
%
|
1.8
|
%
|
(0.1
|
)
|
Total
|
24.9
|
%
|
25.3
|
%
|
(0.4
|
)
|
|
Korea Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
73.6
|
|
67.3
|
|
9.4
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
15,490
|
|
14,201
|
|
9.1
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
9.6
|
%
|
9.6
|
%
|
—
|
|
Parliament
|
7.9
|
%
|
7.2
|
%
|
0.7
|
|
Virginia S.
|
3.0
|
%
|
3.8
|
%
|
(0.8
|
)
|
Others
|
0.5
|
%
|
0.6
|
%
|
(0.1
|
)
|
Total
|
21.0
|
%
|
21.2
|
%
|
(0.2
|
)
|
|
Philippines Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
79.3
|
|
90.2
|
|
(12.0
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
56,611
|
|
66,236
|
|
(14.5
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
28.4
|
%
|
20.0
|
%
|
8.4
|
|
Fortune
|
23.4
|
%
|
29.2
|
%
|
(5.8
|
)
|
Jackpot
|
7.9
|
%
|
12.4
|
%
|
(4.5
|
)
|
Others
|
11.6
|
%
|
11.8
|
%
|
(0.2
|
)
|
Total
|
71.3
|
%
|
73.4
|
%
|
(2.1
|
)
|
Latin America & Canada
|
|
For the Years Ended December 31,
|
|
Variance
|
|||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Net revenues
|
|
$
|
9,007
|
|
|
$
|
9,548
|
|
|
$
|
(541
|
)
|
|
(5.7
|
)%
|
Excise taxes on products
|
|
6,165
|
|
|
6,389
|
|
|
(224
|
)
|
|
(3.5
|
)%
|
|||
Net revenues, excluding excise taxes on products
|
|
2,842
|
|
|
3,159
|
|
|
(317
|
)
|
|
(10.0
|
)%
|
|||
Operating companies income
|
|
938
|
|
|
1,085
|
|
|
(147
|
)
|
|
(13.5
|
)%
|
•
|
unfavorable currency ($525 million) and
|
•
|
unfavorable volume/mix ($104 million), partly offset by
|
•
|
price increases ($312 million).
|
•
|
unfavorable currency ($282 million),
|
•
|
unfavorable volume/mix ($85 million),
|
•
|
higher manufacturing costs ($57 million) and
|
•
|
higher marketing, administration and research costs ($35 million), partly offset by
|
•
|
price increases ($312 million).
|
|
Argentina Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
36.1
|
|
40.8
|
|
(11.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
27,512
|
|
31,910
|
|
(13.8
|
)%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
22.4
|
%
|
24.3
|
%
|
(1.9
|
)
|
Parliament
|
1.9
|
%
|
2.1
|
%
|
(0.2
|
)
|
Philip Morris
|
41.6
|
%
|
44.7
|
%
|
(3.1
|
)
|
Others
|
10.4
|
%
|
7.1
|
%
|
3.3
|
|
Total
|
76.3
|
%
|
78.2
|
%
|
(1.9
|
)
|
|
Canada Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
26.3
|
|
26.7
|
|
(1.6
|
)%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
10,049
|
|
9,926
|
|
1.2
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Belmont
|
3.7
|
%
|
3.3
|
%
|
0.4
|
|
Canadian Classics
|
10.2
|
%
|
10.3
|
%
|
(0.1
|
)
|
Next
|
11.3
|
%
|
10.6
|
%
|
0.7
|
|
Others
|
13.2
|
%
|
13.1
|
%
|
0.1
|
|
Total
|
38.4
|
%
|
37.3
|
%
|
1.1
|
|
|
Mexico Key Market Data
|
|||||
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2016
|
|
2015
|
|
% / p.p.
|
|
Total Cigarette Market (billion units)
|
36.2
|
|
33.8
|
|
7.0
|
%
|
|
|
|
|
|||
PMI Cigarette Shipments (million units)
|
25,080
|
|
23,246
|
|
7.9
|
%
|
|
|
|
|
|||
PMI Cigarette Market Share
|
|
|
|
|||
Marlboro
|
49.0
|
%
|
47.8
|
%
|
1.2
|
|
Delicados
|
9.7
|
%
|
10.7
|
%
|
(1.0
|
)
|
Benson & Hedges
|
4.7
|
%
|
4.5
|
%
|
0.2
|
|
Others
|
5.9
|
%
|
5.8
|
%
|
0.1
|
|
Total
|
69.3
|
%
|
68.8
|
%
|
0.5
|
|
•
|
more cash used for accounts receivable, primarily due to the timing of sales and cash collections (including unfavorable comparisons to the cash flows provided for accounts receivable in 2015 following the expansion of arrangements to sell accounts receivable to unaffiliated financial institutions as disclosed in Item 8, Note 20.
Sale of Accounts Receivable
), partly offset by
|
•
|
more cash provided by accrued liabilities and other current assets, primarily due to the timing of payments for excise taxes.
|
•
|
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
|
|
|
Payments Due
|
|||||||||||||
(in millions)
|
Total
|
2018
|
2019-2020
|
2021-2022
|
2023 and
Thereafter |
||||||||||
Long-term debt
(1)
|
|
$34,120
|
|
|
$2,506
|
|
|
$8,221
|
|
|
$5,811
|
|
|
$17,582
|
|
Interest on borrowings
(2)
|
11,131
|
|
981
|
|
1,656
|
|
1,372
|
|
7,122
|
|
|||||
Operating leases
(3)
|
849
|
|
179
|
|
219
|
|
95
|
|
356
|
|
|||||
Purchase obligations
(4)
:
|
|
|
|
|
|
||||||||||
Inventory and production costs
|
5,040
|
|
2,696
|
|
1,255
|
|
687
|
|
402
|
|
|||||
Other
|
2,230
|
|
1,437
|
|
588
|
|
194
|
|
11
|
|
|||||
|
7,270
|
|
4,133
|
|
1,843
|
|
881
|
|
413
|
|
|||||
Other long-term liabilities
(5)
|
468
|
|
58
|
|
60
|
|
42
|
|
308
|
|
|||||
|
|
$53,838
|
|
|
$7,857
|
|
|
$11,999
|
|
|
$8,201
|
|
|
$25,781
|
|
|
Pre-Tax Earnings Impact
|
||||||
(in millions)
|
At
12/31/17 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$27
|
|
$49
|
|
$58
|
|
$27
|
|
|
||||||
|
Fair Value Impact
|
||||||
(in millions)
|
At
12/31/17 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Interest rates
|
$118
|
|
$150
|
|
$173
|
|
$118
|
|
|
|
|
|
|
|
|
|
Pre-Tax Earnings Impact
|
||||||
(in millions)
|
At
12/31/16 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$63
|
|
$58
|
|
$87
|
|
$34
|
|
|
|
|
|
|
|
|
|
Fair Value Impact
|
||||||
(in millions)
|
At
12/31/16 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Interest rates
|
$143
|
|
$147
|
|
$217
|
|
$112
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
at December 31,
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8,447
|
|
|
$
|
4,239
|
|
Receivables (less allowances of $30 in 2017 and $42 in 2016)
|
3,738
|
|
|
3,499
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
2,606
|
|
|
2,498
|
|
||
Other raw materials
|
1,563
|
|
|
1,569
|
|
||
Finished product
|
4,637
|
|
|
4,950
|
|
||
|
8,806
|
|
|
9,017
|
|
||
Other current assets
|
603
|
|
|
853
|
|
||
Total current assets
|
21,594
|
|
|
17,608
|
|
||
Property, plant and equipment, at cost:
|
|
|
|
||||
Land and land improvements
|
639
|
|
|
590
|
|
||
Buildings and building equipment
|
3,989
|
|
|
3,474
|
|
||
Machinery and equipment
|
8,976
|
|
|
7,366
|
|
||
Construction in progress
|
962
|
|
|
930
|
|
||
|
14,566
|
|
|
12,360
|
|
||
Less: accumulated depreciation
|
7,295
|
|
|
6,296
|
|
||
|
7,271
|
|
|
6,064
|
|
||
Goodwill (Note 3)
|
7,666
|
|
|
7,324
|
|
||
Other intangible assets, net (Note 3)
|
2,432
|
|
|
2,470
|
|
||
Investments in unconsolidated subsidiaries (Note 4)
|
1,074
|
|
|
1,011
|
|
||
Deferred income taxes
|
1,007
|
|
|
859
|
|
||
Other assets
|
1,924
|
|
|
1,515
|
|
||
Total Assets
|
$
|
42,968
|
|
|
$
|
36,851
|
|
at December 31,
|
2017
|
|
2016
|
||||
Liabilities
|
|
|
|
||||
Short-term borrowings (Note 7)
|
$
|
499
|
|
|
$
|
643
|
|
Current portion of long-term debt (Note 7)
|
2,506
|
|
|
2,573
|
|
||
Accounts payable
|
2,242
|
|
|
1,666
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
708
|
|
|
575
|
|
||
Taxes, except income taxes
|
5,324
|
|
|
6,204
|
|
||
Employment costs
|
856
|
|
|
800
|
|
||
Dividends payable
|
1,669
|
|
|
1,621
|
|
||
Other
|
1,346
|
|
|
1,553
|
|
||
Income taxes (Note 11)
|
812
|
|
|
832
|
|
||
Total current liabilities
|
15,962
|
|
|
16,467
|
|
||
Long-term debt (Note 7)
|
31,334
|
|
|
25,851
|
|
||
Deferred income taxes
|
799
|
|
|
1,897
|
|
||
Employment costs
|
2,271
|
|
|
2,800
|
|
||
Income taxes and other liabilities (Note 11)
|
2,832
|
|
|
736
|
|
||
Total liabilities
|
53,198
|
|
|
47,751
|
|
||
Contingencies (Note 18)
|
|
|
|
||||
Stockholders’ (Deficit) Equity
|
|
|
|
||||
Common stock, no par value (2,109,316,331 shares issued in 2017 and 2016)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,972
|
|
|
1,964
|
|
||
Earnings reinvested in the business
|
29,859
|
|
|
30,397
|
|
||
Accumulated other comprehensive losses
|
(8,535
|
)
|
|
(9,559
|
)
|
||
|
23,296
|
|
|
22,802
|
|
||
Less: cost of repurchased stock (556,098,569 and 557,930,784 shares in 2017 and 2016, respectively)
|
35,382
|
|
|
35,490
|
|
||
Total PMI stockholders’ deficit
|
(12,086
|
)
|
|
(12,688
|
)
|
||
Noncontrolling interests
|
1,856
|
|
|
1,788
|
|
||
Total stockholders’ deficit
|
(10,230
|
)
|
|
(10,900
|
)
|
||
Total Liabilities and Stockholders’ (Deficit) Equity
|
$
|
42,968
|
|
|
$
|
36,851
|
|
for the years ended December 31,
|
2017
|
|
2016
|
|
2015
|
||||||
Net revenues
|
$
|
78,098
|
|
|
$
|
74,953
|
|
|
$
|
73,908
|
|
Cost of sales
|
10,432
|
|
|
9,391
|
|
|
9,365
|
|
|||
Excise taxes on products
|
49,350
|
|
|
48,268
|
|
|
47,114
|
|
|||
Gross profit
|
18,316
|
|
|
17,294
|
|
|
17,429
|
|
|||
Marketing, administration and research costs
|
6,725
|
|
|
6,405
|
|
|
6,656
|
|
|||
Asset impairment and exit costs
|
—
|
|
|
—
|
|
|
68
|
|
|||
Amortization of intangibles
|
88
|
|
|
74
|
|
|
82
|
|
|||
Operating income
|
11,503
|
|
|
10,815
|
|
|
10,623
|
|
|||
Interest expense, net (Note 14)
|
914
|
|
|
891
|
|
|
1,008
|
|
|||
Earnings before income taxes
|
10,589
|
|
|
9,924
|
|
|
9,615
|
|
|||
Provision for income taxes (Note 11)
|
4,307
|
|
|
2,768
|
|
|
2,688
|
|
|||
Equity (income)/loss in unconsolidated subsidiaries, net
|
(59
|
)
|
|
(94
|
)
|
|
(105
|
)
|
|||
Net earnings
|
6,341
|
|
|
7,250
|
|
|
7,032
|
|
|||
Net earnings attributable to noncontrolling interests
|
306
|
|
|
283
|
|
|
159
|
|
|||
Net earnings attributable to PMI
|
$
|
6,035
|
|
|
$
|
6,967
|
|
|
$
|
6,873
|
|
Per share data (Note 10):
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
3.88
|
|
|
$
|
4.48
|
|
|
$
|
4.42
|
|
Diluted earnings per share
|
$
|
3.88
|
|
|
$
|
4.48
|
|
|
$
|
4.42
|
|
for the years ended December 31,
|
2017
|
|
2016
|
|
2015
|
||||||
Net earnings
|
$
|
6,341
|
|
|
$
|
7,250
|
|
|
$
|
7,032
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
|
||||||
Change in currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized gains (losses), net of income taxes of $620 in 2017, ($101) in 2016 and ($143) in 2015
|
330
|
|
|
(14
|
)
|
|
(2,248
|
)
|
|||
(Gains)/losses transferred to earnings, net of income taxes of $- in 2017, 2016 and 2015
|
(2
|
)
|
|
5
|
|
|
(1
|
)
|
|||
Change in net loss and prior service cost:
|
|
|
|
|
|
||||||
Net gains (losses) and prior service costs, net of income taxes of ($17) in 2017, $78 in 2016 and $17 in 2015
|
523
|
|
|
(460
|
)
|
|
(536
|
)
|
|||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($31) in 2017, ($43) in 2016 and ($48) in 2015
|
228
|
|
|
224
|
|
|
227
|
|
|||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
|
||||||
Gains (losses) recognized, net of income taxes of $8 in 2017, ($4) in 2016 and ($5) in 2015
|
(44
|
)
|
|
8
|
|
|
38
|
|
|||
(Gains) losses transferred to earnings, net of income taxes of $2 in 2017, ($3) in 2016 and $14 in 2015
|
(11
|
)
|
|
30
|
|
|
(102
|
)
|
|||
Total other comprehensive earnings (losses)
|
1,024
|
|
|
(207
|
)
|
|
(2,622
|
)
|
|||
Total comprehensive earnings
|
7,365
|
|
|
7,043
|
|
|
4,410
|
|
|||
Less comprehensive earnings attributable to:
|
|
|
|
|
|
||||||
Noncontrolling interests
|
306
|
|
|
233
|
|
|
113
|
|
|||
Comprehensive earnings attributable to PMI
|
$
|
7,059
|
|
|
$
|
6,810
|
|
|
$
|
4,297
|
|
|
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, 2015
|
$
|
—
|
|
|
$
|
710
|
|
|
$
|
29,249
|
|
|
$
|
(6,826
|
)
|
|
$
|
(35,762
|
)
|
|
$
|
1,426
|
|
|
$
|
(11,203
|
)
|
Net earnings
|
|
|
|
|
6,873
|
|
|
|
|
|
|
159
|
|
|
7,032
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(2,576
|
)
|
|
|
|
(46
|
)
|
|
(2,622
|
)
|
|||||||||||
Issuance of stock awards
|
|
|
(3
|
)
|
|
|
|
|
|
149
|
|
|
|
|
146
|
|
|||||||||||
Dividends declared ($4.04 per share)
|
|
|
|
|
(6,280
|
)
|
|
|
|
|
|
|
|
(6,280
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(171
|
)
|
|
(171
|
)
|
||||||||||||
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 6)
|
|
|
1,222
|
|
|
|
|
|
|
|
|
400
|
|
|
1,622
|
|
|||||||||||
Balances, December 31, 2015
|
—
|
|
|
1,929
|
|
|
29,842
|
|
|
(9,402
|
)
|
|
(35,613
|
)
|
|
1,768
|
|
|
(11,476
|
)
|
|||||||
Net earnings
|
|
|
|
|
6,967
|
|
|
|
|
|
|
283
|
|
|
7,250
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(157
|
)
|
|
|
|
(50
|
)
|
|
(207
|
)
|
|||||||||||
Issuance of stock awards
|
|
|
37
|
|
|
|
|
|
|
123
|
|
|
|
|
160
|
|
|||||||||||
Dividends declared ($4.12 per share)
|
|
|
|
|
(6,412
|
)
|
|
|
|
|
|
|
|
(6,412
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(219
|
)
|
|
(219
|
)
|
||||||||||||
Other
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
6
|
|
|
4
|
|
|||||||||||
Balances, December 31, 2016
|
—
|
|
|
1,964
|
|
|
30,397
|
|
|
(9,559
|
)
|
|
(35,490
|
)
|
|
1,788
|
|
|
(10,900
|
)
|
|||||||
Net earnings
|
|
|
|
|
6,035
|
|
|
|
|
|
|
306
|
|
|
6,341
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
1,024
|
|
|
|
|
—
|
|
|
1,024
|
|
|||||||||||
Issuance of stock awards
|
|
|
20
|
|
|
|
|
|
|
108
|
|
|
|
|
128
|
|
|||||||||||
Dividends declared ($4.22 per share)
|
|
|
|
|
(6,573
|
)
|
|
|
|
|
|
|
|
(6,573
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(255
|
)
|
|
(255
|
)
|
||||||||||||
Other
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
17
|
|
|
5
|
|
|||||||||||
Balances, December 31, 2017
|
$
|
—
|
|
|
$
|
1,972
|
|
|
$
|
29,859
|
|
|
$
|
(8,535
|
)
|
|
$
|
(35,382
|
)
|
|
$
|
1,856
|
|
|
$
|
(10,230
|
)
|
for the years ended December 31,
|
2017
|
|
2016
|
|
2015
|
||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
|
|
||||||
Net earnings
|
$
|
6,341
|
|
|
$
|
7,250
|
|
|
$
|
7,032
|
|
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
875
|
|
|
743
|
|
|
754
|
|
|||
Deferred income tax (benefit) provision
|
(501
|
)
|
|
182
|
|
|
(18
|
)
|
|||
Asset impairment and exit costs, net of cash paid
|
(10
|
)
|
|
(31
|
)
|
|
(164
|
)
|
|||
Cash effects of changes in:
|
|
|
|
|
|
||||||
Receivables, net
|
(92
|
)
|
|
(1,009
|
)
|
|
647
|
|
|||
Inventories
|
730
|
|
|
(695
|
)
|
|
(841
|
)
|
|||
Accounts payable
|
425
|
|
|
373
|
|
|
310
|
|
|||
Accrued liabilities and other current assets
|
(554
|
)
|
|
1,477
|
|
|
(8
|
)
|
|||
Income taxes
|
1,370
|
|
|
(209
|
)
|
|
(42
|
)
|
|||
Pension plan contributions
|
(66
|
)
|
|
(191
|
)
|
|
(154
|
)
|
|||
Other
|
394
|
|
|
187
|
|
|
349
|
|
|||
Net cash provided by operating activities
|
8,912
|
|
|
8,077
|
|
|
7,865
|
|
|||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
||||||
Capital expenditures
|
(1,548
|
)
|
|
(1,172
|
)
|
|
(960
|
)
|
|||
Investments in unconsolidated subsidiaries
|
(111
|
)
|
|
(41
|
)
|
|
(55
|
)
|
|||
Net investment hedges
|
(1,527
|
)
|
|
295
|
|
|
239
|
|
|||
Other
|
172
|
|
|
(50
|
)
|
|
68
|
|
|||
Net cash used in investing activities
|
(3,014
|
)
|
|
(968
|
)
|
|
(708
|
)
|
for the years ended December 31,
|
2017
|
|
2016
|
|
2015
|
||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
||||||
Short-term borrowing activity by original maturity:
|
|
|
|
|
|
||||||
Net repayments - maturities of 90 days or less
|
$
|
(127
|
)
|
|
$
|
(12
|
)
|
|
$
|
(266
|
)
|
Issuances - maturities longer than 90 days
|
1,634
|
|
|
—
|
|
|
—
|
|
|||
Repayments - maturities longer than 90 days
|
(1,634
|
)
|
|
—
|
|
|
—
|
|
|||
Long-term debt proceeds
|
6,850
|
|
|
3,536
|
|
|
1,539
|
|
|||
Long-term debt repaid
|
(2,551
|
)
|
|
(2,393
|
)
|
|
(1,229
|
)
|
|||
Repurchases of common stock
|
—
|
|
|
—
|
|
|
(48
|
)
|
|||
Dividends paid
|
(6,520
|
)
|
|
(6,378
|
)
|
|
(6,250
|
)
|
|||
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 6)
|
5
|
|
|
7
|
|
|
1,622
|
|
|||
Other
|
(426
|
)
|
|
(173
|
)
|
|
(104
|
)
|
|||
Net cash used in financing activities
|
(2,769
|
)
|
|
(5,413
|
)
|
|
(4,736
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
1,079
|
|
|
(874
|
)
|
|
(686
|
)
|
|||
Cash and cash equivalents:
|
|
|
|
|
|
||||||
Increase
|
4,208
|
|
|
822
|
|
|
1,735
|
|
|||
Balance at beginning of year
|
4,239
|
|
|
3,417
|
|
|
1,682
|
|
|||
Balance at end of year
|
$
|
8,447
|
|
|
$
|
4,239
|
|
|
$
|
3,417
|
|
|
|
|
|
|
|
||||||
Cash Paid:
|
|
|
|
|
|
||||||
Interest
|
$
|
1,050
|
|
|
$
|
1,052
|
|
|
$
|
1,045
|
|
Income taxes
|
$
|
3,403
|
|
|
$
|
2,829
|
|
|
$
|
2,771
|
|
Note 1.
|
Note 2.
|
Note 3.
|
|
|
Goodwill
|
|
Other Intangible
Assets, net
|
||||||||||||
(in millions)
|
December 31, 2017
|
|
December 31, 2016
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||
European Union
|
$
|
1,419
|
|
|
$
|
1,238
|
|
|
$
|
458
|
|
|
$
|
479
|
|
Eastern Europe, Middle East & Africa
|
423
|
|
|
372
|
|
|
194
|
|
|
200
|
|
||||
Asia
|
3,577
|
|
|
3,596
|
|
|
1,048
|
|
|
1,074
|
|
||||
Latin America & Canada
|
2,247
|
|
|
2,118
|
|
|
732
|
|
|
717
|
|
||||
Total
|
$
|
7,666
|
|
|
$
|
7,324
|
|
|
$
|
2,432
|
|
|
$
|
2,470
|
|
(in millions)
|
|
European
Union |
|
Eastern Europe,
Middle East
&
Africa |
|
Asia
|
|
Latin
America & Canada |
|
Total
|
||||||||||
Balance at January 1, 2016
|
|
$
|
1,310
|
|
|
$
|
374
|
|
|
$
|
3,581
|
|
|
$
|
2,150
|
|
|
$
|
7,415
|
|
Changes due to:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency
|
|
(72
|
)
|
|
(2
|
)
|
|
15
|
|
|
(32
|
)
|
|
(91
|
)
|
|||||
Balance at December 31, 2016
|
|
1,238
|
|
|
372
|
|
|
3,596
|
|
|
2,118
|
|
|
7,324
|
|
|||||
Changes due to:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency
|
|
181
|
|
|
51
|
|
|
(19
|
)
|
|
129
|
|
|
342
|
|
|||||
Balance at December 31, 2017
|
|
$
|
1,419
|
|
|
$
|
423
|
|
|
$
|
3,577
|
|
|
$
|
2,247
|
|
|
$
|
7,666
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
(in millions)
|
Gross
Carrying Amount |
|
|
Accumulated
Amortization |
|
|
Gross
Carrying Amount |
|
|
Accumulated
Amortization |
|
||||
Non-amortizable intangible assets
|
$
|
1,323
|
|
|
|
|
$
|
1,455
|
|
|
|
||||
Amortizable intangible assets
|
1,798
|
|
|
$
|
689
|
|
|
1,598
|
|
|
$
|
583
|
|
||
Total other intangible assets
|
$
|
3,121
|
|
|
$
|
689
|
|
|
$
|
3,053
|
|
|
$
|
583
|
|
Description (dollars in millions)
|
Gross
Carrying Amount |
Initial Estimated
Useful Lives |
|
Weighted-Average
Remaining Useful Life |
||
Trademarks
|
$
|
1,559
|
|
2 - 40 years
|
|
19 years
|
Distribution networks
|
152
|
|
5 - 30 years
|
|
9 years
|
|
Other (including farmer contracts and intellectual property rights)
|
87
|
|
4 - 17 years
|
|
9 years
|
|
|
$
|
1,798
|
|
|
|
|
Note 4.
|
|
|
For the Years Ended December 31,
|
|||||
(in millions)
|
|
2017
|
2016
|
||||
Net revenues
|
|
$
|
4,425
|
|
$
|
3,985
|
|
|
|
At December 31,
|
|||||
(in millions)
|
|
2017
|
2016
|
||||
Receivables
|
|
$
|
293
|
|
$
|
289
|
|
Note 5.
|
Note 6.
|
Note 7.
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||
(in millions)
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
||
Commercial paper
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Bank loans
|
499
|
|
|
5.7
|
|
|
643
|
|
|
5.0
|
|
||
|
$
|
499
|
|
|
|
|
$
|
643
|
|
|
|
|
December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
U.S. dollar notes, 1.375% to 6.375% (average interest rate 3.560%), due through 2044
|
$
|
23,291
|
|
|
$
|
19,857
|
|
Foreign currency obligations:
|
|
|
|
||||
Euro notes, 0.625% to 3.125% (average interest rate 2.250%), due through 2037
|
8,997
|
|
|
6,828
|
|
||
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.269%), due through 2024
|
1,376
|
|
|
1,312
|
|
||
Other (average interest rate 3.421%), due through 2024
|
176
|
|
|
427
|
|
||
|
33,840
|
|
|
28,424
|
|
||
Less current portion of long-term debt
|
2,506
|
|
|
2,573
|
|
||
|
$
|
31,334
|
|
|
$
|
25,851
|
|
(in millions)
|
|
|
|
|
|
|
|
|
Type
|
|
Face Value
|
|
Interest
Rate |
|
Issuance
|
|
Maturity
|
EURO notes
|
(b)
|
€500 (approximately $648)
|
|
3.125%
|
|
June 2013
|
|
June 2033
|
EURO notes
|
(b)
|
€500 (approximately $578)
|
|
2.000%
|
|
May 2016
|
|
May 2036
|
EURO notes
|
(b)
|
€500 (approximately $582)
|
|
1.875%
|
|
November 2017
|
|
November 2037
|
Swiss franc notes
|
(b)
|
CHF200 (approximately $217)
|
|
0.875%
|
|
March 2013
|
|
March 2019
|
Swiss franc notes
|
(b)
|
CHF275 (approximately $311)
|
|
0.750%
|
|
May 2014
|
|
December 2019
|
Swiss franc notes
|
(b)
|
CHF325 (approximately $334)
|
|
1.000%
|
|
September 2012
|
|
September 2020
|
Swiss franc notes
|
(b)
|
CHF300 (approximately $335)
|
|
2.000%
|
|
December 2011
|
|
December 2021
|
Swiss franc notes
|
(b)
|
CHF250 (approximately $283)
|
|
1.625%
|
|
May 2014
|
|
May 2024
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
||
2018
|
$
|
2,506
|
|
2019
|
4,091
|
|
|
2020
|
4,130
|
|
|
2021
|
3,056
|
|
|
2022
|
2,755
|
|
|
2023-2027
|
8,144
|
|
|
2028-2032
|
1,097
|
|
|
Thereafter
|
8,341
|
|
|
|
34,120
|
|
|
Debt discounts
|
(280
|
)
|
|
Total long-term debt
|
$
|
33,840
|
|
Type
(in billions of dollars)
|
Committed
Credit Facilities |
|
Commercial
Paper |
||||
364-day revolving credit, expiring February 6, 2018
|
$
|
2.0
|
|
|
|
||
Multi-year revolving credit, expiring February 28, 2021
|
2.5
|
|
|
|
|||
Multi-year revolving credit, expiring October 1, 2022
|
3.5
|
|
|
|
|||
Total facilities
|
$
|
8.0
|
|
|
|
||
Commercial paper outstanding
|
|
|
$
|
—
|
|
Note 8.
|
|
Shares Issued
|
|
Shares
Repurchased |
|
Shares
Outstanding |
|||
Balances, January 1, 2015
|
2,109,316,331
|
|
|
(562,416,635
|
)
|
|
1,546,899,696
|
|
Issuance of stock awards
|
|
|
2,444,373
|
|
|
2,444,373
|
|
|
Balances, December 31, 2015
|
2,109,316,331
|
|
|
(559,972,262
|
)
|
|
1,549,344,069
|
|
Issuance of stock awards
|
|
|
2,041,478
|
|
|
2,041,478
|
|
|
Balances, December 31, 2016
|
2,109,316,331
|
|
|
(557,930,784
|
)
|
|
1,551,385,547
|
|
Issuance of stock awards
|
|
|
1,832,215
|
|
|
1,832,215
|
|
|
Balances, December 31, 2017
|
2,109,316,331
|
|
|
(556,098,569
|
)
|
|
1,553,217,762
|
|
Note 9.
|
|
Number of
Shares |
Weighted-
Average Grant Date Fair Value Per Share |
|||
Balance at January 1, 2017
|
4,500,990
|
|
$
|
82.08
|
|
Granted
|
1,210,210
|
|
98.59
|
|
|
Vested
|
(2,022,856
|
)
|
78.19
|
|
|
Forfeited
|
(75,944
|
)
|
88.82
|
|
|
Balance at December 31, 2017
|
3,612,400
|
|
$
|
89.65
|
|
(in millions, except per RSU award granted)
|
Total Weighted-Average Grant Date Fair Value of RSU Awards Granted
|
|
Weighted-Average Grant Date Fair Value Per RSU Award Granted
|
Compensation Expense related to RSU Awards
|
||||||
2017
|
$
|
119
|
|
|
$
|
98.59
|
|
$
|
111
|
|
2016
|
$
|
108
|
|
|
$
|
89.03
|
|
$
|
126
|
|
2015
|
$
|
126
|
|
|
$
|
82.28
|
|
$
|
166
|
|
(dollars in millions)
|
Shares of RSU Awards that Vested
|
|
Grant Date Fair Value of Vested Shares of RSU Awards
|
Total Fair Value of RSU Awards that Vested
|
|||||
2017
|
2,022,856
|
|
|
$
|
158
|
|
$
|
208
|
|
2016
|
2,302,525
|
|
|
$
|
202
|
|
$
|
210
|
|
2015
|
2,711,974
|
|
|
$
|
217
|
|
$
|
224
|
|
|
Number of
Shares |
|
Grant Date
Fair Value Subject to TSR Performance Factor Per Share (a) |
Grant Date
Fair Value Subject to Other Performance Factors Per Share (b) |
|||||
Balance at January 1, 2017
|
427,570
|
|
|
$
|
104.60
|
|
$
|
89.02
|
|
Granted
|
393,460
|
|
|
128.72
|
|
98.29
|
|
||
Vested
|
—
|
|
|
—
|
|
—
|
|
||
Forfeited
|
—
|
|
|
—
|
|
—
|
|
||
Balance at December 31, 2017
|
821,030
|
|
|
$
|
116.16
|
|
$
|
93.46
|
|
(in millions, except per PSU award granted)
|
PSU Grant Date Fair Value Subject to TSR Performance Factor
(a)
|
|
PSU Grant Date Fair Value Subject to Other Performance Factors
(b)
|
|
Compensation Expense related to PSU Awards
|
||||||||||||
|
Total
|
Per PSU Award
|
|
Total
|
Per PSU Award
|
|
Total
|
||||||||||
2017
|
$
|
25
|
|
$
|
128.72
|
|
|
$
|
19
|
|
$
|
98.29
|
|
|
$
|
37
|
|
2016
|
$
|
22
|
|
$
|
104.60
|
|
|
$
|
19
|
|
$
|
89.02
|
|
|
$
|
27
|
|
Note 10.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Net earnings attributable to PMI
|
$
|
6,035
|
|
|
$
|
6,967
|
|
|
$
|
6,873
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
14
|
|
|
19
|
|
|
24
|
|
|||
Net earnings for basic and diluted EPS
|
$
|
6,021
|
|
|
$
|
6,948
|
|
|
$
|
6,849
|
|
Weighted-average shares for basic EPS
|
1,552
|
|
|
1,551
|
|
|
1,549
|
|
|||
Plus contingently issuable performance stock units (PSUs)
|
1
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average shares for diluted EPS
|
1,553
|
|
|
1,551
|
|
|
1,549
|
|
Note 11.
|
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Earnings before income taxes
|
$
|
10,589
|
|
|
$
|
9,924
|
|
|
$
|
9,615
|
|
Provision for income taxes:
|
|
|
|
|
|
||||||
United States federal and state:
|
|
|
|
|
|
||||||
Current
|
$
|
1,662
|
|
|
$
|
(39
|
)
|
|
$
|
(56
|
)
|
Deferred
|
(384
|
)
|
|
293
|
|
|
117
|
|
|||
Total United States
|
1,278
|
|
|
254
|
|
|
61
|
|
|||
Outside United States:
|
|
|
|
|
|
||||||
Current
|
3,146
|
|
|
2,625
|
|
|
2,762
|
|
|||
Deferred
|
(117
|
)
|
|
(111
|
)
|
|
(135
|
)
|
|||
Total outside United States
|
3,029
|
|
|
2,514
|
|
|
2,627
|
|
|||
Total provision for income taxes
|
$
|
4,307
|
|
|
$
|
2,768
|
|
|
$
|
2,688
|
|
•
|
A reduction of the U.S. federal corporate tax rate from 35% to 21%; and
|
•
|
The requirement to pay a one-time transition tax on accumulated foreign earnings, including 2017 earnings ("transition tax").
|
•
|
A provisional charge of
$1.4 billion
, which represents the transition tax of
$2.2 billion
, net of a reversal of
$0.7 billion
of previously recorded deferred tax liabilities on part of the accumulated foreign earnings, and other items of
$0.1 billion
.
|
•
|
Re-measurement of U.S. deferred tax assets and liabilities using a rate of 21%, which, under the Tax Cuts and Jobs Act, is expected to be in place when such deferred assets and liabilities reverse in the future. In connection with this re-measurement, PMI recorded a provisional charge of
$0.2 billion
.
|
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at January 1,
|
$
|
79
|
|
|
$
|
88
|
|
|
$
|
123
|
|
Additions based on tax positions related to the current year
|
71
|
|
|
13
|
|
|
17
|
|
|||
Additions for tax positions of previous years
|
5
|
|
|
1
|
|
|
6
|
|
|||
Reductions for tax positions of prior years
|
—
|
|
|
(7
|
)
|
|
(42
|
)
|
|||
Reductions due to lapse of statute of limitations
|
(7
|
)
|
|
(14
|
)
|
|
(7
|
)
|
|||
Settlements
|
(4
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||
Other
|
1
|
|
|
—
|
|
|
(8
|
)
|
|||
Balance at December 31,
|
$
|
145
|
|
|
$
|
79
|
|
|
$
|
88
|
|
(in millions)
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|||
Unrecognized tax benefits
|
$
|
145
|
|
|
$
|
79
|
|
|
$
|
88
|
|
Accrued interest and penalties
|
23
|
|
|
15
|
|
|
28
|
|
|||
Tax credits and other indirect benefits
|
(35
|
)
|
|
(31
|
)
|
|
(40
|
)
|
|||
Liability for tax contingencies
|
$
|
133
|
|
|
$
|
63
|
|
|
$
|
76
|
|
|
2017
|
|
2016
|
|
2015
|
|||
U.S. federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|||
Foreign rate differences
|
(12.2
|
)
|
|
(12.6
|
)
|
|
(12.3
|
)
|
Dividend repatriation cost
|
16.4
|
|
|
5.8
|
|
|
5.7
|
|
Other
|
1.5
|
|
|
(0.3
|
)
|
|
(0.4
|
)
|
Effective tax rate
|
40.7
|
%
|
|
27.9
|
%
|
|
28.0
|
%
|
|
At December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Deferred income tax assets:
|
|
|
|
||||
Accrued postretirement and postemployment benefits
|
$
|
239
|
|
|
$
|
287
|
|
Accrued pension costs
|
334
|
|
|
256
|
|
||
Inventory
|
131
|
|
|
241
|
|
||
Accrued liabilities
|
117
|
|
|
137
|
|
||
Foreign exchange
|
91
|
|
|
—
|
|
||
Other
|
114
|
|
|
173
|
|
||
Total deferred income tax assets
|
1,026
|
|
|
1,094
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Trade names
|
(546
|
)
|
|
(554
|
)
|
||
Property, plant and equipment
|
(223
|
)
|
|
(217
|
)
|
||
Unremitted earnings
|
(49
|
)
|
|
(636
|
)
|
||
Foreign exchange
|
—
|
|
|
(725
|
)
|
||
Total deferred income tax liabilities
|
(818
|
)
|
|
(2,132
|
)
|
||
Net deferred income tax assets (liabilities)
|
$
|
208
|
|
|
$
|
(1,038
|
)
|
Note 12.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Net revenues:
|
|
|
|
|
|
||||||
European Union
|
$
|
27,580
|
|
|
$
|
27,129
|
|
|
$
|
26,563
|
|
Eastern Europe, Middle East & Africa
|
18,045
|
|
|
18,286
|
|
|
18,328
|
|
|||
Asia
|
22,635
|
|
|
20,531
|
|
|
19,469
|
|
|||
Latin America & Canada
|
9,838
|
|
|
9,007
|
|
|
9,548
|
|
|||
Net revenues
(1)
|
$
|
78,098
|
|
|
$
|
74,953
|
|
|
$
|
73,908
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Earnings before income taxes:
|
|
|
|
|
|
||||||
Operating companies income:
|
|
|
|
|
|
||||||
European Union
|
$
|
3,775
|
|
|
$
|
3,994
|
|
|
$
|
3,576
|
|
Eastern Europe, Middle East & Africa
|
2,888
|
|
|
3,016
|
|
|
3,425
|
|
|||
Asia
|
4,149
|
|
|
3,196
|
|
|
2,886
|
|
|||
Latin America & Canada
|
1,002
|
|
|
938
|
|
|
1,085
|
|
|||
Amortization of intangibles
|
(88
|
)
|
|
(74
|
)
|
|
(82
|
)
|
|||
General corporate expenses
|
(164
|
)
|
|
(161
|
)
|
|
(162
|
)
|
|||
Less:
|
|
|
|
|
|
||||||
Equity (income)/loss in unconsolidated subsidiaries, net
|
(59
|
)
|
|
(94
|
)
|
|
(105
|
)
|
|||
Operating income
|
11,503
|
|
|
10,815
|
|
|
10,623
|
|
|||
Interest expense, net
|
(914
|
)
|
|
(891
|
)
|
|
(1,008
|
)
|
|||
Earnings before income taxes
|
$
|
10,589
|
|
|
$
|
9,924
|
|
|
$
|
9,615
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Depreciation expense:
|
|
|
|
|
|
||||||
European Union
|
$
|
213
|
|
|
$
|
184
|
|
|
$
|
184
|
|
Eastern Europe, Middle East & Africa
|
164
|
|
|
150
|
|
|
163
|
|
|||
Asia
|
313
|
|
|
247
|
|
|
230
|
|
|||
Latin America & Canada
|
85
|
|
|
79
|
|
|
85
|
|
|||
|
775
|
|
|
660
|
|
|
662
|
|
|||
Other
|
12
|
|
|
9
|
|
|
10
|
|
|||
Total depreciation expense
|
$
|
787
|
|
|
$
|
669
|
|
|
$
|
672
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Capital expenditures:
|
|
|
|
|
|
||||||
European Union
|
$
|
956
|
|
|
$
|
665
|
|
|
$
|
497
|
|
Eastern Europe, Middle East & Africa
|
182
|
|
|
223
|
|
|
147
|
|
|||
Asia
|
227
|
|
|
180
|
|
|
185
|
|
|||
Latin America & Canada
|
175
|
|
|
103
|
|
|
130
|
|
|||
|
1,540
|
|
|
1,171
|
|
|
959
|
|
|||
Other
|
8
|
|
|
1
|
|
|
1
|
|
|||
Total capital expenditures
|
$
|
1,548
|
|
|
$
|
1,172
|
|
|
$
|
960
|
|
|
At December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Long-lived assets:
|
|
|
|
|
|
||||||
European Union
|
$
|
4,130
|
|
|
$
|
3,282
|
|
|
$
|
3,129
|
|
Eastern Europe, Middle East & Africa
|
976
|
|
|
866
|
|
|
743
|
|
|||
Asia
|
2,078
|
|
|
1,916
|
|
|
1,743
|
|
|||
Latin America & Canada
|
885
|
|
|
765
|
|
|
605
|
|
|||
Total long-lived assets
|
8,069
|
|
|
6,829
|
|
|
6,220
|
|
|||
Other
|
1,126
|
|
|
750
|
|
|
644
|
|
|||
Total property, plant and equipment, net and Other assets
|
$
|
9,195
|
|
|
$
|
7,579
|
|
|
$
|
6,864
|
|
Note 13.
|
|
Pension
(1)
|
|
Postretirement
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Benefit obligation at January 1,
|
$
|
8,387
|
|
|
$
|
8,086
|
|
|
$
|
227
|
|
|
$
|
211
|
|
Service cost
|
208
|
|
|
207
|
|
|
4
|
|
|
3
|
|
||||
Interest cost
|
108
|
|
|
146
|
|
|
8
|
|
|
9
|
|
||||
Benefits paid
|
(226
|
)
|
|
(240
|
)
|
|
(10
|
)
|
|
(10
|
)
|
||||
Settlement and curtailment
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Actuarial losses (gains)
|
(93
|
)
|
|
427
|
|
|
12
|
|
|
15
|
|
||||
Currency
|
621
|
|
|
(329
|
)
|
|
7
|
|
|
(2
|
)
|
||||
Other
|
23
|
|
|
91
|
|
|
—
|
|
|
1
|
|
||||
Benefit obligation at December 31,
|
9,028
|
|
|
8,387
|
|
|
248
|
|
|
227
|
|
||||
Fair value of plan assets at January 1,
|
6,457
|
|
|
6,404
|
|
|
|
|
|
||||||
Actual return on plan assets
|
742
|
|
|
322
|
|
|
|
|
|
||||||
Employer contributions
|
66
|
|
|
191
|
|
|
|
|
|
||||||
Employee contributions
|
40
|
|
|
39
|
|
|
|
|
|
||||||
Benefits paid
|
(226
|
)
|
|
(240
|
)
|
|
|
|
|
||||||
Settlement and curtailment
|
—
|
|
|
—
|
|
|
|
|
|
||||||
Currency
|
519
|
|
|
(259
|
)
|
|
|
|
|
||||||
Fair value of plan assets at December 31,
|
7,598
|
|
|
6,457
|
|
|
|
|
|
||||||
Net pension and postretirement liability recognized at December 31,
|
$
|
(1,430
|
)
|
|
$
|
(1,930
|
)
|
|
$
|
(248
|
)
|
|
$
|
(227
|
)
|
|
Pension
|
|
Postretirement
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Other assets
|
$
|
47
|
|
|
$
|
33
|
|
|
|
|
|
||||
Accrued liabilities — employment costs
|
(26
|
)
|
|
(23
|
)
|
|
$
|
(10
|
)
|
|
$
|
(10
|
)
|
||
Long-term employment costs
|
(1,451
|
)
|
|
(1,940
|
)
|
|
(238
|
)
|
|
(217
|
)
|
||||
|
$
|
(1,430
|
)
|
|
$
|
(1,930
|
)
|
|
$
|
(248
|
)
|
|
$
|
(227
|
)
|
|
Pension
|
|
Postretirement
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Discount rate
|
1.51
|
%
|
|
1.52
|
%
|
|
3.79
|
%
|
|
3.68
|
%
|
Rate of compensation increase
|
1.65
|
|
|
1.68
|
|
|
|
|
|
||
Health care cost trend rate assumed for next year
|
|
|
|
|
6.17
|
|
|
7.15
|
|
||
Ultimate trend rate
|
|
|
|
|
4.62
|
|
|
5.08
|
|
||
Year that rate reaches the ultimate trend rate
|
|
|
|
|
2029
|
|
2029
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
Service cost
|
$
|
208
|
|
|
$
|
207
|
|
|
$
|
205
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
4
|
|
Interest cost
|
108
|
|
|
146
|
|
|
156
|
|
|
8
|
|
|
9
|
|
|
9
|
|
||||||
Expected return on plan assets
|
(326
|
)
|
|
(346
|
)
|
|
(340
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses
|
186
|
|
|
186
|
|
|
194
|
|
|
5
|
|
|
2
|
|
|
4
|
|
||||||
Prior service cost
|
6
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlement and curtailment
|
6
|
|
|
4
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic pension and postretirement costs
|
$
|
188
|
|
|
$
|
201
|
|
|
$
|
222
|
|
|
$
|
17
|
|
|
$
|
14
|
|
|
$
|
17
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||
Discount rate - service cost
|
1.68
|
%
|
|
1.81
|
%
|
|
2.04
|
%
|
|
3.68
|
%
|
|
4.45
|
%
|
|
4.20
|
%
|
Discount rate - interest cost
|
1.27
|
|
|
1.81
|
|
|
2.04
|
|
|
3.68
|
|
|
4.45
|
|
|
4.20
|
|
Expected rate of return on plan assets
|
4.80
|
|
|
5.36
|
|
|
5.38
|
|
|
|
|
|
|
|
|||
Rate of compensation increase
|
1.68
|
|
|
2.03
|
|
|
2.12
|
|
|
|
|
|
|
|
|||
Health care cost trend rate
|
|
|
|
|
|
|
7.15
|
|
|
6.23
|
|
|
6.62
|
|
Asset Category
(in millions)
|
At December 31, 2017
|
|
Quoted Prices
In Active Markets for Identical Assets/Liabilities (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||
Cash and cash equivalents
|
$
|
17
|
|
|
$
|
17
|
|
|
|
|
|
|
|
||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. securities
|
146
|
|
|
146
|
|
|
|
|
|
|
|
||||
International securities
|
518
|
|
|
518
|
|
|
|
|
|
|
|
||||
Investment funds
(a)
|
6,219
|
|
|
4,191
|
|
|
$
|
2,028
|
|
|
|
|
|||
International government bonds
|
119
|
|
|
119
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
247
|
|
|
247
|
|
|
|
|
|
|
|
||||
Other
|
22
|
|
|
22
|
|
|
|
|
|
|
|
||||
Total assets in the fair value hierarchy
|
$
|
7,288
|
|
|
$
|
5,260
|
|
|
$
|
2,028
|
|
|
$
|
—
|
|
Investment funds measured at net asset value
(b)
|
310
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,598
|
|
|
|
|
|
|
|
Asset Category
(in millions)
|
At December 31, 2016
|
|
Quoted Prices
In Active Markets for Identical Assets/Liabilities (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
8
|
|
|
|
|
|
|
|
||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. securities
|
131
|
|
|
131
|
|
|
|
|
|
|
|
||||
International securities
|
432
|
|
|
432
|
|
|
|
|
|
|
|
||||
Investment funds
(a)
|
5,270
|
|
|
3,530
|
|
|
$
|
1,740
|
|
|
|
|
|||
International government bonds
|
309
|
|
|
309
|
|
|
|
|
|
|
|
||||
Other
|
10
|
|
|
10
|
|
|
|
|
|
|
|
||||
Total assets in the fair value hierarchy
|
$
|
6,160
|
|
|
$
|
4,420
|
|
|
$
|
1,740
|
|
|
$
|
—
|
|
Investment funds measured at net asset value
(b)
|
297
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
6,457
|
|
|
|
|
|
|
|
|
One-Percentage-Point Increase
|
|
|
One-Percentage-Point Decrease
|
|
Effect on total service and interest cost
|
21.7
|
%
|
|
(16.7
|
)%
|
Effect on postretirement benefit obligation
|
16.3
|
|
|
(13.0
|
)
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Net losses
|
$
|
(2,624
|
)
|
|
$
|
(80
|
)
|
|
$
|
(617
|
)
|
|
$
|
(3,321
|
)
|
Prior service cost
|
(35
|
)
|
|
4
|
|
|
—
|
|
|
(31
|
)
|
||||
Net transition obligation
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Deferred income taxes
|
327
|
|
|
28
|
|
|
186
|
|
|
541
|
|
||||
Losses to be amortized
|
$
|
(2,337
|
)
|
|
$
|
(48
|
)
|
|
$
|
(431
|
)
|
|
$
|
(2,816
|
)
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Net losses
|
$
|
(3,314
|
)
|
|
$
|
(73
|
)
|
|
$
|
(713
|
)
|
|
$
|
(4,100
|
)
|
Prior service cost
|
(53
|
)
|
|
4
|
|
|
—
|
|
|
(49
|
)
|
||||
Net transition obligation
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Deferred income taxes
|
350
|
|
|
24
|
|
|
215
|
|
|
589
|
|
||||
Losses to be amortized
|
$
|
(3,022
|
)
|
|
$
|
(45
|
)
|
|
$
|
(498
|
)
|
|
$
|
(3,565
|
)
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Net losses
|
$
|
(3,074
|
)
|
|
$
|
(61
|
)
|
|
$
|
(710
|
)
|
|
$
|
(3,845
|
)
|
Prior service cost
|
(40
|
)
|
|
5
|
|
|
—
|
|
|
(35
|
)
|
||||
Net transition obligation
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||
Deferred income taxes
|
320
|
|
|
20
|
|
|
213
|
|
|
553
|
|
||||
Losses to be amortized
|
$
|
(2,799
|
)
|
|
$
|
(36
|
)
|
|
$
|
(497
|
)
|
|
$
|
(3,332
|
)
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Amounts transferred to earnings as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
$
|
175
|
|
|
$
|
5
|
|
|
$
|
68
|
|
|
$
|
248
|
|
Prior service cost
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
Other income/expense:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
Prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Deferred income taxes
|
(10
|
)
|
|
(1
|
)
|
|
(20
|
)
|
|
(31
|
)
|
||||
|
176
|
|
|
4
|
|
|
48
|
|
|
228
|
|
||||
Other movements during the year:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
509
|
|
|
(12
|
)
|
|
28
|
|
|
525
|
|
||||
Prior service cost
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||
Deferred income taxes
|
(13
|
)
|
|
5
|
|
|
(9
|
)
|
|
(17
|
)
|
||||
|
509
|
|
|
(7
|
)
|
|
19
|
|
|
521
|
|
||||
Total movements in other comprehensive earnings (losses)
|
$
|
685
|
|
|
$
|
(3
|
)
|
|
$
|
67
|
|
|
$
|
749
|
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Amounts transferred to earnings as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
$
|
193
|
|
|
$
|
2
|
|
|
$
|
62
|
|
|
$
|
257
|
|
Prior service cost
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
Other income/expense:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Deferred income taxes
|
(26
|
)
|
|
—
|
|
|
(17
|
)
|
|
(43
|
)
|
||||
|
177
|
|
|
2
|
|
|
45
|
|
|
224
|
|
||||
Other movements during the year:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
(437
|
)
|
|
(15
|
)
|
|
(65
|
)
|
|
(517
|
)
|
||||
Prior service cost
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
||||
Deferred income taxes
|
55
|
|
|
4
|
|
|
19
|
|
|
78
|
|
||||
|
(400
|
)
|
|
(11
|
)
|
|
(46
|
)
|
|
(457
|
)
|
||||
Total movements in other comprehensive earnings (losses)
|
$
|
(223
|
)
|
|
$
|
(9
|
)
|
|
$
|
(1
|
)
|
|
$
|
(233
|
)
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Amounts transferred to earnings as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
$
|
194
|
|
|
$
|
4
|
|
|
$
|
69
|
|
|
$
|
267
|
|
Prior service cost
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Other income/expense:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Prior service cost
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Deferred income taxes
|
(26
|
)
|
|
(2
|
)
|
|
(20
|
)
|
|
(48
|
)
|
||||
|
176
|
|
|
2
|
|
|
49
|
|
|
227
|
|
||||
Other movements during the year:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
(510
|
)
|
|
12
|
|
|
(58
|
)
|
|
(556
|
)
|
||||
Deferred income taxes
|
4
|
|
|
(4
|
)
|
|
17
|
|
|
17
|
|
||||
|
(506
|
)
|
|
8
|
|
|
(41
|
)
|
|
(539
|
)
|
||||
Total movements in other comprehensive earnings (losses)
|
$
|
(330
|
)
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
(312
|
)
|
Note 14.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Research and development expense
|
$
|
453
|
|
|
$
|
429
|
|
|
$
|
423
|
|
Advertising expense
|
$
|
830
|
|
|
$
|
405
|
|
|
$
|
448
|
|
Foreign currency net transaction losses
|
$
|
49
|
|
|
$
|
272
|
|
|
$
|
102
|
|
Interest expense
|
$
|
1,096
|
|
|
$
|
1,069
|
|
|
$
|
1,132
|
|
Interest income
|
(182
|
)
|
|
(178
|
)
|
|
(124
|
)
|
|||
Interest expense, net
|
$
|
914
|
|
|
$
|
891
|
|
|
$
|
1,008
|
|
Rent expense
|
$
|
313
|
|
|
$
|
284
|
|
|
$
|
286
|
|
(in millions)
|
|
||
2018
|
$
|
179
|
|
2019
|
125
|
|
|
2020
|
94
|
|
|
2021
|
58
|
|
|
2022
|
37
|
|
|
Thereafter
|
356
|
|
|
|
$
|
849
|
|
Note 15.
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
|
|
Fair
Value
|
|
|
|
Fair
Value
|
||||||||||||
(in millions)
|
Balance Sheet Classification
|
|
2017
|
|
2016
|
|
Balance Sheet Classification
|
|
2017
|
|
2016
|
||||||||
Foreign exchange contracts designated as hedging instruments
|
Other current
assets
|
|
$
|
84
|
|
|
$
|
207
|
|
|
Other accrued
liabilities
|
|
$
|
197
|
|
|
$
|
66
|
|
|
Other assets
|
|
34
|
|
|
436
|
|
|
Other liabilities
|
|
880
|
|
|
36
|
|
||||
Foreign exchange contracts not designated as hedging instruments
|
Other current
assets
|
|
22
|
|
|
161
|
|
|
Other accrued
liabilities
|
|
37
|
|
|
61
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other assets
|
|
—
|
|
|
9
|
|
|
Other liabilities
|
|
14
|
|
|
—
|
|
||||
Total derivatives
|
|
|
$
|
140
|
|
|
$
|
813
|
|
|
|
|
$
|
1,128
|
|
|
$
|
163
|
|
(pre-tax, millions)
|
For the Year Ended December 31,
|
||||||||||||||||||||||||
|
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives
|
|
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
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
|
|
2017
|
|
2016
|
2015
|
|
||||||||||||
Derivatives in Cash Flow Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
(52
|
)
|
|
$
|
12
|
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Net revenues
|
|
$
|
60
|
|
|
$
|
(38
|
)
|
$
|
149
|
|
|
||||||
|
|
|
|
|
|
|
Cost of sales
|
|
1
|
|
|
46
|
|
(3
|
)
|
|
|||||||||
|
|
|
|
|
|
|
Marketing, administration and research costs
|
|
(7
|
)
|
|
(11
|
)
|
1
|
|
|
|||||||||
|
|
|
|
|
|
|
Interest expense, net
|
|
(41
|
)
|
|
(30
|
)
|
(31
|
)
|
|
|||||||||
Derivatives in Net Investment Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
(1,644
|
)
|
|
296
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|||||||||
Total
|
$
|
(1,696
|
)
|
|
$
|
308
|
|
|
$
|
296
|
|
|
|
|
$
|
13
|
|
|
$
|
(33
|
)
|
$
|
116
|
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Gain as of January 1,
|
$
|
97
|
|
|
$
|
59
|
|
|
$
|
123
|
|
Derivative (gains)/losses transferred to earnings
|
(11
|
)
|
|
30
|
|
|
(102
|
)
|
|||
Change in fair value
|
(44
|
)
|
|
8
|
|
|
38
|
|
|||
Gain as of December 31,
|
$
|
42
|
|
|
$
|
97
|
|
|
$
|
59
|
|
Note 16.
|
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
December 31, 2017 |
|
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
|
$
|
140
|
|
|
$
|
—
|
|
|
$
|
140
|
|
|
$
|
—
|
|
Pension plan assets
|
7,288
|
|
|
5,260
|
|
|
2,028
|
|
|
—
|
|
||||
Total assets in fair value hierarchy
|
$
|
7,428
|
|
|
$
|
5,260
|
|
|
$
|
2,168
|
|
|
$
|
—
|
|
Pension plan assets measured at net asset value
(a)
|
310
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,738
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Debt
|
$
|
35,856
|
|
|
$
|
35,685
|
|
|
$
|
171
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
1,128
|
|
|
—
|
|
|
1,128
|
|
|
—
|
|
||||
Total liabilities
|
$
|
36,984
|
|
|
$
|
35,685
|
|
|
$
|
1,299
|
|
|
$
|
—
|
|
(in millions)
|
Fair Value At
December 31, 2016 |
|
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
|
$
|
813
|
|
|
$
|
—
|
|
|
$
|
813
|
|
|
$
|
—
|
|
Pension plan assets
|
6,160
|
|
|
4,420
|
|
|
1,740
|
|
|
—
|
|
||||
Total assets in fair value hierarchy
|
$
|
6,973
|
|
|
$
|
4,420
|
|
|
$
|
2,553
|
|
|
$
|
—
|
|
Pension plan assets measured at net asset value
(a)
|
297
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,270
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Debt
|
$
|
30,192
|
|
|
$
|
29,756
|
|
|
$
|
436
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
163
|
|
|
—
|
|
|
163
|
|
|
—
|
|
||||
Total liabilities
|
$
|
30,355
|
|
|
$
|
29,756
|
|
|
$
|
599
|
|
|
$
|
—
|
|
Note 17.
|
(Losses) Earnings
|
At December 31,
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Currency translation adjustments
|
$
|
(5,761
|
)
|
|
$
|
(6,091
|
)
|
|
$
|
(6,129
|
)
|
Pension and other benefits
|
(2,816
|
)
|
|
(3,565
|
)
|
|
(3,332
|
)
|
|||
Derivatives accounted for as hedges
|
42
|
|
|
97
|
|
|
59
|
|
|||
Total accumulated other comprehensive losses
|
$
|
(8,535
|
)
|
|
$
|
(9,559
|
)
|
|
$
|
(9,402
|
)
|
Note 18.
|
Type of Case
|
|
Number of Cases Pending as of February 9, 2018
|
|
Number of Cases Pending as of December 31, 2016
|
|
Number of Cases Pending as of December 31, 2015
|
|||
Individual Smoking and Health Cases
|
|
57
|
|
|
64
|
|
|
68
|
|
Smoking and Health Class Actions
|
|
11
|
|
|
11
|
|
|
11
|
|
Health Care Cost Recovery Actions
|
|
16
|
|
|
16
|
|
|
16
|
|
Label-Related Class Actions
|
|
1
|
|
|
—
|
|
|
—
|
|
Individual Label-Related Cases
|
|
1
|
|
|
3
|
|
|
3
|
|
Public Civil Actions
|
|
2
|
|
|
2
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
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. In April 2004, the court awarded “moral damages” of R$1,000 (approximately $305) 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 assess 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.
|
|
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 appealed the decision. In February 2015, the appellate court unanimously dismissed plaintiff's appeal. In September 2015, plaintiff appealed to the Superior Court of Justice. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that plaintiff did not have standing to bring the lawsuit. This appeal is still pending.
|
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
May 27, 2015
|
|
Canada/Cecilia Létourneau
|
|
Class Action
|
|
On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the
Létourneau
class on liability and awarded a total of CAD 131 million (approximately $104 million) in punitive damages, allocating CAD 46 million (approximately $37 million) to our subsidiary. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days. The court did not order the payment of compensatory damages.
|
|
In June 2015, our subsidiary commenced the appellate process with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust notwithstanding appeal. In July 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make the payment into a trust. In August 2015, plaintiffs filed a motion for security with the Court of Appeal covering both the
Létourneau
case and the
Blais
case described below. In October 2015, the Court of Appeal granted the motion and ordered our subsidiary to furnish security totaling CAD 226 million (approximately $180 million) to cover both the
Létourneau
and
Blais
cases. The hearing for the merits appeal took place in November 2016. (See below for further detail.)
|
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
May 27, 2015
|
|
Canada/Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais
|
|
Class Action
|
|
On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the
Blais
class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $12.3 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion including pre-judgment interest (approximately $2.5 billion)). The trial court awarded CAD 90,000 (approximately $71,500) in punitive damages, allocating CAD 30,000 (approximately $23,900) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $795 million) of the compensatory damage award, CAD 200 million (approximately $159 million) of which is our subsidiary’s portion, into a trust within 60 days.
|
|
In June 2015, our subsidiary commenced the appellate process with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust notwithstanding appeal. In July 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make the payment into a trust. In August 2015, plaintiffs filed a motion for security with the Court of Appeal. In October 2015, the Court of Appeal granted the motion and ordered our subsidiary to furnish security totaling, together with the
Létourneau
case, CAD 226 million (approximately $180 million). The hearing for the merits appeal took place in November 2016. (See below for further detail.)
|
Date
|
|
Location of
Court/Name of Plaintiff |
|
Type of
Case |
|
Verdict
|
|
Post-Trial
Developments |
August 5, 2016
|
|
Argentina/Hugo Lespada
|
|
Individual Action
|
|
On August 5, 2016, the Civil Court No. 14 - Mar del Plata, issued a verdict in favor of plaintiff, an individual smoker, and awarded him ARS 110,000 (approximately $5,558), plus interest, in compensatory and moral damages.
The trial court found that our subsidiary failed to warn plaintiff of the risk of becoming addicted to cigarettes. |
|
On August 23, 2016, our subsidiary filed its notice of appeal. On October 31, 2017, the Civil and Commercial Court of Appeals of Mar del Plata ruled that plaintiff's claim was barred by the statute of limitations and it reversed the trial court's decision. On November 28, 2017, plaintiff filed an extraordinary appeal of the reversal of the trial court's decision to the Supreme Court of the Province of Buenos Aires.
|
•
|
57
cases brought by individual plaintiffs in Argentina (
30
), Brazil (
10
), Canada (
4
), Chile (
5
), Costa Rica (
1
), Italy (
3
), the Philippines (
1
), Russia (
1
), Turkey (
1
) and Scotland (
1
), compared with
64
such cases on
December 31, 2016
, and
68
cases on
December 31, 2015
; and
|
•
|
11
cases brought on behalf of classes of individual plaintiffs in Brazil (
2
) and Canada (
9
), compared with
11
such cases on
December 31, 2016
, and
11
such cases on
December 31, 2015
.
|
Note 19.
|
(in millions)
|
Gross Amounts Recognized
|
Gross Amount Offset in the Consolidated Balance Sheet
|
Net Amounts Presented in the Consolidated Balance Sheet
|
Gross Amounts Not Offset in the
Consolidated
Balance Sheet
|
Net Amount
|
||||||||||||||
Financial Instruments
|
Cash Collateral Received/Pledged
|
||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
At December 31, 2017
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
140
|
|
$
|
—
|
|
$
|
140
|
|
$
|
(50
|
)
|
$
|
(78
|
)
|
$
|
12
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
1,128
|
|
$
|
—
|
|
$
|
1,128
|
|
$
|
(50
|
)
|
$
|
(1,004
|
)
|
$
|
74
|
|
|
At December 31, 2016
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
813
|
|
$
|
—
|
|
$
|
813
|
|
$
|
(126
|
)
|
$
|
(607
|
)
|
$
|
80
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
163
|
|
$
|
—
|
|
$
|
163
|
|
$
|
(126
|
)
|
$
|
(31
|
)
|
$
|
6
|
|
Note 20.
|
Note 21.
|
Note 22.
|
|
2017 Quarters
|
||||||||||||||
(in millions, except per share data)
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
||||||||
Net revenues
|
$
|
16,556
|
|
|
$
|
19,319
|
|
|
$
|
20,638
|
|
|
$
|
21,585
|
|
Gross profit
|
$
|
3,887
|
|
|
$
|
4,398
|
|
|
$
|
4,738
|
|
|
$
|
5,293
|
|
Net earnings attributable to PMI
|
$
|
1,590
|
|
|
$
|
1,781
|
|
|
$
|
1,970
|
|
|
$
|
694
|
|
Per share data:
|
|
|
|
|
|
|
|
||||||||
Basic EPS
|
$
|
1.02
|
|
|
$
|
1.14
|
|
|
$
|
1.27
|
|
|
$
|
0.44
|
|
Diluted EPS
|
$
|
1.02
|
|
|
$
|
1.14
|
|
|
$
|
1.27
|
|
|
$
|
0.44
|
|
Dividends declared
|
$
|
1.04
|
|
|
$
|
1.04
|
|
|
$
|
1.07
|
|
|
$
|
1.07
|
|
Market price:
|
|
|
|
|
|
|
|
||||||||
— High
|
$
|
114.65
|
|
|
$
|
123.55
|
|
|
$
|
121.69
|
|
|
$
|
115.28
|
|
— Low
|
$
|
89.97
|
|
|
$
|
108.56
|
|
|
$
|
109.31
|
|
|
$
|
101.58
|
|
|
|
||||||||||||||
|
2016 Quarters
|
||||||||||||||
(in millions, except per share data)
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
||||||||
Net revenues
|
$
|
16,788
|
|
|
$
|
19,041
|
|
|
$
|
19,935
|
|
|
$
|
19,189
|
|
Gross profit
|
$
|
3,987
|
|
|
$
|
4,285
|
|
|
$
|
4,550
|
|
|
$
|
4,472
|
|
Net earnings attributable to PMI
|
$
|
1,530
|
|
|
$
|
1,788
|
|
|
$
|
1,938
|
|
|
$
|
1,711
|
|
Per share data:
|
|
|
|
|
|
|
|
||||||||
Basic EPS
|
$
|
0.98
|
|
|
$
|
1.15
|
|
|
$
|
1.25
|
|
|
$
|
1.10
|
|
Diluted EPS
|
$
|
0.98
|
|
|
$
|
1.15
|
|
|
$
|
1.25
|
|
|
$
|
1.10
|
|
Dividends declared
|
$
|
1.02
|
|
|
$
|
1.02
|
|
|
$
|
1.04
|
|
|
$
|
1.04
|
|
Market price:
|
|
|
|
|
|
|
|
||||||||
— High
|
$
|
99.53
|
|
|
$
|
102.55
|
|
|
$
|
104.20
|
|
|
$
|
98.21
|
|
— Low
|
$
|
84.46
|
|
|
$
|
95.91
|
|
|
$
|
96.95
|
|
|
$
|
86.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ BARRY J. MISTHAL
|
|
/S/ DR. MICHAEL ABRESCH
|
Barry J. Misthal
|
|
Dr. Michael Abresch
|
|
|
|
Lausanne, Switzerland
|
|
|
February 13, 2018
|
|
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of PMI;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;
|
•
|
provide reasonable assurance that receipts and expenditures of PMI are being made only in accordance with the authorization of management and directors of PMI; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
.
|
Name
|
|
Office
|
|
Age
|
|
|
André Calantzopoulos
|
|
Chief Executive Officer
|
|
60
|
|
|
Massimo Andolina
|
|
Senior Vice President, Operations
|
|
49
|
|
|
Drago Azinovic
|
|
President, Middle East & Africa Region and PMI Duty Free
|
|
55
|
|
|
Werner Barth
|
|
Senior Vice President, Commercial
|
|
53
|
|
|
Charles Bendotti
|
|
Senior Vice President, People and Culture
|
|
45
|
|
|
Patrick Brunel
|
|
Chief Information Officer
|
|
52
|
|
|
Frank de Rooij
|
|
Vice President, Treasury and Corporate Finance
|
|
52
|
|
|
Frederic de Wilde
|
|
President, European Union Region
|
|
50
|
|
|
Marc S. Firestone
|
|
President, External Affairs and General Counsel
|
|
58
|
|
|
Paul Janelle
|
|
Vice President, Corporate Planning and Business Development
|
|
52
|
|
|
Stacey Kennedy
|
|
President, South and Southeast Asia Region
|
|
45
|
|
|
Martin G. King
|
|
Chief Financial Officer
|
|
53
|
|
|
Andreas Kurali
|
|
Vice President and Controller
|
|
52
|
|
|
Marco Mariotti
|
|
President, Eastern Europe Region
|
|
53
|
|
|
Jacek Olczak
|
|
Chief Operating Officer
|
|
53
|
|
|
Jeanne Pollès
|
|
President, Latin America & Canada Region
|
|
52
|
|
|
Paul Riley
|
|
President, East Asia and Australia Region
|
|
52
|
|
|
Jaime Suarez
|
|
Chief Digital Officer
|
|
44
|
|
|
Jerry E. Whitson
|
|
Deputy General Counsel and Corporate Secretary
|
|
62
|
|
|
Miroslaw Zielinski
|
|
President, Science and Innovation
|
|
56
|
|
|
Item 11.
|
Executive Compensation.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
|
Number of Securities
to be Issued upon
Exercise of Outstanding
Options and Vesting of RSUs and PSUs
(a)
|
|
Weighted Average
Exercise Price of
Outstanding Options
(b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding Securities
reflected in column (a))
(c)
|
|
|||
Equity compensation plans
approved by stockholders
|
5,254,460
(1)
|
|
$
|
—
|
|
|
25,991,850
|
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Item 14.
|
Principal Accounting Fees and Services
.
|
Item 15.
|
Exhibits and Financial Statement Schedules
.
|
|
Page
|
Consolidated Balance Sheets at December 31, 2017 and 2016
|
69 - 70
|
Consolidated Statements of Earnings for the years ended December 31, 2017, 2016 and 2015
|
71
|
Consolidated Statements of Comprehensive Earnings for the years ended December 31,
2017, 2016 and 2015
|
72
|
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended
December 31, 2017, 2016 and 2015
|
73
|
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016
and 2015
|
74 - 75
|
Notes to Consolidated Financial Statements
|
76 - 118
|
Report of Independent Registered Public Accounting Firm
|
119 - 120
|
Report of Management on Internal Control Over Financial Reporting
|
121
|
2.1
|
|
—
|
|
|
3.1
|
|
—
|
|
|
3.2
|
|
—
|
|
|
4.1
|
|
—
|
|
|
4.2
|
|
—
|
|
|
|
|
|
|
4.6
|
|
—
|
|
The Registrant agrees to furnish copies of any instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the Registrant and its consolidated subsidiaries to the Commission upon request.
|
10.1
|
|
—
|
|
|
10.2
|
|
—
|
|
|
10.3
|
|
—
|
|
|
10.4
|
|
__
|
|
|
10.5
|
|
__
|
|
|
10.6
|
|
__
|
|
|
10.7
|
|
__
|
|
|
10.8
|
|
__
|
|
|
10.9
|
|
__
|
|
|
10.10
|
|
__
|
|
|
10.11
|
|
__
|
|
|
10.12
|
|
—
|
|
|
10.13
|
|
—
|
|
|
10.14
|
|
—
|
|
|
10.15
|
|
—
|
|
|
10.16
|
|
—
|
|
|
10.17
|
|
—
|
|
|
10.18
|
|
—
|
|
10.19
|
|
—
|
|
|
10.20
|
|
—
|
|
10.34
|
|
—
|
|
|
10.35
|
|
—
|
|
|
10.36
|
|
—
|
|
|
10.37
|
|
—
|
|
|
10.38
|
|
—
|
|
|
10.39
|
|
—
|
|
|
10.40
|
|
—
|
|
|
10.41
|
|
—
|
|
|
10.42
|
|
—
|
|
|
10.43
|
|
—
|
|
|
10.44
|
|
—
|
|
|
10.45
|
|
—
|
|
|
10.46
|
|
—
|
|
|
10.47
|
|
—
|
|
|
10.48
|
|
—
|
|
|
10.49
|
|
—
|
|
|
10.50
|
|
—
|
|
|
10.51
|
|
—
|
|
12
|
|
—
|
|
|
21
|
|
—
|
|
|
23
|
|
—
|
|
|
24
|
|
—
|
|
|
31.1
|
|
—
|
|
|
31.2
|
|
—
|
|
|
32.1
|
|
—
|
|
|
32.2
|
|
—
|
|
|
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.
|
*
|
Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.
|
PHILIP MORRIS INTERNATIONAL INC.
|
|
|
|
By:
|
/s/ A
NDRÉ
C
ALANTZOPOULOS
|
|
(André Calantzopoulos
Chief Executive Officer)
|
Signature
|
Title
|
Date
|
|
|
|
/s/ ANDRÉ CALANTZOPOULOS
|
Chief Executive Officer
|
February 13, 2018
|
(André Calantzopoulos)
|
||
/s/ MARTIN G. KING
|
Chief Financial Officer
|
February 13, 2018
|
(Martin G. King)
|
||
/s/ ANDREAS KURALI
|
Vice President and Controller
|
February 13, 2018
|
(Andreas Kurali)
|
||
*HAROLD BROWN,
LOUIS C. CAMILLERI,
MASSIMO FERRAGAMO,
WERNER GEISSLER,
JENNIFER LI,
JUN MAKIHARA,
SERGIO MARCHIONNE,
KALPANA MORPARIA,
LUCIO A. NOTO,
FREDERIK PAULSEN,
ROBERT B. POLET,
STEPHEN M. WOLF
|
Directors
|
|
*By:
|
/s/ ANDRÉ CALANTZOPOULOS
|
|
February 13, 2018
|
|
(André Calantzopoulos
Attorney-in-fact)
|
|
(a)
|
“Award” means the grant under the Plan of Common Stock.
|
(b)
|
“Board” means the Board of Directors of the Company.
|
(c)
|
“Committee” means the Nominating and Corporate Governance Committee of the Board or a subcommittee thereof, any successor thereto or such other committee or subcommittee as may be designated by the Board to administer the Plan.
|
(d)
|
“Common Stock” means the Common Stock of the Company.
|
(e)
|
“Company” means Philip Morris International Inc., a corporation organized under the laws of the Commonwealth of Virginia, or any successor thereto.
|
(f)
|
“Deferred Stock” means an unfunded obligation of the Company, represented by an entry on the books and records of the Company, to issue one share of Common Stock on the date of distribution.
|
(g)
|
“Deferred Stock Account” means the unfunded deferred compensation account established by the Company with respect to each participant who elects to participate in the Deferred Stock Program in accordance with Section 6 of the Plan.
|
(h)
|
“Deferred Stock Program” means the provisions of Section 6 of the Plan that permit participants to defer all or part of any Award.
|
(i)
|
“Fair Market Value” means, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stock on the New York Stock Exchange-Composite Transactions or, if no such sale of Common Stock is reported on such date, the fair market value of the Common Stock as determined by the Committee in good faith.
|
(j)
|
“Non-Employee Director” means each member of the Board who is not a full-time employee of the Company or of any corporation in which the Company owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation, and “eligible Non-Employee Director” has the meaning provided in Section 3 of the Plan.
|
(k)
|
“Plan” means this 2017 Stock Compensation Plan for Non-Employee Directors, as amended from time to time.
|
(l)
|
“Plan Year” means the period commencing at the opening of business on the day on which the Company’s Annual Meeting of Shareholders is held and ending on the day immediately preceding the day on which the Company’s next Annual Meeting of Shareholders is held.
|
(a)
|
Annual Awards. On the first day of each Plan Year, each eligible Non-Employee Director serving as such immediately after the Annual Meeting held on such day shall receive an Award of Common Stock having a Fair Market Value equal to $175,000 (with any fractional share being rounded up to the next whole share) or such other amount as the Committee determines in its discretion. If an eligible Non-Employee Director first becomes a member of the Board on a day other than the first day of a Plan Year, the Committee may, in its discretion, make a pro-rated Award to such eligible Non-Employee Director.
|
(b)
|
Terms of Awards. Awards pursuant to Section 5(a) are eligible for participation in the Deferred Stock Program.
|
(a)
|
Each Plan participant may elect to participate in the Deferred Stock Program with respect to Awards granted under Section 5(a). The Deferred Stock Program shall be administered in accordance with the terms of this Section 6, provided that the Committee may modify the terms of the Deferred Stock Program or may require deferral of the payment of Awards under such rules and procedures as it may establish. Any deferral election shall be made at a time and for such period as shall satisfy the requirements of Internal Revenue Code Section 409A(a)(4).
|
(b)
|
Any election to have the Company establish a Deferred Stock Account shall be made in terms of integral multiples of 25% of the number of shares of Common Stock that the participant otherwise would have been granted on each date of grant, shall be made no later than the last day of the calendar year immediately preceding the date of grant (or in the case of a participant who is first becoming eligible for this Plan and any other Plan required to be aggregated with this Plan under Internal Revenue Code Section 409A and the regulations and other guidance thereunder, no later than 30 days after the participant first becomes eligible and before the date of grant), and shall specify the time and form of distribution of the participant’s Deferred Stock Account in a manner complying with Internal Revenue Code Section 409A(a)(2) and (3). Any such election shall remain in effect for purposes of the Plan until the participant executes (i) a new election applicable to any grants to be made in years after the year in which the new election is made or (ii) an election not to participate in the Deferred Stock Program for grants in such future years. New elections pursuant to clause (i) of the preceding sentence may be made only to the extent permitted under rules and procedures established by the Committee taking into account administrative feasibility and other constraints.
|
(c)
|
The Deferred Stock Account of a participant who elects to participate in the Deferred Stock Program shall be credited with shares of Deferred Stock equal to the number of shares of Common Stock that the participant elected to receive as Deferred Stock. The Deferred Stock Account shall thereafter be credited with amounts equal to the cash dividends that would have been paid had the participant held a number of shares of Common Stock equal to the number of shares of Deferred Stock in the participant’s Deferred Stock Account, and any such amounts shall be treated as invested in additional shares of Deferred Stock.
|
(d)
|
If as a result of adjustments or substitutions in connection with an event described in the second paragraph of Section 4 of this Plan or as a result of the transfer of the transferred accounts, a participant has received or receives with respect to Deferred Stock credited to the participant’s Deferred Stock Account rights or amounts measured by reference to stock other than Common Stock, (i) such rights or amounts shall be treated as subject to elections made, crediting of the participant’s account, and any other matters relating to this Plan in a manner parallel to the treatment of Deferred Stock under the Plan, provided that any crediting of amounts to reflect dividends with respect to such other stock shall be treated as invested in additional Deferred Stock rather than such other stock, and (ii) within 12 months following the event described in Section 4, the participant shall be offered the opportunity to convert the portion of his or her account measured by reference to such other stock to Deferred Stock with the same Fair Market Value (rounded as necessary to reflect fractional shares) as of the date of such conversion.
|
(e)
|
Any election by a participant for his or her Deferred Stock Account to be paid upon his or her separation from service as a member of the Board shall be applied in accordance with Internal Revenue Code Section 409A. No separation from service shall be deemed to occur until the participant ceases to serve on the Board.
|
(f)
|
The Deferred Stock Program shall be administered under such rules and procedures as the Committee may from time to time establish, including rules with respect to elections to defer, beneficiary designations and distributions under the Deferred Stock Program. Notwithstanding anything in this Plan to the contrary, all elections to defer, distributions, and other aspects of the Deferred Stock Program shall be made in accordance with and shall comply with Internal Revenue Code Section 409A and any regulations and other guidance thereunder.
|
(a)
|
The Committee may require each person acquiring shares of Common Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may include any legend that the Committee deems appropriate to reflect any restrictions on transfer.
|
(b)
|
Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements for Non-Employee Directors.
|
(c)
|
Nothing in the Plan shall confer upon any grantee the right to continued service as a member of the Board.
|
(d)
|
No later than the date as of which an amount first becomes includable in the gross income of the participant for income tax purposes with respect to any Award the participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state, local or foreign taxes of any kind that are required by law or applicable regulation to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising from an Award may be settled with Common Stock, including Common Stock that is part of, or is received upon exercise of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company, shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settling of withholding obligations with Common Stock.
|
(e)
|
The terms of this Plan shall be binding upon and shall inure to the benefit of any successor to Philip Morris International Inc. and any permitted successors or assigns of a grantee.
|
(f)
|
The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Recipients of an Award are deemed to submit to the exclusive jurisdiction and venue of the Federal or state courts of Virginia, to resolve any and all issues that may arise out of or relate to the Plan or any Award. Notwithstanding anything in this Plan to the contrary, the Plan shall be construed to reflect the intent of the Company that all elections to defer, distributions, and other aspects of the Plan shall comply with Internal Revenue Code Section 409A and any regulations and other guidance thereunder.
|
(g)
|
If any provision of the Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be enforced and construed as if such provision had not been included.
|
(h)
|
The Plan shall be effective May 3, 2017. Except as otherwise provided by the Board, no Awards shall be made after the Awards made immediately following the 2027 Annual Meeting of Shareholders.
|
PRIVATE & CONFIDENTIAL
|
Mr. Martin King
|
c/o Philip Morris Asia Limited
|
|
Lausanne, October 17, 2017
|
(a)
|
process your personal information for its, and its Affiliates’, business purposes. Those purposes include legal, personnel, administrative and management purposes (including, for example: payroll administration; correspondence; IT systems development, operation and maintenance; building access controls; performance review, and talent management);
|
(b)
|
process your sensitive personal data (for example data relating to health), where this is necessary for the administration of the employment relationship, and is permitted by law (for example, to administer health benefits);
|
(c)
|
make your personal information available to its Affiliates for them to process for their own benefit, for the same purposes as described above;
|
(d)
|
make your personal information available, and to permit the Company’s Affiliates also to make your personal information available:
|
(i)
|
to third parties who provide products or services to the Company or its Affiliates (such as advisers, payroll administrators, and information services providers) for the same purposes as described above; and
|
(ii)
|
to other third parties, where required or permitted by law, including: regulatory authorities; potential or future employers; and governmental or quasi-governmental organisations.
|
a)
|
If they have been generated
within your contractual duties
, they belong to the Company, regardless of whether they are protectable or not, and no specific compensation is due to you by the Company;
|
b)
|
If they have been generated
outside the performance of your contractual duties
, they shall also belong to the Company. In this case, if you make such invention/patent/design, you shall promptly inform the Company thereof in writing. If the Company declares that it wishes to acquire such invention/patent/design, you shall be entitled to an appropriate special compensation, which shall be determined by taking into account all circumstances, such as the business value of the invention, patent or design, the contribution of the Company or its auxiliary persons, the utilization of the Company's installations, as well as your expenses and your position within the Company.
|
/s/ DAMIEN HIROUX
Damien Hiroux
Director Human Resources Switzerland
|
/s/ RALF ZYSK
Ralf Zysk
Vice President Compensation & Benefits
and International Assignments
PMI
|
|
||
|
|
|
||
|
|
|
Read and approved:
|
/s/ MARTIN KING
|
Date:
|
October 18, 2017
|
|
(Martin King)
|
|
|
|
|
For the Years Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Earnings before income taxes
|
$
|
10,589
|
|
|
$
|
9,924
|
|
|
$
|
9,615
|
|
|
$
|
10,650
|
|
|
$
|
12,542
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Dividends from less than 50%
owned affiliates |
120
|
|
|
117
|
|
|
127
|
|
|
107
|
|
|
1
|
|
|||||
Fixed charges
|
1,203
|
|
|
1,166
|
|
|
1,232
|
|
|
1,284
|
|
|
1,216
|
|
|||||
Interest capitalized, net of
amortization |
1
|
|
|
—
|
|
|
(3
|
)
|
|
1
|
|
|
4
|
|
|||||
Earnings available for fixed charges
|
$
|
11,913
|
|
|
$
|
11,207
|
|
|
$
|
10,971
|
|
|
$
|
12,042
|
|
|
$
|
13,763
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest incurred
|
$
|
1,098
|
|
|
$
|
1,071
|
|
|
$
|
1,137
|
|
|
$
|
1,172
|
|
|
$
|
1,105
|
|
Portion of rent expense deemed to
represent interest factor |
105
|
|
|
95
|
|
|
95
|
|
|
112
|
|
|
111
|
|
|||||
Fixed charges
|
$
|
1,203
|
|
|
$
|
1,166
|
|
|
$
|
1,232
|
|
|
$
|
1,284
|
|
|
$
|
1,216
|
|
Ratio of earnings to fixed charges
|
9.9
|
|
|
9.6
|
|
|
8.9
|
|
|
9.4
|
|
|
11.3
|
|
|
|
|
Name
|
|
State or
Country of
Organization
|
|
||
|
||
|
|
|
Compania Colombiana de Tabaco S.A.S.
|
|
Colombia
|
f6 Cigarettenfabrik GmbH & Co. KG
|
|
Germany
|
Leonard Dingler (Proprietary) Limited
|
|
South Africa
|
Limited Liability Company "Philip Morris Sales & Distribution"
|
|
Ukraine
|
Massalin Particulares S.R.L.
|
|
Argentina
|
Papastratos Cigarettes Manufacturing Company S.A.
|
|
Greece
|
Philip Morris Benelux BVBA
|
|
Belgium
|
Philip Morris Brands Sàrl
|
|
Switzerland
|
Philip Morris Brasil Industria e Comercio Ltda.
|
|
Brazil
|
Philip Morris & Company (UK) Limited
|
|
United Kingdom
|
Philip Morris CR a.s.
|
|
Czech Republic
|
Philip Morris Exports Sàrl
|
|
Switzerland
|
Philip Morris Finance SA
|
|
Switzerland
|
Philip Morris Finland Ltd
|
|
Finland
|
Philip Morris Global Brands Inc.
|
|
USA
|
Philip Morris GmbH
|
|
Germany
|
Philip Morris Holland B.V.
|
|
Netherlands
|
Philip Morris Holland Holdings B.V.
|
|
Netherlands
|
Philip Morris International Holdings B.V.
|
|
Netherlands
|
Philip Morris International Management SA
|
|
Switzerland
|
Philip Morris Investments B.V.
|
|
Netherlands
|
Philip Morris Italia S.r.l.
|
|
Italy
|
Philip Morris Japan Limited
|
|
Japan
|
Philip Morris Kazakhstan LLP
|
|
Kazakhstan
|
Philip Morris Korea Inc.
|
|
Korea, Republic of
|
UAB "Philip Morris Lietuva"
|
|
Lithuania
|
Philip Morris Limited
|
|
Australia
|
Philip Morris Manufacturing GmbH
|
|
Germany
|
Philip Morris Manufacturing & Technology Bologna S.p.A.
|
|
Italy
|
Philip Morris Mexico Productos Y Servicios, Sociedad de Responsabilidad Limitada de Capital Variable
|
|
Mexico
|
Philip Morris Mexico, Sociedad Anónima de Capital Variable
|
|
Mexico
|
Philip Morris Misr Limited Liability Company
|
|
Egypt
|
Philip Morris Operations a.d. Nis
|
|
Serbia
|
Philip Morris (Pakistan) Limited
|
|
Pakistan
|
Philip Morris Philippines Manufacturing Inc.
|
|
Philippines
|
Philip Morris Polska Spolka Akcyjna
|
|
Poland
|
Philip Morris Polska Distribution Sp. z.o.o.
|
|
Poland
|
Philip Morris Romania S.R.L.
|
|
Romania
|
Philip Morris Products S.A.
|
|
Switzerland
|
Philip Morris SA Philip Morris Sabanci Pazarlama ve Satis A.S.
|
|
Turkey
|
Limited Liability Company "Philip Morris Sales and Marketing"
|
|
Russia
|
PHILSA Philip Morris Sabanci Sigara ve Tutunculuk Sanayi ve Ticaret A.S.
|
|
Turkey
|
PMFTC Inc.
|
|
Philippines
|
PM Tobakk Norge AS
|
|
Norway
|
PT Hanjaya Mandala Sampoerna Tbk.
|
|
Indonesia
|
PT Philip Morris Indonesia
|
|
Indonesia
|
Rothmans, Benson & Hedges Inc.
|
|
Canada
|
Tabaqueira II, S.A.
|
|
Portugal
|
Tabaqueira - Empresa Industrial de Tabacos, S.A.
|
|
Portugal
|
ZAO "Philip Morris Izhora"
|
|
Russia
|
|
|
|
|
|
/s/ BARRY J. MISTHAL
|
|
|
|
/s/ DR. MICHAEL ABRESCH
|
|
|
|
|
|
Barry J. Misthal
|
|
|
|
Dr. Michael Abresch
|
|
/s/ HAROLD BROWN
|
Dr. Harold Brown
|
|
/s/ LOUIS C. CAMILLERI
|
Louis C. Camilleri
|
|
/s/ MASSIMO FERRAGAMO
|
Massimo Ferragamo
|
|
/s/ WERNER GEISSLER
|
Werner Geissler
|
|
/s/ JENNIFER LI
|
Jennifer Li
|
|
/s/ JUN MAKIHARA
|
Jun Makihara
|
|
/s/ SERGIO MARCHIONNE
|
Sergio Marchionne
|
|
/s/ KALPANA MORPARIA
|
Kalpana Morparia
|
|
/s/ LUCIO A. NOTO
|
Lucio A. Noto
|
|
/s/ FREDERIK PAULSON
|
Frederik Paulson
|
|
/s/ ROBERT B. POLET
|
Robert B. Polet
|
|
/s/ STEPHEN M. WOLF
|
Stephen M. Wolf
|
1.
|
I have reviewed this
annual
report on
Form 10-K
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
annual
report on
Form 10-K
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/ MARTIN G. KING
|
Martin G. King
|
Chief Financial Officer
|
/s/ ANDRÉ CALANTZOPOULOS
|
André Calantzopoulos
|
Chief Executive Officer
|
February 13, 2018
|
/s/ MARTIN G. KING
|
Martin G. King
|
Chief Financial Officer
|
February 13, 2018
|