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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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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2.125% 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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2.000% 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
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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
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New York Stock Exchange
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4.875% Notes due 2043
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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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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, 2019
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Common Stock,
no par value
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1,554,584,344
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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 1, 2019, to be filed with the Securities and Exchange Commission (“SEC”) on or about March 21, 2019.
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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 Region (“EU”) 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 (“EE”) 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 (“ME&A”) 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 (“S&SA”) 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 (“EA&A”) 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 (“LA&C”) 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 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 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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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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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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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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regulation, restrictions or prohibitions 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;
|
•
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encouraging litigation against tobacco companies; and
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•
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excluding tobacco companies from transparent public dialogue regarding public health and other policy matters.
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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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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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Because we have operations in numerous countries, our results may be influenced by economic, regulatory and political developments, natural disasters, pandemics or conflicts.
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•
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We may be unable to anticipate changes in adult consumer preferences.
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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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The financial and business performance of our reduced-risk products is less predictable than our cigarette business.
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•
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We lose revenues as a result of counterfeiting, contraband, cross-border purchases, “illicit whites,” non-tax-paid volume produced by local manufacturers, and counterfeiting of our
IQOS
device and heated tobacco units.
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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 achieve our strategic goals may be impaired if we fail to attract and retain the best global talent.
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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.
|
•
|
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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EE
(1)
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ME&A
|
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S&SA
|
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EA&A
(1)
|
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LA&C
|
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TOTAL
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|||||||
Fully integrated
|
8
|
|
|
5
|
|
|
3
|
|
|
8
|
|
|
1
|
|
|
6
|
|
|
31
|
|
Make-pack
|
2
|
|
|
—
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|
|
—
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|
|
1
|
|
|
—
|
|
|
2
|
|
|
5
|
|
Other
|
3
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
8
|
|
Total
|
13
|
|
|
5
|
|
|
4
|
|
|
10
|
|
|
2
|
|
|
10
|
|
|
44
|
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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
|
|
PMI
|
|
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PMI Peer Group
(1)
|
|
S&P 500 Index
|
December 31, 2013
|
|
$100.00
|
|
|
$100.00
|
|
$100.00
|
December 31, 2014
|
|
$97.90
|
|
|
$107.80
|
|
$113.70
|
December 31, 2015
|
|
$111.00
|
|
|
$116.80
|
|
$115.30
|
December 31, 2016
|
|
$120.50
|
|
|
$118.40
|
|
$129.00
|
December 31, 2017
|
|
$144.50
|
|
|
$140.50
|
|
$157.20
|
December 31, 2018
|
|
$96.50
|
|
|
$127.70
|
|
$150.30
|
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, 2018 –
October 31, 2018 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
November 1, 2018 –
November 30, 2018 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
December 1, 2018 –
December 31, 2018 (1) |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Pursuant to Publicly Announced
Plans or Programs |
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|||
October 1, 2018 –
October 31, 2018 (2) |
|
439
|
|
|
$
|
82.22
|
|
|
|
|
|
|||
November 1, 2018 –
November 30, 2018 (2) |
|
872
|
|
|
$
|
88.80
|
|
|
|
|
|
|||
December 1, 2018 –
December 31, 2018 (2) |
|
1,482
|
|
|
$
|
72.28
|
|
|
|
|
|
|||
For the Quarter Ended
December 31, 2018 |
|
2,793
|
|
|
$
|
79.00
|
|
|
|
|
|
(1)
|
During this reporting period, we did not have an authorized share repurchase program.
|
(2)
|
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.
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues including excise taxes
|
$
|
79,823
|
|
|
$
|
78,098
|
|
|
$
|
74,953
|
|
|
$
|
73,908
|
|
|
$
|
80,106
|
|
Excise taxes on products
|
50,198
|
|
|
49,350
|
|
|
48,268
|
|
|
47,114
|
|
|
50,339
|
|
|||||
Net revenues
(1)
|
29,625
|
|
|
28,748
|
|
|
26,685
|
|
|
26,794
|
|
|
29,767
|
|
|||||
Operating income
(1)
|
11,377
|
|
|
11,581
|
|
|
10,903
|
|
|
10,745
|
|
|
11,787
|
|
|||||
Net earnings attributable to PMI
|
7,911
|
|
|
6,035
|
|
|
6,967
|
|
|
6,873
|
|
|
7,493
|
|
|||||
Basic earnings per share
|
5.08
|
|
|
3.88
|
|
|
4.48
|
|
|
4.42
|
|
|
4.76
|
|
|||||
Diluted earnings per share
|
5.08
|
|
|
3.88
|
|
|
4.48
|
|
|
4.42
|
|
|
4.76
|
|
|||||
Dividends declared per share
|
4.49
|
|
|
4.22
|
|
|
4.12
|
|
|
4.04
|
|
|
3.88
|
|
|||||
Total assets
|
39,801
|
|
|
42,968
|
|
|
36,851
|
|
|
33,956
|
|
|
35,187
|
|
|||||
Long-term debt
(2)
|
26,975
|
|
|
31,334
|
|
|
25,851
|
|
|
25,250
|
|
|
26,929
|
|
|||||
Total debt
|
31,759
|
|
|
34,339
|
|
|
29,067
|
|
|
28,480
|
|
|
29,455
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
|
|
|
|
|
|
•
|
European Union ("EU");
|
•
|
Eastern Europe ("EE");
|
•
|
Middle East & Africa ("ME&A"), which includes our international duty free business;
|
•
|
South & Southeast Asia ("S&SA");
|
•
|
East Asia & Australia ("EA&A"); and
|
•
|
Latin America & Canada ("LA&C").
|
•
|
Net Revenues –
Net revenues of
$29.6 billion
for the
year ended December 31,
2018
,
increased
by
$0.9 billion
, or
3.1%
, from the comparable
2017
amount. The change in our net revenues from the comparable
2017
amount was driven by the following:
|
•
|
Diluted Earnings Per Share
–
The changes in our reported diluted earnings per share (“diluted EPS”) for the year ended
December 31, 2018
, from the comparable
2017
amounts, were as follows:
|
|
Diluted EPS
|
% Growth
(Decline)
|
|||
For the year ended December 31, 2017
|
$
|
3.88
|
|
|
|
|
|
|
|||
2017 Asset impairment and exit costs
|
—
|
|
|
||
2017 Tax items
|
0.84
|
|
|
||
Subtotal of 2017 items
|
0.84
|
|
|
||
|
|
|
|||
2018 Asset impairment and exit costs
|
—
|
|
|
||
2018 Tax items
|
(0.02
|
)
|
|
||
Subtotal of 2018 items
|
(0.02
|
)
|
|
||
|
|
|
|||
Currency
|
(0.11
|
)
|
|
||
Interest
|
0.13
|
|
|
||
Change in tax rate
|
0.40
|
|
|
||
Operations
|
(0.04
|
)
|
|
||
For the year ended December 31, 2018
|
$
|
5.08
|
|
30.9
|
%
|
•
|
East Asia & Australia: Unfavorable volume/mix and
higher
marketing, administration and research costs, partially offset by
lower
manufacturing costs and
favorable
pricing;
|
•
|
South & Southeast Asia: Favorable pricing, partially offset by
unfavorable
volume/mix,
higher
marketing, administration and research costs, and
higher
manufacturing costs;
|
•
|
Latin America & Canada: Favorable pricing, partially offset by
unfavorable
volume/mix and
higher
marketing, administration and research costs;
|
•
|
Eastern Europe: Favorable pricing, partially offset by
unfavorable
volume/mix and
higher
marketing, administration and research costs;
|
•
|
European Union: Favorable pricing and
favorable
volume/mix, partially offset by
higher
marketing, administration and research costs, and
higher
manufacturing costs; and
|
•
|
Middle East & Africa: Favorable pricing,
favorable
volume/mix and lower marketing, administration and research costs, partially offset by
higher
manufacturing costs.
|
|
2018
|
2017
|
Pension plans
|
1.61%
|
1.51%
|
Postretirement plans
|
3.97%
|
3.79%
|
(in millions)
|
2018
|
2017
|
2016
|
||||||
Net Revenues
|
|
|
|
||||||
European Union
|
$
|
9,298
|
|
$
|
8,318
|
|
$
|
8,162
|
|
Eastern Europe
|
2,921
|
|
2,711
|
|
2,484
|
|
|||
Middle East & Africa
|
4,114
|
|
3,988
|
|
4,516
|
|
|||
South & Southeast Asia
|
4,656
|
|
4,417
|
|
4,396
|
|
|||
East Asia & Australia
|
5,580
|
|
6,373
|
|
4,285
|
|
|||
Latin America & Canada
|
3,056
|
|
2,941
|
|
2,842
|
|
|||
Net revenues
|
$
|
29,625
|
|
$
|
28,748
|
|
$
|
26,685
|
|
Operating Income
|
|
|
|
||||||
European Union
|
$
|
4,105
|
|
$
|
3,691
|
|
$
|
3,920
|
|
Eastern Europe
|
902
|
|
887
|
|
890
|
|
|||
Middle East & Africa
|
1,627
|
|
1,884
|
|
1,990
|
|
|||
South & Southeast Asia
|
1,747
|
|
1,514
|
|
1,474
|
|
|||
East Asia & Australia
|
1,851
|
|
2,608
|
|
1,691
|
|
|||
Latin America & Canada
|
1,145
|
|
997
|
|
938
|
|
|||
Operating income
|
$
|
11,377
|
|
$
|
11,581
|
|
$
|
10,903
|
|
•
|
the EU, primarily reflecting lower cigarette shipment volume in France, Germany and Italy, partly offset by higher heated tobacco unit shipment volume across the Region, notably in Italy;
|
•
|
Eastern Europe, reflecting lower cigarette shipment volume, principally in Russia and Ukraine, partly offset by higher heated tobacco unit shipment volume across the Region, notably in Russia;
|
•
|
East Asia & Australia, reflecting lower cigarette shipment volume, principally in Japan and Korea; lower heated tobacco unit shipment volume in Japan, reflecting the net impact of estimated distributor inventory movements described in the East Asia & Australia Region section below; partly offset by higher heated tobacco unit shipment volume in Korea; and
|
•
|
Latin America & Canada, reflecting lower cigarette shipment volume, notably in Argentina and Colombia;
|
•
|
Middle East & Africa, reflecting essentially flat cigarette shipment volume, with declines, notably in Saudi Arabia and the UAE, almost completely offset by higher cigarette shipment volume, notably in Turkey, as well as by higher heated tobacco unit shipment volume, mainly in PMI Duty Free; and
|
•
|
South & Southeast Asia, reflecting higher cigarette shipment volume, principally in Pakistan, the Philippines and Thailand.
|
•
|
Marlboro
,
mainly due to France, the GCC, notably Saudi Arabia and the UAE, Italy, Japan and Korea, partly offset by Indonesia, North Africa and Turkey;
|
•
|
L&M
, mainly due to the GCC, notably Saudi Arabia, as well as North Africa, Russia and Turkey, partly offset by Kazakhstan, Serbia and Thailand;
|
•
|
Sampoerna A
in Indonesia, mainly reflecting the impact of its retail price increasing past its round pack price point in the fourth quarter of 2017;
|
•
|
Parliament
, mainly due to Korea and Russia, partly offset by Turkey;
|
•
|
Bond Street
, mainly due to Kazakhstan, Russia and Ukraine;
|
•
|
Lark
, mainly due to Japan, partly offset by Turkey; and
|
•
|
"Others," mainly due to: mid-price brands, notably
Sampoerna U
in Indonesia, partly reflecting the impact of above-inflation retail price increases; the successful portfolio consolidation of local brands into international trademarks, notably in Brazil, Colombia, Mexico and Russia; low-price
Jackpot
in the Philippines, reflecting up-trading as a result of narrowed price gaps; partly offset by low-price
Hope
in the Philippines and
Morven
in Pakistan.
|
•
|
Chesterfield,
mainly driven by Argentina, Brazil, Colombia, the GCC, notably Saudi Arabia, Mexico and Turkey, partly offset by Portugal, Russia and Venezuela;
|
•
|
Philip Morris
, mainly driven by Russia, partly offset by Argentina, Italy and the Philippines;
|
•
|
Dji Sam Soe
in Indonesia, notably reflecting the continued strong performance of its
Magnum Mild 16s
variant launched in the second quarter of 2017; and
|
•
|
Fortune
in the Philippines, reflecting the favorable impact of its narrowed retail price gap to competitors' products.
|
•
|
Total international cigarette market share of
26.8%
,
down
by
0.3
points; and
|
•
|
Total international heated tobacco unit market share of
1.6%
, up by
0.8
points.
|
|
|
|
|
PMI Shipments (billion units)
|
|
PMI Market Share (%)
(1)
|
||||||||||||
Market
|
|
Total Market
(billion units) |
|
Total
|
|
Cigarette
|
|
Heated Tobacco Unit
|
|
Total
|
|
Heated Tobacco Unit
|
||||||
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
European Union
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
France
|
|
40.9
|
45.1
|
|
18.5
|
19.7
|
|
18.4
|
19.7
|
|
—
|
—
|
|
45.5
|
43.5
|
|
0.1
|
—
|
Germany
|
|
75.2
|
76.9
|
|
28.1
|
28.6
|
|
27.7
|
28.5
|
|
0.4
|
0.1
|
|
37.3
|
37.2
|
|
0.5
|
0.2
|
Italy
|
|
69.0
|
69.8
|
|
35.2
|
36.8
|
|
33.5
|
36.1
|
|
1.7
|
0.7
|
|
51.8
|
52.2
|
|
2.2
|
0.7
|
Poland
|
|
43.2
|
41.7
|
|
17.9
|
17.8
|
|
17.6
|
17.7
|
|
0.4
|
0.1
|
|
41.5
|
42.7
|
|
0.9
|
0.2
|
Spain
|
|
45.0
|
45.0
|
|
14.1
|
14.5
|
|
13.9
|
14.4
|
|
0.2
|
0.1
|
|
32.1
|
32.3
|
|
0.4
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Russia
|
|
238.1
|
260.0
|
|
68.0
|
72.4
|
|
64.6
|
72.1
|
|
3.4
|
0.3
|
|
28.4
|
27.8
|
|
1.0
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East & Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Saudi Arabia
|
|
20.6
|
26.1
|
|
7.4
|
10.9
|
|
7.4
|
10.9
|
|
—
|
—
|
|
41.5
|
45.2
|
|
—
|
—
|
Turkey
|
|
118.5
|
106.2
|
|
55.0
|
49.6
|
|
55.0
|
49.6
|
|
—
|
—
|
|
46.4
|
46.7
|
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South & Southeast Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Indonesia
|
|
307.0
|
307.4
|
|
101.4
|
101.3
|
|
101.4
|
101.3
|
|
—
|
—
|
|
33.0
|
33.0
|
|
—
|
—
|
Philippines
|
|
73.2
|
74.9
|
|
51.2
|
50.6
|
|
51.2
|
50.6
|
|
—
|
—
|
|
69.9
|
67.6
|
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Asia & Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Australia
|
|
12.8
|
13.9
|
|
3.8
|
4.3
|
|
3.8
|
4.3
|
|
—
|
—
|
|
29.7
|
30.6
|
|
—
|
—
|
Japan
|
|
167.3
|
171.5
|
|
52.3
|
66.1
|
|
30.8
|
34.9
|
|
21.4
|
31.3
|
|
34.0
|
32.1
|
|
15.5
|
10.8
|
Korea
|
|
69.5
|
70.6
|
|
17.4
|
14.9
|
|
12.0
|
13.5
|
|
5.4
|
1.4
|
|
25.0
|
21.2
|
|
7.8
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America & Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Argentina
|
|
35.0
|
36.2
|
|
25.8
|
27.0
|
|
25.8
|
27.0
|
|
—
|
—
|
|
73.7
|
74.7
|
|
—
|
—
|
Canada
|
|
23.4
|
24.6
|
|
8.9
|
9.3
|
|
8.9
|
9.3
|
|
—
|
—
|
|
38.1
|
37.3
|
|
0.1
|
—
|
Mexico
|
|
35.5
|
35.8
|
|
24.2
|
24.4
|
|
24.2
|
24.4
|
|
—
|
—
|
|
68.0
|
68.1
|
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Market share estimates are calculated using IMS data
Note: % change for Total Market and PMI shipments in the discussion below is computed based on millions of units |
Financial Summary
|
||||||||||||||||||||||||||||
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
29,625
|
|
$
|
28,748
|
|
|
3.1
|
%
|
3.4
|
%
|
|
$
|
877
|
|
$
|
(103
|
)
|
$
|
1,488
|
|
$
|
(724
|
)
|
$
|
216
|
|
Cost of Sales
|
|
(10,758
|
)
|
(10,432
|
)
|
|
(3.1
|
)%
|
(2.3
|
)%
|
|
(326
|
)
|
(83
|
)
|
—
|
|
(180
|
)
|
(63
|
)
|
|||||||
Marketing, Administration and Research Costs
|
|
(7,408
|
)
|
(6,647
|
)
|
|
(11.4
|
)%
|
(11.0
|
)%
|
|
(761
|
)
|
(29
|
)
|
—
|
|
—
|
|
(732
|
)
|
|||||||
Amortization of Intangibles
|
|
(82
|
)
|
(88
|
)
|
|
6.8
|
%
|
5.7
|
%
|
|
6
|
|
1
|
|
—
|
|
—
|
|
5
|
|
|||||||
Operating Income
|
|
$
|
11,377
|
|
$
|
11,581
|
|
|
(1.8
|
)%
|
0.1
|
%
|
|
$
|
(204
|
)
|
$
|
(214
|
)
|
$
|
1,488
|
|
$
|
(904
|
)
|
$
|
(574
|
)
|
•
|
European Union, notably reflecting lower cigarette shipment volume in Greece, Italy and Spain, partly offset by higher heated tobacco unit shipment volume;
|
•
|
Eastern Europe, notably reflecting lower cigarette shipment volume in Russia and Ukraine; partly offset by higher heated tobacco unit shipment volume;
|
•
|
Middle East & Africa, notably reflecting lower cigarette shipment volume in 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; partly offset by higher cigarette shipment volume in North Africa, notably Algeria, and higher heated tobacco unit shipment volume;
|
•
|
South & Southeast Asia, notably reflecting lower cigarette shipment volume in Indonesia and Pakistan - impacted by excise tax-driven price increases and an increase in the prevalence of illicit trade - and the Philippines; and
|
•
|
Latin America & Canada, notably reflecting lower cigarette shipment volume in Argentina, Brazil, Canada, Colombia and Mexico;
|
•
|
East Asia & Australia, notably reflecting higher heated tobacco unit shipment volume, mainly in Japan and Korea, partly offset by lower cigarette shipment volume in Japan and Korea.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
28,748
|
|
$
|
26,685
|
|
|
7.7
|
%
|
9.4
|
%
|
|
$
|
2,063
|
|
$
|
(437
|
)
|
$
|
1,386
|
|
$
|
1,114
|
|
$
|
—
|
|
Cost of Sales
|
|
(10,432
|
)
|
(9,391
|
)
|
|
(11.1
|
)%
|
(11.4
|
)%
|
|
(1,041
|
)
|
30
|
|
—
|
|
(1,107
|
)
|
36
|
|
|||||||
Marketing, Administration and Research Costs
|
|
(6,647
|
)
|
(6,317
|
)
|
|
(5.2
|
)%
|
(9.2
|
)%
|
|
(330
|
)
|
250
|
|
—
|
|
—
|
|
(580
|
)
|
|||||||
Amortization of Intangibles
|
|
(88
|
)
|
(74
|
)
|
|
(18.9
|
)%
|
(18.9
|
)%
|
|
(14
|
)
|
—
|
|
—
|
|
—
|
|
(14
|
)
|
|||||||
Operating Income
|
|
$
|
11,581
|
|
$
|
10,903
|
|
|
6.2
|
%
|
7.7
|
%
|
|
$
|
678
|
|
$
|
(157
|
)
|
$
|
1,386
|
|
$
|
7
|
|
$
|
(558
|
)
|
•
|
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 our operating 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 and the U.K. In July 2018, we pilot-launched
IQOS MESH
, one of our Platform 4 products, in London, U.K.
|
•
|
We completed a small-scale city test of
TEEPS
, our Platform 2 product, that we had initiated in December 2017 in Santo Domingo, the Dominican Republic, and are working on improving this product and incorporating our learnings into our future plans.
|
•
|
Depending on the outcome of the use and adaptation study described above, we plan to conduct a consumer test of our Platform 3 product.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
9,298
|
|
$
|
8,318
|
|
|
11.8
|
%
|
5.9
|
%
|
|
$
|
980
|
|
$
|
489
|
|
$
|
248
|
|
$
|
243
|
|
$
|
—
|
|
Operating Income
|
|
$
|
4,105
|
|
$
|
3,691
|
|
|
11.2
|
%
|
2.9
|
%
|
|
$
|
414
|
|
$
|
308
|
|
$
|
248
|
|
$
|
116
|
|
$
|
(258
|
)
|
European Union Key Data
|
|
Full-Year
|
|||||
|
|
|
|
Change
|
|
||
|
|
2018
|
|
2017
|
|
% / pp
|
|
Total Market (billion units)
|
|
484.3
|
|
492.4
|
|
(1.7
|
)%
|
|
|
|
|
|
|||
PMI Shipment Volume (million units)
|
|
|
|
|
|||
Cigarettes
|
|
179,622
|
|
187,293
|
|
(4.1
|
)%
|
Heated Tobacco Units
|
|
5,977
|
|
1,889
|
|
+100.0%
|
|
Total European Union
|
|
185,599
|
|
189,182
|
|
(1.9
|
)%
|
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|
|||
Marlboro
|
|
18.5
|
%
|
18.8
|
%
|
(0.3
|
)
|
L&M
|
|
6.9
|
%
|
6.9
|
%
|
—
|
|
Chesterfield
|
|
5.9
|
%
|
6.0
|
%
|
(0.1
|
)
|
Philip Morris
|
|
2.9
|
%
|
3.1
|
%
|
(0.2
|
)
|
HEETS
|
|
1.2
|
%
|
0.3
|
%
|
0.9
|
|
Others
|
|
3.1
|
%
|
3.2
|
%
|
(0.1
|
)
|
Total European Union
|
|
38.5
|
%
|
38.3
|
%
|
0.2
|
|
•
|
France,
down
by
9.2%
, primarily reflecting the impact of significant excise tax-driven price increases and an increase in the prevalence of illicit trade;
|
•
|
Germany,
down
by
2.2%
, primarily reflecting the impact of price increases;
|
•
|
Italy,
down
by
1.3%
, primarily reflecting the impact of price increases; and
|
•
|
the United Kingdom,
down
by
6.9%
, primarily reflecting the impact of price increases;
|
•
|
Poland,
up
by
3.7%
, primarily driven by a decrease in the prevalence of illicit trade.
|
•
|
France,
down
by
6.4%
, or by
5.0%
excluding the net impact of estimated distributor inventory movements, primarily due to a lower total market, partly offset by higher market share, notably of
Marlboro
and
Philip Morris
;
|
•
|
Germany,
down
by
1.8%
, primarily due to the lower total market, partly offset by higher market share; and
|
•
|
Italy,
down
by
4.1%
, or by
1.9%
excluding the net impact of estimated distributor inventory movements, primarily due to the lower total market and lower cigarette market share.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
2,921
|
|
$
|
2,711
|
|
|
7.7
|
%
|
12.1
|
%
|
|
$
|
210
|
|
$
|
(118
|
)
|
$
|
286
|
|
$
|
42
|
|
$
|
—
|
|
Operating Income
|
|
$
|
902
|
|
$
|
887
|
|
|
1.7
|
%
|
13.1
|
%
|
|
$
|
15
|
|
$
|
(101
|
)
|
$
|
286
|
|
$
|
(92
|
)
|
$
|
(78
|
)
|
•
|
Russia,
down
by
8.4%
, primarily reflecting the timing and impact of excise tax-driven retail price increases, as well as an increase in the prevalence of illicit trade; and
|
•
|
Ukraine,
down
by
8.1%
, primarily reflecting the timing and impact of excise tax-driven retail price increases and an increase in the prevalence of illicit trade.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2018
|
|
2017
|
|
Change
|
|
Cigarettes
|
108,718
|
|
119,398
|
|
(8.9
|
)%
|
Heated Tobacco Units
|
4,979
|
|
674
|
|
+100.0%
|
|
Total Eastern Europe
|
113,697
|
|
120,072
|
|
(5.3
|
)%
|
•
|
Russia,
down
by
6.1%
, due to the lower total market, partly offset by higher total market share driven by heated tobacco unit share, partially offset by lower cigarette market share, notably due to mid-price
L&M
and low-price
Bond Street
, reflecting the impact of down-trading to competitive products, partly offset by
Philip Morris
; and
|
•
|
Ukraine,
down
by
8.8%
, mainly due to the lower total market, partly offset by higher total market share driven by heated tobacco unit volume.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
4,114
|
|
$
|
3,988
|
|
|
3.2
|
%
|
8.0
|
%
|
|
$
|
126
|
|
$
|
(193
|
)
|
$
|
19
|
|
$
|
84
|
|
$
|
216
|
|
Operating Income
|
|
$
|
1,627
|
|
$
|
1,884
|
|
|
(13.6
|
)%
|
0.3
|
%
|
|
$
|
(257
|
)
|
$
|
(263
|
)
|
$
|
19
|
|
$
|
13
|
|
$
|
(26
|
)
|
•
|
Turkey,
up
by
11.6%
, primarily reflecting a reduction in the prevalence of illicit trade;
|
•
|
Algeria,
down
by
8.5%
, or by
0.6%
excluding the net impact of estimated trade inventory movements mainly associated with the timing of excise tax announcements in 2018 compared to 2017; and
|
•
|
The GCC, notably Saudi Arabia and the UAE,
down
by
21.1%
and
23.9%
, respectively, primarily reflecting the impact of price increases and the introduction of the new excise tax in 2017, and VAT in January 2018.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2018
|
|
2017
|
|
Change
|
|
Cigarettes
|
136,605
|
|
136,759
|
|
(0.1
|
)%
|
Heated Tobacco Units
|
3,403
|
|
907
|
|
+100.0%
|
|
Total Middle East & Africa
|
140,008
|
|
137,666
|
|
1.7
|
%
|
•
|
Turkey,
up
by
10.8%
, reflecting a higher total market, partly offset by lower market share; and
|
•
|
PMI Duty Free, up by 6.6%, reflecting higher heated tobacco shipment volume;
|
•
|
the GCC, notably Saudi Arabia and the UAE,
down
by
32.5%
and
55.6%
, respectively, reflecting the lower total market and market share due to the impact of excise tax and VAT-driven price increases.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
4,656
|
|
$
|
4,417
|
|
|
5.4
|
%
|
10.9
|
%
|
|
$
|
239
|
|
$
|
(244
|
)
|
$
|
548
|
|
$
|
(65
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,747
|
|
$
|
1,514
|
|
|
15.4
|
%
|
23.6
|
%
|
|
$
|
233
|
|
$
|
(124
|
)
|
$
|
548
|
|
$
|
(126
|
)
|
$
|
(65
|
)
|
•
|
Pakistan,
up
by
31.2%
or approximately 14.1 billion units, notably reflecting an increase in the duty-paid market driven by a reduction in the prevalence of illicit trade. Excluding the net impact of estimated trade inventory movements, the total market was
up
by
17.7%
;
|
•
|
the Philippines,
down
by
2.2%
, primarily reflecting the impact of excise tax-driven retail price increases; and
|
•
|
Thailand,
down
by
2.7%
, primarily reflecting the impact of excise tax-driven price increases.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2018
|
|
2017
|
|
Change
|
|
Cigarettes
|
178,469
|
|
171,600
|
|
4.0
|
%
|
Heated Tobacco Units
|
—
|
|
—
|
|
—
|
%
|
Total South & Southeast Asia
|
178,469
|
|
171,600
|
|
4.0
|
%
|
•
|
Pakistan,
up
by
27.0%
, reflecting the higher total market, partly offset by lower market share;
|
•
|
the Philippines,
up
by
1.1%
, mainly reflecting higher market share, driven by
Marlboro
and
Fortune
, partly offset by a lower total market; and
|
•
|
Thailand, up by 67.1%, mainly reflecting higher market share driven by the price repositioning of the
L&M 7.1
variant in 2017 and its subsequent distribution expansion during 2018.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
5,580
|
|
$
|
6,373
|
|
|
(12.4
|
)%
|
(13.4
|
)%
|
|
$
|
(793
|
)
|
$
|
62
|
|
$
|
55
|
|
$
|
(910
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,851
|
|
$
|
2,608
|
|
|
(29.0
|
)%
|
(28.9
|
)%
|
|
$
|
(757
|
)
|
$
|
(2
|
)
|
$
|
55
|
|
$
|
(704
|
)
|
$
|
(106
|
)
|
•
|
Australia,
down
by
8.4%
, primarily reflecting the impact of excise tax-driven retail price increases;
|
•
|
Japan,
down
by
2.4%
, or down by
2.8%
excluding the impact of estimated trade and consumer inventory movements following the October 1 excise tax-driven retail price increases;
|
•
|
Korea,
down
by
1.5%
, or by
2.2%
excluding the net impact of estimated trade inventory movements, partly related to the implementation of graphic health warnings in December 2018; and
|
•
|
Taiwan,
down
by
13.5%
, or by 12.7% excluding the net impact of estimated trade inventory movements, mainly due to excise tax-driven retail price increases in 2017.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2018
|
|
2017
|
|
Change
|
|
Cigarettes
|
56,163
|
|
62,653
|
|
(10.4
|
)%
|
Heated Tobacco Units
|
26,866
|
|
32,729
|
|
(17.9
|
)%
|
Total East Asia & Australia
|
83,029
|
|
95,382
|
|
(13.0
|
)%
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2018
|
2017
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
3,056
|
|
$
|
2,941
|
|
|
3.9
|
%
|
7.3
|
%
|
|
$
|
115
|
|
$
|
(99
|
)
|
$
|
332
|
|
$
|
(118
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,145
|
|
$
|
997
|
|
|
14.8
|
%
|
18.1
|
%
|
|
$
|
148
|
|
$
|
(32
|
)
|
$
|
332
|
|
$
|
(111
|
)
|
$
|
(41
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2018
|
|
2017
|
|
Change
|
|
Cigarettes
|
80,738
|
|
84,223
|
|
(4.1
|
)%
|
Heated Tobacco Units
|
147
|
|
27
|
|
+100.0%
|
|
Total Latin America & Canada
|
80,885
|
|
84,250
|
|
(4.0
|
)%
|
•
|
Argentina,
down
by
4.6%
, reflecting the lower total market and lower market share; and
|
•
|
Colombia, down by 11.0%, reflecting the lower total market.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
8,318
|
|
$
|
8,162
|
|
|
1.9
|
%
|
1.4
|
%
|
|
$
|
156
|
|
$
|
45
|
|
$
|
156
|
|
$
|
(45
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
3,691
|
|
$
|
3,920
|
|
|
(5.8
|
)%
|
(4.7
|
)%
|
|
$
|
(229
|
)
|
$
|
(43
|
)
|
$
|
156
|
|
$
|
(119
|
)
|
$
|
(223
|
)
|
European Union Key Data
|
Full-Year
|
|||||
|
|
|
Change
|
|
||
|
2017
|
|
2016
|
|
% / pp
|
|
Total Market (billion units)
|
492.4
|
|
501.8
|
|
(1.9
|
)%
|
|
|
|
|
|||
PMI Shipment Volume (million units)
|
|
|
|
|||
Cigarettes
|
187,293
|
|
193,586
|
|
(3.3
|
)%
|
Heated Tobacco Units
|
1,889
|
|
224
|
|
+100.0%
|
|
Total European Union
|
189,182
|
|
193,810
|
|
(2.4
|
)%
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|||
Marlboro
|
18.8
|
%
|
19.0
|
%
|
(0.2
|
)
|
L&M
|
6.9
|
%
|
6.9
|
%
|
—
|
|
Chesterfield
|
6.0
|
%
|
5.9
|
%
|
0.1
|
|
Philip Morris
|
3.1
|
%
|
3.2
|
%
|
(0.1
|
)
|
HEETS
|
0.3
|
%
|
—
|
%
|
0.3
|
|
Others
|
3.2
|
%
|
3.3
|
%
|
(0.1
|
)
|
Total European Union
|
38.3
|
%
|
38.3
|
%
|
—
|
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
2,711
|
|
$
|
2,484
|
|
|
9.1
|
%
|
(0.1
|
)%
|
|
$
|
227
|
|
$
|
229
|
|
$
|
157
|
|
$
|
(159
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
887
|
|
$
|
890
|
|
|
(0.3
|
)%
|
(9.8
|
)%
|
|
$
|
(3
|
)
|
$
|
84
|
|
$
|
157
|
|
$
|
(164
|
)
|
$
|
(80
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
119,398
|
|
129,456
|
|
(7.8
|
)%
|
Heated Tobacco Units
|
674
|
|
64
|
|
+100.0%
|
|
Total Eastern Europe
|
120,072
|
|
129,520
|
|
(7.3
|
)%
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
3,988
|
|
$
|
4,516
|
|
|
(11.7
|
)%
|
(0.2
|
)%
|
|
$
|
(528
|
)
|
$
|
(520
|
)
|
$
|
207
|
|
$
|
(215
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,884
|
|
$
|
1,990
|
|
|
(5.3
|
)%
|
(5.0
|
)%
|
|
$
|
(106
|
)
|
$
|
(6
|
)
|
$
|
207
|
|
$
|
(180
|
)
|
$
|
(127
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
136,759
|
|
141,937
|
|
(3.6
|
)%
|
Heated Tobacco Units
|
907
|
|
36
|
|
+100.0%
|
|
Total Middle East & Africa
|
137,666
|
|
141,973
|
|
(3.0
|
)%
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
4,417
|
|
$
|
4,396
|
|
|
0.5
|
%
|
1.9
|
%
|
|
$
|
21
|
|
$
|
(63
|
)
|
$
|
353
|
|
$
|
(269
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,514
|
|
$
|
1,474
|
|
|
2.7
|
%
|
5.9
|
%
|
|
$
|
40
|
|
$
|
(47
|
)
|
$
|
353
|
|
$
|
(236
|
)
|
$
|
(30
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
171,600
|
|
185,279
|
|
(7.4
|
)%
|
Heated Tobacco Units
|
—
|
|
—
|
|
—
|
%
|
Total South & Southeast Asia
|
171,600
|
|
185,279
|
|
(7.4
|
)%
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
6,373
|
|
$
|
4,285
|
|
|
48.7
|
%
|
50.5
|
%
|
|
$
|
2,088
|
|
$
|
(74
|
)
|
$
|
206
|
|
$
|
1,956
|
|
$
|
—
|
|
Operating Income
|
|
$
|
2,608
|
|
$
|
1,691
|
|
|
54.2
|
%
|
58.7
|
%
|
|
$
|
917
|
|
$
|
(75
|
)
|
$
|
206
|
|
$
|
858
|
|
$
|
(72
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
62,653
|
|
74,750
|
|
(16.2
|
)%
|
Heated Tobacco Units
|
32,729
|
|
7,070
|
|
+100.0%
|
|
Total East Asia & Australia
|
95,382
|
|
81,820
|
|
16.6
|
%
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2017
|
2016
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
2,941
|
|
$
|
2,842
|
|
|
3.5
|
%
|
5.4
|
%
|
|
$
|
99
|
|
$
|
(54
|
)
|
$
|
307
|
|
$
|
(154
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
997
|
|
$
|
938
|
|
|
6.3
|
%
|
13.8
|
%
|
|
$
|
59
|
|
$
|
(70
|
)
|
$
|
307
|
|
$
|
(152
|
)
|
$
|
(26
|
)
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2017
|
|
2016
|
|
Change
|
|
Cigarettes
|
84,223
|
|
87,938
|
|
(4.2
|
)%
|
Heated Tobacco Units
|
27
|
|
—
|
|
—
|
%
|
Total Latin America & Canada
|
84,250
|
|
87,938
|
|
(4.2
|
)%
|
|
|
|
|
|
|
|
|
|
•
|
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
|
|
|
Payments Due
|
|||||||||||||
(in millions)
|
Total
|
2019
|
2020-2021
|
2022-2023
|
2024 and
Thereafter |
||||||||||
Long-term debt
(1)
|
|
$31,268
|
|
|
$4,054
|
|
|
$7,098
|
|
|
$4,358
|
|
|
$15,758
|
|
Interest on borrowings
(2)
|
10,360
|
|
902
|
|
1,542
|
|
1,258
|
|
6,658
|
|
|||||
Operating leases
(3)
|
772
|
|
147
|
|
176
|
|
95
|
|
354
|
|
|||||
Purchase obligations
(4)
:
|
|
|
|
|
|
||||||||||
Inventory and production costs
|
4,217
|
|
2,492
|
|
1,165
|
|
406
|
|
154
|
|
|||||
Other
|
2,629
|
|
1,070
|
|
842
|
|
227
|
|
490
|
|
|||||
|
6,846
|
|
3,562
|
|
2,007
|
|
633
|
|
644
|
|
|||||
Other long-term liabilities
(5)
|
1,916
|
|
78
|
|
346
|
|
448
|
|
1,044
|
|
|||||
|
|
$51,162
|
|
|
$8,743
|
|
|
$11,169
|
|
|
$6,792
|
|
|
$24,458
|
|
|
Pre-Tax Earnings Impact
|
||||||
(in millions)
|
At
December 31, 2018 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$19
|
|
$20
|
|
$23
|
|
$19
|
|
|
||||||
|
Fair Value Impact
|
||||||
(in millions)
|
At
December 31, 2018 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Interest rates
|
$142
|
|
$132
|
|
$152
|
|
$96
|
|
|
|
|
|
|
|
|
|
Pre-Tax Earnings Impact
|
||||||
(in millions)
|
At
December 31, 2017 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$27
|
|
$49
|
|
$58
|
|
$27
|
|
|
|
|
|
|
|
|
|
Fair Value Impact
|
||||||
(in millions)
|
At
December 31, 2017 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Interest rates
|
$118
|
|
$150
|
|
$173
|
|
$118
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
for the years ended December 31,
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues including excise taxes
|
$
|
79,823
|
|
|
$
|
78,098
|
|
|
$
|
74,953
|
|
Excise taxes on products
|
50,198
|
|
|
49,350
|
|
|
48,268
|
|
|||
Net revenues (Notes 2 & 21)
|
29,625
|
|
|
28,748
|
|
|
26,685
|
|
|||
Cost of sales
|
10,758
|
|
|
10,432
|
|
|
9,391
|
|
|||
Gross profit
|
18,867
|
|
|
18,316
|
|
|
17,294
|
|
|||
Marketing, administration and research costs
|
7,408
|
|
|
6,647
|
|
|
6,317
|
|
|||
Amortization of intangibles
|
82
|
|
|
88
|
|
|
74
|
|
|||
Operating income
|
11,377
|
|
|
11,581
|
|
|
10,903
|
|
|||
Interest expense, net (Note 14)
|
665
|
|
|
914
|
|
|
891
|
|
|||
Pension and other employee benefit costs (Note 13)
|
41
|
|
|
78
|
|
|
88
|
|
|||
Earnings before income taxes
|
10,671
|
|
|
10,589
|
|
|
9,924
|
|
|||
Provision for income taxes (Note 11)
|
2,445
|
|
|
4,307
|
|
|
2,768
|
|
|||
Equity investments and securities (income)/loss, net
|
(60
|
)
|
|
(59
|
)
|
|
(94
|
)
|
|||
Net earnings
|
8,286
|
|
|
6,341
|
|
|
7,250
|
|
|||
Net earnings attributable to noncontrolling interests
|
375
|
|
|
306
|
|
|
283
|
|
|||
Net earnings attributable to PMI
|
$
|
7,911
|
|
|
$
|
6,035
|
|
|
$
|
6,967
|
|
Per share data (Note 10):
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
5.08
|
|
|
$
|
3.88
|
|
|
$
|
4.48
|
|
Diluted earnings per share
|
$
|
5.08
|
|
|
$
|
3.88
|
|
|
$
|
4.48
|
|
for the years ended December 31,
|
2018
|
|
2017
|
|
2016
|
||||||
Net earnings
|
$
|
8,286
|
|
|
$
|
6,341
|
|
|
$
|
7,250
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
|
||||||
Change in currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized gains (losses), net of income taxes of ($47) in 2018, $620 in 2017 and ($101) in 2016
|
(812
|
)
|
|
330
|
|
|
(14
|
)
|
|||
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2018, 2017 and 2016
|
—
|
|
|
(2
|
)
|
|
5
|
|
|||
Change in net loss and prior service cost:
|
|
|
|
|
|
||||||
Net gains (losses) and prior service costs, net of income taxes of $65 in 2018, ($17) in 2017 and $78 in 2016
|
(1,046
|
)
|
|
523
|
|
|
(460
|
)
|
|||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($43) in 2018, ($31) in 2017 and ($43) in 2016
|
218
|
|
|
228
|
|
|
224
|
|
|||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
|
||||||
Gains (losses) recognized, net of income taxes of ($4) in 2018, $8 in 2017 and ($4) in 2016
|
24
|
|
|
(44
|
)
|
|
8
|
|
|||
(Gains) losses transferred to earnings, net of income taxes of $5 in 2018, $2 in 2017 and ($3) in 2016
|
(31
|
)
|
|
(11
|
)
|
|
30
|
|
|||
Total other comprehensive earnings (losses)
|
(1,647
|
)
|
|
1,024
|
|
|
(207
|
)
|
|||
Total comprehensive earnings
|
6,639
|
|
|
7,365
|
|
|
7,043
|
|
|||
Less comprehensive earnings attributable to:
|
|
|
|
|
|
||||||
Noncontrolling interests
|
304
|
|
|
306
|
|
|
233
|
|
|||
Comprehensive earnings attributable to PMI
|
$
|
6,335
|
|
|
$
|
7,059
|
|
|
$
|
6,810
|
|
at December 31,
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6,593
|
|
|
$
|
8,447
|
|
Trade receivables (less allowances of $25 in 2018 and $25 in 2017)
|
2,950
|
|
|
3,194
|
|
||
Other receivables
|
614
|
|
|
544
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
2,318
|
|
|
2,606
|
|
||
Other raw materials
|
1,405
|
|
|
1,563
|
|
||
Finished product
|
5,081
|
|
|
4,637
|
|
||
|
8,804
|
|
|
8,806
|
|
||
Other current assets
|
481
|
|
|
603
|
|
||
Total current assets
|
19,442
|
|
|
21,594
|
|
||
Property, plant and equipment, at cost:
|
|
|
|
||||
Land and land improvements
|
600
|
|
|
639
|
|
||
Buildings and building equipment
|
3,975
|
|
|
3,989
|
|
||
Machinery and equipment
|
9,096
|
|
|
8,976
|
|
||
Construction in progress
|
886
|
|
|
962
|
|
||
|
14,557
|
|
|
14,566
|
|
||
Less: accumulated depreciation
|
7,356
|
|
|
7,295
|
|
||
|
7,201
|
|
|
7,271
|
|
||
Goodwill (Note 3)
|
7,189
|
|
|
7,666
|
|
||
Other intangible assets, net (Note 3)
|
2,278
|
|
|
2,432
|
|
||
Investments in unconsolidated subsidiaries and equity securities (Notes 4 & 16 )
|
1,269
|
|
|
1,074
|
|
||
Deferred income taxes
|
977
|
|
|
1,007
|
|
||
Other assets
|
1,445
|
|
|
1,924
|
|
||
Total Assets
|
$
|
39,801
|
|
|
$
|
42,968
|
|
at December 31,
|
2018
|
|
2017
|
||||
Liabilities
|
|
|
|
||||
Short-term borrowings (Note 7)
|
$
|
730
|
|
|
$
|
499
|
|
Current portion of long-term debt (Note 7)
|
4,054
|
|
|
2,506
|
|
||
Accounts payable
|
2,068
|
|
|
2,242
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
732
|
|
|
708
|
|
||
Taxes, except income taxes
|
5,088
|
|
|
5,324
|
|
||
Employment costs
|
794
|
|
|
856
|
|
||
Dividends payable
|
1,783
|
|
|
1,669
|
|
||
Other
|
1,366
|
|
|
1,346
|
|
||
Income taxes (Note 11)
|
576
|
|
|
812
|
|
||
Total current liabilities
|
17,191
|
|
|
15,962
|
|
||
Long-term debt (Note 7)
|
26,975
|
|
|
31,334
|
|
||
Deferred income taxes
|
898
|
|
|
799
|
|
||
Employment costs
|
3,083
|
|
|
2,271
|
|
||
Income taxes and other liabilities (Note 11)
|
2,393
|
|
|
2,832
|
|
||
Total liabilities
|
50,540
|
|
|
53,198
|
|
||
Contingencies (Note 18)
|
|
|
|
||||
Stockholders’ (Deficit) Equity
|
|
|
|
||||
Common stock, no par value (2,109,316,331 shares issued in 2018 and 2017)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,939
|
|
|
1,972
|
|
||
Earnings reinvested in the business
|
31,014
|
|
|
29,859
|
|
||
Accumulated other comprehensive losses
|
(10,111
|
)
|
|
(8,535
|
)
|
||
|
22,842
|
|
|
23,296
|
|
||
Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively)
|
35,301
|
|
|
35,382
|
|
||
Total PMI stockholders’ deficit
|
(12,459
|
)
|
|
(12,086
|
)
|
||
Noncontrolling interests
|
1,720
|
|
|
1,856
|
|
||
Total stockholders’ deficit
|
(10,739
|
)
|
|
(10,230
|
)
|
||
Total Liabilities and Stockholders’ (Deficit) Equity
|
$
|
39,801
|
|
|
$
|
42,968
|
|
for the years ended December 31,
|
2018
|
|
2017
|
|
2016
|
||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
|
|
||||||
Net earnings
|
$
|
8,286
|
|
|
$
|
6,341
|
|
|
$
|
7,250
|
|
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
989
|
|
|
875
|
|
|
743
|
|
|||
Deferred income tax (benefit) provision
|
(100
|
)
|
|
(501
|
)
|
|
182
|
|
|||
Cash effects of changes in:
|
|
|
|
|
|
||||||
Receivables, net
|
53
|
|
|
(92
|
)
|
|
(1,009
|
)
|
|||
Inventories
|
(613
|
)
|
|
730
|
|
|
(695
|
)
|
|||
Accounts payable
|
(51
|
)
|
|
425
|
|
|
373
|
|
|||
Accrued liabilities and other current assets
|
910
|
|
|
(554
|
)
|
|
1,477
|
|
|||
Income taxes
|
(135
|
)
|
|
1,370
|
|
|
(209
|
)
|
|||
Pension plan contributions
|
(110
|
)
|
|
(66
|
)
|
|
(191
|
)
|
|||
Other
|
249
|
|
|
384
|
|
|
156
|
|
|||
Net cash provided by operating activities
|
9,478
|
|
|
8,912
|
|
|
8,077
|
|
|||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
||||||
Capital expenditures
|
(1,436
|
)
|
|
(1,548
|
)
|
|
(1,172
|
)
|
|||
Investments in unconsolidated subsidiaries and equity securities
|
(63
|
)
|
|
(111
|
)
|
|
(41
|
)
|
|||
Net investment hedges
|
416
|
|
|
(1,527
|
)
|
|
295
|
|
|||
Other
|
85
|
|
|
103
|
|
|
84
|
|
|||
Net cash used in investing activities
|
(998
|
)
|
|
(3,083
|
)
|
|
(834
|
)
|
for the years ended December 31,
|
2018
|
|
2017
|
|
2016
|
||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
||||||
Short-term borrowing activity by original maturity:
|
|
|
|
|
|
||||||
Net issuances (repayments) - maturities of 90 days or less
|
$
|
255
|
|
|
$
|
(127
|
)
|
|
$
|
(12
|
)
|
Issuances - maturities longer than 90 days
|
—
|
|
|
1,634
|
|
|
—
|
|
|||
Repayments - maturities longer than 90 days
|
—
|
|
|
(1,634
|
)
|
|
—
|
|
|||
Long-term debt proceeds
|
—
|
|
|
6,850
|
|
|
3,536
|
|
|||
Long-term debt repaid
|
(2,484
|
)
|
|
(2,551
|
)
|
|
(2,393
|
)
|
|||
Dividends paid
|
(6,885
|
)
|
|
(6,520
|
)
|
|
(6,378
|
)
|
|||
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 6)
|
(81
|
)
|
|
5
|
|
|
7
|
|
|||
Other
|
(456
|
)
|
|
(426
|
)
|
|
(173
|
)
|
|||
Net cash used in financing activities
|
(9,651
|
)
|
|
(2,769
|
)
|
|
(5,413
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(685
|
)
|
|
1,085
|
|
|
(965
|
)
|
|||
Cash, cash equivalents and restricted cash
(1)
:
|
|
|
|
|
|
||||||
Increase (Decrease)
|
(1,856
|
)
|
|
4,145
|
|
|
865
|
|
|||
Balance at beginning of year
|
8,476
|
|
|
4,331
|
|
|
3,466
|
|
|||
Balance at end of year
|
$
|
6,620
|
|
|
$
|
8,476
|
|
|
$
|
4,331
|
|
|
|
|
|
|
|
||||||
Cash Paid:
|
|
|
|
|
|
||||||
Interest
|
$
|
882
|
|
|
$
|
1,050
|
|
|
$
|
1,052
|
|
Income taxes
|
$
|
2,749
|
|
|
$
|
3,403
|
|
|
$
|
2,829
|
|
|
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, 2016
|
$
|
—
|
|
|
$
|
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
|
)
|
|||||||
Net earnings
|
|
|
|
|
7,911
|
|
|
|
|
|
|
375
|
|
|
8,286
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(1,572
|
)
|
|
|
|
(75
|
)
|
|
(1,647
|
)
|
|||||||||||
Issuance of stock awards
|
|
|
47
|
|
|
|
|
|
|
81
|
|
|
|
|
128
|
|
|||||||||||
Dividends declared ($4.49 per share)
|
|
|
|
|
(6,994
|
)
|
|
|
|
|
|
|
|
(6,994
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(435
|
)
|
|
(435
|
)
|
||||||||||||
Adoption of new accounting standards (Note 21)
|
|
|
|
|
238
|
|
|
|
|
|
|
|
|
238
|
|
||||||||||||
Other (Note 6)
|
|
|
(80
|
)
|
|
|
|
(4
|
)
|
|
|
|
(1
|
)
|
|
(85
|
)
|
||||||||||
Balances, December 31, 2018
|
$
|
—
|
|
|
$
|
1,939
|
|
|
$
|
31,014
|
|
|
$
|
(10,111
|
)
|
|
$
|
(35,301
|
)
|
|
$
|
1,720
|
|
|
$
|
(10,739
|
)
|
Note 1.
|
Note 2.
|
Note 3.
|
|
(in millions)
|
European Union
|
Eastern Europe
|
Middle East & Africa
|
South & Southeast Asia
|
East Asia & Australia
|
Latin America & Canada
|
Total
|
||||||||||||||
Balance at January 1, 2017
|
$
|
1,238
|
|
$
|
281
|
|
$
|
91
|
|
$
|
3,030
|
|
$
|
566
|
|
$
|
2,118
|
|
$
|
7,324
|
|
Changes due to:
|
|
|
|
|
|
|
|
||||||||||||||
Currency
|
181
|
|
40
|
|
11
|
|
(20
|
)
|
1
|
|
129
|
|
342
|
|
|||||||
Balances, December 31, 2017
|
1,419
|
|
321
|
|
102
|
|
3,010
|
|
567
|
|
2,247
|
|
7,666
|
|
|||||||
Changes due to:
|
|
|
|
|
|
|
|
||||||||||||||
Currency
|
(62
|
)
|
(18
|
)
|
(15
|
)
|
(215
|
)
|
(31
|
)
|
(136
|
)
|
(477
|
)
|
|||||||
Balances, December 31, 2018
|
$
|
1,357
|
|
$
|
303
|
|
$
|
87
|
|
$
|
2,795
|
|
$
|
536
|
|
$
|
2,111
|
|
$
|
7,189
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||
(in millions)
|
Weighted-Average Remaining Useful Life
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
||||||||||||
Non-amortizable intangible assets
|
|
$
|
1,269
|
|
|
$
|
1,269
|
|
|
$
|
1,323
|
|
|
$
|
1,323
|
|
||||
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks
|
19 years
|
1,488
|
|
$
|
608
|
|
880
|
|
|
1,559
|
|
$
|
575
|
|
984
|
|
||||
Distribution networks
|
8 years
|
141
|
|
82
|
|
59
|
|
|
152
|
|
79
|
|
73
|
|
||||||
Other*
|
10 years
|
107
|
|
37
|
|
70
|
|
|
87
|
|
35
|
|
52
|
|
||||||
Total other intangible assets
|
|
$
|
3,005
|
|
$
|
727
|
|
$
|
2,278
|
|
|
$
|
3,121
|
|
$
|
689
|
|
$
|
2,432
|
|
Note 4.
|
|
|
For the Years Ended December 31,
|
||||||||
(in millions)
|
|
2018
|
2017
|
2016
|
||||||
Net revenues
(a)
|
|
$
|
2,714
|
|
$
|
2,521
|
|
$
|
2,465
|
|
|
|
At December 31,
|
|||||
(in millions)
|
|
2018
|
2017
|
||||
Receivables
|
|
$
|
308
|
|
$
|
358
|
|
Note 5.
|
|
At December 31,
|
|||||
(in millions)
|
2018
|
2017
|
||||
Balance at beginning of period
|
$
|
71
|
|
$
|
51
|
|
Changes due to:
|
|
|
||||
Warranties issued
|
179
|
|
168
|
|
||
Settlements
|
(183
|
)
|
(148
|
)
|
||
Balance at end of period
|
$
|
67
|
|
$
|
71
|
|
Note 6.
|
Note 7.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||
(in millions)
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
||
Commercial paper
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Bank loans
|
730
|
|
|
5.8
|
|
|
499
|
|
|
5.7
|
|
||
|
$
|
730
|
|
|
|
|
$
|
499
|
|
|
|
|
December 31,
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
U.S. dollar notes, 1.375% to 6.375% (average interest rate 3.328%), due through 2044
|
$
|
20,819
|
|
|
$
|
23,291
|
|
Foreign currency obligations:
|
|
|
|
||||
Euro notes, 0.625% to 3.125% (average interest rate 2.250%), due through 2037
|
8,656
|
|
|
8,997
|
|
||
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.269%), due through 2024
|
1,374
|
|
|
1,376
|
|
||
Other (average interest rate 3.351%), due through 2024
|
180
|
|
|
176
|
|
||
|
31,029
|
|
|
33,840
|
|
||
Less current portion of long-term debt
|
4,054
|
|
|
2,506
|
|
||
|
$
|
26,975
|
|
|
$
|
31,334
|
|
(in millions)
|
|
|
|
|
|
|
|
|
Type
|
|
Face Value
|
|
Interest
Rate |
|
Issuance
|
|
Maturity
|
U.S. dollar notes
|
|
$1,500
|
|
6.375%
|
|
May 2008
|
|
May 2038
|
U.S. dollar notes
|
|
$750
|
|
4.375%
|
|
November 2011
|
|
November 2041
|
U.S. dollar notes
|
|
$700
|
|
4.500%
|
|
March 2012
|
|
March 2042
|
U.S. dollar notes
|
|
$750
|
|
3.875%
|
|
August 2012
|
|
August 2042
|
U.S. dollar notes
|
|
$850
|
|
4.125%
|
|
March 2013
|
|
March 2043
|
U.S. dollar notes
|
|
$750
|
|
4.875%
|
|
November 2013
|
|
November 2043
|
U.S. dollar notes
|
|
$750
|
|
4.250%
|
|
November 2014
|
|
November 2044
|
U.S. dollar notes
|
(a)
|
$500
|
|
4.250%
|
|
May 2016
|
|
November 2044
|
EURO notes
|
(b)
|
€750 (approximately $951)
|
|
2.125%
|
|
May 2012
|
|
May 2019
|
EURO notes
|
(b)
|
€1,250 (approximately $1,621)
|
|
1.750%
|
|
March 2013
|
|
March 2020
|
EURO notes
|
(b)
|
€750 (approximately $1,029)
|
|
1.875%
|
|
March 2014
|
|
March 2021
|
EURO notes
|
(b)
|
€600 (approximately $761)
|
|
2.875%
|
|
May 2012
|
|
May 2024
|
EURO notes
|
(b)
|
€500 (approximately $582)
|
|
0.625%
|
|
November 2017
|
|
November 2024
|
EURO notes
|
(b)
|
€750 (approximately $972)
|
|
2.750%
|
|
March 2013
|
|
March 2025
|
EURO notes
|
(b)
|
€1,000 (approximately $1,372)
|
|
2.875%
|
|
March 2014
|
|
March 2026
|
EURO notes
|
(b)
|
€500 (approximately $697)
|
|
2.875%
|
|
May 2014
|
|
May 2029
|
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
|
|
|
|
|
|
|
|
|
|
Type
(in billions of dollars)
|
Committed
Credit Facilities |
|
Commercial
Paper |
||||
364-day revolving credit, expiring February 5, 2019
|
$
|
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, 2016
|
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
|
|
Issuance of stock awards
|
|
|
1,361,959
|
|
|
1,361,959
|
|
|
Balances, December 31, 2018
|
2,109,316,331
|
|
|
(554,736,610
|
)
|
|
1,554,579,721
|
|
Note 9.
|
|
Number of
Shares |
Weighted-
Average Grant Date Fair Value Per Share |
|||
Balance at January 1, 2018
|
3,612,400
|
|
$
|
89.65
|
|
Granted
|
1,288,700
|
|
100.19
|
|
|
Vested
|
(1,451,876
|
)
|
83.29
|
|
|
Forfeited
|
(130,429
|
)
|
96.24
|
|
|
Balance at December 31, 2018
|
3,318,795
|
|
$
|
96.26
|
|
(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
|
||||||
2018
|
$
|
129
|
|
|
$
|
100.19
|
|
$
|
114
|
|
2017
|
$
|
119
|
|
|
$
|
98.59
|
|
$
|
111
|
|
2016
|
$
|
108
|
|
|
$
|
89.03
|
|
$
|
126
|
|
(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
|
|||||
2018
|
1,451,876
|
|
|
$
|
121
|
|
$
|
149
|
|
2017
|
2,022,856
|
|
|
$
|
158
|
|
$
|
208
|
|
2016
|
2,302,525
|
|
|
$
|
202
|
|
$
|
210
|
|
|
Number of
Shares |
|
Grant Date
Fair Value Subject to Other Performance Factors Per Share |
Grant Date
Fair Value Subject to TSR Performance Factor Per Share |
|||||
Balance at January 1, 2018
|
821,030
|
|
|
$
|
93.46
|
|
$
|
116.16
|
|
Granted
|
401,500
|
|
|
100.69
|
|
118.98
|
|
||
Vested
|
—
|
|
|
—
|
|
—
|
|
||
Forfeited
|
(27,560
|
)
|
|
94.98
|
|
116.71
|
|
||
Balance at December 31, 2018
|
1,194,970
|
|
|
$
|
95.85
|
|
$
|
117.09
|
|
(in millions, except per PSU award granted)
|
PSU Grant Date Fair Value Subject to Other Performance Factors
|
|
PSU Grant Date Fair Value Subject to TSR Performance Factor
|
|
Compensation Expense related to PSU Awards
|
||||||||||||
|
Total
|
Per PSU Award
|
|
Total
|
Per PSU Award
|
|
Total
|
||||||||||
2018
|
$
|
20
|
|
$
|
100.69
|
|
|
$
|
24
|
|
$
|
118.98
|
|
|
$
|
24
|
|
2017
|
$
|
19
|
|
$
|
98.29
|
|
|
$
|
25
|
|
$
|
128.72
|
|
|
$
|
37
|
|
2016
|
$
|
19
|
|
$
|
89.02
|
|
|
$
|
22
|
|
$
|
104.60
|
|
|
$
|
27
|
|
|
For the Years Ended December 31,
|
|
|||||||
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
Risk-free interest rate
(a)
|
2.3
|
%
|
|
1.5
|
%
|
|
1.0
|
%
|
|
Expected volatility
(b)
|
19.6
|
%
|
|
15.8
|
%
|
|
17.5
|
%
|
|
Note 10.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Net earnings attributable to PMI
|
$
|
7,911
|
|
|
$
|
6,035
|
|
|
$
|
6,967
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
16
|
|
|
14
|
|
|
19
|
|
|||
Net earnings for basic and diluted EPS
|
$
|
7,895
|
|
|
$
|
6,021
|
|
|
$
|
6,948
|
|
Weighted-average shares for basic EPS
|
1,555
|
|
|
1,552
|
|
|
1,551
|
|
|||
Plus contingently issuable performance stock units (PSUs)
|
—
|
|
|
1
|
|
|
—
|
|
|||
Weighted-average shares for diluted EPS
|
1,555
|
|
|
1,553
|
|
|
1,551
|
|
Note 11.
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Earnings before income taxes
|
$
|
10,671
|
|
|
$
|
10,589
|
|
|
$
|
9,924
|
|
Provision for income taxes:
|
|
|
|
|
|
||||||
United States federal and state:
|
|
|
|
|
|
||||||
Current
|
$
|
120
|
|
|
$
|
1,662
|
|
|
$
|
(39
|
)
|
Deferred
|
(113
|
)
|
|
(384
|
)
|
|
293
|
|
|||
Total United States
|
7
|
|
|
1,278
|
|
|
254
|
|
|||
Outside United States:
|
|
|
|
|
|
||||||
Current
|
2,425
|
|
|
3,146
|
|
|
2,625
|
|
|||
Deferred
|
13
|
|
|
(117
|
)
|
|
(111
|
)
|
|||
Total outside United States
|
2,438
|
|
|
3,029
|
|
|
2,514
|
|
|||
Total provision for income taxes
|
$
|
2,445
|
|
|
$
|
4,307
|
|
|
$
|
2,768
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at January 1,
|
$
|
145
|
|
|
$
|
79
|
|
|
$
|
88
|
|
Additions based on tax positions related to the current year
|
10
|
|
|
71
|
|
|
13
|
|
|||
Additions for tax positions of previous years
|
15
|
|
|
5
|
|
|
1
|
|
|||
Reductions for tax positions of prior years
|
(94
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Reductions due to lapse of statute of limitations
|
(3
|
)
|
|
(7
|
)
|
|
(14
|
)
|
|||
Settlements
|
(19
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|||
Other
|
2
|
|
|
1
|
|
|
—
|
|
|||
Balance at December 31,
|
$
|
56
|
|
|
$
|
145
|
|
|
$
|
79
|
|
(in millions)
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|||
Unrecognized tax benefits
|
$
|
56
|
|
|
$
|
145
|
|
|
$
|
79
|
|
Accrued interest and penalties
|
12
|
|
|
23
|
|
|
15
|
|
|||
Tax credits and other indirect benefits
|
(14
|
)
|
|
(35
|
)
|
|
(31
|
)
|
|||
Liability for tax contingencies
|
$
|
54
|
|
|
$
|
133
|
|
|
$
|
63
|
|
|
2018
|
|
2017
|
|
2016
|
|||
U.S. federal statutory rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|||
Foreign rate differences
|
1.3
|
|
|
(12.2
|
)
|
|
(12.6
|
)
|
Dividend repatriation cost
|
2.5
|
|
|
16.4
|
|
|
5.8
|
|
Global intangible low-taxed income
|
1.2
|
|
|
|
|
|
||
Net operating losses
|
(1.1
|
)
|
|
|
|
|
||
Foreign derived intangible income
|
(1.1
|
)
|
|
|
|
|
||
Other
|
(0.9
|
)
|
|
1.5
|
|
|
(0.3
|
)
|
Effective tax rate
|
22.9
|
%
|
|
40.7
|
%
|
|
27.9
|
%
|
|
At December 31,
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
Deferred income tax assets:
|
|
|
|
||||
Accrued postretirement and postemployment benefits
|
$
|
193
|
|
|
$
|
239
|
|
Accrued pension costs
|
390
|
|
|
334
|
|
||
Inventory
|
136
|
|
|
131
|
|
||
Accrued liabilities
|
138
|
|
|
117
|
|
||
Net operating losses
|
452
|
|
|
213
|
|
||
Foreign exchange
|
—
|
|
|
91
|
|
||
Other
|
37
|
|
|
57
|
|
||
Total deferred income tax assets
|
1,346
|
|
|
1,182
|
|
||
Less: valuation allowance
|
(257
|
)
|
|
(156
|
)
|
||
Deferred income tax assets, net of valuation allowance
|
1,089
|
|
|
1,026
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Trade names
|
(508
|
)
|
|
(546
|
)
|
||
Property, plant and equipment
|
(222
|
)
|
|
(223
|
)
|
||
Unremitted earnings
|
(123
|
)
|
|
(49
|
)
|
||
Foreign exchange
|
(157
|
)
|
|
—
|
|
||
Total deferred income tax liabilities
|
(1,010
|
)
|
|
(818
|
)
|
||
Net deferred income tax assets
|
$
|
79
|
|
|
$
|
208
|
|
Note 12.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenues:
|
|
|
|
|
|
||||||
European Union
|
$
|
9,298
|
|
|
$
|
8,318
|
|
|
$
|
8,162
|
|
Eastern Europe
|
2,921
|
|
|
2,711
|
|
|
2,484
|
|
|||
Middle East & Africa
|
4,114
|
|
|
3,988
|
|
|
4,516
|
|
|||
South & Southeast Asia
|
4,656
|
|
|
4,417
|
|
|
4,396
|
|
|||
East Asia & Australia
|
5,580
|
|
|
6,373
|
|
|
4,285
|
|
|||
Latin America & Canada
|
3,056
|
|
|
2,941
|
|
|
2,842
|
|
|||
Net revenues
|
$
|
29,625
|
|
|
$
|
28,748
|
|
|
$
|
26,685
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Combustible products:
|
|
|
|
|
|
||||||
European Union
|
$
|
8,433
|
|
|
$
|
8,048
|
|
|
$
|
8,105
|
|
Eastern Europe
|
2,597
|
|
|
2,657
|
|
|
2,478
|
|
|||
Middle East & Africa
|
3,732
|
|
|
3,893
|
|
|
4,513
|
|
|||
South & Southeast Asia
|
4,656
|
|
|
4,417
|
|
|
4,396
|
|
|||
East Asia & Australia
|
3,074
|
|
|
3,156
|
|
|
3,619
|
|
|||
Latin America & Canada
|
3,037
|
|
|
2,937
|
|
|
2,841
|
|
|||
Total combustible products
|
$
|
25,529
|
|
|
$
|
25,107
|
|
|
$
|
25,952
|
|
Reduced-risk products:
|
|
|
|
|
|
||||||
European Union
|
$
|
865
|
|
|
$
|
269
|
|
|
57
|
|
|
Eastern Europe
|
324
|
|
|
55
|
|
|
6
|
|
|||
Middle East & Africa
|
382
|
|
|
94
|
|
|
4
|
|
|||
South & Southeast Asia
|
—
|
|
|
—
|
|
|
—
|
|
|||
East Asia & Australia
|
2,506
|
|
|
3,218
|
|
|
666
|
|
|||
Latin America & Canada
|
19
|
|
|
4
|
|
|
1
|
|
|||
Total reduced-risk products
|
$
|
4,096
|
|
|
$
|
3,640
|
|
|
$
|
733
|
|
Total PMI net revenues
|
$
|
29,625
|
|
|
$
|
28,748
|
|
|
$
|
26,685
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Operating income:
|
|
|
|
|
|
||||||
European Union
|
$
|
4,105
|
|
|
$
|
3,691
|
|
|
$
|
3,920
|
|
Eastern Europe
|
902
|
|
|
887
|
|
|
890
|
|
|||
Middle East & Africa
|
1,627
|
|
|
1,884
|
|
|
1,990
|
|
|||
South & Southeast Asia
|
1,747
|
|
|
1,514
|
|
|
1,474
|
|
|||
East Asia & Australia
|
1,851
|
|
|
2,608
|
|
|
1,691
|
|
|||
Latin America & Canada
|
1,145
|
|
|
997
|
|
|
938
|
|
|||
Operating income
|
$
|
11,377
|
|
|
$
|
11,581
|
|
|
$
|
10,903
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Depreciation expense:
|
|
|
|
|
|
||||||
European Union
|
$
|
269
|
|
|
$
|
213
|
|
|
$
|
184
|
|
Eastern Europe
|
101
|
|
|
76
|
|
|
62
|
|
|||
Middle East & Africa
|
105
|
|
|
88
|
|
|
88
|
|
|||
South & Southeast Asia
|
154
|
|
|
153
|
|
|
147
|
|
|||
East Asia & Australia
|
173
|
|
|
160
|
|
|
100
|
|
|||
Latin America & Canada
|
94
|
|
|
85
|
|
|
79
|
|
|||
|
896
|
|
|
775
|
|
|
660
|
|
|||
Other
|
11
|
|
|
12
|
|
|
9
|
|
|||
Total depreciation expense
|
$
|
907
|
|
|
$
|
787
|
|
|
$
|
669
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Capital expenditures:
|
|
|
|
|
|
||||||
European Union
|
$
|
813
|
|
|
$
|
956
|
|
|
$
|
665
|
|
Eastern Europe
|
136
|
|
|
97
|
|
|
69
|
|
|||
Middle East & Africa
|
65
|
|
|
85
|
|
|
154
|
|
|||
South & Southeast Asia
|
129
|
|
|
140
|
|
|
156
|
|
|||
East Asia & Australia
|
215
|
|
|
87
|
|
|
24
|
|
|||
Latin America & Canada
|
74
|
|
|
175
|
|
|
103
|
|
|||
|
1,432
|
|
|
1,540
|
|
|
1,171
|
|
|||
Other
|
4
|
|
|
8
|
|
|
1
|
|
|||
Total capital expenditures
|
$
|
1,436
|
|
|
$
|
1,548
|
|
|
$
|
1,172
|
|
|
At December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Long-lived assets:
|
|
|
|
|
|
||||||
European Union
|
$
|
4,216
|
|
|
$
|
4,130
|
|
|
$
|
3,282
|
|
Eastern Europe
|
547
|
|
|
546
|
|
|
466
|
|
|||
Middle East & Africa
|
362
|
|
|
430
|
|
|
400
|
|
|||
South & Southeast Asia
|
1,297
|
|
|
1,419
|
|
|
1,413
|
|
|||
East Asia & Australia
|
781
|
|
|
659
|
|
|
503
|
|
|||
Latin America & Canada
|
779
|
|
|
885
|
|
|
765
|
|
|||
Total long-lived assets
|
7,982
|
|
|
8,069
|
|
|
6,829
|
|
|||
Other
|
664
|
|
|
1,126
|
|
|
750
|
|
|||
Total property, plant and equipment, net and Other assets
|
$
|
8,646
|
|
|
$
|
9,195
|
|
|
$
|
7,579
|
|
Note 13.
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Net pension costs (income)
|
$
|
(51
|
)
|
|
$
|
(20
|
)
|
|
$
|
(6
|
)
|
Net postemployment costs
|
80
|
|
|
85
|
|
|
83
|
|
|||
Net postretirement costs
|
12
|
|
|
13
|
|
|
11
|
|
|||
Total pension and other employee benefit costs
|
$
|
41
|
|
|
$
|
78
|
|
|
$
|
88
|
|
|
Pension
(1)
|
|
Postretirement
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Benefit obligation at January 1,
|
$
|
9,028
|
|
|
$
|
8,387
|
|
|
$
|
248
|
|
|
$
|
227
|
|
Service cost
|
210
|
|
|
208
|
|
|
4
|
|
|
4
|
|
||||
Interest cost
|
109
|
|
|
108
|
|
|
9
|
|
|
8
|
|
||||
Benefits paid
|
(218
|
)
|
|
(226
|
)
|
|
(8
|
)
|
|
(10
|
)
|
||||
Settlement and curtailment
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Actuarial losses (gains)
|
210
|
|
|
(93
|
)
|
|
(34
|
)
|
|
12
|
|
||||
Currency
|
(196
|
)
|
|
621
|
|
|
(9
|
)
|
|
7
|
|
||||
Other
|
8
|
|
|
23
|
|
|
(1
|
)
|
|
—
|
|
||||
Benefit obligation at December 31,
|
9,152
|
|
|
9,028
|
|
|
209
|
|
|
248
|
|
||||
Fair value of plan assets at January 1,
|
7,598
|
|
|
6,457
|
|
|
|
|
|
||||||
Actual return on plan assets
|
(447
|
)
|
|
742
|
|
|
|
|
|
||||||
Employer contributions
|
110
|
|
|
66
|
|
|
|
|
|
||||||
Employee contributions
|
24
|
|
|
40
|
|
|
|
|
|
||||||
Benefits paid
|
(218
|
)
|
|
(226
|
)
|
|
|
|
|
||||||
Settlement and curtailment
|
—
|
|
|
—
|
|
|
|
|
|
||||||
Currency
|
(179
|
)
|
|
519
|
|
|
|
|
|
||||||
Fair value of plan assets at December 31,
|
6,888
|
|
|
7,598
|
|
|
|
|
|
||||||
Net pension and postretirement liability recognized at December 31,
|
$
|
(2,264
|
)
|
|
$
|
(1,430
|
)
|
|
$
|
(209
|
)
|
|
$
|
(248
|
)
|
|
Pension
|
|
Postretirement
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Other assets
|
$
|
37
|
|
|
$
|
47
|
|
|
|
|
|
||||
Accrued liabilities — employment costs
|
(20
|
)
|
|
(26
|
)
|
|
$
|
(10
|
)
|
|
$
|
(10
|
)
|
||
Long-term employment costs
|
(2,281
|
)
|
|
(1,451
|
)
|
|
(199
|
)
|
|
(238
|
)
|
||||
|
$
|
(2,264
|
)
|
|
$
|
(1,430
|
)
|
|
$
|
(209
|
)
|
|
$
|
(248
|
)
|
|
Pension
|
|
Postretirement
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Discount rate
|
1.61
|
%
|
|
1.51
|
%
|
|
3.97
|
%
|
|
3.79
|
%
|
Rate of compensation increase
|
1.86
|
|
|
1.65
|
|
|
|
|
|
||
Interest crediting rate
|
3.40
|
|
|
3.40
|
|
|
|
|
|
||
Health care cost trend rate assumed for next year
|
|
|
|
|
6.17
|
|
|
6.17
|
|
||
Ultimate trend rate
|
|
|
|
|
4.59
|
|
|
4.62
|
|
||
Year that rate reaches the ultimate trend rate
|
|
|
|
|
2040
|
|
2029
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Service cost
|
$
|
210
|
|
|
$
|
208
|
|
|
$
|
207
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
Interest cost
|
109
|
|
|
108
|
|
|
146
|
|
|
9
|
|
|
8
|
|
|
9
|
|
||||||
Expected return on plan assets
|
(349
|
)
|
|
(326
|
)
|
|
(346
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses
|
172
|
|
|
186
|
|
|
186
|
|
|
4
|
|
|
5
|
|
|
2
|
|
||||||
Prior service cost
|
2
|
|
|
6
|
|
|
4
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||
Settlement and curtailment
|
15
|
|
|
6
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic pension and postretirement costs
|
$
|
159
|
|
|
$
|
188
|
|
|
$
|
201
|
|
|
$
|
16
|
|
|
$
|
17
|
|
|
$
|
14
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||
Discount rate - service cost
|
1.92
|
%
|
|
1.68
|
%
|
|
1.81
|
%
|
|
3.79
|
%
|
|
3.68
|
%
|
|
4.45
|
%
|
Discount rate - interest cost
|
1.25
|
|
|
1.27
|
|
|
1.81
|
|
|
3.79
|
|
|
3.68
|
|
|
4.45
|
|
Expected rate of return on plan assets
|
4.76
|
|
|
4.80
|
|
|
5.36
|
|
|
|
|
|
|
|
|||
Rate of compensation increase
|
1.65
|
|
|
1.68
|
|
|
2.03
|
|
|
|
|
|
|
|
|||
Interest crediting rate
|
3.40
|
|
|
3.40
|
|
|
3.00
|
|
|
|
|
|
|
|
|||
Health care cost trend rate
|
|
|
|
|
|
|
6.17
|
|
|
7.15
|
|
|
6.23
|
|
Asset Category
(in millions)
|
At December 31, 2018
|
|
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
|
$
|
84
|
|
|
$
|
84
|
|
|
|
|
|
|
|
||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. securities
|
139
|
|
|
139
|
|
|
|
|
|
|
|
||||
International securities
|
442
|
|
|
442
|
|
|
|
|
|
|
|
||||
Investment funds
(a)
|
5,508
|
|
|
3,595
|
|
|
$
|
1,913
|
|
|
|
|
|||
International government bonds
|
176
|
|
|
120
|
|
|
56
|
|
|
|
|
||||
Corporate bonds
|
232
|
|
|
232
|
|
|
|
|
|
|
|
||||
Other
|
19
|
|
|
19
|
|
|
|
|
|
|
|
||||
Total assets in the fair value hierarchy
|
$
|
6,600
|
|
|
$
|
4,631
|
|
|
$
|
1,969
|
|
|
$
|
—
|
|
Investment funds measured at net asset value
(b)
|
288
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
6,888
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Net losses
|
$
|
(3,438
|
)
|
|
$
|
(41
|
)
|
|
$
|
(702
|
)
|
|
$
|
(4,181
|
)
|
Prior service cost
|
(27
|
)
|
|
3
|
|
|
—
|
|
|
(24
|
)
|
||||
Net transition obligation
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||
Deferred income taxes
|
379
|
|
|
20
|
|
|
164
|
|
|
563
|
|
||||
Losses to be amortized
|
$
|
(3,090
|
)
|
|
$
|
(18
|
)
|
|
$
|
(538
|
)
|
|
$
|
(3,646
|
)
|
(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
|
||||||||
Amounts transferred to earnings as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
$
|
180
|
|
|
$
|
5
|
|
|
$
|
62
|
|
|
$
|
247
|
|
Prior service cost
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Net transition obligation
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Other income/expense:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
||||
Prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Deferred income taxes
|
(28
|
)
|
|
(1
|
)
|
|
(14
|
)
|
|
(43
|
)
|
||||
|
167
|
|
|
3
|
|
|
48
|
|
|
218
|
|
||||
Other movements during the year:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
(1,008
|
)
|
|
34
|
|
|
(147
|
)
|
|
(1,121
|
)
|
||||
Prior service cost
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||
Deferred income taxes
|
80
|
|
|
(7
|
)
|
|
(8
|
)
|
|
65
|
|
||||
|
(920
|
)
|
|
27
|
|
|
(155
|
)
|
|
(1,048
|
)
|
||||
Total movements in other comprehensive earnings (losses)
|
$
|
(753
|
)
|
|
$
|
30
|
|
|
$
|
(107
|
)
|
|
$
|
(830
|
)
|
(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
|
)
|
Note 14.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Research and development expense
|
$
|
383
|
|
|
$
|
453
|
|
|
$
|
429
|
|
Advertising expense
|
$
|
896
|
|
|
$
|
830
|
|
|
$
|
405
|
|
Foreign currency net transaction losses
|
$
|
21
|
|
|
$
|
49
|
|
|
$
|
272
|
|
Interest expense
|
$
|
855
|
|
|
$
|
1,096
|
|
|
$
|
1,069
|
|
Interest income
|
(190
|
)
|
|
(182
|
)
|
|
(178
|
)
|
|||
Interest expense, net
|
$
|
665
|
|
|
$
|
914
|
|
|
$
|
891
|
|
Rent expense
|
$
|
312
|
|
|
$
|
313
|
|
|
$
|
284
|
|
(in millions)
|
|
||
2019
|
$
|
147
|
|
2020
|
103
|
|
|
2021
|
73
|
|
|
2022
|
52
|
|
|
2023
|
43
|
|
|
Thereafter
|
354
|
|
|
|
$
|
772
|
|
Note 15.
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||||||
|
|
|
Fair
Value
|
|
|
|
Fair
Value
|
||||||||||||
(in millions)
|
Balance Sheet Classification
|
|
2018
|
|
2017
|
|
Balance Sheet Classification
|
|
2018
|
|
2017
|
||||||||
Foreign exchange contracts designated as hedging instruments
|
Other current
assets
|
|
$
|
54
|
|
|
$
|
84
|
|
|
Other accrued
liabilities
|
|
$
|
47
|
|
|
$
|
197
|
|
|
Other assets
|
|
99
|
|
|
34
|
|
|
Other liabilities
|
|
525
|
|
|
880
|
|
||||
Foreign exchange contracts not designated as hedging instruments
|
Other current
assets
|
|
67
|
|
|
22
|
|
|
Other accrued
liabilities
|
|
46
|
|
|
37
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other assets
|
|
—
|
|
|
—
|
|
|
Other liabilities
|
|
13
|
|
|
14
|
|
||||
Total derivatives
|
|
|
$
|
220
|
|
|
$
|
140
|
|
|
|
|
$
|
631
|
|
|
$
|
1,128
|
|
(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
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
|
|
2018
|
|
2017
|
2016
|
|
||||||||||||
Derivatives in Cash Flow Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
$
|
28
|
|
|
$
|
(52
|
)
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Net revenues
|
|
$
|
18
|
|
|
$
|
60
|
|
$
|
(38
|
)
|
|
||||||
|
|
|
|
|
|
|
Cost of sales
|
|
—
|
|
|
1
|
|
46
|
|
|
|||||||||
|
|
|
|
|
|
|
Marketing, administration and research costs
|
|
6
|
|
|
(7
|
)
|
(11
|
)
|
|
|||||||||
|
|
|
|
|
|
|
Interest expense, net
|
|
(1
|
)
|
|
(41
|
)
|
(30
|
)
|
|
|||||||||
Derivatives in Net Investment Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
324
|
|
|
(1,644
|
)
|
|
296
|
|
|
|
|
|
|
|
|
|
|||||||||
Total
|
$
|
352
|
|
|
$
|
(1,696
|
)
|
|
$
|
308
|
|
|
|
|
$
|
23
|
|
|
$
|
13
|
|
$
|
(33
|
)
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Gain as of January 1,
|
$
|
42
|
|
|
$
|
97
|
|
|
$
|
59
|
|
Derivative (gains)/losses transferred to earnings
|
(31
|
)
|
|
(11
|
)
|
|
30
|
|
|||
Change in fair value
|
24
|
|
|
(44
|
)
|
|
8
|
|
|||
Gain as of December 31,
|
$
|
35
|
|
|
$
|
42
|
|
|
$
|
97
|
|
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, 2018 |
|
Quoted
Prices
in Active Markets for
Identical Assets/Liabilities (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs
(Level 3) |
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
$
|
288
|
|
|
$
|
288
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
220
|
|
|
$
|
—
|
|
|
220
|
|
|
—
|
|
|||
Pension plan assets
|
6,600
|
|
|
4,631
|
|
|
1,969
|
|
|
—
|
|
||||
Total assets in fair value hierarchy
|
$
|
7,108
|
|
|
$
|
4,919
|
|
|
$
|
2,189
|
|
|
$
|
—
|
|
Pension plan assets measured at net asset value
(a)
|
288
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,396
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Debt
|
$
|
31,162
|
|
|
$
|
30,997
|
|
|
$
|
165
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
631
|
|
|
—
|
|
|
631
|
|
|
—
|
|
||||
Total liabilities
|
$
|
31,793
|
|
|
$
|
30,997
|
|
|
$
|
796
|
|
|
$
|
—
|
|
(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
|
|
|
$
|
—
|
|
Note 17.
|
(Losses) Earnings
|
At December 31,
|
||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Currency translation adjustments
|
$
|
(6,500
|
)
|
|
$
|
(5,761
|
)
|
|
$
|
(6,091
|
)
|
Pension and other benefits
|
(3,646
|
)
|
|
(2,816
|
)
|
|
(3,565
|
)
|
|||
Derivatives accounted for as hedges
|
35
|
|
|
42
|
|
|
97
|
|
|||
Total accumulated other comprehensive losses
|
$
|
(10,111
|
)
|
|
$
|
(8,535
|
)
|
|
$
|
(9,559
|
)
|
Note 18.
|
Type of Case
|
|
Number of Cases Pending as of February 4, 2019
|
|
Number of Cases Pending as of February 9, 2018
|
|
Number of Cases Pending as of December 31, 2016
|
|||
Individual Smoking and Health Cases
|
|
55
|
|
|
57
|
|
|
64
|
|
Smoking and Health Class Actions
|
|
10
|
|
|
11
|
|
|
11
|
|
Health Care Cost Recovery Actions
|
|
16
|
|
|
16
|
|
|
16
|
|
Label-Related Class Actions
|
|
1
|
|
|
1
|
|
|
—
|
|
Individual Label-Related Cases
|
|
7
|
|
|
1
|
|
|
3
|
|
Public Civil Actions
|
|
2
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
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 $273) 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. In March 2017, plaintiff filed an
en banc
appeal 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. Both appeals are 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 $100 million) in punitive damages, allocating CAD 46 million (approximately $35 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 $172.5 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 $11.8 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 $2.37 billion)). The trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $763 million) of the compensatory damage award, CAD 200 million (approximately $153 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 $172.5 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 $2,960), 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.
|
•
|
55
cases brought by individual plaintiffs in Argentina (
32
), Brazil (
8
), Canada (
2
), Chile (
4
), Costa Rica (
1
), Italy (
3
), the Philippines (
1
), Poland (
2
), Turkey (
1
) and Scotland (
1
), compared with
57
such cases on
February 9, 2018
, and
64
cases on
December 31, 2016
; and
|
•
|
10
cases brought on behalf of classes of individual plaintiffs in Brazil (
1
) and Canada (
9
), compared with
11
such cases on
February 9, 2018
, and
11
such cases on
December 31, 2016
.
|
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, 2018
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
220
|
|
$
|
—
|
|
$
|
220
|
|
$
|
(124
|
)
|
$
|
(80
|
)
|
$
|
16
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Foreign exchange contracts
|
$
|
631
|
|
$
|
—
|
|
$
|
631
|
|
$
|
(124
|
)
|
$
|
(427
|
)
|
$
|
80
|
|
|
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
|
|
Note 20.
|
Note 21.
|
(in millions)
|
For the Year Ended December 31, 2017
|
|
For the Year Ended December 31, 2016
|
||||||||||||||||||
Net Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
As reported
|
|
Retrospective Adoption
|
|
As reported
|
|
Retrospective Adoption
|
||||||||||||||
|
Net revenues
|
Excises taxes
|
|
Net
revenues |
|
Net revenues
|
Excises taxes
|
|
Net
revenues
|
||||||||||||
|
$
|
78,098
|
|
$
|
49,350
|
|
|
$
|
28,748
|
|
|
$
|
74,953
|
|
$
|
48,268
|
|
|
$
|
26,685
|
|
Note 22.
|
|
2018 Quarters
|
||||||||||||||
(in millions, except per share data)
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
||||||||
Net revenues
|
$
|
6,896
|
|
|
$
|
7,726
|
|
|
$
|
7,504
|
|
|
$
|
7,499
|
|
Gross profit
|
$
|
4,281
|
|
|
$
|
4,982
|
|
|
$
|
4,886
|
|
|
$
|
4,718
|
|
Net earnings attributable to PMI
|
$
|
1,556
|
|
|
$
|
2,198
|
|
|
$
|
2,247
|
|
|
$
|
1,910
|
|
Per share data:
|
|
|
|
|
|
|
|
||||||||
Basic EPS
|
$
|
1.00
|
|
|
$
|
1.41
|
|
|
$
|
1.44
|
|
|
$
|
1.23
|
|
Diluted EPS
|
$
|
1.00
|
|
|
$
|
1.41
|
|
|
$
|
1.44
|
|
|
$
|
1.23
|
|
Dividends declared
|
$
|
1.07
|
|
|
$
|
1.14
|
|
|
$
|
1.14
|
|
|
$
|
1.14
|
|
|
|
||||||||||||||
|
2017 Quarters
|
||||||||||||||
(in millions, except per share data)
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
||||||||
Net revenues
|
$
|
6,064
|
|
|
$
|
6,917
|
|
|
$
|
7,473
|
|
|
$
|
8,294
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ PRICEWATERHOUSECOOPERS SA
|
|
|
PricewaterhouseCoopers SA
|
|
|
|
|
|
|
|
|
/S/ CHAD MUELLER
|
|
/S/ DR. MICHAEL ABRESCH
|
Chad Mueller
|
|
Dr. Michael Abresch
|
|
|
|
Lausanne, Switzerland
|
|
|
February 7, 2019
|
|
|
•
|
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
|
|
61
|
|
|
Massimo Andolina
|
|
Senior Vice President, Operations
|
|
50
|
|
|
Drago Azinovic
|
|
President, Middle East & Africa Region and PMI Duty Free
|
|
56
|
|
|
Werner Barth
|
|
Senior Vice President, Commercial
|
|
54
|
|
|
Charles Bendotti
|
|
Senior Vice President, People and Culture
|
|
46
|
|
|
Frank de Rooij
|
|
Vice President, Treasury and Corporate Finance
|
|
53
|
|
|
Frederic de Wilde
|
|
President, European Union Region
|
|
51
|
|
|
Marc S. Firestone
|
|
President, External Affairs and General Counsel
|
|
59
|
|
|
Stacey Kennedy
|
|
President, South and Southeast Asia Region
|
|
46
|
|
|
Martin G. King
|
|
Chief Financial Officer
|
|
54
|
|
|
Michael Kunst
|
|
Senior Vice President, Commercial Transformation
|
|
50
|
|
|
Andreas Kurali
|
|
Vice President and Controller
|
|
53
|
|
|
Marco Mariotti
|
|
President, Eastern Europe Region
|
|
54
|
|
|
Mario Masseroli
|
|
President, Latin America & Canada Region
|
|
48
|
|
|
Deepak Mishra
|
|
Chief Strategy Officer
|
|
47
|
|
|
Jacek Olczak
|
|
Chief Operating Officer
|
|
54
|
|
|
Paul Riley
|
|
President, East Asia and Australia Region
|
|
53
|
|
|
Marian Salzman
|
|
Senior Vice President, Global Communications
|
|
60
|
|
|
Jaime Suarez
|
|
Chief Digital Officer
|
|
45
|
|
|
Michael Voegele
|
|
Chief Technology Officer
|
|
46
|
|
|
Jerry E. Whitson
|
|
Deputy General Counsel and Corporate Secretary
|
|
63
|
|
|
Miroslaw Zielinski
|
|
President, Science and Innovation
|
|
57
|
|
|
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
|
5,708,735
(1)
|
|
$
|
—
|
|
|
23,886,194
|
|
|
Item 14.
|
Principal Accounting Fees and Services
.
|
Item 15.
|
Exhibits and Financial Statement Schedules
.
|
|
Page
|
Consolidated Statements of Earnings for the years ended December 31, 2018, 2017 and 2016
|
57
|
Consolidated Statements of Comprehensive Earnings for the years ended December 31,
2018, 2017 and 2016
|
58
|
Consolidated Balance Sheets at December 31, 2018 and 2017
|
59 - 60
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017
and 2016 |
61 - 62
|
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended
December 31, 2018, 2017 and 2016
|
63
|
Notes to Consolidated Financial Statements
|
64 - 109
|
Report of Independent Registered Public Accounting Firm
|
110 - 111
|
Report of Management on Internal Control Over Financial Reporting
|
112
|
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
|
|
—
|
|
10.43
|
|
—
|
|
|
10.44
|
|
—
|
|
|
10.45
|
|
—
|
|
|
10.46
|
|
—
|
|
|
10.47
|
|
—
|
|
|
10.48
|
|
—
|
|
|
10.49
|
|
—
|
|
|
10.50
|
|
—
|
|
|
10.51
|
|
—
|
|
|
10.52
|
|
—
|
|
|
10.53
|
|
—
|
|
|
10.54
|
|
—
|
|
|
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 7, 2019
|
(André Calantzopoulos)
|
||
/s/ MARTIN G. KING
|
Chief Financial Officer
|
February 7, 2019
|
(Martin G. King)
|
||
/s/ ANDREAS KURALI
|
Vice President and Controller
|
February 7, 2019
|
(Andreas Kurali)
|
||
*LOUIS C. CAMILLERI,
MASSIMO FERRAGAMO,
WERNER GEISSLER,
LISA A. HOOK,
JENNIFER LI,
JUN MAKIHARA,
KALPANA MORPARIA,
LUCIO A. NOTO,
FREDERIK PAULSEN,
ROBERT B. POLET,
STEPHEN M. WOLF
|
Directors
|
|
*By:
|
/s/ ANDRÉ CALANTZOPOULOS
|
|
February 7, 2019
|
|
(André Calantzopoulos
Attorney-in-fact)
|
|
|
|
|
Name
|
|
State or
Country of
Organization
|
|
||
|
||
|
|
|
Compania Colombiana de Tabaco S.A.S.
|
|
Colombia
|
Latin America and Canada Investments B.V.
|
|
Netherlands
|
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 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
|
Philip Morris Trading (Thailand) Company Limited
|
|
Thailand
|
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
|
AO "Philip Morris Izhora"
|
|
Russia
|
|
|
|
/s/ PRICEWATERHOUSECOOPERS SA
|
|
|
PricewaterhouseCoopers SA
|
|
|
|
|
|
/s/ CHAD MUELLER
|
|
/s/ DR. MICHAEL ABRESCH
|
Chad Mueller
|
|
Dr. Michael Abresch
|
|
/s/ LOUIS C. CAMILLERI
|
Louis C. Camilleri
|
|
/s/ MASSIMO FERRAGAMO
|
Massimo Ferragamo
|
|
/s/ WERNER GEISSLER
|
Werner Geissler
|
|
/s/ LISA A. HOOK
|
Lisa A. Hook
|
|
/s/ JENNIFER LI
|
Jennifer Li
|
|
/s/ JUN MAKIHARA
|
Jun Makihara
|
|
/s/ KALPANA MORPARIA
|
Kalpana Morparia
|
|
/s/ LUCIO A. NOTO
|
Lucio A. Noto
|
|
/s/ FREDERIK PAULSEN
|
Frederik Paulsen
|
|
/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.
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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):
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a.
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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
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b.
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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.
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/s/ MARTIN G. KING
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Martin G. King
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Chief Financial Officer
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/s/ ANDRÉ CALANTZOPOULOS
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André Calantzopoulos
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Chief Executive Officer
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February 7, 2019
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/s/ MARTIN G. KING
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Martin G. King
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Chief Financial Officer
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February 7, 2019
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