(X)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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( )
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Philip Morris International Inc.
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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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Registrant’s telephone number, including area code
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(917) 663-2000
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Page No.
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PART I -
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Item 1.
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Condensed Consolidated Statements of Earnings for the
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Three Months Ended March 31, 2019 and 2018
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Condensed Consolidated Statements of Comprehensive Earnings for the
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Three Months Ended March 31, 2019 and 2018
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Condensed Consolidated Balance Sheets at
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March 31, 2019 and December 31, 2018
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Condensed Consolidated Statements of Cash Flows for the
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Three Months Ended March 31, 2019 and 2018
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Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
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Three Months Ended March 31, 2019 and 2018
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Item 2.
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Item 4.
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PART II -
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Item 1.
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||
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Item 1A.
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||
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Item 2.
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Item 6.
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For the Three Months Ended March 31,
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||||||
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2019
|
|
2018
|
||||
Revenues including excise taxes
|
$
|
17,705
|
|
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$
|
18,426
|
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Excise taxes on products
|
10,954
|
|
|
11,530
|
|
||
Net revenues
|
6,751
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|
|
6,896
|
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||
Cost of sales
|
2,465
|
|
|
2,615
|
|
||
Gross profit
|
4,286
|
|
|
4,281
|
|
||
Marketing, administration and research costs (Notes 19 & 20)
|
2,217
|
|
|
1,833
|
|
||
Amortization of intangibles
|
19
|
|
|
22
|
|
||
Operating income
|
2,050
|
|
|
2,426
|
|
||
Interest expense, net
|
152
|
|
|
227
|
|
||
Pension and other employee benefit costs (Note 3)
|
21
|
|
|
6
|
|
||
Earnings before income taxes
|
1,877
|
|
|
2,193
|
|
||
Provision for income taxes
|
424
|
|
|
559
|
|
||
Equity investments and securities (income)/loss, net
|
(11
|
)
|
|
(13
|
)
|
||
Net earnings
|
1,464
|
|
|
1,647
|
|
||
Net earnings attributable to noncontrolling interests
|
110
|
|
|
91
|
|
||
Net earnings attributable to PMI
|
$
|
1,354
|
|
|
$
|
1,556
|
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Per share data (Note 6):
|
|
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||||
Basic earnings per share
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$
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0.87
|
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$
|
1.00
|
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Diluted earnings per share
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$
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0.87
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$
|
1.00
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For the Three Months Ended March 31,
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||||||
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|
2019
|
|
2018
|
||||
Net earnings
|
|
$
|
1,464
|
|
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$
|
1,647
|
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Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
||||
Change in currency translation adjustments:
|
|
|
|
|
||||
Unrealized gains (losses), net of income taxes of ($128) in 2019 and $192 in 2018
|
|
286
|
|
|
(371
|
)
|
||
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $- in 2019 and $- in 2018 (Note 20)
|
|
502
|
|
|
—
|
|
||
Change in net loss and prior service cost:
|
|
|
|
|
||||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($4) in 2019 and ($11) in 2018
|
|
63
|
|
|
50
|
|
||
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of ($15) in 2019 and $- in 2018 (Note 20)
|
|
27
|
|
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—
|
|
||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
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||||
Gains (losses) recognized, net of income taxes of $1 in 2019 and $10 in 2018
|
|
(1
|
)
|
|
(64
|
)
|
||
(Gains) losses transferred to earnings, net of income taxes of $1 in 2019 and ($1) in 2018
|
|
(4
|
)
|
|
2
|
|
||
Total other comprehensive earnings (losses)
|
|
873
|
|
|
(383
|
)
|
||
Total comprehensive earnings
|
|
2,337
|
|
|
1,264
|
|
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Less comprehensive earnings attributable to:
|
|
|
|
|
||||
Noncontrolling interests
|
|
109
|
|
|
56
|
|
||
Comprehensive earnings attributable to PMI
|
|
$
|
2,228
|
|
|
$
|
1,208
|
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March 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,081
|
|
|
$
|
6,593
|
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Trade receivables (less allowances of $25 in 2019 and $25 in 2018)
|
2,958
|
|
|
2,950
|
|
||
Other receivables
|
577
|
|
|
614
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
2,294
|
|
|
2,318
|
|
||
Other raw materials
|
1,548
|
|
|
1,405
|
|
||
Finished product
|
4,476
|
|
|
5,081
|
|
||
|
8,318
|
|
|
8,804
|
|
||
Other current assets
|
807
|
|
|
481
|
|
||
Total current assets
|
15,741
|
|
|
19,442
|
|
||
Property, plant and equipment, at cost
|
14,299
|
|
|
14,557
|
|
||
Less: accumulated depreciation
|
7,405
|
|
|
7,356
|
|
||
|
6,894
|
|
|
7,201
|
|
||
Goodwill (Note 4)
|
5,775
|
|
|
7,189
|
|
||
Other intangible assets, net (Note 4)
|
2,129
|
|
|
2,278
|
|
||
Investments in unconsolidated subsidiaries and equity securities (Notes 11&14)
|
4,578
|
|
|
1,269
|
|
||
Deferred income taxes
|
951
|
|
|
977
|
|
||
Other assets
|
1,974
|
|
|
1,445
|
|
||
TOTAL ASSETS
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$
|
38,042
|
|
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$
|
39,801
|
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March 31,
2019 |
|
December 31,
2018 |
||||
LIABILITIES
|
|
|
|
||||
Short-term borrowings (Note 10)
|
$
|
1,551
|
|
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$
|
730
|
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Current portion of long-term debt (Note 10)
|
5,582
|
|
|
4,054
|
|
||
Accounts payable
|
1,812
|
|
|
2,068
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
580
|
|
|
732
|
|
||
Taxes, except income taxes
|
4,354
|
|
|
5,088
|
|
||
Employment costs
|
713
|
|
|
794
|
|
||
Dividends payable
|
1,783
|
|
|
1,783
|
|
||
Other
|
1,741
|
|
|
1,366
|
|
||
Income taxes
|
370
|
|
|
576
|
|
||
Total current liabilities
|
18,486
|
|
|
17,191
|
|
||
Long-term debt (Note 10)
|
23,131
|
|
|
26,975
|
|
||
Deferred income taxes
|
921
|
|
|
898
|
|
||
Employment costs
|
2,958
|
|
|
3,083
|
|
||
Income taxes and other liabilities
|
2,731
|
|
|
2,393
|
|
||
Total liabilities
|
48,227
|
|
|
50,540
|
|
||
Contingencies (Note 8)
|
|
|
|
||||
STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
||||
Common stock, no par value
(2,109,316,331 shares issued in 2019 and 2018) |
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,907
|
|
|
1,939
|
|
||
Earnings reinvested in the business
|
30,588
|
|
|
31,014
|
|
||
Accumulated other comprehensive losses
|
(9,237
|
)
|
|
(10,111
|
)
|
||
|
23,258
|
|
|
22,842
|
|
||
Less: cost of repurchased stock
(553,520,033 and 554,736,610 shares in 2019 and 2018, respectively)
|
35,226
|
|
|
35,301
|
|
||
Total PMI stockholders’ deficit
|
(11,968
|
)
|
|
(12,459
|
)
|
||
Noncontrolling interests
|
1,783
|
|
|
1,720
|
|
||
Total stockholders’ deficit
|
(10,185
|
)
|
|
(10,739
|
)
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
$
|
38,042
|
|
|
$
|
39,801
|
|
|
For the Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Net earnings
|
$
|
1,464
|
|
|
$
|
1,647
|
|
|
|
|
|
||||
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
||||
Depreciation and amortization
|
240
|
|
|
242
|
|
||
Deferred income tax (benefit) provision
|
(94
|
)
|
|
26
|
|
||
Cash effects of changes in:
|
|
|
|
||||
Receivables, net
|
4
|
|
|
(113
|
)
|
||
Inventories
|
237
|
|
|
338
|
|
||
Accounts payable
|
(7
|
)
|
|
(62
|
)
|
||
Accrued liabilities and other current assets
|
(855
|
)
|
|
(509
|
)
|
||
Income taxes
|
(251
|
)
|
|
(315
|
)
|
||
Pension plan contributions
|
(17
|
)
|
|
(25
|
)
|
||
Other
|
520
|
|
(1)
|
151
|
|
||
Net cash provided by operating activities
|
1,241
|
|
|
1,380
|
|
||
|
|
|
|
||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Capital expenditures
|
(324
|
)
|
|
(365
|
)
|
||
Investments in unconsolidated subsidiaries and equity securities
|
(24
|
)
|
|
(18
|
)
|
||
Deconsolidation of RBH (Note 20)
|
(1,346
|
)
|
(2)
|
—
|
|
||
Net investment hedges
|
91
|
|
|
(665
|
)
|
||
Other
|
7
|
|
|
30
|
|
||
Net cash used in investing activities
|
(1,596
|
)
|
|
(1,018
|
)
|
|
For the Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
||||
|
|
|
|
||||
Short-term borrowing activity by original maturity:
|
|
|
|
||||
Net issuances - maturities of 90 days or less
|
$
|
(167
|
)
|
|
$
|
103
|
|
Issuances - maturities longer than 90 days
|
989
|
|
|
—
|
|
||
Long-term debt repaid
|
(2,137
|
)
|
|
—
|
|
||
Dividends paid
|
(1,780
|
)
|
|
(1,659
|
)
|
||
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 17)
|
—
|
|
|
(91
|
)
|
||
Other
|
(56
|
)
|
|
(91
|
)
|
||
Net cash used in financing activities
|
(3,151
|
)
|
|
(1,738
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(28
|
)
|
|
131
|
|
||
|
|
|
|
||||
Cash, cash equivalents and restricted cash
(3)
:
|
|
|
|
||||
Increase (Decrease)
|
(3,534
|
)
|
|
(1,245
|
)
|
||
Balance at beginning of period
|
6,620
|
|
|
8,476
|
|
||
Balance at end of period
|
$
|
3,086
|
|
|
$
|
7,231
|
|
|
|
|
|
|
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, 2018
|
$
|
—
|
|
|
$
|
1,972
|
|
|
$
|
29,859
|
|
|
$
|
(8,535
|
)
|
|
$
|
(35,382
|
)
|
|
$
|
1,856
|
|
|
$
|
(10,230
|
)
|
Net earnings
|
|
|
|
|
1,556
|
|
|
|
|
|
|
91
|
|
|
1,647
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
(344
|
)
|
|
|
|
(39
|
)
|
|
(383
|
)
|
|||||||||||
Issuance of stock awards
|
|
|
(29
|
)
|
|
|
|
|
|
74
|
|
|
|
|
45
|
|
|||||||||||
Dividends declared ($1.07 per share)
|
|
|
|
|
(1,668
|
)
|
|
|
|
|
|
|
|
(1,668
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
(36
|
)
|
||||||||||||
Adoption of new accounting standards
|
|
|
|
|
238
|
|
|
|
|
|
|
|
|
238
|
|
||||||||||||
Other (Note 17)
|
|
|
(87
|
)
|
|
|
|
(4
|
)
|
|
|
|
(4
|
)
|
|
(95
|
)
|
||||||||||
Balances, March 31, 2018
|
$
|
—
|
|
|
$
|
1,856
|
|
|
$
|
29,985
|
|
|
$
|
(8,883
|
)
|
|
$
|
(35,308
|
)
|
|
$
|
1,868
|
|
|
$
|
(10,482
|
)
|
Balances, January 1, 2019
|
$
|
—
|
|
|
$
|
1,939
|
|
|
$
|
31,014
|
|
|
$
|
(10,111
|
)
|
|
$
|
(35,301
|
)
|
|
$
|
1,720
|
|
|
$
|
(10,739
|
)
|
Net earnings
|
|
|
|
|
1,354
|
|
|
|
|
|
|
110
|
|
|
1,464
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
345
|
|
|
|
|
(1
|
)
|
|
344
|
|
|||||||||||
Issuance of stock awards
|
|
|
(32
|
)
|
|
|
|
|
|
75
|
|
|
|
|
43
|
|
|||||||||||
Dividends declared ($1.14 per share)
|
|
|
|
|
(1,780
|
)
|
|
|
|
|
|
|
|
(1,780
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
(46
|
)
|
||||||||||||
Deconsolidation of RBH (Note 20)
|
|
|
|
|
|
|
529
|
|
|
|
|
|
|
529
|
|
||||||||||||
Balances, March 31, 2019
|
$
|
—
|
|
|
$
|
1,907
|
|
|
$
|
30,588
|
|
|
$
|
(9,237
|
)
|
|
$
|
(35,226
|
)
|
|
$
|
1,783
|
|
|
$
|
(10,185
|
)
|
|
Number of
Shares
Granted
|
|
Weighted-Average Grant Date Fair Value Per RSU Award Granted
|
|
Compensation Expense Related to RSU Awards (in millions)
|
|||||
2019
|
1,621,070
|
|
|
$
|
77.13
|
|
|
$
|
36
|
|
2018
|
1,249,650
|
|
|
$
|
100.70
|
|
|
$
|
38
|
|
|
|
|
|
Number of Shares Granted
|
PSU Grant Date Fair Value Subject to Other Performance Factors Per Share
|
PSU Grant Date Fair Value Subject to TSR Performance Factor Per Share
|
Compensation Expense Related to PSU Awards (in millions)
|
|||||||
2019
|
625,200
|
|
$
|
77.20
|
|
$
|
83.59
|
|
$
|
18
|
|
2018
|
401,500
|
|
$
|
100.69
|
|
$
|
118.98
|
|
$
|
21
|
|
|
|
|
||||
|
2019
|
|
2018
|
|
||
Risk-free interest rate
(a)
|
2.4
|
%
|
|
2.3
|
%
|
|
Expected volatility
|
21.4
|
%
|
(b)
|
19.6
|
%
|
(c)
|
|
|
|
|
For the Three Months Ended March 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Net pension costs (income)
|
$
|
(5
|
)
|
|
$
|
(16
|
)
|
Net postemployment costs
|
24
|
|
|
19
|
|
||
Net postretirement costs
|
2
|
|
|
3
|
|
||
Total pension and other employee benefit costs
|
$
|
21
|
|
|
$
|
6
|
|
|
Pension
(1)
|
||||||
|
For the Three Months Ended March 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Service cost
|
$
|
54
|
|
|
$
|
53
|
|
Interest cost
|
29
|
|
|
28
|
|
||
Expected return on plan assets
|
(79
|
)
|
|
(87
|
)
|
||
Amortization:
|
|
|
|
||||
Net loss
|
45
|
|
|
43
|
|
||
Prior service cost
|
—
|
|
|
—
|
|
||
Net periodic pension cost
|
$
|
49
|
|
|
$
|
37
|
|
(in millions)
|
European Union
|
Eastern Europe
|
Middle East & Africa
|
South & Southeast Asia
|
East Asia & Australia
|
Latin America & Canada
|
Total
|
||||||||||||||
Balances, December 31, 2018
|
1,357
|
|
303
|
|
87
|
|
2,795
|
|
536
|
|
2,111
|
|
7,189
|
|
|||||||
Changes due to:
|
|
|
|
|
|
|
|
||||||||||||||
Currency
|
(18
|
)
|
(3
|
)
|
(1
|
)
|
35
|
|
5
|
|
31
|
|
49
|
|
|||||||
Deconsolidation of RBH
|
|
|
|
|
|
|
|
|
|
|
(1,463
|
)
|
(1,463
|
)
|
|||||||
Balances, March 31, 2019
|
$
|
1,339
|
|
$
|
300
|
|
$
|
86
|
|
$
|
2,830
|
|
$
|
541
|
|
$
|
679
|
|
$
|
5,775
|
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||||||
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
||||||||||||
(in millions)
|
|
Balance Sheet Classification
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
Balance Sheet Classification
|
|
At March 31, 2019
|
|
At December 31, 2018
|
||||||||
Derivative contracts designated as hedging instruments
|
|
Other current assets
|
|
$
|
278
|
|
|
$
|
54
|
|
|
Other accrued liabilities
|
|
$
|
55
|
|
|
$
|
47
|
|
|
|
Other assets
|
|
42
|
|
|
99
|
|
|
Other liabilities
|
|
447
|
|
|
525
|
|
||||
Derivative contracts not designated as hedging instruments
|
|
Other current assets
|
|
39
|
|
|
67
|
|
|
Other accrued liabilities
|
|
44
|
|
|
46
|
|
||||
|
|
Other assets
|
|
—
|
|
|
—
|
|
|
Other liabilities
|
|
20
|
|
|
13
|
|
||||
Total derivatives
|
|
|
|
$
|
359
|
|
|
$
|
220
|
|
|
|
|
$
|
566
|
|
|
$
|
631
|
|
|
|
|
|
|
|
|
|
|
|
(pre-tax, in millions)
|
For the Three Months Ended March 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
|
||||||||||||
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
||||||||
Derivatives in Cash Flow Hedging Relationship
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative contracts
|
$
|
(2
|
)
|
|
$
|
(74
|
)
|
|
|
|
|
|
|
||||
|
|
|
|
|
Net revenues
|
|
$
|
10
|
|
|
$
|
(9
|
)
|
||||
|
|
|
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
Marketing, administration and research costs
|
|
(3
|
)
|
|
8
|
|
||||||
|
|
|
|
|
Interest expense, net
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Derivatives in Net Investment Hedging Relationship
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative contracts
|
211
|
|
|
(608
|
)
|
|
|
|
|
|
|
||||||
Total
|
$
|
209
|
|
|
$
|
(682
|
)
|
|
|
|
$
|
5
|
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
(in millions)
|
For the Three Months Ended March 31,
|
|||||
|
2019
|
2018
|
||||
Gain as of January 1,
|
$
|
35
|
|
$
|
42
|
|
Derivative (gains)/losses transferred to earnings
|
(4
|
)
|
2
|
|
||
Change in fair value
|
(1
|
)
|
(64
|
)
|
||
Gain/(loss) as of March 31,
|
$
|
30
|
|
$
|
(20
|
)
|
(in millions)
|
For the Three Months Ended March 31,
|
|||||
|
2019
|
2018
|
||||
Net earnings attributable to PMI
|
$
|
1,354
|
|
$
|
1,556
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
4
|
|
3
|
|
||
Net earnings for basic and diluted EPS
|
$
|
1,350
|
|
$
|
1,553
|
|
Weighted-average shares for basic EPS
|
1,555
|
|
1,553
|
|
||
Plus contingently issuable performance stock units (PSUs)
|
1
|
|
1
|
|
||
Weighted-average shares for diluted EPS
|
1,556
|
|
1,554
|
|
(in millions)
|
For the Three Months Ended March 31,
|
|||||
|
2019
|
2018
|
||||
Net revenues:
|
|
|
||||
European Union
|
$
|
2,159
|
|
$
|
1,988
|
|
Eastern Europe
|
579
|
|
567
|
|
||
Middle East & Africa
|
927
|
|
961
|
|
||
South & Southeast Asia
|
1,113
|
|
1,081
|
|
||
East Asia & Australia
|
1,321
|
|
1,591
|
|
||
Latin America & Canada
|
652
|
|
708
|
|
||
Net revenues
|
$
|
6,751
|
|
$
|
6,896
|
|
Operating income (loss):
|
|
|
||||
European Union
|
$
|
896
|
|
$
|
740
|
|
Eastern Europe
|
129
|
|
151
|
|
||
Middle East & Africa
|
344
|
|
374
|
|
||
South & Southeast Asia
|
440
|
|
429
|
|
||
East Asia & Australia
|
427
|
|
515
|
|
||
Latin America & Canada
|
(186
|
)
|
217
|
|
||
Operating income
|
$
|
2,050
|
|
$
|
2,426
|
|
•
|
Asset impairment and exit costs
- See Note 19.
Asset Impairment and Exit Costs
for details of the
$20 million
pre-tax charge included in the South & Southeast Asia segment for the
three months ended March 31,
2019
.
|
•
|
Canadian tobacco litigation-related expense
- See Note 8.
Contingencies
and Note 20.
Deconsolidation of RBH
for details of the
$194 million
pre-tax charge included in the Latin America & Canada segment for the
three months ended March 31,
2019
.
|
•
|
Loss on deconsolidation of RBH
- See Note 20.
Deconsolidation of RBH
for details of the
$239 million
loss included in the Latin America & Canada segment for the
three months ended March 31,
2019
.
|
(in millions)
|
For the Three Months Ended March 31,
|
|||||
|
2019
|
2018
|
||||
Net revenues:
|
|
|
||||
Combustible products:
|
|
|
||||
European Union
|
$
|
1,812
|
|
$
|
1,836
|
|
Eastern Europe
|
471
|
|
527
|
|
||
Middle East & Africa
|
829
|
|
884
|
|
||
South & Southeast Asia
|
1,113
|
|
1,081
|
|
||
East Asia & Australia
|
638
|
|
737
|
|
||
Latin America & Canada
|
646
|
|
704
|
|
||
Total combustible products
|
$
|
5,508
|
|
$
|
5,769
|
|
Reduced-risk products:
|
|
|
||||
European Union
|
$
|
347
|
|
$
|
152
|
|
Eastern Europe
|
108
|
|
40
|
|
||
Middle East & Africa
|
98
|
|
77
|
|
||
South & Southeast Asia
|
—
|
|
—
|
|
||
East Asia & Australia
|
683
|
|
854
|
|
||
Latin America & Canada
|
6
|
|
4
|
|
||
Total reduced-risk products
|
$
|
1,243
|
|
$
|
1,127
|
|
|
|
|
||||
Total PMI net revenues
|
$
|
6,751
|
|
$
|
6,896
|
|
Type of Case
|
|
Number of Cases Pending as of April 23, 2019
|
|
Number of Cases Pending as of April 24, 2018
|
|
Number of Cases Pending as of April 25, 2017
|
Individual Smoking and Health Cases
|
|
53
|
|
62
|
|
63
|
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
|
|
1
|
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 $255) 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/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 $11.6 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 $2.32 billion)). The trial court awarded CAD 90,000 (approximately $67,370) in punitive damages, allocating CAD 30,000 (approximately $22,460) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $748.6 million) of the compensatory damage award, CAD 200 million (approximately $149.7 million) of which is our subsidiary’s portion, into a trust within 60 days.
|
|
In June 2015, RBH commenced the appellate process with the Court of Appeal of Quebec. On March 1 2019, the Court of Appeal issued a decision largely affirming the trial court's decision. (See “
Stayed Litigation — Canada
” for further detail.)
|
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 $98.1 million) in punitive damages, allocating CAD 46 million (approximately $34.4 million) to RBH. 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, RBH commenced the appellate process with the Court of Appeal of Quebec. On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court's decision. (See “
Stayed Litigation — Canada
” 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 $2,628), 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.
|
•
|
53
cases brought by individual plaintiffs in Argentina (
32
), Brazil (
8
), Canada (
2
), Chile (
4
), Costa Rica (
1
), Italy (
1
), the Philippines (
1
), Poland (
2
), Turkey (
1
) and Scotland (
1
), compared with
62
such cases on
April 24, 2018
, and
63
cases on
April 25, 2017
; and
|
•
|
10
cases brought on behalf of classes of individual plaintiffs in Brazil (
1
) and Canada (
9
), compared with
11
such cases on
April 24, 2018
and
11
such cases on
April 25, 2017
.
|
(in millions)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
U.S. dollar notes, 1.875% to 6.375% (average interest rate 3.499%), due through 2044
|
|
$
|
18,879
|
|
|
$
|
20,819
|
|
Foreign currency obligations:
|
|
|
|
|
||||
Euro notes, 0.625% to 3.125% (average interest rate 2.250%), due through 2037
|
|
8,498
|
|
|
8,656
|
|
||
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.337%), due through 2024
|
|
1,155
|
|
|
1,374
|
|
||
Other (average interest rate 3.272%), due through 2024
|
|
181
|
|
|
180
|
|
||
|
|
28,713
|
|
|
31,029
|
|
||
Less current portion of long-term debt
|
|
5,582
|
|
|
4,054
|
|
||
|
|
$
|
23,131
|
|
|
$
|
26,975
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Committed
Credit
Facilities
|
||
364-day revolving credit, expiring February 4, 2020
|
|
$
|
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
|
|
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 March 31, 2019
|
|
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
|
|
$
|
320
|
|
|
$
|
320
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative contracts
|
|
359
|
|
|
—
|
|
|
359
|
|
|
—
|
|
||||
Total assets
|
|
$
|
679
|
|
|
$
|
320
|
|
|
$
|
359
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
$
|
29,787
|
|
|
$
|
29,626
|
|
|
$
|
161
|
|
|
$
|
—
|
|
Derivative contracts
|
|
566
|
|
|
—
|
|
|
566
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
30,353
|
|
|
$
|
29,626
|
|
|
$
|
727
|
|
|
$
|
—
|
|
(in millions)
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
At March 31, 2018
|
||||||
Currency translation adjustments
|
|
$
|
(5,711
|
)
|
|
$
|
(6,500
|
)
|
|
$
|
(6,097
|
)
|
Pension and other benefits
|
|
(3,556
|
)
|
|
(3,646
|
)
|
|
(2,766
|
)
|
|||
Derivatives accounted for as hedges
|
|
30
|
|
|
35
|
|
|
(20
|
)
|
|||
Total accumulated other comprehensive losses
|
|
$
|
(9,237
|
)
|
|
$
|
(10,111
|
)
|
|
$
|
(8,883
|
)
|
(in millions)
|
Gross Amounts Recognized
|
Gross Amount Offset in the Condensed Consolidated Balance Sheet
|
Net Amounts Presented in the Condensed Consolidated Balance Sheet
|
Gross Amounts Not Offset in the
Condensed Consolidated
Balance Sheet
|
|
||||||||||||||
Financial Instruments
|
Cash Collateral Received/Pledged
|
Net Amount
|
|||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
At March 31, 2019
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
359
|
|
$
|
—
|
|
$
|
359
|
|
$
|
(291
|
)
|
$
|
(46
|
)
|
$
|
22
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
566
|
|
$
|
—
|
|
$
|
566
|
|
$
|
(291
|
)
|
$
|
(268
|
)
|
$
|
7
|
|
|
At December 31, 2018
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
220
|
|
$
|
—
|
|
$
|
220
|
|
$
|
(124
|
)
|
$
|
(80
|
)
|
$
|
16
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
631
|
|
$
|
—
|
|
$
|
631
|
|
$
|
(124
|
)
|
$
|
(427
|
)
|
$
|
80
|
|
|
For the Three Months Ended March 31,
|
|||||
(in millions)
|
2019
|
2018
|
||||
|
|
|
||||
Net revenues:
|
|
|
||||
Megapolis Group
|
$
|
359
|
|
$
|
357
|
|
Other
|
213
|
|
164
|
|
||
Net revenues
(a)
|
$
|
572
|
|
$
|
521
|
|
(in millions)
|
|
At March 31, 2019
|
At December 31, 2018
|
||||
|
|
|
|
||||
Receivables:
|
|
|
|
|
|||
Megapolis Group
|
|
$
|
434
|
|
$
|
172
|
|
Other
|
|
150
|
|
136
|
|
||
Receivables
|
|
$
|
584
|
|
$
|
308
|
|
|
|
|
|
||||
Payables:
|
|
|
|
||||
Megapolis Group
|
|
$
|
2
|
|
$
|
—
|
|
Other
|
|
57
|
|
8
|
|
||
Payables
|
|
$
|
59
|
|
$
|
8
|
|
|
For the Three Months Ended
|
For the Year Ended
|
||||
(in millions)
|
March 31, 2019
|
December 31, 2018
|
||||
Balance at beginning of period
|
$
|
67
|
|
$
|
71
|
|
Changes due to:
|
|
|
||||
Warranties issued
|
78
|
|
179
|
|
||
Settlements
|
(39
|
)
|
(183
|
)
|
||
Balance at end of period
|
$
|
106
|
|
$
|
67
|
|
(in millions)
|
March 31, 2019
|
||
Assets:
|
|
||
Other assets
|
$
|
707
|
|
|
|
||
Liabilities:
|
|
||
Current
|
|
||
Accrued liabilities - Other
|
$
|
180
|
|
Noncurrent
|
|
||
Income taxes and other liabilities
|
526
|
|
|
Total lease liabilities
|
$
|
706
|
|
(in millions)
|
March 31, 2019
|
||
Operating lease cost
|
$
|
60
|
|
Short-term lease cost
|
12
|
|
|
Variable lease cost
|
8
|
|
|
Total lease cost
|
$
|
80
|
|
(in millions)
|
Total
|
||
2019
|
$
|
159
|
|
2020
|
164
|
|
|
2021
|
120
|
|
|
2022
|
85
|
|
|
2023
|
63
|
|
|
Thereafter
|
313
|
|
|
Total lease payments
|
904
|
|
|
Less: Interest
|
198
|
|
|
Present value of lease liabilities
|
$
|
706
|
|
(in millions)
|
Total
|
||
2019
|
$
|
147
|
|
2020
|
103
|
|
|
2021
|
73
|
|
|
2022
|
52
|
|
|
2023
|
43
|
|
|
Thereafter
|
354
|
|
|
|
$
|
772
|
|
(in millions)
|
March 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities in Operating cash flows
|
$
|
59
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
$
|
53
|
|
Weighted-average remaining lease term (years)
|
10.4
|
|
|
Weighted-average discount rate
(1)
|
4.7
|
%
|
•
|
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
$6.8 billion
for the
three months ended March 31,
2019
decreased
by
$145 million
, or
(2.1)%
, from the comparable
2018
amount. The change in our net revenues from the comparable
2018
amount was driven by the following:
|
•
|
Diluted Earnings Per Share
- The changes in our reported diluted earnings per share ("diluted EPS") for the
three months ended March 31,
2019
, from the comparable
2018
amounts, were as follows:
|
|
Diluted EPS
|
% Growth (Decline)
|
|||
For the three months ended March 31, 2018
|
$
|
1.00
|
|
|
|
2018 Asset impairment and exit costs
|
—
|
|
|
||
2018 Tax items
|
—
|
|
|
||
Subtotal of 2018 items
|
—
|
|
|
||
2019 Asset impairment and exit costs
|
(0.01
|
)
|
|
||
2019 Canadian tobacco litigation-related expense
|
(0.09
|
)
|
|
||
2019 Loss on deconsolidation of RBH
|
(0.12
|
)
|
|
||
2019 Tax items
|
—
|
|
|
||
Subtotal of 2019 items
|
(0.22
|
)
|
|
||
Currency
|
(0.06
|
)
|
|
||
Interest
|
0.03
|
|
|
||
Change in tax rate
|
0.04
|
|
|
||
Operations
|
0.08
|
|
|
||
For the three months ended March 31, 2019
|
$
|
0.87
|
|
(13.0
|
)%
|
•
|
European Union: Favorable volume/mix and favorable pricing, partially offset by
higher
manufacturing costs;
|
•
|
South & Southeast Asia: Favorable pricing and
favorable
volume/mix, partially offset by
higher
marketing, administration and research costs and
higher
manufacturing costs; and
|
•
|
Latin America & Canada: Favorable pricing,
lower
manufacturing costs and lower marketing, administration and research costs, partially offset by
unfavorable
volume/mix;
|
•
|
East Asia & Australia: Unfavorable volume/mix, partially offset by
favorable
pricing and
lower
manufacturing costs;
|
•
|
Middle East & Africa: Unfavorable pricing, partially offset by
favorable
volume/mix; and
|
•
|
Eastern Europe: Higher marketing, administration and research costs and
higher
manufacturing costs, partially offset by
favorable
pricing and
favorable
volume/mix.
|
(in millions)
|
For the Three Months Ended March 31,
|
|||||||
|
2019
|
2018
|
Change
|
|||||
Net revenues:
|
|
|
|
|||||
European Union
|
$
|
2,159
|
|
$
|
1,988
|
|
8.6
|
%
|
Eastern Europe
|
579
|
|
567
|
|
2.1
|
%
|
||
Middle East & Africa
|
927
|
|
961
|
|
(3.5
|
)%
|
||
South & Southeast Asia
|
1,113
|
|
1,081
|
|
3.0
|
%
|
||
East Asia & Australia
|
1,321
|
|
1,591
|
|
(17.0
|
)%
|
||
Latin America & Canada
|
652
|
|
708
|
|
(7.9
|
)%
|
||
Net revenues
|
$
|
6,751
|
|
$
|
6,896
|
|
(2.1
|
)%
|
Operating income (loss):
|
|
|
|
|||||
European Union
|
$
|
896
|
|
$
|
740
|
|
21.1
|
%
|
Eastern Europe
|
129
|
|
151
|
|
(14.6
|
)%
|
||
Middle East & Africa
|
344
|
|
374
|
|
(8.0
|
)%
|
||
South & Southeast Asia
|
440
|
|
429
|
|
2.6
|
%
|
||
East Asia & Australia
|
427
|
|
515
|
|
(17.1
|
)%
|
||
Latin America & Canada
|
(186
|
)
|
217
|
|
>(100)%
|
|
||
Operating income
|
$
|
2,050
|
|
$
|
2,426
|
|
(15.5
|
)%
|
•
|
Asset impairment and exit costs
- See Note 19.
Asset Impairment and Exit Costs
for details of the
$20 million
pre-tax charge included in the South & Southeast Asia segment for the
three months ended March 31,
2019
.
|
•
|
Canadian tobacco litigation-related expense
- See Note 8.
Contingencies
and Note 20.
Deconsolidation of RBH
for details of the
$194 million
pre-tax charge included in the Latin America & Canada segment for the
three months ended March 31,
2019
.
|
•
|
Loss on deconsolidation of RBH
- See Note 20.
Deconsolidation of RBH
for details of the
$239 million
loss included in the Latin America & Canada segment for the
three months ended March 31,
2019
.
|
PMI Shipment Volume (Million Units)
|
||||||
|
For the Three Months Ended March 31,
|
|||||
|
2019
|
2018
|
Change
|
|||
Cigarettes
|
|
|
|
|||
European Union
|
39,488
|
|
39,671
|
|
(0.5
|
)%
|
Eastern Europe
|
20,320
|
|
22,039
|
|
(7.8
|
)%
|
Middle East & Africa
|
33,304
|
|
29,248
|
|
13.9
|
%
|
South & Southeast Asia
|
41,492
|
|
40,218
|
|
3.2
|
%
|
East Asia & Australia
|
12,113
|
|
14,091
|
|
(14.0
|
)%
|
Latin America & Canada
|
17,580
|
|
19,013
|
|
(7.5
|
)%
|
Total Cigarettes
|
164,297
|
|
164,280
|
|
—
|
%
|
Heated Tobacco Units
|
|
|
|
|||
European Union
|
2,293
|
|
928
|
|
+100%
|
|
Eastern Europe
|
1,548
|
|
564
|
|
+100%
|
|
Middle East & Africa
|
754
|
|
709
|
|
6.3
|
%
|
South & Southeast Asia
|
—
|
|
—
|
|
—
|
%
|
East Asia & Australia
|
6,849
|
|
7,342
|
|
(6.7
|
)%
|
Latin America & Canada
|
54
|
|
23
|
|
+100%
|
|
Total Heated Tobacco Units
|
11,498
|
|
9,566
|
|
20.2
|
%
|
Cigarettes and Heated Tobacco Units
|
|
|
|
|||
European Union
|
41,781
|
|
40,599
|
|
2.9
|
%
|
Eastern Europe
|
21,868
|
|
22,603
|
|
(3.3
|
)%
|
Middle East & Africa
|
34,058
|
|
29,957
|
|
13.7
|
%
|
South & Southeast Asia
|
41,492
|
|
40,218
|
|
3.2
|
%
|
East Asia & Australia
|
18,962
|
|
21,433
|
|
(11.5
|
)%
|
Latin America & Canada
|
17,634
|
|
19,036
|
|
(7.4
|
)%
|
Total Cigarettes and Heated Tobacco Units
|
175,795
|
|
173,846
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
the EU, reflecting higher heated tobacco unit shipment volume across the Region, and higher cigarette shipment volume in Germany, Poland and Spain, partly offset by lower cigarette shipment volume in France and Italy;
|
•
|
Middle East & Africa, primarily reflecting higher cigarette shipment volume, notably Algeria, Egypt, Saudi Arabia and Turkey, partly offset by lower cigarette shipment volume in PMI Duty Free; and
|
•
|
South & South East Asia, reflecting higher cigarette shipment volume, principally in Pakistan, the Philippines and Thailand, partly offset by Indonesia;
|
•
|
Eastern Europe, reflecting lower cigarette shipment volume, principally in Russia, partly offset by higher heated tobacco unit shipment volume across the Region, notably Russia;
|
•
|
East Asia & Australia, reflecting lower cigarette shipment volume, notably in Japan and Korea, and lower heated tobacco unit shipment volume in Japan; and
|
•
|
Latin America & Canada, reflecting lower cigarette shipment volume, principally in Argentina and Venezuela.
|
•
|
A net unfavorable impact of
1.3
billion heated tobacco units, mainly due to Japan and Russia; and
|
•
|
A net favorable impact of approximately
0.3
billion cigarettes, mainly driven by Saudi Arabia, partly offset by Japan, North Africa and PMI Duty Free.
|
•
|
Marlboro
,
mainly driven by Algeria, Germany, Indonesia, the Philippines, Saudi Arabia, Spain and Turkey, partly offset by Argentina, Italy, Japan, PMI Duty Free and Russia;
|
•
|
L&M
, mainly driven by Egypt, Saudi Arabia and Thailand, partly offset by Russia;
|
•
|
Chesterfield,
mainly driven by Mexico, Saudi Arabia and Turkey, partly offset by Argentina, Italy and Venezuela;
|
•
|
Philip Morris
, mainly driven by Russia, partly offset by Argentina; and
|
•
|
Parliament
, mainly driven by Turkey, partly offset by Korea.
|
•
|
Sampoerna A
and
Dji Sam Soe
in Indonesia, mainly reflecting the impact of retail price increases resulting in widened price gaps with competitors' products and the impact of estimated trade inventory movements following the absence of an excise tax increase in January 2019;
|
•
|
Bond Street
, mainly due to Russia and Ukraine;
|
•
|
Lark
, mainly due to Japan, partly offset by Turkey;
|
•
|
Fortune
in the Philippines, mainly reflecting up-trading to
Marlboro
resulting from a narrowed price gap; 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, low-price brands into international trademarks, notably in Mexico and Russia.
|
•
|
Total international cigarette market share of
26.4%
,
up
by
0.5
points; and
|
•
|
Total international heated tobacco unit market share of
2.0%
, up by
0.5
points.
|
Financial Summary
|
||||||||||||||||||||||||||||
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
6,751
|
|
$
|
6,896
|
|
|
(2.1
|
)%
|
3.2
|
%
|
|
$
|
(145
|
)
|
$
|
(369
|
)
|
$
|
228
|
|
$
|
(15
|
)
|
$
|
11
|
|
Cost of Sales
|
|
(2,465
|
)
|
(2,615
|
)
|
|
5.7
|
%
|
1.5
|
%
|
|
150
|
|
110
|
|
—
|
|
10
|
|
30
|
|
|||||||
Marketing, Administration and Research Costs
(1)
|
|
(2,217
|
)
|
(1,833
|
)
|
|
(20.9
|
)%
|
(27.2
|
)%
|
|
(384
|
)
|
114
|
|
—
|
|
—
|
|
(498
|
)
|
|||||||
Amortization of Intangibles
|
|
(19
|
)
|
(22
|
)
|
|
13.6
|
%
|
9.1
|
%
|
|
3
|
|
1
|
|
—
|
|
—
|
|
2
|
|
|||||||
Operating Income
|
|
$
|
2,050
|
|
$
|
2,426
|
|
|
(15.5
|
)%
|
(9.6
|
)%
|
|
$
|
(376
|
)
|
$
|
(144
|
)
|
$
|
228
|
|
$
|
(5
|
)
|
$
|
(455
|
)
|
•
|
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 Note 8.
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 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 -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
2,159
|
|
$
|
1,988
|
|
|
8.6
|
%
|
15.8
|
%
|
|
$
|
171
|
|
$
|
(143
|
)
|
$
|
68
|
|
$
|
246
|
|
$
|
—
|
|
Operating Income
|
|
$
|
896
|
|
$
|
740
|
|
|
21.1
|
%
|
31.1
|
%
|
|
$
|
156
|
|
$
|
(74
|
)
|
$
|
68
|
|
$
|
197
|
|
$
|
(35
|
)
|
European Union Key Data
|
|
First-Quarter
|
|||||
|
|
|
|
Change
|
|
||
|
|
2019
|
|
2018
|
|
% / pp
|
|
Total Market (billion units)
|
|
107.3
|
|
107.8
|
|
(0.5
|
)%
|
|
|
|
|
|
|||
PMI Shipment Volume (million units)
|
|
|
|
|
|||
Cigarettes
|
|
39,488
|
|
39,671
|
|
(0.5
|
)%
|
Heated Tobacco Units
|
|
2,293
|
|
928
|
|
+100.0%
|
|
Total European Union
|
|
41,781
|
|
40,599
|
|
2.9
|
%
|
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|
|||
Marlboro
|
|
18.2
|
%
|
18.3
|
%
|
(0.1
|
)
|
L&M
|
|
6.7
|
%
|
6.7
|
%
|
—
|
|
Chesterfield
|
|
5.9
|
%
|
5.9
|
%
|
—
|
|
Philip Morris
|
|
2.8
|
%
|
3.1
|
%
|
(0.3
|
)
|
HEETS
|
|
2.1
|
%
|
0.8
|
%
|
1.3
|
|
Others
|
|
3.2
|
%
|
3.4
|
%
|
(0.2
|
)
|
Total European Union
|
|
38.9
|
%
|
38.2
|
%
|
0.7
|
|
•
|
France,
down
by
8.1%
, mainly due to the impact of significant excise-tax driven price increases in March 2018 and 2019, as well as an increase in the prevalence of illicit trade;
|
•
|
Germany,
down
by
4.0%
, or by
1.0%
excluding the net impact of estimated trade inventory movements of competitors' products in the quarter, primarily reflecting the impact of price increases in March 2018; and
|
•
|
Italy,
down
by
2.9%
, or by
1.7%
excluding the net impact of estimated trade inventory movements, primarily reflecting the impact of price increases in 2018 and in February 2019;
|
•
|
Poland,
up
by
8.1%
, primarily reflecting a lower prevalence of illicit trade; and
|
•
|
Spain,
up
by
2.7%
, partly reflecting a lower prevalence of illicit trade.
|
•
|
higher heated tobacco unit shipment volume across the Region, notably Italy, driven by higher market share; and
|
•
|
higher cigarette shipment volume in: Germany, primarily reflecting higher market share of cigarettes, particularly of
Marlboro
, benefiting from estimated favorable trade inventory movements in the quarter noted above; Poland, mainly driven by a higher total market; and Spain, primarily reflecting net favorable estimated distributor movements;
|
•
|
lower cigarette shipment volume, notably in France, mainly reflecting a lower total market, and Italy, primarily reflecting the lower total market, due mainly to the impact of price increases in March 2018 and February 2019, as well as lower cigarette market share due to out-switching to
HEETS
.
|
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
579
|
|
$
|
567
|
|
|
2.1
|
%
|
13.4
|
%
|
|
$
|
12
|
|
$
|
(64
|
)
|
$
|
17
|
|
$
|
59
|
|
$
|
—
|
|
Operating Income
|
|
$
|
129
|
|
$
|
151
|
|
|
(14.6
|
)%
|
(2.0
|
)%
|
|
$
|
(22
|
)
|
$
|
(19
|
)
|
$
|
17
|
|
$
|
14
|
|
$
|
(34
|
)
|
•
|
Russia,
down
by
8.3%
, primarily reflecting the impact of price increases, as well as the unfavorable impact in the quarter of estimated trade inventory movements in certain key accounts; and
|
•
|
Ukraine,
down
by
10.6%
, primarily reflecting the impact of price increases and an increase in the prevalence of illicit trade.
|
PMI Shipment Volume (million units)
|
First-Quarter
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
20,320
|
|
22,039
|
|
(7.8
|
)%
|
Heated Tobacco Units
|
1,548
|
|
564
|
|
+100.0%
|
|
Total Eastern Europe
|
21,868
|
|
22,603
|
|
(3.3
|
)%
|
•
|
Russia,
down
by
5.0%
. Excluding the net unfavorable impact of estimated distributor inventory movements of
0.5
billion units, primarily of heated tobacco units, reflecting an adjustment subsequent to the increase in shipments in the fourth quarter of 2018 ahead of their planned geographic expansion, our in-market sales decline was
0.9%
, reflecting a lower total market, partly offset by higher market share of heated tobacco units;
|
•
|
Kazakhstan, up by 12.3%, reflecting a higher total market and a higher market share of heated tobacco units; and
|
•
|
Ukraine,
up
by
2.3%
, reflecting a higher market share of cigarettes and heated tobacco units, partly offset by a lower total market.
|
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
927
|
|
$
|
961
|
|
|
(3.5
|
)%
|
3.5
|
%
|
|
$
|
(34
|
)
|
$
|
(68
|
)
|
$
|
(50
|
)
|
$
|
73
|
|
$
|
11
|
|
Operating Income
|
|
$
|
344
|
|
$
|
374
|
|
|
(8.0
|
)%
|
(1.1
|
)%
|
|
$
|
(30
|
)
|
$
|
(26
|
)
|
$
|
(50
|
)
|
$
|
35
|
|
$
|
11
|
|
•
|
Algeria,
up
by
19.3%
, or down by
0.8%
excluding the net favorable impact of estimated trade inventory movements associated with expectations regarding excise tax announcements in 2019 compared to 2018;
|
•
|
Saudi Arabia,
up
by
8.1%
, primarily reflecting a favorable comparison with the first quarter of 2018, which was down by 40.8% mainly due to the impact of retail price increases in 2017 and the first quarter of 2018 following the introduction of the new excise tax in June 2017 and VAT in January 2018; and
|
•
|
Turkey,
up
by
10.1%
, or by
4.3%
, excluding the net favorable impact of estimated trade inventory movements associated with expectations regarding excise tax and pricing changes in 2019 compared to 2018 following the excise tax increase in January 2019.
|
PMI Shipment Volume (million units)
|
First-Quarter
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
33,304
|
|
29,248
|
|
13.9
|
%
|
Heated Tobacco Units
|
754
|
|
709
|
|
6.3
|
%
|
Total Middle East & Africa
|
34,058
|
|
29,957
|
|
13.7
|
%
|
•
|
North Africa, notably in: Algeria, up by 36.4%, reflecting a higher total market, as well as higher market share benefiting from the estimated trade inventory movements noted above; and Egypt, up by 9.4%, primarily reflecting higher market share, driven by
L&M
;
|
•
|
Saudi Arabia,
up
by
+100%
. Net favorable estimated distributor inventory movements in the quarter totaled
2.6
billion cigarettes, mainly attributable to: adjustments ahead of an importation deadline before the implementation of plain packaging scheduled for January 1, 2020; port closures related to the timing of Ramadan; and adjustments in 2018 following the introduction of the new excise tax in 2017. Excluding the impact of these inventory movements, our in-market sales grew by
8.6%
, reflecting a favorable comparison with the first quarter of 2018, which was down by 54.5%, mainly due to the impact of the factors described for the total market above; and
|
•
|
Turkey,
up
by
21.1%
, reflecting a higher total market and a higher market share, notably of
Marlboro
and
Parliament
;
|
•
|
PMI Duty Free, down by 12.4%. Excluding the net unfavorable impact of estimated distributor inventory movements of 0.5 billion units, principally cigarettes, our in-market sales decline was 3.1%, notably reflecting the retail travel industry decline in Asia.
|
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
1,113
|
|
$
|
1,081
|
|
|
3.0
|
%
|
8.6
|
%
|
|
$
|
32
|
|
$
|
(61
|
)
|
$
|
76
|
|
$
|
17
|
|
$
|
—
|
|
Operating Income
|
|
$
|
440
|
|
$
|
429
|
|
|
2.6
|
%
|
9.6
|
%
|
|
$
|
11
|
|
$
|
(30
|
)
|
$
|
76
|
|
$
|
14
|
|
$
|
(49
|
)
|
•
|
Indonesia,
down
by
0.8%
, mainly due to the impact of estimated trade inventory movements in the quarter following the absence of an excise tax increase in January 2019;
|
•
|
Vietnam,
down
by
5.6%
reflecting the unfavorable impact of trade inventory movements related to an anticipated excise tax increase in January 2019;
|
•
|
the Philippines,
up
by
8.9%
, benefiting from the net impact of favorable trade inventory movements associated with expectations regarding excise tax-driven price increases; and
|
•
|
Thailand,
up
by
27.4%
, primarily reflecting on-going recovery from the September 2017 excise tax reform.
|
PMI Shipment Volume (million units)
|
First-Quarter
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
41,492
|
|
40,218
|
|
3.2
|
%
|
Heated Tobacco Units
|
—
|
|
—
|
|
—
|
%
|
Total South & Southeast Asia
|
41,492
|
|
40,218
|
|
3.2
|
%
|
•
|
Pakistan,
up
by
10.5%
, mainly reflecting higher market share benefiting from estimated trade inventory movements in anticipation of excise tax-driven price increases in the first quarter of 2019;
|
•
|
the Philippines,
up
by
8.8%
, mainly reflecting the estimated trade inventory movements described above;
and
|
•
|
Thailand,
up
by
33.3%
, mainly reflecting a higher total market, as well as a higher market share driven by the continued strong performance of
L&M
7.1
and the favorable impact of distribution expansion in 2018;
|
•
|
Indonesia,
down
by
3.7%
, mainly reflecting a lower market share primarily due to the widened retail price gap of
A Mild
to competitive brands following its price increase in October 2018, as well as the lower total market.
|
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||
Net Revenues
|
|
$ 1,321
|
$ 1,591
|
|
(17.0
|
)%
|
(17.0
|
)%
|
|
$
|
(270
|
)
|
$
|
—
|
|
$
|
86
|
|
$
|
(356
|
)
|
$
|
—
|
|
Operating Income
|
|
$ 427
|
$ 515
|
|
(17.1
|
)%
|
(16.1
|
)%
|
|
$
|
(88
|
)
|
$
|
(5
|
)
|
$
|
86
|
|
$
|
(222
|
)
|
$
|
53
|
|
•
|
Japan,
down
by
4.5%
, mainly reflecting the impact of the October 1, 2018 excise tax-driven retail price increases;
|
•
|
Taiwan,
up
by
16.6%
, primarily driven by a favorable comparison with the first quarter of 2018 that was down by 23.9% reflecting the impact of excise tax-driven price increases in 2017.
|
PMI Shipment Volume (million units)
|
First-Quarter
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
12,113
|
|
14,091
|
|
(14.0
|
)%
|
Heated Tobacco Units
|
6,849
|
|
7,342
|
|
(6.7
|
)%
|
Total East Asia & Australia
|
18,962
|
|
21,433
|
|
(11.5
|
)%
|
•
|
Japan,
down
by
14.2%
. Excluding the net unfavorable impact of estimated distributor inventory movements of approximately
1.2
billion units, comprised of approximately
0.7
billion heated tobacco units and approximately
0.5
billion cigarettes, our in-market sales decline was
5.6%
, reflecting the lower total market and lower cigarette market share; and
|
•
|
Korea,
down
by
9.7%
, principally due to lower cigarette market share, notably of
Marlboro
and
Parliament
.
|
Financial Summary -
Quarters Ended March 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
652
|
|
$
|
708
|
|
|
(7.9
|
)%
|
(3.2
|
)%
|
|
$
|
(56
|
)
|
$
|
(33
|
)
|
$
|
31
|
|
$
|
(54
|
)
|
$
|
—
|
|
Operating Income (Loss)
|
|
$
|
(186
|
)
|
$
|
217
|
|
|
-(100)%
|
|
-(100)%
|
|
|
$
|
(403
|
)
|
$
|
10
|
|
$
|
31
|
|
$
|
(43
|
)
|
$
|
(401
|
)
|
•
|
Argentina,
down
by
9.1%
, primarily due to the impact of cumulative price increases and the continuing economic downturn;
|
•
|
Brazil,
down
by
5.2%
, mainly due to the impact of cumulative price increases;
|
•
|
Canada,
down
by
9.7%
, primarily due to the impact of cumulative pricing; and
|
•
|
Venezuela, down by 56.7%, mainly reflecting the deterioration of the socioeconomic environment and the impact of inflation-driven price increases.
|
PMI Shipment Volume (million units)
|
First-Quarter
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
17,580
|
|
19,013
|
|
(7.5
|
)%
|
Heated Tobacco Units
|
54
|
|
23
|
|
+100.0%
|
|
Total Latin America & Canada
|
17,634
|
|
19,036
|
|
(7.4
|
)%
|
•
|
Argentina,
down
by
11.0%
, primarily reflecting the lower total market; and
|
•
|
Canada,
down
by
8.2%
, reflecting the lower total market;
|
•
|
Brazil, up by 1.9%, reflecting higher market share, up by 1.5 points to 20.6%, mainly driven by
Chesterfield
, partly offset by a lower total market.
|
|
|
Short-term
|
|
Long-term
|
|
Outlook
|
Moody’s
|
|
P-1
|
|
A2
|
|
Stable
|
Standard & Poor’s
|
|
A-1
|
|
A
|
|
Stable
|
Fitch
|
|
F1
|
|
A
|
|
Stable
|
(in billions)
|
|
|
|
|
||||
Type
|
|
Committed
Credit
Facilities
|
|
Commercial
Paper
|
||||
364-day revolving credit, expiring February 4, 2020
|
|
$
|
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
|
|
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
•
|
restrictions on or licensing of outlets permitted to sell cigarettes;
|
•
|
the levying of substantial and increasing tax and duty charges;
|
•
|
restrictions or bans on advertising, marketing and sponsorship;
|
•
|
the display of larger health warnings, graphic health warnings and other labeling requirements;
|
•
|
restrictions on packaging design, including the use of colors, and plain packaging;
|
•
|
restrictions on packaging and cigarette formats and dimensions;
|
•
|
restrictions or bans on the display of tobacco product packaging at the point of sale and restrictions or bans on cigarette vending machines;
|
•
|
requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;
|
•
|
disclosure, restrictions, or bans of tobacco product ingredients;
|
•
|
increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;
|
•
|
regulation, restrictions or prohibitions of novel tobacco or nicotine-containing products;
|
•
|
elimination of duty free sales and duty free allowances for travelers;
|
•
|
encouraging litigation against tobacco companies; and
|
•
|
excluding tobacco companies from transparent public dialogue regarding public health and other policy matters.
|
•
|
promote brand equity successfully;
|
•
|
anticipate and respond to new adult consumer trends;
|
•
|
develop new products and markets and broaden brand portfolios;
|
•
|
improve productivity;
|
•
|
convince adult smokers to convert to our RRPs;
|
•
|
ensure adequate production capacity to meet demand for our products; and
|
•
|
be able to protect or enhance margins through price increases.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Period
|
|
Total Number
of Shares
Repurchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Plans or
Programs
|
||||||
January 1, 2019 –
January 31, 2019 (1)
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
February 1, 2019 –
February 28, 2019 (1)
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
March 1, 2019 –
March 31, 2019 (1)
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Pursuant to Publicly
Announced Plans
or Programs
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|||
January 1, 2019 –
January 31, 2019 (2) |
|
1,536
|
|
|
$
|
66.98
|
|
|
|
|
|
|||
February 1, 2019 –
February 28, 2019 (2) |
|
130,536
|
|
|
$
|
84.49
|
|
|
|
|
|
|||
March 1, 2019 –
March 31, 2019 (2) |
|
4,565
|
|
|
$
|
87.15
|
|
|
|
|
|
|||
For the Quarter Ended March 31, 2019
|
|
136,637
|
|
|
$
|
84.38
|
|
|
|
|
|
(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 and performance share unit awards and used shares to pay all, or a portion of, the related taxes.
|
Item 6.
|
Exhibits.
|
|
|
|
3.1
|
|
|
|
|
|
10.1
|
|
|
|
|
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10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
31.1
|
|
|
|
|
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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.
|
PHILIP MORRIS INTERNATIONAL INC.
|
|
/s/ MARTIN G. KING
|
|
Martin G. King
|
Chief Financial Officer
|
|
April 25, 2019
|
|
|
Page No
|
|
ARTICLE I
|
DEFINITIONS
|
2
|
|
|
|
|
|
ARTICLE II
|
BENEFIT EQUALIZATION RETIREMENT ALLOWANCES AND
BENEFIT EQUALIZATION PROFIT-SHARING ALLOWANCES
|
13
|
|
|
|
|
|
ARTICLE III
|
FUNDS FROM WHICH ALLOWANCES ARE PAYABLE
|
21
|
|
|
|
|
|
ARTICLE IV
|
THE ADMINISTRATOR
|
22
|
|
|
|
|
|
ARTICLE V
|
AMENDMENT AND DISCONTINUANCE OF THE PLAN
|
23
|
|
|
|
|
|
ARTICLE VI
|
FORMS; COMMUNICATIONS
|
24
|
|
|
|
|
|
ARTICLE VII
|
INTERPRETATION OF PROVISIONS
|
25
|
|
|
|
|
|
ARTICLE VIII
|
CHANGE IN CONTROL PROVISIONS
|
26
|
|
A.
|
Benefit Equalization Retirement Allowances and other benefits payable under this Plan shall be as follows:
|
B.
|
Benefit Equalization Profit-Sharing Allowances payable under this Plan shall be as follows:
|
C.
|
BEP Benefit Commencement Date and termination of Benefit Equalization Retirement Allowances payable in the form of an Optional Payment:
|
1.
|
I have reviewed this
quarterly
report on
Form 10-Q
of Philip Morris International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ ANDRÉ CALANTZOPOULOS
|
André Calantzopoulos
|
Chief Executive Officer
|
1.
|
I have reviewed this
quarterly
report on
Form 10-Q
of Philip Morris International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ MARTIN G. KING
|
Martin G. King
|
Chief Financial Officer
|
/s/ ANDRÉ CALANTZOPOULOS
|
André Calantzopoulos
|
Chief Executive Officer
|
April 25, 2019
|
/s/ MARTIN G. KING
|
Martin G. King
|
Chief Financial Officer
|
April 25, 2019
|