☒
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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
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New York
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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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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, no par value
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PM
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New York Stock Exchange
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2.000% Notes due 2020
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PM20B
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New York Stock Exchange
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Floating Notes due 2020
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PM20C
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New York Stock Exchange
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1.750% Notes due 2020
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PM20A
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New York Stock Exchange
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4.500% Notes due 2020
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PM20
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New York Stock Exchange
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1.875% Notes due 2021
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PM21B
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New York Stock Exchange
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1.875% Notes due 2021
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PM21C
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New York Stock Exchange
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4.125% Notes due 2021
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PM21
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New York Stock Exchange
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2.900% Notes due 2021
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PM21A
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New York Stock Exchange
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2.625% Notes due 2022
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PM22A
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New York Stock Exchange
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2.375% Notes due 2022
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PM22B
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New York Stock Exchange
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2.500% Notes due 2022
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PM22
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New York Stock Exchange
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2.500% Notes due 2022
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PM22C
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New York Stock Exchange
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2.625% Notes due 2023
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PM23
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New York Stock Exchange
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2.125% Notes due 2023
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PM23B
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New York Stock Exchange
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3.600% Notes due 2023
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PM23A
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New York Stock Exchange
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2.875% Notes due 2024
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PM24
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New York Stock Exchange
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2.875% Notes due 2024
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PM24C
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New York Stock Exchange
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0.625% Notes due 2024
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PM24B
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New York Stock Exchange
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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3.250% Notes due 2024
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PM24A
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New York Stock Exchange
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2.750% Notes due 2025
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PM25
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New York Stock Exchange
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3.375% Notes due 2025
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PM25A
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New York Stock Exchange
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2.750% Notes due 2026
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PM26A
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New York Stock Exchange
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2.875% Notes due 2026
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PM26
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New York Stock Exchange
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0.125% Notes due 2026
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PM26B
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New York Stock Exchange
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3.125% Notes due 2027
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PM27
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New York Stock Exchange
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3.125% Notes due 2028
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PM28
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New York Stock Exchange
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2.875% Notes due 2029
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PM29
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New York Stock Exchange
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3.375% Notes due 2029
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PM29A
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New York Stock Exchange
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0.800% Notes due 2031
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PM31
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New York Stock Exchange
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3.125% Notes due 2033
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PM33
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New York Stock Exchange
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2.000% Notes due 2036
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PM36
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New York Stock Exchange
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1.875% Notes due 2037
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PM37A
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New York Stock Exchange
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6.375% Notes due 2038
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PM38
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New York Stock Exchange
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1.450% Notes due 2039
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PM39
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New York Stock Exchange
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4.375% Notes due 2041
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PM41
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New York Stock Exchange
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4.500% Notes due 2042
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PM42
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New York Stock Exchange
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3.875% Notes due 2042
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PM42A
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New York Stock Exchange
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4.125% Notes due 2043
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PM43
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New York Stock Exchange
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4.875% Notes due 2043
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PM43A
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New York Stock Exchange
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4.250% Notes due 2044
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PM44
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New York Stock Exchange
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Class
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Outstanding at
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January 31, 2020
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Common Stock,
no par value
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1,555,911,930
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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 6, 2020, to be filed with the Securities and Exchange Commission (“SEC”) on or about March 26, 2020.
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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, Iceland and the United Kingdom;
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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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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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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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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. LA&C also includes transactions under license with Altria Group, Inc., for the distribution of our Platform 1 product in the United States.
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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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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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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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Distribution through national or regional wholesalers that then supply the retail trade; and
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Our own brand retail and e-commerce infrastructures for our RRP products and accessories.
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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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PM USA owns all rights to jointly funded intellectual property in the United States, its territories and possessions.
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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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the levying of substantial and increasing tax and duty charges;
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restrictions or bans on advertising, marketing and sponsorship;
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the display of larger health warnings, graphic health warnings and other labeling requirements;
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restrictions on packaging design, including the use of colors, and plain packaging;
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restrictions on packaging and cigarette formats and dimensions;
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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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requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;
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disclosure, restrictions, or bans of tobacco product ingredients;
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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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regulation, restrictions or prohibitions of novel tobacco or nicotine-containing products;
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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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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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We may be unable to anticipate changes in adult consumer preferences.
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promote brand equity successfully;
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anticipate and respond to new adult consumer trends;
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develop new products and markets and broaden brand portfolios;
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improve productivity;
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convince adult smokers to convert to our RRPs;
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ensure adequate production capacity to meet demand for our products; and
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be able to protect or enhance margins through price increases.
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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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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 Platform 1 device and heated tobacco units.
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From time to time, we are subject to governmental investigations on a range of matters.
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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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We may be unsuccessful in our efforts to differentiate reduced-risk products and cigarettes with respect to taxation.
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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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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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We may be unable to expand our brand portfolio through successful acquisitions or the development of strategic business relationships.
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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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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.
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•
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We may be unable to adequately protect our intellectual property rights, and disputes relating to intellectual property rights could harm our business.
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•
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We may be required to replace third-party contract manufacturers or service providers with our own resources.
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Item 1B.
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Unresolved Staff Comments.
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Item 3.
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Legal Proceedings.
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Item 4.
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Mine Safety Disclosures.
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Date
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PMI
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PMI Peer Group (1)
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S&P 500 Index
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December 31, 2014
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$100.00
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$100.00
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$100.00
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December 31, 2015
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$113.40
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$108.20
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$101.40
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December 31, 2016
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$123.10
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$109.70
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$113.50
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December 31, 2017
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$147.60
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$130.20
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$138.30
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December 31, 2018
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$98.60
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$118.30
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$132.20
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December 31, 2019
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$133.00
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$146.40
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$173.90
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Period
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Total
Number of
Shares
Repurchased
|
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Average
Price Paid
per Share
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Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
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Approximate
Dollar Value
of Shares that
May Yet be
Purchased
Under the Plans
or Programs
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||||||
October 1, 2019 –
October 31, 2019 (1) |
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—
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$
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—
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—
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$
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—
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November 1, 2019 –
November 30, 2019 (1) |
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—
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$
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—
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—
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$
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—
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December 1, 2019 –
December 31, 2019 (1) |
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—
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$
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—
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—
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$
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—
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Pursuant to Publicly Announced
Plans or Programs |
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—
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$
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—
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October 1, 2019 –
October 31, 2019 (2) |
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897
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|
$
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75.37
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|
|
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|||
November 1, 2019 –
November 30, 2019 (2) |
|
690
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|
|
$
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81.33
|
|
|
|
|
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|||
December 1, 2019 –
December 31, 2019 (2) |
|
1,186
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|
|
$
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82.69
|
|
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|
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|||
For the Quarter Ended
December 31, 2019 |
|
2,773
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|
|
$
|
79.98
|
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(1)
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During this reporting period, we did not have an authorized share repurchase program.
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(2)
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Shares repurchased represent shares tendered to us by employees who vested in restricted and performance share unit awards and used shares to pay all, or a portion of, the related taxes.
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2019
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2018
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2017
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2016
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2015
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||||||||||
Summary of Operations:
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||||||||||
Revenues including excise taxes
|
$
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77,921
|
|
|
$
|
79,823
|
|
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$
|
78,098
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$
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74,953
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$
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73,908
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Excise taxes on products
|
48,116
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50,198
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49,350
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48,268
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47,114
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|||||
Net revenues
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29,805
|
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|
29,625
|
|
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28,748
|
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26,685
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26,794
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Operating income
|
10,531
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|
11,377
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|
11,581
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|
10,903
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|
|
10,745
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|||||
Net earnings attributable to PMI
|
7,185
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|
|
7,911
|
|
|
6,035
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|
|
6,967
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|
|
6,873
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|||||
Basic earnings per share
|
4.61
|
|
|
5.08
|
|
|
3.88
|
|
|
4.48
|
|
|
4.42
|
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|||||
Diluted earnings per share
|
4.61
|
|
|
5.08
|
|
|
3.88
|
|
|
4.48
|
|
|
4.42
|
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|||||
Dividends declared per share
|
4.62
|
|
|
4.49
|
|
|
4.22
|
|
|
4.12
|
|
|
4.04
|
|
|||||
Total assets
|
42,875
|
|
|
39,801
|
|
|
42,968
|
|
|
36,851
|
|
|
33,956
|
|
|||||
Long-term debt (1)
|
26,656
|
|
|
26,975
|
|
|
31,334
|
|
|
25,851
|
|
|
25,250
|
|
|||||
Total debt
|
31,045
|
|
|
31,759
|
|
|
34,339
|
|
|
29,067
|
|
|
28,480
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|
Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
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|
•
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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"), which includes transactions under license with Altria Group, Inc. for the distribution of our Platform 1 product in the United States.
|
•
|
Net Revenues – Net revenues of $29.8 billion for the year ended December 31, 2019, increased by $0.2 billion, or 0.6%, from the comparable 2018 amount. The change in our net revenues from the comparable 2018 amount was driven by the following (variances not to scale with year-to-date results):
|
•
|
Diluted Earnings Per Share – The changes in our reported diluted earnings per share (“diluted EPS”) for the year ended December 31, 2019, from the comparable 2018 amounts, were as follows:
|
|
Diluted EPS
|
% Growth
(Decline)
|
|||
For the year ended December 31, 2018
|
$
|
5.08
|
|
|
|
|
|
|
|||
2018 Asset impairment and exit costs
|
—
|
|
|
||
2018 Tax items
|
0.02
|
|
|
||
Subtotal of 2018 items
|
0.02
|
|
|
||
|
|
|
|||
2019 Asset impairment and exit costs
|
(0.23
|
)
|
|
||
2019 Canadian tobacco litigation-related expense
|
(0.09
|
)
|
|
||
2019 Loss on deconsolidation of RBH
|
(0.12
|
)
|
|
||
2019 Russia excise and VAT audit charge
|
(0.20
|
)
|
|
||
2019 Fair value adjustment for equity security investments
|
0.02
|
|
|
||
2019 Tax items
|
0.04
|
|
|
||
Subtotal of 2019 items
|
(0.58
|
)
|
|
||
|
|
|
|||
Currency
|
(0.13
|
)
|
|
||
Interest
|
0.04
|
|
|
||
Change in tax rate
|
(0.04
|
)
|
|
||
Operations
|
0.22
|
|
|
||
For the year ended December 31, 2019
|
$
|
4.61
|
|
(9.3
|
)%
|
•
|
European Union: Favorable volume/mix and favorable pricing, partially offset by higher marketing, administration and research costs and higher manufacturing costs;
|
•
|
South & Southeast Asia: Favorable pricing and lower manufacturing costs, partially offset by unfavorable volume/mix and higher marketing, administration and research costs;
|
•
|
Middle East & Africa: Favorable pricing, lower manufacturing costs and lower marketing, administration and research costs, partially offset by unfavorable volume/mix; and
|
•
|
East Asia & Australia: Favorable pricing and lower manufacturing costs, partially offset by unfavorable volume/mix and higher marketing, administration and research costs;
|
•
|
Latin America & Canada: Unfavorable impact resulting from the deconsolidation of RBH, as well as unfavorable volume/mix, partially offset by lower marketing, administration and research costs, favorable pricing and lower manufacturing costs; and
|
•
|
Eastern Europe: Higher marketing, administration and research costs and higher manufacturing costs, partially offset by favorable volume/mix and favorable pricing.
|
|
2019
|
2018
|
Pension plans
|
0.83%
|
1.61%
|
Postretirement plans
|
3.28%
|
3.97%
|
(in millions)
|
2019
|
2018
|
2017
|
||||||
Net Revenues
|
|
|
|
||||||
European Union
|
$
|
9,817
|
|
$
|
9,298
|
|
$
|
8,318
|
|
Eastern Europe
|
3,282
|
|
2,921
|
|
2,711
|
|
|||
Middle East & Africa
|
4,042
|
|
4,114
|
|
3,988
|
|
|||
South & Southeast Asia
|
5,094
|
|
4,656
|
|
4,417
|
|
|||
East Asia & Australia
|
5,364
|
|
5,580
|
|
6,373
|
|
|||
Latin America & Canada
|
2,206
|
|
3,056
|
|
2,941
|
|
|||
Net revenues
|
$
|
29,805
|
|
$
|
29,625
|
|
$
|
28,748
|
|
Operating Income
|
|
|
|
||||||
European Union
|
$
|
3,970
|
|
$
|
4,105
|
|
$
|
3,691
|
|
Eastern Europe
|
547
|
|
902
|
|
887
|
|
|||
Middle East & Africa
|
1,684
|
|
1,627
|
|
1,884
|
|
|||
South & Southeast Asia
|
2,163
|
|
1,747
|
|
1,514
|
|
|||
East Asia & Australia
|
1,932
|
|
1,851
|
|
2,608
|
|
|||
Latin America & Canada
|
235
|
|
1,145
|
|
997
|
|
|||
Operating income
|
$
|
10,531
|
|
$
|
11,377
|
|
$
|
11,581
|
|
•
|
Russia excise and VAT audit charge - See Item 8, Note 18. Contingencies for details of the $374 million pre-tax charge included in the Eastern Europe segment for the year ended December 31, 2019.
|
•
|
Asset impairment and exit costs - See Item 8, Note 21. Asset Impairment and Exit Costs for details of the $422 million pre-tax charge for the year ended December 31, 2019, as well as a breakdown of these costs by segment.
|
•
|
Canadian tobacco litigation-related expense - See Item 8, Note 18. Contingencies and Note 22. Deconsolidation of RBH for details of the $194 million pre-tax charge included in the Latin America & Canada segment for the year ended December 31, 2019.
|
•
|
Loss on deconsolidation of RBH - See Item 8, Note 22. Deconsolidation of RBH for details of the $239 million loss included in the Latin America & Canada segment for the year ended December 31, 2019.
|
•
|
Middle East & Africa, primarily reflecting lower cigarette shipment volume, notably in Turkey, partly offset by Egypt and Saudi Arabia, and lower heated tobacco unit shipment volume in PMI Duty Free;
|
•
|
South & Southeast Asia, reflecting lower cigarette shipment volume, primarily in Indonesia, Pakistan and the Philippines, partly offset by Thailand;
|
•
|
East Asia & Australia, primarily reflecting lower cigarette shipment volume in Japan and lower cigarette and heated tobacco unit shipment volume in Korea, partly offset by higher heated tobacco unit shipment volume in Japan; and
|
•
|
Latin America & Canada, reflecting lower cigarette shipment volume, principally in Argentina, Canada (primarily due to the impact of the deconsolidation of RBH) and Venezuela. Excluding the volume impact from the RBH deconsolidation of approximately 4.3 billion units (reflecting the volume of RBH-owned brands from March 22, 2018 through December 31, 2018), our total shipment volume in the Region decreased by 5.2%;
|
•
|
the EU, reflecting higher heated tobacco unit shipment volume across the Region, notably in Italy, partly offset by lower cigarette shipment volume, primarily in France, Germany and Italy; and
|
•
|
Eastern Europe, reflecting higher heated tobacco unit shipment volume across the Region, notably in Kazakhstan, Russia and Ukraine, partly offset by lower cigarette shipment volume, primarily in Russia and Ukraine.
|
•
|
Marlboro, mainly due to Italy and Japan, partly reflecting the impact of out-switching to heated tobacco units, as well as France, partially offset by the Philippines, Saudi Arabia and Turkey;
|
•
|
Chesterfield, mainly due to Argentina, Italy, Russia and Venezuela, partly offset by Brazil;
|
•
|
Philip Morris, notably due to Argentina, partly offset by Indonesia and Russia;
|
•
|
Parliament, mainly due to Japan, Korea and Russia;
|
•
|
Sampoerna A in Indonesia, mainly reflecting the impact of retail price increases resulting in widened price gaps with competitors' products;
|
•
|
Bond Street, mainly due to Russia and Ukraine;
|
•
|
Lark, mainly due to Japan and Turkey;
|
•
|
Fortune in the Philippines, mainly reflecting up-trading to Marlboro resulting from narrowed price gaps with the below premium price segment; and
|
•
|
"Others," notably due to: the impact of the deconsolidation of RBH in Canada; mid-price Sampoerna U in Indonesia, partly reflecting the impact of above-inflation retail price increases; and low-price brands, notably Morven in Pakistan and Next/Dubliss in Russia, partly offset by Jackpot in the Philippines.
|
•
|
L&M, mainly driven by Egypt and Thailand, partly offset by Russia and Turkey; and
|
•
|
Dji Sam Soe in Indonesia, driven by the strong performance of the DSS Magnum Mild 16 variant and the introduction of 20s and 50s variants.
|
•
|
Total international heated tobacco unit market share of 2.2%, up by 0.6 points; and
|
•
|
Total international cigarette market share of 26.2%, down by 0.5 points.
|
Financial Summary
|
||||||||||||||||||||||||||||
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other(1) |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
29,805
|
|
$
|
29,625
|
|
|
0.6
|
%
|
3.8
|
%
|
|
$
|
180
|
|
$
|
(937
|
)
|
$
|
1,483
|
|
$
|
397
|
|
$
|
(763
|
)
|
Cost of Sales
|
|
(10,513
|
)
|
(10,758
|
)
|
|
2.3
|
%
|
(0.5
|
)%
|
|
245
|
|
302
|
|
—
|
|
(309
|
)
|
252
|
|
|||||||
Marketing, Administration and Research Costs (2)
|
|
(8,695
|
)
|
(7,408
|
)
|
|
(17.4
|
)%
|
(22.0
|
)%
|
|
(1,287
|
)
|
340
|
|
—
|
|
—
|
|
(1,627
|
)
|
|||||||
Amortization of Intangibles
|
|
(66
|
)
|
(82
|
)
|
|
19.5
|
%
|
15.9
|
%
|
|
16
|
|
3
|
|
—
|
|
—
|
|
13
|
|
|||||||
Operating Income
|
|
$
|
10,531
|
|
$
|
11,377
|
|
|
(7.4
|
)%
|
(4.9
|
)%
|
|
$
|
(846
|
)
|
$
|
(292
|
)
|
$
|
1,483
|
|
$
|
88
|
|
$
|
(2,125
|
)
|
•
|
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 became effective on May 20, 2019; 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. In light of the current confusion in the e-vapor category, we have postponed our planned launch of an improved version of this product until the third quarter of 2020, when we expect to reach the optimal capacity for commercialization at scale.
|
•
|
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. We are finalizing our improvements to this product and plan to conduct a consumer test by the end of 2020.
|
•
|
Depending on the outcome of the use and adaptation study described above as well as consumer research, we plan to conduct a consumer test of our Platform 3 product by the end of 2020.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
9,817
|
|
$
|
9,298
|
|
|
5.6
|
%
|
11.6
|
%
|
|
$
|
519
|
|
$
|
(563
|
)
|
$
|
288
|
|
$
|
794
|
|
$
|
—
|
|
Operating Income
|
|
$
|
3,970
|
|
$
|
4,105
|
|
|
(3.3
|
)%
|
4.8
|
%
|
|
$
|
(135
|
)
|
$
|
(330
|
)
|
$
|
288
|
|
$
|
587
|
|
$
|
(680
|
)
|
European Union Key Data
|
|
Full-Year
|
|||||
|
|
|
|
Change
|
|
||
|
|
2019
|
|
2018
|
|
% / pp
|
|
Total Market (billion units)
|
|
482.5
|
|
484.5
|
|
(0.4
|
)%
|
|
|
|
|
|
|||
PMI Shipment Volume (million units)
|
|
|
|
|
|||
Cigarettes
|
|
174,319
|
|
179,622
|
|
(3.0
|
)%
|
Heated Tobacco Units
|
|
12,569
|
|
5,977
|
|
+100.0%
|
|
Total European Union
|
|
186,888
|
|
185,599
|
|
0.7
|
%
|
|
|
|
|
|
|||
PMI Market Share
|
|
|
|
|
|||
Marlboro
|
|
18.0
|
%
|
18.5
|
%
|
(0.5
|
)
|
L&M
|
|
6.7
|
%
|
6.9
|
%
|
(0.2
|
)
|
Chesterfield
|
|
5.8
|
%
|
5.9
|
%
|
(0.1
|
)
|
Philip Morris
|
|
2.7
|
%
|
2.9
|
%
|
(0.2
|
)
|
HEETS
|
|
2.5
|
%
|
1.2
|
%
|
1.3
|
|
Others
|
|
3.1
|
%
|
3.1
|
%
|
—
|
|
Total European Union
|
|
38.8
|
%
|
38.5
|
%
|
0.3
|
|
•
|
France, down by 7.4%, primarily reflecting the impact of significant excise tax-driven price increases and a higher prevalence of illicit trade;
|
•
|
Germany, down by 2.5%, primarily reflecting the impact of price increases in 2018 and March 2019; and
|
•
|
Italy, down by 1.5%, primarily reflecting the impact of price increases in 2018 and the first quarter of 2019;
|
•
|
Poland, up by 6.8%, primarily reflecting a lower prevalence of illicit trade; and
|
•
|
Spain, up by 0.8%, partly reflecting a lower prevalence of illicit trade.
|
•
|
higher heated tobacco unit shipment volume across the Region (notably Italy), driven by higher market share;
|
•
|
lower cigarette shipment volume, mainly in France, due to the lower total market and lower cigarette market share, as well as Germany and Italy, partly reflecting out-switching to heated tobacco units.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
3,282
|
|
$
|
2,921
|
|
|
12.4
|
%
|
16.1
|
%
|
|
$
|
361
|
|
$
|
(108
|
)
|
$
|
85
|
|
$
|
384
|
|
$
|
—
|
|
Operating Income
|
|
$
|
547
|
|
$
|
902
|
|
|
(39.4
|
)%
|
(41.9
|
)%
|
|
$
|
(355
|
)
|
$
|
23
|
|
$
|
85
|
|
$
|
109
|
|
$
|
(572
|
)
|
•
|
Russia, down by 5.2%, primarily reflecting the impact of price increases, as well as an increase in the prevalence of illicit trade; and
|
•
|
Ukraine, down by 12.0%, primarily reflecting the impact of excise tax-driven price increases, as well as an increase in the prevalence of illicit trade;
|
•
|
Kazakhstan, up by 5.7%, partly reflecting a lower prevalence of illicit trade.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
100,644
|
|
108,718
|
|
(7.4
|
)%
|
Heated Tobacco Units
|
13,453
|
|
4,979
|
|
+100.0%
|
|
Total Eastern Europe
|
114,097
|
|
113,697
|
|
0.4
|
%
|
•
|
Kazakhstan, up by 11.6%, reflecting the higher total market and a higher market share of heated tobacco units;
|
•
|
Ukraine, down by 3.0%, reflecting the lower total market, partly offset by a higher market share of heated tobacco units.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
4,042
|
|
$
|
4,114
|
|
|
(1.8
|
)%
|
2.2
|
%
|
|
$
|
(72
|
)
|
$
|
(162
|
)
|
$
|
207
|
|
$
|
(113
|
)
|
$
|
(4
|
)
|
Operating Income
|
|
$
|
1,684
|
|
$
|
1,627
|
|
|
3.5
|
%
|
6.8
|
%
|
|
$
|
57
|
|
$
|
(53
|
)
|
$
|
207
|
|
$
|
(128
|
)
|
$
|
31
|
|
•
|
Algeria, up by 7.0%, partly reflecting the timing of estimated trade inventory movements in 2019 compared to 2018; and
|
•
|
Egypt, up by 1.6%, mainly due to the timing of estimated trade inventory movements in 2019 related to anticipated price increases;
|
•
|
Duty Free, down by 1.6%, mainly reflecting lower purchases by travelers to China; and
|
•
|
Morocco, down by 16.0%, primarily reflecting the impact of significant excise tax-driven price increases in 2019.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
134,568
|
|
136,605
|
|
(1.5
|
)%
|
Heated Tobacco Units
|
2,654
|
|
3,403
|
|
(22.0
|
)%
|
Total Middle East & Africa
|
137,222
|
|
140,008
|
|
(2.0
|
)%
|
•
|
PMI Duty Free, down by 7.0%. Excluding the net unfavorable impact of estimated distributor inventory movements of 0.4 billion units, PMI's in-market sales decline was 4.6%, mainly reflecting lower market share and the lower total market; and
|
•
|
Turkey, down by 5.6%, mainly reflecting lower market share, primarily driven by the timing of retail price increases in April 2019 compared to competition;
|
•
|
Egypt, up by 12.2%, primarily reflecting higher market share, driven by L&M, as well as the higher total market; and
|
•
|
Saudi Arabia, up by 24.9%. Excluding the net favorable impact of estimated distributor inventory movements of 1.5 billion units, mainly attributable to the timing of shipments compared to 2018, PMI's in-market sales grew by 4.1%, primarily reflecting higher market share.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
5,094
|
|
$
|
4,656
|
|
|
9.4
|
%
|
9.6
|
%
|
|
$
|
438
|
|
$
|
(10
|
)
|
$
|
583
|
|
$
|
(135
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
2,163
|
|
$
|
1,747
|
|
|
23.8
|
%
|
22.8
|
%
|
|
$
|
416
|
|
$
|
17
|
|
$
|
583
|
|
$
|
(99
|
)
|
$
|
(85
|
)
|
•
|
Pakistan, down by 14.0%, mainly reflecting the impact of excise tax-driven price increases;
|
•
|
the Philippines, down by 3.7%, primarily reflecting the impact of price increases in the below premium segment in the fourth quarter of 2018, as well as price increases in the third quarter of 2019; and
|
•
|
Vietnam, down by 5.2%, mainly reflecting the impact of excise tax-driven price increases;
|
•
|
Indonesia, up by 1.1%, reflecting the absence of an excise tax increase in 2019; and
|
•
|
Thailand, up by 5.8%, primarily reflecting on-going recovery from the September 2017 excise tax reform.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
174,934
|
|
178,469
|
|
(2.0
|
)%
|
Heated Tobacco Units
|
—
|
|
—
|
|
—
|
%
|
Total South & Southeast Asia
|
174,934
|
|
178,469
|
|
(2.0
|
)%
|
•
|
Indonesia, down by 2.9%, mainly reflecting lower market share, primarily due to the widened retail price gap of Sampoerna A to competitive brands following its price increase in October 2018, partly offset by the higher total market;
|
•
|
Pakistan, down by 8.6%, mainly reflecting the lower total market, partly offset by higher market share driven by favorable retail price gaps with competitors' brands; and
|
•
|
the Philippines, down by 2.9%, mainly reflecting the lower total market, partly offset by higher market share, notably of Marlboro;
|
•
|
Thailand, up by 18.0%, mainly reflecting higher market share, driven by the continued strong performance of L&M 7.1 and the favorable impact of distribution expansion in 2018, as well as the higher total market.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
5,364
|
|
$
|
5,580
|
|
|
(3.9
|
)%
|
(3.4
|
)%
|
|
$
|
(216
|
)
|
$
|
(26
|
)
|
$
|
230
|
|
$
|
(420
|
)
|
$
|
—
|
|
Operating Income
|
|
$
|
1,932
|
|
$
|
1,851
|
|
|
4.4
|
%
|
2.4
|
%
|
|
$
|
81
|
|
$
|
37
|
|
$
|
230
|
|
$
|
(292
|
)
|
$
|
106
|
|
•
|
Australia, down by 5.9%, or by 8.9% excluding the impact of estimated trade inventory movements, mainly reflecting the impact of excise tax-driven retail price increases;
|
•
|
Japan, down by 5.6%, mainly reflecting the impact of the October 1, 2018 excise tax-driven retail price increases, as well as out-switching to the cigarillo category;
|
•
|
Korea, down by 1.4%, reflecting the secular decline of the cigarette category, partly offset by the growth of the heat-not-burn category; and
|
•
|
Taiwan, down by 1.9%, continuing to reflect the impact of significant excise tax-driven retail price increases in June 2017, as well as an increase in the prevalence of illicit trade.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
49,951
|
|
56,163
|
|
(11.1
|
)%
|
Heated Tobacco Units
|
30,677
|
|
26,866
|
|
14.2
|
%
|
Total East Asia & Australia
|
80,628
|
|
83,029
|
|
(2.9
|
)%
|
•
|
Korea, down by 11.1%, principally due to lower cigarette and heated tobacco unit market share, as well as the lower total market;
|
•
|
Japan, up by 0.3%, reflecting the net favorable impact of estimated distributor inventory movements of approximately 2.6 billion units (comprised of approximately 3.4 billion heated tobacco units, partially offset by approximately 0.8 billion cigarettes), mainly due to a favorable comparison with 2018 in which IQOS consumable inventories in Japan were reduced. Excluding the impact of these inventory movements, PMI's in-market sales declined by 4.2%, primarily reflecting the lower total market, partly offset by higher heated tobacco unit market share.
|
Financial Summary -
Years Ended December 31, |
|
|
|
|
Change
Fav./(Unfav.) |
|
Variance
Fav./(Unfav.) |
|||||||||||||||||||||
|
2019
|
2018
|
|
Total
|
Excl.
Curr. |
|
Total
|
Cur-
rency |
Price
|
Vol/
Mix |
Cost/
Other(1) |
|||||||||||||||||
(in millions)
|
|
|
|
|||||||||||||||||||||||||
Net Revenues
|
|
$
|
2,206
|
|
$
|
3,056
|
|
|
(27.8
|
)%
|
(25.6
|
)%
|
|
$
|
(850
|
)
|
$
|
(68
|
)
|
$
|
90
|
|
$
|
(113
|
)
|
$
|
(759
|
)
|
Operating Income
|
|
$
|
235
|
|
$
|
1,145
|
|
|
(79.5
|
)%
|
(80.7
|
)%
|
|
$
|
(910
|
)
|
$
|
14
|
|
$
|
90
|
|
$
|
(89
|
)
|
$
|
(925
|
)
|
•
|
Argentina, down by 4.6%, primarily due to the impact of cumulative price increases and the impact of the economic downturn as of the second half of 2018;
|
•
|
Canada, down by 7.7%, primarily due to the impact of cumulative price increases, as well as the growing prevalence of e-vapor products; and
|
•
|
Venezuela, down by 61.6%, mainly reflecting the deterioration of the socioeconomic environment and the impact of inflation-driven price increases.
|
PMI Shipment Volume (million units)
|
Full-Year
|
|||||
|
2019
|
|
2018
|
|
Change
|
|
Cigarettes
|
72,293
|
|
80,738
|
|
(10.5
|
)%
|
Heated Tobacco Units
|
299
|
|
147
|
|
+100.0%
|
|
Total Latin America & Canada
|
72,592
|
|
80,885
|
|
(10.3
|
)%
|
•
|
Argentina, down by 9.4%, primarily reflecting the lower total market, as well as lower market share; and
|
•
|
Venezuela, down by 74.8%, primarily reflecting the lower total market.
|
|
For the Years Ended December 31,
|
||||||||
(in millions)
|
2019
|
2018
|
2017
|
||||||
Net cash provided by operating activities
|
$
|
10,090
|
|
$
|
9,478
|
|
$
|
8,912
|
|
Net cash used in investing activities
|
(1,811
|
)
|
(998
|
)
|
(3,083
|
)
|
|||
Net cash used in financing activities
|
(8,061
|
)
|
(9,651
|
)
|
(2,769
|
)
|
•
|
Net Cash Provided by Operating Activities
|
•
|
Net Cash Used in Investing Activities
|
•
|
Net Cash Used in Financing Activities
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
Type
|
|
Face Value
|
|
Interest Rate
|
|
Issuance
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
U.S. dollar notes
|
(a)
|
$900
|
|
2.875%
|
|
May 2019
|
|
May 2024
|
U.S. dollar notes
|
(b)
|
$750
|
|
3.375%
|
|
May 2019
|
|
August 2029
|
EURO notes
|
(c)
|
€500 (approximately $557)
|
(d)
|
0.125%
|
|
August 2019
|
|
August 2026
|
EURO notes
|
(c)
|
€750 (approximately $835)
|
(d)
|
0.800%
|
|
August 2019
|
|
August 2031
|
EURO notes
|
(c)
|
€750 (approximately $835)
|
(d)
|
1.450%
|
|
August 2019
|
|
August 2039
|
|
|
|
|
|
|
|
|
|
•
|
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
|
|
|
Payments Due
|
|||||||||||||
(in millions)
|
Total
|
2020
|
2021-2022
|
2023-2024
|
2025 and Thereafter
|
||||||||||
Long-term debt (1)
|
|
$30,962
|
|
|
$4,051
|
|
|
$5,779
|
|
|
$4,890
|
|
|
$16,242
|
|
Interest on borrowings (2)
|
10,124
|
|
877
|
|
1,534
|
|
1,273
|
|
6,440
|
|
|||||
Operating leases (3)
|
949
|
|
222
|
|
286
|
|
158
|
|
283
|
|
|||||
Purchase obligations (4):
|
|
|
|
|
|
||||||||||
Inventory and production costs
|
3,493
|
|
2,199
|
|
885
|
|
409
|
|
—
|
|
|||||
Other
|
2,180
|
|
977
|
|
578
|
|
213
|
|
412
|
|
|||||
|
5,673
|
|
3,176
|
|
1,463
|
|
622
|
|
412
|
|
|||||
Other long-term liabilities (5)
|
1,992
|
|
278
|
|
408
|
|
661
|
|
645
|
|
|||||
|
|
$49,700
|
|
|
$8,604
|
|
|
$9,470
|
|
|
$7,604
|
|
|
$24,022
|
|
|
Fair Value Impact
|
||||||
(in millions)
|
At
December 31, 2019 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$18
|
|
$20
|
|
$24
|
|
$18
|
|
|
|
|
|
|
|
|
Interest rates
|
$301
|
|
$247
|
|
$346
|
|
$169
|
|
|
|
|
|
|
|
|
|
Fair Value Impact
|
||||||
(in millions)
|
At
December 31, 2018 |
|
Average
|
|
High
|
|
Low
|
Instruments sensitive to:
|
|
|
|
|
|
|
|
Foreign currency rates
|
$19
|
|
$20
|
|
$23
|
|
$19
|
|
|
|
|
|
|
|
|
Interest rates
|
$142
|
|
$132
|
|
$152
|
|
$96
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
for the years ended December 31,
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues including excise taxes
|
$
|
77,921
|
|
|
$
|
79,823
|
|
|
$
|
78,098
|
|
Excise taxes on products
|
48,116
|
|
|
50,198
|
|
|
49,350
|
|
|||
Net revenues
|
29,805
|
|
|
29,625
|
|
|
28,748
|
|
|||
Cost of sales
|
10,513
|
|
|
10,758
|
|
|
10,432
|
|
|||
Gross profit
|
19,292
|
|
|
18,867
|
|
|
18,316
|
|
|||
Marketing, administration and research costs (Notes 18, 21 & 22)
|
8,695
|
|
|
7,408
|
|
|
6,647
|
|
|||
Amortization of intangibles
|
66
|
|
|
82
|
|
|
88
|
|
|||
Operating income
|
10,531
|
|
|
11,377
|
|
|
11,581
|
|
|||
Interest expense, net (Note 14)
|
570
|
|
|
665
|
|
|
914
|
|
|||
Pension and other employee benefit costs (Note 13)
|
89
|
|
|
41
|
|
|
78
|
|
|||
Earnings before income taxes
|
9,872
|
|
|
10,671
|
|
|
10,589
|
|
|||
Provision for income taxes (Note 11)
|
2,293
|
|
|
2,445
|
|
|
4,307
|
|
|||
Equity investments and securities (income)/loss, net
|
(149
|
)
|
|
(60
|
)
|
|
(59
|
)
|
|||
Net earnings
|
7,728
|
|
|
8,286
|
|
|
6,341
|
|
|||
Net earnings attributable to noncontrolling interests
|
543
|
|
|
375
|
|
|
306
|
|
|||
Net earnings attributable to PMI
|
$
|
7,185
|
|
|
$
|
7,911
|
|
|
$
|
6,035
|
|
Per share data (Note 10):
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
4.61
|
|
|
$
|
5.08
|
|
|
$
|
3.88
|
|
Diluted earnings per share
|
$
|
4.61
|
|
|
$
|
5.08
|
|
|
$
|
3.88
|
|
for the years ended December 31,
|
2019
|
|
2018
|
|
2017
|
||||||
Net earnings
|
$
|
7,728
|
|
|
$
|
8,286
|
|
|
$
|
6,341
|
|
Other comprehensive earnings (losses), net of income taxes:
|
|
|
|
|
|
||||||
Change in currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized gains (losses), net of income taxes of ($161) in 2019, ($47) in 2018 and $620 in 2017
|
505
|
|
|
(812
|
)
|
|
330
|
|
|||
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2019, 2018 and 2017
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $0 in 2019, 2018 and 2017 (Note 22)
|
502
|
|
|
—
|
|
|
—
|
|
|||
Change in net loss and prior service cost:
|
|
|
|
|
|
||||||
Net gains (losses) and prior service costs, net of income taxes of $247 in 2019, $65 in 2018 and ($17) in 2017
|
(454
|
)
|
|
(1,046
|
)
|
|
523
|
|
|||
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($69) in 2019, ($43) in 2018 and ($31) in 2017
|
243
|
|
|
218
|
|
|
228
|
|
|||
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of ($15) in 2019, $0 in 2018 and $0 in 2017 (Note 22)
|
27
|
|
|
—
|
|
|
—
|
|
|||
Change in fair value of derivatives accounted for as hedges:
|
|
|
|
|
|
||||||
Gains (losses) recognized, net of income taxes of $2 in 2019, ($4) in 2018 and $8 in 2017
|
(18
|
)
|
|
24
|
|
|
(44
|
)
|
|||
(Gains) losses transferred to earnings, net of income taxes of $3 in 2019, $5 in 2018 and $2 in 2017
|
(14
|
)
|
|
(31
|
)
|
|
(11
|
)
|
|||
Total other comprehensive earnings (losses)
|
791
|
|
|
(1,647
|
)
|
|
1,024
|
|
|||
Total comprehensive earnings
|
8,519
|
|
|
6,639
|
|
|
7,365
|
|
|||
Less comprehensive earnings attributable to:
|
|
|
|
|
|
||||||
Noncontrolling interests
|
586
|
|
|
304
|
|
|
306
|
|
|||
Comprehensive earnings attributable to PMI
|
$
|
7,933
|
|
|
$
|
6,335
|
|
|
$
|
7,059
|
|
at December 31,
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6,861
|
|
|
$
|
6,593
|
|
Trade receivables (less allowances of $20 in 2019 and $25 in 2018)
|
3,080
|
|
|
2,950
|
|
||
Other receivables
|
637
|
|
|
614
|
|
||
Inventories:
|
|
|
|
||||
Leaf tobacco
|
2,052
|
|
|
2,318
|
|
||
Other raw materials
|
1,596
|
|
|
1,405
|
|
||
Finished product
|
5,587
|
|
|
5,081
|
|
||
|
9,235
|
|
|
8,804
|
|
||
Other current assets
|
701
|
|
|
481
|
|
||
Total current assets
|
20,514
|
|
|
19,442
|
|
||
Property, plant and equipment, at cost:
|
|
|
|
||||
Land and land improvements
|
566
|
|
|
600
|
|
||
Buildings and building equipment
|
4,132
|
|
|
3,975
|
|
||
Machinery and equipment
|
9,354
|
|
|
9,096
|
|
||
Construction in progress
|
394
|
|
|
886
|
|
||
|
14,446
|
|
|
14,557
|
|
||
Less: accumulated depreciation
|
7,815
|
|
|
7,356
|
|
||
|
6,631
|
|
|
7,201
|
|
||
Goodwill (Note 3)
|
5,858
|
|
|
7,189
|
|
||
Other intangible assets, net (Note 3)
|
2,113
|
|
|
2,278
|
|
||
Investments in unconsolidated subsidiaries and equity securities (Notes 4 & 16)
|
4,635
|
|
|
1,269
|
|
||
Deferred income taxes
|
1,153
|
|
|
977
|
|
||
Other assets
|
1,971
|
|
|
1,445
|
|
||
Total Assets
|
$
|
42,875
|
|
|
$
|
39,801
|
|
at December 31,
|
2019
|
|
2018
|
||||
Liabilities
|
|
|
|
||||
Short-term borrowings (Note 7)
|
$
|
338
|
|
|
$
|
730
|
|
Current portion of long-term debt (Note 7)
|
4,051
|
|
|
4,054
|
|
||
Accounts payable
|
2,299
|
|
|
2,068
|
|
||
Accrued liabilities:
|
|
|
|
||||
Marketing and selling
|
666
|
|
|
732
|
|
||
Taxes, except income taxes
|
5,837
|
|
|
5,088
|
|
||
Employment costs
|
1,042
|
|
|
794
|
|
||
Dividends payable
|
1,831
|
|
|
1,783
|
|
||
Other
|
1,973
|
|
|
1,366
|
|
||
Income taxes (Note 11)
|
796
|
|
|
576
|
|
||
Total current liabilities
|
18,833
|
|
|
17,191
|
|
||
Long-term debt (Note 7)
|
26,656
|
|
|
26,975
|
|
||
Deferred income taxes
|
908
|
|
|
898
|
|
||
Employment costs
|
3,634
|
|
|
3,083
|
|
||
Income taxes and other liabilities (Note 11)
|
2,443
|
|
|
2,393
|
|
||
Total liabilities
|
52,474
|
|
|
50,540
|
|
||
Contingencies (Note 18)
|
|
|
|
||||
Stockholders’ (Deficit) Equity
|
|
|
|
||||
Common stock, no par value (2,109,316,331 shares issued in 2019 and 2018)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
2,019
|
|
|
1,939
|
|
||
Earnings reinvested in the business
|
30,987
|
|
|
31,014
|
|
||
Accumulated other comprehensive losses
|
(9,363
|
)
|
|
(10,111
|
)
|
||
|
23,643
|
|
|
22,842
|
|
||
Less: cost of repurchased stock (553,421,668 and 554,736,610 shares in 2019 and 2018, respectively)
|
35,220
|
|
|
35,301
|
|
||
Total PMI stockholders’ deficit
|
(11,577
|
)
|
|
(12,459
|
)
|
||
Noncontrolling interests
|
1,978
|
|
|
1,720
|
|
||
Total stockholders’ deficit
|
(9,599
|
)
|
|
(10,739
|
)
|
||
Total Liabilities and Stockholders’ (Deficit) Equity
|
$
|
42,875
|
|
|
$
|
39,801
|
|
for the years ended December 31,
|
2019
|
|
2018
|
|
2017
|
||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
|
|
|
||||||
Net earnings
|
$
|
7,728
|
|
|
$
|
8,286
|
|
|
$
|
6,341
|
|
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
964
|
|
|
989
|
|
|
875
|
|
|||
Deferred income tax (benefit) provision
|
(141
|
)
|
|
(100
|
)
|
|
(501
|
)
|
|||
Asset impairment and exit costs, net of cash paid (Note 21)
|
371
|
|
|
(3
|
)
|
|
(10
|
)
|
|||
Cash effects of changes in:
|
|
|
|
|
|
||||||
Receivables, net
|
(331
|
)
|
|
53
|
|
|
(92
|
)
|
|||
Inventories
|
(548
|
)
|
|
(613
|
)
|
|
730
|
|
|||
Accounts payable
|
451
|
|
|
(51
|
)
|
|
425
|
|
|||
Accrued liabilities and other current assets
|
1,108
|
|
|
910
|
|
|
(554
|
)
|
|||
Income taxes
|
75
|
|
|
(135
|
)
|
|
1,370
|
|
|||
Pension plan contributions
|
(200
|
)
|
|
(110
|
)
|
|
(66
|
)
|
|||
Other
|
613
|
|
(1)
|
252
|
|
|
394
|
|
|||
Net cash provided by operating activities
|
10,090
|
|
|
9,478
|
|
|
8,912
|
|
|||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
|
|
|
||||||
Capital expenditures
|
(852
|
)
|
|
(1,436
|
)
|
|
(1,548
|
)
|
|||
Investments in unconsolidated subsidiaries and equity securities
|
(31
|
)
|
|
(63
|
)
|
|
(111
|
)
|
|||
Deconsolidation of RBH (Note 22)
|
(1,346
|
)
|
(2)
|
—
|
|
|
—
|
|
|||
Net investment hedges
|
386
|
|
|
416
|
|
|
(1,527
|
)
|
|||
Other
|
32
|
|
|
85
|
|
|
103
|
|
|||
Net cash used in investing activities
|
(1,811
|
)
|
|
(998
|
)
|
|
(3,083
|
)
|
for the years ended December 31,
|
2019
|
|
2018
|
|
2017
|
||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
||||||
Short-term borrowing activity by original maturity:
|
|
|
|
|
|
||||||
Net issuances (repayments) - maturities of 90 days or less
|
$
|
(364
|
)
|
|
$
|
255
|
|
|
$
|
(127
|
)
|
Issuances - maturities longer than 90 days
|
989
|
|
|
—
|
|
|
1,634
|
|
|||
Repayments - maturities longer than 90 days
|
(989
|
)
|
|
—
|
|
|
(1,634
|
)
|
|||
Long-term debt proceeds
|
3,819
|
|
|
—
|
|
|
6,850
|
|
|||
Long-term debt repaid
|
(3,998
|
)
|
|
(2,484
|
)
|
|
(2,551
|
)
|
|||
Dividends paid
|
(7,161
|
)
|
|
(6,885
|
)
|
|
(6,520
|
)
|
|||
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 6)
|
51
|
|
|
(81
|
)
|
|
5
|
|
|||
Other
|
(408
|
)
|
|
(456
|
)
|
|
(426
|
)
|
|||
Net cash used in financing activities
|
(8,061
|
)
|
|
(9,651
|
)
|
|
(2,769
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
27
|
|
|
(685
|
)
|
|
1,085
|
|
|||
Cash, cash equivalents and restricted cash(3):
|
|
|
|
|
|
||||||
Increase (Decrease)
|
245
|
|
|
(1,856
|
)
|
|
4,145
|
|
|||
Balance at beginning of year
|
6,620
|
|
|
8,476
|
|
|
4,331
|
|
|||
Balance at end of year
|
$
|
6,865
|
|
|
$
|
6,620
|
|
|
$
|
8,476
|
|
|
|
|
|
|
|
||||||
Cash Paid:
|
|
|
|
|
|
||||||
Interest
|
$
|
800
|
|
|
$
|
882
|
|
|
$
|
1,050
|
|
Income taxes
|
$
|
2,430
|
|
|
$
|
2,749
|
|
|
$
|
3,403
|
|
|
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, 2017
|
$
|
—
|
|
|
$
|
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 (1)
|
|
|
|
|
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
|
)
|
|||||||
Net earnings
|
|
|
|
|
7,185
|
|
|
|
|
|
|
543
|
|
|
7,728
|
|
|||||||||||
Other comprehensive earnings (losses), net of income taxes
|
|
|
|
|
|
|
219
|
|
|
|
|
43
|
|
|
262
|
|
|||||||||||
Issuance of stock awards
|
|
|
79
|
|
|
|
|
|
|
81
|
|
|
|
|
160
|
|
|||||||||||
Dividends declared ($4.62 per share)
|
|
|
|
|
(7,212
|
)
|
|
|
|
|
|
|
|
(7,212
|
)
|
||||||||||||
Payments to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
(378
|
)
|
|
(378
|
)
|
||||||||||||
Deconsolidation of RBH (Note 22)
|
|
|
|
|
|
|
529
|
|
|
|
|
|
|
529
|
|
||||||||||||
Other
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
50
|
|
|
51
|
|
||||||||||
Balances, December 31, 2019
|
$
|
—
|
|
|
$
|
2,019
|
|
|
$
|
30,987
|
|
|
$
|
(9,363
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
1,978
|
|
|
$
|
(9,599
|
)
|
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, 2018
|
$
|
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
|
|
|||||||
Changes due to:
|
|
|
|
|
|
|
|
||||||||||||||
Currency
|
(19
|
)
|
(3
|
)
|
2
|
|
103
|
|
15
|
|
34
|
|
132
|
|
|||||||
Deconsolidation of RBH
|
|
|
|
|
|
(1,463
|
)
|
(1,463
|
)
|
||||||||||||
Balances, December 31, 2019
|
$
|
1,338
|
|
$
|
300
|
|
$
|
89
|
|
$
|
2,898
|
|
$
|
551
|
|
$
|
682
|
|
$
|
5,858
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||
(in millions)
|
Weighted-Average Remaining Useful Life
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
|
||||||||||||
Non-amortizable intangible assets
|
|
$
|
1,319
|
|
|
$
|
1,319
|
|
|
$
|
1,269
|
|
|
$
|
1,269
|
|
||||
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks
|
14 years
|
1,217
|
|
$
|
526
|
|
691
|
|
|
1,488
|
|
$
|
608
|
|
880
|
|
||||
Distribution networks
|
8 years
|
113
|
|
72
|
|
41
|
|
|
141
|
|
82
|
|
59
|
|
||||||
Other*
|
9 years
|
106
|
|
44
|
|
62
|
|
|
107
|
|
37
|
|
70
|
|
||||||
Total other intangible assets
|
|
$
|
2,755
|
|
$
|
642
|
|
$
|
2,113
|
|
|
$
|
3,005
|
|
$
|
727
|
|
$
|
2,278
|
|
Note 4.
|
|
|
For the Years Ended December 31,
|
||||||||
(in millions)
|
|
2019
|
2018
|
2017
|
||||||
Net revenues
|
|
|
|
|
||||||
Megapolis Group
|
|
$
|
2,236
|
|
$
|
1,994
|
|
$
|
1,874
|
|
Other
|
|
1,015
|
|
720
|
|
647
|
|
|||
Net revenues (a)
|
|
$
|
3,251
|
|
$
|
2,714
|
|
$
|
2,521
|
|
|
|
|
|
|
||||||
Expenses:
|
|
|
|
|
||||||
Other
|
|
$
|
63
|
|
$
|
21
|
|
$
|
23
|
|
Expenses
|
|
$
|
63
|
|
$
|
21
|
|
$
|
23
|
|
|
|
At December 31,
|
|||||
(in millions)
|
|
2019
|
2018
|
||||
Receivables:
|
|
|
|
||||
Megapolis Group
|
|
$
|
375
|
|
$
|
172
|
|
Other
|
|
148
|
|
136
|
|
||
Receivables
|
|
$
|
523
|
|
$
|
308
|
|
|
|
|
|
||||
Payables:
|
|
|
|
||||
Other
|
|
$
|
20
|
|
$
|
8
|
|
Payables
|
|
$
|
20
|
|
$
|
8
|
|
Note 5.
|
|
At December 31,
|
|||||
(in millions)
|
2019
|
2018
|
||||
Balance at beginning of period
|
$
|
67
|
|
$
|
71
|
|
Changes due to:
|
|
|
||||
Warranties issued
|
303
|
|
179
|
|
||
Settlements
|
(230
|
)
|
(183
|
)
|
||
Currency
|
—
|
|
—
|
|
||
Balance at end of period
|
$
|
140
|
|
$
|
67
|
|
Note 6.
|
Note 7.
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||
(in millions)
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
|
Amount Outstanding
|
|
|
Average Year-End Rate
|
|
||
Commercial paper
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Bank loans
|
338
|
|
|
5.5
|
|
|
730
|
|
|
5.8
|
|
||
|
$
|
338
|
|
|
|
|
$
|
730
|
|
|
|
|
December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
U.S. dollar notes, 1.875% to 6.375% (average interest rate 3.516%), due through 2044
|
$
|
19,783
|
|
|
$
|
20,819
|
|
Foreign currency obligations:
|
|
|
|
||||
Euro notes, 0.125% to 3.125% (average interest rate 1.950%), due through 2039
|
9,822
|
|
|
8,656
|
|
||
Swiss franc notes, 1.000% to 2.000% (average interest rate 1.521%), due through 2024
|
899
|
|
|
1,374
|
|
||
Other (average interest rate 3.125%), due through 2025
|
203
|
|
|
180
|
|
||
|
30,707
|
|
|
31,029
|
|
||
Less current portion of long-term debt
|
4,051
|
|
|
4,054
|
|
||
|
$
|
26,656
|
|
|
$
|
26,975
|
|
(in millions)
|
|
|
|
|
|
|
|
|
Type
|
|
Face Value
|
|
Interest
Rate |
|
Issuance
|
|
Maturity
|
U.S. dollar notes
|
|
$300
|
|
Floating
|
|
February 2017
|
|
February 2020
|
U.S. dollar notes
|
|
$1,000
|
|
2.000%
|
|
February 2017
|
|
February 2020
|
U.S. dollar notes
|
|
$1,000
|
|
4.500%
|
|
March 2010
|
|
March 2020
|
U.S. dollar notes
|
|
$750
|
|
1.875%
|
|
February 2016
|
|
February 2021
|
U.S. dollar notes
|
|
$350
|
|
4.125%
|
|
May 2011
|
|
May 2021
|
U.S. dollar notes
|
|
$750
|
|
2.900%
|
|
November 2011
|
|
November 2021
|
U.S. dollar notes
|
|
$500
|
|
2.625%
|
|
February 2017
|
|
February 2022
|
U.S. dollar notes
|
|
$750
|
|
2.375%
|
|
August 2017
|
|
August 2022
|
U.S. dollar notes
|
|
$750
|
|
2.500%
|
|
August 2012
|
|
August 2022
|
U.S. dollar notes
|
|
$750
|
|
2.500%
|
|
November 2017
|
|
November 2022
|
U.S. dollar notes
|
|
$600
|
|
2.625%
|
|
March 2013
|
|
March 2023
|
U.S. dollar notes
|
|
$500
|
|
2.125%
|
|
May 2016
|
|
May 2023
|
U.S. dollar notes
|
|
$500
|
|
3.600%
|
|
November 2013
|
|
November 2023
|
U.S. dollar notes
|
|
$900
|
|
2.875%
|
|
May 2019
|
|
May 2024
|
U.S. dollar notes
|
|
$750
|
|
3.250%
|
|
November 2014
|
|
November 2024
|
U.S. dollar notes
|
|
$750
|
|
3.375%
|
|
August 2015
|
|
August 2025
|
U.S. dollar notes
|
|
$750
|
|
2.750%
|
|
February 2016
|
|
February 2026
|
U.S. dollar notes
|
|
$500
|
|
3.125%
|
|
August 2017
|
|
August 2027
|
U.S. dollar notes
|
|
$500
|
|
3.125%
|
|
November 2017
|
|
March 2028
|
U.S. dollar notes
|
|
$750
|
|
3.375%
|
|
May 2019
|
|
August 2029
|
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)
|
€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 $557)
|
|
0.125%
|
|
August 2019
|
|
August 2026
|
EURO notes
|
(b)
|
€500 (approximately $697)
|
|
2.875%
|
|
May 2014
|
|
May 2029
|
EURO notes
|
(b)
|
€750 (approximately $835)
|
|
0.800%
|
|
August 2019
|
|
August 2031
|
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
|
Euro notes
|
(b)
|
€750 (approximately $835)
|
|
1.450%
|
|
August 2019
|
|
August 2039
|
Swiss franc notes
|
(b)
|
CHF325 (approximately $334)
|
|
1.000%
|
|
September 2012
|
|
September 2020
|
Swiss franc notes
|
(b)
|
CHF300 (approximately $335)
|
|
2.000%
|
|
December 2011
|
|
December 2021
|
Swiss franc notes
|
(b)
|
CHF250 (approximately $283)
|
|
1.625%
|
|
May 2014
|
|
May 2024
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
||
2020
|
$
|
4,051
|
|
2021
|
3,015
|
|
|
2022
|
2,764
|
|
|
2023
|
1,607
|
|
|
2024
|
3,283
|
|
|
2025-2029
|
6,332
|
|
|
2030-2034
|
1,400
|
|
|
Thereafter
|
8,510
|
|
|
|
30,962
|
|
|
Debt discounts
|
(255
|
)
|
|
Total long-term debt
|
$
|
30,707
|
|
Type
(in billions of dollars)
|
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
|
|
|
$
|
—
|
|
Note 8.
|
|
Shares Issued
|
|
Shares
Repurchased |
|
Shares
Outstanding |
|||
Balances, January 1, 2017
|
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
|
|
Issuance of stock awards
|
|
|
1,314,942
|
|
|
1,314,942
|
|
|
Balances, December 31, 2019
|
2,109,316,331
|
|
|
(553,421,668
|
)
|
|
1,555,894,663
|
|
Note 9.
|
|
Number of
Shares |
Weighted-
Average Grant Date Fair Value Per Share |
|||
Balance at January 1, 2019
|
3,318,795
|
|
$
|
96.26
|
|
Granted
|
1,726,760
|
|
77.28
|
|
|
Vested
|
(1,126,057
|
)
|
89.56
|
|
|
Forfeited
|
(193,628
|
)
|
89.36
|
|
|
Balance at December 31, 2019
|
3,725,870
|
|
$
|
89.85
|
|
(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
|
||||||
2019
|
$
|
133
|
|
|
$
|
77.28
|
|
$
|
118
|
|
2018
|
$
|
129
|
|
|
$
|
100.19
|
|
$
|
114
|
|
2017
|
$
|
119
|
|
|
$
|
98.59
|
|
$
|
111
|
|
(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
|
|||||
2019
|
1,126,057
|
|
|
$
|
101
|
|
$
|
95
|
|
2018
|
1,451,876
|
|
|
$
|
121
|
|
$
|
149
|
|
2017
|
2,022,856
|
|
|
$
|
158
|
|
$
|
208
|
|
|
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, 2019
|
1,194,970
|
|
|
$
|
95.85
|
|
$
|
117.09
|
|
Granted
|
647,700
|
|
|
77.23
|
|
83.59
|
|
||
Vested
|
(330,616
|
)
|
|
89.02
|
|
104.60
|
|
||
Forfeited
|
(164,594
|
)
|
|
90.28
|
|
107.09
|
|
||
Balance at December 31, 2019
|
1,347,460
|
|
|
$
|
88.19
|
|
$
|
107.61
|
|
(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
|
||||||||||
2019
|
$
|
30
|
|
$
|
77.23
|
|
|
$
|
21
|
|
$
|
83.59
|
|
|
$
|
54
|
|
2018
|
$
|
20
|
|
$
|
100.69
|
|
|
$
|
24
|
|
$
|
118.98
|
|
|
$
|
24
|
|
2017
|
$
|
19
|
|
$
|
98.29
|
|
|
$
|
25
|
|
$
|
128.72
|
|
|
$
|
37
|
|
|
For the Years Ended December 31,
|
|
|||||||
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
Risk-free interest rate (a)
|
2.4
|
%
|
|
2.3
|
%
|
|
1.5
|
%
|
|
Expected volatility
|
21.4
|
%
|
(b)
|
19.6
|
%
|
(c)
|
15.8
|
%
|
(c)
|
(dollars in millions)
|
Shares of PSU Awards that Vested
|
|
Grant Date Fair Value of Vested Shares of PSU Awards
|
Total Fair Value of PSU Awards that Vested
|
|||||
2019
|
330,616
|
|
|
$
|
32
|
|
$
|
28
|
|
Note 10.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Net earnings attributable to PMI
|
$
|
7,185
|
|
|
$
|
7,911
|
|
|
$
|
6,035
|
|
Less distributed and undistributed earnings attributable to share-based payment awards
|
17
|
|
|
16
|
|
|
14
|
|
|||
Net earnings for basic and diluted EPS
|
$
|
7,168
|
|
|
$
|
7,895
|
|
|
$
|
6,021
|
|
Weighted-average shares for basic EPS
|
1,555
|
|
|
1,555
|
|
|
1,552
|
|
|||
Plus contingently issuable performance stock units (PSUs)
|
1
|
|
|
—
|
|
|
1
|
|
|||
Weighted-average shares for diluted EPS
|
1,556
|
|
|
1,555
|
|
|
1,553
|
|
Note 11.
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Earnings before income taxes
|
$
|
9,872
|
|
|
$
|
10,671
|
|
|
$
|
10,589
|
|
Provision for income taxes:
|
|
|
|
|
|
||||||
United States federal and state:
|
|
|
|
|
|
||||||
Current
|
$
|
17
|
|
|
$
|
120
|
|
|
$
|
1,662
|
|
Deferred
|
24
|
|
|
(113
|
)
|
|
(384
|
)
|
|||
Total United States
|
41
|
|
|
7
|
|
|
1,278
|
|
|||
Outside United States:
|
|
|
|
|
|
||||||
Current
|
2,417
|
|
|
2,425
|
|
|
3,146
|
|
|||
Deferred
|
(165
|
)
|
|
13
|
|
|
(117
|
)
|
|||
Total outside United States
|
2,252
|
|
|
2,438
|
|
|
3,029
|
|
|||
Total provision for income taxes
|
$
|
2,293
|
|
|
$
|
2,445
|
|
|
$
|
4,307
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Balance at January 1,
|
$
|
56
|
|
|
$
|
145
|
|
|
$
|
79
|
|
Additions based on tax positions related to the current year
|
10
|
|
|
10
|
|
|
71
|
|
|||
Additions for tax positions of previous years
|
1
|
|
|
15
|
|
|
5
|
|
|||
Reductions for tax positions of prior years
|
(2
|
)
|
|
(94
|
)
|
|
—
|
|
|||
Reductions due to lapse of statute of limitations
|
(1
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|||
Settlements
|
—
|
|
|
(19
|
)
|
|
(4
|
)
|
|||
Other
|
(1
|
)
|
|
2
|
|
|
1
|
|
|||
Balance at December 31,
|
$
|
63
|
|
|
$
|
56
|
|
|
$
|
145
|
|
(in millions)
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|||
Unrecognized tax benefits
|
$
|
63
|
|
|
$
|
56
|
|
|
$
|
145
|
|
Accrued interest and penalties
|
16
|
|
|
12
|
|
|
23
|
|
|||
Tax credits and other indirect benefits
|
(12
|
)
|
|
(14
|
)
|
|
(35
|
)
|
|||
Liability for tax contingencies
|
$
|
67
|
|
|
$
|
54
|
|
|
$
|
133
|
|
|
2019
|
|
2018
|
|
2017
|
|||
U.S. federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|||
Foreign rate differences
|
1.8
|
|
|
1.3
|
|
|
(12.2
|
)
|
Dividend repatriation cost
|
(0.5
|
)
|
|
2.5
|
|
|
16.4
|
|
Global intangible low-taxed income
|
1.4
|
|
|
1.2
|
|
|
|
|
U.S. state taxes
|
0.7
|
|
|
(1.1
|
)
|
|
|
|
Foreign derived intangible income
|
(1.2
|
)
|
|
(1.1
|
)
|
|
|
|
Other
|
—
|
|
|
(0.9
|
)
|
|
1.5
|
|
Effective tax rate
|
23.2
|
%
|
|
22.9
|
%
|
|
40.7
|
%
|
|
At December 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Deferred income tax assets:
|
|
|
|
||||
Accrued postretirement and postemployment benefits
|
$
|
184
|
|
|
$
|
193
|
|
Accrued pension costs
|
620
|
|
|
390
|
|
||
Inventory
|
176
|
|
|
136
|
|
||
Accrued liabilities
|
130
|
|
|
138
|
|
||
Net operating loss carryforwards and tax credits
|
486
|
|
|
452
|
|
||
Other
|
101
|
|
|
37
|
|
||
Total deferred income tax assets
|
1,697
|
|
|
1,346
|
|
||
Less: valuation allowance
|
(304
|
)
|
|
(257
|
)
|
||
Deferred income tax assets, net of valuation allowance
|
1,393
|
|
|
1,089
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Trade names
|
(469
|
)
|
|
(508
|
)
|
||
Property, plant and equipment
|
(180
|
)
|
|
(222
|
)
|
||
Unremitted earnings
|
(243
|
)
|
|
(123
|
)
|
||
Foreign exchange
|
(256
|
)
|
|
(157
|
)
|
||
Total deferred income tax liabilities
|
(1,148
|
)
|
|
(1,010
|
)
|
||
Net deferred income tax assets
|
$
|
245
|
|
|
$
|
79
|
|
Note 12.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Net revenues:
|
|
|
|
|
|
||||||
European Union
|
$
|
9,817
|
|
|
$
|
9,298
|
|
|
$
|
8,318
|
|
Eastern Europe
|
3,282
|
|
|
2,921
|
|
|
2,711
|
|
|||
Middle East & Africa
|
4,042
|
|
|
4,114
|
|
|
3,988
|
|
|||
South & Southeast Asia
|
5,094
|
|
|
4,656
|
|
|
4,417
|
|
|||
East Asia & Australia
|
5,364
|
|
|
5,580
|
|
|
6,373
|
|
|||
Latin America & Canada
|
2,206
|
|
|
3,056
|
|
|
2,941
|
|
|||
Net revenues
|
$
|
29,805
|
|
|
$
|
29,625
|
|
|
$
|
28,748
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Combustible products:
|
|
|
|
|
|
||||||
European Union
|
$
|
8,093
|
|
|
$
|
8,433
|
|
|
$
|
8,048
|
|
Eastern Europe
|
2,438
|
|
|
2,597
|
|
|
2,657
|
|
|||
Middle East & Africa
|
3,721
|
|
|
3,732
|
|
|
3,893
|
|
|||
South & Southeast Asia
|
5,094
|
|
|
4,656
|
|
|
4,417
|
|
|||
East Asia & Australia
|
2,693
|
|
|
3,074
|
|
|
3,156
|
|
|||
Latin America & Canada
|
2,179
|
|
|
3,037
|
|
|
2,937
|
|
|||
Total combustible products
|
$
|
24,218
|
|
|
$
|
25,529
|
|
|
$
|
25,107
|
|
Reduced-risk products:
|
|
|
|
|
|
||||||
European Union
|
$
|
1,724
|
|
|
$
|
865
|
|
|
$
|
269
|
|
Eastern Europe
|
844
|
|
|
324
|
|
|
55
|
|
|||
Middle East & Africa
|
321
|
|
|
382
|
|
|
94
|
|
|||
South & Southeast Asia
|
—
|
|
|
—
|
|
|
—
|
|
|||
East Asia & Australia
|
2,671
|
|
|
2,506
|
|
|
3,218
|
|
|||
Latin America & Canada
|
27
|
|
|
19
|
|
|
4
|
|
|||
Total reduced-risk products
|
$
|
5,587
|
|
|
$
|
4,096
|
|
|
$
|
3,640
|
|
Total PMI net revenues
|
$
|
29,805
|
|
|
$
|
29,625
|
|
|
$
|
28,748
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Operating income:
|
|
|
|
|
|
||||||
European Union
|
$
|
3,970
|
|
|
$
|
4,105
|
|
|
$
|
3,691
|
|
Eastern Europe
|
547
|
|
|
902
|
|
|
887
|
|
|||
Middle East & Africa
|
1,684
|
|
|
1,627
|
|
|
1,884
|
|
|||
South & Southeast Asia
|
2,163
|
|
|
1,747
|
|
|
1,514
|
|
|||
East Asia & Australia
|
1,932
|
|
|
1,851
|
|
|
2,608
|
|
|||
Latin America & Canada
|
235
|
|
|
1,145
|
|
|
997
|
|
|||
Operating income
|
$
|
10,531
|
|
|
$
|
11,377
|
|
|
$
|
11,581
|
|
•
|
Russia excise and VAT audit charge - See Note 18. Contingencies for details of the $374 million pre-tax charge included in the Eastern Europe segment for the year ended December 31, 2019.
|
•
|
Asset impairment and exit costs - See Note 21. Asset Impairment and Exit Costs for details of the $422 million pre-tax charge for the year ended December 31, 2019, as well as a breakdown of these costs by segment.
|
•
|
Canadian tobacco litigation-related expense - See Note 18. Contingencies and Note 22. Deconsolidation of RBH for details of the $194 million pre-tax charge included in the Latin America & Canada segment for the year ended December 31, 2019.
|
•
|
Loss on deconsolidation of RBH - See Note 22. Deconsolidation of RBH for details of the $239 million loss included in the Latin America & Canada segment for the year ended December 31, 2019.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Depreciation expense:
|
|
|
|
|
|
||||||
European Union
|
$
|
254
|
|
|
$
|
269
|
|
|
$
|
213
|
|
Eastern Europe
|
147
|
|
|
101
|
|
|
76
|
|
|||
Middle East & Africa
|
90
|
|
|
105
|
|
|
88
|
|
|||
South & Southeast Asia
|
142
|
|
|
154
|
|
|
153
|
|
|||
East Asia & Australia
|
185
|
|
|
173
|
|
|
160
|
|
|||
Latin America & Canada
|
69
|
|
|
94
|
|
|
85
|
|
|||
|
887
|
|
|
896
|
|
|
775
|
|
|||
Other
|
11
|
|
|
11
|
|
|
12
|
|
|||
Total depreciation expense
|
$
|
898
|
|
|
$
|
907
|
|
|
$
|
787
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Capital expenditures:
|
|
|
|
|
|
||||||
European Union
|
$
|
466
|
|
|
$
|
813
|
|
|
$
|
956
|
|
Eastern Europe
|
132
|
|
|
136
|
|
|
97
|
|
|||
Middle East & Africa
|
35
|
|
|
65
|
|
|
85
|
|
|||
South & Southeast Asia
|
100
|
|
|
129
|
|
|
140
|
|
|||
East Asia & Australia
|
67
|
|
|
215
|
|
|
87
|
|
|||
Latin America & Canada
|
52
|
|
|
74
|
|
|
175
|
|
|||
|
852
|
|
|
1,432
|
|
|
1,540
|
|
|||
Other
|
—
|
|
|
4
|
|
|
8
|
|
|||
Total capital expenditures
|
$
|
852
|
|
|
$
|
1,436
|
|
|
$
|
1,548
|
|
|
At December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Long-lived assets:
|
|
|
|
|
|
||||||
European Union
|
$
|
4,275
|
|
|
$
|
4,216
|
|
|
$
|
4,130
|
|
Eastern Europe
|
774
|
|
|
547
|
|
|
546
|
|
|||
Middle East & Africa
|
369
|
|
|
362
|
|
|
430
|
|
|||
South & Southeast Asia
|
1,361
|
|
|
1,297
|
|
|
1,419
|
|
|||
East Asia & Australia
|
829
|
|
|
781
|
|
|
659
|
|
|||
Latin America & Canada
|
478
|
|
|
779
|
|
|
885
|
|
|||
Total long-lived assets
|
8,086
|
|
|
7,982
|
|
|
8,069
|
|
|||
Other
|
516
|
|
|
664
|
|
|
1,126
|
|
|||
Total property, plant and equipment, net and Other assets
|
$
|
8,602
|
|
|
$
|
8,646
|
|
|
$
|
9,195
|
|
Note 13.
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Net pension costs (income)
|
$
|
(18
|
)
|
|
$
|
(51
|
)
|
|
$
|
(20
|
)
|
Net postemployment costs
|
100
|
|
|
80
|
|
|
85
|
|
|||
Net postretirement costs
|
7
|
|
|
12
|
|
|
13
|
|
|||
Total pension and other employee benefit costs
|
$
|
89
|
|
|
$
|
41
|
|
|
$
|
78
|
|
|
Pension(1)
|
|
Postretirement
|
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Benefit obligation at January 1
|
$
|
9,152
|
|
|
$
|
9,028
|
|
|
$
|
209
|
|
|
$
|
248
|
|
Service cost
|
214
|
|
|
210
|
|
|
2
|
|
|
4
|
|
||||
Interest cost
|
118
|
|
|
109
|
|
|
7
|
|
|
9
|
|
||||
Net benefits paid
|
(250
|
)
|
|
(218
|
)
|
|
(8
|
)
|
|
(8
|
)
|
||||
Settlement and curtailment
|
50
|
|
|
1
|
|
|
|
|
|
—
|
|
||||
Actuarial losses (gains)
|
1,430
|
|
|
210
|
|
|
27
|
|
|
(34
|
)
|
||||
Currency
|
29
|
|
|
(196
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Deconsolidation of RBH
|
(166
|
)
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
||||
Other
|
35
|
|
|
8
|
|
|
(5
|
)
|
|
(1
|
)
|
||||
Benefit obligation at December 31,
|
10,612
|
|
|
9,152
|
|
|
190
|
|
|
209
|
|
||||
Fair value of plan assets at January 1,
|
6,888
|
|
|
7,598
|
|
|
|
|
|
||||||
Actual return on plan assets
|
1,211
|
|
|
(447
|
)
|
|
|
|
|
||||||
Employer contributions
|
200
|
|
|
110
|
|
|
|
|
|
||||||
Standard employee contributions
|
44
|
|
|
24
|
|
|
|
|
|
||||||
Net benefits paid
|
(250
|
)
|
|
(218
|
)
|
|
|
|
|
||||||
Settlement and curtailment
|
—
|
|
|
—
|
|
|
|
|
|
||||||
Currency
|
7
|
|
|
(179
|
)
|
|
|
|
|
||||||
Deconsolidation of RBH
|
(172
|
)
|
|
—
|
|
|
|
|
|
||||||
Fair value of plan assets at December 31,
|
7,928
|
|
|
6,888
|
|
|
|
|
|
||||||
Net pension and postretirement liability recognized at December 31,
|
$
|
(2,684
|
)
|
|
$
|
(2,264
|
)
|
|
$
|
(190
|
)
|
|
$
|
(209
|
)
|
|
Pension
|
|
Postretirement
|
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Other assets
|
$
|
43
|
|
|
$
|
37
|
|
|
|
|
|
||||
Accrued liabilities — employment costs
|
(23
|
)
|
|
(20
|
)
|
|
$
|
(8
|
)
|
|
$
|
(10
|
)
|
||
Long-term employment costs
|
(2,704
|
)
|
|
(2,281
|
)
|
|
(182
|
)
|
|
(199
|
)
|
||||
|
$
|
(2,684
|
)
|
|
$
|
(2,264
|
)
|
|
$
|
(190
|
)
|
|
$
|
(209
|
)
|
|
Pension
|
|
Postretirement
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Discount rate
|
0.83
|
%
|
|
1.61
|
%
|
|
3.28
|
%
|
|
3.97
|
%
|
Rate of compensation increase
|
1.82
|
|
|
1.86
|
|
|
|
|
|
||
Interest crediting rate
|
3.20
|
|
|
3.40
|
|
|
|
|
|
||
Health care cost trend rate assumed for next year
|
|
|
|
|
6.21
|
|
|
6.17
|
|
||
Ultimate trend rate
|
|
|
|
|
5.09
|
|
|
4.59
|
|
||
Year that rate reaches the ultimate trend rate
|
|
|
|
|
2023
|
|
2040
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
Service cost
|
$
|
214
|
|
|
$
|
210
|
|
|
$
|
208
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost
|
118
|
|
|
109
|
|
|
108
|
|
|
7
|
|
|
9
|
|
|
8
|
|
||||||
Expected return on plan assets
|
(328
|
)
|
|
(349
|
)
|
|
(326
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses
|
189
|
|
|
172
|
|
|
186
|
|
|
—
|
|
|
4
|
|
|
5
|
|
||||||
Prior service cost
|
(1
|
)
|
|
2
|
|
|
6
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||||
Settlement and curtailment
|
4
|
|
|
15
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic pension and postretirement costs
|
$
|
196
|
|
|
$
|
159
|
|
|
$
|
188
|
|
|
$
|
9
|
|
|
$
|
16
|
|
|
$
|
17
|
|
|
Pension
|
|
Postretirement
|
||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||
Discount rate - service cost
|
2.14
|
%
|
|
1.92
|
%
|
|
1.68
|
%
|
|
3.97
|
%
|
|
3.79
|
%
|
|
3.68
|
%
|
Discount rate - interest cost
|
1.35
|
|
|
1.25
|
|
|
1.27
|
|
|
3.97
|
|
|
3.79
|
|
|
3.68
|
|
Expected rate of return on plan assets
|
4.70
|
|
|
4.76
|
|
|
4.80
|
|
|
|
|
|
|
|
|||
Rate of compensation increase
|
1.86
|
|
|
1.65
|
|
|
1.68
|
|
|
|
|
|
|
|
|||
Interest crediting rate
|
3.40
|
|
|
3.40
|
|
|
3.40
|
|
|
|
|
|
|
|
|||
Health care cost trend rate
|
|
|
|
|
|
|
6.17
|
|
|
6.17
|
|
|
7.15
|
|
Asset Category
(in millions)
|
At December 31, 2019
|
|
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
|
$
|
276
|
|
|
$
|
276
|
|
|
|
|
|
|
|
||
Equity securities:
|
|
|
|
|
|
|
|
||||||||
U.S. securities
|
170
|
|
|
170
|
|
|
|
|
|
|
|
||||
International securities
|
563
|
|
|
563
|
|
|
|
|
|
|
|
||||
Investment funds(a)
|
6,125
|
|
|
4,625
|
|
|
$
|
1,500
|
|
|
|
|
|||
International government bonds
|
197
|
|
|
137
|
|
|
60
|
|
|
|
|
||||
Corporate bonds
|
282
|
|
|
282
|
|
|
|
|
|
|
|
||||
Other
|
6
|
|
|
6
|
|
|
|
|
|
|
|
||||
Total assets in the fair value hierarchy
|
$
|
7,619
|
|
|
$
|
6,059
|
|
|
$
|
1,560
|
|
|
$
|
—
|
|
Investment funds measured at net asset value(b)
|
309
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,928
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
(in millions)
|
Pension
|
|
Post-
retirement |
|
Post-
employment |
|
Total
|
||||||||
Net losses
|
$
|
(3,718
|
)
|
|
$
|
(63
|
)
|
|
$
|
(775
|
)
|
|
$
|
(4,556
|
)
|
Prior service cost
|
3
|
|
|
2
|
|
|
—
|
|
|
5
|
|
||||
Net transition obligation
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||
Deferred income taxes
|
520
|
|
|
24
|
|
|
182
|
|
|
726
|
|
||||
Losses to be amortized
|
$
|
(3,199
|
)
|
|
$
|
(37
|
)
|
|
$
|
(593
|
)
|
|
$
|
(3,829
|
)
|
(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
|
||||||||
Amounts transferred to earnings as components of net periodic benefit cost:
|
|
|
|
|
|
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
$
|
198
|
|
|
$
|
3
|
|
|
$
|
77
|
|
|
$
|
278
|
|
Prior service cost
|
32
|
|
|
(1
|
)
|
|
—
|
|
|
31
|
|
||||
Other income/expense:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Deferred income taxes
|
(51
|
)
|
|
(1
|
)
|
|
(17
|
)
|
|
(69
|
)
|
||||
|
182
|
|
|
1
|
|
|
60
|
|
|
243
|
|
||||
Other movements during the year:
|
|
|
|
|
|
|
|
||||||||
Net losses
|
(521
|
)
|
|
(27
|
)
|
|
(150
|
)
|
|
(698
|
)
|
||||
Prior service cost
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||
Deconsolidation of RBH (net of deferred income taxes)
|
26
|
|
|
1
|
|
|
|
|
27
|
|
|||||
Deferred income taxes
|
206
|
|
|
6
|
|
|
35
|
|
|
247
|
|
||||
|
(291
|
)
|
|
(20
|
)
|
|
(115
|
)
|
|
(426
|
)
|
||||
Total movements in other comprehensive earnings (losses)
|
$
|
(109
|
)
|
|
$
|
(19
|
)
|
|
$
|
(55
|
)
|
|
$
|
(183
|
)
|
(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
|
|
||||
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
|
|
||||
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
|
|
Note 14.
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Research and development expense
|
$
|
465
|
|
|
$
|
383
|
|
|
$
|
453
|
|
Advertising expense
|
$
|
730
|
|
|
$
|
896
|
|
|
$
|
830
|
|
Foreign currency net transaction (gains)/losses
|
$
|
(95
|
)
|
|
$
|
21
|
|
|
$
|
49
|
|
Interest expense
|
$
|
796
|
|
|
$
|
855
|
|
|
$
|
1,096
|
|
Interest income
|
(226
|
)
|
|
(190
|
)
|
|
(182
|
)
|
|||
Interest expense, net
|
$
|
570
|
|
|
$
|
665
|
|
|
$
|
914
|
|
Total lease cost
|
$
|
332
|
|
(1)
|
$
|
312
|
|
|
$
|
313
|
|
Note 15.
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||||||
|
|
|
Fair Value
|
|
|
|
Fair Value
|
||||||||||||
(in millions)
|
Balance Sheet Classification
|
|
2019
|
|
2018
|
|
Balance Sheet
Classification
|
|
2019
|
|
2018
|
||||||||
Derivative contracts designated as hedging instruments
|
Other current assets
|
|
$
|
319
|
|
|
$
|
54
|
|
|
Other accrued liabilities
|
|
$
|
23
|
|
|
$
|
47
|
|
|
Other assets
|
|
21
|
|
|
99
|
|
|
Income taxes and other liabilities
|
|
301
|
|
|
525
|
|
||||
Derivative contracts not designated as hedging instruments
|
Other current assets
|
|
50
|
|
|
67
|
|
|
Other accrued liabilities
|
|
70
|
|
|
46
|
|
||||
|
Other assets
|
|
—
|
|
|
—
|
|
|
Income taxes and other liabilities
|
|
25
|
|
|
13
|
|
||||
Total derivatives
|
|
|
$
|
390
|
|
|
$
|
220
|
|
|
|
|
$
|
419
|
|
|
$
|
631
|
|
(pre-tax, in 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
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
|
|
2019
|
|
2018
|
2017
|
||||||||||||
Derivatives in Cash Flow Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative contracts
|
$
|
(20
|
)
|
|
$
|
28
|
|
|
$
|
(52
|
)
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Net revenues
|
|
$
|
22
|
|
|
$
|
18
|
|
$
|
60
|
|
||||||
|
|
|
|
|
|
|
Cost of sales
|
|
1
|
|
|
—
|
|
1
|
|
|||||||||
|
|
|
|
|
|
|
Marketing, administration and research costs
|
|
2
|
|
|
6
|
|
(7
|
)
|
|||||||||
|
|
|
|
|
|
|
Interest expense, net
|
|
(8
|
)
|
|
(1
|
)
|
(41
|
)
|
|||||||||
Derivatives in Net Investment Hedging Relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative contracts
|
369
|
|
|
324
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
|
|||||||||
Total
|
$
|
349
|
|
|
$
|
352
|
|
|
$
|
(1,696
|
)
|
|
|
|
$
|
17
|
|
|
$
|
23
|
|
$
|
13
|
|
|
For the Years Ended December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Gain as of January 1,
|
$
|
35
|
|
|
$
|
42
|
|
|
$
|
97
|
|
Derivative (gains)/losses transferred to earnings
|
(14
|
)
|
|
(31
|
)
|
|
(11
|
)
|
|||
Change in fair value
|
(18
|
)
|
|
24
|
|
|
(44
|
)
|
|||
Gain as of December 31,
|
$
|
3
|
|
|
$
|
35
|
|
|
$
|
42
|
|
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, 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 (1)
|
$
|
332
|
|
|
$
|
332
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative contracts
|
390
|
|
|
$
|
—
|
|
|
390
|
|
|
—
|
|
|||
Pension plan assets
|
7,619
|
|
|
6,059
|
|
|
1,560
|
|
|
—
|
|
||||
Total assets in fair value hierarchy
|
$
|
8,341
|
|
|
$
|
6,391
|
|
|
$
|
1,950
|
|
|
$
|
—
|
|
Pension plan assets measured at net asset value (2)
|
309
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
8,650
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Debt
|
$
|
32,988
|
|
|
$
|
32,821
|
|
|
$
|
167
|
|
|
$
|
—
|
|
Derivative contracts
|
419
|
|
|
—
|
|
|
419
|
|
|
—
|
|
||||
Total liabilities
|
$
|
33,407
|
|
|
$
|
32,821
|
|
|
$
|
586
|
|
|
$
|
—
|
|
(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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative 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 (1)
|
288
|
|
|
|
|
|
|
|
|||||||
Total assets
|
$
|
7,396
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Debt
|
$
|
31,162
|
|
|
$
|
30,997
|
|
|
$
|
165
|
|
|
$
|
—
|
|
Derivative contracts
|
631
|
|
|
—
|
|
|
631
|
|
|
—
|
|
||||
Total liabilities
|
$
|
31,793
|
|
|
$
|
30,997
|
|
|
$
|
796
|
|
|
$
|
—
|
|
Note 17.
|
(Losses) Earnings
|
At December 31,
|
||||||||||
(in millions)
|
2019
|
|
2018
|
|
2017
|
||||||
Currency translation adjustments
|
$
|
(5,537
|
)
|
|
$
|
(6,500
|
)
|
|
$
|
(5,761
|
)
|
Pension and other benefits
|
(3,829
|
)
|
|
(3,646
|
)
|
|
(2,816
|
)
|
|||
Derivatives accounted for as hedges
|
3
|
|
|
35
|
|
|
42
|
|
|||
Total accumulated other comprehensive losses
|
$
|
(9,363
|
)
|
|
$
|
(10,111
|
)
|
|
$
|
(8,535
|
)
|
Note 18.
|
Type of Case
|
|
Number of Cases Pending as of February 3, 2020
|
|
Number of Cases Pending as of February 4, 2019
|
|
Number of Cases Pending as of February 9, 2018
|
Individual Smoking and Health Cases
|
|
50
|
|
55
|
|
57
|
Smoking and Health Class Actions
|
|
10
|
|
10
|
|
11
|
Health Care Cost Recovery Actions
|
|
17
|
|
16
|
|
16
|
Label-Related Class Actions
|
|
—
|
|
1
|
|
1
|
Individual Label-Related Cases
|
|
5
|
|
7
|
|
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 $233) 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 $11.7 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 $2.34 billion)). The trial court awarded CAD 90,000 (approximately $67,980) in punitive damages, allocating CAD 30,000 (approximately $22,660) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $755.3 million) of the compensatory damage award, CAD 200 million (approximately $151.1 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 $99 million) in punitive damages, allocating CAD 46 million (approximately $34.7 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 $1,825), 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.
|
•
|
50 cases brought by individual plaintiffs in Argentina (31), Brazil (5), Canada (2), Chile (5), Costa Rica (1), Italy (1), the Philippines (1), Poland (2), Turkey (1) and Scotland (1), compared with 55 such cases on February 4, 2019, and 57 cases on February 9, 2018; and
|
•
|
10 cases brought on behalf of classes of individual plaintiffs in Brazil (1) and Canada (9), compared with 10 such cases on February 4, 2019 and 11 such cases on February 9, 2018.
|
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, 2019
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
390
|
|
$
|
—
|
|
$
|
390
|
|
$
|
(297
|
)
|
$
|
(91
|
)
|
$
|
2
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
419
|
|
$
|
—
|
|
$
|
419
|
|
$
|
(297
|
)
|
$
|
(59
|
)
|
$
|
63
|
|
|
At December 31, 2018
|
|
|
|
|
|
|
|||||||||||||
Assets
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
220
|
|
$
|
—
|
|
$
|
220
|
|
$
|
(124
|
)
|
$
|
(80
|
)
|
$
|
16
|
|
|
Liabilities
|
|
|
|
|
|
|
|||||||||||||
Derivative contracts
|
$
|
631
|
|
$
|
—
|
|
$
|
631
|
|
$
|
(124
|
)
|
$
|
(427
|
)
|
$
|
80
|
|
Note 20.
|
Note 21.
|
(in millions)
|
2019
|
||
Separation programs:
|
|
||
European Union
|
$
|
251
|
|
South & Southeast Asia
|
3
|
|
|
Latin America & Canada
|
49
|
|
|
Total separation programs
|
303
|
|
|
Asset impairment charges
|
|
||
European Union
|
91
|
|
|
South & Southeast Asia
|
17
|
|
|
Latin America & Canada
|
11
|
|
|
Total asset impairment charges
|
119
|
|
|
Asset impairment and exit costs
|
$
|
422
|
|
(in millions)
|
|
||
Liability balance, January 1, 2019
|
$
|
—
|
|
Charges, net
|
303
|
|
|
Cash spent
|
(49
|
)
|
|
Currency/other(a)
|
(63
|
)
|
|
Liability balance, December 31, 2019
|
$
|
191
|
|
Note 22.
|
Note 23.
|
(in millions)
|
December 31, 2019
|
||
Assets:
|
|
||
Other assets
|
$
|
766
|
|
|
|
||
Liabilities:
|
|
||
Current
|
|
||
Accrued liabilities - Other
|
$
|
194
|
|
Noncurrent
|
|
||
Income taxes and other liabilities
|
569
|
|
|
Total lease liabilities
|
$
|
763
|
|
(in millions)
|
December 31, 2019
|
||
Operating lease cost
|
$
|
242
|
|
Short-term lease cost
|
61
|
|
|
Variable lease cost
|
29
|
|
|
Total lease cost
|
$
|
332
|
|
(in millions)
|
Total
|
||
2020
|
$
|
222
|
|
2021
|
162
|
|
|
2022
|
124
|
|
|
2023
|
92
|
|
|
2024
|
66
|
|
|
Thereafter
|
283
|
|
|
Total lease payments
|
949
|
|
|
Less: Interest
|
186
|
|
|
Present value of lease liabilities
|
$
|
763
|
|
(in millions)
|
Total
|
||
2019
|
$
|
147
|
|
2020
|
103
|
|
|
2021
|
73
|
|
|
2022
|
52
|
|
|
2023
|
43
|
|
|
Thereafter
|
354
|
|
|
|
$
|
772
|
|
(in millions)
|
December 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities in Operating cash flows
|
$
|
240
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
$
|
221
|
|
Weighted-average remaining lease term (years)
|
9.6
|
|
|
Weighted-average discount rate(1)
|
4.4
|
%
|
Note 24.
|
Note 25.
|
|
2019 Quarters
|
||||||||||||||
(in millions, except per share data)
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
||||||||
Net revenues
|
$
|
6,751
|
|
|
$
|
7,699
|
|
|
$
|
7,642
|
|
|
$
|
7,713
|
|
Gross profit
|
$
|
4,286
|
|
|
$
|
5,034
|
|
|
$
|
5,037
|
|
|
$
|
4,935
|
|
Net earnings attributable to PMI
|
$
|
1,354
|
|
|
$
|
2,319
|
|
|
$
|
1,896
|
|
|
$
|
1,616
|
|
Per share data:
|
|
|
|
|
|
|
|
||||||||
Basic EPS
|
$
|
0.87
|
|
|
$
|
1.49
|
|
|
$
|
1.22
|
|
|
$
|
1.04
|
|
Diluted EPS
|
$
|
0.87
|
|
|
$
|
1.49
|
|
|
$
|
1.22
|
|
|
$
|
1.04
|
|
Dividends declared
|
$
|
1.14
|
|
|
$
|
1.14
|
|
|
$
|
1.17
|
|
|
$
|
1.17
|
|
|
|
||||||||||||||
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/S/ PRICEWATERHOUSECOOPERS SA
|
|
|
PricewaterhouseCoopers SA
|
|
|
|
|
|
|
|
|
/S/ CHAD MUELLER
|
|
/S/ CLAUDIA BENZ
|
Chad Mueller
|
|
Claudia Benz
|
|
|
|
Lausanne, Switzerland
|
|
|
February 7, 2020
|
|
|
•
|
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
|
|
62
|
|
|
Massimo Andolina
|
|
Senior Vice President, Operations
|
|
51
|
|
|
Drago Azinovic
|
|
President, Middle East & Africa Region and PMI Duty Free
|
|
57
|
|
|
Werner Barth
|
|
Senior Vice President, Commercial
|
|
55
|
|
|
Charles Bendotti
|
|
Senior Vice President, People and Culture
|
|
47
|
|
|
Frank de Rooij
|
|
Vice President, Treasury and Corporate Finance
|
|
54
|
|
|
Frederic de Wilde
|
|
President, European Union Region
|
|
52
|
|
|
Marc S. Firestone
|
|
President, External Affairs and General Counsel
|
|
60
|
|
|
Stacey Kennedy
|
|
President, South and Southeast Asia Region
|
|
47
|
|
|
Martin G. King
|
|
Chief Financial Officer
|
|
55
|
|
|
Michael Kunst
|
|
Senior Vice President, Commercial Transformation
|
|
51
|
|
|
Andreas Kurali
|
|
Vice President and Controller
|
|
54
|
|
|
Bin Li
|
|
Chief Product Officer
|
|
48
|
|
|
Marco Mariotti
|
|
President, Eastern Europe Region
|
|
55
|
|
|
Mario Masseroli
|
|
President, Latin America & Canada Region
|
|
49
|
|
|
Deepak Mishra
|
|
Chief Strategy Officer
|
|
48
|
|
|
John O'Mullane
|
|
Chief Life Sciences Officer
|
|
66
|
|
|
Jacek Olczak
|
|
Chief Operating Officer
|
|
55
|
|
|
Paul Riley
|
|
President, East Asia and Australia Region
|
|
54
|
|
|
Marian Salzman
|
|
Senior Vice President, Global Communications
|
|
61
|
|
|
Jaime Suarez
|
|
Chief Digital Officer
|
|
46
|
|
|
Michael Voegele
|
|
Chief Technology Officer
|
|
47
|
|
|
Stefano Volpetti
|
|
Chief Consumer Officer
|
|
48
|
|
|
Jerry E. Whitson
|
|
Deputy General Counsel and Corporate Secretary
|
|
64
|
|
|
Miroslaw Zielinski
|
|
Chief New Ventures Officer
|
|
58
|
|
|
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
|
6,289,960 (1)
|
|
$
|
—
|
|
|
21,081,444
|
|
|
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, 2019, 2018 and 2017
|
53
|
Consolidated Statements of Comprehensive Earnings for the years ended December 31,
2019, 2018 and 2017
|
54
|
Consolidated Balance Sheets at December 31, 2019 and 2018
|
55 - 56
|
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018
and 2017 |
57 - 58
|
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended
December 31, 2019, 2018 and 2017
|
59
|
Notes to Consolidated Financial Statements
|
60 - 109
|
Report of Independent Registered Public Accounting Firm
|
110 - 112
|
Report of Management on Internal Control Over Financial Reporting
|
113
|
2.1
|
|
—
|
|
|
3.1
|
|
—
|
|
|
3.2
|
|
—
|
|
|
4.1
|
|
—
|
|
|
4.2
|
|
—
|
|
|
4.3
|
|
—
|
|
|
4.4
|
|
—
|
|
|
|
|
|
|
4.6
|
|
—
|
|
The Registrant agrees to furnish copies of any instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the Registrant and its consolidated subsidiaries to the Commission upon request.
|
10.1
|
|
—
|
|
|
10.2
|
|
—
|
|
10.3
|
|
—
|
|
|
10.4
|
|
__
|
|
|
10.5
|
|
__
|
|
|
10.6
|
|
__
|
|
|
10.7
|
|
__
|
|
|
10.8
|
|
__
|
|
|
10.9
|
|
__
|
|
|
10.10
|
|
__
|
|
|
10.11
|
|
__
|
|
|
10.12
|
|
—
|
|
|
10.13
|
|
—
|
|
|
10.14
|
|
—
|
|
|
10.15
|
|
—
|
|
|
10.16
|
|
—
|
|
|
10.17
|
|
—
|
|
|
10.18
|
|
—
|
|
|
10.19
|
|
—
|
|
|
10.20
|
|
—
|
|
|
10.21
|
|
—
|
|
10.22
|
|
—
|
|
|
10.23
|
|
—
|
|
|
10.24
|
|
—
|
|
|
10.25
|
|
—
|
|
|
10.26
|
|
—
|
|
|
10.27
|
|
—
|
|
|
10.28
|
|
—
|
|
|
10.29
|
|
—
|
|
10.43
|
|
—
|
|
|
10.44
|
|
—
|
|
|
10.45
|
|
—
|
|
|
10.46
|
|
—
|
|
|
10.47
|
|
—
|
|
|
10.48
|
|
—
|
|
|
10.49
|
|
—
|
|
|
10.50
|
|
—
|
|
|
10.51
|
|
—
|
|
|
10.52
|
|
—
|
|
21
|
|
—
|
|
|
23
|
|
—
|
|
|
24
|
|
—
|
|
|
31.1
|
|
—
|
|
|
31.2
|
|
—
|
|
|
32.1
|
|
—
|
|
|
32.2
|
|
—
|
|
|
101.INS
|
|
—
|
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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XBRL Taxonomy Extension Schema.
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase.
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101.LAB
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XBRL Taxonomy Extension Label Linkbase.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase.
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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*
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Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.
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PHILIP MORRIS INTERNATIONAL INC.
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By:
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/s/ ANDRÉ CALANTZOPOULOS
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(André Calantzopoulos
Chief Executive Officer)
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Signature
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Title
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Date
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/s/ ANDRÉ CALANTZOPOULOS
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Chief Executive Officer
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February 7, 2020
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(André Calantzopoulos)
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/s/ MARTIN G. KING
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Chief Financial Officer
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February 7, 2020
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(Martin G. King)
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/s/ ANDREAS KURALI
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Vice President and Controller
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February 7, 2020
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(Andreas Kurali)
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*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
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Directors
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*By:
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/s/ ANDRÉ CALANTZOPOULOS
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February 7, 2020
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(André Calantzopoulos
Attorney-in-fact)
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•
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restricting dividends on our common stock;
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•
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diluting the voting power of our common stock;
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•
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impairing liquidation rights of our common stock; or
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•
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delaying or preventing a change in control of us without further action by our shareholders.
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Under our bylaws, only our Board of Directors or our chairman may call special meetings of shareholders.
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•
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a majority of disinterested directors; and
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•
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the holders of two-thirds of the voting shares, other than the shares beneficially owned by the interested shareholder, approve the affiliated transaction.
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•
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the corporation formed by such consolidation or into which we are merged or the person which acquires by conveyance or transfer our properties and assets substantially as an entirety is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes, by a supplemental indenture, payment of the principal of and any premium and interest (including any additional amounts payable) on all the notes and the performance of every covenant of the indenture;
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•
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after giving effect to the transaction, no Event of Default (as defined below) with respect to any series of notes, and no event which, after notice or lapse of time or both, would become an Event of Default, will have happened and be continuing;
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•
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the successor corporation assuming the notes agrees, by supplemental indenture, to indemnify the individuals liable therefor for the amount of United States federal estate tax paid solely as a result of such assumption in respect of notes held by individuals who are not citizens or residents of the United States at the time of their death; and
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•
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we deliver to the trustee an officers’ certificate and an opinion of counsel, each stating that the consolidation, merger, conveyance or transfer and the supplemental indenture comply with these provisions. (Section 801)
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•
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waive our compliance with certain covenants of the indenture; and (Section 1009)
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•
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waive any past default under the indenture, except:
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•
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a default in the payment of the principal of, or any premium or interest on, any notes; and
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•
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a default with respect to a covenant or provision of the indenture which itself cannot be modified or amended without the consent of the holder of each affected note.
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•
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we fail to pay any installment of interest on any note of that series for 30 days after payment was due;
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•
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we fail to make payment of the principal of, or any premium on, any notes of that series when due;
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•
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we fail to make any sinking fund payment when due with respect to notes of that series;
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•
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we fail to perform any other covenant or warranty in respect of any notes of that series contained in the indenture or in such notes or in the applicable board resolution under which such series is issued and this failure continues for 90 days after we receive written notice of it from the trustee or holders of 25% in aggregate principal amount of all outstanding series of the notes
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•
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we or a court take certain actions relating to bankruptcy, insolvency or reorganization of our company; or
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any other event of default that may be specified for the notes of the series or in the board resolution with respect to the notes of that series. (Section 501)
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the signing officer has supervised a review of our activities during such year and performance under the indenture; and
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to the best of his or her knowledge, based on the review, we comply with all conditions and covenants of the indenture. (Section 1005)
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in the case of a Principal Facility, liens incurred in connection with the issuance by a state or political subdivision thereof of any securities the interest on which is exempt from federal income taxes by virtue of Section 103 of the Internal Revenue Code of 1986, as amended, or any other laws or regulations in effect at the time of such issuance;
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liens existing on the date of the indenture;
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liens on property or shares of capital stock existing at the time we or any of our subsidiaries acquire such property or shares of stock (including acquisition through merger, share exchange or consolidation) or securing the payment of all or part of the purchase price, construction or improvement thereof incurred prior to, at the time of, or within 180 days after the later of the acquisition, completion of construction or improvement or commencement of full operation of such property for the purpose of financing all or a portion of such purchase or construction or improvement; or
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liens for the sole purpose of extending, renewing or replacing in whole or in part the indebtedness secured by any lien referred to in the foregoing three bullet points or in this bullet point; provided, however, that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the lien so extended, renewed or replaced (plus improvements on such property).
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Name
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State or
Country of
Organization
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Compania Colombiana de Tabaco S.A.S.
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Colombia
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Latin America and Canada Investments B.V.
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Netherlands
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Limited Liability Company "Philip Morris Sales & Distribution"
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Ukraine
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Massalin Particulares S.R.L.
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Argentina
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Papastratos Cigarettes Manufacturing Company S.A.
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Greece
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Philip Morris Benelux BVBA
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Belgium
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Philip Morris Brands Sàrl
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Switzerland
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Philip Morris Brasil Industria e Comercio Ltda.
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Brazil
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Philip Morris & Company (UK) Limited
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United Kingdom
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Philip Morris CR a.s.
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Czech Republic
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Philip Morris Exports Sàrl
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Switzerland
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Philip Morris Finance SA
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Switzerland
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Philip Morris Finland Ltd
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Finland
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Philip Morris Global Brands Inc.
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USA
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Philip Morris GmbH
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Germany
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Philip Morris Holland Holdings B.V.
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Netherlands
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Philip Morris International Holdings B.V.
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Netherlands
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Philip Morris Investments B.V.
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Netherlands
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Philip Morris Italia S.r.l.
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Italy
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Philip Morris Japan Limited
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Japan
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Philip Morris Kazakhstan LLP
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Kazakhstan
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Philip Morris Korea Inc.
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South Korea
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Philip Morris Limited
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Australia
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Philip Morris Manufacturing GmbH
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Germany
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Philip Morris Manufacturing & Technology Bologna S.p.A.
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Italy
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Philip Morris Mexico Productos Y Servicios, Sociedad de Responsabilidad Limitada de Capital Variable
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Mexico
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Philip Morris Mexico, Sociedad Anónima de Capital Variable
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Mexico
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Philip Morris Misr Limited Liability Company
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Egypt
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Philip Morris Operations a.d. Nis
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Serbia
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Philip Morris (Pakistan) Limited
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Pakistan
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Philip Morris Philippines Manufacturing Inc.
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Philippines
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Philip Morris Polska Spolka Akcyjna
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Poland
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Philip Morris Polska Distribution Sp. z.o.o.
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Poland
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Philip Morris Romania S.R.L.
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Romania
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Philip Morris Products S.A.
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Switzerland
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Philip Morris SA Philip Morris Sabanci Pazarlama ve Satis A.S.
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Turkey
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Philip Morris Trading (Thailand) Company Limited
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Thailand
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Limited Liability Company "Philip Morris Sales and Marketing"
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Russia
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PHILSA Philip Morris Sabanci Sigara ve Tutunculuk Sanayi ve Ticaret A.S.
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Turkey
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PMFTC Inc.
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Philippines
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PT Hanjaya Mandala Sampoerna Tbk.
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Indonesia
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PT Philip Morris Indonesia
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Indonesia
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Tabaqueira II, S.A.
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Portugal
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Tabaqueira - Empresa Industrial de Tabacos, S.A.
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Portugal
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AO "Philip Morris Izhora"
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Russia
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/s/ PRICEWATERHOUSECOOPERS SA
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PricewaterhouseCoopers SA
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/s/ CHAD MUELLER
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/s/ CLAUDIA BENZ
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Chad Mueller
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Claudia Benz
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/s/ LOUIS C. CAMILLERI
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Louis C. Camilleri
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/s/ MASSIMO FERRAGAMO
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Massimo Ferragamo
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/s/ WERNER GEISSLER
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Werner Geissler
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/s/ LISA A. HOOK
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Lisa A. Hook
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/s/ JENNIFER LI
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Jennifer Li
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/s/ JUN MAKIHARA
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Jun Makihara
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/s/ KALPANA MORPARIA
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Kalpana Morparia
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/s/ LUCIO A. NOTO
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Lucio A. Noto
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/s/ FREDERIK PAULSEN
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Frederik Paulsen
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/s/ ROBERT B. POLET
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Robert B. Polet
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/s/ STEPHEN M. WOLF
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Stephen M. Wolf
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1.
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I have reviewed this annual report on Form 10-K of Philip Morris International Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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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/ ANDRÉ CALANTZOPOULOS
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André Calantzopoulos
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Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of Philip Morris International Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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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, 2020
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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, 2020
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