10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33708

PHILIP MORRIS INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Virginia	13-3435103
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
120 Park Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

917-663-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, no par value	New York Stock Exchange
4.875% Notes due 2013	New York Stock Exchange
6.875% Notes due 2014	New York Stock Exchange
5.875% Notes due 2015	New York Stock Exchange
2.500% Notes due 2016	New York Stock Exchange
1.625% Notes due 2017	New York Stock Exchange
1.125% Notes due 2017	New York Stock Exchange
5.650% Notes due 2018	New York Stock Exchange
2.125% Notes due 2019	New York Stock Exchange
4.500% Notes due 2020	New York Stock Exchange
4.125% Notes due 2021	New York Stock Exchange
2.900% Notes due 2021	New York Stock Exchange
2.500% Notes due 2022	New York Stock Exchange
2.875% Notes due 2024	New York Stock Exchange
6.375% Notes due 2038	New York Stock Exchange
4.375% Notes due 2041	New York Stock Exchange
4.500% Notes due 2042	New York Stock Exchange
3.875% Notes due 2042	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ  No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ¨  No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ	Accelerated filer  ¨	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨  No  þ

As of June 29, 2012, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $148 billion based on the closing sale price of the common stock as reported on the New York Stock Exchange.

Class	Outstanding at	January 31, 2013
Common Stock, no par value	1,647,788,932	shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Portions of the registrant’s annual report to shareholders for the year ended December 31, 2012 (the “2012 Annual Report”)	Parts I, II, and IV
Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May 8, 2013, to be filed with the Securities and Exchange Commission (“SEC”) on or about March 28, 2013	Part III

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	12
Item 4.	Mine Safety Disclosures	21
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
Item 9A.	Controls and Procedures	23
Item 9B.	Other Information	23
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	24
Item 11.	Executive Compensation	25
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
Item 13.	Certain Relationships and Related Transactions, and Director Independence	25
Item 14.	Principal Accounting Fees and Services	25
PART IV
Item 15.	Exhibits and Financial Statement Schedules	26
Signatures		31

In this report, “PMI,” “we,” “us” and “our” refers to Philip Morris International Inc. and its subsidiaries.

PART I

Item 1. Business.

(a) General Development of Business

General

Philip Morris International Inc. is a Virginia holding company incorporated in 1987. Our subsidiaries and affiliates and their licensees are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Our products are sold in more than 180 markets and, in many of these markets, they hold the number one or number two market share position. We have a wide range of premium, mid-price and low-price brands. Our portfolio comprises both international and local brands.

Our portfolio of international and local brands is led by Marlboro, the world’s best selling international cigarette, which accounted for approximately 33% of our total 2012 shipment volume. Marlboro is complemented in the premium-price category by Merit, Parliament and Virginia Slims. Our leading mid-price brands are L&M and Chesterfield. Other leading international brands include Bond Street, Lark, Muratti, Next, Philip Morris and Red & White.

We also own a number of important local cigarette brands, such as Sampoerna, Dji Sam Soe and U Mild in Indonesia, Fortune, Champion and Hope in the Philippines, Diana in Italy, Optima and Apollo-Soyuz in Russia, Morven Gold in Pakistan, Boston in Colombia, Belmont, Canadian Classics and Number 7 in Canada, Best and Classic in Serbia, f6 in Germany, Delicados in Mexico, Assos in Greece and Petra in the Czech Republic and Slovakia. While there are a number of markets where local brands remain important, international brands are expanding their share in numerous markets. With international brands contributing approximately 70% of our shipment volume in 2012, we are well-positioned to continue to benefit from this trend.

Separation from Altria Group, Inc.

We were a wholly owned subsidiary of Altria Group, Inc. (“Altria”) until the distribution of all of our shares owned by Altria (the “Spin-off”) was made on March 28, 2008 (the “Distribution Date”).

Acquisitions and Other Business Arrangements

During 2012, we did not acquire any businesses. During 2011 and 2010, we expanded our business with the following transactions:

2011:

In June 2011, we completed the acquisition of a cigarette business in Jordan, consisting primarily of cigarette manufacturing assets and inventories, for $42 million. In January 2011, we acquired a cigar business, consisting primarily of trademarks in the Australian and New Zealand markets, for $20 million.

Effective January 1, 2011, we established a new business structure with Vietnam National Tobacco Corporation (“Vinataba”) in Vietnam, further developing our existing joint venture with Vinataba through the licensing of Marlboro and establishing a PMI-controlled branch for the building of our brands.

2010:

In February 2010, our affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). PMPMI and FTC hold equal economic interests in PMFTC, while we manage the day-to-day operations of PMFTC and have a majority of its Board of Directors. The establishment of PMFTC permits both parties to benefit from their complementary brand portfolios, as well as cost synergies from the resulting integration of manufacturing, distribution and procurement, and the further development and advancement of tobacco growing in the Philippines.

In June 2010, we announced that our affiliate, Philip Morris Brasil Industria e Comercio Ltda. (“PMB”), would begin directly sourcing tobacco leaf from approximately 17,000 tobacco farmers in Southern Brazil. This initiative has enhanced PMI’s direct involvement in the supply chain and provides approximately 10% of PMI’s global leaf requirements. The vertically integrated structure was made possible following separate agreements with two leaf suppliers in Brazil, Alliance One Brasil Exportadora de Tabacos Ltda. (“AOB”) and Universal Leaf Tabacos Ltda. (“ULT”).

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These agreements resulted in AOB and ULT assigning approximately 9,000 and 8,000 contracts with tobacco farmers to PMB, respectively. As a result, PMB offered employment to more than 200 employees, most of them agronomy specialists, and acquired related assets in Southern Brazil. The purchase price for the net assets and the contractual relationships was $83 million.

Source of Funds — Dividends

We are a legal entity separate and distinct from our direct and indirect subsidiaries. Accordingly, our right, and thus the right of our creditors and stockholders, to participate in any distribution of the assets or earnings of any subsidiary is subject to the prior rights of creditors of such subsidiary, except to the extent that claims of our company itself as a creditor may be recognized. As a holding company, our principal sources of funds, including funds to make payment on our debt securities, are from the receipt of dividends and repayment of debt from our subsidiaries. Our principal wholly owned and majority-owned subsidiaries currently are not limited by long-term debt or other agreements in their ability to pay cash dividends or to make other distributions with respect to their common stock.

(b) Financial Information About Segments

We divide our markets into four geographic regions, which constitute our segments for financial reporting purposes:

• The European Union (“EU”) Region is headquartered in Lausanne, Switzerland and covers all the EU countries except for Slovenia, Bulgaria and Romania, and also comprises Switzerland, Norway and Iceland, which are linked to the EU through trade agreements;

• The Eastern Europe, Middle East & Africa (“EEMA”) Region is also headquartered in Lausanne and includes Eastern Europe, the Balkans (including Slovenia, Bulgaria and Romania), Turkey, the Middle East and Africa and our international duty free business;

• The Asia Region is headquartered in Hong Kong and covers all other Asian markets as well as Australia, New Zealand and the Pacific Islands; and

• The Latin America & Canada Region is headquartered in New York and covers the South American continent, Central America, Mexico, the Caribbean and Canada.

Net revenues and operating companies income^*(together with a reconciliation to operating income) attributable to each such segment for each of the last three years are set forth in Note 12. Segment Reporting to our consolidated financial statements, which is incorporated herein by reference to the 2012 Annual Report. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of our operating results by business segment.

The relative percentages of operating companies income attributable to each reportable segment were as follows:

	2012		2011		2010
European Union	29.6	%	33.5	%	37.6	%
Eastern Europe, Middle East & Africa	26.3		23.7		27.5
Asia	36.7		35.5		26.6
Latin America & Canada	7.4		7.3		8.3
	100.0	%	100.0	%	100.0	%

______________________________

^*  Our management evaluates segment performance and allocates resources based on operating companies income, which we define as operating income before general corporate expenses and amortization of intangibles. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies to our consolidated financial statements and are incorporated herein by reference to the 2012 Annual Report.

We use the term net revenues to refer to our operating revenues from the sale of our products, net of sales and promotion incentives. Our net revenues and operating income are affected by various factors, including the volume of products we sell, the price of our products, changes in currency exchange rates and the mix of products we sell.

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Mix is a term used to refer to the proportionate value of premium-price brands to mid-price or low-price brands in any given market (product mix). Mix can also refer to the proportion of shipment volume in more profitable markets versus shipment volume in less profitable markets (geographic mix). We often collect excise taxes from our customers and then remit them to local governments, and, in those circumstances, we include excise taxes in our net revenues and excise taxes on products. Our cost of sales consists principally of tobacco leaf, non-tobacco raw materials, labor and manufacturing costs.

Our marketing, administration and research costs include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (including general corporate expenses), and costs incurred to develop new products. The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses.

(c) Narrative Description of Business

Our subsidiaries and affiliates and their licensees manufacture, market and sell tobacco products outside the United States.

Our total cigarette shipments increased 1.3% in 2012 to 927.0 billion units. We estimate that international cigarette market shipments were approximately 5.7 trillion units in 2012, a 0.7% increase over 2011. We estimate that our reported share of the international cigarette market (which is defined as worldwide cigarette volume excluding the United States) was approximately 16.3% in 2012, 16.2% in 2011 and 16.1% in 2010. Excluding the People’s Republic of China (“PRC”), we estimate that our reported share of the international cigarette market was approximately 28.8%, 28.3%, and 27.6% in 2012, 2011 and 2010, respectively.

Shipments of our principal cigarette brand, Marlboro, increased 0.5% in 2012, and represented approximately 9.3% of the international cigarette market, excluding the PRC, in 2012, 9.2% in 2011 and 9.1% in 2010.

We have a cigarette market share of at least 15%, and, in a number of instances substantially more than 15%, in 98 markets, including Algeria, Argentina, Australia, Austria, Belgium, Canada, Colombia, the Czech Republic, Egypt, Finland, France, Germany, Greece, Hungary, Indonesia, Italy, Japan, Kazakhstan, Korea, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Spain, Sweden, Switzerland, Thailand, Turkey and Ukraine.

References to total international cigarette market, total cigarette market, total market and market shares in this Form 10-K reflect our best estimates based on a number of internal and external sources.

Consumer Focused Marketing & Sales

In 2012, we launched a new strategic framework that combines our marketing and sales expertise with our in-depth knowledge of various sales territories. This framework allows us not only to engage more effectively with our adult consumers but also to enhance the success of our direct and indirect trade partners. The main benefits are:

• improved effectiveness of direct adult consumer engagement activities;

• more effective communication with our retailers about our brands;

• increased speed, efficiency and widespread availability of our products; and

• distribution and sales strategies tailored to the individual characteristics of each market (namely, the needs and capabilities of retailers, the wholesale infrastructure, our competitive position, operating costs and the regulatory framework).

The four main types of distribution that we use globally, often simultaneously in a given market, are:

• Direct Sales and Distribution, where we have set up our own distribution directly to retailers;

• Distribution through single independent distributors who are responsible for distribution in a single market;

• Exclusive Zonified Distribution, where distributors are assigned an exclusive territory within a market to enable them to obtain a suitable return on their investment; and

• Distribution through national or regional wholesalers that then supply the retail trade.

In many markets we also directly supply key accounts, including gas stations, retail chains and supermarkets.

Our distribution and sales systems are supported by sales forces that total approximately 18,100 employees worldwide. Our sales forces are well trained and recognized by trade surveys for their professionalism.

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Our products are marketed and promoted through various media and channels, including, where permitted by law, point of sale communications, brand events, access-restricted Web sites, print and direct communication to verified adult smokers. Our direct communication with verified adult smokers utilizes mail, E-mail and other electronic communication tools. Promotional activities include, where permitted by law, competitions, invitations to events, interactive programs, consumer premiums and price promotions. To support advertising and promotional activities in the markets, we have a dedicated consumer engagement group that develops innovative engagement tools for adult consumers based on the latest technologies and adult consumer trends.

Competition    

We are subject to highly competitive conditions in all aspects of our business. We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, innovation, packaging, service, marketing, advertising and retail price. Our competitors include three large international tobacco companies and several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, Egypt, the PRC, Taiwan, Thailand and Vietnam. Industry consolidation and privatizations of state-owned enterprises have led to an overall increase in competitive pressures. Some competitors have different profit and volume objectives, and some international competitors are susceptible to changes in different currency exchange rates. We compete predominantly with American blend cigarette brands, such as Marlboro, L&M and Chesterfield, which are the most popular across many of our markets. We seek to compete in all profitable retail price categories, although our brand portfolio is weighted towards the premium-price category.

Procurement and Raw Materials        

We purchase tobacco leaf of various grades and styles throughout the world, the majority through independent tobacco suppliers. We also contract directly with farmers in several countries including Argentina, Brazil, Colombia, the Dominican Republic, Ecuador, Italy, Kazakhstan, Mexico, Pakistan, the Philippines, Poland, and the United States.

As discussed above, in June 2010, we announced that our affiliate, PMB, began directly sourcing tobacco leaf from tobacco farmers in Southern Brazil. This initiative expanded PMI’s direct involvement in the supply chain and provides approximately 10% of PMI’s global leaf requirements.

Our largest sources of supply are:

• Brazil, particularly for Virginia tobaccos but also for Burley;    

• The United States for Virginia (flue-cured) and Burley tobaccos, particularly higher quality varieties for use in leading international brands;

• Indonesia, mostly for domestic use in kretek products;

• Turkey and Greece, mostly for Oriental; and

• Argentina and Malawi, mostly for Burley.

We believe that there is an adequate supply of tobacco in the world markets to satisfy our current and anticipated production requirements.

In addition to tobacco leaf, we purchase a wide variety of direct materials from a total of approximately 430 suppliers. Our top ten suppliers of direct materials combined represent approximately 55% of our total direct materials purchases. The three most significant direct materials that we purchase are printed paper board used in packaging, acetate tow used in filter making and fine paper used in cigarette manufacturing. In addition, the adequate supply and procurement of cloves are of particular importance to our Indonesian business.

Business Environment

Information called for by this Item is hereby incorporated by reference to the paragraphs captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results by Business Segment—Business Environment” on pages 29 to 37 of the 2012 Annual Report and made a part hereof.

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Other Matters

Customers    

None of our business segments is dependent upon a single customer or a few customers, the loss of which would have a material adverse effect on our consolidated results of operations.

Employees    

As of December 31, 2012, we employed approximately 87,100 people worldwide, including employees under temporary contracts and hourly paid part-time staff. Our businesses are subject to a number of laws and regulations relating to our relationship with our employees. Generally, these laws and regulations are specific to the location of each business. In addition, in accordance with European Union requirements, we have established a European Works Council composed of management and elected members of our workforce. We believe that our relations with our employees and their representative organizations are excellent.

Executive Officers of the Registrant    

The disclosure regarding executive officers is set forth under the heading “Executive Officers as of February 22, 2013” in Item 10 of Part III of this Form 10-K and is incorporated herein by reference.

Research and Development    

One of our strategic priorities is to develop, assess and commercialize a portfolio of innovative products with the potential to reduce the risk of smoking-related diseases in comparison to conventional cigarettes. We refer to these as next generation products, or NGPs. PMI draws upon a team of world-class scientists from a broad spectrum of scientific disciplines, whose efforts are guided by the following key objectives:

• to develop a series of products that provides adult smokers the taste, sensory experience and smoking ritual characteristics that are as close as possible to those currently provided by conventional cigarettes;

• to substantiate a significant reduction of risk for the individual adult smoker as well as a reduction of harm for the population as a whole, based on robust scientific evidence derived from well-established assessment processes; and

• to advocate for the development of regulatory frameworks for the assessment, approval and commercialization of NGPs, including the communication of substantiated reductions in risk to consumers.

We believe the elimination of combustion via tobacco heating and other innovative systems for aerosol generation is the most promising path to reduce risk and, accordingly, the NGPs we are developing are based on platforms that do not involve combustion. These platforms are in various stages of development. One platform is in the early stages of clinical trials and industrial scale-up, another is in its final development phase, and the third requires at least one year for further product development. We are also developing other potential platforms.

Our approach to individual risk assessment is to use cessation as the benchmark because the short-term and long-term effects of smoking cessation are well known and the closer the clinical data derived from adult smokers who switch to an NGP resemble the data from those who quit, the more confident one can be that the product reduces the risk.

We also conduct research to support and reinforce our conventional product business. We seek to be at the forefront of innovation. Significant investments have been made in new product development efforts for conventional products, resulting in a wide range of product enhancements and the launch of innovative new products. Further, with the increase in product regulations, support for the conventional cigarette business has expanded and is expected to become more complex, requiring additional capacity for analysis and testing in compliance with applicable laws and regulations.

Finally, working through biotechnology partners, we are conducting research and development on technology platforms that can potentially lead to the development of alternative uses of tobacco.

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The research and development expense for the years ended December 31, 2012, 2011 and 2010 is set forth in Note 14. Additional Information to our consolidated financial statements, which is incorporated herein by reference to the 2012 Annual Report.

Intellectual Property    

Our trademarks are valuable assets and their protection and reputation are essential to us. We own the trademark rights to all of our principal brands, including Marlboro, or have the right to use them in all countries where we use them.

In addition, we have more than 3,400 granted patents worldwide and approximately as many pending patent applications. Our patent portfolio, as a whole, is material to our business. However, no one patent, or group of related patents, is material to us. We also have registered industrial designs and proprietary secrets, technology, know-how, processes and other intellectual property rights that are not registered.

Effective January 1, 2008, PMI entered into an Intellectual Property Agreement with Philip Morris USA Inc. (“PM USA”). The Intellectual Property Agreement governs the ownership of intellectual property between PMI and PM USA. Ownership of the jointly funded intellectual property has been allocated as follows:

• PMI owns all rights to the jointly-funded intellectual property outside the United States, its territories and possessions; and

• PM USA owns all rights to the jointly-funded intellectual property in the United States, its territories and possessions.

Ownership of intellectual property related to patent applications and resulting patents based solely on the jointly-funded intellectual property, regardless of when filed or issued, will be exclusive to PM USA in the United States, its territories and possessions and exclusive to PMI everywhere else in the world.

The Intellectual Property Agreement contains provisions concerning intellectual property that is independently developed by us or PM USA following the Distribution Date. For ten years following the Distribution Date, independently developed intellectual property may be subject to rights under certain circumstances that would allow either us or PM USA a priority position to obtain the rights to the new intellectual property from the other party, with the price and other terms to be negotiated.

In the event of a dispute between us and PM USA under the Intellectual Property Agreement, we have agreed with PM USA to submit the dispute first to negotiation between our and PM USA’s senior executives and then to binding arbitration.

Seasonality    

Our business segments are not significantly affected by seasonality, although in certain markets cigarette consumption trends rise during the summer months due to longer daylight time and tourism.

Environmental Regulation    

We are subject to applicable international, national and local environmental laws and regulations in the countries in which we do business. We have specific programs across our business units designed to meet applicable environmental compliance requirements and reduce wastage as well as water and energy consumption. We have developed and implemented a consistent environmental and occupational health and safety (“EHS”) management system, which involves policies, standard practices and procedures at all our manufacturing centers. We also conduct regular safety assessments at our offices, warehouses and car fleet organizations. Furthermore, we have engaged an external certification body to validate the effectiveness of our EHS management system at our manufacturing centers around the world, in accordance with internationally recognized standards. Our subsidiaries expect to continue to make investments in order to drive improved performance and maintain compliance with environmental laws and regulations. We assess and report the compliance status of all our legal entities on a regular basis. Based on the management and controls we have in place, environmental expenditures have not had, and are not expected to have, a material adverse effect on our consolidated results of operations, capital expenditures, financial position, earnings or competitive position.

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(d) Financial Information About Geographic Areas

The amounts of net revenues and long-lived assets attributable to each of our geographic segments for each of the last three fiscal years are set forth in Note 12. Segment Reporting to our consolidated financial statements, which is incorporated herein by reference to the 2012 Annual Report.

(e) Available Information    

We are required to file with the SEC annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Investors may read and copy any document that we file, including this Annual Report on Form 10-K, at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Investors may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet Web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, from which investors can electronically access our SEC filings.

We make available free of charge on, or through, our Web site (www.pmi.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Investors can access our filings with the SEC by visiting www.pmi.com.

The information on our Web site is not, and shall not be deemed to be, a part of this report or incorporated into any other filings we make with the SEC.

Item 1A. Risk Factors.    

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this Annual Report. Any of the following risks could materially adversely affect our business, our operating results, our financial condition and the actual outcome of matters as to which forward-looking statements are made in this Annual Report.

Forward-Looking and Cautionary Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor webcasts. You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in our securities. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us; any such statement is qualified by reference to the following cautionary statements. We elaborate on these and other risks we face throughout this document, particularly in the “Business Environment” section. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. We do not undertake to update any forward-looking statement that we may make from time to time except in the normal course of our public disclosure obligations.

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Risks Related to Our Business and Industry

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.

Tax regimes, including excise taxes, sales taxes and import duties, can disproportionately affect the retail price of manufactured cigarettes versus other tobacco products, or disproportionately affect the relative retail price of our manufactured cigarette brands versus cigarette brands manufactured by certain of our competitors. Because our portfolio is weighted toward the premium-price manufactured cigarette category, tax regimes based on sales price can place us at a competitive disadvantage in certain markets. As a result, our volume and profitability may be adversely affected in these markets.

Increases in cigarette taxes are expected to continue to have an adverse impact on our sales of cigarettes, due to resulting lower consumption levels, a shift in sales from manufactured cigarettes to other tobacco products and from the premium-price to the mid-price or low-price cigarette categories, where we may be under-represented, from local sales to legal cross-border purchases of lower price products, or to illicit products such as contraband, counterfeit and illicit whites.

Our business faces significant governmental action aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco products.

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volume in many of our markets, and we expect that such factors will continue to reduce consumption levels and will increase downtrading and the risk of counterfeiting, contraband and cross-border purchases. Significant regulatory developments will take place over the next few years in most of our markets, driven principally by the World Health Organization's Framework Convention on Tobacco Control (“FCTC”). The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation. The FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the palatability and attractiveness of tobacco products to adult smokers. Regulatory initiatives that have been proposed, introduced or enacted include:

• restrictions on or licensing of outlets permitted to sell cigarettes;

• the levying of substantial and increasing tax and duty charges;

• restrictions or bans on advertising, marketing and sponsorship;

• the display of larger health warnings, graphic health warnings and other labeling requirements;

• restrictions on packaging design, including the use of colors, and plain packaging;

• restrictions on packaging and cigarette formats and dimensions;

• restrictions or bans on the display of tobacco product packaging at the point of sale and restrictions or bans on cigarette vending machines;

• requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;

• disclosure, restrictions, or bans of tobacco product ingredients;

• increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;

• elimination of duty free sales and duty free allowances for travelers; and

• encouraging litigation against tobacco companies.

Our operating income could be significantly affected by regulatory initiatives resulting in a significant decrease in demand for our brands, in particular requirements that lead to a commoditization of tobacco products, as well as any significant increase in the cost of complying with new regulatory requirements.

Litigation related to tobacco use and exposure to environmental tobacco smoke (“ETS”) could substantially reduce our profitability and could severely impair our liquidity.

There is litigation related to tobacco products pending in certain jurisdictions. Damages claimed in some tobacco-related litigation are significant and, in certain cases in Brazil, Canada, Israel and Nigeria, range into the billions of

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U.S. dollars. We anticipate that new cases will continue to be filed. The FCTC encourages litigation against tobacco product manufacturers. It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. See Item 3. Legal Proceedings of this Form 10-K.

We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, innovation, packaging, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors' introduction of lower-price products or innovative products, higher tobacco product taxes, higher absolute prices and larger gaps between retail price categories, and product regulation that diminishes the ability to differentiate tobacco products. Competitors include three large international tobacco companies and several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, China, Egypt, Taiwan, Thailand and Vietnam. Industry consolidation and privatizations of state-owned enterprises have led to an overall increase in competitive pressures. Some competitors have different profit and volume objectives and some international competitors are susceptible to changes in different currency exchange rates.

Because we have operations in numerous countries, our results may be influenced by economic, regulatory and political developments or natural disasters in many countries.

Some of the countries in which we operate face the threat of civil unrest and can be subject to regime changes. In others, nationalization, terrorism, conflict and the threat of war may have a significant impact on the business environment. Economic, political, regulatory or other developments or natural disasters could disrupt our supply chain, manufacturing capabilities or our distribution capabilities. In addition, such developments could lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, which could reduce our volumes, revenues and net earnings. In certain markets, we are dependent on governmental approvals of various actions such as price changes.

In addition, despite our high ethical standards and rigorous control and compliance procedures aimed at preventing and detecting unlawful conduct, given the breadth and scope of our international operations, we may not be able to detect all potential improper or unlawful conduct by our employees and international partners.

We may be unable to anticipate changes in consumer preferences or to respond to consumer behavior influenced by economic downturns.

Our tobacco business is subject to changes in consumer preferences, which may be influenced by local economic conditions. To be successful, we must:

• promote brand equity successfully;

• anticipate and respond to new consumer trends;

• develop new products and markets and broaden brand portfolios;

• improve productivity; and

• be able to protect or enhance margins through price increases.

In periods of economic uncertainty, consumers may tend to purchase lower-price brands, and the volume of our premium-price and mid-price brands and our profitability could suffer accordingly. Such downtrading trends may be reinforced by regulation that limits branding, communication and product differentiation.

We lose revenues as a result of counterfeiting, contraband and cross-border purchases.

Large quantities of counterfeit cigarettes are sold in the international market. We believe that Marlboro is the most heavily counterfeited international cigarette brand, although we cannot quantify the revenues we lose as a result of this activity. In addition, our revenues are reduced by contraband and legal cross-border purchases.

From time to time, we are subject to governmental investigations on a range of matters.

Investigations include allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of customs duties and/or excise taxes, allegations of false and misleading usage of descriptors such as “lights” and “ultra lights” and allegations of unlawful advertising. We cannot predict the outcome of those investigations or whether additional investigations may be commenced, and it is possible that our business could be materially affected by an unfavorable outcome of pending or future investigations. See

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“Management's Discussion and Analysis of Financial Condition and Results of Operations-Operating Results by Business Segment-Business Environment-Governmental Investigations” for a description of governmental investigations to which we are subject.

We may be unsuccessful in our attempts to produce products with the potential to reduce the risk of smoking-related diseases compared to conventional cigarettes.

We continue to seek ways to develop commercially viable new product technologies that may reduce the risk of smoking-related diseases. Our goal is to develop products whose potential for risk reduction can be substantiated and provide adult smokers the taste, sensory experience and smoking ritual characteristics that are as close as possible to those currently provided by conventional cigarettes. We may not succeed in these efforts. If we do not succeed, but others do, we may be at a competitive disadvantage. Furthermore, we cannot predict whether regulators will permit the marketing of tobacco products with claims of reduced risk and harm, which could significantly undermine the commercial viability of these products.

Our reported results could be adversely affected by unfavorable currency exchange rates, and currency devaluations could impair our competitiveness.

We conduct our business primarily in local currency and, for purposes of financial reporting, the local currency results are translated into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will translate into fewer U.S. dollars. During periods of local economic crises, foreign currencies may be devalued significantly against the U.S. dollar, reducing our margins. Actions to recover margins may result in lower volume and a weaker competitive position.

The repatriation of our foreign earnings, changes in the earnings mix, and changes in U.S. tax laws may increase our effective tax rate. Our ability to receive payments from foreign subsidiaries or to repatriate royalties and dividends could be restricted by local country currency exchange controls.

Because we are a U.S. holding company, our most significant source of funds is distributions from our non-U.S. subsidiaries. Under current U.S. tax law, in general we do not pay U.S. taxes on our foreign earnings until they are repatriated to the U.S. as distributions from our non-U.S. subsidiaries. These distributions may result in a residual U.S. tax cost. It may be advantageous to us in certain circumstances to significantly increase the amount of such distributions, which could result in a material increase in our overall effective tax rate. Additionally, the Obama Administration has indicated that it favors changes in U.S. tax law that would fundamentally change how our earnings are taxed in the U.S. If enacted and depending upon its precise terms, such legislation could increase our overall effective tax rate. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries' ability to make payments outside the country.

Our ability to grow may be limited by our inability to introduce new products, enter new markets or to improve our margins through higher pricing and improvements in our brand and geographic mix.

Our profitability may suffer if we are unable to introduce new products or enter new markets successfully, to raise prices or maintain an acceptable proportion of our sales of higher margin products and sales in higher margin geographies.

We may be unable to expand our brand portfolio through successful acquisitions and the development of strategic business relationships.

One element of our growth strategy is to strengthen our brand portfolio and market positions through selective acquisitions and the development of strategic business relationships. Acquisition and strategic business development opportunities are limited and present risks of failing to achieve efficient and effective integration, strategic objectives and anticipated revenue improvements and cost savings. There is no assurance that we will be able to acquire attractive businesses on favorable terms, or that future acquisitions or strategic business developments will be accretive to earnings.

Government mandated prices, production control programs, shifts in crops driven by economic conditions and the impacts of climate change may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.

As with other agricultural commodities, the price of tobacco leaf and cloves can be influenced by imbalances in supply and demand, and crop quality can be influenced by variations in weather patterns, including those caused by climate change. Tobacco production in certain countries is subject to a variety of controls, including government mandated prices and production control programs. Changes in the patterns of demand for agricultural products could cause farmers to plant less tobacco. Any significant change in tobacco leaf and clove prices, quality and quantity could affect our profitability and our business.

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Our ability to implement our strategy of attracting and retaining the best global talent may be impaired by the decreasing social acceptance of cigarette smoking.

The tobacco industry competes for talent with consumer products and other companies that enjoy greater societal acceptance. As a result, we may be unable to attract and retain the best global talent.

The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, loss of revenue, assets or personal or other sensitive data.

We use information systems to help manage business processes, collect and interpret business data and communicate internally and externally with employees, suppliers, customers and others. Some of these information systems are managed by third-party service providers. We have backup systems and business continuity plans in place, and we take care to protect our systems and data from unauthorized access. Nevertheless, failure of our systems to function as intended, or penetration of our systems by outside parties intent on extracting or corrupting information or otherwise disrupting business processes, could result in loss of revenue, assets or personal or other sensitive data, cause damage to our reputation and that of our brands and result in significant remediation and other costs to us.

We may be required to replace third party contract manufacturers or service providers with our own resources.

In certain instances, we contract with third parties to manufacture some of our products or product parts or to provide other services. We may be unable to renew these agreements on satisfactory terms for numerous reasons, including government regulations; accordingly, our costs may increase significantly if we must replace such third parties with our own resources.

Item 1B. Unresolved Staff Comments.

None.

Item 2.Properties.    

As of December 31, 2012, we operated and owned 53 manufacturing facilities and maintained contract manufacturing relationships with 22 third-party manufacturers across 22 markets. In addition, we work with 38 third-party operators in Indonesia who manufacture our hand-rolled cigarettes.

PMI Owned Manufacturing Facilities

	EU	EEMA	Asia	Latin America & Canada	TOTAL
Fully integrated	9	9	9	8	35
Make-pack	—	—	6	2	8
Other	2	1	2	5	10
Total	11	10	17	15	53

In 2012, 26 of our facilities each manufactured over 10 billion cigarettes, of which seven facilities each produced over 30 billion units. Our largest factories are in Bergen-op-Zoom (the Netherlands), Marikina and Batangas (Philippines). St. Petersburg and Krasnodar (Russia), Berlin (Germany), Izmir (Turkey), Krakow (Poland), Kharkiv (Ukraine), Merlo (Argentina), Kutna Hora (Czech Republic), Neuchatel (Switzerland), Sukorejo and Karawang (Indonesia) and Klaipeda (Lithuania). Our smallest factories are mostly in Latin America and Asia, where due to tariff and other constraints we have established small manufacturing units in individual markets, several of which are make-pack operations. We will continue to optimize our manufacturing base, taking into consideration the evolution of trade blocks.

The plants and properties owned or leased and operated by our subsidiaries are maintained in good condition and are believed to be suitable and adequate for our present needs.

In 2012, we announced that we are working on all aspects that will lead to the commercialization of NGPs in the 2016 to 2017 period. We are planning to build one or two new manufacturing facilities in Europe to produce NGPs and expect ground-breaking for our first factory to take place in 2013. We anticipate capital expenditures of 500-600 million Euros over a three-year period to achieve an initial capacity of approximately 30 billion NGP units per year.

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Item 3. Legal Proceedings.        

Tobacco-Related Litigation     

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. Our indemnitees include distributors, licensees, and others that have been named as parties in certain cases and that we have agreed to defend, as well as to pay costs and some or all of judgments, if any, that may be entered against them. Pursuant to the terms of the Distribution Agreement between Altria and PMI, PMI will indemnify Altria and PM USA for tobacco product claims based in substantial part on products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for tobacco product claims based in substantial part on products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

It is possible that there could be adverse developments in pending cases against us and our subsidiaries. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in certain cases in Brazil, Canada, Israel and Nigeria, range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. Much of the tobacco-related litigation is in its early stages, and litigation is subject to uncertainty. However, as discussed below, we have to date been largely successful in defending tobacco-related litigation.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. Legal defense costs are expensed as incurred.

It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts, if any. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

To date, we have paid total judgments, including costs, of approximately six thousand Euros in tobacco-related cases. These payments were made in order to appeal three Italian small claims cases, all of which were subsequently reversed on appeal. To date, no tobacco-related case has been finally resolved in favor of a plaintiff against us, our subsidiaries or indemnitees.

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The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of February 15, 2013, December 31, 2011 and December 31, 2010:

Type of Case	Number of Cases Pending as of February 15, 2013	Number of Cases Pending  as of December 31, 2011	Number of Cases Pending  as of December 31, 2010
Individual Smoking and Health Cases	75	75	94
Smoking and Health Class Actions	11	10	11
Health Care Cost Recovery Actions	15	11	10
Lights Class Actions	2	2	2
Individual Lights Cases (small claims court)	1	9	10
Public Civil Actions	4	3	7

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 394 Smoking and Health, Lights, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor. Ten cases have had decisions in favor of plaintiffs. Seven of these cases have subsequently reached final resolution in our favor and three remain on appeal.

The table below lists the verdicts and post-trial developments in the three pending cases in which verdicts were returned in favor of plaintiffs:

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 2011	Brazil/Laszlo	Individual Smoking and Health	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.

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Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
September 2009	Brazil/Bernhardt	Individual Smoking and Health	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.

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Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
February 2004	Brazil/The Smoker Health Defense Association	Class Action	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.

Pending claims related to tobacco products generally fall within the following categories:

Smoking and Health Litigation: These cases primarily allege personal injury and are brought by individual plaintiffs or on behalf of a class or purported class of individual plaintiffs. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.

As of February 15, 2013, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 75 cases brought by individual plaintiffs in Argentina (30), Brazil (28), Canada (2), Chile (4), Costa Rica (2), Greece (1), Italy (5), the Philippines (1), Scotland (1) and Turkey (1), compared with 75 such cases on December 31, 2011, and 94 cases on December 31, 2010; and

• 11 cases brought on behalf of classes of individual plaintiffs in Brazil (2) and Canada (9), compared with 10 such cases on December 31, 2011, and 11 such cases on December 31, 2010.

In the first class action pending in Brazil, The Smoker Health Defense Association (ADESF) v. Souza Cruz, S.A. and Philip Morris Marketing, S.A., Nineteenth Lower Civil Court of the Central Courts of the Judiciary District of São Paulo, Brazil, filed July 25, 1995, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer organization, is seeking damages for smokers and former smokers and injunctive relief. The verdict and post-trial developments in this case are described in the above table.

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In the second class action pending in Brazil, Public Prosecutor of São Paulo v. Philip Morris Brasil Industria e Comercio Ltda., Civil Court of the City of São Paulo, Brazil, filed August 6, 2007, our subsidiary is a defendant. The plaintiff, the Public Prosecutor of the State of São Paulo, is seeking (i) unspecified damages on behalf of all smokers nationwide, former smokers, and their relatives; (ii) unspecified damages on behalf of people exposed to environmental tobacco smoke (“ETS”) nationwide, and their relatives; and (iii) reimbursement of the health care costs allegedly incurred for the treatment of tobacco-related diseases by all Brazilian States and Municipalities, and the Federal District. In an interim ruling issued in December 2007, the trial court limited the scope of this claim to the State of São Paulo only. In December 2008, the Seventh Civil Court of São Paulo issued a decision declaring that it lacked jurisdiction because the case involved issues similar to the ADESF case discussed above and should be transferred to the Nineteenth Lower Civil Court in São Paulo where the ADESF case is pending. The court further stated that these cases should be consolidated for the purposes of judgment. In April 2010, the São Paulo Court of Appeals reversed the Seventh Civil Court's decision that consolidated the cases, finding that they are based on different legal claims and are progressing at different stages of proceedings. This case was returned to the Seventh Civil Court of São Paulo, and our subsidiary filed its closing arguments in December 2010. In March 2012, the trial court dismissed the case on the merits. This decision has been appealed.

In the first class action pending in Canada, Cecilia Letourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiff, an individual smoker, is seeking compensatory and unspecified punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005. In February 2011, the trial court ruled that the federal government would remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

In the second class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Ltd.,Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiffs, an anti-smoking organization and an individual smoker, are seeking compensatory and unspecified punitive damages for each member of the class who allegedly suffers from certain smoking-related diseases. The class was certified in 2005. In February 2011, the trial court ruled that the federal government will remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

In the third class action pending in Canada, Kunta v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada, filed June 12, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma and mild reversible lung disease resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. In September 2009, plaintiff's counsel informed defendants that he did not anticipate taking any action in this case while he pursues the class action filed in Saskatchewan (see description of Adams, below).

In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al.,The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits. Preliminary motions are pending.

In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al.,The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs

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allegedly caused by tobacco products. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the sixth class action pending in Canada, Dorion v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

In the ninth class action pending in Canada, Suzanne Jacklin v. Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits. Plaintiff's counsel have indicated that they do not intend to take any action in this case in the near future.

Health Care Cost Recovery Litigation: These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices. Plaintiffs in these cases seek various forms of relief including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of February 15, 2013, there were 15 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Canada (9), Nigeria (5) and Spain (1), compared with 11 such cases on December 31, 2011 and 10 such cases on December 31, 2010.

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, our subsidiaries, our indemnitee (PM USA), and other members of the industry are defendants.

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The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.” The Supreme Court of Canada has held that the statute is constitutional. We and certain other non-Canadian defendants challenged the jurisdiction of the court. The court rejected the jurisdictional challenge. Pre-trial discovery is ongoing.

In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v. Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of New Brunswick based on legislation enacted in the province. This legislation is similar to the law introduced in British Columbia that authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Pre-trial discovery is ongoing.

In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v. Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada, filed September 29, 2009, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Ontario based on legislation enacted in the province. This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v. Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St. Johns, Canada, filed February 8, 2011, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, our subsidiary, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v. Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Alberta based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” We, our subsidiaries and our indemnitees have all been served with the statement of claim.

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

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In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections. We currently have no employees, operations or assets in Nigeria.

In the second health care cost recovery case in Nigeria, The Attorney General of Kano State v. British American Tobacco (Nigeria) Limited, et al., High Court of Kano State, Kano, Nigeria, filed May 9, 2007, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary is in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v. British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us. As a result of this ruling, Philip Morris International Inc. is not currently a defendant in the case. Plaintiff may appeal the ruling or follow the procedural steps required to serve Philip Morris International Inc.

In the fourth health care cost recovery case in Nigeria, The Attorney General of Oyo State, et al., v. British American Tobacco (Nigeria) Limited, et al., High Court of Oyo State, Ibadan, Nigeria, filed May 25, 2007, our subsidiary and other members of the industry are defendants. Plaintiffs seek reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary challenged service as improper. In June 2010, the court ruled that plaintiffs did not have leave to serve the writ of summons on the defendants and that they must re-serve the writ. Our subsidiary has not yet been re-served.

In the fifth health care cost recovery case in Nigeria, The Attorney General of Ogun State v. British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria, filed February 26, 2008, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In May 2010, the trial court rejected our subsidiary's service objections. Our subsidiary has appealed.

In a series of proceedings in Spain, Junta de Andalucia, et al. v. Philip Morris Spain, et al., Court of First Instance, Madrid, Spain, the first of which was filed February 21, 2002, our subsidiary and other members of the industry were defendants. The plaintiffs sought reimbursement for the cost of treating certain of their citizens for various alleged smoking-related illnesses. In May 2004, the first instance court dismissed the initial case, finding that the State was a necessary party to the claim, and thus, the claim must be filed in the Administrative Court. In September 2007, the plaintiffs filed their complaint in the Administrative Court, which dismissed the claim based on a procedural issue in November 2007. In November 2009, the Supreme Court rejected plaintiffs' appeal, resulting in the final dismissal of the claim. However, plaintiffs have filed a second claim in the Administrative Court against the Ministry of Economy. This second claim seeks the same relief as the original claim, but relies on a different procedural posture. The Administrative Court has recognized our subsidiary as a party in this proceeding. Our subsidiary and other defendants filed preliminary objections that resulted in a stay of the term to file the answer. In May 2011, the court rejected the defendants' preliminary objections, but it has not yet set a deadline for defendants to file their answers.

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Lights Cases: These cases, brought by individual plaintiffs, or on behalf of a class of individual plaintiffs, allege that the use of the term “lights” constitutes fraudulent and misleading conduct. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including misrepresentation, deception, and breach of consumer protection laws. Plaintiffs seek various forms of relief including restitution, injunctive relief, and compensatory and other damages. Defenses raised include lack of causation, lack of reliance, assumption of the risk, and statute of limitations.

As of February 15, 2013, there were a number of lights cases pending against our subsidiaries or indemnitees, as follows:

• 2 cases brought on behalf of overlapping classes of individual plaintiffs in Israel, compared with 2 such cases on December 31, 2011, and 2 such cases on December 31, 2010; and

• 1 case brought by an individual in the equivalent of small claims courts in Italy, where the maximum damages are approximately one thousand Euros per case, compared with 9 such cases on December 31, 2011, and 10 such cases on December 31, 2010.

In the first class action pending in Israel, El-Roy, et al. v. Philip Morris Incorporated, et al., District Court of Tel-Aviv/Jaffa, Israel, filed January 18, 2004, our subsidiary and our indemnitees (PM USA and our former importer) are defendants. The plaintiffs filed a purported class action claiming that the class members were misled by the descriptor “lights” into believing that lights cigarettes are safer than full flavor cigarettes. The claim seeks recovery of the purchase price of lights cigarettes and compensation for distress for each class member. Hearings took place in November and December 2008 regarding whether the case meets the legal requirements necessary to allow it to proceed as a class action. The parties' briefing on class certification was completed in March 2011. In November 2012, the court denied class certification and dismissed the individual claims. Plaintiffs have appealed and an oral hearing has been scheduled for March 2014.

The claims in the second class action pending in Israel, Navon, et al. v. Philip Morris Products USA, et al., District Court of Tel-Aviv/Jaffa, Israel, filed December 5, 2004, against our indemnitee (our distributor) and other members of the industry are similar to those in El-Roy, and the case is currently stayed pending a ruling on class certification in El-Roy. In February 2013, the district court issued an order to dismiss the case if plaintiffs fail to take action by March 10, 2013.

Public Civil Actions: Claims have been filed either by an individual, or a public or private entity, seeking to protect collective or individual rights, such as the right to health, the right to information or the right to safety. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including product defect, concealment, and misrepresentation. Plaintiffs in these cases seek various forms of relief including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

As of February 15, 2013, there were 4 public civil actions pending against our subsidiaries in Argentina (2), Brazil (1), and Venezuela (1), compared with 3 such cases on December 31, 2011, and 7 such cases on December 31, 2010.

In the first public civil action in Argentina, Asociación Argentina de Derecho de Danos v. Massalin Particulares S.A., et al., Civil Court of Buenos Aires, Argentina, filed February 26, 2007, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer association, seeks the establishment of a relief fund for reimbursement of medical costs associated with diseases allegedly caused by smoking. Our subsidiary filed its answer in September 2007. In March 2010, the case file was transferred to the Federal Court on Administrative Matters after the Civil Court granted the plaintiff's request to add the national government as a co-plaintiff in the case.

In the second public civil action in Argentina, Conciencia Ciudadana Mejorar Asociación Civil, et al.v. Massalin Particulares S.A., 4th Civil & Commercial Court of Zarate, Argentina, filed September 20, 2012, our subsidiary is a defendant. Plaintiffs, a civil association and an individual, seek an order requiring our subsidiary to place information regarding tar, nicotine, and carbon monoxide yields on the packages of cigarettes in the Marlboro brand family. Plaintiffs also seek moral and punitive damages. Our subsidiary has been served with the complaint.

In the public civil action in Brazil, The Brazilian Association for the Defense of Consumer Health (“SAUDECON”) v. Philip Morris Brasil Industria e Comercio Ltda. and Souza Cruz S.A., Civil Court of City of Porto Alegre, Brazil, filed November 3, 2008, our subsidiary is a defendant. The plaintiff, a consumer organization, is asking the court to establish a fund that will be used to provide treatment to smokers who claim to be addicted and who do not otherwise have

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access to smoking cessation treatment. Plaintiff requests that each defendant's liability be determined according to its market share. In May 2009, the trial court dismissed the case on the merits. Plaintiff has appealed.

In the public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties.

Other Litigation

We are also involved in other litigation arising in the ordinary course of our business. While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our share repurchase activity for each of the three months in the quarter ended December 31, 2012 was as follows:

Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October 1, 2012 – October 31, 2012 (1)	5,399,168	$	89.36	15,224,690	$	16,624,552,350
November 1, 2012 – November 30, 2012 (1)	11,681,345	$	86.99	26,906,035	$	15,608,407,524
December 1, 2012 – December 31, 2012 (1)	5,299,496	$	87.06	32,205,531	$	15,147,045,939
Pursuant to Publicly Announced Plans or Programs	22,380,009	$	87.58
October 1, 2012 – October 31, 2012 (3)	250	$	90.12
November 1, 2012 – November 30, 2012 (3)	3,672	$	89.70
December 1, 2012 – December 31, 2012 (3)	6,068	$	88.58
For the Quarter Ended December 31, 2012	22,389,999	$	87.58

(1) On February 11, 2010, our Board of Directors authorized a share repurchase program of $12 billion over three years. This program commenced in May 2010, after the completion of our previous two-year $13 billion program. On July 31, 2012, we completed the $12 billion share repurchase program ahead of schedule by purchasing, in total, 179.1 million shares for $12.0 billion.

On June 13, 2012, our Board of Directors authorized a new share repurchase program of $18 billion over three years. The new program commenced on August 1, 2012 after the completion of the three-year $12 billion program in July 2012. These share repurchases have been made pursuant to the $18 billion program.

(2) Aggregate number of shares repurchased under the above-mentioned share repurchase program as of the end of the period presented.

(3) Shares repurchased represent shares tendered to us by employees who vested in restricted and deferred stock awards, or exercised stock options, and used shares to pay all, or a portion of, the related taxes and/or option exercise price.

The principal stock exchange on which our common stock (no par value) is listed is the New York Stock Exchange. At January 31, 2013, there were approximately 77,500 holders of record of our common stock.

Our common stock is also listed on the NYSE Euronext in Paris and the SIX Swiss Exchange.

The other information called for by this Item is hereby incorporated by reference to the paragraph captioned “Quarterly Financial Data (Unaudited)” on page 87 of the 2012 Annual Report and made a part hereof.

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Item 6. Selected Financial Data.

The information called for by this Item is hereby incorporated by reference to the information with respect to 2008-2012 appearing under the caption “Selected Financial Data-Five-Year Review” on page 51 of the 2012 Annual Report and made a part hereof.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information called for by this Item is hereby incorporated by reference to the paragraphs captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) on pages 21 to 50 of the 2012 Annual Report and made a part hereof.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information called for by this Item is hereby incorporated by reference to the paragraphs in the MD&A captioned “Market Risk” on pages 46 to 47 of the 2012 Annual Report and made a part hereof.

Item 8. Financial Statements and Supplementary Data.

The information called for by this Item is hereby incorporated by reference to the 2012 Annual Report as set forth under the caption “Quarterly Financial Data (Unaudited)” on page 87 of the 2012 Annual Report and in the Index to Consolidated Financial Statements and Schedules (see Item 15) and made a part hereof.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

PMI carried out an evaluation, with the participation of PMI’s management, including PMI’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of PMI’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, PMI’s Chief Executive Officer and Chief Financial Officer concluded that PMI’s disclosure controls and procedures are effective. There have been no changes in PMI’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, PMI’s internal control over financial reporting.

See Exhibit 13 for the Report of Management on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm on pages 88 to 89 of the 2012 Annual Report incorporated herein by reference and made a part hereof.

Item 9B. Other Information.

None.

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PART III

Except for the information relating to the executive officers set forth in Item 10 and the information relating to equity compensation plans set forth in Item 12, the information called for by Items 10-14 is hereby incorporated by reference to PMI’s definitive proxy statement for use in connection with its annual meeting of stockholders to be held on May 8, 2013 that will be filed with the SEC on or about March 28, 2013 (the “proxy statement”), and, except as indicated therein, made a part hereof.

Item 10. Directors, Executive Officers and Corporate Governance.    

Executive Officers as of February 22, 2013:

Name	Office	Age
Louis C. Camilleri	Chairman and Chief Executive Officer	58
Drago Azinovic	President, European Union Region	50
Bertrand Bonvin	Senior Vice President, Research & Development	44
Patrick Brunel	Senior Vice President and Chief Information Officer	47
André Calantzopoulos	Chief Operating Officer	55
Kevin Click	Senior Vice President, Human Resources	51
Frederic de Wilde	Senior Vice President, Marketing & Sales	45
Marc S. Firestone	Senior Vice President and General Counsel	53
Even Hurwitz	Senior Vice President, Corporate Affairs	51
Martin King	Senior Vice President, Operations	48
Marco Kuepfer	Vice President, Finance and Treasurer	55
James R. Mortensen	President, Latin America & Canada Region	55
Jacek Olczak	Chief Financial Officer	48
Matteo Pellegrini	President, Asia Region	50
Joachim Psotta	Vice President and Controller	55
Jerry E. Whitson	Deputy General Counsel and Corporate Secretary	57
Miroslaw Zielinski	President, Eastern Europe, Middle East & Africa Region & PMI Duty Free	51

All of the above-mentioned officers, except for Messrs. Camilleri, Azinovic, Firestone and Whitson, have been employed by us in various capacities during the past five years.

Prior to the Distribution Date, Mr. Camilleri served as the Chairman and Chief Executive Officer of Altria, positions he held from August 2002 and April 2002, respectively. Mr. Camilleri also served as a director of Kraft from March 2001 to December 2007 and as Kraft’s Chairman from September 2002 to March 30, 2007.

Before joining Philip Morris International Inc. in March 2009, Mr. Azinovic held a variety of positions at Altadis, and subsequently, after the acquisition of Altadis in 2008, at Imperial Tobacco Group, lastly as Marketing Director.

Before joining Philip Morris International Inc. in April 2012, Mr. Firestone was Executive Vice President, Corporate and Legal Affairs and General Counsel of Kraft Foods Inc., where he served since 2003. From 1988 to 2003, Mr. Firestone held numerous positions in the law departments of Philip Morris Companies Inc. and Philip Morris International Inc., lastly as Senior Vice President & General Counsel of PMI.

Before joining Philip Morris International Inc. in September 2010, Mr. Whitson was a Senior Partner at the law firm of Hunton & Williams LLP, where he served for 30 years, lastly as the head of the firm’s Business Practice Group and as a member of its Executive Committee.

Codes of Conduct and Corporate Governance

We have adopted the Philip Morris International Code of Conduct, which complies with requirements set forth in Item 406 of Regulation S-K. This Code of Conduct applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

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We have also adopted a code of business conduct and ethics that applies to the members of our Board of Directors. These documents are available free of charge on our Web site at www.pmi.com.

In addition, we have adopted corporate governance guidelines and charters for our Audit, Finance, Compensation and Leadership Development, Product Innovation and Regulatory Affairs and Nominating and Corporate Governance committees of the Board of Directors. All of these documents are available free of charge on our Web site at www.pmi.com. Any waiver granted by Philip Morris International Inc. to its principal executive officer, principal financial officer or controller or any person performing similar functions under the Code of Conduct, or certain amendments to the Code of Conduct, will be disclosed on our Web site at www.pmi.com.

The information on our Web site is not, and shall not be deemed to be, a part of this Report or incorporated into any other filings made with the SEC.

Item 11. Executive Compensation.

Refer to “Executive Compensation” and “Compensation of Directors” sections of the proxy statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The number of shares to be issued upon exercise or vesting and the number of shares remaining available for future issuance under PMI’s equity compensation plans at December 31, 2012, were as follows:

	Number of Shares to be Issued upon Exercise of Outstanding Options and Vesting of Deferred Stock (a)	Weighted Average Exercise Price of Outstanding Options (b)		Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities reflected in column (a)) (c)
Equity compensation plans    approved by stockholders	8,987,356	$	26.13	30,793,721

Refer to “Ownership of Equity Securities” section of the proxy statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Refer to “Related Person Transactions and Code of Conduct” and “Independence of Nominees” sections of the proxy statement.

Item 14. Principal Accounting Fees and Services.

Refer to “Audit Committee Matters” section of the proxy statement.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Index to Consolidated Financial Statements and Schedules

	2012 Annual Report Page
Data incorporated by reference to Philip Morris International Inc.’s 2012 Annual Report:
Consolidated Balance Sheets at December 31, 2012 and 2011	52-53
Consolidated Statements of Earnings for the years ended December 31, 2012, 2011 and    2010	54
Consolidated Statements of Comprehensive Earnings for the years ended December 31,    2012, 2011 and 2010	54
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended    December 31, 2012, 2011 and 2010	55
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011    and 2010	56-57
Notes to Consolidated Financial Statements	58-87
Report of Independent Registered Public Accounting Firm	88
Report of Management on Internal Control Over Financial Reporting	89

Schedules have been omitted either because such schedules are not required or are not applicable.

(b) The following exhibits are filed as part of this Report:        

2.1	—	Distribution Agreement between Altria Group, Inc. and Philip Morris International Inc. dated January 30, 2008 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 filed February 7, 2008).
3.1	—	Amended and Restated Articles of Incorporation of Philip Morris International Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 filed February 7, 2008).
3.2	—	Amended and Restated By-laws of Philip Morris International Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed December 6, 2011).
4.1	—	Specimen Stock Certificate of Philip Morris International Inc. (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form 10 filed February 7, 2008).
4.2	—	Indenture dated as of April 25, 2008, between Philip Morris International Inc. and HSBC Bank USA, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3, dated April 25, 2008).
4.3	—	Issue and Paying Agency Agreement, dated March 13, 2009, by and among Philip Morris International Inc., HSBC Private Bank (C.I.) Limited, Jersey Branch, as registrar, HSBC Bank PLC, as principal paying agent and HSBC Corporate Trustee Company (UK) Limited, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed March 19, 2009).
4.4	—	Trust Deed relating to Euro Medium Term Note Program, dated March 13, 2009, between Philip Morris International Inc., as issuer, and HSBC Corporate Trustee Company (UK) Limited, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed March 19, 2009).

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4.5	—	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	—	Transition Services Agreement between Altria Corporate Services, Inc. and Philip Morris International Inc., dated as of March 28, 2008 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 31, 2008).
10.2	—	Tax Sharing Agreement between Altria Group, Inc. and Philip Morris International Inc., dated as of March 28, 2008 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed March 31, 2008).
10.3	—	Employee Matters Agreement between Altria Group, Inc. and Philip Morris International Inc., dated as of March 28, 2008 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed March 31, 2008).
10.4	—	Intellectual Property Agreement between Philip Morris International Inc. and Philip Morris USA Inc., dated as of January 1, 2008 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form 10 filed March 5, 2008).
10.5	—	Credit Agreement relating to a US$3,500,000,000 Revolving Credit Facility (including a US$800,000,000 swingline option) dated as of October 25, 2011, among Philip Morris International Inc. and the Initial Lenders named therein and Citibank International plc as Facility Agent and Citibank, N.A. as Swingline Agent and Citigroup Global Markets Limited, Barclays Capital, BNP Paribas, Credit Suisse, Cayman Islands Branch, Deutsche Bank Securities Inc., Goldman Sachs International, HSBC Bank PLC, J.P. Morgan Limited, RBS Securities Inc. and Société Générale as Mandated Lead Arrangers and Bookrunners (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 26, 2011).
10.6	__	Amended and Restated Credit Agreement relating to a US$2,500,000,000 Revolving Credit Facility (including a US$700,000,000 swingline option), dated as of May 11, 2011, among Philip Morris International Inc. and the Initial Lenders named therein and J.P. Morgan Europe Limited as Facility Agent, JPMorgan Chase Bank, N.A. as Swingline Agent and J.P. Morgan Limited, Deutsche Bank Securities Inc., Citigroup Global Markets Limited, Credit Suisse AG, Cayman Islands Branch, Goldman Sachs Credit Partners L.P. and RBS Securities Inc. as Mandated Lead Arrangers and Bookrunners (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 17, 2011).
10.7	—	Anti-Contraband and Anti-Counterfeit Agreement and General Release dated July 9, 2004 and Appendices (Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form 10 filed February 7, 2008).
10.8	—	Philip Morris International Inc. Automobile Policy (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form 10 filed February 7, 2008).*
10.9	—	Philip Morris International Benefit Equalization Plan, as amended and in effect on August 6, 2012 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).*
10.10	—	Philip Morris International Inc. 2008 Performance Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form 10 filed February 7, 2008).*
10.11	—	Form of Philip Morris International Inc. 2008 Performance Incentive Plan Deferred Stock Agreement (2008 Grants) (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form 10 filed February 7, 2008).*

10.12 — Form of Philip Morris International Inc. 2008 Performance Incentive Plan Restricted Stock Agreement (2009 Grants) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 10, 2009).*

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10.13	—	Form of Philip Morris International Inc. 2008 Performance Incentive Plan Deferred Stock Agreement (2009 Grants) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed February 10, 2009).*
10.14	—	Philip Morris International Inc. 2012 Performance Incentive Plan, effective May 7, 2012 (incorporated by reference to Exhibit A to the Definitive Proxy Statement filed on March 30, 2012).*
10.15	—	Pension Fund of Philip Morris in Switzerland (IC) (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K for the year ended December 31, 2010).*
10.16	—	Summary of Supplemental Pension Plan of Philip Morris in Switzerland.*
10.17	—	Form of Restated Employee Grantor Trust Enrollment Agreement (Executive Trust Arrangement) (incorporated by reference to Exhibit 10.18 to the Registration Statement on Form 10 filed February 7, 2008).*
10.18	—	Form of Restated Employee Grantor Trust Enrollment Agreement (Secular Trust Arrangement) (incorporated by reference to Exhibit 10.19 to the Registration Statement on Form 10 filed February 7, 2008).*
10.19	—	Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (amended and restated as of May 11, 2011) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 12, 2011).*
10.20	—	Philip Morris International Inc. 2008 Deferred Fee Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.21 to the Registration Statement on Form 10 filed February 7, 2008).*
10.21	—	Amendment to Employment Agreement with André Calantzopoulos. The employment agreement was previously filed as Exhibit 10.22 to the Registration Statement on Form 10 filed February 7, 2008 and is incorporated by reference to this Exhibit 10.21.*
10.22	—	Amendment to Employment Agreement with Hermann Waldemer.  The employment agreement was previously filed as Exhibit 10.24 to the Registration Statement on Form 10 filed February 7, 2008 and is incorporated by reference to this Exhibit 10.22.*
10.23	—	Employment Agreement with David Bernick (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).*
10.24	—	Amendment to Employment Agreement with Matteo Pellegrini. The employment agreement was previously filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and is incorporated by reference to this Exhibit 10.24.*
10.25	—	Agreement with Louis C. Camilleri (incorporated by reference to Exhibit 10.25 to the Registration Statement on Form 10 filed February 7, 2008).*
10.26	—	Amendment No. 1 to the Time Sharing Agreement between PM Global Services Inc. and Louis C. Camilleri, dated August 22, 2012 (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).*
10.27	—	Amendment No. 2 to the Time Sharing Agreement between PM Global Services Inc. and Louis C. Camilleri, dated October 23, 2012.*
10.28	—	Employment Agreement with Jacek Olczak (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).*
10.29	—	Amended and Restated Supplemental Management Employees’ Retirement Plan (incorporated by reference to Exhibit 10.27 to the Annual Report on Form 10-K for the year ended December 31, 2008).*
10.30	—	Support Agreement, dated as of July 31, 2008, between Rothmans Inc., Philip Morris International Inc. and Latin America and Canada Holdings Limited (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 31, 2008).

-28-

10.31	—	Amendment No. 1, dated as of August 31, 2012, to the Amended and Restated Credit Agreement, dated as of May 11, 2011, among Philip Morris International Inc., the lenders named therein and J.P. Morgan Europe Limited, as facility agent (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).
10.32	—	Amendment No. 1, dated as of August 31, 2012, to the Credit Agreement, dated as of October 25, 2011, among Philip Morris International Inc., the lenders named therein and Citibank International plc, as facility agent (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).
10.33	—	Supplemental Equalization Plan, amended and restated as of August 6, 2012 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q to the quarter ended September 30, 2012).*
10.34	—	Form of Supplemental Equalization Plan Employee Grantor Trust Enrollment Agreement (Secular Trust) (incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K for the year ended December 31, 2008).*
10.35	—	Form of Supplemental Equalization Plan Employee Grantor Trust Enrollment Agreement (Executive Trust) (incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K for the year ended December 31, 2008).*
10.36	—	Philip Morris International Inc. Form of Indemnification Agreement with Directors and Executive Officers (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 18, 2009).*
10.37	—	Form of Restricted Stock Agreement (2010 Grants) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 17, 2010).*
10.38	—	Form of Deferred Stock Agreement (2010 Grants) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed February 17, 2010).*
10.39	—	Form of Deferred Stock Agreement (April 16, 2012) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2012).*
10.40	—	Philip Morris International Performance Incentive Plan, as amended and restated effective February 11, 2010 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed February 17, 2010).*
10.41	—	Form of Restricted Stock Agreement (2011 Grants) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 11, 2011).*
10.42	—	Form of Deferred Stock Agreement (2011 Grants) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed February 11, 2011).*
10.43	—	Time Sharing Agreement between PMI Global Services Inc. and Louis C. Camilleri dated August 18, 2010 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed August 19, 2010).*
10.44	—	Form of Deferred Stock Agreement (2012 Grants) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 13, 2012).*
10.45	—	Form of Deferred Stock Agreement (2013 Grants) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 12, 2013).*
10.46	—	Separation Agreement and Release between Philip Morris International Management SA and David Bernick (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed February 13, 2012).*
10.47	—	Separation Agreement and Release between Philip Morris International Management SA and Hermann Waldemer dated May 7, 2012 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 10, 2012).*

-29-

12	—	Statement regarding computation of ratios of earnings to fixed charges.
13	—	Pages 21 to 89 of the 2012 Annual Report, but only to the extent set forth in Items 1, 5-8, 9A, and 15 hereof. With the exception of the aforementioned information incorporated by reference in this Annual Report on Form 10-K, the 2012 Annual Report is not to be deemed “filed” as part of this Report.
21	—	Subsidiaries of Philip Morris International Inc.
23	—	Consent of independent registered public accounting firm.
24	—	Powers of attorney.
31.1	—	Certification of the Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	—	Certification of the Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	—	Certification of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	—	Certification of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	—	XBRL Instance Document.
101.SCH	—	XBRL Taxonomy Extension Schema.

101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	—	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	—	XBRL Taxonomy Extension Label Linkbase.
101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase.

* Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.

-30-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PHILIP MORRIS INTERNATIONAL INC.
By:	/s/    LOUIS C. CAMILLERI
	(Louis C. Camilleri Chairman and Chief Executive Officer)

Date: February 22, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

Signature	Title	Date
/s/    LOUIS C. CAMILLERI	Director, Chairman and Chief Executive Officer	February 22, 2013
(Louis C. Camilleri)
/s/    JACEK OLCZAK	Chief Financial Officer	February 22, 2013
(Jacek Olczak)
/s/    JOACHIM PSOTTA	Vice President and Controller	February 22, 2013
(Joachim Psotta)
*HAROLD BROWN, MATHIS CABIALLAVETTA, J. DUDLEY FISHBURN, JENNIFER LI, GRAHAM MACKAY, SERGIO MARCHIONNE, KALPANA MORPARIA, LUCIO A. NOTO, ROBERT B. POLET, CARLOS SLIM HELÚ, STEPHEN M. WOLF	Directors

*By:	/s/    LOUIS C. CAMILLERI	February 22, 2013
	(Louis C. Camilleri Attorney-in-fact)

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EX-10.16

Exhibit 10.16

SUMMARY OF SUPPLEMENTAL PENSION PLAN OF PHILIP MORRIS IN SWITZERLAND

Supplemental Pension Plan of Philip Morris in Switzerland

Plan Summary

Overview:	A non-qualified plan that provides retirement, disability and death benefits to executives whose retirement benefits would otherwise be limited by the compensation caps under the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans in Switzerland (LPP). This plan is not intended to otherwise increase the benefits promised under the broad-based retirement plans.
Eligible Population:	Swiss-based employees in salary band D or above, or those with pensionable earnings in excess of the salary limit described in article 79c of the LPP, currently 835’200CHF.
Benefits:	The benefits under this plan are determined based on the formulas of the Pension Fund of Philip Morris in Switzerland and the Philip Morris in Switzerland IC Plan (formula applicable to salary bands G and below), respectively, without regard to the compensation limits applicable to those plans. Offsetting these benefits under this plan are those benefits earned under the Pension Fund of Philip Morris in Switzerland and the Philip Morris in Switzerland IC Plan and any personal contributions that employees would have made to those plans absent the compensation limits.
Employee Contributions:	None
Company Contributions:	100% funded by the company into a non-qualified trust arrangement.
Form of Payment:	Lump sum payment at retirement, disability, death or termination of employment, if the plan’s Board of Trustees determines in its sole discretion that the employee is entitled to benefits from the supplemental plan.
Tax Impact:	Benefits are taxable to the employee and subject to social security deductions upon distribution. Tax and social security gross-up will be applied.

EX-10.21

Exhibit 10.21

[LETTERHEAD OF PHILIP MORRIS INTERNATIONAL]

PERSONAL AND CONFIDENTIAL

HAND DELIVERY

To: Andre Calantzopoulos    Lausanne, April 1, 2012

Dear Andre,

Further to your annual performance assessment and discussion with your supervisor, we are pleased to confirm that effective April 1, 2012, your gross base salary is being increased by 3%

from     CHF 1'433'146.-- p.a.*        CHF 110'242.-- p.m.*

to      CHF 1'476'150.-- p.a.*        CHF 113'550.-- p.m.*

Your new Position in Range as a result of this salary increase will be 53%.

It is agreed and understood that this letter will for all purposes be regarded as a continuation of your employment with Philip Morris International Management SA.

All other conditions relating to your employment Philip Morris International Management SA remain as stated in your employment contract and, if applicable, in any subsequent amendments.

We would like to take this opportunity to wish you continued success and satisfaction.

Yours sincerely,

PHILIP MORRIS INTERNATIONAL MANAGEMENT SA

/s/ NICOLA ARTINGSTALL RAVUSSIN

Nicola Artingstall Ravussin

Director Human Resources

Business Partner Switzerland

*p.a. = annual

*p.m. = monthly

Philip Morris International Management SA, Avenue de Rhodanie 50, 1007 Lausanne, Switzerland

T:+41 (58) 242 00 00,F: +41 (58) 242 01 01,W: www.pmi.com

EX-10.22

Exhibit 10.22

[LETTERHEAD OF PHILIP MORRIS INTERNATIONAL]

PERSONAL AND CONFIDENTIAL

HAND DELIVERY

To: Hermann Waldemer                        Lausanne, April 1, 2012

Dear Hermann,

Further to your annual performance assessment and discussion with your supervisor, we are pleased to confirm that effective April 1, 2012, your gross base salary is being increased by 3%

from	CHF 1'116'752.-- p.a.*	CHF 85'904.-- p.m.*
to	CHF 1'150'266.-- p.a.*	CHF 88'482.-- p.m.*

Your new Position in Range as a result of this salary increase will be 25%.

It is agreed and understood that this letter will for all purposes be regarded as a continuation of your employment with Philip Morris International Management SA.

All other conditions relating to your employment Philip Morris International Management SA remain as stated in your employment contract and, if applicable, in any subsequent amendments.

We would like to take this opportunity to wish you continued success and satisfaction.

Yours sincerely,

PHILIP MORRIS INTERNATIONAL MANAGEMENT SA

/s/ NICOLA ARTINGSTALL RAVUSSIN

Nicola Artingstall Ravussin

Director Human Resources

Business Partner Switzerland

*p.a. = annual

*p.m. = monthly

Philip Morris International Management SA, Avenue de Rhodanie 50, 1007 Lausanne, Switzerland

T:+41 (58) 242 00 00,F: +41 (58) 242 01 01,W: www.pmi.com

EX-10.24

EXHIBIT 10.24

MERIT INCREASE STATEMENT FOR EXPATRIATES

Pellegrini Mateo

Philip Morris International

2012 MERIT INCREASE – EFFECTIVE 1 APRIL 2012

Current Annual Base Salary    :                CHF 910,092.00

Merit Increase            :                3.29 %

New Annual Base Salary    :                CHF 940,008.00

Comparatio/Position in Range :                22.0 %

Your new salary will be implemented together with the April 2012 payroll.

Since 2008, all expatriates have one unique Merit review date in April. If this is the first time you are part of the Expat Merit cycle and your home merit review date differs from April, your merit increase already includes the necessary prorated adjustment.

EX-10.27

EXHIBIT 10.27

AMENDMENT NO.2 TO TIME SHARING AGREEMENT

THIS AMENDMENT NO.2 TO TIME SHARING AGREEMENT (the “Amendment”) is made and entered into this 23^rd day of October, 2012, by and between PMI Global Services Inc., with an address of 180 Airport Rd, Hgr D2, White Plains, NY 10604 (“Operator”) and Louis C. Camilleri, with an address of 120 Park Avenue, New York, New York 10017 (“User”).

WITNESSETH, that

WHEREAS, Operator and User are parties to that certain Time Sharing Agreement dated August 18, 2010, as amended (“Agreement”);

WHEREAS, the parties desire to amend the Agreement; and

WHEREAS, Wells Fargo acknowledges and consents to this Amendment.

NOW THEREFORE, Operator and User declaring their intention to enter into and be bound by this Amendment, and for the good and valuable consideration set forth below, hereby covenant and agree as follows:

1.    Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.

2.    Amendment.

Exhibit A to the Agreement is hereby deleted in its entirety and replaced with the Exhibit A attached hereto.

3.    This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to its choice of law provisions.

IN WITNESS WHEREOF, the parties hereto have caused the signatures of their authorized representatives to be affixed below on the day and year first above written. The persons signing below warrant their authority to sign.

Operator:                         User:    

PMI GLOBAL SERVICES INC.                

By:    /s/     JAMES R. WEST        /s/ LOUIS C. CAMILLERI        

Name:    James R. West                    Name:     Louis C. Camilleri__________

Title:    Vice President            

1

ACKNOWLEDGED AND AGREED:

Wells Fargo Bank Northwest, National Association, not in its individual capacity, but solely as Owner Trustee under that certain Amended and Restated Trust Agreement dated as of June 1, 2012, as amended and supplemented from time to time.

By:    /s/     MICHAEL ARSENAULT    

Name:    Michael Arsenault        

Title:    Vice President

2

EXHIBIT A

Registration Number	Serial Number	Aircraft Description
N551PM	5374	Gulfstream Aerospace GV-SP (G550)
N552PM	5382	Gulfstream Aerospace GV-SP (G550)

3

EX-12

Exhibit 12

PHILIP MORRIS INTERNATIONAL INC. AND SUBSIDIARIES

Computation of Ratios of Earnings to Fixed Charges

(in millions of dollars)

	For the Years Ended December 31,
	2012		2011			2010		2009		2008
Earnings before income taxes	$	12,987	$	12,532		$	10,324	$	9,243	$	9,937
Add (deduct):
Equity in net loss (earnings) of less than 50% owned affiliates	17		10			8		6		64
Dividends from less than 50% owned affiliates	—		—			—		—		12
Fixed charges	1,115		1,042			1,069		1,006		618
Interest capitalized, net of amortization	2		(2		)	1		2		(11		)
Earnings available for fixed charges	$	14,121	$	13,582		$	11,402	$	10,257	$	10,620
Fixed charges:
Interest incurred	$	1,009	$	940		$	976	$	920	$	543
Portion of rent expense deemed to represent interest factor	106		102			93		86		75
Fixed charges	$	1,115	$	1,042		$	1,069	$	1,006	$	618
Ratio of earnings to fixed charges	12.7		13.0			10.7		10.2		17.2

- 1 -

EX-13

Exhibit 13

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Description of Our Company

We are a holding company whose subsidiaries and affiliates, and their licensees, are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside the United States of America. We manage our business in four segments:

• European Union;

• Eastern Europe, Middle East & Africa (“EEMA”);

• Asia; and

• Latin America & Canada.

Our products are sold in more than 180 markets and, in many of these markets, they hold the number one or number two market share position. We have a wide range of premium, mid-price and low-price brands. Ourportfolio comprises both international and local brands.

We use the term net revenues to refer to our operating revenues from the sale of our products, net of sales and promotion incentives. Our net revenues and operating income are affected by various factors, including the volume of products we sell, the price of our products, changes in currency exchange rates and the mix of products we sell. Mix is a term used to refer to the proportionate value of premium-price brands to mid-price or low-price brands in any given market (product mix). Mix can also refer to the proportion of shipment volume in more profitable markets versus shipment volume in less profitable markets (geographic mix). We often collect excise taxes from our customers and then remit them to governments, and, in those circumstances, we include the excise taxes in our net revenues and in excise taxes on products. Our cost of sales consists principally of tobacco leaf, non-tobacco raw materials, labor and manufacturing costs.

Our marketing, administration and research costs include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (including general corporate expenses), and costs incurred to develop new products. The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses.

We are a legal entity separate and distinct from our direct and indirect subsidiaries. Accordingly, our right, and thus the right of our creditors and stockholders, to participate in any distribution of the assets or earnings of any subsidiary is subject to the prior rights of creditors of such subsidiary, except to the extent that claims of our company itself as a creditor may be recognized. As a holding company, our principal sources of funds, including funds to make payment on our debt securities, are from the receipt of dividends and repayment of debt from our subsidiaries. Our principal wholly owned and majority-owned subsidiaries currently are not limited by long-term debt or other agreements in their ability to pay cash dividends or to make other distributions with respect to their common stock.

Prior to March 28, 2008, we were a wholly owned subsidiary of Altria Group, Inc. (“Altria”).

Executive Summary

The following executive summary provides significant highlights from the Discussion and Analysis that follows.

Consolidated Operating Results– The changes in our reported diluted earnings per share (“diluted EPS”) for the year ended December 31, 2012, from the comparable 2011 amounts, were as follows:

	Diluted EPS			% Growth
For the year ended December 31, 2011	$	4.85
2011 Asset impairment and exit costs	0.05
2011 Tax items	(0.02		)
Subtotal of 2011 items	0.03
2012 Asset impairment and exit costs	(0.03		)
2012 Tax items	(0.02		)
Subtotal of 2012 items	(0.05		)
Currency	(0.23		)
Interest	(0.03		)
Change in tax rate	0.02
Impact of lower shares outstanding and share-based payments	0.20
Operations	0.38
For the year ended December 31, 2012	$	5.17		6.6	%

See the discussion of events affecting the comparability of statement of earnings amounts in the Consolidated Operating Results section of the following Discussion and Analysis.

Asset Impairment and Exit Costs – During 2012, we recorded pre-tax asset impairment and exit costs of $83 million ($52 million after tax and noncontrolling interests or $0.03 per share) primarily related to factory restructurings and the consolidation of R&D activities, as well as contract termination charges in Asia. During 2011, we recorded pre-tax asset impairment and exit costs of $109 million ($82 million after tax or $0.05 per share) primarily related to factory and R&D restructurings, as well as a contract termination charge in EEMA. For further details, seeNote 5. Asset Impairment and Exit Costs to our consolidated financial statements.

Income Taxes - The 2012 effective tax rate was unfavorably impacted by an additional income tax provision of $79 million following the conclusion of the IRS examination of Altria’s consolidated tax returns for the years 2004-2006, partially offset by a $40 million benefit from a tax accounting method change in Germany. The 2011 effective tax rate was favorably impacted by an enacted decrease in corporate income tax rates in Greece ($11 million) and the reversal of

21

a valuation allowance in Brazil ($15 million). The special tax items discussed in this paragraph decreased our diluted EPS by $0.02 per share in 2012 and increased our diluted EPS by $0.02 per share in 2011. Excluding the impact of the special items in each year, the change in tax rate that increased our diluted EPS by $0.02 per share in 2012 was primarily due to earnings mix and repatriation cost differences.

Currency – The unfavorable currency impact during 2012 was due primarily to the Argentine peso, Brazilian real, the Euro, Indonesian rupiah, Polish zloty, Russian ruble and Turkish lira, partially offset by the Japanese yen and the Swiss franc.

Interest – The unfavorable impact of interest was due primarily to higher average debt levels, partially offset by lower average interest rates on debt.

Lower Shares Outstanding and Share-Based Payments – The favorable diluted EPS impact was due to the repurchase of our common stock pursuant to our share repurchase programs.

Operations – The increase in diluted EPS of $0.38 from our operations was due primarily to the following segments:

• EEMA: Higher pricing and favorable volume/mix, partially offset by higher marketing, administration and research costs;

• Asia: Higher pricing and lower manufacturing costs (reflecting favorable shipping costs related to substantial air freight expenses to ship product to Japan in 2011), partially offset by higher marketing, administration and research costs and unfavorable volume/mix attributable to Japan; and

• Latin America & Canada: Higher pricing, partially offset by unfavorable volume/mix and higher manufacturing costs.

For further details, see the “Consolidated Operating Results” and “Operating Results by Business Segment” sections of the following “Discussion and Analysis.”

2013 Forecasted Results – On February 7, 2013, we announced our forecast for 2013 full-year reported diluted EPS to be in a range of $5.68 to $5.78, at prevailing exchange rates at that time, versus $5.17 in 2012. Excluding a forecasted total unfavorable currency impact of approximately $0.06 per share for the full-year 2013, the reported diluted earnings per share range represents a projected increase of 10% to 12% versus adjusted diluted earnings per share of $5.22 in 2012. We calculated 2012 adjusted diluted EPS as reported diluted EPS of $5.17, plus the $0.02 per share charge related to discrete tax items, and the $0.03 per share charge related to asset impairment and exit costs.

This 2013 guidance excludes the impact of potential future acquisitions, unanticipated asset impairment and exit cost charges and any unusual events. The factors described in the Cautionary Factors That May Affect Future Results section of the following Discussion and Analysis represent continuing risks to this forecast.

Adjusted diluted EPS is not a U.S. GAAP measure. We define adjusted diluted EPS as reported diluted EPS adjusted for asset impairment and exit costs, discrete tax items and unusual items. We believe it is appropriate to disclose this measure as it represents core

earnings, improves comparability and helps investors analyze business performance and trends. Adjusted diluted EPS should be considered neither in isolation nor as a substitute for reported diluted EPS prepared in accordance with U.S. GAAP.

Discussion and Analysis         

Critical Accounting Policies and Estimates

Note 2. Summary of Significant Accounting Policies to our consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. In most instances, we must use a particular accounting policy or method because it is the only one that is permitted under accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The preparation of financial statements requires that we use estimates and assumptions that affect the reported amounts of our assets, liabilities, net revenues and expenses, as well as our disclosure of contingencies. If actual amounts differ from previous estimates, we include the revisions in our consolidated results of operations in the period during which we know the actual amounts. Historically, aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements.

The selection and disclosure of our critical accounting policies and estimates have been discussed with our Audit Committee. The following is a discussion of the more significant assumptions, estimates, accounting policies and methods used in the preparation of our consolidated financial statements:

•Revenue Recognition – As required by U.S. GAAP, we recognize revenues, net of sales and promotion incentives. Our net revenues include excise taxes and shipping and handling charges billed to our customers. Our net revenues are recognized upon shipment or delivery of goods when title and risk of loss pass to our customers. We record shipping and handling costs paid to third parties as part of cost of sales.

•Goodwill and Non-Amortizable Intangible Assets Valuation – We test goodwill and non-amortizable intangible assets annually for impairment or more frequently if events occur that would warrant such review. We perform our annual impairment analysis in the first quarter of each year. The impairment analysis involves comparing the fair value of each reporting unit or non-amortizable intangible asset to the carrying value. If the carrying value exceeds the fair value, goodwill or a non-amortizable intangible asset is considered impaired. To determine the fair value of goodwill, we primarily use a discounted cash flow model, supported by the market approach using earnings multiples of comparable companies. To determine the fair value of non-amortizable intangible

22

assets, we primarily use a discounted cash flow model applying the relief-from-royalty method. These discounted cash flow models include management assumptions relevant for forecasting operating cash flows, which are subject to changes in business conditions, such as volumes and prices, costs to produce, discount rates and estimated capital needs.  Management considers historical experience and all available information at the time the fair values are estimated, and we believe these assumptions are consistent with the assumptions a hypothetical marketplace participant would use. We concluded that the fair value of our reporting units and non-amortizable intangible assets exceeded the carrying value and any reasonable movement in the assumptions would not result in an impairment. Since the March 28, 2008 spin-off from Altria, we have not recorded a charge to earnings for an impairment of goodwill or non-amortizable intangible assets.

•Marketing and Advertising Costs – As required by U.S. GAAP, we record marketing costs as an expense in the year to which costs relate. We do not defer amounts on our balance sheet. We expense advertising costs during the year in which the costs are incurred. We record trade promotion costs as a reduction of revenues during the year in which these programs are offered, relying on estimates of utilization and redemption rates that have been developed from historical information. Such programs include, but are not limited to, discounts, rebates, in-store display incentives and volume-based incentives. For interim reporting purposes, advertising and certain consumer incentives are charged to earnings based on estimated sales and related expenses for the full year.

•Employee Benefit Plans – As discussed in Note 13. Benefit Plans to our consolidated financial statements, we provide a range of benefits to our employees and retired employees, including pensions, postretirement health care and postemployment benefits (primarily severance). We record annual amounts relating to these plans based on calculations specified by U.S. GAAP. These calculations include various actuarial assumptions, such as discount rates, assumed rates of return on plan assets, compensation increases and turnover rates. We review actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. As permitted by U.S. GAAP, any effect of the modifications is generally amortized over future periods. We believe that the assumptions utilized in calculating our obligations under these plans are reasonable based upon advice from our actuaries.

At December 31, 2012, our discount rate was 4.05% for our U.S. pension and postretirement plans. This rate was 45 basis points lower than our 2011 discount rate of 4.50%. Our weighted-average discount rate assumption for our non-U.S. pension plans decreased to 2.38%, from 3.40% at December 31, 2011. Our weighted-average discount rate assumption for our non-U.S. postretirement plans was 4.59% at December 31, 2012, and 5.45% at December 31, 2011. We anticipate that assumption changes, coupled with the amortization of deferred losses, will increase 2013 pre-tax U.S. and non-U.S. pension and postretirement expense to approximately $327 million as compared with $222 million in 2012, excluding amounts related to early retirement programs. A fifty-basis-point decrease in our discount rate would increase our 2013 pension and postretirement expense by approximately $60 million, and a fifty-basis-point increase in our discount rate would decrease our 2013 pension and postretirement expense by approximately $50 million. Similarly, a fifty-basis-point decrease (increase) in the expected return on plan assets would increase

(decrease) our 2013 pension expense by approximately $30 million.

See Note 13. Benefit Plans to our consolidated financial statements for a sensitivity discussion of the assumed health care cost trend rates.

•Income Taxes – Income tax provisions for jurisdictions outside the United States, as well as state and local income tax provisions, are determined on a separate company basis, and the related assets and liabilities are recorded in our consolidated balance sheets.

The extent of our operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. In accordance with the authoritative guidance for income taxes, we evaluate potential tax exposures and record tax liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary.

The effective tax rates used for interim reporting are based on our full-year geographic earnings mix projections and cash repatriation plans. Changes in currency exchange rates, earnings mix or in cash repatriation plans could have an impact on the effective tax rates, which we monitor each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

At December 31, 2012, applicable United States federal income taxes and foreign withholding taxes have not been provided on approximately $18 billion of accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. These earnings have been or will be invested to support the growth of our international business. Further, we do not foresee a need to repatriate these earnings to the U.S. since our U.S. cash requirements are supported by distributions from foreign entities of earnings that have not been designated as permanently reinvested and existing credit facilities. Repatriation of earnings from foreign subsidiaries for which we have asserted that the earnings are

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permanently reinvested would result in additional U.S. income and foreign withholding taxes. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable.

Prior to the spin-off of PMI by Altria, we were a wholly owned subsidiary of Altria. We participated in a tax-sharing agreement with Altria for U.S. tax liabilities, and our accounts were included with those of Altria for purposes of its U.S. federal income tax return. Under the terms of the agreement, taxes were computed on a separate company basis. To the extent that we generated foreign tax credits, capital losses and other credits that could not be utilized on a separate company basis, but were utilized in Altria’s consolidated U.S. federal income tax return, we would recognize the resulting benefit in the calculation of our provision for income taxes. We made payments to, or were reimbursed by, Altria for the tax effects resulting from our inclusion in Altria’s consolidated United States federal income tax return. On the date of the spin-off of PMI by Altria, we entered into a Tax Sharing Agreement with Altria. The Tax Sharing Agreement generally governs Altria’s and our respective rights, responsibilities and obligations for pre-distribution periods and for potential taxes on the spin-off of PMI by Altria. With respect to any potential tax resulting from the spin-off of PMI by Altria, responsibility for the tax will be allocated to the party that acted (or failed to act) in a manner which resulted in the tax. Beginning March 31, 2008, we were no longer a member of the Altria consolidated tax return group, and we filed our own U.S. federal consolidated income tax return.

•Fair Value Assessment of PMFTC Inc. – As discussed in Note 6. Acquisitions and Other Business Arrangements, on February 25, 2010, our affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). PMPMI and FTC hold equal economic interests in PMFTC, while we manage the day-to-day operations of PMFTC and have a majority of its Board of Directors. Consequently, we accounted for the contributed assets and liabilities of FTC as a business combination.

The fair value of the assets and liabilities contributed by FTC in this non-cash transaction was determined to be $1.17 billion. FTC holds the right to sell its interest in PMFTC to us, except in certain circumstances, during the period from February 25, 2015, through February 24, 2018, at an agreed-upon value of $1.17 billion, which was recorded on our consolidated balance sheet as a redeemable noncontrolling interest at the date of the business combination.

In future periods, if the fair value of 50% of PMFTC were to drop below the redemption value of $1.17 billion, the difference would be treated as a special dividend to FTC and would reduce our earnings per share. Reductions in earnings per share may be partially or fully reversed in subsequent periods if the fair value of the redeemable noncontrolling interest increases relative to the redemption value. Such increases in earnings per share would be limited to cumulative prior reductions. At December 31, 2012, we determined that 50% of the fair value of PMFTC exceeded the redemption value of $1.17 billion and that any reasonable movement in the assumptions would not result in the fair value being less than the redemption value.

•Hedging – As discussed below in “Market Risk,” we use derivative financial instruments principally to reduce exposures to market risks resulting from fluctuations in foreign currency exchange rates by creating offsetting exposures. For derivatives to which we have elected to apply hedge accounting, we meet the requirements of U.S. GAAP. As a result, gains and losses on these derivatives are initially deferred in accumulated other comprehensive losses on the consolidated balance sheet and recognized in the consolidated statement of earnings in the periods when the related hedged transactions are also recognized in operating results. If we had elected not to use the hedge accounting provisions permitted under U.S. GAAP, gains (losses) deferred in stockholders’ (deficit) equity would have been recorded in our net earnings.

•Contingencies – As discussed in Note 21. Contingencies to our consolidated financial statements, legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. Much of the tobacco-related litigation is in its early stages, and litigation is subject to uncertainty. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. Legal defense costs are expensed as incurred.

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Consolidated Operating Results

See pages 47 to 50 for a discussion of our “Cautionary Factors That May Affect Future Results.” Our cigarette volume, net revenues, excise taxes on products and operating companies income by segment were as follows:

(in millions)	2012		2011		2010
Cigarette Volume
European Union	197,966		211,493		222,964
Eastern Europe, Middle East & Africa	303,828		290,250		289,312
Asia	326,582		313,282		282,290
Latin America & Canada	98,660		100,241		105,290
Total cigarette volume	927,036		915,266		899,856
(in millions)	2012		2011		2010
Net Revenues
European Union	$	27,338	$	29,768	$	28,050
Eastern Europe, Middle East & Africa	19,272		17,452		15,928
Asia	21,071		19,590		15,235
Latin America & Canada	9,712		9,536		8,500
Net revenues	$	77,393	$	76,346	$	67,713
(in millions)	2012		2011		2010
Excise Taxes on Products
European Union	$	18,812	$	20,556	$	19,239
Eastern Europe, Middle East & Africa	10,940		9,571		8,519
Asia	9,873		8,885		7,300
Latin America & Canada	6,391		6,237		5,447
Excise taxes on products	$	46,016	$	45,249	$	40,505

(in millions)	2012			2011			2010
Operating Income
Operating companies income:
European Union	$	4,187		$	4,560		$	4,311
Eastern Europe, Middle East & Africa	3,726			3,229			3,152
Asia	5,197			4,836			3,049
Latin America & Canada	1,043			988			953
Amortization of intangibles	(97		)	(98		)	(88		)
General corporate expenses	(210		)	(183		)	(177		)
Operating income	$	13,846		$	13,332		$	11,200

As discussed in Note 12. Segment Reporting to our consolidated financial statements, we evaluate segment performance and allocate resources based on operating companies income, which we define as operating income before general corporate expenses and amortization of intangibles. We believe it is appropriate to disclose this measure to help investors analyze the business performance and trends of our various business segments.

References to total international cigarette market, total cigarette market, total market and market shares throughout this

“Discussion and Analysis” reflect our best estimates based on a number of internal and external sources.

The following events that occurred during 2012, 2011 and 2010 affected the comparability of our statement of earnings amounts:

•Asset Impairment and Exit Costs – For the years ended December 31, 2012, 2011 and 2010, pre-tax asset impairment and exit costs by segment were as follows:

(in millions)	2012		2011		2010
Separation programs:
European Union	$	—	$	35	$	27
Eastern Europe, Middle East & Africa	—		6		—
Asia	13		7		—
Latin America & Canada	29		15		—
Total separation programs	42		63		27
Contract termination charges:
Eastern Europe, Middle East & Africa	—		12		—
Asia	13		—		20
Total contract termination charges	13		12		20
Asset impairment charges:
European Union	5		10		—
Eastern Europe, Middle East & Africa	5		7		—
Asia	13		8		—
Latin America & Canada	5		9		—
Total asset impairment charges	28		34		—
Asset impairment and exit costs	$	83	$	109	$	47

For further details, see Note 5. Asset Impairment and Exit Costs to our consolidated financial statements.

•Acquisitions and Other Business Arrangements –In 2012, we did not have any acquisitions and other business arrangements. For details on 2011 and 2010, see Note 6. Acquisitions and Other Business Arrangements to our consolidated financial statements.

2012 compared with 2011

The following discussion compares our consolidated operating results for the year ended December 31, 2012, with the year ended December 31, 2011.

Our cigarette shipment volume of 927.0 billion units increased by 11.8 billion (1.3%), due primarily to gains in:

•EEMA, driven mainly by Egypt, Russia and Turkey; and

• Asia, driven mainly by Indonesia, the Philippines, Thailand and Vietnam, partially offset by Japan and Korea.

These gains were partially offset by declines in:

• the European Union, predominantly due to France and southern Europe; and

• Latin America & Canada, mainly due to Argentina, Canada, Colombia and Mexico.

Excluding acquisitions, our cigarette shipment volume was up by 1.3%. Excluding acquisitions and the Japan hurdle of 6.3 billion units related to additional volume shipped in the second quarter of 2011 as a result of the disruption of our principal competitor's supply chain following the natural disaster in March 2011, our cigarette shipment volume was up by 2.0%.

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Our market share in our top 30 OCI markets was 37.4%, up by 0.6 share points. Our market share grew in a number of markets, notably Algeria, Argentina, Australia, Belgium, Brazil, Colombia, Egypt, Greece, Indonesia, Mexico, Poland, Russia, Thailand, Turkey and Ukraine.

Total cigarette shipment volume of Marlboro of 301.6 billion units was up by 0.5%, or by 1.1%, excluding the Japan hurdle. This increase is due primarily to growth in: EEMA of 3.6%, notably in the Middle East, North Africa and Turkey, partly offset by Romania, Russia and Ukraine; Asia of 3.6%, principally driven by Indonesia, the Philippines and Vietnam, partly offset by Japan and Korea; and Latin America & Canada of 0.7%, notably in Brazil and Colombia, partly offset by Argentina. Cigarette shipments of Marlboro declined in the European Union by 4.6%, notably in France, Italy and Spain.

Total cigarette shipment volume of L&M of 93.7 billion units was up by 4.0%, reflecting growth in: EEMA of 8.6%, notably in Egypt, Russia and Turkey; Asia of 14.8%, mainly in Thailand; and Latin America & Canada of 6.9%, mainly in Brazil and Colombia. Cigarette shipment volume of L&M declined in the European Union by 4.1%, notably in Greece, Poland and Spain, partly offset by growth in France.

Total cigarette shipment volume of Bond Street of 46.8 billion units increased by 4.1%, led mainly by growth in Kazakhstan and Ukraine, partly offset by a decline in Hungary.

Total cigarette shipment volume of Parliament of 43.4 billion units was up by 10.1%, or by 11.1%, excluding the Japan hurdle, fueled by strong growth in EEMA of 16.5%, driven by Kazakhstan, Russia, Turkey and Ukraine. Cigarette shipment volume of Parliament declined in Asia by 4.3%, notably in Japan and Korea.

Total cigarette shipment volume of Philip Morris of 38.0 billion units decreased by 3.2%, or by 1.4%, excluding the Japan hurdle, mainly reflecting a decline in Japan and the Philippines, partly offset by growth in Argentina and Portugal.

Total cigarette shipment volume of Chesterfield of 35.5 billion units was down by 3.2%, due mainly to Ukraine, partly offset by growth in the European Union, notably in Poland, Portugal and the United Kingdom.

Total cigarette shipment volume of Lark of 32.1 billion units decreased by 4.6%. Excluding the Japan hurdle, cigarette shipment volume of Lark increased 3.5%.

Our other tobacco products ("OTP") consist mainly of tobacco for roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos. Total shipment volume of OTP, in cigarette equivalent units, excluding acquisitions, grew by 9.8% to 31.2 billion units, notably in Belgium, France, Germany, Greece, Italy and Spain, partly offset by Poland.

Total shipment volume for cigarettes and OTP combined was up by 1.5%, excluding acquisitions. Total shipment volume for cigarettes and OTP combined was up by 2.2%, excluding acquisitions and the Japan hurdle.

Our net revenues and excise taxes on products were as follows:

(in millions)	2012		2011		Variance		%
Net revenues	$	77,393	$	76,346	$	1,047	1.4	%
Excise taxes on products	46,016		45,249		767		1.7	%
Net revenues, excluding excise taxes on products	$	31,377	$	31,097	$	280	0.9	%

Currency movements decreased net revenues by $5.0 billion and net revenues, excluding excise taxes on products, by $1.5 billion. The $1.5 billion decrease was due primarily to the Argentine peso, Brazilian real, Euro, Indonesian rupiah, Mexican peso, Polish zloty, Russian ruble and Turkish lira, partially offset by the Japanese yen and Philippine peso.

Net revenues shown in the table above include $1,709 million in 2012 and $1,589 million in 2011 related to sales of OTP. These net revenue amounts include excise taxes billed to customers. Excluding excises taxes, net revenues for OTP were $676 million in 2012 and $616 million in 2011.

Net revenues, which include excise taxes billed to customers, increased$1.0 billion (1.4%). Excluding excise taxes, net revenues increased$280 million (0.9%) to $31.4 billion. This increase was due to:

• price increases ($1.8 billion) and

• the impact of acquisitions ($28 million), partly offset by

• unfavorable currency ($1.5 billion) and

• unfavorable volume/mix ($12 million).

Excise taxes on products increased$767 million (1.7%), due to:

• higher excise taxes resulting from changes in retail prices and tax rates ($3.9 billion) and

• volume/mix ($415 million), partly offset by

• favorable currency ($3.5 billion).

Governments have consistently increased excise taxes in most of the markets in which we operate. As discussed under the caption “Business Environment,” we expect excise taxes to continue to increase.

Our cost of sales; marketing, administration and research costs; and operating income were as follows:

(in millions)	2012		2011		Variance			%
Cost of sales	$	10,373	$	10,678	$	(305	)	(2.9	)%
Marketing, administration and research costs	6,978		6,880		98			1.4	%
Operating income	13,846		13,332		514			3.9	%

Cost of sales decreased$305 million (2.9%), due primarily to:

• favorable currency ($557 million), partly offset by

• volume/mix ($221 million),

• higher manufacturing costs ($16 million) and

• the impact of acquisitions ($15 million).

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With regard to tobacco leaf prices, we continue to expect modest increases going forward, broadly in line with inflation, as the market has now been stabilized, due in part to our increased direct involvement with local farmers. We also anticipate some cost pressure in 2013, driven in large measure by the historical leaf tobacco price increases that will continue to affect our product costs in the current year, higher prices for cloves and higher prices for a number of other direct materials we use in the production of our brands.

Marketing, administration and research costs increased$98 million (1.4%), due to:

• higher expenses ($424 million, principally related to increased marketing expenditures, notably in Germany, Indonesia and Russia, increased headcount and business infrastructure in Russia and expenditures incurred to combat illicit trade in cigarettes) and

• the impact of acquisitions ($9 million), partly offset by

• favorable currency ($335 million).

Operating income increased by $514 million (3.9%). This increase was due primarily to:

• price increases ($1.8 billion), partly offset by

• unfavorable currency ($600 million),

• higher marketing, administration and research costs ($424 million) and

• unfavorable volume/mix ($233 million).

Interest expense, net, of $859 millionincreased$59 million, due primarily to higher average debt levels, partially offset by lower average interest rates on debt.

Our effective tax rate increased0.4 percentage points to 29.5%. The 2012 effective tax rate was unfavorably impacted by an additional income tax provision of $79 million following the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2004-2006, partially offset by a $40 million benefit from a tax accounting method change in Germany. The 2011 effective tax rate was favorably impacted by an enacted decrease in corporate income tax rates in Greece ($11 million) and the reversal of a valuation allowance in Brazil ($15 million). The effective tax rate is based on our full-year geographic earnings mix and cash repatriation plans. Changes in our cash repatriation plans could have an impact on the effective tax rate, which we monitor each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions. Based upon tax regulations in existence at December 31, 2012, the American Taxpayer Relief Act of 2012 and our cash repatriation plans, we estimate that our 2013 effective tax rate will be approximately 29% to 30%.

We are regularly examined by tax authorities around the world, and we are currently under examination in a number of jurisdictions. It is reasonably possible that within the next twelve months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties. An estimate of any possible charge cannot be made at this time.

Net earnings attributable to PMI of $8.8 billionincreased$209 million (2.4%). This increase was due primarily to higher operating income, partially offset by a higher effective tax rate and higher interest expense, net. Diluted and basic EPS of $5.17increased by 6.6%. Excluding an unfavorable currency impact of $0.23, diluted EPS increased by 11.3%. Excluding the unfavorable currency impact and the 2011 earnings per share hurdle of $0.10 related to Japan, diluted EPS increased by 13.7%.

2011 compared with 2010

The following discussion compares our consolidated operating results for the year ended December 31, 2011, with the year ended December 31, 2010.

Our cigarette shipment volume of 915.3 billion units increased15.4 billion (1.7%), due primarily to gains in:

• Asia, primarily driven by a higher total market and share in Indonesia, higher share in Japan (including the benefit from the shortages of competitors’ products) and Korea, as well as the favorable impact of the business combination in the Philippines; and

• EEMA, primarily due to higher total markets in Algeria and Saudi Arabia, and higher share in Algeria and Turkey.

These gains were partially offset by declines in:

• the European Union, primarily due to lower total markets and share, mainly in Italy, Portugal and Spain, and a lower total market in Greece; and

• Latin America & Canada, due mainly to Mexico, reflecting a lower total market, partly offset by a higher total market and share in Argentina, and higher share in Canada.

Excluding acquisitions (primarily the business combination with Fortune Tobacco Corporation in the Philippines in 2010), our cigarette shipment volume was up 0.5%, driven by growth from each of our top ten brands by volume, which, collectively, represented more than 75% of our total cigarette shipment volume.

Our market share performance was stable or registered growth in a number of markets, including Algeria, Argentina, Australia, Austria, Belgium, Canada, France, Germany, Greece, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, the Netherlands, the Philippines, Russia, Singapore, Thailand and Turkey.

Total cigarette shipments of Marlboro of 300.1 billion units were up by 0.9%, due primarily to an increase in Asia of 8.8%, mainly Indonesia, Japan, Korea and Vietnam; and growth in EEMA of 5.3%, primarily due to the Middle East and North Africa. These increases were partially offset by declines in the European Union of 5.1%, mainly reflecting lower total markets and share, primarily in Italy, Portugal and Spain, a lower market in Greece, and lower share in Germany, partly offset by share growth in Belgium and Hungary; and in Latin America & Canada of 5.8%, mainly due to a lower total market in Mexico, partly offset by share growth in Argentina, Colombia and Brazil.

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Total cigarette shipments of L&M of 90.1 billion units were up by 1.7%, reflecting growth in the European Union, EEMA and Latin America & Canada segments.

Total cigarette shipments of Bond Street of 45.0 billion units increased by 2.0%, led mainly by growth in Kazakhstan, Russia and Ukraine, partially offset by declines in Hungary and Turkey.

Total cigarette shipments of Parliament of 39.4 billion units were up by 12.1%.

Total cigarette shipments of Philip Morris of 39.3 billion units increased by 1.4%, mainly reflecting growth in Japan and Argentina, partly offset by a decline in the Philippines.

Total cigarette shipments of Chesterfield of 36.7 billion units were up by 0.6%, driven by growth in the European Union, primarily in Germany and Portugal.

Total cigarette shipments of Lark of 33.7 billion units increased by 17.5%, driven by growth in Japan, partially offset by a decline in Turkey.

Total shipment volume of OTP, in cigarette equivalent units, excluding acquisitions, grew by 8.3%, notably in Benelux, France, Italy and Germany.

Total shipment volume for cigarettes and OTP combined was up by 0.8% excluding acquisitions.

Our net revenues and excise taxes on products were as follows:

(in millions)	2011		2010		Variance		%
Net revenues	$	76,346	$	67,713	$	8,633	12.7	%
Excise taxes on products	45,249		40,505		4,744		11.7	%
Net revenues, excluding excise taxes on products	$	31,097	$	27,208	$	3,889	14.3	%

Currency movements increased net revenues by $2.6 billion and net revenues, excluding excise taxes on products, by $1.2 billion. The $1.2 billion increase was due primarily to the Australian dollar, the Euro, Indonesian rupiah, Japanese yen, Russian ruble and the Swiss franc, partially offset by the Turkish lira.

Net revenues shown in the table above include $1,589 million in 2011 and $1,321 million in 2010 related to sales of OTP. These net revenue amounts include excise taxes billed to customers. Excluding excises taxes, net revenues for OTP were $616 million in 2011 and $514 million in 2010.

Net revenues, which include excise taxes billed to customers, increased$8.6 billion (12.7%). Excluding excise taxes, net revenues increased$3.9 billion (14.3%) to $31.1 billion. This increase was due to:

• price increases ($1.9 billion),

• favorable currency ($1.2 billion),

• favorable volume/mix ($609 million) and

• the impact of acquisitions ($137 million).

Excise taxes on products increased$4.7 billion (11.7%), due to:

• higher excise taxes resulting from changes in retail prices and tax rates ($3.2 billion),

• currency movements ($1.3 billion),

• volume/mix ($198 million) and

• the impact of acquisitions ($52 million).

Our cost of sales; marketing, administration and research costs; and operating income were as follows:

(in millions)	2011		2010		Variance		%
Cost of sales	$	10,678	$	9,713	$	965	9.9	%
Marketing, administration and research costs	6,880		6,160		720		11.7	%
Operating income	13,332		11,200		2,132		19.0	%

Cost of sales increased$965 million (9.9%), due to:

• higher manufacturing costs ($428 million, including air freight costs related to additional shipments to Japan),

• currency movements ($254 million),

• volume/mix ($187 million) and

• the impact of acquisitions ($96 million).

Marketing, administration and research costs increased$720 million (11.7%), due to:

• currency ($427 million),

• higher expenses ($278 million, principally related to increased marketing investment in Japan and Russia, and business infrastructure investment in Russia) and

• the impact of acquisitions ($15 million).

Operating income increased$2.1 billion (19.0%). This increase was due primarily to:

• price increases ($1.9 billion),

• favorable currency ($565 million) and

• favorable volume/mix ($422 million), partially offset by

• higher manufacturing expenses ($428 million),

• higher marketing, administration and research costs ($278 million) and

• higher asset impairment and exit costs ($62 million).

Interest expense, net, of $800 milliondecreased$76 million, due primarily to lower average interest rates on debt and higher interest income, partially offset by higher average debt levels.

Our effective tax rate increased1.7 percentage points to 29.1%, due primarily to higher discrete tax items in 2010 that benefited our 2010 effective tax rate. The 2011 effective tax rate was favorably impacted by an enacted decrease in corporate income tax rates in Greece ($11 million) and the reversal of a valuation allowance in Brazil ($15 million). The 2010 effective tax rate was favorably impacted by the reversal of tax reserves ($148 million) following the conclusion of the IRS examination of Altria Group, Inc.’s consolidated tax returns for the years 2000 through 2003, partially offset by the negative impact of an enacted increase in corporate income tax rates in Greece ($21 million) and the net result of an audit in Italy ($6 million).

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Net earnings attributable to PMI of $8.6 billionincreased$1.3 billion (18.3%). This increase was due primarily to higher operating income, partially offset by a higher effective tax rate. Diluted and basic EPS of $4.85 increased by 23.7% and 23.4%, respectively. Excluding a favorable currency impact of $0.19, diluted EPS increased by 18.9%.

Operating Results by Business Segment

Business Environment

Taxes, Legislation, Regulation and Other Matters Regarding the Manufacture, Marketing, Sale and Use of Tobacco Products

The tobacco industry faces a number of challenges that may adversely affect our business, volume, results of operations, cash flows and financial position. These challenges, which are discussed below and in “Cautionary Factors That May Affect Future Results,” include:

• actual and proposed tobacco legislation and regulation;

• actual and proposed excise tax increases, as well as changes in excise tax structures and retail selling price regulations;

• price gaps and changes in price gaps between premium and mid-price and low-price brands and between cigarettes and other tobacco products;

• increased efforts by tobacco control advocates and governments to “denormalize” smoking and impose extreme regulatory requirements impacting our ability to communicate with adult consumers and differentiate our products from competitors' products, including legislation to mandate plain (generic) packaging resulting in the expropriation of our brands and trademarks;

• actual and proposed extreme regulatory requirements related to the ingredients in tobacco products, including restrictions and complete bans;

• other actual and proposed restrictions affecting tobacco manufacturing, testing and performance standards and requirements, packaging, marketing, advertising, product display and sales;

• governmental and private bans and restrictions on smoking;

• illicit trade in cigarettes and other tobacco products, including counterfeit, contraband and so called “illicit whites;”

• actual and proposed restrictions on imports in certain jurisdictions;

• pending and threatened litigation as discussed in Note 21. Contingencies; and

• governmental investigations.

In the ordinary course of business, many factors can affect the timing of sales to customers, including the timing of holidays and

other annual or special events, the timing of promotions, customer incentive programs and customer inventory programs, as well as the actual or speculated timing of pricing actions and tax-driven price increases.

•Framework Convention on Tobacco Control: The World Health Organization's (“WHO”) Framework Convention on Tobacco Control (“FCTC”) entered into force in February 2005. As of February 2013, 175 countries, as well as the European Community, have become Parties to the FCTC. The FCTC is the first international public health treaty, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. The treaty recommends (and, in certain instances, requires) Parties to have in place or enact legislation that would:

• establish specific actions to prevent youth smoking;

• restrict and/or eliminate all tobacco product advertising, marketing, promotions and sponsorships;

• initiate public education campaigns to inform the public about the health consequences of smoking and the benefits of quitting;

• implement regulations imposing tobacco product testing, disclosure and performance standards;

• impose health warning requirements on tobacco product packaging;

• adopt measures aimed at eliminating illicit trade in tobacco products;

• restrict smoking in public places;

• implement public health-based fiscal policies (tax and price measures);

• adopt and implement measures that ensure that packaging and labeling, including descriptive terms, do not create the false impression that one brand of tobacco products is safer than another;

• phase out or restrict duty free tobacco sales; and

• encourage litigation against tobacco product manufacturers.

In many respects, the areas of regulation we support mirror provisions of the FCTC. For example, we have long advocated for laws that strictly prohibit the sale of tobacco products to minors, limit public smoking, mandate the placement of health warnings on tobacco product packaging, and regulate product content to ensure that changes to the product do not increase the adverse health effects of smoking and to establish a regulatory framework for future reduced risk products. We also strongly support the use of tax and price policies to achieve public health objectives, provided that they do not result in increased illicit trade. We do not, however, agree with the current views of the WHO and others who are pursuing policies that have gone far beyond the original text of the FCTC treaty.

For example, following the entry into force of the FCTC, the Conference of the Parties (“CoP”), the governing body of the FCTC, has adopted several guidelines proposed

29

by tobacco control advocates and supported by WHO that provide non-binding recommendations which purport to supplement specific articles of the treaty. The recommendations include measures that we strongly oppose, such as point-of-sale display bans, plain packaging, a ban on all forms of communications to adult smokers, measures to prohibit or restrict ingredients that may increase the palatability or attractiveness of tobacco products, bans on charitable contributions, measures to prevent the use of journalistic expression or political commentary “for the promotion of tobacco use,” bans on retailer incentive programs and limits on tobacco industry involvement in the development of tobacco policy and regulations.

These recommendations and the actions of the WHO and others reflect an extreme application of the treaty, are not based on sound evidence of a public health benefit, and in many cases are likely to lead to adverse consequences.The evidence does not show that these measures will help achieve the public health goals of the original treaty provisions. In fact, as we discuss below, some of these extreme measures are likely to undermine the original goals of the FCTC and public health by leading to a further increase in illicit trade, the proliferation of low-price cigarettes and, in the case of measures such as plain packaging, will result in the expropriation of our trademarks, harm competition and violate international treaties.

Although to date only a few governments have adopted these extreme measures, it is not possible to predict whether or to what extent the various CoP guidelines and WHO recommendations will be adopted. If governments choose to implement regulation based on these extreme recommendations, such regulation may adversely affect our business, volume, results of operations, cash flows and financial position. In some instances, including those described below, where such regulation has been adopted, we have commenced legal proceedings challenging the regulation. It is not possible to predict the outcome of these legal proceedings.

•Excise Taxes: Tobacco products are subject to substantial excise taxes and to other product taxation worldwide. Significant increases in tobacco-related taxes or fees have been proposed or enacted and are likely to continue to be proposed or enacted. For example, the Philippines recently enacted a new excise tax law that increased the excise tax on the premium-price segment by more than 100% and on the low-price segment by nearly 340% in 2013 and provides for further significant increases primarily affecting the lower tier until both tiers are merged in 2017. In addition, in certain jurisdictions, our products are subject to tax structures that discriminate against premium price products and manufactured cigarettes.

Excessive and disruptive tax increases and discriminatory tax structures, which we oppose, are expected to continue to have an adverse impact on our sales of cigarettes, due to lower consumption levels and to a shift in consumer purchases from premium to non-premium, discount, other low-price or low-taxed tobacco products, such as fine-cut tobacco, and/or illicit products. Such tax increases undermine public health and ultimately undercut government revenue objectives.

At the fifth session of the CoP held in November 2012, the Parties did not adopt guidelines on price and tax measures to reduce the demand for tobacco but instead adopted a brief “set of guiding principles and recommendations for implementation of Article 6,”

which does not include extreme proposals. An inter-session working group will prepare and present new draft guidelines at the sixth session of the CoP in 2014.

•EU Tobacco Products Directive: In December 2012, the European Commission adopted its proposal for a significantly revised EU Tobacco Products Directive (2001/37/EC). Among other things, the European Commission's proposal includes a ban on menthol cigarettes, a ban on slim cigarettes, oversized health warnings covering 75% of the front and back panels, as well as 50% of the side panels of cigarette packs, mandatory sizes and shapes for tobacco packaging, and further restrictions on product descriptions and brand differentiation. Under the proposal, Member States would have the option to further standardize tobacco packaging, including by introducing plain packaging, if justified in the “public interest.” The proposal would also require non-traditional nicotine-containing products, such as certain e-cigarettes, as well as certain reduced risk products under development, to obtain approval under the Medicinal Products Directive. In addition, by seeking to prohibit accurate, substantiated product descriptions related to reduced risk, the European Commission's proposal would introduce significant hurdles to the commercialization of reduced risk products in the EU.

The proposal may be amended and must be approved by the European Parliament and the Council of Ministers, a process that, according to the European Commission, is expected to continue until 2014, with full implementation in 2015 and 2016. It is not possible to predict the ultimate outcome of this legislative process.

•Plain Packaging: We strongly oppose plain packaging, which not only constitutes an expropriation of our valuable trademarks, but is a pure and simple confiscation of the core of our business. We believe that transforming the industry into a low-price commodity business will not reduce consumption, smoking incidence or initiation. Indeed, there is no sound evidence that plain packaging will have any measurable impact on smoking behavior. Even many public health advocates agree today that plain packaging will have no impact on current smokers and claim that the measure is intended to reduce initiation among youth. However, the data do not support that claim either. On the contrary, over time plain packaging is likely to be counterproductive from a public health perspective because it will increase the availability of cheaper tobacco products and spur an increase in illicit trade. Cheaper tobacco products are known to increase consumption, especially among youth. Further, increased illicit trade will hurt the legitimate industry, its entire supply chain and government revenues. Moreover, plain packaging imposes on free competition and trade as well as the use of intellectual property; it violates the terms of: (1) the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”), which prohibits unjustified encumbrances on trademarks and protects geographical indications; (2) the

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Paris Convention, which prevents acts that constitute unfair competition; and (3) the Agreement on Technical Barriers to Trade, which prohibits regulations that constitute barriers to trade. We will take all steps necessary to ensure that all constituencies understand the adverse consequences of plain packaging and to obtain all protection and relief to which we are entitled under the law.

Plain packaging went into effect in Australia in December 2012. The Australian law bans the use of company branding, logos and colors on packaging of all tobacco products for sale to consumers other than the brand name and variant, which may be printed only in specified locations and in a uniform font. It also imposes restrictions on the branding of cigarette sticks.

The Australian plain packaging legislation triggered three legal challenges. Our Australian subsidiary, Philip Morris Limited (“PML”), and other major tobacco companies filed lawsuits against the government in the High Court of Australia arguing that by implementing plain packaging, the government violated the Australian Constitution because it acquired property without compensation. The High Court initially heard the cases brought by certain British American Tobacco companies (“BAT”) and by JT International. In August 2012, the High Court issued its ruling in favor of the government. In the court's written reasons, published in October 2012, a majority of the Justices recognized that plain packaging deprived the plaintiffs of property. However, because no “benefit” inured to the government or a third party, the court held that plain packaging did not violate the Australian Constitution. We expect that the court's ruling will also apply to PML's case. Given the particular nature of the Australian Constitution, we do not expect the decision to be a significant adverse precedent in other jurisdictions. In fact, we expect that the court's finding that plain packaging deprives tobacco manufacturers of their intellectual property would raise serious questions about the legality of plain packaging legislation in other jurisdictions.

Our subsidiary, Philip Morris Asia Limited, has initiated international arbitration proceedings against the Australian government pursuant to the Hong Kong-Australia Bilateral Investment Treaty (the “Investment Treaty”). Formal proceedings under the Investment Treaty commenced in November 2011. In the arbitration, Philip Morris Asia Limited is seeking substantial compensation from the Australian government. The arbitration may take several years to complete.

Three World Trade Organization (“WTO”) members, Ukraine, Honduras and the Dominican Republic, have initiated WTO dispute settlement cases against Australia. They claim, among other things, that plain packaging creates unnecessary barriers to trade in violation of the WTO Agreement on Technical Barriers to Trade; unjustifiably encumbers the use of trademarks and reduces the protection of geographical indications in violation of TRIPS; and will create confusion among consumers in violation of the Paris Convention. In September 2012, Ukraine requested a panel to hear the dispute, which the Dispute Settlement Body of the WTO is now establishing. Thirty-four countries and the European Union have intervened as third parties in the Ukrainian case, including Indonesia, China, Japan, Korea and the United States. Honduras and the Dominican Republic have both announced they will request that panels be formed to hear their disputes against Australia. WTO dispute settlement cases can take several years to complete. It is not possible to predict the outcome of these cases.

Although plain packaging was already recommended in 2008 under the FCTC guidelines adopted by the third CoP, to date no country other than Australia has adopted this measure. Two countries, the UK and New Zealand conducted consultations to consider plain packaging. In the UK, between April and August 2012, the Department of Health held a public consultation “to seek the views of interested people, businesses and organisations on a policy initiative that would require the packaging of tobacco products to be standardized [plain], the aim being to improve public health by reducing the use of tobacco.” It is not possible to predict whether the consultation will result in any legislative action. In New Zealand, the government announced in February 2013 that it would agree in principle to follow Australia but that it would "wait and see what happens with Australia's legal cases" before adopting legislation and implementing regulation. Thus, plain packaging is not expected to proceed in New Zealand, if at all, until the WTO and other challenges to Australia's legislation are resolved.

In addition, in some instances, such as under the recently adopted proposal of the European Commission, excessively large health warnings, combined with other standardization measures and packaging restrictions, may impact our ability to use our distinctive brands and trademarks in a manner that approximates, or is substantially equivalent to, plain packaging.

•Restrictions and Bans on the Use of Ingredients and Disclosure Laws: Until recently, efforts to regulate the use of ingredients have focused on whether ingredients increase the toxicity and/or addictiveness of cigarette smoke. Increasingly, however, tobacco control advocates and some regulators, including the WHO, the European Commission and individual governments, are considering regulating or have regulated cigarette ingredients with the stated objective of reducing the “palatability” or “attractiveness” of cigarette smoke, smoking and/or tobacco products. We oppose regulations that would ban ingredients for the purpose of reducing the palatability or attractiveness of tobacco products because, in light of the millions of smokers in countries like Canada, the UK and China who prefer cigarettes without ingredients, there is no reasonable basis to conclude that an ingredient ban would reduce smoking prevalence or youth smoking initiation. Indeed, we do not believe it is appropriate to use “attractiveness,” which is an inherently subjective and variable term, as a basis for regulation of ingredients, let alone bans of entire product categories. It also lacks scientific, empirically verified criteria.

In November 2010, the fourth session of the CoP adopted “partial” and “provisional” guidelines on Articles 9 and 10 of the FCTC (regulation of contents and disclosure of tobacco products). Among other things, these guidelines recommend that Parties implement measures to prohibit or restrict ingredients and colorings that may increase the palatability or attractiveness of tobacco products. The CoP

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determined that these guidelines will have to be periodically re-assessed “in light of the scientific evidence and country experience.” The Working Group on Articles 9 and 10 is

expected to present a set of recommendations focused on toxicity and addictiveness at future sessions of the CoP.

In March 2012, Brazil's National Sanitation Agency ("ANVISA") published a resolution that prohibits the use of all synthetic and natural substances with flavoring or aromatic properties, with a limited exception to allow for the use of sugars to replace those lost during the tobacco leaf-drying process. Manufacturers have until September 2013 to comply with the resolution. The ban, if implemented, would make it impossible to continue producing the traditional American Blend tobacco products currently preferred by Brazilian smokers and will require manufacturers to modify most, if not all, products in the market. In September 2012, Sinditabaco (a tobacco industry union of which Philip Morris Brasil Ltda. is a member) filed a lawsuit in Brazilian federal court against ANVISA challenging the ingredients ban. The lawsuit claims that ANVISA lacks authority to institute the ban, failed to produce evidence justifying or supporting the ban, failed to comply with due process and proportionality requirements and ignored the unintended consequences of the measure, such as encouraging illicit trade. In December 2012, the court granted Sinditabaco a preliminary injunction, suspending ANVISA's ingredients ban until a full hearing of the dispute. In February 2013, ANVISA appealed the injunction order.

We oppose bans or sweeping restrictions on ingredients such as those recently adopted in Brazil or the ban on menthol proposed by the European Commission, which are arbitrary and without any scientific evidence demonstrating a public health benefit. We support regulations that would restrict the use of ingredients that are determined, based on sound scientific testing methods and data, to significantly increase the adverse health effects of tobacco smoke or youth smoking initiation.

Many countries have enacted or proposed legislation or regulations that require cigarette manufacturers to disclose to governments and to the public the ingredients used in the manufacture of tobacco products and, in certain cases, to provide toxicological information about those ingredients. We have made and will continue to make full disclosures where adequate assurances of trade secret protection are provided. In jurisdictions where it is not possible to obtain appropriate assurances of trade secret protection, we will seek to resolve the matter with governments through alternative means.

•Bans on Display of Tobacco Products at Retail: In a few of our markets, governments have banned the display of tobacco products at the point of sale (“display bans”), while in other countries proposals for display bans have been specifically rejected. In some countries, proposals are currently under consideration. We oppose display bans on the grounds that they unnecessarily restrict competition and encourage illicit trade -- consequences that undermine public health objectives. Further, the data show that where implemented, display bans have not reduced smoking prevalence and initiation, or had any material beneficial impact on public health. In some markets, our subsidiaries and, in some cases, individual retailers, have commenced legal proceedings to overturn display bans.

•Health Warning Requirements: We support health warning requirements designed to inform consumers of the risks of smoking and defer to governments on the content of the warnings, whether graphic or textual, except for content that vilifies tobacco companies or is not justified by the actual repercussions of smoking. In countries where health warnings are not required, we place them on packaging voluntarily in the official language or languages of the country. For example, we are voluntarily placing health warnings on packaging in many African countries in official local languages occupying 30% of the front and back of the pack. In most of our markets, governments require large and often graphic health warnings on cigarette packs, consistent with, and often larger than, the FCTC minimum of 30% of the front and back of the pack. For instance, Egypt, Hong Kong, Panama, and Singapore are among the growing number of countries requiring health warnings occupying 50% of the front and back of the pack. We have not opposed such health warning requirements.

To date, only a few countries have implemented warnings covering more than 50% of the front and/or back of the pack. They include, for instance, Australia (75% front and 90% back), Mexico (30% front and 100% back), Uruguay (80% front and back) and Canada (75% front and back).

The data show that disproportionately increasing the size of health warnings does not effectively reduce tobacco consumption. For this reason, and because it infringes upon our intellectual property rights, leaving insufficient space for our distinctive trademarks and pack designs, we oppose extremely large health warnings. In a few markets we have commenced legal proceedings challenging extreme warning size requirements or content that is not justified by the actual repercussions of smoking.

We believe governments should continue to educate the public on the serious health effects of smoking. Our corporate Web site, www.pmi.com, includes, among other things, the views of public health authorities on smoking, disease causation in smokers, addiction and exposure to environmental tobacco smoke (“ETS”). The site reflects our agreement with the medical and scientific consensus that cigarette smoking is addictive and causes lung cancer, heart disease, emphysema and other serious diseases in smokers. The Web site advises the public to rely on the messages of public health authorities in making all smoking-related decisions. The information on our Web site is not, and shall not be deemed to be, a part of this document or incorporated into any filings we make with the SEC.

•Other Packaging Restrictions: Tobacco control advocates and some regulators are calling for further restrictions on packaging, including standardizing the shape, format and lay-out of packaging, as well as broad restrictions on how the space left for branding and product descriptions can be used. Such measures further restrict our ability to provide information to consumers and to differentiate our brands from those of our competitors.

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Many countries, including all EU Member States, prohibit descriptors such as “lights,” “mild” and “low tar.” We do not oppose these types of descriptor bans.

Some public health advocates, governments, and the FCTC guidelines have sought the implementation of, and in some cases have passed, restrictions on packaging and labelling that prohibit (1) the use of colors that are alleged to suggest that a brand is less harmful than others, (2) specific descriptive phrases deemed to be misleading, including, for example, “premium,” “full flavor,” “international,” “gold,” “silver,” and “menthol” and (3) in one country, all but one pack variation per brand. The measures proposed by the European Commission would also prohibit any references on the pack to taste and flavor as well as pack design elements suggesting a “positive social effect.” We believe such regulations are unreasonably broad, unnecessarily limit brand and product differentiation, are anticompetitive, prevent us from providing consumers with factual information about our products, unduly restrict our intellectual property and violate international trade agreements. We oppose these broad packaging restrictions and in some instances have commenced litigation to challenge them.

•Bans and Restrictions on Advertising, Marketing, Promotions and Sponsorships: For many years, countries have imposed partial or total bans on tobacco advertising, marketing, promotions and sponsorships. The FCTC calls for a “comprehensive ban on advertising, promotion and sponsorship” and requires governments that have no constitutional constraints to ban all forms of advertising. Where constitutional constraints exist, the FCTC requires governments to restrict to the fullest extent possible advertising on radio and television, advertising in print and other media, including the Internet, and sponsorships of international events within five years of the effective date of a country's ratification of the FCTC. The FCTC also requires disclosure of expenditures on advertising, promotion and sponsorship where such activities are not prohibited. The CoP-adopted guidelines recommend that governments adopt extreme and sweeping prohibitions, including all forms of communications to adult smokers. We oppose complete bans on advertising and communications. We believe that the available evidence does not support the contention that limitations on marketing are effective in reducing smoking prevalence, but we would generally not oppose such limitations as long as manufacturers retain the ability to communicate directly and effectively to adult smokers.

•Restrictions on Product Design and Emissions: Tobacco control advocates and some regulators are calling for regulations to further standardize tobacco products themselves by, for example, requiring that cigarettes have a certain minimum diameter, which amounts to a ban on slim cigarettes, or requiring the use of standardized filter and cigarette paper designs. We oppose such restrictions. We believe that there is no correlation between product design variations and overall smoking rates or youth smoking initiation, nor any scientific evidence showing a health benefit that would result from product design restrictions.

Many countries, including all EU Member States, have established, and continue to consider reducing, maximum yields of tar, nicotine and/or carbon monoxide, as measured by the ISO standard test method. Several countries, including Brazil and Canada, require manufacturers to test and report by-brand yields of up to 47 of the more than 100 smoke constituents that have been

identified as potential causes of smoking-related diseases. No country to date has adopted ceilings based on an alternative test method or for other smoke constituents, although the concept of “selective constituent reduction” is supported by some public health advocates. At the fifth session of the CoP in November 2012, the working group on FCTC Articles 9 and 10 was tasked with preparing draft guidelines or a progress report, to be presented at the sixth session of the CoP, regarding testing and measuring five selected tobacco contents and nine selected smoke constituents using methods validated by the WHO. It is not certain whether and when actual testing requirements and/or ceilings will be recommended by the CoP and whether individual countries will adopt them. We agree with those scientists who have argued that selectively reducing some constituents in conventional cigarettes will not lead to a meaningful reduction in disease and thus will not benefit public health, yet will mislead consumers into believing that conventional cigarettes with regulated (i.e., reduced) levels of these constituents are safer.

Reduced cigarette ignition propensity standards have been adopted in several of our markets, for instance in Australia, Canada and the EU, and are being considered in several others. At the fifth session of the CoP in November 2012, guidelines were adopted that recommend that Parties introduce the same reduced ignition propensity standards as adopted by the U.S., Canada, Australia and the EU. Reduced ignition propensity standards should be uniform across jurisdictions, technically feasible and apply equally to all manufacturers. However, we believe that the experience from countries that have mandated reduced ignition propensity requirements for several years -- namely the U.S. and Canada -- should be thoroughly examined to evaluate the effectiveness of such requirements, in particular in terms of reducing the risk of cigarette-ignited fires, before additional countries consider introducing such standards.

•Restrictions on Public Smoking: The pace and scope of public smoking restrictions have increased significantly in most of our markets. In the EU, all countries have regulations in place that restrict or ban smoking in public and/or work places, restaurants, bars and nightclubs. Some EU Member States allow narrow exemptions from smoking bans, for instance for separate smoking rooms in the hospitality sector, but others have banned virtually all indoor public smoking. In other regions, many countries have adopted or are likely to adopt regulations introducing substantial public smoking restrictions similar to those in the EU, including Australia, Canada, Hong Kong, Thailand, Turkey and Ukraine. Some public health groups have called for, and some regional governments and municipalities have adopted or proposed, bans on smoking in outdoor places, as well as bans on smoking in cars when minors are present. The FCTC requires Parties to adopt restrictions on public smoking. The

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CoP-adopted guidelines on public smoking are based on the premise that any exposure to ETS is harmful. The guidelines call for total bans in all indoor public places, defining “indoor” broadly, and reject any exemptions based on the type of venue (e.g., nightclubs). On private place smoking, such as in cars and homes, the guidelines recommend increased education on the risk of exposure to ETS.

We support a single, consistent public health message on the health effects of exposure to ETS. Our Web site states that “the conclusions of public health authorities on secondhand smoke warrant public health measures that regulate smoking in public places” and that “outright bans are appropriate in many places.” For example, we support banning smoking in schools, playgrounds and other facilities for youth and in indoor public places where general public services are provided, such as public transportation vehicles, supermarkets, public spaces in indoor shopping centers, cinemas, banks and post offices. We believe, however, that governments can and should seek a balance between the desire to protect non-smokers from exposure to ETS and allowing the millions of people who smoke to do so in some public places. In the hospitality sector, such as restaurants, bars, cafés and other entertainment establishments, the law should grant private business owners the flexibility to permit, restrict or prohibit smoking. In the workplace, designated smoking rooms can provide places for adults to smoke. Finally, we oppose legislation that would prohibit smoking outdoors (beyond outdoor places and facilities for children) and in private places such as homes, apartments and cars.

•Illicit Trade: Illicit trade may account for as much as 10% of global cigarette consumption; this includes counterfeit, contraband and the growing problem of "illicit whites," which are unique cigarette brands manufactured predominantly for smuggling. We estimate that illicit trade in the European Union accounted for more than 10% of total cigarette consumption in 2011 and for approximately 11% of total cigarette consumption in 2012. Regulatory measures and related governmental actions to prevent the illicit manufacture and trade of tobacco products are being considered by a number of jurisdictions. At the fifth session of the CoP in November 2012, the Protocol to Eliminate Illicit Trade in Tobacco Products (the “Protocol”) was adopted. The Protocol includes supply chain control measures such as licensing of manufacturers and distributors, enforcement in free trade zones, controls on duty free and internet sales and the implementation of tracking and tracing technologies. In the EU, the European Commission's proposal for revising the Tobacco Products Directive contains tracking and tracing measures that are based to some extent on the Protocol but, unlike the Protocol, also require tracking at pack level down to retail, which we believe is not only unnecessarily burdensome but not feasible.

It is not possible to predict how long it will take for a sufficient number of Parties to ratify the Protocol such that it enters into force. Nor is it possible to predict when Parties will implement the Protocol's measures in national legislation or to what extent the measures outlined in the Protocol will be effective in curbing the growth of, or even eliminating, illicit trade. Among other things, the effectiveness of any legislative measure required under the Protocol will depend on whether and how such measure is adopted and implemented in national legislation across the world, and, critically, the level of actual enforcement of such national legislation.

We support strict regulations and enforcement measures to prevent all forms of illicit trade in tobacco products. Governments agree that illicit trade is an extremely serious issue. It creates a cheap and unregulated source of tobacco, thus undermining efforts to reduce smoking, especially among youth, damages legitimate businesses, stimulates organized crime and results in massive amounts of corruption and lost tax revenue. We therefore believe that in addition to taking direct measures against illicit trade, governments, when assessing proposed regulation, such as display bans, plain packaging, ingredients bans or tax increases, should always carefully consider the potential implications of such regulation on illicit trade.

•Cooperation Agreements to Combat Illicit Trade of Cigarettes: In 2004, we entered into an agreement with the European Commission (acting on behalf of the European Community) that provides for broad cooperation with European law enforcement agencies on anti-contraband and anti-counterfeit efforts. All 27 Member States of the EU have signed the agreement. Under the terms of the agreement, we agreed to make financial contributions in the form of 13 payments over 12 years. Commencing in July 2007, we began making payments of approximately $75 million a year over the final 10 years of the agreement, each of which is to be adjusted based on certain variables, including our market share in the EU in the year preceding payment. We record these payments as an expense in cost of sales when product is shipped. We are also required to pay the excise taxes, VAT and customs duties on qualifying product seizures of up to 90 million cigarettes and are subject to payments of five times the applicable taxes and duties if qualifying product seizures exceed 90 million cigarettes in a given year. To date, our annual payments related to product seizures have been immaterial.

In 2009, our subsidiaries Philip Morris Colombia and Coltabaco entered into an Investment and Cooperation Agreement with the Republic of Colombia, together with the Departments of Colombia and the Capital District of Bogotá, to promote investment in and cooperation on anti-contraband and anti-counterfeit efforts with respect to the Colombian tobacco market. The agreement provides $200 million in funding to the Colombian governments over a 20-year period to address issues of mutual interest, such as combating the illegal cigarette trade, including the threat of counterfeit tobacco products, and increasing the quality and quantity of locally grown tobacco.

In June 2012, we announced that we will contribute €15 million to INTERPOL over a three-year period to support the agency's global initiative to combat trans-border crime involving illicit goods, including tobacco products. The contribution to INTERPOL's Fund For A Safer World will be used for coordination of information gathering, training programs for law enforcement officials, development of product authentication standards and public information campaigns.

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•Labor Conditions for Tobacco Workers: In July 2010, Human Rights Watch published a report raising issues related to

labor conditions for tobacco workers in Kazakhstan, particularly migrant workers. We have undertaken both an internal and third party review of our labor practices and policies in Kazakhstan and subsequently globally. In reviewing our policies and practices, we have sought the advice of local and international non-profit organizations with expertise in the area of fair labor practices. During 2011, we began implementing our comprehensive Agricultural Labor Practices ("ALP") Code, which strengthens and expands our existing practices and policies. This includes setting additional principles and standards for working conditions on tobacco farms, tailored training programs and regular external assessments to monitor the progress we, our suppliers, and farmers make. To date, over 2,900 field technicians in 30 countries have received in-depth training on the ALP Code, including child labor, forced labor prevention and safe work environment requirements. During 2012, these field technicians communicated our expectations to approximately 497,000 farmers with whom our affiliates or suppliers have contracts. A progress report on our ALP program is available on our Web site at www.pmi.com. The information on our Web site is not, and shall not be deemed to be, a part of this document or incorporated into any filings we make with the SEC.

•Other Legislation, Regulation or Governmental Action: In Argentina, the National Commission for the Defense of Competition issued a resolution in May 2010, in which it found that our affiliate's establishment in 1997 of a system of exclusive zonified distributors (“EZD”s) in Buenos Aires city and region was anticompetitive, despite having issued two prior decisions (in 1997 and 2000) in which it had found the establishment of the EZD system was not anticompetitive. The resolution is not a final decision, and our Argentinean affiliate has opposed the resolution and submitted additional evidence.

In June 2011 in Brazil, the Secretariat of Economic Defense recommended to the Administrative Council for Economic Defense (“CADE”) that it find that the merchandising arrangements of our affiliate and those of a competitor violated the Brazilian Competition Act and that it impose fines of unspecified amounts against each company. In July 2012, our competitor entered into a consent decree with CADE that prohibits certain of the competitor's merchandising arrangements and in connection therewith agreed to pay R$ 2.9 million (approximately $1.46 million). In January 2013, our subsidiary also entered into a consent decree with CADE that, like our competitor's consent decree, prohibits certain merchandising arrangements and agreed to pay R$ 250,000 (approximately $126,000). The consent decree suspends CADE's investigation for 60 months, after which the investigation will be closed without prejudice. The prohibition of certain merchandising arrangements will remain in force permanently.

It is not possible to predict what, if any, additional legislation, regulation or other governmental action will be enacted or implemented relating to the manufacturing, advertising, sale or use of cigarettes, or the tobacco industry generally. It is possible, however, that legislation, regulation or other governmental action could be enacted or implemented that might materially affect our business, volume, results of operations and cash flows.

Governmental Investigations: From time to time, we are subject to governmental investigations on a range of matters. As part of an

investigation by the Department of Special Investigations (“DSI”) of the government of Thailand into alleged under-declaration of import prices by Thai cigarette importers, the DSI proposed to bring charges against our subsidiary, Philip Morris (Thailand) Limited, Thailand Branch (“PM Thailand”) for alleged underpayment of customs duties and excise taxes of approximately $2 billion covering the period from July 28, 2003, to February 20, 2007. In September 2009, the DSI submitted the case file to the Public Prosecutor for review. The DSI also commenced an informal inquiry alleging underpayment by PM Thailand of customs duties and excise taxes of approximately $1.8 billion, covering the period 2000-2003. We have been cooperating with the Thai authorities and believe that PM Thailand's declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization (“WTO”) and Thai law. PM Thailand also contends that it reached an agreement with the Thai Customs Department in 2003 regarding valuation methodologies. The Public Prosecutor's office has issued a non-prosecution order in the 2003-2007 investigation. In August 2011, the Director-General of DSI publicly announced that he disagreed with the non-prosecution order. The matter has now been referred to the Attorney General for resolution. If the Attorney General agrees with the Public Prosecutor's non-prosecution order, the 2003-2007 investigation will end. If the Attorney General agrees with the Director General of DSI, the matter will be submitted to the Criminal Court.

Additionally, in November 2010, a WTO panel issued its decision in a dispute that began in August 2006 between the Philippines and Thailand concerning a series of Thai customs and tax measures affecting cigarettes imported by PM Thailand into Thailand from the Philippines. The WTO panel decided that Thailand had no basis to find that PM Thailand's declared customs values and taxes paid were too low, as alleged by the DSI in 2009. While the WTO ruling does not resolve the above-referenced investigation, it should assist the Thai authorities' review of the matter. Further, the WTO ruling creates obligations for Thailand to revise its laws, regulations, or practices affecting the customs valuation and tax treatment of future cigarette imports. The WTO Dispute Settlement Body (“DSB”) has adopted the WTO panel's report and also the report by the WTO Appellate Body (following an unsuccessful appeal by Thailand). Thailand agreed in September 2011 to implement VAT-related measures to comply with the DSB's recommendations and rulings by October 15, 2012, and to implement measures to comply with the rest of the DSB's recommendations and rulings by May 15, 2012. If a dispute settlement panel determines that Thailand has failed to comply with the DSB's recommendations and rulings, the Philippines may request authorization to take retaliatory actions against Thailand.

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Next Generation Products: One of our strategic priorities is to develop, assess and commercialize a portfolio of innovative products with the potential to reduce the risk of smoking-related diseases in comparison to conventional cigarettes. We refer to these as next generation products (“NGPs”). In the U.S. regulatory context they are referred to as modified-risk tobacco products (“MRTPs”). Our efforts are guided by the following key objectives:

• to develop a series of products that provides adult smokers the taste, sensory experience and smoking ritual characteristics that are as close as possible to those currently provided by conventional cigarettes;

• to substantiate a significant reduction of risk for the individual adult smoker as well as a reduction of harm for the population as a whole, based on robust scientific evidence derived from well-established assessment processes; and

• to advocate for the development of regulatory frameworks for the assessment, approval and commercialization of NGPs, including the communication of substantiated reductions in risk to consumers.

We believe the elimination of combustion via tobacco heating and other innovative systems for aerosol generation is the most promising path to reduce risk, and, accordingly, the NGPs we are developing are based on platforms that do not involve combustion. These platforms are in various stages of development. One platform is in the early stages of clinical trials and industrial scale-up, another is in its final development phase, and the third requires at least one year for further product development. We are also developing other potential platforms.

Our approach to individual risk assessment is to use cessation as the benchmark, because the short-term and long-term effects of smoking cessation are well known, and the closer the clinical data derived from adult smokers who switch to an NGP resemble the data from those who quit, the more confident one can be that the product reduces risk.

Today, only the U.S. has established a regulatory framework for assessing MRTPs under the jurisdiction of the Food and Drug Administration (the “FDA”). Future FDA actions are likely to influence the regulatory approach of other interested governments. In March 2012, the FDA released draft guidance establishing the types and levels of evidence necessary to qualify a product as an MRTP. The draft guidance recommends studies that are generally in line with PMI's assessment approach, which we have submitted to the FDA. In parallel, we are beginning engagement with regulators in the EU, as well as in a number of Asian markets.

We are also proceeding with all other aspects that lead to commercialization. We are planning to build one or two new factories to produce NGPs in Europe. We anticipate capital expenditures in the range of €500 million to €600 million ($666 million to $799 million) over a three-year period to achieve the capacity to produce 30 billion NGP units per year. This expenditure will be close to double the level of a conventional cigarette factory of equivalent output.

We currently expect the first NGP factory to be ready by 2016, final data from clinical studies during the beginning of 2016 and a

launch in the first markets between 2016 and 2017. However, there can be no assurance that we will succeed in these efforts or that regulators will permit the marketing of our NGPs with claims of reduced risk or reduced harm.

Acquisitions and Other Business Arrangements

In June 2011, we completed the acquisition of a cigarette business in Jordan, consisting primarily of cigarette manufacturing assets and inventories, for $42 million. In January 2011, we acquired a cigar business, consisting primarily of trademarks in the Australian and New Zealand markets, for $20 million.  The effects of these and other smaller acquisitions in 2011 were not material to our consolidated financial position, results of operations or cash flows.

Effective January 1, 2011, we established a new business structure with Vietnam National Tobacco Corporation (“Vinataba”) in Vietnam. Under the terms of the agreement, we have further developed our existing joint venture with Vinataba through the licensing of Marlboro and the establishment of a PMI-controlled branch for the business building of our brands.

On February 25, 2010, our affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). PMPMI and FTC hold equal economic interests in PMFTC, while we manage the day-to-day operations of PMFTC and have a majority of its Board of Directors. Consequently, we accounted for the contributed assets and liabilities of FTC as a business combination. The establishment of PMFTC permits both parties to benefit from their respective, complementary brand portfolios, as well as cost synergies from the resulting integration of manufacturing, distribution and procurement, and the further development and advancement of tobacco growing in the Philippines. FTC holds the right to sell its interest in PMFTC to PMI, except in certain circumstances, during the period from February 25, 2015 through February 24, 2018, at an agreed-upon value of $1.17 billion, which was recorded on PMI's consolidated balance sheet as a redeemable noncontrolling interest at the date of the business combination.

In June 2010, we announced that our affiliate, Philip Morris Brasil Industria e Comercio Ltda. (“PMB”), will begin directly sourcing tobacco leaf from approximately 17,000 tobacco farmers in Southern Brazil. This initiative enhances PMI’s direct involvement in the supply chain and is expected to provide approximately 10% of PMI’s global leaf requirements. The vertically integrated structure was made possible following separate agreements with two leaf suppliers in Brazil, Alliance One Brasil Exportadora de Tabacos Ltda. (“AOB”) and Universal Leaf Tabacos Ltda. (“ULT”). These agreements resulted in AOB assigning approximately 9,000 contracts with tobacco farmers to PMB and ULT assigning approximately 8,000 contracts with tobacco farmers to PMB. As a result, PMB offered employment to more than 200 employees, most of them agronomy specialists, and acquired

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related assets in Southern Brazil. The purchase price for the net assets and the contractual relationships was $83 million, which was paid in 2010.

See Note 6. Acquisitions and Other Business Arrangements to our consolidated financial statements for additional information.

Trade Policy

We are subject to various trade restrictions imposed by the United States and countries in which we do business (“Trade Sanctions”), including the trade and economic sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (“OFAC”) and the U.S. Department of State. It is our policy to fully comply with these Trade Sanctions.

Tobacco products are agricultural products under U.S. law and are not technological or strategic in nature. From time to time we make sales in countries subject to Trade Sanctions, pursuant to either exemptions or licenses granted under the applicable Trade Sanctions.

In April 2012, OFAC granted us licenses to sell cigarettes to customers for import into Iran. To date, we have not made any sales under these licenses.

A subsidiary sells products to distributors that in turn sell those products to duty free customers that supply U.N. peacekeeping forces around the world, including those in the Republic of the Sudan. We do not believe that these exempt sales of our products for ultimate resale in the Republic of the Sudan, which are de minimis in volume and value, present a material risk to our stockholders, our reputation or the value of our shares. We have no employees, operations or assets in the Republic of Sudan.

We do not sell products in Cuba and Syria.

To our knowledge, none of our commercial arrangements result in the governments of any country identified by the U.S. government as a state sponsor of terrorism, nor entities controlled by those governments, receiving cash or acting as intermediaries in violation of U.S. laws.

Certain states have enacted legislation permitting state pension funds to divest or abstain from future investment in stocks of companies that do business with certain countries that are sanctioned by the U.S. We do not believe such legislation has had a material effect on the price of our shares.

2012 compared with 2011

The following discussion compares operating results within each of our reportable segments for 2012 with 2011.

European Union. Net revenues, which include excise taxes billed to customers, decreased$2.4 billion (8.2%). Excluding excise taxes, net revenues decreased$686 million (7.4%) to $8.5 billion. This decrease was due to:

• unfavorable currency ($716 million) and

• unfavorable volume/mix ($445 million), partly offset by

• price increases ($475 million).

The net revenues of the European Union segment include $1,372 million in 2012 and $1,235 million in 2011 related to sales

of OTP. Excluding excise taxes, OTP net revenues for the European Union segment were $475 million in 2012 and $407 million in 2011.

Operating companies income of $4.2 billiondecreased by $373 million (8.2%). This decrease was due to:

• unfavorable currency ($384 million),

• unfavorable volume/mix ($380 million),

• higher manufacturing costs ($62 million, mainly related to the mandated conversion to reduced cigarette ignition propensity paper that began in the fourth quarter of 2011) and

• higher marketing, administration and research costs ($62 million, principally reflecting increased marketing investment behind new brand launches and roll-out of the "Be Marlboro" marketing campaign), partly offset by

• price increases ($475 million) and

• lower pre-tax charges for asset impairment and exit costs ($40 million).

The total cigarette market in the European Union declined by 6.3% to 520 billion units, due primarily to tax-driven price increases, the unfavorable economic and employment environment, particularly in southern Europe, the growth of the OTP category, and the increased prevalence of illicit trade. Our cigarette shipment volume in the European Union declined by 6.4%, due principally to a lower total market across the region. Our market share in the European Union was essentially flat at 38.1%, as gains, notably in Belgium, Greece, Finland, Hungary and Poland, were offset by declines, primarily in the Czech Republic, France and Portugal.

Shipment volume of Marlboro decreased by 4.6%, mainly due to a lower total market. Marlboro's market share increased 0.3 share points to 18.3%, reflecting a higher share mainly in Belgium, Greece, Hungary, Italy and Poland, which more than offset lower share mainly in France, the Netherlands, Portugal and Spain.

Shipment volume of L&M was down by 4.1%. L&M's market share was flat at 6.6%, with gains in Finland, Germany, Poland and the Slovak Republic offset by declines notably in Greece and Portugal.

Shipment volume of Chesterfield was up by 4.7%. Chesterfield's market share was up by 0.4 share points to 3.7%, driven notably by gains in Austria, the Czech Republic, France, Hungary, Poland, Portugal, Spain and the United Kingdom.

Shipment volume of Philip Morris was down by 1.9%. Despite this decline, market share was up by 0.1 share point to 2.1%, with gains, notably in the Czech Republic and Italy, partly offset by a decline in Portugal and Spain.

Our shipment volume of OTP, in cigarette equivalent units, grew by 16.1%, reflecting a higher total market and share. Our OTP total market share was 12.2%, up by 1.1 share points, driven by gains in the fine cut category, notably in Belgium, up by 3.2 share points to 16.3%, France, up by 0.9 share points to 25.2%, Germany, up by 0.7 share points to 14.7%, Greece, up by 4.7 share points to 12.8%, Italy, up by 16.0 share points to 27.9% and Spain, up by 1.1 share points to 11.7%.

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In the Czech Republic, the total cigarette market was down by 2.8% to 20.5 billion units in 2012, mainly reflecting the impact of excise tax-driven price increases in the first and second quarters of 2012 and a more than 20% growth of the fine cut category over the full year. Our shipments were down by 7.4%. Market share was down by 2.1 share points to 42.2%, principally reflecting continued share declines for lower-margin local brands, such as Petra and Sparta, down by a combined 1.2 share points to 6.1%, and Red & White, down by 1.2 share points to 11.7%. This decline was partly offset by a higher share for Marlboro, Chesterfield and Philip Morris,up by 0.2, 0.5 and 0.6 share points to 7.4%, 0.8% and 2.9%, respectively. Market share of L&M was essentially flat at 7.1%.

In France, the total cigarette market was down by 4.9% to 51.5 billion units, mainly reflecting the impact of price increases in the fourth quarters of 2011 and 2012. Our shipments were down by 7.7%. Our market share was down by 0.9 share points to 39.6%, mainly due to Marlboro, down by 0.9 share points to 24.8%, and to L&M, down by 0.3 share points to 2.7%. Market share of premium Philip Morris was up by 0.1 share point to 8.3% and share of Chesterfield was up by 0.2 share points to 3.3%. Our market share of the fine cut category was up by 0.9 share points to 25.2%.

In Germany, the total cigarette market was down by 1.2% to 83.4 billion units, flattered by trade inventory movements of competitors' products in December ahead of the January 2013 excise tax increase. Our shipments were down by 1.5%. Our market share was essentially unchanged at 35.8%, with Marlboro essentially flat at 21.3%, L&M up by 0.1 share point to 10.5% and Chesterfield flat at 2.3%. Our market share of the fine cut category was up by 0.7 share points to 14.7%.

In Italy, the total cigarette market was down by 7.9% to 78.7 billion units, reflecting the impact of price increases in 2011 and March 2012, an unfavorable economic environment, strong growth in the fine cut category, and an increase in illicit trade. Our shipments were down by 7.3%. Our market share was essentially flat at 53.0%, with Marlboro, up by 0.6 share points to 23.1%, fueled by the March 2012 and June 2012 launches of Marlboro Silver and Marlboro Pocket Pack, and Philip Morris, up by 0.4 share points to 3.7%, benefiting from the first-quarter 2012 launch of Philip Morris Selection in the low-price segment, offset by low-price Diana, down by 0.8 share points to 12.4%. Our market share of the fine cut category was up by 16.0 share points to 27.9%.

In Poland, the total cigarette market was down by 6.1% to 52.1 billion units, mainly reflecting the impact of price increases in the first quarter of 2012 and growth in the availability of non-duty paid OTP products. Our shipments were down by 3.1%. Market share was up by 1.1 share points to 36.4%, benefiting from the launch of two new Marlboro super slims variants in the second quarter. Market shares of Marlboro, Chesterfield and L&M were up by 0.9, 0.4 and 0.7 share points to 11.3%, 1.8% and 16.6%, respectively. Our market share of the fine cut category was up by 0.5 share points to 17.8%.

In Spain, the total cigarette market was down by 11.7% to 53.5 billion units, mainly reflecting the impact of price increases in the second half of 2011 and second quarter of 2012, the unfavorable economic environment, the growth of the OTP category and illicit trade. Our shipments were down by 11.4%. Market share was down by 0.3 share points to 30.6%, with higher share of Chesterfield, revamped in the first quarter of 2012, up by 0.6 share points to

9.0%, offset by Marlboro, down by 0.4 share points to 14.3% and Philip Morris, down by 0.3 share points to 0.7%. Market share of L&M was down by 0.2 share points to 6.3%. Our market share of the fine cut category was up by 1.1 share points to 11.7%.

Eastern Europe, Middle East & Africa. Net revenues, which include excise taxes billed to customers, increased$1.8 billion (10.4%). Excluding excise taxes, net revenues increased$451 million (5.7%) to $8.3 billion. This increase was due to:

• price increases ($466 million),

• favorable volume/mix ($425 million) and

• the impact of acquisitions ($27 million), partially offset by

• unfavorable currency ($467 million).

Operating companies income of $3.7 billionincreased by $497 million (15.4%). This increase was due primarily to:

• price increases ($466 million),

• favorable volume/mix ($317 million),

• lower manufacturing costs ($31 million) and

• lower pre-tax charges for asset impairment and exit costs ($20 million), partially offset by

• unfavorable currency ($199 million) and

• higher marketing, administration and research costs ($142 million, principally related to expenditures in marketing and business infrastructure, mainly in Russia).

Our cigarette shipment volume in EEMA increased by 4.7%, mainly reflecting improved market conditions and higher share in Egypt, a higher market share in Russia, and a higher total market and share in Turkey. Our cigarette shipment volume of premium brands grew by 6.7%, driven by Marlboro, up by 3.6%, and by Parliament, up by 16.5%.

In Russia, the total cigarette market declined by an estimated 1.3% to 370 billion units. Our shipment volume increased by 3.8%, mainly reflecting a higher market share. Shipment volume of our premium portfolio was up by 7.0%, driven by Parliament, up by 15.0%. In the mid-price segment, shipment volume was up by 4.8%, mainly due to L&M, up by 20.4%. In the low-price segment, shipment volume was up by 2.3%, driven by Apollo Soyuz, Bond Street and Next, up by 3.7%, 0.5% and 11.7%, respectively. Our market share of 26.3%, as measured by Nielsen, was up by 0.5 share points. Market share of Parliament was up by 0.3 share points to 3.2%; Marlboro was essentially flat at 1.9%; L&M was up by 0.2 share points to 2.6% and Chesterfield was flat at 3.4%; Bond Street was up by 0.3 share points to 6.5%; Next was up by 0.2 share points to 2.9%; and Apollo Soyuz and Optima were flat at 1.4% and 3.2%, respectively.

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In Turkey, the total cigarette market increased by an estimated 8.8% to 99.2 billion units, reflecting: the favorable impact of trade inventory movements in the fourth quarter of 2012 ahead of the January 2013 excise tax increase; a decrease in illicit trade, and a favorable comparison with 2011, which experienced a 10.6% total cigarette market decline in the last three months of the year resulting from excise tax-driven price increases in the fourth quarter. Our shipment volume increased by 12.7%, across each of the premium, mid-price and low-price segments, up by 15.0%, 16.6% and 9.8%, respectively. Our market share, as measured by Nielsen, grew by 0.9 share points to 45.7%, driven by premium Parliament, mid-price Muratti and low-price Lark,up by 0.9, 0.4 and 0.3 share points to 9.0%, 6.6% and 12.2%, respectively, partly offset by a decline in low-price L&M, down by 0.3 share points to 8.4%. Market share of Marlboro was down by 0.1 share point to 9.2%.

In Ukraine, the total cigarette market declined by an estimated 2.6% to 83.4 billion units. Our shipment volume decreased by 0.6%. Our market share, as measured by Nielsen, was up by 0.2 share points to 32.4%. Share for premium Parliament was up by 0.4 share points to 3.2%. Share of Marlboro was flat at 5.8%, Chesterfield was down by 0.5 share points to 7.0% and Bond Street was up by 1.2 share points to 8.4%.

Asia. Net revenues, which include excise taxes billed to customers, increased by $1.5 billion (7.6%). Excluding excise taxes, net revenues increased$493 million (4.6%) to $11.2 billion. This increase was due primarily to:

• price increases ($551 million) and

• favorable volume/mix ($57 million), partially offset by

• unfavorable currency ($116 million).

Operating companies income of $5.2 billionincreased by $361 million (7.5%). This increase was due to:

• price increases ($551 million),

• lower manufacturing costs ($70 million, reflecting favorable shipping costs related to the Japan hurdle) and

• favorable currency ($39 million), partly offset by

• higher marketing, administration and research costs ($176 million, including higher marketing and sales investments in Indonesia),

• unfavorable volume/mix ($99 million, due primarily to the aforementioned Japan hurdle) and

• higher pre-tax charges for asset impairment and exit costs ($24 million).

Our cigarette shipment volume increased by 4.2%, driven by growth in Indonesia, the Philippines, Thailand and Vietnam, partly offset by a decline in Japan and Korea. Excluding the 2011 Japan hurdle of 6.3 billion units, cigarette shipment volume increased by 6.4%. Shipment volume of Marlboro was up by 3.6%, driven by Indonesia, the Philippines and Vietnam, partly offset by Japan and Korea. Shipment volume of Marlboro was up by 6.0%, excluding the 2011 Japan hurdle.

In Indonesia, the total cigarette market was up by 8.2% to 302.5 billion units, driven by growth in the premium and mid-price

segments. Our shipment volume grew by 17.5%. Our market share was up by 2.8 share points to 35.6%, driven notably by Sampoerna A in the premium segment, up by 1.1 share points to 13.8%, and mid-price U Mild, up by 1.2 share points to 3.3%. Marlboro's market share was up by 0.3 share points to 4.8% and its share of the “white” cigarettes segment increased by 4.9 share points to 71.2%. Market share of Dji Sam Soe was essentially flat at 7.8%.

In Japan, the total cigarette market increased by 0.7% to 196.6 billion units, reflecting a favorable comparison with 2011 driven by trade inventory de-loading in the first quarter following the October 2010 excise tax-driven price increase. The estimated underlying decline of the total cigarette market in 2012 was approximately 1%. Our shipment volume was down by 9.7%, or up by 0.6%, excluding the additional hurdle volume of 6.3 billion units associated with 2011. Our market share was down by 3.0 share points to 27.7%, or down by 0.5 share points compared to the 2011 exit share of 28.2%. While share of Marlboro was down by 0.7 share points to 12.4%, it was essentially flat compared to its 2011 exit share, supported by the introduction of new Marlboro menthol variants during the year, and up by 1.0 share point compared to its pre-earthquake level. Share of Lark was down by 1.3 share points to 8.4%, or by 0.2 share points compared to its 2011 exit share of 8.6%. Share of Philip Morris was down by 0.5 share points to 2.3%, or by 0.2 share points compared to its 2011 exit share of 2.5%.

In Korea, the total cigarette market was down by 0.9% to 89.3 billion units. Our shipment volume decreased by 4.0%, reflecting the impact of our price increases in February 2012. Our market share of 19.2% was down by 0.6 share points. Market share of Marlboro and Parliament was down by 0.8 and 0.1 share points to 7.8% and 6.6%, respectively, partly offset by Virginia Slims, up by 0.7 share points to 4.1%.

In the Philippines, the total cigarette market increased by 5.0% to 102.2 billion units, reflecting the growth in the low-price segment and trade loading of competitive products ahead of the excise tax-driven price increase in January 2013. Our shipment volume increased by 1.3%. Our market share was down by 3.3 share points to 90.7%, due primarily to share declines of Champion and Hope. Marlboro's market share was down by 0.2 share points to 20.9%. Market share of Fortune was up by 2.4 share points to 49.4%.

Latin America & Canada. Net revenues, which include excise taxes billed to customers, increased$176 million (1.8%). Excluding excise taxes, net revenues increased$22 million (0.7%) to $3.3 billion. This increase was due to:

• price increases ($267 million), partly offset by

• unfavorable currency ($196 million) and

• unfavorable volume/mix ($49 million).

Operating companies income of $1.0 billionincreased by $55 million (5.6%). This increase was due to:

• price increases ($267 million), partly offset by

• unfavorable volume/mix ($71 million),

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• unfavorable currency ($63 million),

• higher manufacturing costs ($55 million, primarily related to distribution infrastructure),

• higher marketing, administration and research costs ($13 million) and

• higher pre-tax charges for asset impairment and exit costs ($10 million, mainly related to the restructuring of manufacturing facilities).

Our cigarette shipment volume in Latin America & Canada decreased by 1.6%, mainly due to a lower total market in Argentina, Colombia and Mexico and lower share in Canada. Shipment volume of Marlboro increased by 0.7%, mainly reflecting market share growth in Brazil, Colombia and Mexico.

In Argentina, the total cigarette market declined by 0.9% to 43.4 billion units. Our cigarette shipment volume decreased by 0.3%. Our market share was up by 0.9 share points to 74.9%, reflecting growth of mid-price Philip Morris, up by 1.4 share points to 39.4%, partly offset by low-price Next, down by 0.5 share points to 3.1%. Market share of Marlboro was flat at 24.1%.

In Canada, the estimated total tax-paid cigarette market was essentially flat at 32.2 billion units. Our cigarette shipment volume declined by 1.5%. Our market share was down by 0.6 share points to 33.5%, primarily reflecting share losses in the mid-price segment, reflecting fierce price competition. Market share of premium brand Benson & Hedges was essentially flat at 2.1%, premium Belmont was up by 0.2 share points to 2.0%, and low-price brand Next was up by 0.8 share points to 7.7%, offset by mid-price Number 7 and Canadian Classics, and low-price Accord and Quebec Classique, down by 0.2, 0.3, 0.4 and 0.3 share points, to 3.9%, 8.4%, 3.2% and 2.4%, respectively.

In Mexico, the total cigarette market was down by 2.2% to 33.6 billion units, reflecting the impact of price increases in January 2012 and the continued wide prevalence of illicit products. Our cigarette shipment volume decreased by 0.6%. Our market share grew by 1.2 share points to 73.5%, led by Marlboro, up by 1.3 share points to 53.6%. Market share of premium Benson & Hedges was up by 0.1 share point at 6.2% while share of low-price Delicados decreased by 0.5 share points to 10.4%.

2011 compared with 2010

The following discussion compares operating results within each of our reportable segments for 2011 with 2010.

European Union. Net revenues, which include excise taxes billed to customers, increased$1.7 billion (6.1%). Excluding excise taxes, net revenues increased$401 million (4.6%) to $9.2 billion. This increase was due to:

• favorable currency ($440 million) and

• price increases ($298 million), partially offset by

• unfavorable volume/mix ($337 million).

The net revenues of the European Union segment include $1,235 million in 2011 and $1,001 million in 2010 related to sales of OTP. Excluding excise taxes, OTP net revenues for the European Union segment were $407 million in 2011 and $320 million in 2010.

Operating companies income of $4.6 billionincreased by $249 million (5.8%). This increase was due primarily to:

• price increases ($298 million),

• favorable currency ($277 million), and

• lower marketing, administration and research costs ($48 million), partially offset by

• unfavorable volume/mix ($291 million),

• higher manufacturing costs ($64 million) and

• higher pre-tax charges for asset impairment and exit costs ($18 million, representing the restructuring of manufacturing and R&D facilities).

The total cigarette market in the European Union declined by 4.3%, due primarily to the impact of a lower total market: in Greece, mainly reflecting the unfavorable impact of excise tax driven price increases in 2010 and 2011, which drove the retail price of Marlboro up by 25% between the first quarter of each year, and the continuing adverse economic environment; in Italy, due primarily to excise tax driven price increases in 2010 and July 2011, and the VAT-driven price increase of September 2011; in Spain, following the cumulative unfavorable impact of price increases in 2010 and 2011, the implementation of stricter indoor public smoking bans in January 2011, unfavorable trade inventory movements, and continuing adverse economic conditions; in Portugal, reflecting both excise tax and VAT-driven price increases in 2010 and January 2011, and the continuing adverse economic environment; the growth of the OTP segment, primarily in Belgium, France, Germany and Italy; and an increase in illicit trade, notably in Greece and Spain. Excluding Spain, which represented almost half of the total regional market decline, we estimate that the total cigarette market in the European Union declined by 2.5%. Our cigarette shipment volume in the European Union declined by 5.1%, due primarily to the aforementioned reasons. Our market share in the European Union was down by 0.3 share points to 38.2%, as gains, notably in Belgium, France, Germany, Greece, Hungary and the Netherlands, were more than offset by declines, mainly in the Czech Republic, Italy, Poland, Portugal and Spain.

Shipment volume of Marlboro decreased by 5.1%, mainly due to lower total markets, particularly in Greece and Spain, and to lower share, primarily in Germany, Italy, Portugal and Spain, partially offset by higher share in Belgium and Hungary. Marlboro’s market share was down by 0.2 share points to 18.0%, reflecting a higher share mainly in Belgium, the Czech Republic, Greece, Hungary and the Netherlands, which was more than offset by lower share in Germany, Italy and Spain.

Shipment volume of L&M was up by 2.7%, driven by higher share in Germany, the Netherlands and Poland. L&M’s market share was up by 0.2 share points to 6.6%, driven by gains in Germany, the Netherlands, Poland and Spain.

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Shipment volume of Chesterfield was up by 8.5%, and market share was up by 0.2 share points to 3.3%, driven primarily by higher share in France, Poland and Portugal.

Our shipment volume of OTP, in cigarette equivalent units, grew by 16.3%, mainly reflecting a higher total market and share in Belgium, France, Germany and Italy.

In the Czech Republic, the total cigarette market was essentially flat in 2011, at 21.1 billion units. Our shipments were down by 7.4%. Market share was down by 3.5 share points to 44.3%, primarily reflecting continued share declines for local brands,such as Petra and Sparta, down by a combined 2.0 share points. This decline was partly offset by a higher share for Marlboro, up by 0.4 share points to 7.2%, benefiting from the April 2011 launch of Marlboro Core Flavor and Marlboro Gold Touch, and a higher share for Red & White, up by 0.3 share points to 12.9%.

In France, the total cigarette market was down by 1.3% to 54.1 billion units. Our shipments were down by 1.7%. Our market share was up slightly by 0.1 share point to 40.5%. While market share of Marlboro declined by 0.2 share points to 25.7%, it was more than offset by a higher share for the premium Philip Morris brand, up by 0.4 share points to 8.2%, as well as by a higher share for Chesterfield, up by 0.3 share points to 3.1%. Our share of the fine-cut market grew by 4.7 share points to 24.3% for the full year, driven by Philip Morris and the very successful February 2011 launch of Marlboro.

In Germany, the total cigarette market grew by 0.7% to 84.5 billion units. Our shipments were up by 1.8%, and market share grew by 0.4 share points to 35.9%. While share of Marlboro was down by 0.5 share points to 21.4%, share of L&M was up by 1.1 share points to 10.4%.

In Italy, the total cigarette market was down by 1.8% to 85.5 billion units, reflecting the unfavorable impact of excise tax driven price increases in 2010, price increases in July 2011, and a VAT-driven price increase of €0.20 per pack in September 2011. Our shipments were down by 3.6%, and market share declined by 0.8 share points to 53.1%. Marlboro’smarketshare was down by 0.3 share points to 22.5%.

In Poland, the total cigarette market was down by 3.1% to 55.6 billion units, reflecting the unfavorable impact of excise tax driven price increases in the fourth quarter of 2010 and second quarter of 2011, as well as the introduction of an indoor public smoking ban in November of 2010. Our shipments were down by 8.3%. Our market share was down by 2.0 share points to 35.3%, mainly due to lower share of low-price Red & White, down by 2.6 share points to 5.1%, partially offset by L&M, up by 1.1 share points to 15.9%, supported by the launch of L&M Forward in April 2011, and Chesterfield, up by 0.6 share points to 1.4%. Market share of Marlboro was flat at 10.4%.

In Spain, the total cigarette market was down by 16.7% to 60.6 billion units, largely due to the continuing adverse economic environment and the introduction of a total indoor public smoking ban in January 2011. Our shipments were down by 18.4%, and our market share was down by 0.8 share points to 30.9%. Share of Marlboro of 14.7% was down by 0.6 share points, reflecting the additional impact of crossing the €4.00 per pack retail price point during the year.

Eastern Europe, Middle East & Africa. Net revenues, which include excise taxes billed to customers, increased$1.5 billion (9.6%). Excluding excise taxes, net revenues increased$472 million (6.4%) to $7.9 billion. This increase was due to:

• price increases ($271 million),

• favorable volume/mix ($127 million),

• favorable currency ($49 million) and

• the impact of acquisitions ($25 million).

Operating companies income of $3.2 billion increased by $77 million (2.4%). This increase was due primarily to:

• price increases ($271 million) and

• favorable volume/mix ($107 million), partially offset by

• higher manufacturing costs ($109 million),

• unfavorable currency ($97 million),

• higher marketing, administration and research costs ($69 million, including costs related to marketing and business infrastructure investment in Russia) and

• the 2011 pre-tax charges for asset impairment and exit costs ($25 million).

Our cigarette shipment volume in EEMA increased by 0.3%, predominantly due to: the Middle East, primarily Saudi Arabia, mainly reflecting a higher total market; North Africa, primarily Algeria, driven by a higher total market and share growth; and Turkey, reflecting share growth. This increase was partly offset by a decline in Russia and Ukraine, largely due to lower total markets, and Libya, reflecting the imposition of economic sanctions during most of the year.

In Russia, the total cigarette market declined by approximately 2.0% to an estimated 375 billion units. Our shipment volume decreased by 2.3%. While shipment volume of our premium portfolio was down by 5.9%, primarily due to a decline in Marlboro of 12.1%, shipment volume of Parliament was up by 4.2%. In the mid-price segment, shipment volume was down by 0.7%, mainly due to Chesterfield, down by 0.7%, and L&M, down by 4.3%. In the low-price segment, shipment volume of Bond Street was up by 3.3%. Our market share of 25.8%, as measured by A.C. Nielsen, was up by 0.3 share points. Market share for Parliament, in the premium segment, was up slightly by 0.1 share point; Marlboro, in the premium segment, was down by 0.2 share points; L&M in the mid-price segment was down by 0.3 share points; Chesterfield in the mid-price segment was up slightly by 0.1 share point; and Bond Street in the low-price segment was up by 0.6 share points.

In Turkey, the total cigarette market was down by 2.3% to 91.2 billion units, due to the unfavorable impact of excise tax driven price increases in the fourth quarter of 2011. Our shipment volume increased by 7.1%. Our market share, as measured by A.C. Nielsen, grew by 2.7 share points to 44.8%, driven by Parliament, Muratti and L&M, up by 0.9, 0.6 and 3.1 share points, respectively, partly offset by declines in

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Lark and Bond Street, down by 1.0 and 0.6 share points, respectively. Market share of Marlboro was down by 0.2 share points to 9.3%.

In Ukraine, the total cigarette market declined by 8.1% to 85.6 billion units, reflecting the unfavorable impact of excise tax driven price increases in 2010 and 2011. Our shipment volume decreased by 10.7%. Our market share, as measured by A.C. Nielsen, was down by 2.5 share points to 32.2%, due to declines in our medium and low-price segments. Share for premium Parliament was up by 0.4 share points to 2.8%. Share of Marlboro was up by 0.3 share points to 5.8%.

Asia. Net revenues, which include excise taxes billed to customers, increased$4.4 billion (28.6%). Excluding excise taxes, net revenues increased$2.8 billion (34.9%) to $10.7 billion. This increase was due to:

• price increases ($991 million),

• favorable volume/mix ($977 million, including increased shipments to Japan in response to in-market shortages of competitors’ products),

• favorable currency ($690 million) and

• the impact of acquisitions ($112 million, primarily the 2010 business combination in the Philippines).

Operating companies income of $4.8 billionincreased by $1.8 billion (58.6%). This increase was due primarily to:

• price increases ($991 million),

• favorable volume/mix ($765 million),

• favorable currency ($400 million) and

• the impact of acquisitions ($28 million), partially offset by

• higher marketing, administration and research costs ($219 million, partially related to increased marketing investment in Japan) and

• higher manufacturing costs ($183 million, partially related to the air freight of product to Japan).

Our cigarette shipment volume increased by 11.0%, primarily due to growth in Indonesia, Japan, Korea and the Philippines. The growth was partly offset by a decline in Pakistan of 14.6%, due to the continued growth of illicit products and market share erosion. Shipment volume of Marlboro was up by 8.8%, driven by growth in Indonesia, Japan, Korea and Vietnam, partly offset by a decline in the Philippines, reflecting the unfavorable impact of an excise tax driven price increase in January 2011.

In Indonesia, the total cigarette market was up by 9.8% to 279.6 billion units, driven by growth in the low-price and the machine-made LTLN (low “tar,” low nicotine) segments. Our shipment volume increased by 16.6%, with all brand families recording growth. Market share was up by 1.9 share points to 32.8%, driven by growth from premium Sampoerna A, mid-price U Mild and low-price Vegas Mild and Trend Mild. Although Marlboro’s market share was down by 0.2 share points to 4.5%, shipments grew by 5.2% and share of the “white” cigarettes segment increased by 4.8 share points to 66.3%.

In Japan, the total cigarette market decreased by 10.8% to 195.3 billion units, reflecting the unfavorable impact of the October 1, 2010, excise tax driven price increases and the underlying market decline. Our shipment volume was up by 24.1%, driven by increased demand following in-market shortages of competitors’ products during the year. Our market share of 30.7% was up by 6.3 share points, reflecting growth of Marlboro, Lark, the Philip Morris brand and Virginia S.upby 2.1, 3.1, 0.5 and 0.5 share points, to 13.1%, 9.7%, 2.8% and 2.4%, respectively. We exited 2011 with a fourth quarter share of 28.2%, up nearly four share points compared to a full year market share of 24.4% in 2010.

In Korea, the total cigarette market declined by 0.6% to 90.0 billion units. Our shipment volume increased by 16.7%, driven by market share increases. Our market share of 19.8% was up by 2.9 share points, driven by Marlboro and Parliament, up by 1.7 and 1.1 share points to 8.6% and 6.7%, respectively.

In the Philippines, the total cigarette market declined by 4.0% to 97.4 billion units, mainly reflecting the impact of excise tax driven price increases in January 2011. Our shipment volume was up by 7.5%. Adjusted for the business combination of PMFTC, established on February 25, 2010, shipment volume declined by 4.1%. Our market share reached 94.0%, up by 1.2 share points.

Latin America & Canada. Net revenues, which include excise taxes billed to customers, increased$1.0 billion (12.2%). Excluding excise taxes, net revenues increased$246 million (8.1%) to $3.3 billion. This increase was due to:

• price increases ($334 million) and

• favorable currency ($70 million), partially offset by

• unfavorable volume/mix ($158 million).

Operating companies income of $988 millionincreased by $35 million (3.7%). This increase was due primarily to:

• price increases ($334 million), partially offset by

• unfavorable volume/mix ($159 million),

• higher manufacturing costs ($72 million),

• higher marketing, administration and research costs ($42 million) and

• the 2011 pre-tax charges for asset impairment and exit costs ($24 million, primarily related to the closure of manufacturing facilities in Uruguay and Venezuela).

Our cigarette shipment volume decreased by 4.8%, mainly due to Mexico, partly offset by an increase in Argentina. Shipment volume of Marlboro decreased by 5.8%, principally due to Mexico, partially offset by growth in Argentina, Brazil and Colombia.

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In Argentina, the total cigarette market grew by 2.6% to 43.8 billion units, reflecting growth in the economy. Our cigarette shipment volume increased by 3.8%. Our market share was up by 0.7 share points to 74.0%, reflecting growth of Marlboro, up by 0.8 share points to 24.1%, and of the mid-price Philip Morris brand, up by 0.4 share points to 38.0%. Share of low-price Next was down by 0.2 share points to 3.6%.

In Canada, the total tax-paid cigarette market was down by 0.8% to 32.1 billion units, reflecting a flattening of the return of illicit trade to the legitimate market. Our cigarette shipment volume increased by 1.3%. Our market share grew by 0.8 share points to 34.1%, with premium brand Belmont up by 0.1 share point to 1.8% and low-price brand Next up by 2.5 share points to 6.9%, partly offset by mid-price Number 7 and Canadian Classics, and low-price Accord, down by 0.4, 0.4 and 0.7 share points, to 4.1%, 8.7% and 3.6%, respectively.

In Mexico, the total cigarette market was down by 21.1% to 34.3 billion units, primarily due to the significant January 1, 2011, excise tax increase, which drove a 26.7% increase in the retail price of Marlboro, and also fueled a surge in the availability of illicit products. Although our cigarette shipment volume decreased by 18.6%, market share grew by 2.2 share points to 72.3%, led by Marlboro, up by 3.2 share points to 52.3%, and Benson & Hedges, up by 0.6 share points to 6.1%. Market share of low-price Delicados declined by 1.0 share point to 10.9%.

Financial Review

Net Cash Provided by Operating Activities

Net cash provided by operating activities of $9.4 billion for the year ended December 31, 2012, decreased by $1.1 billion from the comparable 2011 period. The decrease was due primarily to an increase in our working capital requirements ($1.5 billion), partially offset by lower pension contributions ($328 million) and higher net earnings ($275 million).

The unfavorable movements in working capital were due primarily to the following:

• less cash provided by accrued liabilities and other current assets ($874 million), largely due to the timing of payments for excise taxes (primarily related to forestalling);

• more cash used for inventories ($692 million), primarily clove and the planned replenishment of tobacco leaf inventories, partly offset by lower finished goods inventories;

• less cash provided by accounts payable ($189 million), primarily due to the timing of payables for leaf and direct materials; and

• more cash used for accounts receivable ($147 million), primarily due to price increases for our products, the timing of cash collections and higher trade purchases in anticipation of excise-tax driven price changes; partly offset by

• more cash provided by income taxes ($407 million), primarily due to higher income tax provisions and the timing of payments.

On February 9, 2012, we announced a one-year, gross productivity and cost savings target for 2012 of approximately $300 million. During 2012, we exceeded this target primarily through the rationalization of tobacco blends and product specifications and other manufacturing and procurement initiatives.

On February 7, 2013, we announced a one-year, gross productivity and cost savings target for 2013 of approximately $300 million to help offset expected moderate cost increases in leaf and direct materials, as well as higher clove costs.

Net cash provided by operating activities of $10.5 billion for the year ended December 31, 2011, increased $1.1 billion from the comparable 2010 period. The increase was due primarily to higher net earnings ($1.4 billion), partly offset by unfavorable movements in working capital ($421 million) and higher contributions to pension plans ($102 million).

The unfavorable movements in working capital were due primarily to the following:

• more cash used for inventories ($1.1 billion), driven by higher finished goods inventories (primarily due to stock movements related to tax-driven price increases); and

• more cash used for accounts receivable ($374 million), primarily due to the timing of collections; partly offset by

• more cash provided by accrued liabilities and other current assets ($650 million), due primarily to the increase in excise tax liabilities associated with inventory movements and the timing of excise and value-added tax (VAT) payments, partially offset by changes in the fair value of financial instruments;

• more cash provided by accounts payable ($271 million), primarily due to the timing of payables for leaf and direct materials; and

• more cash provided by income taxes ($139 million), primarily due to higher income tax provisions and the timing of payments.

On February 10, 2011, we announced a one-year, gross productivity and cost savings target for 2011 of approximately $250 million to be achieved through product specification changes, improved manufacturing performance and various procurement-related initiatives. During 2011, we exceeded this target.

Net Cash Used in Investing Activities

Net cash used in investing activities of $992 million for the year ended December 31, 2012, decreased by $40 million from the comparable 2011 period, due primarily to cash spent in 2011 to purchase businesses ($80 million), and higher cash proceeds from the sale of fixed assets, partially offset by higher capital expenditures ($159 million).

Net cash used in investing activities of $1.0 billion for the year ended December 31, 2011, increased$322 million from the comparable 2010 period, due primarily to higher capital expenditures ($184 million) and lower cash proceeds from the settlement of derivatives designated as net investment hedges ($43 million).

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In 2011, we acquired a cigar business, consisting primarily of trademarks in the Australian and New Zealand markets, for $20 million. In 2011, we also completed the acquisition of a cigarette business in Jordan, consisting primarily of cigarette manufacturing assets and inventories, for $42 million.

In 2010, we spent $83 million for the net assets and contractual relationships of our current leaf suppliers in Brazil. For further details, see Note 6. Acquisitions and Other Business Arrangements.

Our capital expenditures were $1.1 billion in 2012, $897 million in 2011 and $713 million in 2010. The 2012 expenditures were primarily related to investments in productivity-enhancing programs, equipment for new products, the consolidation of our operations in the Philippines and the expansion of our capacity in Indonesia and Russia. We expect total capital expenditures in 2013 of approximately $1.3 billion, to be funded by operating cash flows.

Net Cash Used in Financing Activities

During 2012, net cash used in financing activities was $8.1 billion, compared with net cash used in financing activities of $8.3 billion during 2011 and $8.6 billion in 2010. During 2012, we used a total of $15.4 billion to repurchase our common stock, pay dividends, and repay debt. These uses were partially offset by proceeds from our debt offerings and short-term borrowings in 2012 of $7.6 billion. During 2011, we used a total of $12.8 billion to repurchase our common stock, pay dividends, and repay debt. These uses were partially offset by proceeds from our debt offerings and short-term borrowings in 2011 of $4.7 billion. During 2010, we used a total of $10.1 billion to repurchase our common stock, pay dividends, and repay debt. These uses were partially offset by proceeds from our debt offerings and short-term borrowings in 2010 of $1.6 billion.

Dividends paid in 2012, 2011 and 2010 were $5.4 billion, $4.8 billion and $4.4 billion, respectively.

Debt and Liquidity

We define cash and cash equivalents as short-term, highly liquid investments, readily convertible to known amounts of cash that mature within a maximum of three months and have an insignificant risk of change in value due to interest rate or credit risk changes. As a policy, we do not hold any investments in structured or equity-linked products. Our cash and cash equivalents are predominantly held in short-term bank deposits with institutions having a long-term rating of A- or better.

Credit Ratings – The cost and terms of our financing arrangements as well as our access to commercial paper markets may be affected by applicable credit ratings. At December 31, 2012, our credit ratings and outlook by major credit rating agencies were as follows:

	Short-term	Long-term	Outlook
Moody’s	P-1	A2	Stable
Standard & Poor’s	A-1	A	Stable
Fitch	F1	A	Stable

Credit Facilities –On February 12, 2013, we entered into a 364-day revolving credit facility in the amount of $2.0 billion.

At February 12, 2013, our committed credit facilities were as follows:

(in billions)

Type	Committed Credit Facilities
364-day revolving credit, expiring February 11, 2014	$	2.0
Multi-year revolving credit, expiring March 31, 2015	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	8.0

At February 12, 2013, there were no borrowings under the committed credit facilities, and the entire committed amounts were available for borrowing.

All banks participating in our committed credit facilities have an investment-grade long-term credit rating from the credit rating agencies. We continuously monitor the credit quality of our banking group, and at this time we are not aware of any potential non-performing credit provider.

Each of these facilities requires us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“consolidated EBITDA”) to consolidated interest expense of not less than 3.5 to 1.0 on a rolling four-quarter basis. At December 31, 2012, our ratio calculated in accordance with the agreements was 16.0 to 1.0. These facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require us to post collateral. We expect to continue to meet our covenants. The terms “consolidated EBITDA” and “consolidated interest expense,” both of which include certain adjustments, are defined in the facility agreements previously filed with the U.S. Securities and Exchange Commission.

In addition to the committed credit facilities discussed above, certain of our subsidiaries maintain short-term credit arrangements to meet their respective working capital needs. These credit arrangements, which amounted to approximately $2.0 billion at December 31, 2012, and $1.9 billion at December 31, 2011, are for the sole use of our subsidiaries. Borrowings under these arrangements amounted to $447 million at December 31, 2012, and $247 million at December 31, 2011.

Commercial Paper Program – We have commercial paper programs in place in the U.S. and in Europe. At December 31, 2012 and 2011, we had $2.0 billion and $1.3 billion, respectively, of commercial paper outstanding.

The existence of the commercial paper program and the committed credit facilities, coupled with our operating cash flows, will enable us to meet our liquidity requirements.

Debt – Our total debt was $22.8 billion at December 31, 2012, and $18.5 billion at December 31, 2011. Fixed-rate debt constituted approximately 88% of our total debt at December 31, 2012, and 90% of our total debt at December 31, 2011. The weighted-average all-in financing cost of our total debt was 4.0% in 2012, compared to 4.4% in 2011. See Note 16. Fair Value Measurements to our consolidated financial statements for a discussion of our disclosures related to the fair value of debt. The amount of debt that we can issue is subject to approval by our Board of Directors.

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On February 28, 2011, we filed a new shelf registration statement with the U.S. Securities and Exchange Commission under which we may from time to time sell debt securities and/or warrants to purchase debt securities over a three-year period.

Our debt offerings in 2012 were as follows:

(in millions)
Type		Face Value		Interest Rate		Issuance	Maturity
U.S. dollar notes	(a)	$	700	4.500	%	March 2012	March 2042
U.S. dollar notes	(a)	$	550	1.625		March 2012	March 2017
Euro notes	(b)	€750 (approximately $951)		2.125		May 2012	May 2019
Euro notes	(b)	€600 (approximately $761)		2.875		May 2012	May 2024
U.S. dollar notes	(c)	$	750	1.125		August 2012	August 2017
U.S. dollar notes	(c)	$	750	2.500		August 2012	August 2022
U.S. dollar notes	(c)	$	750	3.875		August 2012	August 2042
Swiss franc notes	(d)	CHF 325 (approximately $334)		1.000		September 2012	September 2020

(a) Interest on these notes is payable semiannually, and the first payment was made in September 2012.

(b) Interest on these notes is payable annually beginning in May 2013.

(c) Interest on these notes is payable semiannually beginning in February 2013.

(d) Interest on these notes is payable annually beginning in September 2013.

The net proceeds from the sale of the securities listed in the table above were used to meet our working capital requirements, to repurchase our common stock, to refinance debt and for general corporate purposes.

As a result of the debt issuances shown in the table above, the weighted-average time to maturity of our long-term debt has increased from 8.2 years at the end of 2011 to 10.1 years at the end of 2012.

In February 2013, we launched and priced a bond offering in the amount of CHF 200 million (approximately $218 million). These bonds will have a fixed interest rate of 0.875% and a maturity date of March 2019. The transaction is scheduled to close in March 2013.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations: We have no off-balance sheet arrangements, including special purpose entities, other than guarantees and contractual obligations that are discussed below.

Guarantees – At December 31, 2012, we were contingently liable for $0.7 billion of guarantees of our own performance, which were primarily related to excise taxes on the shipment of our products. In accordance with U.S. GAAP, there is no liability in the consolidated financial statements associated with these guarantees. At December 31, 2012, our third-party guarantees were insignificant.

Aggregate Contractual Obligations – The following table summarizes our contractual obligations at December 31, 2012:

			Payments Due
	Total		2013		2014-2015		2016-2017		2018 and Thereafter
(in millions)
Long-term debt (1)		$20,598		$2,781		$2,251		$3,899		$11,667
RBH Legal Settlement (2)	227		39		74		80		34
Colombian Investment and Cooperation Agreement (3)	125		8		16		15		86
Interest on borrowings (4)	7,993		791		1,322		1,035		4,845
Operating leases (5)	851		218		261		146		226
Purchase obligations (6):
Inventory and production costs	2,576		1,780		581		150		65
Other	1,849		1,182		544		103		20
	4,425		2,962		1,125		253		85
Other long-term liabilities (7)	366		42		48		37		239
		$34,585		$6,841		$5,097		$5,465		$17,182

⁽¹⁾ Amounts represent the expected cash payments of our long-term debt and capital lease obligations.

⁽²⁾ Amounts represent the estimated future payments due under the terms of the settlement agreement. See Note 19. RBH Legal Settlement, to our consolidated financial statements for more details regarding this settlement.

⁽³⁾ Amounts represent the expected cash payments under the terms of the Colombian Investment and Cooperation Agreement. See Note 18. Colombian Investment and Cooperation Agreement to our consolidated financial statements for more details regarding this agreement.

⁽⁴⁾ Amounts represent the expected cash payments of our interest expense on our long-term debt, including the current portion of long-term debt. Interest on our fixed-rate debt is presented using the stated interest rate. Interest on our variable rate debt is estimated using the rate in effect at December 31, 2012. Amounts exclude the amortization of debt discounts, the amortization of loan fees and fees for lines of credit that would be included in interest expense in the consolidated statements of earnings.

⁽⁵⁾ Amounts represent the minimum rental commitments under non-cancelable operating leases.

⁽⁶⁾ Purchase obligations for inventory and production costs (such as raw materials, indirect materials and supplies, packaging, co-manufacturing arrangements, storage and distribution) are commitments for projected needs to be utilized in the normal course of business. Other purchase obligations include commitments for marketing, advertising, capital expenditures, information technology and professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Amounts represent the minimum commitments under non-cancellable contracts. Any amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.

⁽⁷⁾ Other long-term liabilities consist primarily of postretirement health care costs and accruals established for employment costs. The following long-term liabilities included on the consolidated balance sheet are excluded from the table above: accrued pension and postemployment costs, tax contingencies, insurance accruals and other accruals. We are unable to estimate the timing of payments (or contributions in the case of accrued pension costs) for these items. Currently, we anticipate making pension contributions of approximately $220 million in 2013, based on current tax and benefit laws (as discussed in Note 13. Benefit Plans to our consolidated financial statements).

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The E.C. agreement payments discussed below are excluded from the table above, as the payments are subject to adjustment based on certain variables including our market share in the EU.

E.C. Agreement – In 2004, we entered into an agreement with the European Commission (acting on behalf of the European Community) that provides for broad cooperation with European law enforcement agencies on anti-contraband and anti-counterfeit efforts. This agreement has been signed by all 27 Member States. This agreement calls for payments that are to be adjusted based on certain variables, including our market share in the European Union in the year preceding payment. Because future additional payments are subject to these variables, we record these payments as an expense in cost of sales when product is shipped. In addition, we are also responsible to pay the excise taxes, VAT and customs duties on qualifying product seizures of up to 90 million cigarettes and are subject to payments of five times the applicable taxes and duties if qualifying product seizures exceed 90 million cigarettes in a given year. To date, our annual payments related to product seizures have been immaterial. Total charges related to the E.C. Agreement of $78 million, $86 million and $91 million were recorded in cost of sales in 2012, 2011 and 2010, respectively.

Other – In addition to the contractual obligations noted above, we entered into separate agreements with Grupo Carso, S.A.B. de C.V. (“Grupo Carso”) in 2007 and FTC in 2010, which relate to the potential purchase of the noncontrolling interest in our Mexican and Philippines tobacco businesses by PMI. See Note 4. Related Party Information to our consolidated financial statements for a discussion of our agreement with Grupo Carso and Note 6. Acquisitions and Other Business Arrangements to our consolidated financial statements for a discussion of our agreement with FTC.

Equity and Dividends

As discussed in Note 9. Stock Plans to our consolidated financial statements, during 2012, we granted 3.2 million shares of deferred stock awards at a weighted-average grant date fair value of $79.59. Equity awards generally vest three or more years after the date of the award, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

In May 2012, our stockholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the “2012 Plan”). The 2012 Plan replaced the 2008 Performance Incentive Plan (the “2008 Plan”), and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, we may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. While the 2008 Plan authorized incentive stock options, non-qualified stock options and stock appreciation rights, the 2012 Plan does not authorize any grants of stock options or stock appreciation rights. Up to 30 million shares of our common stock may be issued under the 2012 Plan.

On May 1, 2008, we began a $13.0 billion two-year share repurchase program. On April 30, 2010, we completed this $13.0 billion share repurchase program by purchasing, in total, 277.6 million shares at an average price of $46.83 per share.

On May 1, 2010, we began repurchasing shares under a three-year $12.0 billion share repurchase program that was authorized

by our Board of Directors in February 2010. On July 31, 2012, we completed this share repurchase program ahead of schedule. In total, we purchased 179.1 million shares for $12.0 billion under this program.

On August 1, 2012, we began repurchasing shares under a new three-year $18.0 billion share repurchase program that was authorized by our Board of Directors in June 2012. From August 1, 2012, through December 31, 2012, we repurchased 32.2 million shares of our common stock at a cost of $2.9 billion under this new repurchase program. During 2012, we repurchased 74.9 million shares at a cost of $6.5 billion.

On February 7, 2013, we announced that our forecast includes a share repurchase target amount for 2013 of $6.0 billion.

Dividends paid in 2012 were $5.4 billion. During the third quarter of 2012, our Board of Directors approved a 10.4% increase in the quarterly dividend to $0.85 per common share. As a result, the present annualized dividend rate is $3.40 per common share.

Market Risk

Counterparty Risk -We predominantly work with financial institutions with strong short and long-term credit ratings as assigned by Standard & Poor’s and Moody’s. These banks are also part of a defined group of relationship banks. Non-investment grade institutions are only used in certain emerging markets to the extent required by local business needs. We have a conservative approach when it comes to choosing financial counterparties and financial instruments. As such we do not invest or hold investments in any structured or equity-linked products. The majority of our cash and cash equivalents is currently invested in bank deposits maturing within less than 30 days.

We continuously monitor and assess the credit worthiness of all our counterparties.

Derivative Financial Instruments - We operate in markets outside of the United States, with manufacturing and sales facilities in various locations throughout the world. Consequently, we use certain financial instruments to manage our foreign currency exposure. We use derivative financial instruments principally to reduce our exposure to market risks resulting from fluctuations in foreign exchange rates by creating offsetting exposures. We are not a party to leveraged derivatives and, by policy, do not use derivative financial instruments for speculative purposes.

See Note 15. Financial Instruments and Note 16. Fair Value Measurements to our consolidated financial statements for further details on our derivative financial instruments.

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Value at Risk -We use a value at risk computation to estimate the potential one-day loss in the fair value of our interest-rate-sensitive financial instruments and to estimate the potential one-day loss in pre-tax earnings of our foreign currency price-sensitive derivative financial instruments. This computation includes our debt, short-term investments, and foreign currency forwards, swaps and options. Anticipated transactions, foreign currency trade payables and receivables, and net investments in foreign subsidiaries, which the foregoing instruments are intended to hedge, were excluded from the computation.

The computation estimates were made assuming normal market conditions, using a 95% confidence interval. We use a “variance/co-variance” model to determine the observed interrelationships between movements in interest rates and various currencies. These interrelationships were determined by observing interest rate and forward currency rate movements over the preceding quarter for determining value at risk at December 31, 2012 and 2011, and over each of the four preceding quarters for the calculation of average value at risk amounts during each year. The values of foreign currency options do not change on a one-to-one basis with the underlying currency and were valued accordingly in the computation.

The estimated potential one-day loss in fair value of our interest-rate-sensitive instruments, primarily debt, under normal market conditions and the estimated potential one-day loss in pre-tax earnings from foreign currency instruments under normal market conditions, as calculated in the value at risk model, were as follows:

	Pre-Tax Earnings Impact
(in millions)	At 12/31/12	Average	High	Low
Instruments sensitive to:
Foreign currency rates	$20	$32	$50	$20
	Fair Value Impact
(in millions)	At 12/31/12	Average	High	Low
Instruments sensitive to:
Interest Rates	$70	$71	$76	$66
	Pre-Tax Earnings Impact
(in millions)	At 12/31/11	Average	High	Low
Instruments sensitive to:
Foreign currency rates	$49	$74	$90	$49
	Fair Value Impact
	At 12/31/11	Average	High	Low
Instruments sensitive to:
Interest Rates	$57	$55	$69	$45

The value at risk computation is a risk analysis tool designed to statistically estimate the maximum probable daily loss from adverse movements in interest and foreign currency rates under

normal market conditions. The computation does not purport to represent actual losses in fair value or earnings to be incurred by us, nor does it consider the effect of favorable changes in market rates. We cannot predict actual future movements in such market rates and do not present these results to be indicative of future movements in market rates or to be representative of any actual impact that future changes in market rates may have on our future results of operations or financial position.

Contingencies

See Note 21. Contingencies to our consolidated financial statements for a discussion of contingencies.

Cautionary Factors That May Affect Future Results

Forward-Looking and Cautionary Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor webcasts. You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in our securities. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us; any such statement is qualified by reference to the following cautionary statements. We elaborate on these and other risks we face throughout this document, particularly in the “Business Environment” section. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. We do not undertake to update any forward-looking statement that we may make from time to time except in the normal course of our public disclosure obligations.

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Risks Related to Our Business and Industry

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.

Tax regimes, including excise taxes, sales taxes and import duties, can disproportionately affect the retail price of manufactured cigarettes versus other tobacco products, or disproportionately affect the relative retail price of our manufactured cigarette brands versus cigarette brands manufactured by certain of our competitors. Because our portfolio is weighted toward the premium-price manufactured cigarette category, tax regimes based on sales price can place us at a competitive disadvantage in certain markets. As a result, our volume and profitability may be adversely affected in these markets.

Increases in cigarette taxes are expected to continue to have an adverse impact on our sales of cigarettes, due to resulting lower consumption levels, a shift in sales from manufactured cigarettes to other tobacco products and from the premium-price to the mid-price or low-price cigarette categories, where we may be under-represented, from local sales to legal cross-border purchases of lower price products, or to illicit products such as contraband, counterfeit and illicit whites.

Our business faces significant governmental action aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco products.

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volume in many of our markets, and we expect that such factors will continue to reduce consumption levels and will increase downtrading and the risk of counterfeiting, contraband and cross-border purchases. Significant regulatory developments will take place over the next few years in most of our markets, driven principally by the World Health Organization's Framework Convention on Tobacco Control (“FCTC”). The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation. The FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the palatability and attractiveness of tobacco products to adult smokers. Regulatory initiatives that have been proposed, introduced or enacted include:

• restrictions on or licensing of outlets permitted to sell cigarettes;

• the levying of substantial and increasing tax and duty charges;

• restrictions or bans on advertising, marketing and sponsorship;

• the display of larger health warnings, graphic health warnings and other labeling requirements;

• restrictions on packaging design, including the use of colors, and plain packaging;

• restrictions on packaging and cigarette formats and dimensions;

• restrictions or bans on the display of tobacco product

packaging at the point of sale and restrictions or bans on cigarette vending machines;

• requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents;

• disclosure, restrictions, or bans of tobacco product ingredients;

• increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;

• elimination of duty free sales and duty free allowances for travelers; and

• encouraging litigation against tobacco companies.

Our operating income could be significantly affected by regulatory initiatives resulting in a significant decrease in demand for our brands, in particular requirements that lead to a commoditization of tobacco products, as well as any significant increase in the cost of complying with new regulatory requirements.

Litigation related to tobacco use and exposure to environmental tobacco smoke (“ETS”) could substantially reduce our profitability and could severely impair our liquidity.

There is litigation related to tobacco products pending in certain jurisdictions. Damages claimed in some tobacco-related litigation are significant and, in certain cases in Brazil, Canada, Israel and Nigeria, range into the billions of U.S. dollars. We anticipate that new cases will continue to be filed. The FCTC encourages litigation against tobacco product manufacturers. It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Please see Note 21. Contingencies to our consolidated financial statements for a discussion of tobacco-related litigation.

We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, innovation, packaging, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors' introduction of lower-price products or innovative products, higher tobacco product taxes, higher absolute prices and larger gaps between retail price categories, and product regulation that diminishes the ability to differentiate tobacco products. Competitors include three large international tobacco companies and several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises,

48

principally in Algeria, China, Egypt, Taiwan, Thailand and Vietnam. Industry consolidation and privatizations of state-owned enterprises have led to an overall increase in competitive pressures. Some competitors have different profit and volume objectives and some international competitors are susceptible to changes in different currency exchange rates.

Because we have operations in numerous countries, our results may be influenced by economic, regulatory and political developments or natural disasters in many countries.

Some of the countries in which we operate face the threat of civil unrest and can be subject to regime changes. In others, nationalization, terrorism, conflict and the threat of war may have a significant impact on the business environment. Economic, political, regulatory or other developments or natural disasters could disrupt our supply chain, manufacturing capabilities or our distribution capabilities. In addition, such developments could lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, which could reduce our volumes, revenues and net earnings. In certain markets, we are dependent on governmental approvals of various actions such as price changes.

In addition, despite our high ethical standards and rigorous control and compliance procedures aimed at preventing and detecting unlawful conduct, given the breadth and scope of our international operations, we may not be able to detect all potential improper or unlawful conduct by our employees and international partners.

We may be unable to anticipate changes in consumer preferences or to respond to consumer behavior influenced by economic downturns.

Our tobacco business is subject to changes in consumer preferences, which may be influenced by local economic conditions. To be successful, we must:

• promote brand equity successfully;

• anticipate and respond to new consumer trends;

• develop new products and markets and broaden brand portfolios;

• improve productivity; and

• be able to protect or enhance margins through price increases.

In periods of economic uncertainty, consumers may tend to purchase lower-price brands, and the volume of our premium-price and mid-price brands and our profitability could suffer accordingly. Such downtrading trends may be reinforced by regulation that limits branding, communication and product differentiation.

We lose revenues as a result of counterfeiting, contraband and cross-border purchases.

Large quantities of counterfeit cigarettes are sold in the international market. We believe that Marlboro is the most heavily counterfeited international cigarette brand, although we cannot quantify the revenues we lose as a result of this activity. In addition,

our revenues are reduced by contraband and legal cross-border purchases.

From time to time, we are subject to governmental investigations on a range of matters.

Investigations include allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of customs duties and/or excise taxes, allegations of false and misleading usage of descriptors such as “lights” and “ultra lights” and allegations of unlawful advertising. We cannot predict the outcome of those investigations or whether additional investigations may be commenced, and it is possible that our business could be materially affected by an unfavorable outcome of pending or future investigations. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Operating Results by Business Segment-Business Environment-Governmental Investigations” for a description of governmental investigations to which we are subject.

We may be unsuccessful in our attempts to produce products with the potential to reduce the risk of smoking-related diseases compared to conventional cigarettes.

We continue to seek ways to develop commercially viable new product technologies that may reduce the risk of smoking-related diseases. Our goal is to develop products whose potential for risk reduction can be substantiated and provide adult smokers the taste, sensory experience and smoking ritual characteristics that are as close as possible to those currently provided by conventional cigarettes. We may not succeed in these efforts. If we do not succeed, but others do, we may be at a competitive disadvantage. Furthermore, we cannot predict whether regulators will permit the marketing of tobacco products with claims of reduced risk and harm, which could significantly undermine the commercial viability of these products.

Our reported results could be adversely affected by unfavorable currency exchange rates, and currency devaluations could impair our competitiveness.

We conduct our business primarily in local currency and, for purposes of financial reporting, the local currency results are translated into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will translate into fewer U.S. dollars. During periods of local economic crises, foreign currencies may be devalued significantly against the U.S. dollar, reducing our margins. Actions to recover margins may result in lower volume and a weaker competitive position.

49

The repatriation of our foreign earnings, changes in the earnings mix, and changes in U.S. tax laws may increase our effective tax rate. Our ability to receive payments from foreign subsidiaries or to repatriate royalties and dividends could be restricted by local country currency exchange controls.

Because we are a U.S. holding company, our most significant source of funds is distributions from our non-U.S. subsidiaries. Under current U.S. tax law, in general we do not pay U.S. taxes on our foreign earnings until they are repatriated to the U.S. as distributions from our non-U.S. subsidiaries. These distributions may result in a residual U.S. tax cost. It may be advantageous to us in certain circumstances to significantly increase the amount of such distributions, which could result in a material increase in our overall effective tax rate. Additionally, the Obama Administration has indicated that it favors changes in U.S. tax law that would fundamentally change how our earnings are taxed in the U.S. If enacted and depending upon its precise terms, such legislation could increase our overall effective tax rate. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries' ability to make payments outside the country.

Our ability to grow may be limited by our inability to introduce new products, enter new markets or to improve our margins through higher pricing and improvements in our brand and geographic mix.

Our profitability may suffer if we are unable to introduce new products or enter new markets successfully, to raise prices or maintain an acceptable proportion of our sales of higher margin products and sales in higher margin geographies.

We may be unable to expand our brand portfolio through successful acquisitions and the development of strategic business relationships.

One element of our growth strategy is to strengthen our brand portfolio and market positions through selective acquisitions and the development of strategic business relationships. Acquisition and strategic business development opportunities are limited and present risks of failing to achieve efficient and effective integration, strategic objectives and anticipated revenue improvements and cost savings. There is no assurance that we will be able to acquire attractive businesses on favorable terms, or that future acquisitions or strategic business developments will be accretive to earnings.

Government mandated prices, production control programs, shifts in crops driven by economic conditions and the impacts of climate change may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.

As with other agricultural commodities, the price of tobacco leaf and cloves can be influenced by imbalances in supply and demand, and crop quality can be influenced by variations in weather patterns, including those caused by climate change. Tobacco production in certain countries is subject to a variety of controls, including government mandated prices and production control programs. Changes in the patterns of demand for agricultural products could cause farmers to plant less tobacco. Any significant change in tobacco leaf and clove prices, quality and quantity could affect our profitability and our business.

Our ability to implement our strategy of attracting and retaining the best global talent may be impaired by the decreasing social acceptance of cigarette smoking.

The tobacco industry competes for talent with consumer products and other companies that enjoy greater societal acceptance. As a result, we may be unable to attract and retain the best global talent.

The failure of our information systems to function as intended or their penetration by outside parties with the intent to corrupt them could result in business disruption, loss of revenue, assets or personal or other sensitive data.

We use information systems to help manage business processes, collect and interpret business data and communicate internally and externally with employees, suppliers, customers and others. Some of these information systems are managed by third-party service providers. We have backup systems and business continuity plans in place, and we take care to protect our systems and data from unauthorized access. Nevertheless, failure of our systems to function as intended, or penetration of our systems by outside parties intent on extracting or corrupting information or otherwise disrupting business processes, could result in loss of revenue, assets or personal or other sensitive data, cause damage to our reputation and that of our brands and result in significant remediation and other costs to us.

We may be required to replace third party contract manufacturers or service providers with our own resources.

In certain instances, we contract with third parties to manufacture some of our products or product parts or to provide other services. We may be unable to renew these agreements on satisfactory terms for numerous reasons, including government regulations; accordingly, our costs may increase significantly if we must replace such third parties with our own resources.

50

Selected Financial Data—Five-Year Review

(in millions of dollars, except per share data)

	2012			2011			2010			2009			2008
Summary of Operations:
Net revenues	$	77,393		$	76,346		$	67,713		$	62,080		$	63,640
Cost of sales	10,373			10,678			9,713			9,022			9,328
Excise taxes on products	46,016			45,249			40,505			37,045			37,935
Gross profit	21,004			20,419			17,495			16,013			16,377
Operating income	13,846			13,332			11,200			10,040			10,248
Interest expense, net	859			800			876			797			311
Earnings before income taxes	12,987			12,532			10,324			9,243			9,937
Pre-tax profit margin	16.8		%	16.4		%	15.2		%	14.9		%	15.6		%
Provision for income taxes	3,833			3,653			2,826			2,691			2,787
Net earnings	9,154			8,879			7,498			6,552			7,150
Net earnings attributable to noncontrolling interests	354			288			239			210			260
Net earnings attributable to PMI	8,800			8,591			7,259			6,342			6,890
Basic earnings per share	5.17			4.85			3.93			3.25			3.32
Diluted earnings per share	5.17			4.85			3.92			3.24			3.31
Dividends declared per share to public stockholders	3.24			2.82			2.44			2.24			1.54
Capital expenditures	1,056			897			713			715			1,099
Depreciation and amortization	898			993			932			853			842
Property, plant and equipment, net	6,645			6,250			6,499			6,390			6,348
Inventories	8,949			8,120			8,317			9,207			9,664
Total assets	37,670			35,488			35,050			34,552			32,972
Long-term debt	17,639			14,828			13,370			13,672			11,377
Total debt	22,839			18,545			16,502			15,416			11,961
Stockholders' (deficit) equity	(3,154		)	551			3,933			6,145			7,904
Common dividends declared to public stockholders as a % of Diluted EPS	62.7		%	58.1		%	62.2		%	69.1		%	46.5		%
Market price per common share — high/low	94.13-72.85			79.42-55.85			60.87-42.94			52.35-32.04			56.26-33.30
Closing price of common share at year end	83.64			78.48			58.53			48.19			43.51
Price/earnings ratio at year end — Diluted	16			16			15			15			13
Number of common shares outstanding at year end (millions)	1,654			1,726			1,802			1,887			2,007
Number of employees	87,100			78,100			78,300			77,300			75,600

This Selected Financial Data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements.

51

Consolidated Balance Sheets

(in millions of dollars, except share data)

at December 31,	2012		2011
Assets
Cash and cash equivalents	$	2,983	$	2,550
Receivables (less allowances of $56 in 2012 and $45 in 2011)	3,589		3,201
Inventories:
Leaf tobacco	3,548		3,463
Other raw materials	1,610		1,185
Finished product	3,791		3,472
	8,949		8,120
Deferred income taxes	450		397
Other current assets	619		591
Total current assets	16,590		14,859
Property, plant and equipment, at cost:
Land and land improvements	708		692
Buildings and building equipment	3,948		3,738
Machinery and equipment	8,380		7,880
Construction in progress	843		603
	13,879		12,913
Less: accumulated depreciation	7,234		6,663
	6,645		6,250
Goodwill (Note 3)	9,900		9,928
Other intangible assets, net (Note 3)	3,619		3,697
Other assets	916		754
Total Assets	$	37,670	$	35,488

See notes to consolidated financial statements.

52

at December 31,	2012			2011
Liabilities
Short-term borrowings (Note 7)	$	2,419		$	1,511
Current portion of long-term debt (Note 7)	2,781			2,206
Accounts payable	1,103			1,031
Accrued liabilities:
Marketing and selling	527			519
Taxes, except income taxes	5,350			5,346
Employment costs	896			894
Dividends payable	1,418			1,341
Other	952			873
Income taxes	1,456			897
Deferred income taxes	114			176
Total current liabilities	17,016			14,794
Long-term debt (Note 7)	17,639			14,828
Deferred income taxes	1,875			1,976
Employment costs	2,574			1,665
Other liabilities	419			462
Total liabilities	39,523			33,725
Contingencies (Note 21)
Redeemable noncontrolling interest (Note 6)	1,301			1,212
Stockholders’ (Deficit) Equity
Common stock, no par value (2,109,316,331 shares issued in 2012 and 2011)	—			—
Additional paid-in capital	1,334			1,235
Earnings reinvested in the business	25,076			21,757
Accumulated other comprehensive losses	(3,604		)	(2,863		)
	22,806			20,129
Less: cost of repurchased stock (455,703,347 and 383,407,665 shares in 2012 and 2011, respectively)	26,282			19,900
Total PMI stockholders’ (deficit) equity	(3,476		)	229
Noncontrolling interests	322			322
Total stockholders’ (deficit) equity	(3,154		)	551
Total Liabilities and Stockholders’ (Deficit) Equity	$	37,670		$	35,488

53

Consolidated Statements of Earnings

(in millions of dollars, except per share data)

for the years ended December 31,	2012		2011		2010
Net revenues	$	77,393	$	76,346	$	67,713
Cost of sales	10,373		10,678		9,713
Excise taxes on products	46,016		45,249		40,505
Gross profit	21,004		20,419		17,495
Marketing, administration and research costs	6,978		6,880		6,160
Asset impairment and exit costs (Note 5)	83		109		47
Amortization of intangibles	97		98		88
Operating income	13,846		13,332		11,200
Interest expense, net	859		800		876
Earnings before income taxes	12,987		12,532		10,324
Provision for income taxes	3,833		3,653		2,826
Net earnings	9,154		8,879		7,498
Net earnings attributable to noncontrolling interests	354		288		239
Net earnings attributable to PMI	$	8,800	$	8,591	$	7,259
Per share data (Note 10):
Basic earnings per share	$	5.17	$	4.85	$	3.93
Diluted earnings per share	$	5.17	$	4.85	$	3.92

Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

for the years ended December 31,	2012			2011			2010
Net earnings	$	9,154		$	8,879		$	7,498
Other comprehensive earnings (losses), net of income taxes:
Currency translation adjustments, net of income taxes of $6 in 2012, $10 in 2011 and ($107) in 2010	15			(852		)	(43		)
Change in net loss and prior service cost:
Net losses and prior service costs, net of income taxes of $144 in 2012, $148 in 2011 and $43 in 2010	(943		)	(1,031		)	(318		)
Less amortization of net losses, prior service costs and net transition costs, net of income taxes of ($37) in 2012, ($23) in 2011 and ($20) in 2010	160			94			76
Change in fair value of derivatives accounted for as hedges:
(Gains)/losses transferred to earnings, net of income taxes of $3 in 2012, ($2) in 2011 and ($3) in 2010	(22		)	18			33
Gains/(losses) recognized, net of income taxes of ($14) in 2012, ($1) in 2011 and $6 in 2010	99			(5		)	(50		)
Change in fair value of equity securities	—			(1		)	(10		)
Total other comprehensive losses	(691		)	(1,777		)	(312		)
Total comprehensive earnings	8,463			7,102			7,186
Less comprehensive earnings attributable to:
Noncontrolling interests	210			137			208
Redeemable noncontrolling interest	194			97			42
Comprehensive earnings attributable to PMI	$	8,059		$	6,868		$	6,936

See notes to consolidated financial statements.

54

Consolidated Statements of Stockholders' (Deficit) Equity

(in millions of dollars, except per share data)

	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, 2010	$	—	$	1,403		$	15,358		$	(817	)	$	(10,228	)	$	429			$	6,145
Net earnings						7,259									213			(1)	7,472			(1)
Other comprehensive losses, net of income taxes									(323		)				(5		)	(1)	(328		)	(1)
Exercise of stock options and issuance of other stock awards			(178		)							543							365
Dividends declared ($2.44 per share)						(4,484		)											(4,484		)
Payments to noncontrolling interests															(210		)		(210		)
Common stock repurchased												(5,027		)					(5,027		)
Balances, December 31, 2010	—		1,225			18,133			(1,140		)	(14,712		)	427				3,933
Net earnings						8,591									191			(1)	8,782			(1)
Other comprehensive losses, net of income taxes									(1,723		)				(54		)	(1)	(1,777		)	(1)
Exercise of stock options and issuance of other stock awards			12									212							224
Dividends declared ($2.82 per share)						(4,967		)											(4,967		)
Payments to noncontrolling interests															(241		)		(241		)
Purchase of subsidiary shares from noncontrolling interests			(2		)										(1		)		(3		)
Common stock repurchased												(5,400		)					(5,400		)
Balances, December 31, 2011	—		1,235			21,757			(2,863		)	(19,900		)	322				551
Net earnings						8,800									183			(1)	8,983			(1)
Other comprehensive earnings (losses), net of income taxes									(741		)				27			(1)	(714		)	(1)
Issuance of stock awards and exercise of stock options			100									118							218
Dividends declared ($3.24 per share)						(5,481		)											(5,481		)
Payments to noncontrolling interests															(209		)		(209		)
Purchase of subsidiary shares from noncontrolling interests			(1		)										(1		)		(2		)
Common stock repurchased												(6,500		)					(6,500		)
Balances, December 31, 2012	$	—	$	1,334		$	25,076		$	(3,604	)	$	(26,282	)	$	322			$	(3,154	)

⁽¹⁾ Net earnings attributable to noncontrolling interests exclude $171 million of earnings related to the redeemable noncontrolling interest, which is reported outside of the equity section in the consolidated balance sheet at December 31, 2012. Other comprehensive earnings (losses), net of income taxes, also exclude $25 million of net currency translation adjustment gains and $2 million of net loss and prior service cost losses related to the redeemable noncontrolling interest at December 31, 2012. Net earnings attributable to noncontrolling interests exclude $97 million of earnings related to the redeemable noncontrolling interest, which is reported outside of the equity section in the consolidated balance sheet at December 31, 2011. Other comprehensive losses, net of income taxes, also exclude less than $1 million of net currency translation adjustment losses related to redeemable noncontrolling interest at December 31, 2011.Net earnings attributable to noncontrolling interests exclude $26 million of earnings related to the redeemable noncontrolling interest, which is reported outside the equity section in the consolidated balance sheet at December 31, 2010. Other comprehensive losses, net of income taxes, also exclude $16 million of net currency translation adjustment gains related to the redeemable noncontrolling interest at December 31, 2010.

See notes to consolidated financial statements.

55

Consolidated Statements of Cash Flows

(in millions of dollars)

for the years ended December 31,	2012			2011			2010
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings	$	9,154		$	8,879		$	7,498
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	898			993			932
Deferred income tax (benefit) provision	(248		)	15			101
Asset impairment and exit costs, net of cash paid	26			11			(28		)
Cash effects of changes, net of the effects from acquired companies:
Receivables, net	(398		)	(251		)	123
Inventories	(728		)	(36		)	1,071
Accounts payable	10			199			(72		)
Income taxes	638			231			92
Accrued liabilities and other current assets	(183		)	691			41
Pension plan contributions	(207		)	(535		)	(433		)
Other	459			332			112
Net cash provided by operating activities	9,421			10,529			9,437
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures	(1,056		)	(897		)	(713		)
Purchase of businesses, net of acquired cash	—			(80		)	(83		)
Other	64			(55		)	86
Net cash used in investing activities	(992		)	(1,032		)	(710		)

See notes to consolidated financial statements.

56

for the years ended December 31,	2012			2011			2010
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less	$	1,515		$	(968	)	$	479
Issuances - maturities longer than 90 days	603			921			—
Repayments - maturities longer than 90 days	(1,220		)	(179		)	(488		)
Long-term debt proceeds	5,516			3,767			1,130
Long-term debt repaid	(2,237		)	(1,483		)	(183		)
Repurchases of common stock	(6,525		)	(5,372		)	(5,030		)
Issuances of common stock	1			75			229
Dividends paid	(5,404		)	(4,788		)	(4,423		)
Other	(349		)	(311		)	(292		)
Net cash used in financing activities	(8,100		)	(8,338		)	(8,578		)
Effect of exchange rate changes on cash and cash equivalents	104			(312		)	14
Cash and cash equivalents:
Increase	433			847			163
Balance at beginning of year	2,550			1,703			1,540
Balance at end of year	$	2,983		$	2,550		$	1,703
Cash Paid:
Interest	$	986		$	963		$	912
Income taxes	$	3,420		$	3,366		$	2,728

As discussed in Note 6. Acquisitions and Other Business Arrangements, PMI’s 2010 business combination in the Philippines was a non-cash transaction.

57

Notes to Consolidated Financial Statements

Note 1.

Background and Basis of Presentation:

Background

Philip Morris International Inc. is a holding company incorporated in Virginia, U.S.A., whose subsidiaries and affiliates and their licensees are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc. and its subsidiaries.

Basis of presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and expenses during the reporting periods. Significant estimates and assumptions include, among other things: pension and benefit plan assumptions; the fair value assessment of PMFTC Inc.; useful lives and valuation assumptions of goodwill and other intangible assets; marketing programs, and income taxes. Actual results could differ from those estimates.

The consolidated financial statements include PMI, as well as its wholly owned and majority-owned subsidiaries. Investments in which PMI exercises significant influence (generally 20%-50% ownership interest) are accounted for under the equity method of accounting. Investments in which PMI has an ownership interest of less than 20%, or does not exercise significant influence, are accounted for with the cost method of accounting. All intercompany transactions and balances have been eliminated.

In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, which became effective for PMI in the first quarter of 2012. Under the new guidance, PMI evaluated the presentation options and elected to present comprehensive earnings in a separate statement. As a result of this new standard, certain amounts reported in the prior year statements have been reclassified to conform to the current year presentation.

Note 2.

Summary of Significant Accounting Policies:

Cash and cash equivalents

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Depreciation

Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 15 years, and buildings and building

improvements over periods up to 40 years. Depreciation expense for 2012, 2011 and 2010 was $801 million, $895 million and $844 million, respectively.

Goodwill and non-amortizable intangible assets valuation

PMI tests goodwill and non-amortizable intangible assets for impairment annually or more frequently if events occur that would warrant such review. PMI performs its annual impairment analysis in the first quarter of each year. The impairment analysis involves comparing the fair value of each reporting unit or non-amortizable intangible asset to the carrying value. If the carrying value exceeds the fair value, goodwill or a non-amortizable intangible asset is considered impaired. To determine the fair value of goodwill, PMI primarily uses a discounted cash flow model, supported by the market approach using earnings multiples of comparable companies. To determine the fair value of non-amortizable intangible assets, PMI primarily uses a discounted cash flow model applying the relief-from-royalty method. These discounted cash flow models include management assumptions relevant for forecasting operating cash flows, which are subject to changes in business conditions, such as volumes and prices, costs to produce, discount rates and estimated capital needs. Management considers historical experience and all available information at the time the fair values are estimated, and PMI believes these assumptions are consistent with the assumptions a hypothetical marketplace participant would use. PMI concluded that the fair value of our reporting units and non-amortizable intangible assets exceeded the carrying value, and any reasonable movement in the assumptions would not result in an impairment. Since the March 28, 2008, spin-off from Altria Group, Inc. ("Altria"), PMI has not recorded a charge to earnings for an impairment of goodwill or non-amortizable intangible assets.

Foreign currency translation

PMI translates the results of operations of its subsidiaries and affiliates using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the end of each period. Currency translation adjustments are recorded as a component of stockholders’ (deficit) equity. In addition, some of PMI’s subsidiaries have assets and liabilities denominated in currencies other than their functional currencies, and to the extent those are not designated as net investment hedges, these assets and liabilities generate transaction gains and losses when translated into their respective functional currencies. PMI recorded net transaction losses of $51 million, $24 million and $17 million for the years ended December 31, 2012, 2011 and 2010, respectively, in marketing, administration and research costs on the consolidated statements of earnings.

Hedging instruments

Derivative financial instruments are recorded at fair value on the consolidated balance sheets as either assets or liabilities. Changes in the fair value of derivatives are recorded each period either in accumulated other comprehensive losses on the consolidated balance sheet, or

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in earnings, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive losses are reclassified to the consolidated statements of earnings in the periods in which operating results are affected by the hedged item. Cash flows from hedging instruments are classified in the same manner as the affected hedged item in the consolidated statements of cash flows.

Impairment of long-lived assets

PMI reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. PMI performs undiscounted operating cash flow analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, PMI groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Income taxes

Income tax provisions for jurisdictions outside the United States, as well as state and local income tax provisions, are determined on a separate company basis, and the related assets and liabilities are recorded in PMI’s consolidated balance sheets. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

PMI recognizes accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes on the consolidated statements of earnings.

Inventories

Inventories are stated at the lower of cost or market. The first-in, first-out and average cost methods are used to cost substantially all inventories. It is a generally recognized industry practice to classify leaf tobacco inventory as a current asset although part of such inventory, because of the duration of the aging process, ordinarily would not be utilized within one year.

Marketing costs

PMI promotes its products with advertising, consumer incentives and trade promotions. Such programs include, but are not limited to, discounts, rebates, in-store display incentives and volume-based incentives. Advertising costs are expensed as incurred. Trade promotions are recorded as a reduction of revenues based on amounts estimated as being due to customers at the end of a period, based principally on historical utilization. For interim reporting purposes, advertising and certain consumer incentive expenses are charged to earnings based on estimated sales and related expenses for the full year.

Revenue recognition

PMI recognizes revenues, net of sales incentives and including shipping and handling charges billed to customers, either upon shipment or delivery of goods when title and risk of loss pass to customers. Excise taxes billed by PMI to customers are reported in net revenues. Shipping and handling costs are classified as part of cost of sales and were $802 million, $905 million and $653 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Software costs

PMI capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment on PMI’s consolidated balance sheets and are amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed five years.

Stock-based compensation

PMI measures compensation cost for all stock-based awards at fair value on date of grant and recognizes the compensation costs over the service periods for awards expected to vest. The fair value of restricted stock and deferred stock is determined based on the number of shares granted and the market value at date of grant.

Excess tax benefits from the vesting of stock-based awards of $24 million, $19 million and $32 million were recognized in additional paid-in capital as of December 31, 2012, 2011 and 2010, respectively, and were presented as financing cash flows.

Note 3.

Goodwill and Other Intangible Assets, net:

Goodwill and other intangible assets, net, by segment were as follows:

	Goodwill				Other IntangibleAssets, net
(in millions)	December 31, 2012		December 31, 2011		December 31, 2012		December 31, 2011
European Union	$	1,448	$	1,392	$	647	$	663
Eastern Europe, Middle East & Africa	637		666		242		250
Asia	4,791		4,966		1,542		1,633
Latin America & Canada	3,024		2,904		1,188		1,151
Total	$	9,900	$	9,928	$	3,619	$	3,697

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Goodwill is due primarily to PMI’s acquisitions in Canada, Indonesia, Mexico, Greece, Serbia, Colombia and Pakistan, as well as the business combination in the Philippines in February 2010. The movements in goodwill were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balance at January 1, 2011	$	1,443		$	702		$	5,004		$	3,012		$	10,161
Changes due to:
Acquisitions	—			1			1			1			3
Currency	(51		)	(37		)	(39		)	(109		)	(236		)
Balance at December 31, 2011	1,392			666			4,966			2,904			9,928
Changes due to:
Currency	56			(29		)	(175		)	120			(28		)
Balance at December 31, 2012	$	1,448		$	637		$	4,791		$	3,024		$	9,900

Additional details of other intangible assets were as follows:

	December 31, 2012				December 31, 2011
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	2,046			$	2,067
Amortizable intangible assets	2,046		$	473	2,001		$	371
Total other intangible assets	$	4,092	$	473	$	4,068	$	371

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia in 2005 and Mexico in 2007. Amortizable intangible assets primarily consist of certain trademarks, distribution networks and non-compete agreements associated with business combinations. The range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at December 31, 2012, is as follows:

Description	Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	2 - 40 years	26 years
Distribution networks	20 - 30 years	15 years
Non-compete agreements	3 - 10 years	2 years
Other (including farmer contracts and intellectual property rights)	12.5 - 17 years	13 years

Pre-tax amortization expense for intangible assets during the years ended December 31, 2012, 2011 and 2010, was $97 million, $98 million and $88 million, respectively. Amortization expense for each of the next five years is estimated to be $97 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

The increase in the gross carrying amount of other intangible assets from December 31, 2011, was due to currency movements.

Note 4.

Related Party Information:

Grupo Carso, S.A.B. de C.V. (“Grupo Carso”) retains a 20% noncontrolling interest in PMI’s Mexican tobacco business. A director of PMI has an affiliation with Grupo Carso. In 2007, PMI and Grupo Carso entered into an agreement for PMI to potentially acquire, or for Grupo Carso to potentially sell to PMI, Grupo Carso’s remaining 20% noncontrolling interest in the future.

Note 5.

Asset Impairment and Exit Costs:

During 2012, 2011 and 2010, pre-tax asset impairment and exit costs consisted of the following:

(in millions)	2012		2011		2010
Separation programs:
European Union	$	—	$	35	$	27
Eastern Europe, Middle East & Africa	—		6		—
Asia	13		7		—
Latin America & Canada	29		15		—
Total separation programs	42		63		27
Contract termination charges:
Eastern Europe, Middle East & Africa	—		12		—
Asia	13		—		20
Total contract termination charges	13		12		20
Asset impairment charges:
European Union	5		10		—
Eastern Europe, Middle East & Africa	5		7		—
Asia	13		8		—
Latin America & Canada	5		9		—
Total asset impairment charges	28		34		—
Asset impairment and exit costs	$	83	$	109	$	47

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Exit Costs

Separation Programs

PMI recorded pre-tax separation program charges of $42 million, $63 million and $27 million for the years ended December 31, 2012, 2011 and 2010, respectively. The 2012 pre-tax separation program charges primarily related to severance costs associated with factory restructurings. The 2011 pre-tax separation program charges primarily related to severance costs for factory and R&D restructurings. The 2010 pre-tax separation program charges primarily related to severance costs.

Contract Termination Charges

During 2012, PMI recorded exit costs of $13 million related to the termination of distribution agreements in Asia.

During 2011, PMI recorded exit costs of $12 million related to the termination of a distribution agreement in Eastern Europe, Middle East & Africa.

On February 25, 2010, PMI’s affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). For further details on this business combination, see Note 6. Acquisitions and Other Business Arrangements. During the fourth quarter of 2010, PMI recorded exit costs of $20 million related to the early termination of a transition services agreement between FTC and PMFTC.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for PMI was as follows:

(in millions)
Liability balance, January 1, 2011	$	48
Charges	75
Cash spent	(98		)
Currency/other	3
Liability balance, December 31, 2011	$	28
Charges	55
Cash spent	(57		)
Currency/other	(6		)
Liability balance, December 31, 2012	$	20

Cash payments related to exit costs at PMI were $57 million, $98 million and $75 million for the years ended December 31, 2012, 2011 and 2010, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $20 million, and these costs will be substantially paid by 2013.

Asset Impairment Charges

PMI recorded pre-tax asset impairment charges of $28 million and $34 million for the years ended December 31, 2012 and 2011, respectively. The 2012 and 2011 charges primarily related to the consolidation of R&D activities as well as charges for factory restructurings.

Note 6.

Acquisitions and Other Business Arrangements:

Philippines Business Combination

On February 25, 2010, PMI’s affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). PMPMI and FTC hold equal economic interests in PMFTC, while PMI manages the day-to-day operations of PMFTC and has a majority of its Board of Directors. Consequently, PMI accounted for the contributed assets and liabilities of FTC as a business combination. The establishment of PMFTC permitted both parties to benefit from their respective, complementary brand portfolios, as well as cost synergies from the resulting integration of manufacturing, distribution and procurement, and the further development and advancement of tobacco growing in the Philippines.

As PMI has control of PMFTC, the contribution of PMPMI’s net assets was recorded at book value, while the contribution of the FTC net assets to PMFTC was recorded at fair value. The difference between the two contributions resulted in an increase to PMI’s additional paid-in capital in 2010 of $477 million.

The fair value of the assets and liabilities contributed by FTC in this non-cash transaction was determined to be $1.17 billion. FTC holds the right to sell its interest in PMFTC to PMI, except in certain circumstances, during the period from February 25, 2015, through February 24, 2018, at an agreed-upon value of $1.17 billion, which was recorded on PMI’s consolidated balance sheet as a redeemable noncontrolling interest at the date of the business combination. The amount of FTC’s redeemable noncontrolling interest at the date of the business combination was determined as follows:

(in millions)
Noncontrolling interest in contributed net assets	$	693
Accretion to redeemable value	477
Redeemable noncontrolling interest at date of business combination	$	1,170

PMI decided to immediately recognize the accretion to redeemable value rather than recognizing it over the term of the agreement with FTC. This accretion has been charged against additional paid-in capital and fully offsets the increase that resulted from the contributions of net assets to PMFTC, noted above.

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With the consolidation of PMFTC, FTC’s share of PMFTC’s comprehensive income or loss is attributable to the redeemable noncontrolling interest, impacting the carrying value. To the extent that the attribution of these amounts would cause the carrying value to fall below the redemption amount of $1.17 billion, the carrying amount would be adjusted back up to the redemption value through stockholders’ (deficit) equity. The movement in redeemable noncontrolling interest after the business combination is as follows:

(in millions)
Redeemable noncontrolling interest at date of business combination	$	1,170
Share of net earnings	26
Dividend payments	(24		)
Currency translation	16
Redeemable noncontrolling interest at December 31, 2010	$	1,188
Share of net earnings	97
Dividend payments	(73		)
Currency translation	—
Redeemable noncontrolling interest at December 31, 2011	$	1,212
Share of net earnings	171
Dividend payments	(105		)
Currency translation	25
Net loss and prior service cost	(2		)
Redeemable noncontrolling interest at December 31, 2012	$	1,301

In future periods, if the fair value of 50% of PMFTC were to drop below the redemption value of $1.17 billion, the difference would be treated as a special dividend to FTC and would reduce PMI’s earnings per share. Reductions in earnings per share may be partially or fully reversed in subsequent periods if the fair value of the redeemable noncontrolling interest increases relative to the redemption value. Such increases in earnings per share would be limited to cumulative prior reductions. At December 31, 2012, PMI determined that 50% of the fair value of PMFTC exceeded the redemption value of $1.17 billion.

Brazil

In June 2010, PMI announced that its affiliate, Philip Morris Brasil Industria e Comercio Ltda. (“PMB”), would begin directly sourcing tobacco leaf from approximately 17,000 tobacco farmers in Southern Brazil. This initiative enhanced PMI’s direct involvement in the supply chain and is expected to provide approximately 10% of PMI’s global leaf requirements. The vertically integrated structure was made possible following separate agreements with two leaf suppliers in Brazil, Alliance One Brasil Exportadora de Tabacos Ltda. (“AOB”) and Universal Leaf Tabacos Ltda. (“ULT”). These agreements resulted in AOB assigning approximately 9,000 contracts with tobacco farmers to PMB and ULT assigning approximately 8,000 contracts with tobacco farmers to PMB. As a result, PMB offered employment to more than 200 employees, most of them agronomy specialists, and acquired related assets in Southern Brazil. The purchase price for the net assets and the contractual relationships was $83 million, which was paid in 2010. PMI accounted for these transactions as a business combination. The allocation of the purchase price was to other intangible assets

($34 million, farmers contracts), inventories ($33 million), goodwill ($18 million), property, plant and equipment ($16 million) and other non-current assets ($11 million), partially offset by other current liabilities ($29 million, which consists primarily of the total amount of bank guarantees for tobacco farmers' rural credit facilities).

Other

In June 2011, PMI completed the acquisition of a cigarette business in Jordan, consisting primarily of cigarette manufacturing assets and inventories, for $42 million. In January 2011, PMI acquired a cigar business, consisting primarily of trademarks in the Australian and New Zealand markets, for $20 million.

The effects of these and other smaller acquisitions were not material to PMI's consolidated financial position, results of operations or operating cash flows in any of the periods presented.

Note 7.

Indebtedness:

Short-Term Borrowings

At December 31, 2012 and 2011, PMI’s short-term borrowings and related average interest rates consisted of the following:

	December 31, 2012				December 31, 2011
(in millions)	Amount Outstanding		Average Year-End Rate		Amount Outstanding		Average Year-End Rate
Commercial paper	$	1,972	0.2	%	$	1,264	0.1	%
Bank loans	447		6.6		247		7.7
	$	2,419			$	1,511

Given the mix of subsidiaries and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.

The fair values of PMI’s short-term borrowings at December 31, 2012 and 2011, based upon current market interest rates, approximate the amounts disclosed above.

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Long-Term Debt

At December 31, 2012 and 2011, PMI’s long-term debt consisted of the following:

(in millions)	2012		2011
U.S. dollar notes, 1.125% to 6.875% (average interest rate 4.462%), due through 2042	$	14,702	$	11,269
Foreign currency obligations:
Euro notes, 2.125% to 5.875% (average interest rate 4.227%), due through 2024	3,724		3,533
Swiss franc notes, 1.000% to 3.250% (average interest rate 1.984%), due through 2021	1,579		1,719
Other (average interest rate 2.378%), due through 2024	415		513
	20,420		17,034
Less current portion of long-term debt	2,781		2,206
	$	17,639	$	14,828

Other debt:

Other foreign currency debt above includes debt from our business combination in the Philippines and mortgage debt in Switzerland at December 31, 2012 and 2011. Other foreign currency debt also includes $37 million and $85 million at December 31, 2012 and 2011, respectively, of capital lease obligations primarily associated with PMI’s vending machine distribution network in Japan.

Debt offerings in 2012:

PMI’s debt offerings in 2012 were as follows:

(in millions)
Type		Face Value		Interest Rate	Issuance	Maturity
U.S. dollar notes	(a)	$	700	4.500%	March 2012	March 2042
U.S. dollar notes	(a)	$	550	1.625%	March 2012	March 2017
Euro notes	(b)	€750 (approximately $951)		2.125%	May 2012	May 2019
Euro notes	(b)	€600 (approximately $761)		2.875%	May 2012	May 2024
U.S. dollar notes	(c)	$	750	1.125%	August 2012	August 2017
U.S. dollar notes	(c)	$	750	2.500%	August 2012	August 2022
U.S. dollar notes	(c)	$	750	3.875%	August 2012	August 2042
Swiss franc notes	(d)	CHF 325 (approximately $334)		1.000%	September 2012	September 2020

^(a) Interest on these notes is payable semiannually, and the first payment was made in September 2012.

^(b) Interest on these notes is payable annually beginning in May 2013.

^(c) Interest on these notes is payable semiannually beginning in February 2013.

^(d) Interest on these notes is payable annually beginning in September 2013.

The net proceeds from the sale of the securities listed in the table above were used to meet PMI’s working capital requirements, to repurchase PMI’s common stock, to refinance debt and for general corporate purposes.

Aggregate maturities:

Aggregate maturities of long-term debt are as follows:

(in millions)
2013	$	2,781
2014	1,256
2015	995
2016	2,597
2017	1,302
2018-2022	7,026
2023-2027	940
Thereafter	3,701
	20,598
Debt discounts	(178		)
Total long-term debt	$	20,420

See Note 16. Fair Value Measurements for additional disclosures related to the fair value of PMI’s debt.

Credit Facilities

In May 2011, PMI entered into an agreement with certain financial institutions to extend the expiration date for its $2.5 billion revolving credit facility from September 30, 2013, to March 31, 2015.

On October 25, 2011, PMI entered into a new multi-year revolving credit facility in the amount of $3.5 billion, which expires on October 25, 2016. This new revolving credit facility replaced PMI’s $2.7 billion multi-year credit facility, which was to expire on December 4, 2012.

At December 31, 2012, PMI’s committed credit facilities and commercial paper outstanding were as follows:

Type (in billions of dollars)	Committed Credit Facilities		Commercial Paper
Multi-year revolving credit, expiring March 31, 2015	$	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	6.0
Commercial paper outstanding			$	2.0

At December 31, 2012, there were no borrowings under the committed credit facilities, and the entire committed amounts were available for borrowing.

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Each of these facilities requires PMI to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“consolidated EBITDA”) to consolidated interest expense of not less than 3.5 to 1.0 on a rolling four-quarter basis. At December 31, 2012, PMI’s ratio calculated in accordance with the agreements was 16.0 to 1.0. These facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require PMI to post collateral. The terms “consolidated EBITDA” and “consolidated interest expense,” both of which include certain adjustments, are defined in the facility agreements previously filed with the Securities and Exchange Commission.

In addition to the committed credit facilities discussed above, certain subsidiaries maintain short-term credit arrangements to meet their respective working capital needs. These credit arrangements, which amounted to approximately $2.0 billion at December 31, 2012, and $1.9 billion at December 31, 2011, are for the sole use of the subsidiaries. Borrowings under these arrangements amounted to $447 million at December 31, 2012, and $247 million at December 31, 2011.

Note 8.

Capital Stock:

Shares of authorized common stock are 6.0 billion; issued, repurchased and outstanding shares were as follows:

	Shares Issued	Shares Repurchased		Shares Outstanding
Balances, January 1, 2010	2,109,316,331	(222,151,828	)	1,887,164,503
Repurchase of shares		(97,053,310	)	(97,053,310	)
Exercise of stock options and issuance of other stock awards		11,672,297		11,672,297
Balances, December 31, 2010	2,109,316,331	(307,532,841	)	1,801,783,490
Repurchase of shares		(80,514,257	)	(80,514,257	)
Exercise of stock options and issuance of other stock awards		4,639,433		4,639,433
Balances, December 31, 2011	2,109,316,331	(383,407,665	)	1,725,908,666
Repurchase of shares		(74,897,499	)	(74,897,499	)
Issuance of stock awards and exercise of stock options		2,601,817		2,601,817
Balances, December 31, 2012	2,109,316,331	(455,703,347	)	1,653,612,984

PMI commenced a $13.0 billiontwo-year share repurchase program on May 1, 2008. On April 30, 2010, PMI completed the $13.0 billion share repurchase program, which resulted in the purchase of 277.6 million shares at an average price of $46.83 per share. On May 1, 2010, PMI commenced a new $12.0 billionthree-year share repurchase program. On July 31, 2012, PMI completed, ahead of schedule, the $12.0 billion share repurchase program, which resulted in the purchase of 179.1 million shares at an average

price of $66.99 per share. On August 1, 2012, PMI commenced a new three-year $18 billion share repurchase program that was authorized by PMI's Board of Directors in June 2012. From August 1, 2012, through December 31, 2012, PMI repurchased 32.2 million shares of its common stock at a cost of $2.9 billion, or $88.59 per share, under this new repurchase program. During 2012, 2011 and 2010, PMI repurchased $6.5 billion, $5.4 billion and $5.0 billion, respectively, of its common stock.

At December 31, 2012, 39,781,077 shares of common stock were reserved for stock options and other stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued. PMI currently has no plans to issue any shares of preferred stock.

Note 9.

Stock Plans:

Performance Incentive Plan and Stock Compensation Plan for Non-Employee Directors

In May 2012, PMI's stockholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the "2012 Plan"). The 2012 Plan replaced the 2008 Performance Incentive Plan (the "2008 Plan") and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, PMI may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. While the 2008 Plan authorized incentive stock options, non-qualified stock options and stock appreciation rights, the 2012 Plan does not authorize any stock options or stock appreciation rights. Up to 30 million shares of PMI’s common stock may be issued under the 2012 Plan. At December 31, 2012, shares available for grant under the 2012 Plan were 29,994,920.

In 2008, PMI adopted the Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (the “Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the Non-Employee Directors Plan. As of December 31, 2012, shares available for grant under the plan were 798,801.

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Restricted and Deferred Stock Awards

PMI may grant restricted stock and deferred stock awards to eligible employees; recipients may not sell, assign, pledge or otherwise encumber such shares or awards. Such shares or awards are subject to forfeiture if certain employment conditions are not met. Restricted stock and deferred stock awards generally vest on the third anniversary of the grant date. Shares of restricted stock carry voting and dividend rights. Deferred stock awards carry no such rights, although they do earn dividend equivalents.

During 2012, the activity for restricted stock and deferred stock awards was as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value Per Share
Balance at January 1, 2012	10,437,888		$	48.67
Granted	3,245,500		79.59
Vested	(3,744,454	)	39.65
Forfeited	(454,069	)	56.08
Balance at December 31, 2012	9,484,865		$	62.44

The weighted-average grant date fair value of the restricted stock and deferred stock awards granted to PMI employees during the years ended December 31, 2012, 2011 and 2010, was $258 million, $229 million and $169 million, or $79.59, $59.44 and $47.54 per restricted or deferred share, respectively. The fair value of the restricted stock and deferred stock awards at the date of grant is amortized to expense ratably over the restriction period. PMI recorded compensation expense for the restricted and deferred stock awards of $242 million, $162 million and $127 million for the years ended December 31, 2012, 2011 and 2010, respectively. During the first quarter of 2012, compensation expense included approximately $27 million of accelerated expense primarily associated with employees approaching or reaching certain age milestones that accelerate the vesting. As of December 31, 2012, PMI had $221 million of total unrecognized compensation cost related to non-vested restricted and deferred stock awards. These costs are expected to be recognized over a weighted-average period of 2 years, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

During the year ended December 31, 2012, 3.7 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $148 million. The total fair value of the awards that vested in 2012 was approximately $298 million.

During the year ended December 31, 2011, 1.8 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $84 million. The total fair value of the awards that vested in 2011 was approximately $107 million.

During the year ended December 31, 2010, 2.0 million shares of PMI restricted stock and deferred stock awards vested. Of this amount, 1.4 million shares went to PMI employees, and the remainder went to Altria employees who held PMI stock awards as a result of the spin-off. The grant date fair value of all the vested shares was approximately $123 million. The total fair value of the awards that vested in 2010 was approximately the same as the grant

date fair value. The grant price information for restricted stock and deferred stock awarded prior to January 30, 2008, reflects the historical market price of Altria stock at date of grant and was not adjusted to reflect the spin-off.

Stock Option Awards

At December 31, 2012, PMI shares subject to option that remain under the 2008 Plan were as follows:

	Shares Subject to Option		Weighted- Average Exercise Price		Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at January 1, 2012	63,944		$	27.07
Options exercised	(27,133	)	28.35
Options cancelled	—		—
Balance/Exercisable at December 31, 2012	36,811		$	26.13	1 year	$	2	million

For the years ended December 31, 2012, 2011 and 2010, the total intrinsic value of PMI stock options exercised was $2 million, $129 million and $292 million, respectively.

Note 10.

Earnings per Share:

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

Basic and diluted earnings per share (“EPS”) were calculated using the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Net earnings attributable to PMI	$	8,800	$	8,591	$	7,259
Less distributed and undistributed earnings attributable to share-based payment awards	48		49		33
Net earnings for basic and diluted EPS	$	8,752	$	8,542	$	7,226
Weighted-average shares for basic EPS	1,692		1,761		1,839
Plus incremental shares from assumed conversions:
Stock options	—		1		3
Weighted-average shares for diluted EPS	1,692		1,762		1,842

For the 2012, 2011 and 2010 computations, there were no antidilutive stock options.

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Note 11.

Income Taxes:

Earnings before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2012, 2011 and 2010:

(in millions)	2012			2011			2010
Earnings before income taxes	$	12,987		$	12,532		$	10,324
Provision for income taxes:
United States federal:
Current	$	226		$	270		$	157
Deferred	(61		)	118			145
	165			388			302
State and local	—			—			1
Total United States	165			388			303
Outside United States:
Current	3,855			3,368			2,567
Deferred	(187		)	(103		)	(44		)
Total outside United States	3,668			3,265			2,523
Total provision for income taxes	$	3,833		$	3,653		$	2,826

United States income tax is primarily attributable to repatriation costs.

At December 31, 2012, applicable United States federal income taxes and foreign withholding taxes have not been provided on approximately $18 billion of accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. These earnings have been or will be invested to support the growth of PMI's international business. Further, PMI does not foresee a need to repatriate these earnings to the U.S. since its U.S. cash requirements are supported by distributions from foreign entities of earnings that have not been designated as permanently reinvested and existing credit facilities. Repatriation of earnings from foreign subsidiaries for which PMI has asserted that the earnings are permanently reinvested would result in additional U.S. income and foreign withholding taxes. The determination of the amount of deferred tax related to these earnings is not practicable.

On March 28, 2008, PMI entered into a Tax Sharing Agreement (the “Tax Sharing Agreement”) with Altria. The Tax Sharing Agreement generally governs PMI’s and Altria’s respective rights, responsibilities and obligations for pre-distribution periods and for potential taxes on the spin-off of PMI by Altria. With respect to any potential tax resulting from the spin-off of PMI by Altria, responsibility for the tax will be allocated to the party that acted (or failed to act) in a manner that resulted in the tax.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)	2012			2011			2010
Balance at January 1,	$	104		$	95		$	174
Additions based on tax positions related to the current year	9			17			18
Additions for tax positions of previous years	309			8			35
Reductions for tax positions of prior years	(1		)	(8		)	(125		)
Reductions due to lapse of statute of limitations	—			(7		)	(1		)
Settlements	(297		)	—			(6		)
Other	—			(1		)	—
Balance at December 31,	$	124		$	104		$	95

During 2012, PMI recorded additions to the unrecognized tax benefits liability for tax positions of previous years of $309 million. Included in this amount is $287 million which is related to the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2004-2006. The settlement with the IRS resulted in a reduction of the unrecognized tax benefits liability of $296 million in the same period (reflected in the $297 million of settlements in the table above). After consideration of the impact of the settlement on repatriation costs for subsequent tax years as well as interest costs, the net impact on the 2012 effective tax rate was $79 million, as noted below.

Unrecognized tax benefits and PMI’s liability for contingent income taxes, interest and penalties were as follows:

(in millions)	December 31, 2012			December 31, 2011			December 31, 2010
Unrecognized tax benefits	$	124		$	104		$	95
Accrued interest and penalties	37			28			30
Tax credits and other indirect benefits	(72		)	(55		)	(58		)
Liability for tax contingencies	$	89		$	77		$	67

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $50 million at December 31, 2012. The remainder, if recognized, would principally affect deferred taxes.

For the years ended December 31, 2012, 2011 and 2010, PMI recognized (expense) income in its consolidated statements of earnings of $(65) million, less than $1 million and $17 million, respectively, related to interest and penalties.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2007 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. Years still open to examination by foreign tax authorities in major jurisdictions include Germany (2007 onward), Indonesia (2007 onward), Russia (2010 onward) and Switzerland (2011 onward).

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It is reasonably possible that within the next twelve months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties. An estimate of any possible change cannot be made at this time.

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2012, 2011 and 2010:

	2012		2011		2010
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
Foreign rate differences	(11.8	)	(12.5	)	(10.0	)
Dividend repatriation cost	6.0		6.5		3.5
Reversal of tax reserves no longer required	—		—		(1.4	)
Other	0.3		0.1		0.3
Effective tax rate	29.5	%	29.1	%	27.4	%

The 2012 effective tax rate increased 0.4 percentage points to 29.5%. The 2012 effective tax rate was unfavorably impacted by an additional income tax provision of $79 million following the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2004-2006, partially offset by a $40 million benefit from a tax accounting method change in Germany. Prior to March 28, 2008, PMI was a wholly owned subsidiary of Altria.

The 2011 effective tax rate increased 1.7 percentage points to 29.1%. The 2011 effective tax rate was favorably impacted by an enacted decrease in corporate income tax rates in Greece ($11 million) and the reversal of a valuation allowance in Brazil ($15 million).

The 2010 effective tax rate was favorably impacted by the reversal of tax reserves ($148 million) following the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2000 through 2003, partially offset by the negative impact of an enacted increase in corporate income tax rates in Greece ($21 million) and the net result of an audit in Italy ($6 million).

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:

	At December 31,
(in millions)	2012			2011
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	279		$	223
Accrued pension costs	262			193
Inventory	135			76
Accrued liabilities	150			145
Foreign exchange	52			—
Other	139			110
Total deferred income tax assets	1,017			747
Deferred income tax liabilities:
Trade names	(816		)	(818		)
Property, plant and equipment	(320		)	(323		)
Unremitted earnings	(845		)	(897		)
Foreign exchange	—			(31		)
Total deferred income tax liabilities	(1,981		)	(2,069		)
Net deferred income tax liabilities	$	(964	)	$	(1,322	)

Note 12.

Segment Reporting:

PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Reportable segments for PMI are organized and managed by geographic region. PMI’s reportable segments are European Union; Eastern Europe, Middle East & Africa; Asia, and Latin America & Canada. PMI records net revenues and operating companies income to its segments based upon the geographic area in which the customer resides.

PMI’s management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income before general corporate expenses and amortization of intangibles. Interest expense, net, and provision for income taxes are centrally managed; accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 3. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.

Segment data were as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Net revenues:
European Union	$	27,338		$	29,768		$	28,050
Eastern Europe, Middle East & Africa	19,272			17,452			15,928
Asia	21,071			19,590			15,235
Latin America & Canada	9,712			9,536			8,500
Net revenues(1)	$	77,393		$	76,346		$	67,713
Earnings before income taxes:
Operating companies income:
European Union	$	4,187		$	4,560		$	4,311
Eastern Europe, Middle East & Africa	3,726			3,229			3,152
Asia	5,197			4,836			3,049
Latin America & Canada	1,043			988			953
Amortization of intangibles	(97		)	(98		)	(88		)
General corporate expenses	(210		)	(183		)	(177		)
Operating income	13,846			13,332			11,200
Interest expense, net	(859		)	(800		)	(876		)
Earnings before income taxes	$	12,987		$	12,532		$	10,324

⁽¹⁾  Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

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	For the Years Ended December 31,
(in millions)	2012		2011		2010
Depreciation expense:
European Union	$	181	$	210	$	212
Eastern Europe, Middle East & Africa	211		227		215
Asia	315		358		332
Latin America & Canada	84		90		75
	791		885		834
Other	10		10		10
Total depreciation expense	$	801	$	895	$	844
Capital expenditures:
European Union	$	391	$	382	$	329
Eastern Europe, Middle East & Africa	197		133		102
Asia	277		208		161
Latin America & Canada	127		140		120
	992		863		712
Other	64		34		1
Total capital expenditures	$	1,056	$	897	$	713

	At December 31,
(in millions)	2012		2011		2010
Long-lived assets:
European Union	$	3,066	$	2,938	$	3,226
Eastern Europe, Middle East & Africa	1,215		1,094		1,158
Asia	1,831		1,687		1,765
Latin America & Canada	735		706		663
	6,847		6,425		6,812
Other	139		146		195
Total long-lived assets	$	6,986	$	6,571	$	7,007

Long-lived assets consist of non-current assets other than goodwill; other intangible assets, net, and deferred tax assets. PMI’s largest market in terms of long-lived assets is Switzerland. Total long-lived assets located in Switzerland, which is reflected in the European Union segment above, were $1.1 billion, $1.0 billion and $1.0 billion at December 31, 2012, 2011 and 2010, respectively.

Items affecting the comparability of results from operations were as follows:

• Asset Impairment and Exit Costs—See Note 5. Asset Impairment and Exit Costs for a breakdown of asset impairment and exit costs by segment.

• Acquisitions and Other Business Arrangements— For further details, see Note 6. Acquisitions and Other Business Arrangements.

Note 13.

Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to substantially all U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

Pension Plans

Obligations and Funded Status

The benefit obligations, plan assets and funded status of PMI’s pension plans at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Benefit obligation at January 1,	$	352		$	321		$	5,625		$	4,932
Service cost	6			5			189			178
Interest cost	16			16			189			205
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(8		)	(4		)
Assumption changes	28			44			1,176			510
Actuarial (gains) losses	(3		)	(13		)	41			6
Currency	—			—			167			(52		)
Other	—			—			43			58
Benefit obligation at December 31,	383			352			7,262			5,625
Fair value of plan assets at January 1,	269			251			4,778			4,623
Actual return on plan assets	27			9			625			(162		)
Employer contributions	4			30			203			505
Employee contributions	—			—			47			43
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(5		)	—
Currency	—			—			139			(23		)
Fair value of plan assets at December 31,	284			269			5,627			4,778
Net pension liability recognized at December 31,	$	(99	)	$	(83	)	$	(1,635	)	$	(847	)

At December 31, 2012 and 2011, the combined U.S. and non-U.S. pension plans resulted in a net pension liability of $1,734 million and $930 million, respectively. These amounts were recognized in PMI’s consolidated balance sheets at December 31, 2012 and 2011, as follows:

(in millions)	2012			2011
Other assets	$	29		$	40
Accrued liabilities — employment costs	(22		)	(23		)
Long-term employment costs	(1,741		)	(947		)
	$	(1,734	)	$	(930	)

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The accumulated benefit obligation, which represents benefits earned to date, for the U.S. pension plans was $354 million and $323 million at December 31, 2012 and 2011, respectively. The accumulated benefit obligation for non-U.S. pension plans was $6,469 million and $5,042 million at December 31, 2012 and 2011, respectively.

For U.S. pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation and accumulated benefit obligation were $86 million and $78 million, respectively, as of December 31, 2012. The projected benefit obligation and accumulated benefit obligation were $76 million and $66 million, respectively, as of December 31, 2011. The underfunding relates to plans for salaried employees that cannot be funded under IRS regulations. For non-U.S. plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $6,786 million, $6,058 million, and $5,162 million, respectively, as of December 31, 2012, and $3,785 million, $3,343 million, and $2,973 million, respectively, as of December 31, 2011.

The following weighted-average assumptions were used to determine PMI’s benefit obligations at December 31:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	2.38	%	3.40	%
Rate of compensation increase	3.50		3.50		2.61		2.66

The discount rate for PMI’s U.S. plans is based on an index of high-quality corporate bonds with durations that match the benefit obligations. The discount rate for PMI’s non-U.S. plans was developed from local bond indices that match local benefit obligations as closely as possible.

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans									Non-U.S. Plans
(in millions)	2012			2011			2010			2012			2011			2010
Service cost	$	6		$	5		$	6		$	189		$	178		$	160
Interest cost	16			16			18			189			205			189
Expected return on plan assets	(15		)	(15		)	(16		)	(320		)	(323		)	(283		)
Amortization:
Net losses	9			5			5			120			58			39
Prior service cost	1			1			1			9			8			9
Net transition obligation	—			—			—			1			1			—
Termination, settlement and curtailment	2			2			1			—			1			(6		)
Net periodic pension cost	$	19		$	14		$	15		$	188		$	128		$	108

Termination, settlement and curtailment charges were due primarily to early retirement programs.

For the combined U.S. and non-U.S. pension plans, the estimated net loss and prior service cost that are expected to be amortized from accumulated other comprehensive earnings into net periodic benefit cost during 2013 are $212 million and $10 million, respectively.

The following weighted-average assumptions were used to determine PMI’s net pension cost:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	3.40	%	4.00	%	4.33	%
Expected rate of return on plan assets	5.70		6.25		7.20		6.21		6.21		6.69
Rate of compensation increase	3.50		3.50		4.50		2.66		2.90		3.21

PMI’s expected rate of return on plan assets is determined by the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

PMI and certain of its subsidiaries sponsor defined contribution plans. Amounts charged to expense for defined contribution plans totaled $66 million, $61 million and $53 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Plan Assets

PMI’s investment strategy for U.S. and non-U.S. plans is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the target allocation of PMI’s plan assets is broadly characterized as approximately a 60%/40% split between equity and debt securities. The strategy primarily utilizes indexed U.S. equity securities, international equity securities and investment-grade debt securities. PMI’s plans have no investments in hedge funds, private equity or derivatives. PMI attempts to mitigate investment risk by rebalancing between equity and debt asset classes once a year or as PMI’s contributions and benefit payments are made.

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The fair value of PMI’s pension plan assets at December 31, 2012 and 2011, by asset category was as follows:

Asset Category (in millions)	At December 31, 2012		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	$	420	$	420	$	—	$	—
Equity securities:
U.S. securities	106		106		—		—
International securities	1,129		1,129		—		—
Investment funds(a)(b)	3,805		2,313		1,492		—
International government bonds	411		411		—		—
Corporate bonds	3		3		—		—
Other	37		37		—		—
Total	$	5,911	$	4,419	$	1,492	$	—

^(a)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 60% are invested in U.S. and international equities; 24% are invested in U.S. and international government bonds; 9% are invested in corporate bonds, and 7% are invested in real estate and other money markets.

^(b)  Mutual funds in the amount of $1,363 million were transferred from Level 2 to Level 1 because they are actively traded on a daily basis.

Asset Category (in millions)	At December 31, 2011		QuotedPricesIn ActiveMarkets forIdentical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		SignificantUnobservable Inputs(Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity securities:
U.S. securities	89		89		—		—
International securities	894		894		—		—
Investment funds(c)	3,704		826		2,878		—
International government bonds	314		314		—		—
Corporate bonds	2		2		—		—
Other	33		32		1		—
Total	$	5,047	$	2,168	$	2,879	$	—

^(c)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU, Citigroup Switzerland and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 53% are invested in U.S. and international equities; 34% are invested in U.S. and international government bonds; 7% are invested in corporate bonds, and 6% are invested in real estate and other money markets.

See Note 16. Fair Value Measurements for a discussion of the fair value of pension plan assets.

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and to meet specific funding requirements of its funded U.S. and non-U.S. plans. Currently, PMI anticipates making contributions of approximately $220 million in 2013 to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest rates.

The estimated future benefit payments from PMI pension plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	14	$	210
2014	45		219
2015	17		229
2016	18		241
2017	19		250
2018 - 2022	103		1,470

Postretirement Benefit Plans

Net postretirement health care costs consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans			Non-U.S. Plans
(in millions)	2012	2011	2010	2012	2011	2010
Service cost	$2	$2	$2	$2	$2	$2
Interest cost	5	5	5	5	5	5
Amortization:
Net losses	2	1	1	1	1	—
Net postretirement health care costs	$9	$8	$8	$8	$8	$7

The following weighted-average assumptions were used to determine PMI’s net postretirement costs for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	5.45	%	5.14	%	5.99	%
Health care cost trend rate	7.50		8.00		7.50		6.55		6.29		7.14

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PMI’s postretirement health care plans are not funded. The changes in the accumulated benefit obligation and net amount accrued at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Accumulated postretirement benefit obligation at January 1,	$	115		$	98		$	96		$	99
Service cost	2			2			2			2
Interest cost	5			5			5			5
Benefits paid	(4		)	(4		)	(5		)	(5		)
Assumption changes	10			11			11			(1		)
Actuarial losses (gains)	4			3			6			(2		)
Plan changes	—			—			(3		)	—
Currency	—			—			1			(2		)
Accumulated postretirement benefit obligation at December 31,	$	132		$	115		$	113		$	96

The current portion of PMI’s accrued postretirement health care costs of $11 million at December 31, 2012 and $10 million at December 31, 2011, is included in accrued employment costs on the consolidated balance sheet.

The following weighted-average assumptions were used to determine PMI’s postretirement benefit obligations at December 31, 2012 and 2011:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	4.59	%	5.45	%
Health care cost trend rate assumed for next year	7.50		7.50		6.46		6.55
Ultimate trend rate	5.00		5.00		4.88		4.77
Year that rate reaches the ultimate trend rate	2018		2017		2029		2029

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care trend rates would have the following effects as of December 31, 2012:

	One-Percentage-Point Increase		One-Percentage-Point Decrease
Effect on total service and interest cost	19.9	%	(15.3	)%
Effect on postretirement benefit obligation	15.1		(12.1	)

PMI’s estimated future benefit payments for its postretirement health care plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	5	$	6
2014	5		5
2015	6		5
2016	6		5
2017	6		5
2018 - 2022	33		28

Postemployment Benefit Plans

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering substantially all salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Net postemployment costs consisted of the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Service cost	$	30	$	28	$	26
Interest cost	22		22		24
Amortization of net loss	53		39		39
Other expense	75		106		54
Net postemployment costs	$	180	$	195	$	143

During 2012, 2011 and 2010, certain salaried employees left PMI under separation programs. These programs resulted in incremental postemployment costs, which are included in other expense, above.

The estimated net loss for the postemployment benefit plans that will be amortized from accumulated other comprehensive losses into net postemployment costs during 2013 is approximately $59 million.

The changes in the benefit obligations of the plans at December 31, 2012 and 2011, were as follows:

(in millions)	2012			2011
Accrued postemployment costs at January 1,	$	619		$	574
Service cost	30			28
Interest cost	22			22
Benefits paid	(196		)	(223		)
Actuarial losses	129			118
Other	78			100
Accrued postemployment costs at December 31,	$	682		$	619

The accrued postemployment costs were determined using a weighted-average discount rate of 4.4% and 6.8% in 2012 and 2011, respectively; an assumed ultimate annual weighted-average turnover rate of 2.1% and 2.5% in 2012 and 2011, respectively; assumed compensation cost increases of 3.9% in 2012 and 3.0% in 2011 and assumed benefits as defined in the respective plans. In accordance with local regulations, certain postemployment plans are funded. As a result, the accrued postemployment costs shown above are presented net of the related assets of $28 million and $24 million at December 31, 2012 and 2011, respectively. Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

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Comprehensive Earnings (Losses)

The amounts recorded in accumulated other comprehensive losses at December 31, 2012, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(3,199	)	$	(82	)	$	(612	)	$	(3,893	)
Prior service cost	(60		)	7			—			(53		)
Net transition obligation	(7		)	—			—			(7		)
Deferred income taxes	377			26			185			588
Losses to be amortized	$	(2,889	)	$	(49	)	$	(427	)	$	(3,365	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2011, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(2,401	)	$	(54	)	$	(536	)	$	(2,991	)
Prior service cost	(70		)	3			—			(67		)
Net transition obligation	(8		)	—			—			(8		)
Deferred income taxes	299			19			163			481
Losses to be amortized	$	(2,180	)	$	(32	)	$	(373	)	$	(2,585	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2010, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(1,425	)	$	(46	)	$	(468	)	$	(1,939	)
Prior service cost	(62		)	4			—			(58		)
Net transition obligation	(9		)	—			—			(9		)
Deferred income taxes	199			15			142			356
Losses to be amortized	$	(1,297	)	$	(27	)	$	(326	)	$	(1,650	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2012, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	129		$	3		$	53		$	185
Prior service cost	10			—			—			10
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	4			—			—			4
Deferred income taxes	(20		)	(1		)	(16		)	(37		)
	124			2			37			163
Other movements during the year:
Net losses	(931		)	(31		)	(129		)	(1,091		)
Prior service cost	—			4			—			4
Deferred income taxes	98			8			38			144
	(833		)	(19		)	(91		)	(943		)
Total movements in other comprehensive losses	$	(709	)	$	(17	)	$	(54	)	$	(780	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2011, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	63		$	3		$	39		$	105
Prior service cost	9			(1		)	—			8
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	3			—			—			3
Deferred income taxes	(10		)	(1		)	(12		)	(23		)
	66			1			27			94
Other movements during the year:
Net losses	(1,042		)	(11		)	(107		)	(1,160		)
Prior service cost	(17		)	—			—			(17		)
Deferred income taxes	110			5			33			148
	$	(949	)	$	(6	)	$	(74	)	$	(1,029	)
Total movements in other comprehensive losses	$	(883	)	$	(5	)	$	(47	)	$	(935	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2010, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	44		$	1		$	39		$	84
Prior service cost	10			—			—			10
Other income/expense:
Net gains	(1		)	—			—			(1		)
Prior service cost	3			—			—			3
Deferred income taxes	(8		)	—			(12		)	(20		)
	48			1			27			76
Other movements during the year:
Net losses	(294		)	(20		)	(44		)	(358		)
Prior service cost	(3		)	—			—			(3		)
Deferred income taxes	23			6			14			43
	$	(274	)	$	(14	)	$	(30	)	$	(318	)
Total movements in other comprehensive losses	$	(226	)	$	(13	)	$	(3	)	$	(242	)

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Note 14.

Additional Information:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Research and development expense	$	415		$	413		$	391
Advertising expense	$	483		$	464		$	402
Interest expense	$	1,007		$	934		$	974
Interest income	(148		)	(134		)	(98		)
Interest expense, net	$	859		$	800		$	876
Rent expense	$	318		$	308		$	278

Minimum rental commitments under non-cancelable operating leases in effect at December 31, 2012, were as follows:

(in millions)
2013	$	218
2014	157
2015	104
2016	80
2017	66
Thereafter	226
	$	851

Note 15.

Financial Instruments:

Overview

PMI operates in markets outside of the United States of America,

with manufacturing and sales facilities in various locations around the world. PMI utilizes certain financial instruments to manage foreign currency exposure. Derivative financial instruments are used by PMI principally to reduce exposures to market risks resulting from fluctuations in foreign currency exchange rates by creating offsetting exposures. PMI is not a party to leveraged derivatives and, by policy, does not use derivative financial instruments for speculative purposes. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. PMI formally documents the nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of the forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it were deemed probable that the forecasted transaction would not occur, the gain or loss would be recognized in earnings. PMI reports its net transaction gains or losses in marketing, administration and research costs on the consolidated statements of earnings.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps, foreign currency collars and foreign currency options, collectively referred to as foreign exchange contracts, to mitigate its exposure to changes in exchange rates from third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Indonesian rupiah, Japanese yen, Mexican peso, Russian ruble, Swiss franc and Turkish lira. At December 31, 2012 and 2011, PMI had contracts with aggregate notional amounts of $13.7 billion and $13.1 billion, respectively. Of the $13.7 billion aggregate notional amount at December 31, 2012, $2.7 billion related to cash flow hedges, $1.1 billion related to hedges of net investments in foreign operations, and $9.9 billion related to other derivatives that primarily offset currency exposures on intercompany financing. Of the $13.1 billion aggregate notional amount at December 31, 2011, $3.4 billion related to cash flow hedges, and $9.7 billion related to other derivatives that primarily offset currency exposures on intercompany financing.

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The fair value of PMI’s foreign exchange contracts included in the consolidated balance sheet as of December 31, 2012 and 2011, were as follows:

	Asset Derivatives					Liability Derivatives
		FairValue					FairValue
(in millions)	Balance Sheet Classification	2012		2011		Balance Sheet Classification	2012		2011
Foreign exchange contracts designated as hedging instruments	Other current   assets	$	146	$	57	Other accrued    liabilities	$	8	$	4
Foreign exchange contracts not designated as hedging instruments	Other current   assets	14		88		Other accrued   liabilities	47		62
Total derivatives		$	160	$	145		$	55	$	66

Hedging activities, which represent movement in derivatives as well as the respective underlying transactions, had the following effect on PMI’s consolidated statements of earnings and comprehensive earnings:

	For the Year Ended December 31, 2012
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	66					$	—					$	66
Cost of sales	19						—						19
Marketing, administration and research costs	—						—						—
Operating income	85						—						85
Interest expense, net	(60		)				14						(46		)
Earnings before income taxes	25						14						39
Provision for income taxes	(3		)				1						(2		)
Net earnings attributable to PMI	$	22					$	15					$	37
Other Comprehensive Earnings/(Losses):
Gains transferred to earnings	$	(25	)							$	3		$	(22	)
Recognized gains	113									(14		)	99
Net impact on equity	$	88								$	(11	)	$	77
Currency translation adjustments				$	(19	)				$	5		$	(14	)
	For the Year Ended December 31, 2011
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	(17	)				$	—					$	(17	)
Cost of sales	34						—						34
Marketing, administration and research costs	—						—						—
Operating income	17						—						17
Interest expense, net	(37		)				56						19
Earnings before income taxes	(20		)				56						36
Provision for income taxes	2						(13		)				(11		)
Net earnings attributable to PMI	$	(18	)				$	43					$	25
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	20								$	(2	)	$	18
Recognized losses	(4		)							(1		)	(5		)
Net impact on equity	$	16								$	(3	)	$	13
Currency translation adjustments				$	2								$	2

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	For the Year Ended December 31, 2010
(in millions)	Cash Flow Hedges			Net Investment Hedges		Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	24				$	—					$	24
Cost of sales	(14		)			—						(14		)
Marketing, administration and research costs	3					(3		)				—
Operating income	13					(3		)				10
Interest expense, net	(49		)			10						(39		)
Earnings before income taxes	(36		)			7						(29		)
Provision for income taxes	3					(1		)				2
Net earnings attributable to PMI	$	(33	)			$	6					$	(27	)
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	36							$	(3	)	$	33
Recognized losses	(56		)						6			(50		)
Net impact on equity	$	(20	)						$	3		$	(17	)
Currency translation adjustments	$	(2	)	$	24				$	(10	)	$	12

Each type of hedging activity is described in greater detail below.

Cash Flow Hedges

PMI has entered into foreign exchange contracts to hedge foreign currency exchange risk related to certain forecasted transactions. The effective portion of gains and losses associated with qualifying cash flow hedge contracts is deferred as a component of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s consolidated statements of earnings. During the years ended December 31, 2012, 2011 and

2010, ineffectiveness related to cash flow hedges was not material. As of December 31, 2012, PMI has hedged forecasted transactions for periods not exceeding the next twelve months. The impact of these hedges is included in operating cash flows on PMI’s consolidated statement of cash flows.

For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as cash flow hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Cash Flow Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss)Reclassifiedfrom OtherComprehensiveEarnings/(Losses) into Earnings									Amount ofGain/(Loss)Recognizedin OtherComprehensiveEarnings/(Losses) onDerivatives
		2012			2011			2010			2012		2011			2010
Foreign exchange contracts											$	113	$	(4	)	$	(56	)
	Net revenues	$	66		$	(17	)	$	24
	Cost of sales	19			34			(14		)
	Marketing, administration and research costs	—			—			3
	Interest expense, net	(60		)	(37		)	(49		)
Total		$	25		$	(20	)	$	(36	)	$	113	$	(4	)	$	(56	)

Hedges of Net Investments in Foreign Operations

PMI designates certain foreign currency denominated debt and foreign exchange contracts as net investment hedges of its foreign operations. For the years ended December 31, 2012, 2011 and 2010, these hedges of net investments resulted in gains (losses), net of income taxes, of $(95) million, $(37) million and $315 million,

respectively. These gains (losses) were reported as a component of accumulated other comprehensive losses within currency translation adjustments. For the years ended December 31, 2012, 2011 and 2010, ineffectiveness related to net investment hedges was not material. Other investing cash flows on PMI’s consolidated statements of cash flows include the premiums paid for and settlements of net investment hedges.

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For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as net investment hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Net Investment Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss) Reclassifiedfrom Other Comprehensive Earnings/(Losses) into Earnings						Amount ofGain/(Loss) Recognized inOther Comprehensive Earnings/(Losses) on Derivatives
		2012		2011		2010		2012			2011		2010
Foreign exchange contracts								$	(19	)	$	2	$	24
	Interest expense, net	$	—	$	—	$	—

Other Derivatives

PMI has entered into foreign exchange contracts to hedge the foreign currency exchange risks related to intercompany loans between certain subsidiaries, and third-party loans. While effective as economic hedges, no hedge accounting is applied for these contracts; therefore, the unrealized gains (losses) relating to these contracts are reported in PMI’s consolidated statement of earnings. For the years ended December 31, 2012, 2011 and 2010, the gains (losses) from contracts for which PMI did not apply hedge accounting were $102 million, $34 million and $(97) million, respectively. The gains (losses) from these contracts substantially offset the losses and gains generated by the underlying intercompany and third-party loans being hedged.

As a result, for the years ended December 31, 2012, 2011 and 2010, these items impacted the consolidated statement of earnings as follows:

(pre-tax, in millions)
Derivatives not Designated as Hedging Instruments	Statement of Earnings Classification of Gain/(Loss)	Amount ofGain/(Loss) Recognizedin Earnings
		2012		2011		2010
Foreign exchange contracts
	Marketing, administration   and research costs	$	—	$	—	$	(3	)
	Interest expense, net	14		56		10
Total		$	14	$	56	$	7

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

Derivative gains or losses reported in accumulated other comprehensive losses are a result of qualifying hedging activity. Transfers of these gains or losses to earnings are offset by the corresponding gains or losses on the underlying hedged item. Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Gain as of January 1,	$	15		$	2		$	19
Derivative (gains)/losses transferred to earnings	(22		)	18			33
Change in fair value	99			(5		)	(50		)
Gain as of December 31,	$	92		$	15		$	2

At December 31, 2012, PMI expects $90 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the consolidated statement of earnings within the next twelve months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.

Contingent Features

PMI’s derivative instruments do not contain contingent features.

Credit Exposure and Credit Risk

PMI is exposed to credit loss in the event of non-performance by counterparties. While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments. PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Fair Value

See Note 16. Fair Value Measurements for disclosures related to the fair value of PMI’s derivative financial instruments.

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Note 16.

Fair Value Measurements:

The authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of input that may be used to measure fair value, which are as follows:

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.

PMI's policy is to reflect transfers between hierarchy levels at the end of the reporting period.

Derivative Financial Instruments — Foreign Exchange Contracts

PMI assesses the fair value of its derivative financial instruments, which consist of deliverable and non-deliverable foreign exchange forward contracts, foreign currency swaps, foreign currency collars and foreign currency options, using internally developed models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. PMI’s derivative financial instruments have been classified within Level 2 at December 31, 2012 and 2011. See Note 15. Financial Instruments for additional discussion on derivative financial instruments.

Pension Plan Assets

The fair value of pension plan assets, determined by using readily available quoted market prices in active markets, has been classified within Level 1 of the fair value hierarchy at December 31, 2012 and 2011. The fair value of pension plan assets determined by using quoted prices in markets that are not active has been classified within Level 2 at December 31, 2012 and 2011. See Note 13. Benefit Plans for additional discussion on pension plan assets.

Debt

The fair value of PMI’s outstanding debt, which is utilized solely for disclosure purposes, is determined using quotes and market

interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $37 million of capital lease obligations, was $20,383 million at December 31, 2012. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $85 million of capital lease obligations, was $16,949 million at December 31, 2011.

The aggregate fair values of PMI’s derivative financial instruments, pension plan assets and debt as of December 31, 2012 and 2011, were as follows:

(in millions)	Fair ValueAtDecember 31,2012		QuotedPricesin Active Markets forIdenticalAssets/Liabilities(Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs(Level 3)
Assets:
Foreign exchange contracts	$	160	$	—	$	160	$	—
Pension plan assets (a)	5,911		4,419		1,492		—
Total assets	$	6,071	$	4,419	$	1,652	$	—
Liabilities:
Debt	$	22,719	$	22,316	$	403	$	—
Foreign exchange contracts	55		—		55		—
Total liabilities	$	22,774	$	22,316	$	458	$	—
(a) Mutual funds in the amount of $1,363 million were transferred from Level 2 to Level 1 because they are actively traded on a daily basis.
(in millions)	Fair Value AtDecember 31, 2011		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs(Level 3)
Assets:
Foreign exchange contracts	$	145	$	—	$	145	$	—
Pension plan assets	5,047		2,168		2,879		—
Total assets	$	5,192	$	2,168	$	3,024	$	—
Liabilities:
Debt	$	18,900	$	18,458	$	442	$	—
Foreign exchange contracts	66		—		66		—
Total liabilities	$	18,966	$	18,458	$	508	$	—

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Note 17.

Accumulated Other Comprehensive Losses:

PMI's accumulated other comprehensive losses, net of taxes, consisted of the following:

(Losses) Earnings	At December 31,
(in millions)	2012			2011			2010
Currency translation adjustments	$	(331	)	$	(293	)	$	507
Pension and other benefits	(3,365		)	(2,585		)	(1,650		)
Derivatives accounted for as hedges	92			15			2
Equity securities	—			—			1
Total accumulated other comprehensive losses	$	(3,604	)	$	(2,863	)	$	(1,140	)

Note 18.

Colombian Investment and Cooperation Agreement:

On June 19, 2009, PMI announced that it had signed an agreement with the Republic of Colombia, together with the Departments of Colombia and the Capital District of Bogota, to promote investment and cooperation with respect to the Colombian tobacco market and to fight counterfeit and contraband tobacco products. The Investment and Cooperation Agreement provides $200 million in funding to the Colombian governments over a 20-year period to address issues of mutual interest, such as combating the illegal cigarette trade, including the threat of counterfeit tobacco products, and increasing the quality and quantity of locally grown tobacco. As a result of the Investment and Cooperation Agreement, PMI recorded a pre-tax charge of $135 million in the operating results of the Latin America & Canada segment during the second quarter of 2009.

At December 31, 2012 and 2011, PMI had $77 million and $79 million, respectively, of discounted liabilities associated with the Colombian Investment and Cooperation Agreement. These discounted liabilities are primarily reflected in other long-term liabilities on the consolidated balance sheets and are expected to be paid through 2028.

Note 19.

RBH Legal Settlement:

On July 31, 2008, Rothmans Inc. ("Rothmans") announced the finalization of a CAD 550 million settlement (or approximately $540 million, based on the prevailing exchange rate at that time) between itself and Rothmans, Benson & Hedges Inc. ("RBH"), on the one hand, and the Government of Canada and all ten provinces, on the other hand. The settlement resolves the Royal Canadian Mounted Police's investigation relating to products exported from

Canada by RBH during the 1989-1996 period. Rothmans' sole holding was a 60% interest in RBH. The remaining 40% interest in RBH was owned by PMI.

Subsequent to the finalization of the settlement, PMI announced that it had entered into an agreement with Rothmans to purchase, by way of a tender offer, all of the outstanding common shares of Rothmans. In October 2008, PMI completed the acquisition of all of Rothmans shares.

At December 31, 2012 and 2011, PMI had $190 million and $212 million, respectively, of discounted accrued settlement charges associated with the RBH legal settlement. These accrued settlement charges are primarily reflected in other long-term liabilities on the consolidated balance sheets and are expected to be paid through 2019.

Note 20.

E.C. Agreement:

In 2004, PMI entered into an agreement with the European Commission (“E.C.”) and 10 Member States of the European Union that provides for broad cooperation with European law enforcement agencies on anti-contraband and anti-counterfeit efforts. This agreement has been signed by all 27 Member States. The agreement resolves all disputes between the parties relating to these issues. Under the terms of the agreement, PMI will make 13 payments over 12 years, including an initial payment of $250 million, which was recorded as a pre-tax charge against its earnings in 2004. The agreement calls for additional payments of approximately $150 million on the first anniversary of the agreement (this payment was made in July 2005), approximately $100 million on the second anniversary (this payment was made in July 2006) and approximately $75 million each year thereafter for 10 years, each of which is to be adjusted based on certain variables, including PMI’s market share in the European Union in the year preceding payment. Because future additional payments are subject to these variables, PMI records charges for them as an expense in cost of sales when product is shipped. In addition, PMI is also responsible to pay the excise taxes, VAT and customs duties on qualifying product seizures of up to 90 million cigarettes and is subject to payments of five times the applicable taxes and duties if qualifying product seizures exceed 90 million cigarettes in a given year. To date, PMI’s

78

annual payments related to product seizures have been immaterial. Total charges related to the E.C. Agreement of $78 million, $86 million and $91 million were recorded in cost of sales in 2012, 2011 and 2010, respectively.

Note 21.

Contingencies:

Tobacco-Related Litigation

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. Our indemnitees include distributors, licensees, and others that have been named as parties in certain cases and that we have agreed to defend, as well as to pay costs and some or all of judgments, if any, that may be entered against them. Pursuant to the terms of the Distribution Agreement between Altria and PMI, PMI will indemnify Altria and PM USA for tobacco product claims based in substantial part on products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for tobacco product claims based in substantial part on products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

It is possible that there could be adverse developments in pending cases against us and our subsidiaries. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in certain cases in Brazil, Canada, Israel and Nigeria, range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. Much of the tobacco-related litigation is in its early stages, and litigation is subject to uncertainty. However, as discussed below, we have to date been largely successful in defending tobacco-related litigation.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. Legal defense costs are expensed as incurred.

It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses

to the litigation pending against us, as well as valid bases for appeal of adverse verdicts, if any. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

To date, we have paid total judgments, including costs, of approximately six thousand Euros in tobacco-related cases. These payments were made in order to appeal three Italian small claims cases, all of which were subsequently reversed on appeal. To date, no tobacco-related case has been finally resolved in favor of a plaintiff against us, our subsidiaries or indemnitees.

The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of December 31, 2012, 2011 and 2010:

Type of Case	Number of Cases Pending as of December 31, 2012	Number of Cases Pending  as of December 31, 2011	Number of Cases Pending  as of December 31, 2010
Individual Smoking and Health Cases	76	75	94
Smoking and Health Class Actions	11	10	11
Health Care Cost Recovery Actions	15	11	10
Lights Class Actions	2	2	2
Individual Lights Cases (small claims court)	7	9	10
Public Civil Actions	4	3	7

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 387 Smoking and Health, Lights, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor. Ten cases have had decisions in favor of plaintiffs. Seven of these cases have subsequently reached final resolution in our favor and three remain on appeal.

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The table below lists the verdicts and post-trial developments in the three pending cases in which verdicts were returned in favor of plaintiffs:

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 2011	Brazil/Laszlo	Individual Smoking and Health	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
September 2009	Brazil/Bernhardt	Individual Smoking and Health	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
February 2004	Brazil/The Smoker Health Defense Association	Class Action	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.

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Pending claims related to tobacco products generally fall within the following categories:

Smoking and Health Litigation: These cases primarily allege personal injury and are brought by individual plaintiffs or on behalf of a class or purported class of individual plaintiffs. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.

As of December 31, 2012, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 76 cases brought by individual plaintiffs in Argentina (30), Brazil (29), Canada (2), Chile (4), Costa Rica (2), Greece (1), Italy (5), the Philippines (1), Scotland (1) and Turkey (1), compared with 75 such cases on December 31, 2011, and 94 cases on December 31, 2010; and

• 11 cases brought on behalf of classes of individual plaintiffs in Brazil (2) and Canada (9), compared with 10 such cases on December 31, 2011, and 11 such cases on December 31, 2010.

In the first class action pending in Brazil, The Smoker Health Defense Association (ADESF) v. Souza Cruz, S.A. and Philip Morris Marketing, S.A., Nineteenth Lower Civil Court of the Central Courts of the Judiciary District of São Paulo, Brazil, filed July 25, 1995, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer organization, is seeking damages for smokers and former smokers and injunctive relief. The verdict and post-trial developments in this case are described in the above table.

In the second class action pending in Brazil, Public Prosecutor of São Paulo v. Philip Morris Brasil Industria e Comercio Ltda., Civil Court of the City of São Paulo, Brazil, filed August 6, 2007, our subsidiary is a defendant. The plaintiff, the Public Prosecutor of the State of São Paulo, is seeking (i) unspecified damages on behalf of all smokers nationwide, former smokers, and their relatives; (ii) unspecified damages on behalf of people exposed to environmental tobacco smoke (“ETS”) nationwide, and their relatives; and (iii) reimbursement of the health care costs allegedly incurred for the treatment of tobacco-related diseases by all Brazilian States and Municipalities, and the Federal District. In an interim ruling issued in December 2007, the trial court limited the scope of this claim to the State of São Paulo only. In December 2008, the Seventh Civil Court of São Paulo issued a decision declaring that it lacked jurisdiction because the case involved issues

similar to the ADESF case discussed above and should be transferred to the Nineteenth Lower Civil Court in São Paulo where the ADESF case is pending. The court further stated that these cases should be consolidated for the purposes of judgment. In April 2010, the São Paulo Court of Appeals reversed the Seventh Civil Court's decision that consolidated the cases, finding that they are based on different legal claims and are progressing at different stages of proceedings. This case was returned to the Seventh Civil Court of São Paulo, and our subsidiary filed its closing arguments in December 2010. In March 2012, the trial court dismissed the case on the merits. This decision has been appealed.

In the first class action pending in Canada, Cecilia Letourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiff, an individual smoker, is seeking compensatory and unspecified punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005. In February 2011, the trial court ruled that the federal government would remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

In the second class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Ltd.,Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiffs, an anti-smoking organization and an individual smoker, are seeking compensatory and unspecified punitive damages for each member of the class who allegedly suffers from certain smoking-related diseases. The class was certified in 2005. In February 2011, the trial court ruled that the federal government will remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

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In the third class action pending in Canada, Kunta v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada, filed June 12, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma and mild reversible lung disease resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. In September 2009, plaintiff's counsel informed defendants that he did not anticipate taking any action in this case while he pursues the class action filed in Saskatchewan (see description of Adams, below).

In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al.,The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits. Preliminary motions are pending.

In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al.,The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the sixth class action pending in Canada, Dorion v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the seventh class action pending in Canada, McDermid v.

Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

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In the ninth class action pending in Canada, Suzanne Jacklin v. Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits. Plaintiff's counsel have indicated that they do not intend to take any action in this case in the near future.

Health Care Cost Recovery Litigation: These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices. Plaintiffs in these cases seek various forms of relief including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of December 31, 2012, there were 15 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Canada (9), Nigeria (5) and Spain (1), compared with 11 such cases on December 31, 2011, and 10 such cases on December 31, 2010.

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, our subsidiaries, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.” The Supreme Court of Canada has held that the statute is constitutional. We and certain other non-Canadian defendants challenged the jurisdiction of the court. The court rejected the jurisdictional challenge. Pre-trial discovery is ongoing.

In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v. Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of New Brunswick based on legislation enacted in the province. This legislation is similar to the law introduced in British Columbia that authorizes the

government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Pre-trial discovery is ongoing.

In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v. Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada, filed September 29, 2009, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Ontario based on legislation enacted in the province. This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v. Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St. Johns, Canada, filed February 8, 2011, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, our subsidiary, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

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In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v. Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Alberta based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” We, our subsidiaries and our indemnitees have all been served with the statement of claim.

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court

pending the appeals of certain co-defendants relating to service objections. We currently have no employees, operations or assets in Nigeria.

In the second health care cost recovery case in Nigeria, The Attorney General of Kano State v. British American Tobacco (Nigeria) Limited, et al., High Court of Kano State, Kano, Nigeria, filed May 9, 2007, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary is in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v. British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us. As a result of this ruling, Philip Morris International Inc. is not currently a defendant in the case. Plaintiff may appeal the ruling or follow the procedural steps required to serve Philip Morris International Inc.

In the fourth health care cost recovery case in Nigeria, The Attorney General of Oyo State, et al., v. British American Tobacco (Nigeria) Limited, et al., High Court of Oyo State, Ibadan, Nigeria, filed May 25, 2007, our subsidiary and other members of the industry are defendants. Plaintiffs seek reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary challenged service as improper. In June 2010, the court ruled that plaintiffs did not have leave to serve the writ of summons on the defendants and that they must re-serve the writ. Our subsidiary has not yet been re-served.

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In the fifth health care cost recovery case in Nigeria, The Attorney General of Ogun State v. British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria, filed February 26, 2008, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In May 2010, the trial court rejected our subsidiary's service objections. Our subsidiary has appealed.

In a series of proceedings in Spain, Junta de Andalucia, et al. v. Philip Morris Spain, et al., Court of First Instance, Madrid, Spain, the first of which was filed February 21, 2002, our subsidiary and other members of the industry were defendants. The plaintiffs sought reimbursement for the cost of treating certain of their citizens for various alleged smoking-related illnesses. In May 2004, the first instance court dismissed the initial case, finding that the State was a necessary party to the claim, and thus, the claim must be filed in the Administrative Court. In September 2007, the plaintiffs filed their complaint in the Administrative Court, which dismissed the claim based on a procedural issue in November 2007. In November 2009, the Supreme Court rejected plaintiffs' appeal, resulting in the final dismissal of the claim. However, plaintiffs have filed a second claim in the Administrative Court against the Ministry of Economy. This second claim seeks the same relief as the original claim, but relies on a different procedural posture. The Administrative Court has recognized our subsidiary as a party in this proceeding. Our subsidiary and other defendants filed preliminary objections that resulted in a stay of the term to file the answer. In May 2011, the court rejected the defendants' preliminary objections, but it has not yet set a deadline for defendants to file their answers.

Lights Cases: These cases, brought by individual plaintiffs, or on behalf of a class of individual plaintiffs, allege that the use of the term “lights” constitutes fraudulent and misleading conduct. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including misrepresentation, deception, and breach of consumer protection laws. Plaintiffs seek various forms of relief including restitution, injunctive relief, and compensatory and other damages. Defenses raised include lack of causation, lack of reliance, assumption of the risk, and statute of limitations.

As of December 31, 2012, there were a number of lights cases pending against our subsidiaries or indemnitees, as follows:

• 2 cases brought on behalf of overlapping classes of individual plaintiffs in Israel, compared with 2 such cases on December 31, 2011, and 2 such cases on December 31, 2010; and

• 7 cases brought by individuals in the equivalent of small claims courts in Italy, where the maximum damages are approximately one thousand Euros per case, compared with 9 such cases on December 31, 2011, and 10 such cases on December 31, 2010.

In the first class action pending in Israel, El-Roy, et al. v. Philip Morris Incorporated, et al., District Court of Tel-Aviv/Jaffa, Israel, filed January 18, 2004, our subsidiary and our indemnitees (PM USA and our former importer) are defendants. The plaintiffs filed a purported class action claiming that the class members were misled by the descriptor “lights” into believing that lights cigarettes

are safer than full flavor cigarettes. The claim seeks recovery of the purchase price of lights cigarettes and compensation for distress for each class member. Hearings took place in November and December 2008 regarding whether the case meets the legal requirements necessary to allow it to proceed as a class action. The parties' briefing on class certification was completed in March 2011. In November 2012, the court denied class certification and dismissed the individual claims. Plaintiffs have appealed.

The claims in the second class action pending in Israel, Navon, et al. v. Philip Morris Products USA, et al., District Court of Tel-Aviv/Jaffa, Israel, filed December 5, 2004, against our indemnitee (our distributor) and other members of the industry are similar to those in El-Roy, and the case is currently stayed pending a ruling on class certification in El-Roy. The El-Roy trial court recently denied class certification (see description of El-Roy, above), but the Navon trial court has not yet taken any action.

Public Civil Actions: Claims have been filed either by an individual, or a public or private entity, seeking to protect collective or individual rights, such as the right to health, the right to information or the right to safety. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including product defect, concealment, and misrepresentation. Plaintiffs in these cases seek various forms of relief including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

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As of December 31, 2012, there were 4 public civil actions pending against our subsidiaries in Argentina (2), Brazil (1), and Venezuela (1), compared with 3 such cases on December 31, 2011, and 7 such cases on December 31, 2010.

In the first public civil action in Argentina, Asociación Argentina de Derecho de Danos v. Massalin Particulares S.A., et al., Civil Court of Buenos Aires, Argentina, filed February 26, 2007, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer association, seeks the establishment of a relief fund for reimbursement of medical costs associated with diseases allegedly caused by smoking. Our subsidiary filed its answer in September 2007. In March 2010, the case file was transferred to the Federal Court on Administrative Matters after the Civil Court granted the plaintiff's request to add the national government as a co-plaintiff in the case.

In the second public civil action in Argentina, Conciencia Ciudadana Mejorar Asociación Civil, et al.v. Massalin Particulares S.A., 4th Civil & Commercial Court of Zarate, Argentina, filed September 20, 2012, our subsidiary is a defendant. Plaintiffs, a civil association and an individual, seek an order requiring our subsidiary to place information regarding tar, nicotine, and carbon monoxide yields on the packages of cigarettes in the Marlboro brand family. Plaintiffs also seek moral and punitive damages. Our subsidiary has been served with the complaint.

In the public civil action in Brazil, The Brazilian Association for the Defense of Consumer Health (“SAUDECON”) v. Philip Morris Brasil Industria e Comercio Ltda. and Souza Cruz S.A., Civil Court of City of Porto Alegre, Brazil, filed November 3, 2008, our subsidiary is a defendant. The plaintiff, a consumer organization, is asking the court to establish a fund that will be used to provide treatment to smokers who claim to be addicted and who do not otherwise have access to smoking cessation treatment. Plaintiff

requests that each defendant's liability be determined according to its market share. In May 2009, the trial court dismissed the case on the merits. Plaintiff has appealed.

In the public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties.

Other Litigation

We are also involved in other litigation arising in the ordinary course of our business. While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

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Note 22.

Quarterly Financial Data (Unaudited):

	2012 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	18,022	$	20,037	$	19,592	$	19,742
Gross profit	$	5,006	$	5,454	$	5,336	$	5,208
Net earnings attributable to PMI	$	2,161	$	2,317	$	2,227	$	2,095
Per share data:
Basic EPS	$	1.25	$	1.36	$	1.32	$	1.25
Diluted EPS	$	1.25	$	1.36	$	1.32	$	1.25
Dividends declared	$	0.77	$	0.77	$	0.85	$	0.85
Market price:
— High	$	88.86	$	91.05	$	93.60	$	94.13
— Low	$	72.85	$	81.10	$	86.11	$	82.10
	2011 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	16,530	$	20,234	$	20,706	$	18,876
Gross profit	$	4,496	$	5,429	$	5,515	$	4,979
Net earnings attributable to PMI	$	1,919	$	2,409	$	2,377	$	1,886
Per share data:
Basic EPS	$	1.06	$	1.35	$	1.35	$	1.08
Diluted EPS	$	1.06	$	1.35	$	1.35	$	1.08
Dividends declared	$	0.64	$	0.64	$	0.77	$	0.77
Market price:
— High	$	65.92	$	71.75	$	72.74	$	79.42
— Low	$	55.85	$	64.49	$	62.32	$	60.45

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.

During 2012 and 2011, PMI recorded the following pre-tax charges in earnings:

	2012 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	8	$	8	$	34	$	33
	2011 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	16	$	1	$	43	$	49

Note 23.

Subsequent Event:

The American Taxpayer Relief Act of 2012 (the “Act”) was enacted on January 2, 2013. Included in the Act were extensions through 2013 of several expired or expiring temporary business tax provisions, commonly referred to as “extenders.” The tax impact of new legislation is recognized in the reporting period in which it is enacted. Therefore, PMI will recognize the impact of the Act in the consolidated financial statements in the first quarter of 2013. The impact of the Act is not expected to be material to PMI's consolidated financial position, results of operations or cash flows.

87

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Philip Morris International Inc. and Subsidiaries:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, comprehensive earnings, stockholders’ (deficit) equity, and cash flows, present fairly, in all material respects, the financial position of Philip Morris International Inc. and its subsidiaries (“PMI”) at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, PMI maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). PMI’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on PMI’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers SA

/S/    JAMES A. SCHUMACHER	/S/    FELIX ROTH
James A. Schumacher	Felix Roth
Lausanne, Switzerland
February 7, 2013

88

Report of Management on Internal Control Over Financial Reporting

Management of Philip Morris International Inc. (“PMI”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. PMI’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those written policies and procedures that:

• 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.

Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of PMI’s internal control over financial reporting as of December 31, 2012. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of PMI’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2012, PMI maintained effective internal control over financial reporting.

PricewaterhouseCoopers SA, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of PMI included in this report, has audited the effectiveness of PMI’s internal control over financial reporting as of December 31, 2012, as stated in their report herein.

February 7, 2013

89

EX-21

Exhibit 21

List of Significant Subsidiaries

As of December 31, 2012

Listed below are subsidiaries of Philip Morris International Inc. (the “Company”) as of December 31, 2012 and their state or country of organization. This list omits the subsidiaries of the Company that in the aggregate would not constitute a “significant subsidiary” of the Company, as that term is defined in Rule 1-02(w) of Regulation S-X.

Name	State or Country of Organization
Compania Colombiana de Tabaco S.A.	Colombia
Massalin Particulares S.A.	Argentina
Papastratos Cigarette Manufacturing Company	Greece
Philip Morris Benelux B.V.B.A.	Belgium
Philip Morris Brands SARL	Switzerland
Philip Morris Brasil Industria e Comercio Ltda.	Brazil
Philip Morris Cigatam Productos Y Servicios, S. de R.L. de C.V.	Mexico
Philip Morris CR a.s.	Czech Republic
Philip Morris Finance S.A.	Switzerland
Philip Morris Global Brands Inc.	USA
Philip Morris GmbH	Germany
Philip Morris Holland B.V.	Netherlands
Philip Morris Holland Holdings B.V.	Netherlands
Philip Morris International Management SA	Switzerland
Philip Morris Investments B.V.	Netherlands
Philip Morris Japan Kabushiki Kaisha	Japan
Philip Morris Kazakhstan LLP	Kazakhstan
Philip Morris Korea Inc.	Korea, Republic of
Philip Morris Limited	Australia
Philip Morris Manufacturing GmbH	Germany
Philip Morris Mexico, Sociedad Anónima de Capital Variable	Mexico
Philip Morris Operations a.d.	Serbia
Philip Morris (Pakistan) Limited	Pakistan
Philip Morris Polska S.A.	Poland
Philip Morris Products S.A.	Switzerland
Philip Morris SA, Philip Morris Sabanci Pazarlama ve Satis A.S.	Turkey
Philip Morris Sales and Marketing Ltd.	Russia
PHILSA Philip Morris Sabanci Sigara ve Tutunculuk Sanayi ve Ticaret A.S.	Turkey
PMFTC Inc.	Philippines
PT Hanjaya Mandala Sampoerna Tbk.	Indonesia
PT Philip Morris Indonesia	Indonesia
Rothmans, Benson & Hedges Inc.	Canada
Tabaqueira II, S.A.	Portugal
Tabaqueira - Empresa Industrial de Tabacos, S.A.	Portugal
ZAO Philip Morris Izhora	Russia

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in Philip Morris International Inc.'s Registration Statements on Form S-3 (File No. 333-172490) and Form S-8 (File Nos. 333-149822, 333-149821, 333-181298), of our report dated February 7, 2013, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

PricewaterhouseCoopers SA

/s/ JAMES A. SCHUMACHER	/s/ FELIX ROTH
James A. Schumacher	Felix Roth

Lausanne, Switzerland

February 22, 2013

EX-24

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ HAROLD BROWN

Harold Brown

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ MATHIS CABIALLAVETTA

Mathis Cabiallavetta

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ J. DUDLEY FISHBURN

J. Dudley Fishburn

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ JENNIFER LI

Jennifer Li

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ GRAHAM MACKAY

Graham Mackay

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ SERGIO MARCHIONNE

Sergio Marchionne

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ KALPANA MORPARIA

Kalpana Morparia

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ LUCIO A. NOTO

Lucio A. Noto

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ ROBERT B. POLET

Robert B. Polet

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ CARLOS SLIM HELÚ

Carlos Slim Helú

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT the undersigned, a Director of Philip Morris International Inc., a Virginia corporation (the “Company”), does hereby constitute and appoint Louis C. Camilleri, Jacek Olczak and Jerry Whitson, or any one or more of them, his or her true and lawful attorney, for him or her and in his or her name, place and stead, to execute, by manual or facsimile signature, electronic transmission or otherwise, the Annual Report on Form 10-K of the Company for the year ended December 31, 2012, and any amendments or supplements to said Annual Report and to cause the same to be filed with the Securities and Exchange Commission, together with any exhibits, financial statements and schedules included or to be incorporated by reference therein, hereby granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all acts and things which said attorneys may do or cause to be done by virtue of these presents.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the 7th day of February, 2013.

/s/ STEPHEN M. WOLF

Stephen M. Wolf

EX-31.1

Exhibit 31.1

Certifications

I, Louis C. Camilleri, certify that:

1. I have reviewed this annual report on Form 10-K of Philip Morris International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 22, 2013

/s/ LOUIS C. CAMILLERI

Louis C. Camilleri

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

I, Jacek Olczak, certify that:

1. I have reviewed this annual report on Form 10-K of Philip Morris International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 22, 2013

/s/ JACEK OLCZAK

Jacek Olczak

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Philip Morris International Inc. (the “Company”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Louis C. Camilleri, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)        the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ LOUIS C. CAMILLERI

Louis C. Camilleri

Chairman and Chief Executive Officer

February 22, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Philip Morris International Inc. and will be retained by Philip Morris International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Philip Morris International Inc. (the “Company”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jacek Olczak, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)        the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JACEK OLCZAK

Jacek Olczak

Chief Financial Officer

February 22, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Philip Morris International Inc. and will be retained by Philip Morris International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Capital Stock (Tables)

12 Months Ended

Dec. 31, 2012

Class of Stock Disclosures [Abstract]

Schedule of Common Stock

Shares of authorized common stock are 6.0 billion; issued, repurchased and outstanding shares were as follows:

	Shares Issued	Shares Repurchased		Shares Outstanding
Balances, January 1, 2010	2,109,316,331	(222,151,828	)	1,887,164,503
Repurchase of shares		(97,053,310	)	(97,053,310	)
Exercise of stock options and issuance of other stock awards		11,672,297		11,672,297
Balances, December 31, 2010	2,109,316,331	(307,532,841	)	1,801,783,490
Repurchase of shares		(80,514,257	)	(80,514,257	)
Exercise of stock options and issuance of other stock awards		4,639,433		4,639,433
Balances, December 31, 2011	2,109,316,331	(383,407,665	)	1,725,908,666
Repurchase of shares		(74,897,499	)	(74,897,499	)
Issuance of stock awards and exercise of stock options		2,601,817		2,601,817
Balances, December 31, 2012	2,109,316,331	(455,703,347	)	1,653,612,984

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Financial Instruments (Hedging Activity Reported in Accumulated Other Comprehensive Earnings (Losses) Net of Income Taxes) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Hedging Activity, Affecting Accumulated Other Comprehensive Income [Roll Forward]
Gain at beginning of period	$ 15	$ 2
Derivative (gains)/losses transferred to earnings	(22)	18	33
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	99	(5)	(50)
(Loss)/gain at end of period	92	15	2
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member]
Hedging Activity, Affecting Accumulated Other Comprehensive Income [Roll Forward]
Gain at beginning of period	15	2	19
Derivative (gains)/losses transferred to earnings	(22)	18	33
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	99	(5)	(50)
(Loss)/gain at end of period	$ 92	$ 15	$ 2

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Goodwill and Other Intangible Assets, net (Other Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Non-amortizable intangible assets	$ 2,046	$ 2,067
Amortizable intangible assets, gross carrying amount	2,046	2,001
Accumulated amortization	473	371
Total Other Intangible Assets, Gross Carrying Amount	$ 4,092	$ 4,068

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Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of Tobacco Related Cases Pending Against Company

The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of December 31, 2012, 2011 and 2010:

Type of Case	Number of Cases Pending as of December 31, 2012	Number of Cases Pending  as of December 31, 2011	Number of Cases Pending  as of December 31, 2010
Individual Smoking and Health Cases	76	75	94
Smoking and Health Class Actions	11	10	11
Health Care Cost Recovery Actions	15	11	10
Lights Class Actions	2	2	2
Individual Lights Cases (small claims court)	7	9	10
Public Civil Actions	4	3	7

Schedule of Verdicts and Post Trial Developments

The table below lists the verdicts and post-trial developments in the three pending cases in which verdicts were returned in favor of plaintiffs:

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 2011	Brazil/Laszlo	Individual Smoking and Health	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
September 2009	Brazil/Bernhardt	Individual Smoking and Health	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
February 2004	Brazil/The Smoker Health Defense Association	Class Action	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.

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Contingencies (Verdicts and Post-Trial Developments) (Details) (Cases With Verdicts And Post Trial Developments [Member], Brazil [Member])	12 Months Ended
	Dec. 31, 2012 Individual Smoking And Health Cases [Member] Laszlo [Member] USD ($)	Dec. 31, 2012 Individual Smoking And Health Cases [Member] Laszlo [Member] BRL	Dec. 31, 2012 Individual Smoking And Health Cases [Member] Bernhardt [Member] USD ($)	Dec. 31, 2012 Individual Smoking And Health Cases [Member] Bernhardt [Member] BRL	Dec. 31, 2012 Smoking And Health Class Actions [Member] The Smoker Health Defense Association (ADESF) [Member] USD ($)	Dec. 31, 2012 Smoking And Health Class Actions [Member] The Smoker Health Defense Association (ADESF) [Member] BRL
Loss Contingencies [Line Items]
Date	May 2011	May 2011	September 2009	September 2009	February 2004	February 2004
Verdict	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.
Post-Trial Developments	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.
Loss Contingency, Damages Awarded, Value	$ 17,029	31,333	$ 7,065	13,000	$ 540	1,000
Verdict, increased award to plaintiffs			$ 54,348	100,000
Interest rate on damages, monthly					1.00%	1.00%

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Capital Stock (Schedule of Common Stock) (Details)							12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Shares Issued [Member]	Dec. 31, 2011 Shares Issued [Member]	Dec. 31, 2010 Shares Issued [Member]	Dec. 31, 2009 Shares Issued [Member]	Dec. 31, 2012 Shares Repurchased [Member]	Dec. 31, 2011 Shares Repurchased [Member]	Dec. 31, 2010 Shares Repurchased [Member]	Dec. 31, 2012 Shares Outstanding [Member]	Dec. 31, 2011 Shares Outstanding [Member]	Dec. 31, 2010 Shares Outstanding [Member]
Capital Stock [Roll Forward]
Shares issued, beginning of period	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331
Shares repurchased, beginning of period	(455,703,347)	(383,407,665)					(383,407,665)	(307,532,841)	(222,151,828)
Shares outstanding, beginning of period										1,725,908,666	1,801,783,490	1,887,164,503
Repurchase of shares							(74,897,499)	(80,514,257)	(97,053,310)	(74,897,499)	(80,514,257)	(97,053,310)
Exercise of stock options and issuance of other stock awards							2,601,817	4,639,433	11,672,297	2,601,817	4,639,433	11,672,297
Shares issued, end of period	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331	2,109,316,331
Shares repurchased, end of period	(455,703,347)	(383,407,665)					(455,703,347)	(383,407,665)	(307,532,841)
Shares outstanding, end of period										1,653,612,984	1,725,908,666	1,801,783,490

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Contingencies (Lights Cases) (Narrative) (Details) (EUR €)	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case	May 01, 2010 litigation_case
Israel [Member] | Lights Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2	2	2	2
Italy [Member] | Individual Lights Cases - Small Claims Court [Member]
Loss Contingencies [Line Items]
Cases brought against PM	7	9	10
Maximum damage award	1,000

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Goodwill and Other Intangible Assets, net (Range of Useful Lives of Amortizable Intangible Assets) (Details)	12 Months Ended
	Dec. 31, 2012
Trademarks [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-Average Reamining Useful Life	26 years
Trademarks [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	2 years
Trademarks [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	40 years
Distribution Networks [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-Average Reamining Useful Life	15 years
Distribution Networks [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	20 years
Distribution Networks [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	30 years
Non-Compete Agreements [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-Average Reamining Useful Life	2 years
Non-Compete Agreements [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	3 years
Non-Compete Agreements [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	10 years
Other (Including Farmer Contracts and Intellectual Property Rights) [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted-Average Reamining Useful Life	13 years
Other (Including Farmer Contracts and Intellectual Property Rights) [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	12 years 6 months
Other (Including Farmer Contracts and Intellectual Property Rights) [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lines	17 years

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Income Taxes (Schedule of Reconciliation of Unrecognized Tax Benefits) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Reconciliation of Unrecognized Tax Benefits [Roll Forward]
Balance at January 1,	$ 104	$ 95	$ 174
Additions based on tax positions related to the current year	9	17	18
Additions for tax positions of previous years	309	8	35
Reductions for tax positions of prior years	(1)	(8)	(125)
Reductions due to lapse of statute of limitations	0	(7)	(1)
Settlements	(297)	0	(6)
Other	0	(1)	0
Balance at December 31,	$ 124	$ 104	$ 95

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Additional Information (Schedule of Additional Information) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Additional Information [Abstract]
Research and development expense	$ 415	$ 413	$ 391
Advertising expense	483	464	402
Interest expense	1,007	934	974
Interest income	(148)	(134)	(98)
Interest expense, net	859	800	876
Rent expense	$ 318	$ 308	$ 278

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value of Foreign Exchange Contracts

The fair value of PMI’s foreign exchange contracts included in the consolidated balance sheet as of December 31, 2012 and 2011, were as follows:

	Asset Derivatives					Liability Derivatives
		FairValue					FairValue
(in millions)	Balance Sheet Classification	2012		2011		Balance Sheet Classification	2012		2011
Foreign exchange contracts designated as hedging instruments	Other current   assets	$	146	$	57	Other accrued    liabilities	$	8	$	4
Foreign exchange contracts not designated as hedging instruments	Other current   assets	14		88		Other accrued   liabilities	47		62
Total derivatives		$	160	$	145		$	55	$	66

Hedging Activities Effect on Consolidated Statements of Earnings and Other Comprehensive Earnings

Hedging activities, which represent movement in derivatives as well as the respective underlying transactions, had the following effect on PMI’s consolidated statements of earnings and comprehensive earnings:

	For the Year Ended December 31, 2012
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	66					$	—					$	66
Cost of sales	19						—						19
Marketing, administration and research costs	—						—						—
Operating income	85						—						85
Interest expense, net	(60		)				14						(46		)
Earnings before income taxes	25						14						39
Provision for income taxes	(3		)				1						(2		)
Net earnings attributable to PMI	$	22					$	15					$	37
Other Comprehensive Earnings/(Losses):
Gains transferred to earnings	$	(25	)							$	3		$	(22	)
Recognized gains	113									(14		)	99
Net impact on equity	$	88								$	(11	)	$	77
Currency translation adjustments				$	(19	)				$	5		$	(14	)
	For the Year Ended December 31, 2011
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	(17	)				$	—					$	(17	)
Cost of sales	34						—						34
Marketing, administration and research costs	—						—						—
Operating income	17						—						17
Interest expense, net	(37		)				56						19
Earnings before income taxes	(20		)				56						36
Provision for income taxes	2						(13		)				(11		)
Net earnings attributable to PMI	$	(18	)				$	43					$	25
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	20								$	(2	)	$	18
Recognized losses	(4		)							(1		)	(5		)
Net impact on equity	$	16								$	(3	)	$	13
Currency translation adjustments				$	2								$	2

	For the Year Ended December 31, 2010
(in millions)	Cash Flow Hedges			Net Investment Hedges		Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	24				$	—					$	24
Cost of sales	(14		)			—						(14		)
Marketing, administration and research costs	3					(3		)				—
Operating income	13					(3		)				10
Interest expense, net	(49		)			10						(39		)
Earnings before income taxes	(36		)			7						(29		)
Provision for income taxes	3					(1		)				2
Net earnings attributable to PMI	$	(33	)			$	6					$	(27	)
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	36							$	(3	)	$	33
Recognized losses	(56		)						6			(50		)
Net impact on equity	$	(20	)						$	3		$	(17	)
Currency translation adjustments	$	(2	)	$	24				$	(10	)	$	12

Pre-Tax Effect of Foreign Exchange Contracts Designated as Cash Flow Hedging Instruments

For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as cash flow hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Cash Flow Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss)Reclassifiedfrom OtherComprehensiveEarnings/(Losses) into Earnings									Amount ofGain/(Loss)Recognizedin OtherComprehensiveEarnings/(Losses) onDerivatives
		2012			2011			2010			2012		2011			2010
Foreign exchange contracts											$	113	$	(4	)	$	(56	)
	Net revenues	$	66		$	(17	)	$	24
	Cost of sales	19			34			(14		)
	Marketing, administration and research costs	—			—			3
	Interest expense, net	(60		)	(37		)	(49		)
Total		$	25		$	(20	)	$	(36	)	$	113	$	(4	)	$	(56	)

Pre-Tax Effect of Foreign Exchange Contracts Designated as Net Investment Hedging Instruments

For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as net investment hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Net Investment Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss) Reclassifiedfrom Other Comprehensive Earnings/(Losses) into Earnings						Amount ofGain/(Loss) Recognized inOther Comprehensive Earnings/(Losses) on Derivatives
		2012		2011		2010		2012			2011		2010
Foreign exchange contracts								$	(19	)	$	2	$	24
	Interest expense, net	$	—	$	—	$	—

Pre-Tax Effect of Foreign Exchange Contracts not Designated as Hedging Instruments

As a result, for the years ended December 31, 2012, 2011 and 2010, these items impacted the consolidated statement of earnings as follows:

(pre-tax, in millions)
Derivatives not Designated as Hedging Instruments	Statement of Earnings Classification of Gain/(Loss)	Amount ofGain/(Loss) Recognizedin Earnings
		2012		2011		2010
Foreign exchange contracts
	Marketing, administration   and research costs	$	—	$	—	$	(3	)
	Interest expense, net	14		56		10
Total		$	14	$	56	$	7

Hedging Activity Reported in Accumulated Other Comprehensive Earnings (Losses), Net of Income Taxes

Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Gain as of January 1,	$	15		$	2		$	19
Derivative (gains)/losses transferred to earnings	(22		)	18			33
Change in fair value	99			(5		)	(50		)
Gain as of December 31,	$	92		$	15		$	2

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Subsequent Event

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event:

The American Taxpayer Relief Act of 2012 (the “Act”) was enacted on January 2, 2013. Included in the Act were extensions through 2013 of several expired or expiring temporary business tax provisions, commonly referred to as “extenders.” The tax impact of new legislation is recognized in the reporting period in which it is enacted. Therefore, PMI will recognize the impact of the Act in the consolidated financial statements in the first quarter of 2013. The impact of the Act is not expected to be material to PMI's consolidated financial position, results of operations or cash flows.

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Income Taxes (Schedule of Unrecognized Tax Benefits and Liability for Contingent Income Taxes, Interest and Penalties) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 124	$ 104	$ 95	$ 174
Accrued interest and penalties	37	28	30
Tax credits and other indirect benefits	(72)	(55)	(58)
Liability for tax contingencies	$ 89	$ 77	$ 67

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E.C. Agreement (Details) (Agreement With European Commission [Member], USD $) In Millions, unless otherwise specified	1 Months Ended								12 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Jul. 31, 2010	Jul. 31, 2009	Jul. 31, 2008	Jul. 31, 2007	Jul. 31, 2006	Jul. 31, 2005	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2004 payment
Agreement With European Commission [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of payments												13
Tenure of payment												12 years
Initial payment												$ 250
Additional payments on the first anniversary of the agreement								150
Additional payments on the second anniversary of the agreement							100
Additional payments on the third anniversary of the agreement						75
Additional payments on the fourth anniversary of the agreement					75
Additional payments on the fifth anniversary of the agreement				75
Additional payments on the sixth anniversary of the agreement			75
Additional payments on the seventh anniversary of the agreement		75
Additional payments on the eighth anniversary of the agreement	75
Future annual installment, 2013									75
Future annual installment, 2014									75
Future annual installment, 2015									75
Future annual installment, 2016									75
Future annual installment, 2017									75
Additional payment term, years						10 years
Maximum qualifying product seizures size (in units)												90,000,000
Excise taxes VAT customs duties multiplier, above maximum product seizures												5
Total charges related to E.C. Agreement									$ 78	$ 86	$ 91

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Quarterly Financial Data (Pre-Tax Charges Recorded In Earnings) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Quarterly Financial Data [Abstract]
Asset impairment and exit costs (Note 5)	$ 33	$ 34	$ 8	$ 8	$ 49	$ 43	$ 1	$ 16	$ 83	$ 109	$ 47

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Stock Plans (Stock Option Awards) (Details) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Shares Subject to Option (in shares):
Beginning Balance	63,944
Options cancelled	0
Ending Balance	36,811
Weighted-Average Exercise Price (in dollars per share):
Beginning Balance	$ 27.07
Options exercised	$ 28.35
Options cancelled	$ 0.00
Ending Balance	$ 26.13
Ending Balance, Average Remaining Contractual Term, Years	1 year
Ending Balance, Aggregate Intrinsic Value	$ 2
Performance Incentive Plan2008 [Member]
Shares Subject to Option (in shares):
Options exercised	(27,133)

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Benefit Plans (Weighted-Average Assumptions to Determine Benefit Obligations) (Details)	Dec. 31, 2012	Dec. 31, 2011
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.05%	4.50%
Rate of compensation increase	3.50%	3.50%
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	2.38%	3.40%
Rate of compensation increase	2.61%	2.66%

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Asset Impairment and Exit Costs (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restructuring Cost and Reserve [Line Items]
Separation program charges, pre-tax	$ 42	$ 63	$ 27
Cash payments related to exit costs	57	98	75
Effect on future cash flows amount	20
Pre-tax asset impairment charges	28	34	0
Contract Termination [Member]
Restructuring Cost and Reserve [Line Items]
Total contract termination charges	$ 13	$ 12	$ 20

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Financial Instruments (Pre-Tax Effect of Foreign Exchange Contracts Designated as Cash Flow Hedging Instruments) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	$ 99	$ (5)	$ (50)
Foreign Exchange Contract [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Higher Remaining Maturity Range	12 months
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	99	(5)	(50)
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	113	(4)	(56)
Foreign Exchange Contract [Member] | Net revenues [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	66	(17)	24
Foreign Exchange Contract [Member] | Net revenues [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	66	(17)	24
Foreign Exchange Contract [Member] | Cost of sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	19	34	(14)
Foreign Exchange Contract [Member] | Cost of sales [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	19	34	(14)
Foreign Exchange Contract [Member] | Marketing, administration and research costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	0	0	0
Foreign Exchange Contract [Member] | Marketing, administration and research costs [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	0	0	3
Foreign Exchange Contract [Member] | Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	(46)	19	(39)
Foreign Exchange Contract [Member] | Interest expense, net [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	(60)	(37)	(49)
Foreign Exchange Contract [Member] | Earnings before income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	39	36	(29)
Foreign Exchange Contract [Member] | Earnings before income taxes [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings into Earnings	$ 25	$ (20)	$ (36)

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Income Taxes (Narrative) (Details) (USD $)	12 Months Ended								3 Months Ended	12 Months Ended	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Internal Revenue Service (IRS) [Member] Altria [Member]	Dec. 31, 2012 Germany [Member]	Dec. 31, 2012 Indonesia [Member]	Dec. 31, 2012 Russia [Member]	Dec. 31, 2012 Switzerland [Member]	Mar. 31, 2011 Greece [Member]	Dec. 31, 2010 Greece [Member]	Mar. 31, 2011 Brazil [Member]	Dec. 31, 2010 United States [Member]	Dec. 31, 2010 Italy [Member]
Income Taxes [Line Items]
Accumulated earnings of foreign subsidiaries	$ 18,000,000,000
Additions for tax positions of previous years	309,000,000	8,000,000	35,000,000	287,000,000
Unrecognized tax benefits, settlements	(297,000,000)	0	(6,000,000)	(296,000,000)
Unrecognized tax benefits that, if recognized, would impact effective tax rate	50,000,000
Penalties and interest (expense) income recognized	(65,000,000)	1,000,000	17,000,000
Open tax year					2007 onward	2007 onward	2010 onward	2011 onward
Percentage points increase in effective income tax rate	0.40%	1.70%
Effective tax rate	29.50%	29.10%	27.40%
Impact on effective tax rate due to a discrete tax event				79,000,000								(148,000,000)	6,000,000
Income tax effect resulting from change in accounting principle					40,000,000
Impact on effective tax rate, change in enacted tax rate									(11,000,000)	21,000,000
Reversal of a valuation allowance											$ (15,000,000)

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Benefit Plans (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Amounts Recognized in Balance Sheet	$ (1,734)	$ (930)
Estimated net loss to be amortized	212
Estimated prior service cost to be amortized	10
Amounts charged to expense for defined contribution plans	66	61	53
Estimated contribution to pension plans	220
Accrued postretirement health care costs - current	11	10
Estimated net loss to be amortized into net postemployment costs	59
Annual weighted-average turnover rate	2.10%	2.50%
Percentage increase in assumed compensation cost	3.90%	3.00%
Assets related to postemployment cost	28	24
Equity Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, equity	60.00%
Debt Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, equity	40.00%
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	354	323
Accumulated benefit obligations in excess of plan assets, projected obligation	86	76
Accumulated benefit obligations in excess of plan assets, accumulated benefit obligation	78	66
Weighted-average discount rate	4.05%	4.50%
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Accumulated benefit obligation	6,469	5,042
Accumulated benefit obligations in excess of plan assets, projected obligation	6,786	3,785
Accumulated benefit obligations in excess of plan assets, accumulated benefit obligation	6,058	3,343
Accumulated benefit obligations in excess of plan assets, fair value of plan assets	$ 5,162	$ 2,973
Weighted-average discount rate	2.38%	3.40%
Postemployment Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average discount rate	4.40%	6.80%

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Income Taxes (Schedule of Temporary Differences of Tax Effects to Deferred Income Tax Assets and Liabilities) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$ 279	$ 223
Accrued pension costs	262	193
Inventory	135	76
Accrued liabilities	150	145
Foreign exchange	52	0
Other	139	110
Total deferred income tax assets	1,017	747
Deferred income tax liabilities:
Trade names	(816)	(818)
Property, plant and equipment	(320)	(323)
Unremitted earnings	(845)	(897)
Foreign exchange	0	(31)
Total deferred income tax liabilities	(1,981)	(2,069)
Net deferred income tax liabilities	$ (964)	$ (1,322)

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Benefit Plans (Obligations and Funded Status) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets at December 31,		$ 5,047
Pension [Member]
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets at December 31,	5,911	5,047
U.S. Plans - Pension [Member]
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Net pension liability recognized at December 31,	(99)	(83)
U.S. Plans - Pension [Member] | Defined Benefit Plan, Benefit Obligation [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation at January 1,	352	321
Service cost	6	5
Interest cost	16	16
Benefits paid	(16)	(21)
Termination, settlement and curtailment	0	0
Assumption changes	28	44
Actuarial (gains) losses	(3)	(13)
Currency	0	0
Other	0	0
Benefit obligation at December 31,	383	352
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Benefits paid	(16)	(21)
U.S. Plans - Pension [Member] | Defined Benefit Plan, Plan Assets [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefits paid	(16)	(21)
Termination, settlement and curtailment	0	0
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets at January 1,	269	251
Actual return on plan assets	27	9
Employer contributions	4	30
Employee contributions	0	0
Benefits paid	(16)	(21)
Currency	0	0
Fair value of plan assets at December 31,	284	269
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Net pension liability recognized at December 31,	(1,635)	(847)
Non-U.S. Plans - Pension [Member] | Defined Benefit Plan, Benefit Obligation [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation at January 1,	5,625	4,932
Service cost	189	178
Interest cost	189	205
Benefits paid	(160)	(208)
Termination, settlement and curtailment	(8)	(4)
Assumption changes	1,176	510
Actuarial (gains) losses	41	6
Currency	(167)	52
Other	43	58
Benefit obligation at December 31,	7,262	5,625
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Benefits paid	(160)	(208)
Non-U.S. Plans - Pension [Member] | Defined Benefit Plan, Plan Assets [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefits paid	(160)	(208)
Termination, settlement and curtailment	(5)	0
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets at January 1,	4,778	4,623
Actual return on plan assets	625	(162)
Employer contributions	203	505
Employee contributions	47	43
Benefits paid	(160)	(208)
Currency	139	(23)
Fair value of plan assets at December 31,	$ 5,627	$ 4,778

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Income Taxes (Schedule of Earnings Before Income Taxes and Provision for Income Taxes) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Earnings before income taxes	$ 12,987	$ 12,532	$ 10,324
Current, United States federal	226	270	157
Deferred, United States federal	(61)	118	145
Total, United States federal	165	388	302
State and local	0	0	1
Total United States	165	388	303
Current, Outside United States	3,855	3,368	2,567
Deferred, Outside United States	(187)	(103)	(44)
Total outside United States	3,668	3,265	2,523
Total provision for income taxes	$ 3,833	$ 3,653	$ 2,826

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Stock Plans (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of stock options exercised		$ 2	$ 129	$ 292
Employees Vested [Member] | PMI [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock and deferred stock awards vested				1,400,000
Restricted Stock and Deferred Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value of restricted stock and deferred stock awards granted to employees		258	229	169
Weighted-average grant date fair value, per share		$ 79.59	$ 59.44	$ 47.54
Compensation expense for restricted stock and deferred stock awards		242	162	127
Accelerated compensation cost	27
Unamortized compensation cost related to restricted stock and deferred stock awards		221
Expected period for recognition of unamortized compensation expense, in years		2 years
Restricted stock and deferred stock awards vested		3,744,454	1,800,000	2,000,000
Restricted Stock and Deferred Stock Awards [Member] | Grant Date Fair Value [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of vested restricted stock and deferred stock awards		148	84
Restricted Stock and Deferred Stock Awards [Member] | Total Fair Value [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of vested restricted stock and deferred stock awards		$ 298	$ 107	$ 123
2012 Performance Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated common stock to be awarded under a stock benefit plan, maximum limit		30,000,000
Shares available for grant under the plan		29,994,920
Non Employee Directors Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated common stock to be awarded under a stock benefit plan, maximum limit		1,000,000
Shares available for grant under the plan		798,801
Percentage of voting shares that PMI may own, used in determining non-employee director status		50.00%

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Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments:

Overview

PMI operates in markets outside of the United States of America, with manufacturing and sales facilities in various locations around the world. PMI utilizes certain financial instruments to manage foreign currency exposure. Derivative financial instruments are used by PMI principally to reduce exposures to market risks resulting from fluctuations in foreign currency exchange rates by creating offsetting exposures. PMI is not a party to leveraged derivatives and, by policy, does not use derivative financial instruments for speculative purposes. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. PMI formally documents the nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of the forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it were deemed probable that the forecasted transaction would not occur, the gain or loss would be recognized in earnings. PMI reports its net transaction gains or losses in marketing, administration and research costs on the consolidated statements of earnings.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps, foreign currency collars and foreign currency options, collectively referred to as foreign exchange contracts, to mitigate its exposure to changes in exchange rates from third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Indonesian rupiah, Japanese yen, Mexican peso, Russian ruble, Swiss franc and Turkish lira. At December 31, 2012 and 2011, PMI had contracts with aggregate notional amounts of $13.7 billion and $13.1 billion, respectively. Of the $13.7 billion aggregate notional amount at December 31, 2012, $2.7 billion related to cash flow hedges, $1.1 billion related to hedges of net investments in foreign operations, and $9.9 billion related to other derivatives that primarily offset currency exposures on intercompany financing. Of the $13.1 billion aggregate notional amount at December 31, 2011, $3.4 billion related to cash flow hedges, and $9.7 billion related to other derivatives that primarily offset currency exposures on intercompany financing.

The fair value of PMI’s foreign exchange contracts included in the consolidated balance sheet as of December 31, 2012 and 2011, were as follows:

	Asset Derivatives					Liability Derivatives
		FairValue					FairValue
(in millions)	Balance Sheet Classification	2012		2011		Balance Sheet Classification	2012		2011
Foreign exchange contracts designated as hedging instruments	Other current   assets	$	146	$	57	Other accrued    liabilities	$	8	$	4
Foreign exchange contracts not designated as hedging instruments	Other current   assets	14		88		Other accrued   liabilities	47		62
Total derivatives		$	160	$	145		$	55	$	66

Hedging activities, which represent movement in derivatives as well as the respective underlying transactions, had the following effect on PMI’s consolidated statements of earnings and comprehensive earnings:

	For the Year Ended December 31, 2012
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	66					$	—					$	66
Cost of sales	19						—						19
Marketing, administration and research costs	—						—						—
Operating income	85						—						85
Interest expense, net	(60		)				14						(46		)
Earnings before income taxes	25						14						39
Provision for income taxes	(3		)				1						(2		)
Net earnings attributable to PMI	$	22					$	15					$	37
Other Comprehensive Earnings/(Losses):
Gains transferred to earnings	$	(25	)							$	3		$	(22	)
Recognized gains	113									(14		)	99
Net impact on equity	$	88								$	(11	)	$	77
Currency translation adjustments				$	(19	)				$	5		$	(14	)
	For the Year Ended December 31, 2011
(in millions)	Cash Flow Hedges			Net Investment Hedges			Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	(17	)				$	—					$	(17	)
Cost of sales	34						—						34
Marketing, administration and research costs	—						—						—
Operating income	17						—						17
Interest expense, net	(37		)				56						19
Earnings before income taxes	(20		)				56						36
Provision for income taxes	2						(13		)				(11		)
Net earnings attributable to PMI	$	(18	)				$	43					$	25
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	20								$	(2	)	$	18
Recognized losses	(4		)							(1		)	(5		)
Net impact on equity	$	16								$	(3	)	$	13
Currency translation adjustments				$	2								$	2

	For the Year Ended December 31, 2010
(in millions)	Cash Flow Hedges			Net Investment Hedges		Other Derivatives			Income Taxes			Total
Gain (Loss)
Statement of Earnings:
Net revenues	$	24				$	—					$	24
Cost of sales	(14		)			—						(14		)
Marketing, administration and research costs	3					(3		)				—
Operating income	13					(3		)				10
Interest expense, net	(49		)			10						(39		)
Earnings before income taxes	(36		)			7						(29		)
Provision for income taxes	3					(1		)				2
Net earnings attributable to PMI	$	(33	)			$	6					$	(27	)
Other Comprehensive Earnings/(Losses):
Losses transferred to earnings	$	36							$	(3	)	$	33
Recognized losses	(56		)						6			(50		)
Net impact on equity	$	(20	)						$	3		$	(17	)
Currency translation adjustments	$	(2	)	$	24				$	(10	)	$	12

Each type of hedging activity is described in greater detail below.

Cash Flow Hedges

PMI has entered into foreign exchange contracts to hedge foreign currency exchange risk related to certain forecasted transactions. The effective portion of gains and losses associated with qualifying cash flow hedge contracts is deferred as a component of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s consolidated statements of earnings. During the years ended December 31, 2012, 2011 and 2010, ineffectiveness related to cash flow hedges was not material. As of December 31, 2012, PMI has hedged forecasted transactions for periods not exceeding the next twelve months. The impact of these hedges is included in operating cash flows on PMI’s consolidated statement of cash flows.

For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as cash flow hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Cash Flow Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss)Reclassifiedfrom OtherComprehensiveEarnings/(Losses) into Earnings									Amount ofGain/(Loss)Recognizedin OtherComprehensiveEarnings/(Losses) onDerivatives
		2012			2011			2010			2012		2011			2010
Foreign exchange contracts											$	113	$	(4	)	$	(56	)
	Net revenues	$	66		$	(17	)	$	24
	Cost of sales	19			34			(14		)
	Marketing, administration and research costs	—			—			3
	Interest expense, net	(60		)	(37		)	(49		)
Total		$	25		$	(20	)	$	(36	)	$	113	$	(4	)	$	(56	)

Hedges of Net Investments in Foreign Operations

PMI designates certain foreign currency denominated debt and foreign exchange contracts as net investment hedges of its foreign operations. For the years ended December 31, 2012, 2011 and 2010, these hedges of net investments resulted in gains (losses), net of income taxes, of $(95) million, $(37) million and $315 million, respectively. These gains (losses) were reported as a component of accumulated other comprehensive losses within currency translation adjustments. For the years ended December 31, 2012, 2011 and 2010, ineffectiveness related to net investment hedges was not material. Other investing cash flows on PMI’s consolidated statements of cash flows include the premiums paid for and settlements of net investment hedges.

For the years ended December 31, 2012, 2011 and 2010, foreign exchange contracts that were designated as net investment hedging instruments impacted the consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions)	For the Years Ended December 31,
Derivatives in Net Investment Hedging Relationship	Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount ofGain/(Loss) Reclassifiedfrom Other Comprehensive Earnings/(Losses) into Earnings						Amount ofGain/(Loss) Recognized inOther Comprehensive Earnings/(Losses) on Derivatives
		2012		2011		2010		2012			2011		2010
Foreign exchange contracts								$	(19	)	$	2	$	24
	Interest expense, net	$	—	$	—	$	—

Other Derivatives

PMI has entered into foreign exchange contracts to hedge the foreign currency exchange risks related to intercompany loans between certain subsidiaries, and third-party loans. While effective as economic hedges, no hedge accounting is applied for these contracts; therefore, the unrealized gains (losses) relating to these contracts are reported in PMI’s consolidated statement of earnings. For the years ended December 31, 2012, 2011 and 2010, the gains (losses) from contracts for which PMI did not apply hedge accounting were $102 million, $34 million and $(97) million, respectively. The gains (losses) from these contracts substantially offset the losses and gains generated by the underlying intercompany and third-party loans being hedged.

As a result, for the years ended December 31, 2012, 2011 and 2010, these items impacted the consolidated statement of earnings as follows:

(pre-tax, in millions)
Derivatives not Designated as Hedging Instruments	Statement of Earnings Classification of Gain/(Loss)	Amount ofGain/(Loss) Recognizedin Earnings
		2012		2011		2010
Foreign exchange contracts
	Marketing, administration   and research costs	$	—	$	—	$	(3	)
	Interest expense, net	14		56		10
Total		$	14	$	56	$	7

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

Derivative gains or losses reported in accumulated other comprehensive losses are a result of qualifying hedging activity. Transfers of these gains or losses to earnings are offset by the corresponding gains or losses on the underlying hedged item. Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Gain as of January 1,	$	15		$	2		$	19
Derivative (gains)/losses transferred to earnings	(22		)	18			33
Change in fair value	99			(5		)	(50		)
Gain as of December 31,	$	92		$	15		$	2

At December 31, 2012, PMI expects $90 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the consolidated statement of earnings within the next twelve months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.

Contingent Features

PMI’s derivative instruments do not contain contingent features.

Credit Exposure and Credit Risk

PMI is exposed to credit loss in the event of non-performance by counterparties. While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments. PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Fair Value

See Note 16. Fair Value Measurements for disclosures related to the fair value of PMI’s derivative financial instruments.

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Summary of Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Significant Accounting Policies [Line Items]
Total depreciation expense	$ 801	$ 895	$ 844
Foreign currency net transaction losses	51	24	17
Shipping and handling costs	802	905	653
Excess tax benefits from the vesting of stock-based awards	$ 24	$ 19	$ 32
Building and Building Improvements [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives of assets (years)	40 years
Machinery and Equipment [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives of assets (years)	3 years
Machinery and Equipment [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives of assets (years)	15 years
Software Costs [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives of the software maximum (years)	5 years

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Schedule of Earnings Before Income Taxes and Provision For Income Taxes

Earnings before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2012, 2011 and 2010:

(in millions)	2012			2011			2010
Earnings before income taxes	$	12,987		$	12,532		$	10,324
Provision for income taxes:
United States federal:
Current	$	226		$	270		$	157
Deferred	(61		)	118			145
	165			388			302
State and local	—			—			1
Total United States	165			388			303
Outside United States:
Current	3,855			3,368			2,567
Deferred	(187		)	(103		)	(44		)
Total outside United States	3,668			3,265			2,523
Total provision for income taxes	$	3,833		$	3,653		$	2,826

Schedule of Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)	2012			2011			2010
Balance at January 1,	$	104		$	95		$	174
Additions based on tax positions related to the current year	9			17			18
Additions for tax positions of previous years	309			8			35
Reductions for tax positions of prior years	(1		)	(8		)	(125		)
Reductions due to lapse of statute of limitations	—			(7		)	(1		)
Settlements	(297		)	—			(6		)
Other	—			(1		)	—
Balance at December 31,	$	124		$	104		$	95

Schedule of Unrecognized Tax Benefits and Liability for Contingent Income Taxes, Interest and Penalties

Unrecognized tax benefits and PMI’s liability for contingent income taxes, interest and penalties were as follows:

(in millions)	December 31, 2012			December 31, 2011			December 31, 2010
Unrecognized tax benefits	$	124		$	104		$	95
Accrued interest and penalties	37			28			30
Tax credits and other indirect benefits	(72		)	(55		)	(58		)
Liability for tax contingencies	$	89		$	77		$	67

Schedule of Reasons Attributable to the Differences Between Effective Income Tax Rate and U.S. Federal Statutory Rate

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2012, 2011 and 2010:

	2012		2011		2010
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
Foreign rate differences	(11.8	)	(12.5	)	(10.0	)
Dividend repatriation cost	6.0		6.5		3.5
Reversal of tax reserves no longer required	—		—		(1.4	)
Other	0.3		0.1		0.3
Effective tax rate	29.5	%	29.1	%	27.4	%

Schedule of Temporary Differences of Tax Effects to Deferred Income Tax Assets and Liabilities

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:

	At December 31,
(in millions)	2012			2011
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	279		$	223
Accrued pension costs	262			193
Inventory	135			76
Accrued liabilities	150			145
Foreign exchange	52			—
Other	139			110
Total deferred income tax assets	1,017			747
Deferred income tax liabilities:
Trade names	(816		)	(818		)
Property, plant and equipment	(320		)	(323		)
Unremitted earnings	(845		)	(897		)
Foreign exchange	—			(31		)
Total deferred income tax liabilities	(1,981		)	(2,069		)
Net deferred income tax liabilities	$	(964	)	$	(1,322	)

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Earnings Per Share (Calculation of Basic and Diluted EPS) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Earnings Per Share [Abstract]
Net earnings attributable to PMI	$ 2,095	$ 2,227	$ 2,317	$ 2,161	$ 1,886	$ 2,377	$ 2,409	$ 1,919	$ 8,800	$ 8,591	$ 7,259
Less distributed and undistributed earnings attributable to share-based payment awards									48	49	33
Net earnings for basic and diluted EPS									$ 8,752	$ 8,542	$ 7,226
Weighted-average shares for basic EPS									1,692	1,761	1,839
Plus incremental shares from assumed conversions:
Stock options									0	1	3
Weighted-average shares for diluted EPS									1,692	1,762	1,842

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Benefit Plans (Weighted-Average Assumptions Used to Determine Postretirement Benefit Obligations) (Details) (Postretirement Benefit Obligations [Member])	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.05%	4.50%
Health care cost trend rate assumed for next year	7.50%	750.00%
Ultimate trend rate	5.00%	500.00%
Year that rate reaches the ultimate trend rate	2018	2017
Non-U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.59%	5.45%
Health care cost trend rate assumed for next year	6.46%	655.00%
Ultimate trend rate	4.88%	477.00%
Year that rate reaches the ultimate trend rate	2029	2029

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Acquisitions and Other Business Arrangements (Tables)

12 Months Ended

Dec. 31, 2012

Business Combination, Description [Abstract]

Amount of FTC's Redeemable Noncontrolling Interest at Date of Business Combination

The amount of FTC’s redeemable noncontrolling interest at the date of the business combination was determined as follows:

(in millions)
Noncontrolling interest in contributed net assets	$	693
Accretion to redeemable value	477
Redeemable noncontrolling interest at date of business combination	$	1,170

Movement In Redeemable Noncontrolling Interest After Business Combination

The movement in redeemable noncontrolling interest after the business combination is as follows:

(in millions)
Redeemable noncontrolling interest at date of business combination	$	1,170
Share of net earnings	26
Dividend payments	(24		)
Currency translation	16
Redeemable noncontrolling interest at December 31, 2010	$	1,188
Share of net earnings	97
Dividend payments	(73		)
Currency translation	—
Redeemable noncontrolling interest at December 31, 2011	$	1,212
Share of net earnings	171
Dividend payments	(105		)
Currency translation	25
Net loss and prior service cost	(2		)
Redeemable noncontrolling interest at December 31, 2012	$	1,301

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Goodwill and Other Intangible Assets, net (Goodwill and Other Intangible Assets, net, by Segment) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Goodwill And Other Intangible Assets [Line Items]
Goodwill	$ 9,900	$ 9,928	$ 10,161
Other Intangible Assets, net	3,619	3,697
European Union [Member]
Goodwill And Other Intangible Assets [Line Items]
Goodwill	1,448	1,392	1,443
Other Intangible Assets, net	647	663
Eastern Europe, Middle East & Africa [Member]
Goodwill And Other Intangible Assets [Line Items]
Goodwill	637	666	702
Other Intangible Assets, net	242	250
Asia [Member]
Goodwill And Other Intangible Assets [Line Items]
Goodwill	4,791	4,966	5,004
Other Intangible Assets, net	1,542	1,633
Latin America & Canada [Member]
Goodwill And Other Intangible Assets [Line Items]
Goodwill	3,024	2,904	3,012
Other Intangible Assets, net	$ 1,188	$ 1,151

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Indebtedness (Aggregate Maturities of Long-Term Debt) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Debt Disclosure [Abstract]
2013	$ 2,781
2014	1,256
2015	995
2016	2,597
2017	1,302
2018-2022	7,026
2023-2027	940
Thereafter	3,701
Long-term debt, gross	20,598
Debt discounts	(178)
Long-term debt	$ 20,420	$ 17,034

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Financial Instruments (Pre-Tax Effect of Foreign Exchange Contracts Designated as Other Derivatives) (Details) (Foreign Exchange Contract [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	$ 14	$ 56	$ 7
Marketing, administration and research costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	0
Marketing, administration and research costs [Member] | Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	(3)
Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	(46)	19	(39)
Interest expense, net [Member] | Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	$ 14	$ 56	$ 10

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Acquisitions and Other Business Arrangements (Amount of FTC's Redeemable Noncontrolling Interest At Date Of Business Combination) (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended
	Feb. 25, 2010	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Business Combination, Description [Abstract]
Noncontrolling interest in contributed net assets	$ 693
Accretion to redeemable value	477
Redeemable noncontrolling interest at date of business combination	$ 1,170	$ 1,301	$ 1,212	$ 1,188

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Accumulated Other Comprehensive Losses (Tables)

12 Months Ended

Dec. 31, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Components of Accumulated Other Comprehensive Losses, Net of Taxes

PMI's accumulated other comprehensive losses, net of taxes, consisted of the following:

(Losses) Earnings	At December 31,
(in millions)	2012			2011			2010
Currency translation adjustments	$	(331	)	$	(293	)	$	507
Pension and other benefits	(3,365		)	(2,585		)	(1,650		)
Derivatives accounted for as hedges	92			15			2
Equity securities	—			—			1
Total accumulated other comprehensive losses	$	(3,604	)	$	(2,863	)	$	(1,140	)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings	$ 9,154	$ 8,879	$ 7,498
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	898	993	932
Deferred income tax (benefit) provision	(248)	15	101
Asset impairment and exit costs, net of cash paid	26	11	(28)
Cash effects of changes, net of the effects from acquired companies:
Receivables, net	(398)	(251)	123
Inventories	(728)	(36)	1,071
Accounts payable	10	199	(72)
Income taxes	638	231	92
Accrued liabilities and other current assets	(183)	691	41
Pension plan contributions	(207)	(535)	(433)
Other	459	332	112
Net cash provided by operating activities	9,421	10,529	9,437
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures	(1,056)	(897)	(713)
Purchase of businesses, net of acquired cash	0	(80)	(83)
Other	64	(55)	86
Net cash used in investing activities	(992)	(1,032)	(710)
Short-term borrowing activity by original maturity [Abstract]
Net issuances (repayments) - maturities of 90 days or less	1,515	(968)	479
Issuances - maturities longer than 90 days	603	921	0
Repayments - maturities longer than 90 days	(1,220)	(179)	(488)
Long-term debt proceeds	5,516	3,767	1,130
Long-term debt repaid	(2,237)	(1,483)	(183)
Repurchases of common stock	(6,525)	(5,372)	(5,030)
Issuances of common stock	1	75	229
Dividends paid	(5,404)	(4,788)	(4,423)
Other	(349)	(311)	(292)
Net cash used in financing activities	(8,100)	(8,338)	(8,578)
Effect of exchange rate changes on cash and cash equivalents	104	(312)	14
Cash and cash equivalents:
Increase	433	847	163
Balance at beginning of year	2,550	1,703	1,540
Balance at end of year	2,983	2,550	1,703
Cash Paid:
Interest	986	963	912
Income taxes	$ 3,420	$ 3,366	$ 2,728

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Colombian Investment and Cooperation Agreement (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended
	Jun. 19, 2009	Jun. 30, 2009	Dec. 31, 2012	Dec. 31, 2011
Colombian Investment and Cooperation Agreement [Abstract]
Investment and Cooperation Agreement funding, Colombian Governments	$ 200
Investment and Cooperation Agreement funding period, Colombian Governments (in years)	20 years
Investment and Cooperation Agreement, pre-tax charge		135
Discounted liabilities associated with the Columbian Investment and Corporation Agreement			$ 77	$ 79
Investment and Cooperation Agreement, termination date	2028

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Acquisitions And Other Business Arrangements (Movement In Redeemable Noncontrolling Interest After Business Combination) (Details) (USD $) In Millions, unless otherwise specified	10 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2012	Dec. 31, 2011
Redeemable Noncontrolling Interest [Roll Forward]
Beginning balance	$ 1,170	$ 1,212	$ 1,188
Share of net earnings	26	171	97
Ending balance	1,188	1,301	1,212
Redeemable Noncontrolling Interest [Member]
Redeemable Noncontrolling Interest [Roll Forward]
Dividend payments	(24)	(105)	(73)
Currency translation	16	25
Net loss and prior service cost		$ (2)

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Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segment Data

Segment data were as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Net revenues:
European Union	$	27,338		$	29,768		$	28,050
Eastern Europe, Middle East & Africa	19,272			17,452			15,928
Asia	21,071			19,590			15,235
Latin America & Canada	9,712			9,536			8,500
Net revenues(1)	$	77,393		$	76,346		$	67,713
Earnings before income taxes:
Operating companies income:
European Union	$	4,187		$	4,560		$	4,311
Eastern Europe, Middle East & Africa	3,726			3,229			3,152
Asia	5,197			4,836			3,049
Latin America & Canada	1,043			988			953
Amortization of intangibles	(97		)	(98		)	(88		)
General corporate expenses	(210		)	(183		)	(177		)
Operating income	13,846			13,332			11,200
Interest expense, net	(859		)	(800		)	(876		)
Earnings before income taxes	$	12,987		$	12,532		$	10,324

⁽¹⁾  Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

Other Expenses By Segment

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Depreciation expense:
European Union	$	181	$	210	$	212
Eastern Europe, Middle East & Africa	211		227		215
Asia	315		358		332
Latin America & Canada	84		90		75
	791		885		834
Other	10		10		10
Total depreciation expense	$	801	$	895	$	844
Capital expenditures:
European Union	$	391	$	382	$	329
Eastern Europe, Middle East & Africa	197		133		102
Asia	277		208		161
Latin America & Canada	127		140		120
	992		863		712
Other	64		34		1
Total capital expenditures	$	1,056	$	897	$	713

Long-Lived Assets By Segment

	At December 31,
(in millions)	2012		2011		2010
Long-lived assets:
European Union	$	3,066	$	2,938	$	3,226
Eastern Europe, Middle East & Africa	1,215		1,094		1,158
Asia	1,831		1,687		1,765
Latin America & Canada	735		706		663
	6,847		6,425		6,812
Other	139		146		195
Total long-lived assets	$	6,986	$	6,571	$	7,007

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RBH Legal Settlement

12 Months Ended

Dec. 31, 2012

RBH Legal Settlement [Abstract]

RBH Legal Settlement

RBH Legal Settlement:

On July 31, 2008, Rothmans Inc. ("Rothmans") announced the finalization of a CAD 550 million settlement (or approximately $540 million, based on the prevailing exchange rate at that time) between itself and Rothmans, Benson & Hedges Inc. ("RBH"), on the one hand, and the Government of Canada and all ten provinces, on the other hand. The settlement resolves the Royal Canadian Mounted Police's investigation relating to products exported from Canada by RBH during the 1989-1996 period. Rothmans' sole holding was a 60% interest in RBH. The remaining 40% interest in RBH was owned by PMI.

Subsequent to the finalization of the settlement, PMI announced that it had entered into an agreement with Rothmans to purchase, by way of a tender offer, all of the outstanding common shares of Rothmans. In October 2008, PMI completed the acquisition of all of Rothmans shares.

At December 31, 2012 and 2011, PMI had $190 million and $212 million, respectively, of discounted accrued settlement charges associated with the RBH legal settlement. These accrued settlement charges are primarily reflected in other long-term liabilities on the consolidated balance sheets and are expected to be paid through 2019.

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Colombian Investment and Cooperation Agreement

12 Months Ended

Dec. 31, 2012

Colombian Investment and Cooperation Agreement [Abstract]

Colombian Investment and Cooperation Agreement

Colombian Investment and Cooperation Agreement:

On June 19, 2009, PMI announced that it had signed an agreement with the Republic of Colombia, together with the Departments of Colombia and the Capital District of Bogota, to promote investment and cooperation with respect to the Colombian tobacco market and to fight counterfeit and contraband tobacco products. The Investment and Cooperation Agreement provides $200 million in funding to the Colombian governments over a 20-year period to address issues of mutual interest, such as combating the illegal cigarette trade, including the threat of counterfeit tobacco products, and increasing the quality and quantity of locally grown tobacco. As a result of the Investment and Cooperation Agreement, PMI recorded a pre-tax charge of $135 million in the operating results of the Latin America & Canada segment during the second quarter of 2009.

At December 31, 2012 and 2011, PMI had $77 million and $79 million, respectively, of discounted liabilities associated with the Colombian Investment and Cooperation Agreement. These discounted liabilities are primarily reflected in other long-term liabilities on the consolidated balance sheets and are expected to be paid through 2028.

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Benefit Plans (Net Postemployment Costs) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 30
Interest cost	22	22
Postemployment Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	30	28	26
Interest cost	22	22	24
Amortization of net loss	53	39	39
Other expense	75	106	54
Net postemployment costs	$ 180	$ 195	$ 143

XML

Related Party Information (Details)	Dec. 31, 2012
Related Party Transactions [Abstract]
Noncontrolling interest in PMI's Mexican tobacco business	20.00%

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Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2012

Defined Benefit Plan Disclosure [Line Items]

Fair Value of Pension Plan Assets

The fair value of PMI’s pension plan assets at December 31, 2012 and 2011, by asset category was as follows:

Asset Category (in millions)	At December 31, 2012		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	$	420	$	420	$	—	$	—
Equity securities:
U.S. securities	106		106		—		—
International securities	1,129		1,129		—		—
Investment funds(a)(b)	3,805		2,313		1,492		—
International government bonds	411		411		—		—
Corporate bonds	3		3		—		—
Other	37		37		—		—
Total	$	5,911	$	4,419	$	1,492	$	—

^(a)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 60% are invested in U.S. and international equities; 24% are invested in U.S. and international government bonds; 9% are invested in corporate bonds, and 7% are invested in real estate and other money markets.

^(b)  Mutual funds in the amount of $1,363 million were transferred from Level 2 to Level 1 because they are actively traded on a daily basis.

Asset Category (in millions)	At December 31, 2011		QuotedPricesIn ActiveMarkets forIdentical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		SignificantUnobservable Inputs(Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity securities:
U.S. securities	89		89		—		—
International securities	894		894		—		—
Investment funds(c)	3,704		826		2,878		—
International government bonds	314		314		—		—
Corporate bonds	2		2		—		—
Other	33		32		1		—
Total	$	5,047	$	2,168	$	2,879	$	—

^(c)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU, Citigroup Switzerland and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 53% are invested in U.S. and international equities; 34% are invested in U.S. and international government bonds; 7% are invested in corporate bonds, and 6% are invested in real estate and other money markets.

Amounts Recorded in Accumulated Other Comprehensive Losses

The amounts recorded in accumulated other comprehensive losses at December 31, 2012, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(3,199	)	$	(82	)	$	(612	)	$	(3,893	)
Prior service cost	(60		)	7			—			(53		)
Net transition obligation	(7		)	—			—			(7		)
Deferred income taxes	377			26			185			588
Losses to be amortized	$	(2,889	)	$	(49	)	$	(427	)	$	(3,365	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2011, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(2,401	)	$	(54	)	$	(536	)	$	(2,991	)
Prior service cost	(70		)	3			—			(67		)
Net transition obligation	(8		)	—			—			(8		)
Deferred income taxes	299			19			163			481
Losses to be amortized	$	(2,180	)	$	(32	)	$	(373	)	$	(2,585	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2010, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(1,425	)	$	(46	)	$	(468	)	$	(1,939	)
Prior service cost	(62		)	4			—			(58		)
Net transition obligation	(9		)	—			—			(9		)
Deferred income taxes	199			15			142			356
Losses to be amortized	$	(1,297	)	$	(27	)	$	(326	)	$	(1,650	)

Movements in Other Comprehensive Earnings (Losses)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2012, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	129		$	3		$	53		$	185
Prior service cost	10			—			—			10
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	4			—			—			4
Deferred income taxes	(20		)	(1		)	(16		)	(37		)
	124			2			37			163
Other movements during the year:
Net losses	(931		)	(31		)	(129		)	(1,091		)
Prior service cost	—			4			—			4
Deferred income taxes	98			8			38			144
	(833		)	(19		)	(91		)	(943		)
Total movements in other comprehensive losses	$	(709	)	$	(17	)	$	(54	)	$	(780	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2011, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	63		$	3		$	39		$	105
Prior service cost	9			(1		)	—			8
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	3			—			—			3
Deferred income taxes	(10		)	(1		)	(12		)	(23		)
	66			1			27			94
Other movements during the year:
Net losses	(1,042		)	(11		)	(107		)	(1,160		)
Prior service cost	(17		)	—			—			(17		)
Deferred income taxes	110			5			33			148
	$	(949	)	$	(6	)	$	(74	)	$	(1,029	)
Total movements in other comprehensive losses	$	(883	)	$	(5	)	$	(47	)	$	(935	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2010, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	44		$	1		$	39		$	84
Prior service cost	10			—			—			10
Other income/expense:
Net gains	(1		)	—			—			(1		)
Prior service cost	3			—			—			3
Deferred income taxes	(8		)	—			(12		)	(20		)
	48			1			27			76
Other movements during the year:
Net losses	(294		)	(20		)	(44		)	(358		)
Prior service cost	(3		)	—			—			(3		)
Deferred income taxes	23			6			14			43
	$	(274	)	$	(14	)	$	(30	)	$	(318	)
Total movements in other comprehensive losses	$	(226	)	$	(13	)	$	(3	)	$	(242	)

Postretirement [Member]

Defined Benefit Plan Disclosure [Line Items]

Change in Benefit Obligations

PMI’s postretirement health care plans are not funded. The changes in the accumulated benefit obligation and net amount accrued at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Accumulated postretirement benefit obligation at January 1,	$	115		$	98		$	96		$	99
Service cost	2			2			2			2
Interest cost	5			5			5			5
Benefits paid	(4		)	(4		)	(5		)	(5		)
Assumption changes	10			11			11			(1		)
Actuarial losses (gains)	4			3			6			(2		)
Plan changes	—			—			(3		)	—
Currency	—			—			1			(2		)
Accumulated postretirement benefit obligation at December 31,	$	132		$	115		$	113		$	96

Weighted-Average Assumptions Used to Determine Benefit Obligations

The following weighted-average assumptions were used to determine PMI’s postretirement benefit obligations at December 31, 2012 and 2011:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	4.59	%	5.45	%
Health care cost trend rate assumed for next year	7.50		7.50		6.46		6.55
Ultimate trend rate	5.00		5.00		4.88		4.77
Year that rate reaches the ultimate trend rate	2018		2017		2029		2029

Weighted-Average Assumptions Used to Determine Benefit Cost

The following weighted-average assumptions were used to determine PMI’s net postretirement costs for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	5.45	%	5.14	%	5.99	%
Health care cost trend rate	7.50		8.00		7.50		6.55		6.29		7.14

Components of Net Periodic Benefit Cost

Net postretirement health care costs consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans			Non-U.S. Plans
(in millions)	2012	2011	2010	2012	2011	2010
Service cost	$2	$2	$2	$2	$2	$2
Interest cost	5	5	5	5	5	5
Amortization:
Net losses	2	1	1	1	1	—
Net postretirement health care costs	$9	$8	$8	$8	$8	$7

Estimated Future Benefit Payments

PMI’s estimated future benefit payments for its postretirement health care plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	5	$	6
2014	5		5
2015	6		5
2016	6		5
2017	6		5
2018 - 2022	33		28

Defined Benefit Plan Assumed Health Care Trend Rates

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care trend rates would have the following effects as of December 31, 2012:

	One-Percentage-Point Increase		One-Percentage-Point Decrease
Effect on total service and interest cost	19.9	%	(15.3	)%
Effect on postretirement benefit obligation	15.1		(12.1	)

Postemployment Benefit Plans [Member]

Defined Benefit Plan Disclosure [Line Items]

Components of Net Periodic Benefit Cost

Net postemployment costs consisted of the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Service cost	$	30	$	28	$	26
Interest cost	22		22		24
Amortization of net loss	53		39		39
Other expense	75		106		54
Net postemployment costs	$	180	$	195	$	143

Change in Benefit Obligations of Postemployment Benefit Plans

The changes in the benefit obligations of the plans at December 31, 2012 and 2011, were as follows:

(in millions)	2012			2011
Accrued postemployment costs at January 1,	$	619		$	574
Service cost	30			28
Interest cost	22			22
Benefits paid	(196		)	(223		)
Actuarial losses	129			118
Other	78			100
Accrued postemployment costs at December 31,	$	682		$	619

Obligations and Funded Status [Member] | Pension [Member]

Defined Benefit Plan Disclosure [Line Items]

Change in Benefit Obligations

The benefit obligations, plan assets and funded status of PMI’s pension plans at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Benefit obligation at January 1,	$	352		$	321		$	5,625		$	4,932
Service cost	6			5			189			178
Interest cost	16			16			189			205
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(8		)	(4		)
Assumption changes	28			44			1,176			510
Actuarial (gains) losses	(3		)	(13		)	41			6
Currency	—			—			167			(52		)
Other	—			—			43			58
Benefit obligation at December 31,	383			352			7,262			5,625
Fair value of plan assets at January 1,	269			251			4,778			4,623
Actual return on plan assets	27			9			625			(162		)
Employer contributions	4			30			203			505
Employee contributions	—			—			47			43
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(5		)	—
Currency	—			—			139			(23		)
Fair value of plan assets at December 31,	284			269			5,627			4,778
Net pension liability recognized at December 31,	$	(99	)	$	(83	)	$	(1,635	)	$	(847	)

Pension Liabilities Recognized in Consolidated Balance Sheets

At December 31, 2012 and 2011, the combined U.S. and non-U.S. pension plans resulted in a net pension liability of $1,734 million and $930 million, respectively. These amounts were recognized in PMI’s consolidated balance sheets at December 31, 2012 and 2011, as follows:

(in millions)	2012			2011
Other assets	$	29		$	40
Accrued liabilities — employment costs	(22		)	(23		)
Long-term employment costs	(1,741		)	(947		)
	$	(1,734	)	$	(930	)

Weighted-Average Assumptions Used to Determine Benefit Obligations

The following weighted-average assumptions were used to determine PMI’s benefit obligations at December 31:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	2.38	%	3.40	%
Rate of compensation increase	3.50		3.50		2.61		2.66

Net Periodic Benefit Cost [Member] | Pension [Member]

Defined Benefit Plan Disclosure [Line Items]

Weighted-Average Assumptions Used to Determine Benefit Obligations

The following weighted-average assumptions were used to determine PMI’s net pension cost:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	3.40	%	4.00	%	4.33	%
Expected rate of return on plan assets	5.70		6.25		7.20		6.21		6.21		6.69
Rate of compensation increase	3.50		3.50		4.50		2.66		2.90		3.21

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans									Non-U.S. Plans
(in millions)	2012			2011			2010			2012			2011			2010
Service cost	$	6		$	5		$	6		$	189		$	178		$	160
Interest cost	16			16			18			189			205			189
Expected return on plan assets	(15		)	(15		)	(16		)	(320		)	(323		)	(283		)
Amortization:
Net losses	9			5			5			120			58			39
Prior service cost	1			1			1			9			8			9
Net transition obligation	—			—			—			1			1			—
Termination, settlement and curtailment	2			2			1			—			1			(6		)
Net periodic pension cost	$	19		$	14		$	15		$	188		$	128		$	108

Plan Assets [Member] | Pension [Member]

Defined Benefit Plan Disclosure [Line Items]

Estimated Future Benefit Payments

The estimated future benefit payments from PMI pension plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	14	$	210
2014	45		219
2015	17		229
2016	18		241
2017	19		250
2018 - 2022	103		1,470

XML

E.C. Agreement

12 Months Ended

Dec. 31, 2012

E.C. Agreement [Abstract]

E.C. Agreement

E.C. Agreement:

In 2004, PMI entered into an agreement with the European Commission (“E.C.”) and 10 Member States of the European Union that provides for broad cooperation with European law enforcement agencies on anti-contraband and anti-counterfeit efforts. This agreement has been signed by all 27 Member States. The agreement resolves all disputes between the parties relating to these issues. Under the terms of the agreement, PMI will make 13 payments over 12 years, including an initial payment of $250 million, which was recorded as a pre-tax charge against its earnings in 2004. The agreement calls for additional payments of approximately $150 million on the first anniversary of the agreement (this payment was made in July 2005), approximately $100 million on the second anniversary (this payment was made in July 2006) and approximately $75 million each year thereafter for 10 years, each of which is to be adjusted based on certain variables, including PMI’s market share in the European Union in the year preceding payment. Because future additional payments are subject to these variables, PMI records charges for them as an expense in cost of sales when product is shipped. In addition, PMI is also responsible to pay the excise taxes, VAT and customs duties on qualifying product seizures of up to 90 million cigarettes and is subject to payments of five times the applicable taxes and duties if qualifying product seizures exceed 90 million cigarettes in a given year. To date, PMI’s

annual payments related to product seizures have been immaterial. Total charges related to the E.C. Agreement of $78 million, $86 million and $91 million were recorded in cost of sales in 2012, 2011 and 2010, respectively.

XML

Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies:

Tobacco-Related Litigation

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. Our indemnitees include distributors, licensees, and others that have been named as parties in certain cases and that we have agreed to defend, as well as to pay costs and some or all of judgments, if any, that may be entered against them. Pursuant to the terms of the Distribution Agreement between Altria and PMI, PMI will indemnify Altria and PM USA for tobacco product claims based in substantial part on products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for tobacco product claims based in substantial part on products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

It is possible that there could be adverse developments in pending cases against us and our subsidiaries. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in certain cases in Brazil, Canada, Israel and Nigeria, range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. Much of the tobacco-related litigation is in its early stages, and litigation is subject to uncertainty. However, as discussed below, we have to date been largely successful in defending tobacco-related litigation.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. Legal defense costs are expensed as incurred.

It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts, if any. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

To date, we have paid total judgments, including costs, of approximately six thousand Euros in tobacco-related cases. These payments were made in order to appeal three Italian small claims cases, all of which were subsequently reversed on appeal. To date, no tobacco-related case has been finally resolved in favor of a plaintiff against us, our subsidiaries or indemnitees.

The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of December 31, 2012, 2011 and 2010:

Type of Case	Number of Cases Pending as of December 31, 2012	Number of Cases Pending  as of December 31, 2011	Number of Cases Pending  as of December 31, 2010
Individual Smoking and Health Cases	76	75	94
Smoking and Health Class Actions	11	10	11
Health Care Cost Recovery Actions	15	11	10
Lights Class Actions	2	2	2
Individual Lights Cases (small claims court)	7	9	10
Public Civil Actions	4	3	7

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 387 Smoking and Health, Lights, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor. Ten cases have had decisions in favor of plaintiffs. Seven of these cases have subsequently reached final resolution in our favor and three remain on appeal.

The table below lists the verdicts and post-trial developments in the three pending cases in which verdicts were returned in favor of plaintiffs:

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 2011	Brazil/Laszlo	Individual Smoking and Health	The Civil Court of São Vicente found for plaintiff and ordered Philip Morris Brasil to pay damages of R$31,333 (approximately $17,029), plus future costs for cessation and medical treatment of smoking-related diseases.	In June 2011, Philip Morris Brasil filed an appeal. In December 2011, the Appellate Court reversed the trial court decision. In February 2012, plaintiff appealed the decision. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
September 2009	Brazil/Bernhardt	Individual Smoking and Health	The Civil Court of Rio de Janeiro found for plaintiff and ordered Philip Morris Brasil to pay R$13,000 (approximately $7,065) in “moral damages.”	Philip Morris Brasil filed its appeal against the decision on the merits with the Court of Appeals in November 2009. In February 2010, without addressing the merits, the Court of Appeals annulled the trial court's decision and remanded the case to the trial court to issue a new ruling, which was required to address certain compensatory damage claims made by the plaintiff that the trial court did not address in its original ruling. In July 2010, the trial court reinstated its original decision, while specifically rejecting the compensatory damages claim. Philip Morris Brasil appealed this decision. In March 2011, the Court of Appeals affirmed the trial court's decision and denied Philip Morris Brasil's appeal. The Court of Appeals increased the amount of damages awarded to the plaintiff to R$100,000 (approximately $54,348). Philip Morris Brasil filed an appeal in June 2011. This appeal is still pending.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
February 2004	Brazil/The Smoker Health Defense Association	Class Action	The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess moral or actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.	In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $540) per smoker per full year of smoking plus interest at the rate of 1% per month, as of the date of the ruling. The court did not award actual damages, which were to be assessed in the second phase of the case. The size of the class was not estimated. Defendants appealed to the São Paulo Court of Appeals, which annulled the ruling in November 2008, finding that the trial court had inappropriately ruled without hearing evidence and returned the case to the trial court for further proceedings. In May 2011, the trial court dismissed the claim. Plaintiff has appealed. In addition, the defendants filed a constitutional appeal to the Federal Supreme Tribunal on the basis that the plaintiff did not have standing to bring the lawsuit. This appeal is still pending.

Pending claims related to tobacco products generally fall within the following categories:

Smoking and Health Litigation: These cases primarily allege personal injury and are brought by individual plaintiffs or on behalf of a class or purported class of individual plaintiffs. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.

As of December 31, 2012, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 76 cases brought by individual plaintiffs in Argentina (30), Brazil (29), Canada (2), Chile (4), Costa Rica (2), Greece (1), Italy (5), the Philippines (1), Scotland (1) and Turkey (1), compared with 75 such cases on December 31, 2011, and 94 cases on December 31, 2010; and

• 11 cases brought on behalf of classes of individual plaintiffs in Brazil (2) and Canada (9), compared with 10 such cases on December 31, 2011, and 11 such cases on December 31, 2010.

In the first class action pending in Brazil, The Smoker Health Defense Association (ADESF) v. Souza Cruz, S.A. and Philip Morris Marketing, S.A., Nineteenth Lower Civil Court of the Central Courts of the Judiciary District of São Paulo, Brazil, filed July 25, 1995, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer organization, is seeking damages for smokers and former smokers and injunctive relief. The verdict and post-trial developments in this case are described in the above table.

In the second class action pending in Brazil, Public Prosecutor of São Paulo v. Philip Morris Brasil Industria e Comercio Ltda., Civil Court of the City of São Paulo, Brazil, filed August 6, 2007, our subsidiary is a defendant. The plaintiff, the Public Prosecutor of the State of São Paulo, is seeking (i) unspecified damages on behalf of all smokers nationwide, former smokers, and their relatives; (ii) unspecified damages on behalf of people exposed to environmental tobacco smoke (“ETS”) nationwide, and their relatives; and (iii) reimbursement of the health care costs allegedly incurred for the treatment of tobacco-related diseases by all Brazilian States and Municipalities, and the Federal District. In an interim ruling issued in December 2007, the trial court limited the scope of this claim to the State of São Paulo only. In December 2008, the Seventh Civil Court of São Paulo issued a decision declaring that it lacked jurisdiction because the case involved issues similar to the ADESF case discussed above and should be transferred to the Nineteenth Lower Civil Court in São Paulo where the ADESF case is pending. The court further stated that these cases should be consolidated for the purposes of judgment. In April 2010, the São Paulo Court of Appeals reversed the Seventh Civil Court's decision that consolidated the cases, finding that they are based on different legal claims and are progressing at different stages of proceedings. This case was returned to the Seventh Civil Court of São Paulo, and our subsidiary filed its closing arguments in December 2010. In March 2012, the trial court dismissed the case on the merits. This decision has been appealed.

In the first class action pending in Canada, Cecilia Letourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiff, an individual smoker, is seeking compensatory and unspecified punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005. In February 2011, the trial court ruled that the federal government would remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

In the second class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Ltd.,Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiffs, an anti-smoking organization and an individual smoker, are seeking compensatory and unspecified punitive damages for each member of the class who allegedly suffers from certain smoking-related diseases. The class was certified in 2005. In February 2011, the trial court ruled that the federal government will remain as a third party in the case. In November 2012, the Court of Appeals dismissed defendants' third-party claims against the federal government. Trial began on March 12, 2012. At the present pace, trial is expected to last well into 2013 and possibly 2014, with a judgment to follow at an indeterminate point after the conclusion of the trial proceedings.

In the third class action pending in Canada, Kunta v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada, filed June 12, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma and mild reversible lung disease resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. In September 2009, plaintiff's counsel informed defendants that he did not anticipate taking any action in this case while he pursues the class action filed in Saskatchewan (see description of Adams, below).

In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al.,The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits. Preliminary motions are pending.

In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al.,The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the sixth class action pending in Canada, Dorion v. Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954 to the date the claim was filed. Defendants have filed jurisdictional challenges on the grounds that this action should not proceed during the pendency of the Saskatchewan class action (see description of Adams, above).

In the ninth class action pending in Canada, Suzanne Jacklin v. Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, our subsidiaries, and our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and unspecified punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits. Plaintiff's counsel have indicated that they do not intend to take any action in this case in the near future.

Health Care Cost Recovery Litigation: These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices. Plaintiffs in these cases seek various forms of relief including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of December 31, 2012, there were 15 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Canada (9), Nigeria (5) and Spain (1), compared with 11 such cases on December 31, 2011, and 10 such cases on December 31, 2010.

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, our subsidiaries, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.” The Supreme Court of Canada has held that the statute is constitutional. We and certain other non-Canadian defendants challenged the jurisdiction of the court. The court rejected the jurisdictional challenge. Pre-trial discovery is ongoing.

In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v. Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of New Brunswick based on legislation enacted in the province. This legislation is similar to the law introduced in British Columbia that authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Pre-trial discovery is ongoing.

In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v. Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada, filed September 29, 2009, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Ontario based on legislation enacted in the province. This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v. Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St. Johns, Canada, filed February 8, 2011, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, our subsidiary, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v. Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Alberta based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” We, our subsidiaries and our indemnitees have all been served with the statement of claim.

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Preliminary motions are pending.

In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria Group, Inc.), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections. We currently have no employees, operations or assets in Nigeria.

In the second health care cost recovery case in Nigeria, The Attorney General of Kano State v. British American Tobacco (Nigeria) Limited, et al., High Court of Kano State, Kano, Nigeria, filed May 9, 2007, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary is in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v. British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us. As a result of this ruling, Philip Morris International Inc. is not currently a defendant in the case. Plaintiff may appeal the ruling or follow the procedural steps required to serve Philip Morris International Inc.

In the fourth health care cost recovery case in Nigeria, The Attorney General of Oyo State, et al., v. British American Tobacco (Nigeria) Limited, et al., High Court of Oyo State, Ibadan, Nigeria, filed May 25, 2007, our subsidiary and other members of the industry are defendants. Plaintiffs seek reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. Our subsidiary challenged service as improper. In June 2010, the court ruled that plaintiffs did not have leave to serve the writ of summons on the defendants and that they must re-serve the writ. Our subsidiary has not yet been re-served.

In the fifth health care cost recovery case in Nigeria, The Attorney General of Ogun State v. British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria, filed February 26, 2008, our subsidiary and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. In May 2010, the trial court rejected our subsidiary's service objections. Our subsidiary has appealed.

In a series of proceedings in Spain, Junta de Andalucia, et al. v. Philip Morris Spain, et al., Court of First Instance, Madrid, Spain, the first of which was filed February 21, 2002, our subsidiary and other members of the industry were defendants. The plaintiffs sought reimbursement for the cost of treating certain of their citizens for various alleged smoking-related illnesses. In May 2004, the first instance court dismissed the initial case, finding that the State was a necessary party to the claim, and thus, the claim must be filed in the Administrative Court. In September 2007, the plaintiffs filed their complaint in the Administrative Court, which dismissed the claim based on a procedural issue in November 2007. In November 2009, the Supreme Court rejected plaintiffs' appeal, resulting in the final dismissal of the claim. However, plaintiffs have filed a second claim in the Administrative Court against the Ministry of Economy. This second claim seeks the same relief as the original claim, but relies on a different procedural posture. The Administrative Court has recognized our subsidiary as a party in this proceeding. Our subsidiary and other defendants filed preliminary objections that resulted in a stay of the term to file the answer. In May 2011, the court rejected the defendants' preliminary objections, but it has not yet set a deadline for defendants to file their answers.

Lights Cases: These cases, brought by individual plaintiffs, or on behalf of a class of individual plaintiffs, allege that the use of the term “lights” constitutes fraudulent and misleading conduct. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including misrepresentation, deception, and breach of consumer protection laws. Plaintiffs seek various forms of relief including restitution, injunctive relief, and compensatory and other damages. Defenses raised include lack of causation, lack of reliance, assumption of the risk, and statute of limitations.

As of December 31, 2012, there were a number of lights cases pending against our subsidiaries or indemnitees, as follows:

• 2 cases brought on behalf of overlapping classes of individual plaintiffs in Israel, compared with 2 such cases on December 31, 2011, and 2 such cases on December 31, 2010; and

• 7 cases brought by individuals in the equivalent of small claims courts in Italy, where the maximum damages are approximately one thousand Euros per case, compared with 9 such cases on December 31, 2011, and 10 such cases on December 31, 2010.

In the first class action pending in Israel, El-Roy, et al. v. Philip Morris Incorporated, et al., District Court of Tel-Aviv/Jaffa, Israel, filed January 18, 2004, our subsidiary and our indemnitees (PM USA and our former importer) are defendants. The plaintiffs filed a purported class action claiming that the class members were misled by the descriptor “lights” into believing that lights cigarettes are safer than full flavor cigarettes. The claim seeks recovery of the purchase price of lights cigarettes and compensation for distress for each class member. Hearings took place in November and December 2008 regarding whether the case meets the legal requirements necessary to allow it to proceed as a class action. The parties' briefing on class certification was completed in March 2011. In November 2012, the court denied class certification and dismissed the individual claims. Plaintiffs have appealed.

The claims in the second class action pending in Israel, Navon, et al. v. Philip Morris Products USA, et al., District Court of Tel-Aviv/Jaffa, Israel, filed December 5, 2004, against our indemnitee (our distributor) and other members of the industry are similar to those in El-Roy, and the case is currently stayed pending a ruling on class certification in El-Roy. The El-Roy trial court recently denied class certification (see description of El-Roy, above), but the Navon trial court has not yet taken any action.

Public Civil Actions: Claims have been filed either by an individual, or a public or private entity, seeking to protect collective or individual rights, such as the right to health, the right to information or the right to safety. Plaintiffs' allegations of liability in these cases are based on various theories of recovery including product defect, concealment, and misrepresentation. Plaintiffs in these cases seek various forms of relief including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

As of December 31, 2012, there were 4 public civil actions pending against our subsidiaries in Argentina (2), Brazil (1), and Venezuela (1), compared with 3 such cases on December 31, 2011, and 7 such cases on December 31, 2010.

In the first public civil action in Argentina, Asociación Argentina de Derecho de Danos v. Massalin Particulares S.A., et al., Civil Court of Buenos Aires, Argentina, filed February 26, 2007, our subsidiary and another member of the industry are defendants. The plaintiff, a consumer association, seeks the establishment of a relief fund for reimbursement of medical costs associated with diseases allegedly caused by smoking. Our subsidiary filed its answer in September 2007. In March 2010, the case file was transferred to the Federal Court on Administrative Matters after the Civil Court granted the plaintiff's request to add the national government as a co-plaintiff in the case.

In the second public civil action in Argentina, Conciencia Ciudadana Mejorar Asociación Civil, et al.v. Massalin Particulares S.A., 4th Civil & Commercial Court of Zarate, Argentina, filed September 20, 2012, our subsidiary is a defendant. Plaintiffs, a civil association and an individual, seek an order requiring our subsidiary to place information regarding tar, nicotine, and carbon monoxide yields on the packages of cigarettes in the Marlboro brand family. Plaintiffs also seek moral and punitive damages. Our subsidiary has been served with the complaint.

In the public civil action in Brazil, The Brazilian Association for the Defense of Consumer Health (“SAUDECON”) v. Philip Morris Brasil Industria e Comercio Ltda. and Souza Cruz S.A., Civil Court of City of Porto Alegre, Brazil, filed November 3, 2008, our subsidiary is a defendant. The plaintiff, a consumer organization, is asking the court to establish a fund that will be used to provide treatment to smokers who claim to be addicted and who do not otherwise have access to smoking cessation treatment. Plaintiff requests that each defendant's liability be determined according to its market share. In May 2009, the trial court dismissed the case on the merits. Plaintiff has appealed.

In the public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties.

Other Litigation

We are also involved in other litigation arising in the ordinary course of our business. While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIT) EQUITY (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Dividends declared (in dollars per share)	$ 2.82
Share of net earnings	$ (97)
Maximum [Member] | Redeemable Noncontrolling Interest [Member]
Currency translation	$ 1

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Quarterly Financial Data

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited):

	2012 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	18,022	$	20,037	$	19,592	$	19,742
Gross profit	$	5,006	$	5,454	$	5,336	$	5,208
Net earnings attributable to PMI	$	2,161	$	2,317	$	2,227	$	2,095
Per share data:
Basic EPS	$	1.25	$	1.36	$	1.32	$	1.25
Diluted EPS	$	1.25	$	1.36	$	1.32	$	1.25
Dividends declared	$	0.77	$	0.77	$	0.85	$	0.85
Market price:
— High	$	88.86	$	91.05	$	93.60	$	94.13
— Low	$	72.85	$	81.10	$	86.11	$	82.10
	2011 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	16,530	$	20,234	$	20,706	$	18,876
Gross profit	$	4,496	$	5,429	$	5,515	$	4,979
Net earnings attributable to PMI	$	1,919	$	2,409	$	2,377	$	1,886
Per share data:
Basic EPS	$	1.06	$	1.35	$	1.35	$	1.08
Diluted EPS	$	1.06	$	1.35	$	1.35	$	1.08
Dividends declared	$	0.64	$	0.64	$	0.77	$	0.77
Market price:
— High	$	65.92	$	71.75	$	72.74	$	79.42
— Low	$	55.85	$	64.49	$	62.32	$	60.45

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.

During 2012 and 2011, PMI recorded the following pre-tax charges in earnings:

	2012 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	8	$	8	$	34	$	33
	2011 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	16	$	1	$	43	$	49

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Segment Reporting (Segment Data) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Segment Reporting Information [Line Items]
Net revenues	$ 19,742	$ 19,592	$ 20,037	$ 18,022	$ 18,876	$ 20,706	$ 20,234	$ 16,530	$ 77,393	[1]	$ 76,346	[1]	$ 67,713	[1]
Amortization of intangibles									(97)		(98)		(88)
General corporate expenses									(210)		(183)		(177)
Operating income									13,846		13,332		11,200
Interest expense, net									(859)		(800)		(876)
Earnings before income taxes									12,987		12,532		10,324
European Union [Member]
Segment Reporting Information [Line Items]
Net revenues									27,338		29,768		28,050
Operating companies income									4,187		4,560		4,311
Eastern Europe, Middle East & Africa [Member]
Segment Reporting Information [Line Items]
Net revenues									19,272		17,452		15,928
Operating companies income									3,726		3,229		3,152
Asia [Member]
Segment Reporting Information [Line Items]
Net revenues									21,071		19,590		15,235
Operating companies income									5,197		4,836		3,049
Latin America & Canada [Member]
Segment Reporting Information [Line Items]
Net revenues									9,712		9,536		8,500
Operating companies income									1,043		988		953
Customer Concentration Risk [Member] | Germany [Member]
Segment Reporting Information [Line Items]
Net revenues									$ 7,700		$ 8,100		$ 7,500

[1] Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

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Fair Value Measurements (Aggregate Fair Value of Derivative Financial Instruments And Debt) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign exchange contracts, Assets		$ 145
Pension plan assets		5,047
Assets, Fair Value Disclosure		5,192
Debt		18,900
Foreign exchange contracts, Liabilities		66
Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign exchange contracts, Assets	160
Pension plan assets	5,911
Assets, Fair Value Disclosure	6,071
Debt	22,719
Foreign exchange contracts, Liabilities	55
Liabilities, Fair Value Disclosure	22,774	18,966
Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Pension plan assets	4,419	2,168
Assets, Fair Value Disclosure	4,419	2,168
Debt	22,316	18,458
Liabilities, Fair Value Disclosure	22,316	18,458
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign exchange contracts, Assets	160	145
Pension plan assets	1,492	2,879
Assets, Fair Value Disclosure	1,652	3,024
Debt	403	442
Foreign exchange contracts, Liabilities	55	66
Liabilities, Fair Value Disclosure	$ 458	$ 508

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Stock Plans (Tables)

12 Months Ended

Dec. 31, 2012

Employee Service Share-based Compensation, Aggregate Disclosures [Abstract]

Activity for Restricted Stock and Deferred Stock Awards

During 2012, the activity for restricted stock and deferred stock awards was as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value Per Share
Balance at January 1, 2012	10,437,888		$	48.67
Granted	3,245,500		79.59
Vested	(3,744,454	)	39.65
Forfeited	(454,069	)	56.08
Balance at December 31, 2012	9,484,865		$	62.44

Stock Option Awards

At December 31, 2012, PMI shares subject to option that remain under the 2008 Plan were as follows:

	Shares Subject to Option		Weighted- Average Exercise Price		Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at January 1, 2012	63,944		$	27.07
Options exercised	(27,133	)	28.35
Options cancelled	—		—
Balance/Exercisable at December 31, 2012	36,811		$	26.13	1 year	$	2	million

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Goodwill and Other Intangible Assets, net (Movement in Goodwill) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Goodwill [Roll Forward]
Beginning Balance	$ 9,928	$ 10,161
Changes due to:
Acquisitions		3
Currency	(28)	(236)
Ending Balance	9,900	9,928
European Union [Member]
Goodwill [Roll Forward]
Beginning Balance	1,392	1,443
Changes due to:
Acquisitions		0
Currency	56	(51)
Ending Balance	1,448	1,392
Eastern Europe, Middle East & Africa [Member]
Goodwill [Roll Forward]
Beginning Balance	666	702
Changes due to:
Acquisitions		1
Currency	(29)	(37)
Ending Balance	637	666
Asia [Member]
Goodwill [Roll Forward]
Beginning Balance	4,966	5,004
Changes due to:
Acquisitions		1
Currency	(175)	(39)
Ending Balance	4,791	4,966
Latin America & Canada [Member]
Goodwill [Roll Forward]
Beginning Balance	2,904	3,012
Changes due to:
Acquisitions		1
Currency	120	(109)
Ending Balance	$ 3,024	$ 2,904

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Stock Plans (Activity for Restricted Stock and Deferred Stock Awards) (Details) (Restricted Stock and Deferred Stock Awards [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restricted Stock and Deferred Stock Awards [Member]
Number of Shares (in shares):
Beginning Balance	10,437,888
Granted	3,245,500
Vested	(3,744,454)	(1,800,000)	(2,000,000)
Forfeited	(454,069)
Ending Balance	9,484,865	10,437,888
Weighted-Average Grant Date Fair Value (in dollars per share):
Beginning Balance	$ 48.67
Granted	$ 79.59	$ 59.44	$ 47.54
Vested	$ 39.65
Forfeited	$ 56.08
Ending Balance	$ 62.44	$ 48.67

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CONSOLIDATED BALANCE SHEETS (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 2,983	$ 2,550
Receivables (less allowances of $56 in 2012 and $45 in 2011)	3,589	3,201
Inventories:
Leaf tobacco	3,548	3,463
Other raw materials	1,610	1,185
Finished product	3,791	3,472
Total inventory, net	8,949	8,120
Deferred income taxes	450	397
Other current assets	619	591
Total current assets	16,590	14,859
Property, Plant and Equipment [Abstract]
Land and land improvements	708	692
Buildings and building equipment	3,948	3,738
Machinery and equipment	8,380	7,880
Construction in progress	843	603
Total property, plant and equipment, at cost	13,879	12,913
Less: accumulated depreciation	7,234	6,663
Total property, plant and equipment, net	6,645	6,250
Goodwill (Note 3)	9,900	9,928
Other intangible assets, net (Note 3)	3,619	3,697
Other assets	916	754
Total Assets	37,670	35,488
LIABILITIES
Short-term borrowings (Note 7)	2,419	1,511
Current portion of long-term debt (Note 7)	2,781	2,206
Accounts payable	1,103	1,031
Accrued liabilities:
Marketing and selling	527	519
Taxes, except income taxes	5,350	5,346
Employment costs	896	894
Dividends payable	1,418	1,341
Other	952	873
Income taxes	1,456	897
Deferred income taxes	114	176
Total current liabilities	17,016	14,794
Long-term debt (Note 7)	17,639	14,828
Deferred income taxes	1,875	1,976
Employment costs	2,574	1,665
Other liabilities	419	462
Total liabilities	39,523	33,725
Contingencies (Note 21)
Redeemable noncontrolling interest (Note 6)	1,301	1,212
Stockholders’ (Deficit) Equity
Common stock, no par value (2,109,316,331 shares issued in 2012 and 2011)	0	0
Additional paid-in capital	1,334	1,235
Earnings reinvested in the business	25,076	21,757
Accumulated other comprehensive losses	(3,604)	(2,863)
Total stockholders' equity before treasury stock	22,806	20,129
Less: cost of repurchased stock (455,703,347 and 383,407,665 shares in 2012 and 2011, respectively)	26,282	19,900
Total PMI stockholders’ (deficit) equity	(3,476)	229
Noncontrolling interests	322	322
Total stockholders’ (deficit) equity	(3,154)	551
Total Liabilities and Stockholders’ (Deficit) Equity	$ 37,670	$ 35,488

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Additional Information (Tables)

12 Months Ended

Dec. 31, 2012

Additional Information [Abstract]

Schedule of Additional Information

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Research and development expense	$	415		$	413		$	391
Advertising expense	$	483		$	464		$	402
Interest expense	$	1,007		$	934		$	974
Interest income	(148		)	(134		)	(98		)
Interest expense, net	$	859		$	800		$	876
Rent expense	$	318		$	308		$	278

Minimum Rental Commitments under Non-Cancelable Operating Leases

Minimum rental commitments under non-cancelable operating leases in effect at December 31, 2012, were as follows:

(in millions)
2013	$	218
2014	157
2015	104
2016	80
2017	66
Thereafter	226
	$	851

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Benefit Plans (Changes in Accumulated Benefit Obligation of Postretirement Benefit Plans) (Details) (Postretirement [Member], Post Retirement Health Care Plans [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation at January 1,	$ 115	$ 98
Service cost	2	2	2
Interest cost	5	5	5
Benefits paid	(4)	(4)
Assumption changes	10	11
Actuarial losses (gains)	4	3
Plan changes	0	0
Currency	0	0
Benefit obligation at December 31,	132	115	98
Non-U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation at January 1,	96	99
Service cost	2	2	2
Interest cost	5	5	5
Benefits paid	(5)	(5)
Assumption changes	11	(1)
Actuarial losses (gains)	6	(2)
Plan changes	(3)	0
Currency	1	(2)
Benefit obligation at December 31,	$ 113	$ 96	$ 99

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Fair Value Measurements (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	$ 1,363
Capital lease obligations, carrying value	37	85
Debt excluding short-term borrowings and capital lease obligations, carrying value	$ 20,383	$ 16,949

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement of Other Comprehensive Income [Abstract]
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax Effect	$ 6	$ 10	$ (107)
Other Comprehensive Income Net Losses and Prior Service Costs, Tax Effect	144	148	43
Other Comprehensive Income Amortization of Net Losses Prior Service Costs and Net Transition Costs, Tax Effect	(37)	(23)	(20)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax Effect	3	(2)	(3)
Derivative Instruments Gain Loss Recognized In Other Comprehensive Earnings (Losses) Tax Effect	$ (14)	$ (1)	$ 6

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Benefit Plans (Net Postretirement Health Care Costs Recognized) (Details) (Post Retirement Health Care Plans [Member], Postretirement [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 2	$ 2	$ 2
Interest cost	5	5	5
Amortization:
Net losses	2	1	1
Net postretirement health care costs	9	8	8
Non-U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	2	2	2
Interest cost	5	5	5
Amortization:
Net losses	1	1	0
Net postretirement health care costs	$ 8	$ 8	$ 7

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Asset Impairment and Exit Costs (Movement in the Exit Cost Liabilities) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restructuring Reserve [Roll Forward]
Liability, beginning balance	$ 28	$ 48
Charges	55	75
Cash spent	(57)	(98)	(75)
Currency/other	(6)	3
Liability, ending balance	$ 20	$ 28	$ 48

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Benefit Plans (Estimated Future Benefit Payments for Postretirement Health Plans) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
U.S. Plans - Postretirement [Member]
Defined Benefit Plan, Expected Future Benefit Payments, Fiscal Year Maturity [Abstract]
2013	$ 5
2014	5
2015	6
2016	6
2017	6
2018-2022	33
Non-U.S. Plans - Postretirement [Member]
Defined Benefit Plan, Expected Future Benefit Payments, Fiscal Year Maturity [Abstract]
2013	6
2014	5
2015	5
2016	5
2017	5
2018-2022	$ 28

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Goodwill and Other Intangible Assets, net (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, net, by Segment

Goodwill and other intangible assets, net, by segment were as follows:

	Goodwill				Other IntangibleAssets, net
(in millions)	December 31, 2012		December 31, 2011		December 31, 2012		December 31, 2011
European Union	$	1,448	$	1,392	$	647	$	663
Eastern Europe, Middle East & Africa	637		666		242		250
Asia	4,791		4,966		1,542		1,633
Latin America & Canada	3,024		2,904		1,188		1,151
Total	$	9,900	$	9,928	$	3,619	$	3,697

Movements in Goodwill

The movements in goodwill were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balance at January 1, 2011	$	1,443		$	702		$	5,004		$	3,012		$	10,161
Changes due to:
Acquisitions	—			1			1			1			3
Currency	(51		)	(37		)	(39		)	(109		)	(236		)
Balance at December 31, 2011	1,392			666			4,966			2,904			9,928
Changes due to:
Currency	56			(29		)	(175		)	120			(28		)
Balance at December 31, 2012	$	1,448		$	637		$	4,791		$	3,024		$	9,900

Other Intangible Assets

Additional details of other intangible assets were as follows:

	December 31, 2012				December 31, 2011
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	2,046			$	2,067
Amortizable intangible assets	2,046		$	473	2,001		$	371
Total other intangible assets	$	4,092	$	473	$	4,068	$	371

Range of Useful Lives and Weighted Average Remaining Useful Life of Amortizable Intangible Assets

The range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at December 31, 2012, is as follows:

Description	Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	2 - 40 years	26 years
Distribution networks	20 - 30 years	15 years
Non-compete agreements	3 - 10 years	2 years
Other (including farmer contracts and intellectual property rights)	12.5 - 17 years	13 years

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Indebtedness (Long-Term Debt) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Long term debt obligations	$ 20,420	$ 17,034
Less current portion of long-term debt	2,781	2,206
Long-term debt (Note 7)	17,639	14,828
US Dollar Notes [Member] | US Dollar Notes [Member]
Debt Instrument [Line Items]
Long-term debt	14,702	11,269
Due through	2042
Interest rate, minimum	1.125%
Interest rate, maximum	6.875%
Interest rate, average	4.462%
Foreign Currency Obligations [Member] | Euro Notes [Member]
Debt Instrument [Line Items]
Long-term debt	3,724	3,533
Due through	2024
Interest rate, minimum	2.125%
Interest rate, maximum	5.875%
Interest rate, average	4.227%
Foreign Currency Obligations [Member] | Swiss Franc Notes [Member]
Debt Instrument [Line Items]
Long-term debt	1,579	1,719
Due through	2021
Interest rate, minimum	1.00%
Interest rate, maximum	3.25%
Interest rate, average	1.984%
Foreign Currency Obligations [Member] | Other Payable [Member]
Debt Instrument [Line Items]
Long term debt obligations	$ 415	$ 513
Due through	2024
Interest rate, average	2.378%

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Segment Reporting

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting:

PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Reportable segments for PMI are organized and managed by geographic region. PMI’s reportable segments are European Union; Eastern Europe, Middle East & Africa; Asia, and Latin America & Canada. PMI records net revenues and operating companies income to its segments based upon the geographic area in which the customer resides.

PMI’s management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income before general corporate expenses and amortization of intangibles. Interest expense, net, and provision for income taxes are centrally managed; accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 3. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.

Segment data were as follows:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Net revenues:
European Union	$	27,338		$	29,768		$	28,050
Eastern Europe, Middle East & Africa	19,272			17,452			15,928
Asia	21,071			19,590			15,235
Latin America & Canada	9,712			9,536			8,500
Net revenues(1)	$	77,393		$	76,346		$	67,713
Earnings before income taxes:
Operating companies income:
European Union	$	4,187		$	4,560		$	4,311
Eastern Europe, Middle East & Africa	3,726			3,229			3,152
Asia	5,197			4,836			3,049
Latin America & Canada	1,043			988			953
Amortization of intangibles	(97		)	(98		)	(88		)
General corporate expenses	(210		)	(183		)	(177		)
Operating income	13,846			13,332			11,200
Interest expense, net	(859		)	(800		)	(876		)
Earnings before income taxes	$	12,987		$	12,532		$	10,324

⁽¹⁾  Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Depreciation expense:
European Union	$	181	$	210	$	212
Eastern Europe, Middle East & Africa	211		227		215
Asia	315		358		332
Latin America & Canada	84		90		75
	791		885		834
Other	10		10		10
Total depreciation expense	$	801	$	895	$	844
Capital expenditures:
European Union	$	391	$	382	$	329
Eastern Europe, Middle East & Africa	197		133		102
Asia	277		208		161
Latin America & Canada	127		140		120
	992		863		712
Other	64		34		1
Total capital expenditures	$	1,056	$	897	$	713

	At December 31,
(in millions)	2012		2011		2010
Long-lived assets:
European Union	$	3,066	$	2,938	$	3,226
Eastern Europe, Middle East & Africa	1,215		1,094		1,158
Asia	1,831		1,687		1,765
Latin America & Canada	735		706		663
	6,847		6,425		6,812
Other	139		146		195
Total long-lived assets	$	6,986	$	6,571	$	7,007

Long-lived assets consist of non-current assets other than goodwill; other intangible assets, net, and deferred tax assets. PMI’s largest market in terms of long-lived assets is Switzerland. Total long-lived assets located in Switzerland, which is reflected in the European Union segment above, were $1.1 billion, $1.0 billion and $1.0 billion at December 31, 2012, 2011 and 2010, respectively.

Items affecting the comparability of results from operations were as follows:

• Asset Impairment and Exit Costs—See Note 5. Asset Impairment and Exit Costs for a breakdown of asset impairment and exit costs by segment.

• Acquisitions and Other Business Arrangements— For further details, see Note 6. Acquisitions and Other Business Arrangements.

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Asset Impairment and Exit Costs (Tables)

12 Months Ended

Dec. 31, 2012

Restructuring and Related Activities [Abstract]

Schedule of Asset Impairment and Exit Costs

During 2012, 2011 and 2010, pre-tax asset impairment and exit costs consisted of the following:

(in millions)	2012		2011		2010
Separation programs:
European Union	$	—	$	35	$	27
Eastern Europe, Middle East & Africa	—		6		—
Asia	13		7		—
Latin America & Canada	29		15		—
Total separation programs	42		63		27
Contract termination charges:
Eastern Europe, Middle East & Africa	—		12		—
Asia	13		—		20
Total contract termination charges	13		12		20
Asset impairment charges:
European Union	5		10		—
Eastern Europe, Middle East & Africa	5		7		—
Asia	13		8		—
Latin America & Canada	5		9		—
Total asset impairment charges	28		34		—
Asset impairment and exit costs	$	83	$	109	$	47

Movement in the Exit Cost Liabilities

The movement in exit cost liabilities for PMI was as follows:

(in millions)
Liability balance, January 1, 2011	$	48
Charges	75
Cash spent	(98		)
Currency/other	3
Liability balance, December 31, 2011	$	28
Charges	55
Cash spent	(57		)
Currency/other	(6		)
Liability balance, December 31, 2012	$	20

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Benefit Plans (Effect of Change in One-Percentage-Points to Trend Rates) (Details) (Post Retirement Health Care Plans [Member], Postretirement Benefit Obligations [Member])	12 Months Ended
	Dec. 31, 2012
Post Retirement Health Care Plans [Member] | Postretirement Benefit Obligations [Member]
Effect on total service and interest cost, One-Percentage-Point Increase	19.90%
Effect on postretirement benefit obligation, One-Percentage-Point Increase	15.10%
Effect on total service and interest cost, One-Percentage-Point Decrease	(15.30%)
Effect on postretirement benefit obligation, One-Percentage-Point Decrease	(12.10%)

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Contingencies (Health Care Cost Recovery Litigation) (Narrative) (Details) (Health Care Cost Recovery Actions [Member])	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case
Loss Contingencies [Line Items]
Cases brought against PM	15	11	10
Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM	9
Nigeria [Member]
Loss Contingencies [Line Items]
Cases brought against PM	5
Spain [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1

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Additional Information

12 Months Ended

Dec. 31, 2012

Additional Information [Abstract]

Additional Information

Additional Information:

	For the Years Ended December 31,
(in millions)	2012			2011			2010
Research and development expense	$	415		$	413		$	391
Advertising expense	$	483		$	464		$	402
Interest expense	$	1,007		$	934		$	974
Interest income	(148		)	(134		)	(98		)
Interest expense, net	$	859		$	800		$	876
Rent expense	$	318		$	308		$	278

Minimum rental commitments under non-cancelable operating leases in effect at December 31, 2012, were as follows:

(in millions)
2013	$	218
2014	157
2015	104
2016	80
2017	66
Thereafter	226
	$	851

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Indebtedness (Credit Facilities) (Details) (USD $) In Billions, unless otherwise specified		12 Months Ended				1 Months Ended
	Dec. 31, 2012	Dec. 31, 2012 Multi-Year Revolving Credit, Expiring March 31, 2015 [Member]	Dec. 31, 2012 Multi-Year Revolving Credit, Expiring October 25, 2016 [Member]	Dec. 31, 2012 Short Term Credit Arrangement [Member]	Dec. 31, 2011 Short Term Credit Arrangement [Member]	May 31, 2011 Previous Expiration Date [Member] Multi-Year Revolving Credit, Expiring March 31, 2015 [Member]
Line of Credit Facility [Line Items]
Committed credit facilities, maximum borrowing capacity	$ 6.0	$ 2.5	$ 3.5	$ 2.0	$ 1.9
Commercial paper outstanding	$ 2.0
Multi-year revolving credit facility, expiration date		Mar. 31, 2015	Oct. 25, 2016			Sep. 30, 2013

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Financial Instruments (Hedging Activities Effect on Condensed Consolidated Statements of Earnings and Other Comprehensive Earnings) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	$ (22)	$ 18	$ 33
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	99	(5)	(50)
Foreign Exchange Contract [Member] | Net revenues [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	66	(17)	24
Foreign Exchange Contract [Member] | Cost of sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	19	34	(14)
Foreign Exchange Contract [Member] | Marketing, administration and research costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	0
Foreign Exchange Contract [Member] | Operating income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	85	17	10
Foreign Exchange Contract [Member] | Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	(46)	19	(39)
Foreign Exchange Contract [Member] | Earnings before income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	39	36	(29)
Foreign Exchange Contract [Member] | Provision for Income Taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	(2)	(11)
Foreign Exchange Contract [Member] | Provision for income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings			2
Foreign Exchange Contract [Member] | Net earnings attributable to PMI [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	37	25	(27)
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Net revenues [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	66	(17)	24
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Cost of sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	19	34	(14)
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Marketing, administration and research costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	3
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Operating income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	85	17	13
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	(60)	(37)	(49)
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Earnings before income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	25	(20)	(36)
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Provision for Income Taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	(3)	2	3
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Net earnings attributable to PMI [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	22	(18)	(33)
Foreign Exchange Contract [Member] | Net Investment Hedging [Member] | Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	0	0	0
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	14	56	7
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Net revenues [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	0
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Cost of sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	0
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Marketing, administration and research costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	(3)
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Operating income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	0	0	(3)
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Interest expense, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	14	56	10
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Earnings before income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	14	56	7
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Provision for Income Taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	1	(13)	(1)
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Net earnings attributable to PMI [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in earnings	15	43	6
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	(22)	18	33
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	99	(5)	(50)
Net impact on equity	77	13	(17)
Cumulative translation adjustment	(14)	2	12
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member] | Provision for income taxes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	3	(2)	(3)
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	(14)	(1)	6
Net impact on equity	(11)	(3)	3
Cumulative translation adjustment	5		(10)
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	(25)	20	36
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings on Derivative	113	(4)	(56)
Net impact on equity	88	16	(20)
Cumulative translation adjustment			(2)
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member] | Net Investment Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Cumulative translation adjustment	$ (19)	$ 2	$ 24

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIT) EQUITY (USD $) In Millions, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Earnings Reinvested In The Business [Member]	Accumulated Other Comprehensive Losses [Member]	Cost of Repurchased Stock [Member]	Noncontrolling Interests [Member]
Beginning balance at Dec. 31, 2009	$ 6,145	$ 0	$ 1,403	$ 15,358	$ (817)	$ (10,228)	$ 429
Increase (Decrease) in Stockholders' (Deficit) Equity [Roll Forward]
Net earnings	7,472			7,259			213	[1]
Other comprehensive earnings (losses), net of income taxes	(328)				(323)		(5)	[1]
Exercise of stock options and issuance of other stock awards	365		(178)			543
Dividends declared	(4,484)			(4,484)
Payments to noncontrolling interests	(210)						(210)
Common stock repurchased	(5,027)					(5,027)
Ending balance at Dec. 31, 2010	3,933	0	1,225	18,133	(1,140)	(14,712)	427
Increase (Decrease) in Stockholders' (Deficit) Equity [Roll Forward]
Net earnings	8,782			8,591			191	[1]
Other comprehensive earnings (losses), net of income taxes	(1,777)				(1,723)		(54)	[1]
Exercise of stock options and issuance of other stock awards	224		12			212
Dividends declared	(4,967)			(4,967)
Payments to noncontrolling interests	(241)						(241)
Purchase of subsidiary shares from noncontrolling interests	(3)		(2)				(1)
Common stock repurchased	(5,400)					(5,400)
Ending balance at Dec. 31, 2011	551	0	1,235	21,757	(2,863)	(19,900)	322
Increase (Decrease) in Stockholders' (Deficit) Equity [Roll Forward]
Net earnings	8,983			8,800			183	[1]
Other comprehensive earnings (losses), net of income taxes	(714)				(741)		27	[1]
Exercise of stock options and issuance of other stock awards	218		100			118
Dividends declared	(5,481)			(5,481)
Payments to noncontrolling interests	(209)						(209)
Purchase of subsidiary shares from noncontrolling interests	(2)		(1)				(1)
Common stock repurchased	(6,500)					(6,500)
Ending balance at Dec. 31, 2012	$ (3,154)	$ 0	$ 1,334	$ 25,076	$ (3,604)	$ (26,282)	$ 322

[1] Net earnings attributable to noncontrolling interests exclude $171 million of earnings related to the redeemable noncontrolling interest, which is reported outside of the equity section in the consolidated balance sheet at December 31, 2012. Other comprehensive earnings (losses), net of income taxes, also exclude $25 million of net currency translation adjustment gains and $2 million of net loss and prior service cost losses related to the redeemable noncontrolling interest at December 31, 2012. Net earnings attributable to noncontrolling interests exclude $97 million of earnings related to the redeemable noncontrolling interest, which is reported outside of the equity section in the consolidated balance sheet at December 31, 2011. Other comprehensive losses, net of income taxes, also exclude less than $1 million of net currency translation adjustment losses related to redeemable noncontrolling interest at December 31, 2011. Net earnings attributable to noncontrolling interests exclude $26 million of earnings related to the redeemable noncontrolling interest, which is reported outside the equity section in the consolidated balance sheet at December 31, 2010. Other comprehensive losses, net of income taxes, also exclude $16 million of net currency translation adjustment gains related to the redeemable noncontrolling interest at December 31, 2010.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Receivables, allowances	$ 56	$ 45
Common stock, no par value	$ 0	$ 0
Common stock, shares issued	2,109,316,331	2,109,316,331
Repurchased stock, shares	455,703,347	383,407,665

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Indebtedness

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Indebtedness

Indebtedness:

Short-Term Borrowings

At December 31, 2012 and 2011, PMI’s short-term borrowings and related average interest rates consisted of the following:

	December 31, 2012				December 31, 2011
(in millions)	Amount Outstanding		Average Year-End Rate		Amount Outstanding		Average Year-End Rate
Commercial paper	$	1,972	0.2	%	$	1,264	0.1	%
Bank loans	447		6.6		247		7.7
	$	2,419			$	1,511

Given the mix of subsidiaries and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.

The fair values of PMI’s short-term borrowings at December 31, 2012 and 2011, based upon current market interest rates, approximate the amounts disclosed above.

Long-Term Debt

At December 31, 2012 and 2011, PMI’s long-term debt consisted of the following:

(in millions)	2012		2011
U.S. dollar notes, 1.125% to 6.875% (average interest rate 4.462%), due through 2042	$	14,702	$	11,269
Foreign currency obligations:
Euro notes, 2.125% to 5.875% (average interest rate 4.227%), due through 2024	3,724		3,533
Swiss franc notes, 1.000% to 3.250% (average interest rate 1.984%), due through 2021	1,579		1,719
Other (average interest rate 2.378%), due through 2024	415		513
	20,420		17,034
Less current portion of long-term debt	2,781		2,206
	$	17,639	$	14,828

Other debt:

Other foreign currency debt above includes debt from our business combination in the Philippines and mortgage debt in Switzerland at December 31, 2012 and 2011. Other foreign currency debt also includes $37 million and $85 million at December 31, 2012 and 2011, respectively, of capital lease obligations primarily associated with PMI’s vending machine distribution network in Japan.

Debt offerings in 2012:

PMI’s debt offerings in 2012 were as follows:

(in millions)
Type		Face Value		Interest Rate	Issuance	Maturity
U.S. dollar notes	(a)	$	700	4.500%	March 2012	March 2042
U.S. dollar notes	(a)	$	550	1.625%	March 2012	March 2017
Euro notes	(b)	€750 (approximately $951)		2.125%	May 2012	May 2019
Euro notes	(b)	€600 (approximately $761)		2.875%	May 2012	May 2024
U.S. dollar notes	(c)	$	750	1.125%	August 2012	August 2017
U.S. dollar notes	(c)	$	750	2.500%	August 2012	August 2022
U.S. dollar notes	(c)	$	750	3.875%	August 2012	August 2042
Swiss franc notes	(d)	CHF 325 (approximately $334)		1.000%	September 2012	September 2020

^(a) Interest on these notes is payable semiannually, and the first payment was made in September 2012.

^(b) Interest on these notes is payable annually beginning in May 2013.

^(c) Interest on these notes is payable semiannually beginning in February 2013.

^(d) Interest on these notes is payable annually beginning in September 2013.

The net proceeds from the sale of the securities listed in the table above were used to meet PMI’s working capital requirements, to repurchase PMI’s common stock, to refinance debt and for general corporate purposes.

Aggregate maturities:

Aggregate maturities of long-term debt are as follows:

(in millions)
2013	$	2,781
2014	1,256
2015	995
2016	2,597
2017	1,302
2018-2022	7,026
2023-2027	940
Thereafter	3,701
	20,598
Debt discounts	(178		)
Total long-term debt	$	20,420

See Note 16. Fair Value Measurements for additional disclosures related to the fair value of PMI’s debt.

Credit Facilities

In May 2011, PMI entered into an agreement with certain financial institutions to extend the expiration date for its $2.5 billion revolving credit facility from September 30, 2013, to March 31, 2015.

On October 25, 2011, PMI entered into a new multi-year revolving credit facility in the amount of $3.5 billion, which expires on October 25, 2016. This new revolving credit facility replaced PMI’s $2.7 billion multi-year credit facility, which was to expire on December 4, 2012.

At December 31, 2012, PMI’s committed credit facilities and commercial paper outstanding were as follows:

Type (in billions of dollars)	Committed Credit Facilities		Commercial Paper
Multi-year revolving credit, expiring March 31, 2015	$	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	6.0
Commercial paper outstanding			$	2.0

At December 31, 2012, there were no borrowings under the committed credit facilities, and the entire committed amounts were available for borrowing.

Each of these facilities requires PMI to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“consolidated EBITDA”) to consolidated interest expense of not less than 3.5 to 1.0 on a rolling four-quarter basis. At December 31, 2012, PMI’s ratio calculated in accordance with the agreements was 16.0 to 1.0. These facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require PMI to post collateral. The terms “consolidated EBITDA” and “consolidated interest expense,” both of which include certain adjustments, are defined in the facility agreements previously filed with the Securities and Exchange Commission.

In addition to the committed credit facilities discussed above, certain subsidiaries maintain short-term credit arrangements to meet their respective working capital needs. These credit arrangements, which amounted to approximately $2.0 billion at December 31, 2012, and $1.9 billion at December 31, 2011, are for the sole use of the subsidiaries. Borrowings under these arrangements amounted to $447 million at December 31, 2012, and $247 million at December 31, 2011.

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Benefit Plans (Movements in Other Comprehensive Earnings (Losses)) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Amortization:
Net losses	$ 185	$ 105	$ 84
Prior service cost	10	8	10
Net transition obligation	1	1
Other income/expense:
Net loss	4	3	(1)
Prior service cost			3
Deferred income taxes	(37)	(23)	(20)
Amounts transferred to earnings as components of net periodic benefit cost	163	94	76
Other movements during the year:
Net losses	(1,091)	(1,160)	(358)
Prior service cost	4	(17)	(3)
Deferred income taxes	144	148	43
Other movements during the year	(943)	(1,029)	(318)
Total movements in other comprehensive losses	780	935	242
Pension [Member]
Amortization:
Net losses	129	63	44
Prior service cost	10	9	10
Net transition obligation	1	1
Other income/expense:
Net loss	4	3	(1)
Prior service cost			3
Deferred income taxes	(20)	(10)	(8)
Amounts transferred to earnings as components of net periodic benefit cost	124	66	48
Other movements during the year:
Net losses	(931)	(1,042)	(294)
Prior service cost	0	(17)	(3)
Deferred income taxes	98	110	23
Other movements during the year	(833)	(949)	(274)
Total movements in other comprehensive losses	709	883	226
Postretirement [Member]
Amortization:
Net losses	3	3	1
Prior service cost	0	(1)	0
Net transition obligation	0	0
Other income/expense:
Net loss	0	0	0
Prior service cost			0
Deferred income taxes	(1)	(1)	0
Amounts transferred to earnings as components of net periodic benefit cost	2	1	1
Other movements during the year:
Net losses	(31)	(11)	(20)
Prior service cost	4	0	0
Deferred income taxes	8	5	6
Other movements during the year	(19)	(6)	(14)
Total movements in other comprehensive losses	17	5	13
Postemployment Benefit Plans [Member]
Amortization:
Net losses	53	39	39
Prior service cost	0	0	0
Net transition obligation	0	0
Other income/expense:
Net loss	0	0	0
Prior service cost			0
Deferred income taxes	(16)	(12)	(12)
Amounts transferred to earnings as components of net periodic benefit cost	37	27	27
Other movements during the year:
Net losses	(129)	(107)	(44)
Prior service cost	0	0	0
Deferred income taxes	38	33	14
Other movements during the year	(91)	(74)	(30)
Total movements in other comprehensive losses	$ 54	$ 47	$ 3

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Benefit Plans (Estimated Future Benefit Payments From Pension Plans) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
2013	$ 14
2014	45
2015	17
2016	18
2017	19
2018-2022	103
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
2013	210
2014	219
2015	229
2016	241
2017	250
2018-2022	$ 1,470

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Benefit Plans (Net Pension Cost Weighted-Average Assumptions) (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.50%	5.40%	5.90%
Expected rate of return on plan assets	5.70%	6.25%	7.20%
Rate of compensation increase	3.50%	3.50%	4.50%
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.40%	4.00%	4.33%
Expected rate of return on plan assets	6.21%	6.21%	6.69%
Rate of compensation increase	2.66%	2.90%	3.21%

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Contingencies (Smoking and Health Litigation) (Narrative) (Details)	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case
Individual Smoking And Health Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM	76	75	94
Individual Smoking And Health Cases [Member] | Argentina [Member]
Loss Contingencies [Line Items]
Cases brought against PM	30
Individual Smoking And Health Cases [Member] | Brazil [Member]
Loss Contingencies [Line Items]
Cases brought against PM	29
Individual Smoking And Health Cases [Member] | Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Individual Smoking And Health Cases [Member] | Chile [Member]
Loss Contingencies [Line Items]
Cases brought against PM	4
Individual Smoking And Health Cases [Member] | Costa Rica [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Individual Smoking And Health Cases [Member] | Greece [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Individual Smoking And Health Cases [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM	5
Individual Smoking And Health Cases [Member] | The Philippines [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Individual Smoking And Health Cases [Member] | Scotland [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Individual Smoking And Health Cases [Member] | Turkey [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	11	10	11
Smoking And Health Class Actions [Member] | Brazil [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Smoking And Health Class Actions [Member] | Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM	9

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Contingencies (Tobacco-Related Litigation) (Narrative) (Details) (EUR €) In Thousands, unless otherwise specified	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case
Final Resolution In Favor Of Company [Member]
Loss Contingencies [Line Items]
Number of cases decided	387
Individual Lights Cases - Small Claims Court [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM	7	9	10
Individual Lights Cases - Small Claims Court [Member] | Italy [Member] | Cases With Costs [Member]
Loss Contingencies [Line Items]
Payments for total judgments including legal costs	6
Case Decided In Favor Of Plaintiff [Member]
Loss Contingencies [Line Items]
Number of cases decided	10
Case Decided In Favor Of Plaintiff [Member] | Cases Remaining On Appeal [Member]
Loss Contingencies [Line Items]
Cases brought against PM	3
Case Decided In Favor Of Plaintiff [Member] | Final Resolution In Favor Of Company [Member]
Loss Contingencies [Line Items]
Number of cases decided	7
Cases With Verdicts And Post Trial Developments [Member]
Loss Contingencies [Line Items]
Cases brought against PM	3

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Document And Entity Information (USD $) In Billions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Jan. 31, 2013	Jun. 29, 2012
Document And Entity Information [Abstract]
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Amendment Flag	false
Document Fiscal Period Focus	FY
Entity Registrant Name	Philip Morris International Inc.
Entity Central Index Key	0001413329
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		1,647,788,932
Entity Public Float			$ 148

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Contingencies (Public Civil Actions) (Narrative) (Details) (Public Civil Actions [Member])	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case
Loss Contingencies [Line Items]
Cases brought against PM	4	3	7
Argentina [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Brazil [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Venezuela [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1

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Capital Stock

12 Months Ended

Dec. 31, 2012

Class of Stock Disclosures [Abstract]

Capital Stock

Capital Stock:

Shares of authorized common stock are 6.0 billion; issued, repurchased and outstanding shares were as follows:

	Shares Issued	Shares Repurchased		Shares Outstanding
Balances, January 1, 2010	2,109,316,331	(222,151,828	)	1,887,164,503
Repurchase of shares		(97,053,310	)	(97,053,310	)
Exercise of stock options and issuance of other stock awards		11,672,297		11,672,297
Balances, December 31, 2010	2,109,316,331	(307,532,841	)	1,801,783,490
Repurchase of shares		(80,514,257	)	(80,514,257	)
Exercise of stock options and issuance of other stock awards		4,639,433		4,639,433
Balances, December 31, 2011	2,109,316,331	(383,407,665	)	1,725,908,666
Repurchase of shares		(74,897,499	)	(74,897,499	)
Issuance of stock awards and exercise of stock options		2,601,817		2,601,817
Balances, December 31, 2012	2,109,316,331	(455,703,347	)	1,653,612,984

PMI commenced a $13.0 billiontwo-year share repurchase program on May 1, 2008. On April 30, 2010, PMI completed the $13.0 billion share repurchase program, which resulted in the purchase of 277.6 million shares at an average price of $46.83 per share. On May 1, 2010, PMI commenced a new $12.0 billionthree-year share repurchase program. On July 31, 2012, PMI completed, ahead of schedule, the $12.0 billion share repurchase program, which resulted in the purchase of 179.1 million shares at an average price of $66.99 per share. On August 1, 2012, PMI commenced a new three-year $18 billion share repurchase program that was authorized by PMI's Board of Directors in June 2012. From August 1, 2012, through December 31, 2012, PMI repurchased 32.2 million shares of its common stock at a cost of $2.9 billion, or $88.59 per share, under this new repurchase program. During 2012, 2011 and 2010, PMI repurchased $6.5 billion, $5.4 billion and $5.0 billion, respectively, of its common stock.

At December 31, 2012, 39,781,077 shares of common stock were reserved for stock options and other stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued. PMI currently has no plans to issue any shares of preferred stock.

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Income Taxes (Schedule of Reasons Attributable to the Differences Between Effective Income Tax Rate And Federal Statutory Rate) (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
U.S. federal statutory rate	35.00%	35.00%	35.00%
Increase (decrease) resulting from:
Foreign rate differences	(11.80%)	(12.50%)	(10.00%)
Dividend repatriation cost	6.00%	6.50%	3.50%
Reversal of tax reserves no longer required	0.00%	0.00%	(1.40%)
Other	0.30%	0.10%	0.30%
Effective tax rate	29.50%	29.10%	27.40%

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Benefit Plans (Components of Net Periodic Benefit Cost) (Details) (Pension [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 6	$ 5	$ 6
Interest cost	16	16	18
Expected return on plan assets	(15)	(15)	(16)
Amortization:
Net losses	9	5	5
Prior service cost	1	1	1
Net transition obligation	0	0	0
Termination, settlement and curtailment	2	2	1
Net periodic pension cost	19	14	15
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	189	178	160
Interest cost	189	205	189
Expected return on plan assets	(320)	(323)	(283)
Amortization:
Net losses	120	58	39
Prior service cost	9	8	9
Net transition obligation	1	1	0
Termination, settlement and curtailment	0	1	(6)
Net periodic pension cost	$ 188	$ 128	$ 108

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CONSOLIDATED STATEMENTS OF EARNINGS (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Income Statement [Abstract]
Net revenues	$ 77,393	[1]	$ 76,346	[1]	$ 67,713	[1]
Cost of sales	10,373		10,678		9,713
Excise taxes on products	46,016		45,249		40,505
Gross profit	21,004		20,419		17,495
Marketing, administration and research costs	6,978		6,880		6,160
Asset impairment and exit costs (Note 5)	83		109		47
Amortization of intangibles	97		98		88
Operating income	13,846		13,332		11,200
Interest expense, net	859		800		876
Earnings before income taxes	12,987		12,532		10,324
Provision for income taxes	3,833		3,653		2,826
Net earnings	9,154		8,879		7,498
Net earnings attributable to noncontrolling interests	354		288		239
Net earnings attributable to PMI	$ 8,800		$ 8,591		$ 7,259
Per share data (Note 10):
Basic earnings per share	$ 5.17		$ 4.85		$ 3.93
Diluted earnings per share	$ 5.17		$ 4.85		$ 3.92

[1] Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies:

Cash and cash equivalents

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Depreciation

Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 15 years, and buildings and building improvements over periods up to 40 years. Depreciation expense for 2012, 2011 and 2010 was $801 million, $895 million and $844 million, respectively.

Goodwill and non-amortizable intangible assets valuation

PMI tests goodwill and non-amortizable intangible assets for impairment annually or more frequently if events occur that would warrant such review. PMI performs its annual impairment analysis in the first quarter of each year. The impairment analysis involves comparing the fair value of each reporting unit or non-amortizable intangible asset to the carrying value. If the carrying value exceeds the fair value, goodwill or a non-amortizable intangible asset is considered impaired. To determine the fair value of goodwill, PMI primarily uses a discounted cash flow model, supported by the market approach using earnings multiples of comparable companies. To determine the fair value of non-amortizable intangible assets, PMI primarily uses a discounted cash flow model applying the relief-from-royalty method. These discounted cash flow models include management assumptions relevant for forecasting operating cash flows, which are subject to changes in business conditions, such as volumes and prices, costs to produce, discount rates and estimated capital needs. Management considers historical experience and all available information at the time the fair values are estimated, and PMI believes these assumptions are consistent with the assumptions a hypothetical marketplace participant would use. PMI concluded that the fair value of our reporting units and non-amortizable intangible assets exceeded the carrying value, and any reasonable movement in the assumptions would not result in an impairment. Since the March 28, 2008, spin-off from Altria Group, Inc. ("Altria"), PMI has not recorded a charge to earnings for an impairment of goodwill or non-amortizable intangible assets.

Foreign currency translation

PMI translates the results of operations of its subsidiaries and affiliates using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the end of each period. Currency translation adjustments are recorded as a component of stockholders’ (deficit) equity. In addition, some of PMI’s subsidiaries have assets and liabilities denominated in currencies other than their functional currencies, and to the extent those are not designated as net investment hedges, these assets and liabilities generate transaction gains and losses when translated into their respective functional currencies. PMI recorded net transaction losses of $51 million, $24 million and $17 million for the years ended December 31, 2012, 2011 and 2010, respectively, in marketing, administration and research costs on the consolidated statements of earnings.

Hedging instruments

Derivative financial instruments are recorded at fair value on the consolidated balance sheets as either assets or liabilities. Changes in the fair value of derivatives are recorded each period either in accumulated other comprehensive losses on the consolidated balance sheet, or

in earnings, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive losses are reclassified to the consolidated statements of earnings in the periods in which operating results are affected by the hedged item. Cash flows from hedging instruments are classified in the same manner as the affected hedged item in the consolidated statements of cash flows.

Impairment of long-lived assets

PMI reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. PMI performs undiscounted operating cash flow analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, PMI groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Income taxes

Income tax provisions for jurisdictions outside the United States, as well as state and local income tax provisions, are determined on a separate company basis, and the related assets and liabilities are recorded in PMI’s consolidated balance sheets. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

PMI recognizes accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes on the consolidated statements of earnings.

Inventories

Inventories are stated at the lower of cost or market. The first-in, first-out and average cost methods are used to cost substantially all inventories. It is a generally recognized industry practice to classify leaf tobacco inventory as a current asset although part of such inventory, because of the duration of the aging process, ordinarily would not be utilized within one year.

Marketing costs

PMI promotes its products with advertising, consumer incentives and trade promotions. Such programs include, but are not limited to, discounts, rebates, in-store display incentives and volume-based incentives. Advertising costs are expensed as incurred. Trade promotions are recorded as a reduction of revenues based on amounts estimated as being due to customers at the end of a period, based principally on historical utilization. For interim reporting purposes, advertising and certain consumer incentive expenses are charged to earnings based on estimated sales and related expenses for the full year.

Revenue recognition

PMI recognizes revenues, net of sales incentives and including shipping and handling charges billed to customers, either upon shipment or delivery of goods when title and risk of loss pass to customers. Excise taxes billed by PMI to customers are reported in net revenues. Shipping and handling costs are classified as part of cost of sales and were $802 million, $905 million and $653 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Software costs

PMI capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment on PMI’s consolidated balance sheets and are amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed five years.

Stock-based compensation

PMI measures compensation cost for all stock-based awards at fair value on date of grant and recognizes the compensation costs over the service periods for awards expected to vest. The fair value of restricted stock and deferred stock is determined based on the number of shares granted and the market value at date of grant.

Excess tax benefits from the vesting of stock-based awards of $24 million, $19 million and $32 million were recognized in additional paid-in capital as of December 31, 2012, 2011 and 2010, respectively, and were presented as financing cash flows.

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Background and Basis of Presentation

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background and Basis of Presentation

Background and Basis of Presentation:

Background

Philip Morris International Inc. is a holding company incorporated in Virginia, U.S.A., whose subsidiaries and affiliates and their licensees are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc. and its subsidiaries.

Basis of presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and expenses during the reporting periods. Significant estimates and assumptions include, among other things: pension and benefit plan assumptions; the fair value assessment of PMFTC Inc.; useful lives and valuation assumptions of goodwill and other intangible assets; marketing programs, and income taxes. Actual results could differ from those estimates.

The consolidated financial statements include PMI, as well as its wholly owned and majority-owned subsidiaries. Investments in which PMI exercises significant influence (generally 20%-50% ownership interest) are accounted for under the equity method of accounting. Investments in which PMI has an ownership interest of less than 20%, or does not exercise significant influence, are accounted for with the cost method of accounting. All intercompany transactions and balances have been eliminated.

In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, which became effective for PMI in the first quarter of 2012. Under the new guidance, PMI evaluated the presentation options and elected to present comprehensive earnings in a separate statement. As a result of this new standard, certain amounts reported in the prior year statements have been reclassified to conform to the current year presentation.

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Benefit Plans

12 Months Ended

Dec. 31, 2012

General Discussion of Pension and Other Postretirement Benefits [Abstract]

Benefit Plans

Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to substantially all U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

Pension Plans

Obligations and Funded Status

The benefit obligations, plan assets and funded status of PMI’s pension plans at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Benefit obligation at January 1,	$	352		$	321		$	5,625		$	4,932
Service cost	6			5			189			178
Interest cost	16			16			189			205
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(8		)	(4		)
Assumption changes	28			44			1,176			510
Actuarial (gains) losses	(3		)	(13		)	41			6
Currency	—			—			167			(52		)
Other	—			—			43			58
Benefit obligation at December 31,	383			352			7,262			5,625
Fair value of plan assets at January 1,	269			251			4,778			4,623
Actual return on plan assets	27			9			625			(162		)
Employer contributions	4			30			203			505
Employee contributions	—			—			47			43
Benefits paid	(16		)	(21		)	(160		)	(208		)
Termination, settlement and curtailment	—			—			(5		)	—
Currency	—			—			139			(23		)
Fair value of plan assets at December 31,	284			269			5,627			4,778
Net pension liability recognized at December 31,	$	(99	)	$	(83	)	$	(1,635	)	$	(847	)

At December 31, 2012 and 2011, the combined U.S. and non-U.S. pension plans resulted in a net pension liability of $1,734 million and $930 million, respectively. These amounts were recognized in PMI’s consolidated balance sheets at December 31, 2012 and 2011, as follows:

(in millions)	2012			2011
Other assets	$	29		$	40
Accrued liabilities — employment costs	(22		)	(23		)
Long-term employment costs	(1,741		)	(947		)
	$	(1,734	)	$	(930	)

The accumulated benefit obligation, which represents benefits earned to date, for the U.S. pension plans was $354 million and $323 million at December 31, 2012 and 2011, respectively. The accumulated benefit obligation for non-U.S. pension plans was $6,469 million and $5,042 million at December 31, 2012 and 2011, respectively.

For U.S. pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation and accumulated benefit obligation were $86 million and $78 million, respectively, as of December 31, 2012. The projected benefit obligation and accumulated benefit obligation were $76 million and $66 million, respectively, as of December 31, 2011. The underfunding relates to plans for salaried employees that cannot be funded under IRS regulations. For non-U.S. plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $6,786 million, $6,058 million, and $5,162 million, respectively, as of December 31, 2012, and $3,785 million, $3,343 million, and $2,973 million, respectively, as of December 31, 2011.

The following weighted-average assumptions were used to determine PMI’s benefit obligations at December 31:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	2.38	%	3.40	%
Rate of compensation increase	3.50		3.50		2.61		2.66

The discount rate for PMI’s U.S. plans is based on an index of high-quality corporate bonds with durations that match the benefit obligations. The discount rate for PMI’s non-U.S. plans was developed from local bond indices that match local benefit obligations as closely as possible.

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans									Non-U.S. Plans
(in millions)	2012			2011			2010			2012			2011			2010
Service cost	$	6		$	5		$	6		$	189		$	178		$	160
Interest cost	16			16			18			189			205			189
Expected return on plan assets	(15		)	(15		)	(16		)	(320		)	(323		)	(283		)
Amortization:
Net losses	9			5			5			120			58			39
Prior service cost	1			1			1			9			8			9
Net transition obligation	—			—			—			1			1			—
Termination, settlement and curtailment	2			2			1			—			1			(6		)
Net periodic pension cost	$	19		$	14		$	15		$	188		$	128		$	108

Termination, settlement and curtailment charges were due primarily to early retirement programs.

For the combined U.S. and non-U.S. pension plans, the estimated net loss and prior service cost that are expected to be amortized from accumulated other comprehensive earnings into net periodic benefit cost during 2013 are $212 million and $10 million, respectively.

The following weighted-average assumptions were used to determine PMI’s net pension cost:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	3.40	%	4.00	%	4.33	%
Expected rate of return on plan assets	5.70		6.25		7.20		6.21		6.21		6.69
Rate of compensation increase	3.50		3.50		4.50		2.66		2.90		3.21

PMI’s expected rate of return on plan assets is determined by the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

PMI and certain of its subsidiaries sponsor defined contribution plans. Amounts charged to expense for defined contribution plans totaled $66 million, $61 million and $53 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Plan Assets

PMI’s investment strategy for U.S. and non-U.S. plans is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the target allocation of PMI’s plan assets is broadly characterized as approximately a 60%/40% split between equity and debt securities. The strategy primarily utilizes indexed U.S. equity securities, international equity securities and investment-grade debt securities. PMI’s plans have no investments in hedge funds, private equity or derivatives. PMI attempts to mitigate investment risk by rebalancing between equity and debt asset classes once a year or as PMI’s contributions and benefit payments are made.

The fair value of PMI’s pension plan assets at December 31, 2012 and 2011, by asset category was as follows:

Asset Category (in millions)	At December 31, 2012		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	$	420	$	420	$	—	$	—
Equity securities:
U.S. securities	106		106		—		—
International securities	1,129		1,129		—		—
Investment funds(a)(b)	3,805		2,313		1,492		—
International government bonds	411		411		—		—
Corporate bonds	3		3		—		—
Other	37		37		—		—
Total	$	5,911	$	4,419	$	1,492	$	—

^(a)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 60% are invested in U.S. and international equities; 24% are invested in U.S. and international government bonds; 9% are invested in corporate bonds, and 7% are invested in real estate and other money markets.

^(b)  Mutual funds in the amount of $1,363 million were transferred from Level 2 to Level 1 because they are actively traded on a daily basis.

Asset Category (in millions)	At December 31, 2011		QuotedPricesIn ActiveMarkets forIdentical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		SignificantUnobservable Inputs(Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity securities:
U.S. securities	89		89		—		—
International securities	894		894		—		—
Investment funds(c)	3,704		826		2,878		—
International government bonds	314		314		—		—
Corporate bonds	2		2		—		—
Other	33		32		1		—
Total	$	5,047	$	2,168	$	2,879	$	—

^(c)  Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU, Citigroup Switzerland and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 53% are invested in U.S. and international equities; 34% are invested in U.S. and international government bonds; 7% are invested in corporate bonds, and 6% are invested in real estate and other money markets.

See Note 16. Fair Value Measurements for a discussion of the fair value of pension plan assets.

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and to meet specific funding requirements of its funded U.S. and non-U.S. plans. Currently, PMI anticipates making contributions of approximately $220 million in 2013 to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest rates.

The estimated future benefit payments from PMI pension plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	14	$	210
2014	45		219
2015	17		229
2016	18		241
2017	19		250
2018 - 2022	103		1,470

Postretirement Benefit Plans

Net postretirement health care costs consisted of the following for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans			Non-U.S. Plans
(in millions)	2012	2011	2010	2012	2011	2010
Service cost	$2	$2	$2	$2	$2	$2
Interest cost	5	5	5	5	5	5
Amortization:
Net losses	2	1	1	1	1	—
Net postretirement health care costs	$9	$8	$8	$8	$8	$7

The following weighted-average assumptions were used to determine PMI’s net postretirement costs for the years ended December 31, 2012, 2011 and 2010:

	U.S. Plans						Non-U.S. Plans
	2012		2011		2010		2012		2011		2010
Discount rate	4.50	%	5.40	%	5.90	%	5.45	%	5.14	%	5.99	%
Health care cost trend rate	7.50		8.00		7.50		6.55		6.29		7.14

PMI’s postretirement health care plans are not funded. The changes in the accumulated benefit obligation and net amount accrued at December 31, 2012 and 2011, were as follows:

	U.S. Plans						Non-U.S. Plans
(in millions)	2012			2011			2012			2011
Accumulated postretirement benefit obligation at January 1,	$	115		$	98		$	96		$	99
Service cost	2			2			2			2
Interest cost	5			5			5			5
Benefits paid	(4		)	(4		)	(5		)	(5		)
Assumption changes	10			11			11			(1		)
Actuarial losses (gains)	4			3			6			(2		)
Plan changes	—			—			(3		)	—
Currency	—			—			1			(2		)
Accumulated postretirement benefit obligation at December 31,	$	132		$	115		$	113		$	96

The current portion of PMI’s accrued postretirement health care costs of $11 million at December 31, 2012 and $10 million at December 31, 2011, is included in accrued employment costs on the consolidated balance sheet.

The following weighted-average assumptions were used to determine PMI’s postretirement benefit obligations at December 31, 2012 and 2011:

	U.S. Plans				Non-U.S. Plans
	2012		2011		2012		2011
Discount rate	4.05	%	4.50	%	4.59	%	5.45	%
Health care cost trend rate assumed for next year	7.50		7.50		6.46		6.55
Ultimate trend rate	5.00		5.00		4.88		4.77
Year that rate reaches the ultimate trend rate	2018		2017		2029		2029

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care trend rates would have the following effects as of December 31, 2012:

	One-Percentage-Point Increase		One-Percentage-Point Decrease
Effect on total service and interest cost	19.9	%	(15.3	)%
Effect on postretirement benefit obligation	15.1		(12.1	)

PMI’s estimated future benefit payments for its postretirement health care plans at December 31, 2012, are as follows:

(in millions)	U.S. Plans		Non-U.S. Plans
2013	$	5	$	6
2014	5		5
2015	6		5
2016	6		5
2017	6		5
2018 - 2022	33		28

Postemployment Benefit Plans

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering substantially all salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Net postemployment costs consisted of the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Service cost	$	30	$	28	$	26
Interest cost	22		22		24
Amortization of net loss	53		39		39
Other expense	75		106		54
Net postemployment costs	$	180	$	195	$	143

During 2012, 2011 and 2010, certain salaried employees left PMI under separation programs. These programs resulted in incremental postemployment costs, which are included in other expense, above.

The estimated net loss for the postemployment benefit plans that will be amortized from accumulated other comprehensive losses into net postemployment costs during 2013 is approximately $59 million.

The changes in the benefit obligations of the plans at December 31, 2012 and 2011, were as follows:

(in millions)	2012			2011
Accrued postemployment costs at January 1,	$	619		$	574
Service cost	30			28
Interest cost	22			22
Benefits paid	(196		)	(223		)
Actuarial losses	129			118
Other	78			100
Accrued postemployment costs at December 31,	$	682		$	619

The accrued postemployment costs were determined using a weighted-average discount rate of 4.4% and 6.8% in 2012 and 2011, respectively; an assumed ultimate annual weighted-average turnover rate of 2.1% and 2.5% in 2012 and 2011, respectively; assumed compensation cost increases of 3.9% in 2012 and 3.0% in 2011 and assumed benefits as defined in the respective plans. In accordance with local regulations, certain postemployment plans are funded. As a result, the accrued postemployment costs shown above are presented net of the related assets of $28 million and $24 million at December 31, 2012 and 2011, respectively. Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

Comprehensive Earnings (Losses)

The amounts recorded in accumulated other comprehensive losses at December 31, 2012, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(3,199	)	$	(82	)	$	(612	)	$	(3,893	)
Prior service cost	(60		)	7			—			(53		)
Net transition obligation	(7		)	—			—			(7		)
Deferred income taxes	377			26			185			588
Losses to be amortized	$	(2,889	)	$	(49	)	$	(427	)	$	(3,365	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2011, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(2,401	)	$	(54	)	$	(536	)	$	(2,991	)
Prior service cost	(70		)	3			—			(67		)
Net transition obligation	(8		)	—			—			(8		)
Deferred income taxes	299			19			163			481
Losses to be amortized	$	(2,180	)	$	(32	)	$	(373	)	$	(2,585	)

The amounts recorded in accumulated other comprehensive losses at December 31, 2010, consisted of the following:

(in millions)	Pension			Post- retirement			Post- employment			Total
Net losses	$	(1,425	)	$	(46	)	$	(468	)	$	(1,939	)
Prior service cost	(62		)	4			—			(58		)
Net transition obligation	(9		)	—			—			(9		)
Deferred income taxes	199			15			142			356
Losses to be amortized	$	(1,297	)	$	(27	)	$	(326	)	$	(1,650	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2012, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	129		$	3		$	53		$	185
Prior service cost	10			—			—			10
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	4			—			—			4
Deferred income taxes	(20		)	(1		)	(16		)	(37		)
	124			2			37			163
Other movements during the year:
Net losses	(931		)	(31		)	(129		)	(1,091		)
Prior service cost	—			4			—			4
Deferred income taxes	98			8			38			144
	(833		)	(19		)	(91		)	(943		)
Total movements in other comprehensive losses	$	(709	)	$	(17	)	$	(54	)	$	(780	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2011, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	63		$	3		$	39		$	105
Prior service cost	9			(1		)	—			8
Net transition obligation	1			—			—			1
Other income/expense:
Net losses	3			—			—			3
Deferred income taxes	(10		)	(1		)	(12		)	(23		)
	66			1			27			94
Other movements during the year:
Net losses	(1,042		)	(11		)	(107		)	(1,160		)
Prior service cost	(17		)	—			—			(17		)
Deferred income taxes	110			5			33			148
	$	(949	)	$	(6	)	$	(74	)	$	(1,029	)
Total movements in other comprehensive losses	$	(883	)	$	(5	)	$	(47	)	$	(935	)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2010, were as follows:

(in millions)	Pension			Post- retirement			Post- employment			Total
Amounts transferred to earnings as components of net periodic benefit cost:
Amortization:
Net losses	$	44		$	1		$	39		$	84
Prior service cost	10			—			—			10
Other income/expense:
Net gains	(1		)	—			—			(1		)
Prior service cost	3			—			—			3
Deferred income taxes	(8		)	—			(12		)	(20		)
	48			1			27			76
Other movements during the year:
Net losses	(294		)	(20		)	(44		)	(358		)
Prior service cost	(3		)	—			—			(3		)
Deferred income taxes	23			6			14			43
	$	(274	)	$	(14	)	$	(30	)	$	(318	)
Total movements in other comprehensive losses	$	(226	)	$	(13	)	$	(3	)	$	(242	)

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Stock Plans

12 Months Ended

Dec. 31, 2012

Employee Service Share-based Compensation, Aggregate Disclosures [Abstract]

Stock Plans

Stock Plans:

Performance Incentive Plan and Stock Compensation Plan for Non-Employee Directors

In May 2012, PMI's stockholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the "2012 Plan"). The 2012 Plan replaced the 2008 Performance Incentive Plan (the "2008 Plan") and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, PMI may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. While the 2008 Plan authorized incentive stock options, non-qualified stock options and stock appreciation rights, the 2012 Plan does not authorize any stock options or stock appreciation rights. Up to 30 million shares of PMI’s common stock may be issued under the 2012 Plan. At December 31, 2012, shares available for grant under the 2012 Plan were 29,994,920.

In 2008, PMI adopted the Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (the “Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the Non-Employee Directors Plan. As of December 31, 2012, shares available for grant under the plan were 798,801.

Restricted and Deferred Stock Awards

PMI may grant restricted stock and deferred stock awards to eligible employees; recipients may not sell, assign, pledge or otherwise encumber such shares or awards. Such shares or awards are subject to forfeiture if certain employment conditions are not met. Restricted stock and deferred stock awards generally vest on the third anniversary of the grant date. Shares of restricted stock carry voting and dividend rights. Deferred stock awards carry no such rights, although they do earn dividend equivalents.

During 2012, the activity for restricted stock and deferred stock awards was as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value Per Share
Balance at January 1, 2012	10,437,888		$	48.67
Granted	3,245,500		79.59
Vested	(3,744,454	)	39.65
Forfeited	(454,069	)	56.08
Balance at December 31, 2012	9,484,865		$	62.44

The weighted-average grant date fair value of the restricted stock and deferred stock awards granted to PMI employees during the years ended December 31, 2012, 2011 and 2010, was $258 million, $229 million and $169 million, or $79.59, $59.44 and $47.54 per restricted or deferred share, respectively. The fair value of the restricted stock and deferred stock awards at the date of grant is amortized to expense ratably over the restriction period. PMI recorded compensation expense for the restricted and deferred stock awards of $242 million, $162 million and $127 million for the years ended December 31, 2012, 2011 and 2010, respectively. During the first quarter of 2012, compensation expense included approximately $27 million of accelerated expense primarily associated with employees approaching or reaching certain age milestones that accelerate the vesting. As of December 31, 2012, PMI had $221 million of total unrecognized compensation cost related to non-vested restricted and deferred stock awards. These costs are expected to be recognized over a weighted-average period of 2 years, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

During the year ended December 31, 2012, 3.7 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $148 million. The total fair value of the awards that vested in 2012 was approximately $298 million.

During the year ended December 31, 2011, 1.8 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $84 million. The total fair value of the awards that vested in 2011 was approximately $107 million.

During the year ended December 31, 2010, 2.0 million shares of PMI restricted stock and deferred stock awards vested. Of this amount, 1.4 million shares went to PMI employees, and the remainder went to Altria employees who held PMI stock awards as a result of the spin-off. The grant date fair value of all the vested shares was approximately $123 million. The total fair value of the awards that vested in 2010 was approximately the same as the grant date fair value. The grant price information for restricted stock and deferred stock awarded prior to January 30, 2008, reflects the historical market price of Altria stock at date of grant and was not adjusted to reflect the spin-off.

Stock Option Awards

At December 31, 2012, PMI shares subject to option that remain under the 2008 Plan were as follows:

	Shares Subject to Option		Weighted- Average Exercise Price		Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at January 1, 2012	63,944		$	27.07
Options exercised	(27,133	)	28.35
Options cancelled	—		—
Balance/Exercisable at December 31, 2012	36,811		$	26.13	1 year	$	2	million

For the years ended December 31, 2012, 2011 and 2010, the total intrinsic value of PMI stock options exercised was $2 million, $129 million and $292 million, respectively.

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Segment Reporting (Other Expenses By Segment) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Segment Reporting Information [Line Items]
Depreciation expense	$ 801	$ 895	$ 844
Capital expenditures	1,056	897	713
European Union [Member]
Segment Reporting Information [Line Items]
Depreciation expense	181	210	212
Capital expenditures	391	382	329
Eastern Europe, Middle East & Africa [Member]
Segment Reporting Information [Line Items]
Depreciation expense	211	227	215
Capital expenditures	197	133	102
Asia [Member]
Segment Reporting Information [Line Items]
Depreciation expense	315	358	332
Capital expenditures	277	208	161
Latin America & Canada [Member]
Segment Reporting Information [Line Items]
Depreciation expense	84	90	75
Capital expenditures	127	140	120
Total Reportable Segments [Member]
Segment Reporting Information [Line Items]
Depreciation expense	791	885	834
Capital expenditures	992	863	712
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Depreciation expense	10	10	10
Capital expenditures	$ 64	$ 34	$ 1

XML

Asset Impairment and Exit Costs

12 Months Ended

Dec. 31, 2012

Restructuring and Related Activities [Abstract]

Asset Impairment and Exit Costs

Asset Impairment and Exit Costs:

During 2012, 2011 and 2010, pre-tax asset impairment and exit costs consisted of the following:

(in millions)	2012		2011		2010
Separation programs:
European Union	$	—	$	35	$	27
Eastern Europe, Middle East & Africa	—		6		—
Asia	13		7		—
Latin America & Canada	29		15		—
Total separation programs	42		63		27
Contract termination charges:
Eastern Europe, Middle East & Africa	—		12		—
Asia	13		—		20
Total contract termination charges	13		12		20
Asset impairment charges:
European Union	5		10		—
Eastern Europe, Middle East & Africa	5		7		—
Asia	13		8		—
Latin America & Canada	5		9		—
Total asset impairment charges	28		34		—
Asset impairment and exit costs	$	83	$	109	$	47

Exit Costs

Separation Programs

PMI recorded pre-tax separation program charges of $42 million, $63 million and $27 million for the years ended December 31, 2012, 2011 and 2010, respectively. The 2012 pre-tax separation program charges primarily related to severance costs associated with factory restructurings. The 2011 pre-tax separation program charges primarily related to severance costs for factory and R&D restructurings. The 2010 pre-tax separation program charges primarily related to severance costs.

Contract Termination Charges

During 2012, PMI recorded exit costs of $13 million related to the termination of distribution agreements in Asia.

During 2011, PMI recorded exit costs of $12 million related to the termination of a distribution agreement in Eastern Europe, Middle East & Africa.

On February 25, 2010, PMI’s affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). For further details on this business combination, see Note 6. Acquisitions and Other Business Arrangements. During the fourth quarter of 2010, PMI recorded exit costs of $20 million related to the early termination of a transition services agreement between FTC and PMFTC.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for PMI was as follows:

(in millions)
Liability balance, January 1, 2011	$	48
Charges	75
Cash spent	(98		)
Currency/other	3
Liability balance, December 31, 2011	$	28
Charges	55
Cash spent	(57		)
Currency/other	(6		)
Liability balance, December 31, 2012	$	20

Cash payments related to exit costs at PMI were $57 million, $98 million and $75 million for the years ended December 31, 2012, 2011 and 2010, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $20 million, and these costs will be substantially paid by 2013.

Asset Impairment Charges

PMI recorded pre-tax asset impairment charges of $28 million and $34 million for the years ended December 31, 2012 and 2011, respectively. The 2012 and 2011 charges primarily related to the consolidation of R&D activities as well as charges for factory restructurings.

XML

Acquisitions and Other Business Arrangements (Narrative) (Details) (USD $)	0 Months Ended						0 Months Ended
	Feb. 25, 2010	Dec. 31, 2012	Feb. 25, 2010 Fortune Tobacco Corporation [Member]	Feb. 25, 2010 Fortune Tobacco Corporation [Member] Agreed Upon Value to Sell Between February 2015 And February 2018 [Member]	Dec. 31, 2012 Fortune Tobacco Corporation [Member] Redeemable Noncontrolling Interest [Member]	Jun. 30, 2010 Alliance One Brasil Exportadora De Tabacos Ltda. And Universal Leaf Tabacos Ltda. Agreements [Member]	Jun. 30, 2010 Brazil [Member] employee farmer	Jun. 30, 2010 Brazil [Member] Alliance One Brasil Exportadora De Tabacos Ltda. [Member] contract	Jun. 30, 2010 Brazil [Member] Universal Leaf Tabacos Ltda. [Member] contract	Jun. 30, 2011 Jordan [Member]	Jan. 31, 2011 Australia And New Zealand [Member]
Business Acquisition [Line Items]
Accretion to redeemable value	$ 477,000,000
Cash of acquired entity, other noncash consideration			1,170,000,000
Percent of PMFTC's comprehensive income or loss attributable to the redeemable noncontrolling interest		20.00%			50.00%
Redeemable noncontrolling interest				1,170,000,000
Number of contracts with tobacco farmers							17,000
Percentage of PMI's global leaf requirement							10.00%
Number of contracts with tobacco farmers, per supplier								9,000	8,000
Minimum number of employees							200
Acquisition of business							83,000,000			42,000,000	20,000,000
Purchase price allocated to other intangible assets						34,000,000
Purchase price allocated to inventories						33,000,000
Purchase price allocated to goodwill						18,000,000
Purchase price allocated to property, plant and equipment						16,000,000
Purchase price allocated to other non-current assets						11,000,000
Purchase price allocated to other current liabilities						$ 29,000,000

XML

Financial Instruments (Pre-Tax Effect of Foreign Exchange Contracts Designated as Net Investment Hedging Instruments) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	$ (22)	$ 18	$ 33
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	(14)	2	12
Derivative (gains)/losses transferred to earnings	(22)	18	33
Foreign Exchange Contract [Member] | Other Comprehensive Income (Loss) [Member] | Net Investment Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	(19)	2	24
Foreign Exchange Contract [Member] | Interest expense, net [Member] | Net Investment Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative (gains)/losses transferred to earnings	$ 0	$ 0	$ 0

XML

Goodwill and Other Intangible Assets, net

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, net

Goodwill and Other Intangible Assets, net:

Goodwill and other intangible assets, net, by segment were as follows:

	Goodwill				Other IntangibleAssets, net
(in millions)	December 31, 2012		December 31, 2011		December 31, 2012		December 31, 2011
European Union	$	1,448	$	1,392	$	647	$	663
Eastern Europe, Middle East & Africa	637		666		242		250
Asia	4,791		4,966		1,542		1,633
Latin America & Canada	3,024		2,904		1,188		1,151
Total	$	9,900	$	9,928	$	3,619	$	3,697

Goodwill is due primarily to PMI’s acquisitions in Canada, Indonesia, Mexico, Greece, Serbia, Colombia and Pakistan, as well as the business combination in the Philippines in February 2010. The movements in goodwill were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balance at January 1, 2011	$	1,443		$	702		$	5,004		$	3,012		$	10,161
Changes due to:
Acquisitions	—			1			1			1			3
Currency	(51		)	(37		)	(39		)	(109		)	(236		)
Balance at December 31, 2011	1,392			666			4,966			2,904			9,928
Changes due to:
Currency	56			(29		)	(175		)	120			(28		)
Balance at December 31, 2012	$	1,448		$	637		$	4,791		$	3,024		$	9,900

Additional details of other intangible assets were as follows:

	December 31, 2012				December 31, 2011
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	2,046			$	2,067
Amortizable intangible assets	2,046		$	473	2,001		$	371
Total other intangible assets	$	4,092	$	473	$	4,068	$	371

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia in 2005 and Mexico in 2007. Amortizable intangible assets primarily consist of certain trademarks, distribution networks and non-compete agreements associated with business combinations. The range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at December 31, 2012, is as follows:

Description	Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	2 - 40 years	26 years
Distribution networks	20 - 30 years	15 years
Non-compete agreements	3 - 10 years	2 years
Other (including farmer contracts and intellectual property rights)	12.5 - 17 years	13 years

Pre-tax amortization expense for intangible assets during the years ended December 31, 2012, 2011 and 2010, was $97 million, $98 million and $88 million, respectively. Amortization expense for each of the next five years is estimated to be $97 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

The increase in the gross carrying amount of other intangible assets from December 31, 2011, was due to currency movements.

XML

Related Party Information

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Related Party Information

Related Party Information:

Grupo Carso, S.A.B. de C.V. (“Grupo Carso”) retains a 20% noncontrolling interest in PMI’s Mexican tobacco business. A director of PMI has an affiliation with Grupo Carso. In 2007, PMI and Grupo Carso entered into an agreement for PMI to potentially acquire, or for Grupo Carso to potentially sell to PMI, Grupo Carso’s remaining 20% noncontrolling interest in the future.

XML

Acquisitions and Other Business Arrangements

12 Months Ended

Dec. 31, 2012

Business Combination, Description [Abstract]

Acquisitions and Other Business Arrangements

Acquisitions and Other Business Arrangements:

Philippines Business Combination

On February 25, 2010, PMI’s affiliate, Philip Morris Philippines Manufacturing Inc. (“PMPMI”), and Fortune Tobacco Corporation (“FTC”) combined their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company called PMFTC Inc. (“PMFTC”). PMPMI and FTC hold equal economic interests in PMFTC, while PMI manages the day-to-day operations of PMFTC and has a majority of its Board of Directors. Consequently, PMI accounted for the contributed assets and liabilities of FTC as a business combination. The establishment of PMFTC permitted both parties to benefit from their respective, complementary brand portfolios, as well as cost synergies from the resulting integration of manufacturing, distribution and procurement, and the further development and advancement of tobacco growing in the Philippines.

As PMI has control of PMFTC, the contribution of PMPMI’s net assets was recorded at book value, while the contribution of the FTC net assets to PMFTC was recorded at fair value. The difference between the two contributions resulted in an increase to PMI’s additional paid-in capital in 2010 of $477 million.

The fair value of the assets and liabilities contributed by FTC in this non-cash transaction was determined to be $1.17 billion. FTC holds the right to sell its interest in PMFTC to PMI, except in certain circumstances, during the period from February 25, 2015, through February 24, 2018, at an agreed-upon value of $1.17 billion, which was recorded on PMI’s consolidated balance sheet as a redeemable noncontrolling interest at the date of the business combination. The amount of FTC’s redeemable noncontrolling interest at the date of the business combination was determined as follows:

(in millions)
Noncontrolling interest in contributed net assets	$	693
Accretion to redeemable value	477
Redeemable noncontrolling interest at date of business combination	$	1,170

PMI decided to immediately recognize the accretion to redeemable value rather than recognizing it over the term of the agreement with FTC. This accretion has been charged against additional paid-in capital and fully offsets the increase that resulted from the contributions of net assets to PMFTC, noted above.

With the consolidation of PMFTC, FTC’s share of PMFTC’s comprehensive income or loss is attributable to the redeemable noncontrolling interest, impacting the carrying value. To the extent that the attribution of these amounts would cause the carrying value to fall below the redemption amount of $1.17 billion, the carrying amount would be adjusted back up to the redemption value through stockholders’ (deficit) equity. The movement in redeemable noncontrolling interest after the business combination is as follows:

(in millions)
Redeemable noncontrolling interest at date of business combination	$	1,170
Share of net earnings	26
Dividend payments	(24		)
Currency translation	16
Redeemable noncontrolling interest at December 31, 2010	$	1,188
Share of net earnings	97
Dividend payments	(73		)
Currency translation	—
Redeemable noncontrolling interest at December 31, 2011	$	1,212
Share of net earnings	171
Dividend payments	(105		)
Currency translation	25
Net loss and prior service cost	(2		)
Redeemable noncontrolling interest at December 31, 2012	$	1,301

In future periods, if the fair value of 50% of PMFTC were to drop below the redemption value of $1.17 billion, the difference would be treated as a special dividend to FTC and would reduce PMI’s earnings per share. Reductions in earnings per share may be partially or fully reversed in subsequent periods if the fair value of the redeemable noncontrolling interest increases relative to the redemption value. Such increases in earnings per share would be limited to cumulative prior reductions. At December 31, 2012, PMI determined that 50% of the fair value of PMFTC exceeded the redemption value of $1.17 billion.

Brazil

In June 2010, PMI announced that its affiliate, Philip Morris Brasil Industria e Comercio Ltda. (“PMB”), would begin directly sourcing tobacco leaf from approximately 17,000 tobacco farmers in Southern Brazil. This initiative enhanced PMI’s direct involvement in the supply chain and is expected to provide approximately 10% of PMI’s global leaf requirements. The vertically integrated structure was made possible following separate agreements with two leaf suppliers in Brazil, Alliance One Brasil Exportadora de Tabacos Ltda. (“AOB”) and Universal Leaf Tabacos Ltda. (“ULT”). These agreements resulted in AOB assigning approximately 9,000 contracts with tobacco farmers to PMB and ULT assigning approximately 8,000 contracts with tobacco farmers to PMB. As a result, PMB offered employment to more than 200 employees, most of them agronomy specialists, and acquired related assets in Southern Brazil. The purchase price for the net assets and the contractual relationships was $83 million, which was paid in 2010. PMI accounted for these transactions as a business combination. The allocation of the purchase price was to other intangible assets ($34 million, farmers contracts), inventories ($33 million), goodwill ($18 million), property, plant and equipment ($16 million) and other non-current assets ($11 million), partially offset by other current liabilities ($29 million, which consists primarily of the total amount of bank guarantees for tobacco farmers' rural credit facilities).

Other

In June 2011, PMI completed the acquisition of a cigarette business in Jordan, consisting primarily of cigarette manufacturing assets and inventories, for $42 million. In January 2011, PMI acquired a cigar business, consisting primarily of trademarks in the Australian and New Zealand markets, for $20 million.

The effects of these and other smaller acquisitions were not material to PMI's consolidated financial position, results of operations or operating cash flows in any of the periods presented.

XML

Indebtedness (Short-Term Borrowings) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Amount Outstanding	$ 2,419	$ 1,511
Commercial Paper [Member]
Short-term Debt [Line Items]
Amount Outstanding	1,972	1,264
Average Year-End Rate	0.20%	0.10%
Bank Loans [Member]
Short-term Debt [Line Items]
Average Year-End Rate	6.60%	7.70%
Short Term Credit Arrangement [Member]
Short-term Debt [Line Items]
Amount Outstanding	$ 447	$ 247

XML

Contingencies (Number of Tobacco-Related Cases Pending Against us and/or Our Subsidiaries or Indemnitees) (Details)	Dec. 31, 2012 litigation_case	Dec. 31, 2011 litigation_case	Dec. 31, 2010 litigation_case	May 01, 2010 litigation_case
Individual Smoking And Health Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM	76	75	94
Individual Smoking And Health Cases [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM	5
Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	11	10	11
Health Care Cost Recovery Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	15	11	10
Lights Class Actions [Member] | Israel [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2	2	2	2
Individual Lights Cases - Small Claims Court [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM	7	9	10
Public Civil Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	4	3	7

XML

Segment Reporting (Long-Lived Assets By Segment) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Segment Reporting Information [Line Items]
Long-lived assets	$ 6,986	$ 6,571	$ 7,007
European Union [Member]
Segment Reporting Information [Line Items]
Long-lived assets	3,066	2,938	3,226
Eastern Europe, Middle East & Africa [Member]
Segment Reporting Information [Line Items]
Long-lived assets	1,215	1,094	1,158
Asia [Member]
Segment Reporting Information [Line Items]
Long-lived assets	1,831	1,687	1,765
Latin America & Canada [Member]
Segment Reporting Information [Line Items]
Long-lived assets	735	706	663
Total Reportable Segments [Member]
Segment Reporting Information [Line Items]
Long-lived assets	6,847	6,425	6,812
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Long-lived assets	$ 139	$ 146	$ 195

XML

Indebtedness (Debt Offerings During The Current Period) (Details) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 US Dollar Notes [Member] 4.500% U.S. Dollar Notes Due March 2042 [Member] USD ($)		Dec. 31, 2012 US Dollar Notes [Member] 1.625% U.S. Dollar Notes Due March 2017 [Member] USD ($)		Dec. 31, 2012 US Dollar Notes [Member] 1.125% United States Dollar Notes Due August 2017 [Member] USD ($)		Dec. 31, 2012 US Dollar Notes [Member] 2.500% United States Dollar Notes Due August 2022 [Member] USD ($)		Dec. 31, 2012 US Dollar Notes [Member] 3.875% United States Dollar Notes Due August 2042 [Member] USD ($)		Dec. 31, 2012 Foreign Currency Obligations [Member] 2.125% Euro Note Due May 2019 [Member] USD ($)		Dec. 31, 2012 Foreign Currency Obligations [Member] 2.125% Euro Note Due May 2019 [Member] EUR (€)		Dec. 31, 2012 Foreign Currency Obligations [Member] 2.875% Euro Note Due May 2024 [Member] USD ($)		Dec. 31, 2012 Foreign Currency Obligations [Member] 2.875% Euro Note Due May 2024 [Member] EUR (€)		Dec. 31, 2012 Foreign Currency Obligations [Member] 1.000% Swiss Franc Notes Due September 2020 [Member] USD ($)		Dec. 31, 2012 Foreign Currency Obligations [Member] 1.000% Swiss Franc Notes Due September 2020 [Member] CHF
Debt Instrument [Line Items]
Face Value	$ 700	[1]	$ 550	[1]	$ 750	[2]	$ 750	[2]	$ 750	[2]	$ 951	[3]	€ 750	[3]	$ 761	[3]	€ 600	[3]	$ 334	[4]	325	[4]
Interest Rate	4.50%	[1]	1.625%	[1]	1.125%	[2]	2.50%	[2]	3.875%	[2]	2.125%	[3]	2.125%	[3]	2.875%	[3]	2.875%	[3]	1.00%	[4]	1.00%	[4]
Issuance	Mar. 20, 2012	[1]	Mar. 20, 2012	[1]	Aug. 21, 2012	[2]	Aug. 21, 2012	[2]	Aug. 21, 2012	[2]	May 30, 2012	[3]	May 30, 2012	[3]	May 30, 2012	[3]	May 30, 2012	[3]	Sep. 18, 2012	[4]	Sep. 18, 2012	[4]
Maturity	Mar. 20, 2042	[1]	Mar. 20, 2017	[1]	Aug. 21, 2017	[2]	Aug. 22, 2022	[2]	Aug. 21, 2042	[2]	May 30, 2019	[3]	May 30, 2019	[3]	May 01, 2024	[3]	May 01, 2024	[3]	Sep. 18, 2020	[4]	Sep. 18, 2020	[4]

[1] Interest on these notes is payable semiannually, and the first payment was made in September 2012

[2] Interest on these notes is payable semiannually beginning in February 2013

[3] Interest on these notes is payable annually beginning in May 2013

[4] Interest on these notes is payable annually beginning in September 2013

XML

Benefit Plans (Amounts Recorded in Accumulated Other Comprehensive Losses) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan Disclosure [Line Items]
Net losses	$ (3,893)	$ (2,991)	$ (1,939)
Prior service cost	(53)	(67)	(58)
Net transition obligation	(7)	(8)	(9)
Deferred income taxes	588	481	356
Amounts to be amortized	(3,365)	(2,585)	(1,650)
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Net losses	(3,199)	(2,401)	(1,425)
Prior service cost	(60)	(70)	(62)
Net transition obligation	(7)	(8)	(9)
Deferred income taxes	377	299	199
Amounts to be amortized	(2,889)	(2,180)	(1,297)
Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Net losses	(82)	(54)	(46)
Prior service cost	7	3	4
Net transition obligation	0		0
Deferred income taxes	26	19	15
Amounts to be amortized	(49)	(32)	(27)
Postemployment Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net losses	(612)	(536)	(468)
Prior service cost	0		0
Net transition obligation	0		0
Deferred income taxes	185	163	142
Amounts to be amortized	$ (427)	$ (373)	$ (326)

XML

Indebtedness (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Multi-Year Revolving Credit, Expiring October 25, 2016 [Member]	Oct. 25, 2011 Revolving Credit Expiring December 2012 [Member]	Dec. 31, 2012 Short Term Credit Arrangement [Member]	Dec. 31, 2011 Short Term Credit Arrangement [Member]	Dec. 31, 2012 Multi-Year Revolving Credit, Expiring March 31, 2015 [Member]
Indebtedness [Line Items]
Capital lease obligations	$ 37,000,000	$ 85,000,000
Committed credit facilities, maximum borrowing capacity	6,000,000,000		3,500,000,000		2,000,000,000	1,900,000,000	2,500,000,000
Revolving credit facility no longer available to the company				2,700,000,000
Ratio of consolidated EBITDA to consolidated interest expense on a rolling 4 quarter basis, minimum	3.5
Ratio of consolidated EBITDA to consolidated interest expense on a rolling 4 quarter basis	16
Credit facilities, outstanding amount					$ 447,000,000	$ 247,000,000

XML

Benefit Plans (Fair Value of Pension Plan Assets) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets			$ 5,047
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	1,363
Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	4,419		2,168
Significant Other Observable Inputs (Level 2) [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	1,492		2,879
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	5,911		5,047
Pension [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	420		11
Pension [Member] | U.S. securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	106		89
Pension [Member] | International securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	1,129		894
Pension [Member] | Investment funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	3,805	[1]	3,704	[2]
Pension [Member] | International government bonds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	411		314
Pension [Member] | Corporate bonds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	3		2
Percentage of investment in securities	9.00%		7.00%
Pension [Member] | Other [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	37		33
Pension [Member] | US and International Equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of investment in securities	60.00%		53.00%
Pension [Member] | US and International Government Bonds [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of investment in securities	24.00%		34.00%
Pension [Member] | Real Estate And Other Money Markets [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of investment in securities	7.00%		6.00%
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	4,419		2,168
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	420		11
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | U.S. securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	106		89
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | International securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	1,129		894
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | Investment funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	2,313	[1]	826	[2]
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | International government bonds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	411		314
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | Corporate bonds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	3		2
Pension [Member] | Quoted Prices In Active Markets For Identical Assets/Liabilities (Level 1) [Member] | Other [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	37		32
Pension [Member] | Significant Other Observable Inputs (Level 2) [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	1,492		2,879
Pension [Member] | Significant Other Observable Inputs (Level 2) [Member] | Investment funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	1,492	[1]	2,878	[2]
Pension [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair Value of Plan Assets	$ 0		$ 1

[1] Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 60% are invested in U.S. and international equities; 24% are invested in U.S. and international government bonds; 9% are invested in corporate bonds, and 7% are invested in real estate and other money markets.

[2] Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU, Citigroup Switzerland and Barclays Capital U.S. for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 53% are invested in U.S. and international equities; 34% are invested in U.S. and international government bonds; 7% are invested in corporate bonds, and 6% are invested in real estate and other money markets.

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Summary of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Cash and cash equivalents

Cash and cash equivalents

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Depreciation

Depreciation

Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 15 years, and buildings and building improvements over periods up to 40 years. Depreciation expense for 2012, 2011 and 2010 was $801 million, $895 million and $844 million, respectively.

Goodwill and non-amortizable intangible assets valuation

Goodwill and non-amortizable intangible assets valuation

PMI tests goodwill and non-amortizable intangible assets for impairment annually or more frequently if events occur that would warrant such review. PMI performs its annual impairment analysis in the first quarter of each year. The impairment analysis involves comparing the fair value of each reporting unit or non-amortizable intangible asset to the carrying value. If the carrying value exceeds the fair value, goodwill or a non-amortizable intangible asset is considered impaired. To determine the fair value of goodwill, PMI primarily uses a discounted cash flow model, supported by the market approach using earnings multiples of comparable companies. To determine the fair value of non-amortizable intangible assets, PMI primarily uses a discounted cash flow model applying the relief-from-royalty method. These discounted cash flow models include management assumptions relevant for forecasting operating cash flows, which are subject to changes in business conditions, such as volumes and prices, costs to produce, discount rates and estimated capital needs. Management considers historical experience and all available information at the time the fair values are estimated, and PMI believes these assumptions are consistent with the assumptions a hypothetical marketplace participant would use. PMI concluded that the fair value of our reporting units and non-amortizable intangible assets exceeded the carrying value, and any reasonable movement in the assumptions would not result in an impairment. Since the March 28, 2008, spin-off from Altria Group, Inc. ("Altria"), PMI has not recorded a charge to earnings for an impairment of goodwill or non-amortizable intangible assets.

Foreign currency translation

Foreign currency translation

PMI translates the results of operations of its subsidiaries and affiliates using average exchange rates during each period, whereas balance sheet accounts are translated using exchange rates at the end of each period. Currency translation adjustments are recorded as a component of stockholders’ (deficit) equity. In addition, some of PMI’s subsidiaries have assets and liabilities denominated in currencies other than their functional currencies, and to the extent those are not designated as net investment hedges, these assets and liabilities generate transaction gains and losses when translated into their respective functional currencies. PMI recorded net transaction losses of $51 million, $24 million and $17 million for the years ended December 31, 2012, 2011 and 2010, respectively, in marketing, administration and research costs on the consolidated statements of earnings.

Hedging instruments

Hedging instruments

Derivative financial instruments are recorded at fair value on the consolidated balance sheets as either assets or liabilities. Changes in the fair value of derivatives are recorded each period either in accumulated other comprehensive losses on the consolidated balance sheet, or

in earnings, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive losses are reclassified to the consolidated statements of earnings in the periods in which operating results are affected by the hedged item. Cash flows from hedging instruments are classified in the same manner as the affected hedged item in the consolidated statements of cash flows.

Impairment of long-lived assets

Impairment of long-lived assets

PMI reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. PMI performs undiscounted operating cash flow analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, PMI groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Income taxes

Income taxes

Income tax provisions for jurisdictions outside the United States, as well as state and local income tax provisions, are determined on a separate company basis, and the related assets and liabilities are recorded in PMI’s consolidated balance sheets. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

PMI recognizes accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes on the consolidated statements of earnings.

Inventories

Inventories

Inventories are stated at the lower of cost or market. The first-in, first-out and average cost methods are used to cost substantially all inventories. It is a generally recognized industry practice to classify leaf tobacco inventory as a current asset although part of such inventory, because of the duration of the aging process, ordinarily would not be utilized within one year.

Marketing costs

Marketing costs

PMI promotes its products with advertising, consumer incentives and trade promotions. Such programs include, but are not limited to, discounts, rebates, in-store display incentives and volume-based incentives. Advertising costs are expensed as incurred. Trade promotions are recorded as a reduction of revenues based on amounts estimated as being due to customers at the end of a period, based principally on historical utilization. For interim reporting purposes, advertising and certain consumer incentive expenses are charged to earnings based on estimated sales and related expenses for the full year.

Revenue recognition

Revenue recognition

PMI recognizes revenues, net of sales incentives and including shipping and handling charges billed to customers, either upon shipment or delivery of goods when title and risk of loss pass to customers. Excise taxes billed by PMI to customers are reported in net revenues. Shipping and handling costs are classified as part of cost of sales and were $802 million, $905 million and $653 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Software costs

Software costs

PMI capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment on PMI’s consolidated balance sheets and are amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed five years.

Stock-based compensation

Stock-based compensation

PMI measures compensation cost for all stock-based awards at fair value on date of grant and recognizes the compensation costs over the service periods for awards expected to vest. The fair value of restricted stock and deferred stock is determined based on the number of shares granted and the market value at date of grant.

Excess tax benefits from the vesting of stock-based awards of $24 million, $19 million and $32 million were recognized in additional paid-in capital as of December 31, 2012, 2011 and 2010, respectively, and were presented as financing cash flows.

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Goodwill and Other Intangible Assets, net (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Goodwill And Other Intangible Assets [Line Items]
Intangible assets, pre-tax amortization expense	$ 97	$ 98	$ 88
Maximum [Member]
Goodwill And Other Intangible Assets [Line Items]
Estimated maximum amortization expense, year one, assuming no additional transactions occur that require the amortization of intangible assets	97
Estimated maximum amortization expense, year two, assuming no additional transactions occur that require the amortization of intangible assets	97
Estimated maximum amortization expense, year three, assuming no additional transactions occur that require the amortization of intangible assets	97
Estimated maximum amortization expense, year four, assuming no additional transactions occur that require the amortization of intangible assets	97
Estimated maximum amortization expense, year five, assuming no additional transactions occur that require the amortization of intangible assets	$ 97

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes:

Earnings before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2012, 2011 and 2010:

(in millions)	2012			2011			2010
Earnings before income taxes	$	12,987		$	12,532		$	10,324
Provision for income taxes:
United States federal:
Current	$	226		$	270		$	157
Deferred	(61		)	118			145
	165			388			302
State and local	—			—			1
Total United States	165			388			303
Outside United States:
Current	3,855			3,368			2,567
Deferred	(187		)	(103		)	(44		)
Total outside United States	3,668			3,265			2,523
Total provision for income taxes	$	3,833		$	3,653		$	2,826

United States income tax is primarily attributable to repatriation costs.

At December 31, 2012, applicable United States federal income taxes and foreign withholding taxes have not been provided on approximately $18 billion of accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. These earnings have been or will be invested to support the growth of PMI's international business. Further, PMI does not foresee a need to repatriate these earnings to the U.S. since its U.S. cash requirements are supported by distributions from foreign entities of earnings that have not been designated as permanently reinvested and existing credit facilities. Repatriation of earnings from foreign subsidiaries for which PMI has asserted that the earnings are permanently reinvested would result in additional U.S. income and foreign withholding taxes. The determination of the amount of deferred tax related to these earnings is not practicable.

On March 28, 2008, PMI entered into a Tax Sharing Agreement (the “Tax Sharing Agreement”) with Altria. The Tax Sharing Agreement generally governs PMI’s and Altria’s respective rights, responsibilities and obligations for pre-distribution periods and for potential taxes on the spin-off of PMI by Altria. With respect to any potential tax resulting from the spin-off of PMI by Altria, responsibility for the tax will be allocated to the party that acted (or failed to act) in a manner that resulted in the tax.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)	2012			2011			2010
Balance at January 1,	$	104		$	95		$	174
Additions based on tax positions related to the current year	9			17			18
Additions for tax positions of previous years	309			8			35
Reductions for tax positions of prior years	(1		)	(8		)	(125		)
Reductions due to lapse of statute of limitations	—			(7		)	(1		)
Settlements	(297		)	—			(6		)
Other	—			(1		)	—
Balance at December 31,	$	124		$	104		$	95

During 2012, PMI recorded additions to the unrecognized tax benefits liability for tax positions of previous years of $309 million. Included in this amount is $287 million which is related to the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2004-2006. The settlement with the IRS resulted in a reduction of the unrecognized tax benefits liability of $296 million in the same period (reflected in the $297 million of settlements in the table above). After consideration of the impact of the settlement on repatriation costs for subsequent tax years as well as interest costs, the net impact on the 2012 effective tax rate was $79 million, as noted below.

Unrecognized tax benefits and PMI’s liability for contingent income taxes, interest and penalties were as follows:

(in millions)	December 31, 2012			December 31, 2011			December 31, 2010
Unrecognized tax benefits	$	124		$	104		$	95
Accrued interest and penalties	37			28			30
Tax credits and other indirect benefits	(72		)	(55		)	(58		)
Liability for tax contingencies	$	89		$	77		$	67

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $50 million at December 31, 2012. The remainder, if recognized, would principally affect deferred taxes.

For the years ended December 31, 2012, 2011 and 2010, PMI recognized (expense) income in its consolidated statements of earnings of $(65) million, less than $1 million and $17 million, respectively, related to interest and penalties.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2007 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. Years still open to examination by foreign tax authorities in major jurisdictions include Germany (2007 onward), Indonesia (2007 onward), Russia (2010 onward) and Switzerland (2011 onward).

It is reasonably possible that within the next twelve months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties. An estimate of any possible change cannot be made at this time.

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2012, 2011 and 2010:

	2012		2011		2010
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
Foreign rate differences	(11.8	)	(12.5	)	(10.0	)
Dividend repatriation cost	6.0		6.5		3.5
Reversal of tax reserves no longer required	—		—		(1.4	)
Other	0.3		0.1		0.3
Effective tax rate	29.5	%	29.1	%	27.4	%

The 2012 effective tax rate increased 0.4 percentage points to 29.5%. The 2012 effective tax rate was unfavorably impacted by an additional income tax provision of $79 million following the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2004-2006, partially offset by a $40 million benefit from a tax accounting method change in Germany. Prior to March 28, 2008, PMI was a wholly owned subsidiary of Altria.

The 2011 effective tax rate increased 1.7 percentage points to 29.1%. The 2011 effective tax rate was favorably impacted by an enacted decrease in corporate income tax rates in Greece ($11 million) and the reversal of a valuation allowance in Brazil ($15 million).

The 2010 effective tax rate was favorably impacted by the reversal of tax reserves ($148 million) following the conclusion of the IRS examination of Altria's consolidated tax returns for the years 2000 through 2003, partially offset by the negative impact of an enacted increase in corporate income tax rates in Greece ($21 million) and the net result of an audit in Italy ($6 million).

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:

	At December 31,
(in millions)	2012			2011
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	279		$	223
Accrued pension costs	262			193
Inventory	135			76
Accrued liabilities	150			145
Foreign exchange	52			—
Other	139			110
Total deferred income tax assets	1,017			747
Deferred income tax liabilities:
Trade names	(816		)	(818		)
Property, plant and equipment	(320		)	(323		)
Unremitted earnings	(845		)	(897		)
Foreign exchange	—			(31		)
Total deferred income tax liabilities	(1,981		)	(2,069		)
Net deferred income tax liabilities	$	(964	)	$	(1,322	)

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Accumulated Other Comprehensive Losses (Components of Accumulated Other Comprehensive Losses, Net Of Taxes) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Currency translation adjustments	$ (331)	$ (293)	$ 507
Pension and other benefits	(3,365)	(2,585)	(1,650)
Derivatives accounted for as hedges	92	15	2
Equity securities	0	0	1
Total accumulated other comprehensive losses	$ (3,604)	$ (2,863)	$ (1,140)

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Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements:

The authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of input that may be used to measure fair value, which are as follows:

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.

PMI's policy is to reflect transfers between hierarchy levels at the end of the reporting period.

Derivative Financial Instruments — Foreign Exchange Contracts

PMI assesses the fair value of its derivative financial instruments, which consist of deliverable and non-deliverable foreign exchange forward contracts, foreign currency swaps, foreign currency collars and foreign currency options, using internally developed models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. PMI’s derivative financial instruments have been classified within Level 2 at December 31, 2012 and 2011. See Note 15. Financial Instruments for additional discussion on derivative financial instruments.

Pension Plan Assets

The fair value of pension plan assets, determined by using readily available quoted market prices in active markets, has been classified within Level 1 of the fair value hierarchy at December 31, 2012 and 2011. The fair value of pension plan assets determined by using quoted prices in markets that are not active has been classified within Level 2 at December 31, 2012 and 2011. See Note 13. Benefit Plans for additional discussion on pension plan assets.

Debt

The fair value of PMI’s outstanding debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $37 million of capital lease obligations, was $20,383 million at December 31, 2012. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $85 million of capital lease obligations, was $16,949 million at December 31, 2011.

The aggregate fair values of PMI’s derivative financial instruments, pension plan assets and debt as of December 31, 2012 and 2011, were as follows:

(in millions)	Fair ValueAtDecember 31,2012		QuotedPricesin Active Markets forIdenticalAssets/Liabilities(Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs(Level 3)
Assets:
Foreign exchange contracts	$	160	$	—	$	160	$	—
Pension plan assets (a)	5,911		4,419		1,492		—
Total assets	$	6,071	$	4,419	$	1,652	$	—
Liabilities:
Debt	$	22,719	$	22,316	$	403	$	—
Foreign exchange contracts	55		—		55		—
Total liabilities	$	22,774	$	22,316	$	458	$	—
(a) Mutual funds in the amount of $1,363 million were transferred from Level 2 to Level 1 because they are actively traded on a daily basis.
(in millions)	Fair Value AtDecember 31, 2011		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs(Level 3)
Assets:
Foreign exchange contracts	$	145	$	—	$	145	$	—
Pension plan assets	5,047		2,168		2,879		—
Total assets	$	5,192	$	2,168	$	3,024	$	—
Liabilities:
Debt	$	18,900	$	18,458	$	442	$	—
Foreign exchange contracts	66		—		66		—
Total liabilities	$	18,966	$	18,458	$	508	$	—

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Benefit Plans (Weighted-Average Assumptions Used to Determine Postretirement Costs) (Details) (Postretirement [Member])	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.50%	5.40%	5.90%
Health care cost trend rate	7.50%	8.00%	7.50%
Non-U.S. Plans - Postretirement [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	5.45%	5.14%	5.99%
Health care cost trend rate	6.55%	6.29%	7.14%

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Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data [Abstract]

Schedule of Quarterly Financial Information

	2012 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	18,022	$	20,037	$	19,592	$	19,742
Gross profit	$	5,006	$	5,454	$	5,336	$	5,208
Net earnings attributable to PMI	$	2,161	$	2,317	$	2,227	$	2,095
Per share data:
Basic EPS	$	1.25	$	1.36	$	1.32	$	1.25
Diluted EPS	$	1.25	$	1.36	$	1.32	$	1.25
Dividends declared	$	0.77	$	0.77	$	0.85	$	0.85
Market price:
— High	$	88.86	$	91.05	$	93.60	$	94.13
— Low	$	72.85	$	81.10	$	86.11	$	82.10
	2011 Quarters
(in millions, except per share data)	1st		2nd		3rd		4th
Net revenues	$	16,530	$	20,234	$	20,706	$	18,876
Gross profit	$	4,496	$	5,429	$	5,515	$	4,979
Net earnings attributable to PMI	$	1,919	$	2,409	$	2,377	$	1,886
Per share data:
Basic EPS	$	1.06	$	1.35	$	1.35	$	1.08
Diluted EPS	$	1.06	$	1.35	$	1.35	$	1.08
Dividends declared	$	0.64	$	0.64	$	0.77	$	0.77
Market price:
— High	$	65.92	$	71.75	$	72.74	$	79.42
— Low	$	55.85	$	64.49	$	62.32	$	60.45

Pre-Tax Charges Recorded in Earnings

During 2012 and 2011, PMI recorded the following pre-tax charges in earnings:

	2012 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	8	$	8	$	34	$	33
	2011 Quarters
(in millions)	1st		2nd		3rd		4th
Asset impairment and exit costs	$	16	$	1	$	43	$	49

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Additional Information (Minimum Rental Commitments Under Non-Cancelable Operating Leases) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Additional Information [Abstract]
2013	$ 218
2014	157
2015	104
2016	80
2017	66
Thereafter	226
Total	$ 851

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Calculation of Basic and Diluted EPS

Basic and diluted earnings per share (“EPS”) were calculated using the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Net earnings attributable to PMI	$	8,800	$	8,591	$	7,259
Less distributed and undistributed earnings attributable to share-based payment awards	48		49		33
Net earnings for basic and diluted EPS	$	8,752	$	8,542	$	7,226
Weighted-average shares for basic EPS	1,692		1,761		1,839
Plus incremental shares from assumed conversions:
Stock options	—		1		3
Weighted-average shares for diluted EPS	1,692		1,762		1,842

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Financial Instruments (Fair Value of Foreign Exchange Contracts) (Details) (Foreign Exchange Contract [Member], USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Derivatives, Fair Value [Line Items]
Derivatives, Asset Derivatives, Fair Value	$ 160	$ 145
Derivatives, Liability Derivatives, Fair Value	55	66
Designated as Hedging Instrument [Member] | Other current assets [Member]
Derivatives, Fair Value [Line Items]
Derivatives, Asset Derivatives, Fair Value	146	57
Designated as Hedging Instrument [Member] | Other accrued liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivatives, Liability Derivatives, Fair Value	8	4
Not Designated as Hedging Instrument [Member] | Other current assets [Member]
Derivatives, Fair Value [Line Items]
Foreign exchange contracts not designated as hedging instruments, Asset Derivatives, Fair Value	14	88
Not Designated as Hedging Instrument [Member] | Other accrued liabilities [Member]
Derivatives, Fair Value [Line Items]
Foreign exchange contracts not designated as hedging instruments, Liability Derivatives, Fair Value	$ 47	$ 62

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement of Other Comprehensive Income [Abstract]
Net earnings	$ 9,154	$ 8,879	$ 7,498
Other comprehensive earnings (losses), net of income taxes:
Currency translation adjustments, net of income taxes of $6 in 2012, $10 in 2011 and ($107) in 2010	15	(852)	(43)
Change in net loss and prior service cost:
Net losses and prior service costs, net of income taxes of $144 in 2012, $148 in 2011 and $43 in 2010	(943)	(1,031)	(318)
Less amortization of net losses, prior service costs and net transition costs, net of income taxes of ($37) in 2012, ($23) in 2011 and ($20) in 2010	160	94	76
Change in fair value of derivatives accounted for as hedges:
(Gains)/losses transferred to earnings, net of income taxes of $3 in 2012, ($2) in 2011 and ($3) in 2010	(22)	18	33
Gains/(losses) recognized, net of income taxes of ($14) in 2012, ($1) in 2011 and $6 in 2010	99	(5)	(50)
Change in fair value of equity securities	0	(1)	(10)
Total other comprehensive losses	(691)	(1,777)	(312)
Total comprehensive earnings	8,463	7,102	7,186
Less comprehensive earnings attributable to:
Noncontrolling interests	210	137	208
Redeemable noncontrolling interest	194	97	42
Comprehensive earnings attributable to PMI	$ 8,059	$ 6,868	$ 6,936

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Benefit Plans (Pension Liabilities Recognized in Consolidated Balance Sheet) (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
General Discussion of Pension and Other Postretirement Benefits [Abstract]
Other assets	$ 29	$ 40
Accrued liabilities — employment costs	(22)	(23)
Long-term employment costs	(1,741)	(947)
Net pension liability	$ (1,734)	$ (930)

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Supplemental Cash Flow Note

12 Months Ended

Dec. 31, 2012

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Note

As discussed in Note 6. Acquisitions and Other Business Arrangements, PMI’s 2010 business combination in the Philippines was a non-cash transaction.

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Asset Impairment and Exit Costs (Schedule of Asset Impairment and Exit Costs) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restructuring Cost and Reserve [Line Items]
Total separation programs									$ 42	$ 63	$ 27
Total asset impairment charges									28	34	0
Asset impairment and exit costs	33	34	8	8	49	43	1	16	83	109	47
European Union [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs									0	35	27
Total asset impairment charges									5	10	0
Eastern Europe, Middle East & Africa [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs									0	6	0
Total asset impairment charges									5	7	0
Asia [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs									13	7	0
Total asset impairment charges									13	8	0
Latin America & Canada [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs									29	15	0
Total asset impairment charges									5	9	0
Contract Termination [Member]
Restructuring Cost and Reserve [Line Items]
Total contract termination charges									13	12	20
Contract Termination [Member] | Eastern Europe, Middle East & Africa [Member]
Restructuring Cost and Reserve [Line Items]
Total contract termination charges									0	12	0
Contract Termination [Member] | Asia [Member]
Restructuring Cost and Reserve [Line Items]
Total contract termination charges									$ 13	$ 0	$ 20

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Segment Reporting (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Segment Reporting Information [Line Items]
Revenue, Net	$ 19,742	$ 19,592	$ 20,037	$ 18,022	$ 18,876	$ 20,706	$ 20,234	$ 16,530	$ 77,393	[1]	$ 76,346	[1]	$ 67,713	[1]
Long-lived assets	6,986				6,571				6,986		6,571		7,007
Switzerland [Member]
Segment Reporting Information [Line Items]
Long-lived assets	1,100				1,000				1,100		1,000		1,000
Customer Concentration Risk [Member] | Germany [Member]
Segment Reporting Information [Line Items]
Revenue, Net									$ 7,700		$ 8,100		$ 7,500

[1] Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

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Financial Instruments (Narrative) (Details) (Foreign Exchange Contract [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative [Line Items]
Foreign exchange contracts, notional amount	$ 13,700,000,000	$ 13,100,000,000
Foreign exchange contracts, cash flow hedges, notional amount	2,700,000,000	3,400,000,000
Foreign exchange contracts, net investment hedges, notional amount	1,100,000,000
Foreign exchange contracts, other derivatives, notional amount	9,900,000,000	9,700,000,000
Hedge, forecasted transactions, in months	12 months
Derivative gains to be reclassified to earnings	90,000,000
Net Investment Hedging [Member]
Derivative [Line Items]
Gains/(losses) on net investment hedges, net of taxes	(95,000,000)	(37,000,000)	315,000,000
Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Gains/(losses) from foreign currency contracts not designated as hedging instruments	$ 102,000,000	$ 34,000,000	$ (97,000,000)

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Capital Stock (Narrative) (Details) (USD $)	12 Months Ended			0 Months Ended	24 Months Ended	0 Months Ended		5 Months Ended	27 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	May 01, 2008 Two - Year Share Repurchase Program [Member]	Apr. 30, 2010 Two - Year Share Repurchase Program [Member]	Aug. 01, 2012 Three - Year Share Repurchase Program [Member]	May 01, 2010 Three - Year Share Repurchase Program [Member]	Dec. 31, 2012 Three - Year Share Repurchase Program [Member]	Jul. 31, 2012 Three - Year Share Repurchase Program [Member]
Capital Stock [Line Items]
Common stock, shares authorized	6,000,000,000
Common stock repurchase, amount authorized				$ 13,000,000,000		$ 18,000,000,000	$ 12,000,000,000
Repurchase of shares					277,600,000			32,200,000	179,100,000
Stock repurchase program, period in force (years)					2 years	3 years	3 years
Stock repurchase program, completion date					Apr. 30, 2010				Jul. 31, 2012
Acquired average price per share					$ 46.83			$ 88.59	$ 66.99
Common stock repurchased	$ 6,500,000,000	$ 5,400,000,000	$ 5,027,000,000					$ 2,900,000,000
Shares of common stock reserved	39,781,077
Preferred stock shares authorized	250,000,000

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Accumulated Other Comprehensive Losses

12 Months Ended

Dec. 31, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Losses

Accumulated Other Comprehensive Losses:

PMI's accumulated other comprehensive losses, net of taxes, consisted of the following:

(Losses) Earnings	At December 31,
(in millions)	2012			2011			2010
Currency translation adjustments	$	(331	)	$	(293	)	$	507
Pension and other benefits	(3,365		)	(2,585		)	(1,650		)
Derivatives accounted for as hedges	92			15			2
Equity securities	—			—			1
Total accumulated other comprehensive losses	$	(3,604	)	$	(2,863	)	$	(1,140	)

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RBH Legal Settlement (Details) In Millions, unless otherwise specified	0 Months Ended
	Jul. 31, 2008 RBH Legal Settlement [Member] USD ($)	Jul. 31, 2008 RBH Legal Settlement [Member] CAD	Dec. 31, 2012 RBH Legal Settlement [Member] USD ($)	Dec. 31, 2011 RBH Legal Settlement [Member] USD ($)	Jul. 31, 2008 Rothmans [Member]	Jul. 31, 2008 Principal Owner [Member]
Related Party Transaction [Line Items]
Legal settlement incurred	$ 540	550
Ownership percentage					60.00%	40.00%
Discounted accrued settlement charges			$ 190	$ 212
Payment termination date	2019	2019

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Quarterly Financial Data (Schedule of Quarterly Financial Information) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Quarterly Financial Data [Abstract]
Net revenues	$ 19,742	$ 19,592	$ 20,037	$ 18,022	$ 18,876	$ 20,706	$ 20,234	$ 16,530	$ 77,393	[1]	$ 76,346	[1]	$ 67,713	[1]
Gross profit	5,208	5,336	5,454	5,006	4,979	5,515	5,429	4,496	21,004		20,419		17,495
Net earnings attributable to PMI	$ 2,095	$ 2,227	$ 2,317	$ 2,161	$ 1,886	$ 2,377	$ 2,409	$ 1,919	$ 8,800		$ 8,591		$ 7,259
Per share data:
Basic EPS	$ 1.25	$ 1.32	$ 1.36	$ 1.25	$ 1.08	$ 1.35	$ 1.35	$ 1.06	$ 5.17		$ 4.85		$ 3.93
Diluted EPS	$ 1.25	$ 1.32	$ 1.36	$ 1.25	$ 1.08	$ 1.35	$ 1.35	$ 1.06	$ 5.17		$ 4.85		$ 3.92
Dividends declared (in dollars per share)	$ 0.85	$ 0.85	$ 0.77	$ 0.77	$ 0.77	$ 0.77	$ 0.64	$ 0.64	$ 3.24		$ 2.82		$ 2.44
Market price:
High (in dollars per share)	$ 94.13	$ 93.60	$ 91.05	$ 88.86	$ 79.42	$ 72.74	$ 71.75	$ 65.92
Low (in dollars per share)	$ 82.10	$ 86.11	$ 81.10	$ 72.85	$ 60.45	$ 62.32	$ 64.49	$ 55.85

[1] Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.7 billion, $8.1 billion and $7.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.

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Earnings per Share (Narrative) (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Earnings Per Share [Abstract]
Antidilutive stock options	0	0	0

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Indebtedness (Tables)

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

Short-Term Borrowings

At December 31, 2012 and 2011, PMI’s short-term borrowings and related average interest rates consisted of the following:

	December 31, 2012				December 31, 2011
(in millions)	Amount Outstanding		Average Year-End Rate		Amount Outstanding		Average Year-End Rate
Commercial paper	$	1,972	0.2	%	$	1,264	0.1	%
Bank loans	447		6.6		247		7.7
	$	2,419			$	1,511

Long-Term Debt

At December 31, 2012 and 2011, PMI’s long-term debt consisted of the following:

(in millions)	2012		2011
U.S. dollar notes, 1.125% to 6.875% (average interest rate 4.462%), due through 2042	$	14,702	$	11,269
Foreign currency obligations:
Euro notes, 2.125% to 5.875% (average interest rate 4.227%), due through 2024	3,724		3,533
Swiss franc notes, 1.000% to 3.250% (average interest rate 1.984%), due through 2021	1,579		1,719
Other (average interest rate 2.378%), due through 2024	415		513
	20,420		17,034
Less current portion of long-term debt	2,781		2,206
	$	17,639	$	14,828

Debt Offerings During the Current Period

PMI’s debt offerings in 2012 were as follows:

(in millions)
Type		Face Value		Interest Rate	Issuance	Maturity
U.S. dollar notes	(a)	$	700	4.500%	March 2012	March 2042
U.S. dollar notes	(a)	$	550	1.625%	March 2012	March 2017
Euro notes	(b)	€750 (approximately $951)		2.125%	May 2012	May 2019
Euro notes	(b)	€600 (approximately $761)		2.875%	May 2012	May 2024
U.S. dollar notes	(c)	$	750	1.125%	August 2012	August 2017
U.S. dollar notes	(c)	$	750	2.500%	August 2012	August 2022
U.S. dollar notes	(c)	$	750	3.875%	August 2012	August 2042
Swiss franc notes	(d)	CHF 325 (approximately $334)		1.000%	September 2012	September 2020

^(a) Interest on these notes is payable semiannually, and the first payment was made in September 2012.

^(b) Interest on these notes is payable annually beginning in May 2013.

^(c) Interest on these notes is payable semiannually beginning in February 2013.

^(d) Interest on these notes is payable annually beginning in September 2013

Aggregate Maturities of Long-Term Debt

Aggregate maturities of long-term debt are as follows:

(in millions)
2013	$	2,781
2014	1,256
2015	995
2016	2,597
2017	1,302
2018-2022	7,026
2023-2027	940
Thereafter	3,701
	20,598
Debt discounts	(178		)
Total long-term debt	$	20,420

Credit Facilities

At December 31, 2012, PMI’s committed credit facilities and commercial paper outstanding were as follows:

Type (in billions of dollars)	Committed Credit Facilities		Commercial Paper
Multi-year revolving credit, expiring March 31, 2015	$	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	6.0
Commercial paper outstanding			$	2.0

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Earnings Per Share

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per Share:

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

Basic and diluted earnings per share (“EPS”) were calculated using the following:

	For the Years Ended December 31,
(in millions)	2012		2011		2010
Net earnings attributable to PMI	$	8,800	$	8,591	$	7,259
Less distributed and undistributed earnings attributable to share-based payment awards	48		49		33
Net earnings for basic and diluted EPS	$	8,752	$	8,542	$	7,226
Weighted-average shares for basic EPS	1,692		1,761		1,839
Plus incremental shares from assumed conversions:
Stock options	—		1		3
Weighted-average shares for diluted EPS	1,692		1,762		1,842

For the 2012, 2011 and 2010 computations, there were no antidilutive stock options.

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Benefit Plans (Change in Benefit Obligations of Postemployment Benefit Plans) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation at January 1	$ 619
Service cost	30
Interest cost	22	22
Benefit obligation at December 31		619
Postemployment Benefit Plans [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation at January 1	619	574
Service cost	30	28	26
Interest cost	22	22	24
Payments for Postemployment Benefits	196	223
Actuarial losses	129	118
Other	78	100
Benefit obligation at December 31	$ 682	$ 619	$ 574