ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
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 |
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
(Do not check if a smaller reporting company) |
Class | Outstanding at | January 31, 2013 | ||
Common Stock, no par value | 1,647,788,932 | shares |
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 |
Page | |||
Item 1. | |||
Item 1A. | |||
Item 1B. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
Item 7. | |||
Item 7A. | |||
Item 8. | |||
Item 9. | |||
Item 9A. | |||
Item 9B. | |||
Item 10. | |||
Item 11. | |||
Item 12. | |||
Item 13. | |||
Item 14. | |||
Item 15. | |||
Item 1. | Business. |
• | 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. |
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. |
• | 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). |
• | 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. |
• | 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. |
• | 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. |
• | 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. |
Item 1A. | Risk Factors. |
• | 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. |
• | 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. |
Item 1B. | Unresolved Staff Comments. |
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 |
Item 3. | Legal Proceedings. |
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 |
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. |
• | 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. |
• | 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. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
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. |
(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. |
Item 6. | Selected Financial Data. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item 9B. | Other Information. |
Item 10. | Directors, Executive Officers and Corporate Governance. |
Name | Office | Age | ||||
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 |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
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 |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accounting Fees and Services. |
Item 15. | Exhibits and Financial Statement 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 |
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). |
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).* | ||
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). |
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).* | ||
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. |
PHILIP MORRIS INTERNATIONAL INC. | |
By: | /s/ LOUIS C. CAMILLERI |
(Louis C. Camilleri Chairman and Chief Executive Officer) |
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) |
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 835’200 CHF. | |
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. |
from | CHF 1'116'752.-- p.a.* | CHF 85'904.-- p.m.* | |
to | CHF 1'150'266.-- p.a.* | CHF 88'482.-- p.m.* |
Registration Number | Serial Number | Aircraft Description |
N551PM | 5374 | Gulfstream Aerospace GV-SP (G550) |
N552PM | 5382 | Gulfstream Aerospace GV-SP (G550) |
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 |
• | European Union; |
• | Eastern Europe, Middle East & Africa (“EEMA”); |
• | Asia; and |
• | Latin America & Canada. |
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 | % |
• | 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. |
(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 |
(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 |
• | Asia, driven mainly by Indonesia, the Philippines, Thailand and Vietnam, partially offset by Japan and Korea. |
• | the European Union, predominantly due to France and southern Europe; and |
• | Latin America & Canada, mainly due to Argentina, Canada, Colombia and Mexico. |
(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 | % |
• | 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). |
• | 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). |
(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 | % |
• | favorable currency ($557 million), partly offset by |
• | volume/mix ($221 million), |
• | higher manufacturing costs ($16 million) and |
• | the impact of acquisitions ($15 million). |
• | 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). |
• | 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). |
• | 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. |
• | 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. |
(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 | % |
• | price increases ($1.9 billion), |
• | favorable currency ($1.2 billion), |
• | favorable volume/mix ($609 million) and |
• | the impact of acquisitions ($137 million). |
• | 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). |
(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 | % |
• | 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). |
• | 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). |
• | 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). |
• | 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. |
• | 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. |
• | 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. |
• | unfavorable currency ($716 million) and |
• | unfavorable volume/mix ($445 million), partly offset by |
• | price increases ($475 million). |
• | 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). |
• | price increases ($466 million), |
• | favorable volume/mix ($425 million) and |
• | the impact of acquisitions ($27 million), partially offset by |
• | unfavorable currency ($467 million). |
• | 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). |
• | price increases ($551 million) and |
• | favorable volume/mix ($57 million), partially offset by |
• | unfavorable currency ($116 million). |
• | 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). |
• | price increases ($267 million), partly offset by |
• | unfavorable currency ($196 million) and |
• | unfavorable volume/mix ($49 million). |
• | price increases ($267 million), partly offset by |
• | unfavorable volume/mix ($71 million), |
• | 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). |
• | favorable currency ($440 million) and |
• | price increases ($298 million), partially offset by |
• | unfavorable volume/mix ($337 million). |
• | 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). |
• | price increases ($271 million), |
• | favorable volume/mix ($127 million), |
• | favorable currency ($49 million) and |
• | the impact of acquisitions ($25 million). |
• | 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). |
• | 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). |
• | 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). |
• | price increases ($334 million) and |
• | favorable currency ($70 million), partially offset by |
• | unfavorable volume/mix ($158 million). |
• | 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). |
• | 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. |
• | 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. |
Short-term | Long-term | Outlook | |
Moody’s | P-1 | A2 | Stable |
Standard & Poor’s | A-1 | A | Stable |
Fitch | F1 | A | Stable |
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 |
(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 |
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 |
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 |
• | 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 |
• | 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. |
• | 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. |
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 |
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 |
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 |
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 |
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 |
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 | ) |
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 | ) |
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 |
Note 1. |
Note 2. |
Note 3. |
Goodwill | Other Intangible Assets, 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 |
(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 |
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 |
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 |
Note 4. |
Note 5. |
(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 |
(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 |
Note 6. |
(in millions) | |||
Noncontrolling interest in contributed net assets | $ | 693 | |
Accretion to redeemable value | 477 | ||
Redeemable noncontrolling interest at date of business combination | $ | 1,170 |
(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 |
Note 7. |
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 |
(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 |
(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 |
(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 |
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 |
Note 8. |
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 |
Note 9. |
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 |
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 |
Note 10. |
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 |
Note 11. |
(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 |
(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 |
(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 |
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 | % |
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. |
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 |
• | 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. |
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 | ) |
(in millions) | 2012 | 2011 | |||||
Other assets | $ | 29 | $ | 40 | |||
Accrued liabilities — employment costs | (22 | ) | (23 | ) | |||
Long-term employment costs | (1,741 | ) | (947 | ) | |||
$ | (1,734 | ) | $ | (930 | ) |
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 |
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 |
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 |
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 | 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 | $ | 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. |
(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 |
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 |
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 |
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 |
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 |
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 | ) |
(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 |
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 |
(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 |
(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 | ) |
(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 | ) |
(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 | ) |
(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 | ) |
(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 | ) |
(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 | ) |
Note 14. |
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 |
(in millions) | |||
2013 | $ | 218 | |
2014 | 157 | ||
2015 | 104 | ||
2016 | 80 | ||
2017 | 66 | ||
Thereafter | 226 | ||
$ | 851 |
Note 15. |
Asset Derivatives | Liability Derivatives | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
(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 |
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, 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 of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings | Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives | ||||||||||||||||||||||
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, 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 of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings | Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives | |||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||||||||||
Foreign exchange contracts | $ | (19 | ) | $ | 2 | $ | 24 | |||||||||||||||||||
Interest expense, net | $ | — | $ | — | $ | — | ||||||||||||||||||||
(pre-tax, in millions) | |||||||||||||
Derivatives not Designated as Hedging Instruments | Statement of Earnings Classification of Gain/(Loss) | Amount of Gain/(Loss) Recognized in Earnings | |||||||||||
2012 | 2011 | 2010 | |||||||||||
Foreign exchange contracts | |||||||||||||
Marketing, administration and research costs | $ | — | $ | — | $ | (3 | ) | ||||||
Interest expense, net | 14 | 56 | 10 | ||||||||||
Total | $ | 14 | $ | 56 | $ | 7 |
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 |
Note 16. |
Level 1 | — | Quoted prices in active markets for identical assets or liabilities; |
Level 2 | — | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
Level 3 | — | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
(in millions) | Fair Value At December 31, 2012 | 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 | $ | 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 At December 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 | $ | — |
Note 17. |
(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. |
Note 19. |
Note 20. |
Note 21. |
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 |
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. |
• | 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. |
• | 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. |
Note 22. |
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 | |||||||
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. |
/S/ JAMES A. SCHUMACHER | /S/ FELIX ROTH | |
James A. Schumacher | Felix Roth | |
Lausanne, Switzerland | ||
February 7, 2013 |
• | 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. |
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 |
/s/ JAMES A. SCHUMACHER | /s/ FELIX ROTH | |||
James A. Schumacher | Felix Roth |
/s/ HAROLD BROWN |
Harold Brown |
/s/ MATHIS CABIALLAVETTA |
Mathis Cabiallavetta |
/s/ J. DUDLEY FISHBURN |
J. Dudley Fishburn |
/s/ JENNIFER LI |
Jennifer Li |
/s/ GRAHAM MACKAY |
Graham Mackay |
/s/ SERGIO MARCHIONNE |
Sergio Marchionne |
/s/ KALPANA MORPARIA |
Kalpana Morparia |
/s/ LUCIO A. NOTO |
Lucio A. Noto |
/s/ ROBERT B. POLET |
Robert B. Polet |
/s/ CARLOS SLIM HELÚ |
Carlos Slim Helú |
/s/ STEPHEN M. WOLF |
Stephen M. Wolf |
1. | I have reviewed this annual report on Form 10-K of Philip Morris International Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ LOUIS C. CAMILLERI |
Louis C. Camilleri |
Chairman and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Philip Morris International Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ JACEK OLCZAK |
Jacek Olczak |
Chief Financial Officer |
/s/ LOUIS C. CAMILLERI |
Louis C. Camilleri |
Chairman and Chief Executive Officer |
February 22, 2013 |
/s/ JACEK OLCZAK |
Jacek Olczak |
Chief Financial Officer |
February 22, 2013 |
Capital Stock (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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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:
|
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 |
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 |
Contingencies (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
|
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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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
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% |
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 |
Contingencies (Lights Cases) (Narrative) (Details) (EUR €)
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Dec. 31, 2012
litigation_case
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Dec. 31, 2011
litigation_case
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Dec. 31, 2010
litigation_case
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May 01, 2010
litigation_case
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Israel [Member] | Lights Class Actions [Member]
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Loss Contingencies [Line Items] | ||||
Cases brought against PM | 2 | 2 | 2 | 2 |
Italy [Member] | Individual Lights Cases - Small Claims Court [Member]
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Loss Contingencies [Line Items] | ||||
Cases brought against PM | 7 | 9 | 10 | |
Maximum damage award | 1,000 |
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 |
Additional Information (Schedule of Additional Information) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
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Dec. 31, 2011
|
Dec. 31, 2010
|
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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 |
Financial Instruments (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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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:
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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:
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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:
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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:
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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:
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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:
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Subsequent Event
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12 Months Ended |
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Dec. 31, 2012
|
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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. |
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 |
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 |
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) |
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% |
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 |
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) |
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) |
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 |
Financial Instruments
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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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:
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:
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:
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:
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:
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:
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. |
Income Taxes (Tables)
|
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Dec. 31, 2012
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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:
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Schedule of Reconciliation of Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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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:
|
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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:
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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:
|
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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