10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2015

OR

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

For the transition period from                      to                     

Commission File Number 001-33708

Philip Morris International Inc.

(Exact name of registrant as specified in its charter)

Virginia	13-3435103
(State or other jurisdiction of     incorporation or organization)	(I.R.S. Employer     Identification No.)

120 Park Avenue New York, New York	10017
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (917) 663-2000

Former name, former address and former fiscal year, if changed since last report

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ        No  ¨

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

Large accelerated filer  þ    Accelerated filer  ¨    Non-accelerated filer  ¨     Smaller reporting company  ¨

(Do not check if a smaller reporting company)

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

At July 28, 2015, there were 1,549,185,692 shares outstanding of the registrant’s common stock, no par value per share.

-1-

PHILIP MORRIS INTERNATIONAL INC.

TABLE OF CONTENTS

		Page No.
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at
	June 30, 2015 and December 31, 2014	3 –  4
	Condensed Consolidated Statements of Earnings for the
	Six Months Ended June 30, 2015 and 2014	5
	Three Months Ended June 30, 2015 and 2014	6
	Condensed Consolidated Statements of Comprehensive Earnings for the
	Six Months Ended June 30, 2015 and 2014	7
	Three Months Ended June 30, 2015 and 2014	8
	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
	Six Months Ended June 30, 2015 and 2014	9
	Condensed Consolidated Statements of Cash Flows for the
	Six Months Ended June 30, 2015 and 2014	10 –  11
	Notes to Condensed Consolidated Financial Statements	12 – 36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37 – 77
Item 4.	Controls and Procedures	78
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	79
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 6.	Exhibits	81
Signature		82

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

- 2-

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)

	June 30, 2015		December 31, 2014
ASSETS
Cash and cash equivalents	$	1,838	$	1,682
Receivables (less allowances of $72 in 2015 and $50 in 2014)	3,619		4,004
Inventories:
Leaf tobacco	3,154		3,135
Other raw materials	1,671		1,696
Finished product	2,382		3,761
	7,207		8,592
Deferred income taxes	428		533
Other current assets	680		673
Total current assets	13,772		15,484
Property, plant and equipment, at cost	12,327		12,759
Less: accumulated depreciation	6,512		6,688
	5,815		6,071
Goodwill (Note 5)	7,914		8,388
Other intangible assets, net (Note 5)	2,807		2,985
Investments in unconsolidated subsidiaries (Note 15)	1,020		1,083
Other assets	1,385		1,176
TOTAL ASSETS	$	32,713	$	35,187

See notes to condensed consolidated financial statements.

Continued

- 3-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

(in millions of dollars, except share data)

(Unaudited)

	June 30, 2015			December 31, 2014
LIABILITIES
Short-term borrowings (Note 11)	$	1,710		$	1,208
Current portion of long-term debt (Note 11)	2,926			1,318
Accounts payable	1,089			1,242
Accrued liabilities:
Marketing and selling	476			549
Taxes, except income taxes	4,546			5,490
Employment costs	834			1,135
Dividends payable	1,558			1,559
Other	1,366			1,375
Income taxes	651			1,078
Deferred income taxes	230			158
Total current liabilities	15,386			15,112
Long-term debt (Note 11)	24,566			26,929
Deferred income taxes	1,799			1,549
Employment costs	2,124			2,202
Other liabilities	636			598
Total liabilities	44,511			46,390
Contingencies (Note 9)
STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, no par value (2,109,316,331 shares issued in 2015 and 2014)	—			—
Additional paid-in capital	757			710
Earnings reinvested in the business	29,822			29,249
Accumulated other comprehensive losses	(8,107		)	(6,826		)
	22,472			23,133
Less: cost of repurchased stock    (560,140,316 and 562,416,635 shares in 2015 and 2014, respectively)	35,623			35,762
Total PMI stockholders’ deficit	(13,151		)	(12,629		)
Noncontrolling interests	1,353			1,426
Total stockholders’ deficit	(11,798		)	(11,203		)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	32,713		$	35,187

See notes to condensed consolidated financial statements.

- 4-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

(Unaudited)

	For the Six Months Ended June 30,
	2015			2014
Net revenues	$	36,115		$	38,830
Cost of sales	4,607			5,070
Excise taxes on products	22,640			24,116
Gross profit	8,868			9,644
Marketing, administration and research costs	3,062			3,263
Asset impairment and exit costs (Note 2)	—			512
Amortization of intangibles	43			44
Operating income	5,763			5,825
Interest expense, net	534			522
Earnings before income taxes	5,229			5,303
Provision for income taxes	1,528			1,528
Equity (income)/loss in unconsolidated subsidiaries, net	(49		)	(36		)
Net earnings	3,750			3,811
Net earnings attributable to noncontrolling interests	68			85
Net earnings attributable to PMI	$	3,682		$	3,726
Per share data (Note 7):
Basic earnings per share	$	2.37		$	2.35
Diluted earnings per share	$	2.37		$	2.35
Dividends declared	$	2.00		$	1.88

See notes to condensed consolidated financial statements.

- 5-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

(Unaudited)

	For the Three Months Ended June 30,
	2015			2014
Net revenues	$	18,763		$	21,051
Cost of sales	2,378			2,696
Excise taxes on products	11,904			13,254
Gross profit	4,481			5,101
Marketing, administration and research costs	1,568			1,716
Asset impairment and exit costs (Note 2)	—			489
Amortization of intangibles	21			22
Operating income	2,892			2,874
Interest expense, net	259			254
Earnings before income taxes	2,633			2,620
Provision for income taxes	743			752
Equity (income)/loss in unconsolidated subsidiaries, net	(26		)	(27		)
Net earnings	1,916			1,895
Net earnings attributable to noncontrolling interests	29			44
Net earnings attributable to PMI	$	1,887		$	1,851
Per share data (Note 7):
Basic earnings per share	$	1.21		$	1.17
Diluted earnings per share	$	1.21		$	1.17
Dividends declared	$	1.00		$	0.94

See notes to condensed consolidated financial statements.

- 6-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2015			2014
Net earnings	$	3,750		$	3,811
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustment:
Unrealized losses, net of income taxes of ($330) in 2015 and ($59) in 2014	(1,417		)	(114		)
Change in net loss and prior service cost:
Net losses and prior service costs, net of income taxes of $3 in 2014	—			(41		)
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($24) in 2015 and ($26) in 2014	110			81
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of ($6) in 2015 and $5 in 2014	66			(35		)
Gains transferred to earnings, net of income taxes of $8 in 2015 and $2 in 2014	(66		)	(13		)
Total other comprehensive losses	(1,307		)	(122		)
Total comprehensive earnings	2,443			3,689
Less comprehensive earnings attributable to:
Noncontrolling interests	42			87
Comprehensive earnings attributable to PMI	$	2,401		$	3,602

See notes to condensed consolidated financial statements

- 7-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)

	For the Three Months Ended June 30,
	2015			2014
Net earnings	$	1,916		$	1,895
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized losses, net of income taxes of $104 in 2015 and ($55) in 2014	(74		)	(77		)
Change in net loss and prior service cost:
Net losses and prior service costs, net of income taxes of $3 in 2014	—			(41		)
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($12) in 2015 and ($14) in 2014	54			43
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of ($4) in 2015 and $2 in 2014	41			(11		)
Gains transferred to earnings, net of income taxes of $5 in 2015 and $1 in 2014	(39		)	(6		)
Total other comprehensive losses	(18		)	(92		)
Total comprehensive earnings	1,898			1,803
Less comprehensive earnings attributable to:
Noncontrolling interests	28			53
Comprehensive earnings attributable to PMI	$	1,870		$	1,750

See notes to condensed consolidated financial statements

- 8-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Six Months Ended June 30,2015 and 2014

(in millions of dollars, except per share amounts)

(Unaudited)

	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, 2014	$	—	$	723		$	27,843		$	(4,190	)	$	(32,142	)	$	1,492		$	(6,274	)
Net earnings						3,726									85			3,811
Other comprehensive earnings (losses), net of income taxes									(124		)				2			(122		)
Issuance of stock awards and exercise of stock options			(74		)							164						90
Dividends declared ($1.88 per share)						(2,968		)										(2,968		)
Payments to noncontrolling interests															(134		)	(134		)
Common stock repurchased												(2,250		)				(2,250		)
Balances, June 30, 2014	$	—	$	649		$	28,601		$	(4,314	)	$	(34,228	)	$	1,445		$	(7,847	)
Balances, January 1, 2015	$	—	$	710		$	29,249		$	(6,826	)	$	(35,762	)	$	1,426		$	(11,203	)
Net earnings						3,682									68			3,750
Other comprehensive earnings (losses), net of income taxes									(1,281		)				(26		)	(1,307		)
Issuance of stock awards			(66		)							139						73
Dividends declared ($2.00 per share)						(3,109		)										(3,109		)
Payments to noncontrolling interests															(115		)	(115		)
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)			113															113
Balances, June 30, 2015	$	—	$	757		$	29,822		$	(8,107	)	$	(35,623	)	$	1,353		$	(11,798	)

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2015			2014
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings	$	3,750		$	3,811
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	377			427
Deferred income tax provision	146			81
Asset impairment and exit costs, net of cash paid	(204		)	282
Cash effects of changes, net of the effects from acquired companies:
Receivables, net	62			(245		)
Inventories	809			1,484
Accounts payable	38			2
Income taxes	(379		)	(675		)
Accrued liabilities and other current assets	(1,461		)	(1,666		)
Pension plan contributions	(20		)	(82		)
Other	182			1
Net cash provided by operating activities	3,300			3,420
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures	(413		)	(508		)
Purchase of businesses, net of acquired cash	—			(103		)
Investments in unconsolidated subsidiaries	(11		)	(16		)
Other	200			83
Net cash used in investing activities	(224		)	(544		)

See notes to condensed consolidated financial statements.

Continued

- 10-

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in millions of dollars)

(Unaudited)

	For the Six Months Ended June 30,
	2015			2014
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less	$	513		$	(255	)
Issuances - maturities longer than 90 days	73			921
Repayments - maturities longer than 90 days	(13		)	(1,094		)
Long-term debt proceeds	302			3,632
Long-term debt repaid	(400		)	(1,240		)
Repurchases of common stock	(48		)	(2,281		)
Dividends paid	(3,110		)	(2,993		)
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)	113			—
Other	(70		)	(177		)
Net cash used in financing activities	(2,640		)	(3,487		)
Effect of exchange rate changes on cash and cash equivalents	(280		)	(2		)
Cash and cash equivalents:
Increase (Decrease)	156			(613		)
Balance at beginning of period	1,682			2,154
Balance at end of period	$	1,838		$	1,541

See notes to condensed consolidated financial statements.

- 11-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Background and Basis of Presentation:

Background

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

Basis of Presentation

The interim condensed consolidated financial statements of PMI are unaudited. These interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and such principles are applied on a consistent basis. It is the opinion of PMI’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings attributable to PMI for any interim period are not necessarily indicative of results that may be expected for the entire year.

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2014.

Note 2. Asset Impairment and Exit Costs:

Pre-tax asset impairment and exit costs consisted of the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Separation programs:
European Union	$	—	$	359	$	—	$	359
Asia	—		24		—		1
Total separation programs	—		383		—		360
Asset impairment charges:
European Union	—		129		—		129
Total asset impairment charges	—		129		—		129
Asset impairment and exit costs	$	—	$	512	$	—	$	489

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30,2015 was as follows:

(in millions)
Liability balance, January 1, 2015	$	270
Charges, net	—
Cash spent	(204		)
Currency/other	(14		)
Liability balance, June 30, 2015	$	52

Cash payments related to exit costs at PMI were $204 million and $44 million for the six months and three months ended June 30,2015, respectively, and $230 million and $30 million for the six months and three months ended June 30, 2014, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $52 million, and will be substantially paid by the end of 2015.

The pre-tax asset impairment and exit costs shown above are primarily a result of the following:

- 12-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Netherlands

On April 4, 2014, PMI announced the initiation by its affiliate, Philip Morris Holland B.V. (“PMH”), of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH reached an agreement with the trade unions and their members on a social plan and ceased cigarette production on September 1, 2014. For the six months and three months ended June 30, 2014, total pre-tax asset impairment and exit costs of $488 million were recorded for this program in the European Union segment. This amount includes employee separation costs of $359 million and asset impairment costs of $129 million.

Other

Separation Program Charges

PMI recorded other pre-tax separation program charges of $24 million and $1 million for the six months and three months ended June 30, 2014, respectively, related to severance costs for a factory closure in Australia.

Note 3. Stock Plans:

In May 2012, PMI’s shareholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the “2012 Plan”). The 2012 Plan replaced the 2008 Performance Incentive Plan (the “2008 Plan”) and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, PMI may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. Up to 30 million shares of PMI’s common stock may be issued under the 2012 Plan. At June 30, 2015, shares available for grant under the 2012 Plan were 23,252,170.

In 2008, PMI adopted the Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (the “Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the Non-Employee Directors Plan. At June 30, 2015, shares available for grant under the plan were 691,432.

During the six months ended June 30,2015, PMI granted 1.5 million shares of deferred stock awards to eligible employees at a grant date fair value of $82.28 per share. During the six months ended June 30,2014, PMI granted 2.4 million shares of deferred stock awards to eligible employees at a weighted-average grant date fair value of $77.74 per share. PMI recorded compensation expense related to stock awards of $94 million and $113 million during the six months ended June 30, 2015 and 2014, respectively, and $36 million and $47 million during the three months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, PMI had $212 million of total unrecognized compensation cost related to non-vested deferred stock awards. The cost is recognized over the original restriction period of the awards, which is typically three or more years after the date of the award, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

During the six months ended June 30,2015, 2.5 million shares of PMI deferred stock awards vested. The grant date fair value of all the vested shares was approximately $202 million. The total fair value of deferred stock awards that vested during the six months ended June 30,2015 was approximately $209 million.

Note 4. Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to substantially all U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

- 13-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pension Plans

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following:

	U.S. Plans						Non-U.S. Plans
	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	3		$	3		$	101		$	104
Interest cost	9			8			72			103
Expected return on plan assets	(7		)	(8		)	(164		)	(177		)
Amortization:
Net loss	5			3			90			57
Prior service cost	—			—			2			4
Net periodic pension cost	$	10		$	6		$	101		$	91

	U.S. Plans						Non-U.S. Plans
	For the Three Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	2		$	2		$	50		$	52
Interest cost	4			4			36			52
Expected return on plan assets	(3		)	(4		)	(81		)	(89		)
Amortization:
Net loss	2			1			44			29
Prior service cost	—			—			1			2
Net periodic pension cost	$	5		$	3		$	50		$	46

Employer Contributions

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and to meet specific funding requirements of its funded U.S. and non-U.S. plans. Employer contributions of $20 million were made to the pension plans during the six months ended June 30,2015. Currently, PMI anticipates making additional contributions during the remainder of 2015 of approximately $138 million to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest rates.

Note 5. Goodwill and Other Intangible Assets, net:

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

	Goodwill				Other Intangible Assets, net
(in millions)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
European Union	$	1,311	$	1,398	$	551	$	582
Eastern Europe, Middle East & Africa	486		517		210		215
Asia	3,701		3,904		1,131		1,207
Latin America & Canada	2,416		2,569		915		981
Total	$	7,914	$	8,388	$	2,807	$	2,985

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Goodwill primarily reflects PMI’s acquisitions in Canada, Colombia, Greece, Indonesia, Mexico, Pakistan and Serbia, as well as the business combination in the Philippines. The movements in goodwill from December 31, 2014, were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balances, December 31, 2014	$	1,398		$	517		$	3,904		$	2,569		$	8,388
Changes due to:
Currency	(87		)	(31		)	(203		)	(153		)	(474		)
Balances, June 30, 2015	$	1,311		$	486		$	3,701		$	2,416		$	7,914

Additional details of other intangible assets were as follows:

	June 30, 2015				December 31, 2014
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	1,608			$	1,704
Amortizable intangible assets	1,704		$	505	1,877		$	596
Total other intangible assets	$	3,312	$	505	$	3,581	$	596

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia in 2005 and Mexico in 2007. Amortizable intangible assets primarily consist of certain trademarks and distribution networks associated with business combinations. The gross carrying amount, the range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at June 30, 2015, were as follows:

(dollars in millions)	Gross Carrying Amount		Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	$	1,452	2 - 40 years	23 years
Distribution networks	161		5 - 30 years	12 years
Other (including farmer   contracts and intellectual property rights)	91		4 - 17 years	11 years
	$	1,704

Pre-tax amortization expense for intangible assets during the six months ended June 30,2015 and 2014 was $43 million and $44 million, respectively, and $21 million and $22 million for the three months ended June 30,2015 and 2014, respectively. Amortization expense for each of the next five years is estimated to be $72 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

The decrease in the gross carrying amount of other intangible assets from December 31, 2014, was due to currency movements and the retirement of fully amortized intangible assets.

During the first quarter of 2015, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment, and no impairment charges were required as a result of this review.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6. 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 and interest rate exposure. Derivative financial instruments are used by PMI principally to reduce exposures to market risks resulting from fluctuations in foreign currency exchange and interest 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 condensed consolidated statements of earnings.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, collectively referred to as foreign exchange contracts ("foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in exchange and interest rates from third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Australian dollar, Euro, Indonesian rupiah, Japanese yen, Mexican peso, Russian ruble, Swiss franc and Turkish lira. At June 30, 2015, PMI had contracts with aggregate notional amounts of $22.6 billion of which $2.6 billion related to cash flow hedges, $4.9 billion related to hedges of net investments in foreign operations and $15.1 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 condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, were as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
(in millions)	Balance Sheet Classification	At June 30, 2015		At December 31, 2014		Balance Sheet Classification	At June 30, 2015		At December 31, 2014
Foreign exchange contracts designated as hedging instruments	Other current assets	$	318	$	248	Other accrued liabilities	$	2	$	—
	Other assets	173		122		Other liabilities	$	61	$	25
Foreign exchange contracts not designated as hedging instruments	Other current assets	21		34		Other accrued liabilities	78		126
	Other assets	47		2
Total derivatives		$	559	$	406		$	141	$	151

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

For the six months and three months ended June 30,2015 and 2014, PMI's cash flow and net investment hedging instruments impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, millions)	For the Six Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives					Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015		2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	72	$	(40	)
						Net revenues	$	75		$	32
						Marketing, administration and research costs	16			(1		)
						Interest expense, net	(17		)	(16		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	209		36
Total	$	281	$	(4	)		$	74		$	15

(pre-tax, millions)	For the Three Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives						Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015			2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	45		$	(13	)
							Net revenues	$	45		$	17
							Marketing, administration and research costs	9			(1		)
							Interest expense, net	(10		)	(9		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	(77		)	11
Total	$	(32	)	$	(2	)		$	44		$	7

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 condensed consolidated statements of earnings. During the six months and three months ended June 30,2015 and 2014, ineffectiveness related to cash flow hedges was not material. As of June 30, 2015, PMI has hedged forecasted transactions for periods not exceeding the next eighteen months with the exception of one foreign exchange contract that expires in May 2024. The impact of these hedges is primarily included in operating cash flows on PMI’s condensed consolidated statement of cash flows.

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 six months ended June 30,2015 and 2014, these hedges of net investments resulted in gains, net of income taxes, of $642 million and $93 million, respectively. For the three months ended June 30,2015 and 2014, these hedges of net investments resulted in gains (losses), net of income taxes, of $(193) million and $76 million, respectively. These gains (losses) were reported as a component of accumulated other comprehensive losses within currency translation adjustments. For the six months and three months ended June 30,2015 and 2014, ineffectiveness related to net investment hedges was not material. Other investing cash flows on PMI’s condensed consolidated statements of cash flows include the premiums paid for, and settlements of, net investment hedges.

Other Derivatives

PMI has entered into foreign exchange contracts to hedge the foreign currency exchange and interest rate 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 condensed consolidated statement of earnings. For the six months ended June 30,2015 and 2014, the gains (losses) from contracts for which PMI did not apply hedge accounting were $(735) million and $94 million, respectively. For the three months ended June 30,2015 and 2014, the gains from contracts for which PMI did not apply hedge accounting were $16 million and $142 million, respectively. The gains (losses) from these contracts substantially offset the gains (losses) generated by the underlying intercompany and third-party loans being hedged.

For the six months and three months ended June 30,2015 and 2014, the net impact of these contracts on the condensed consolidated statements of earnings was not material.

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:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Gain at beginning of period	$	123		$	63		$	121		$	32
Derivative gains transferred to earnings	(66		)	(13		)	(39		)	(6		)
Change in fair value	66			(35		)	41			(11		)
Gain as of June 30,	$	123		$	15		$	123		$	15

At June 30, 2015, PMI expects $81 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed 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.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 less any cash collateral received or pledged. 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 12. Fair Value Measurements and Note 14. Balance Sheet Offsetting for additional discussion of derivative financial instruments.

Note 7. Earnings Per Share:

Basic and diluted earnings per share (“EPS”) were calculated using the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Net earnings attributable to PMI	$	3,682	$	3,726	$	1,887	$	1,851
Less distributed and undistributed earnings attributable to share-based payment awards	13		17		6		9
Net earnings for basic and diluted EPS	$	3,669	$	3,709	$	1,881	$	1,842
Weighted-average shares for basic and diluted EPS	1,549		1,577		1,549		1,571

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

For the 2015 and 2014 computations, there were no antidilutive stock options.

Note 8. Segment Reporting:

PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States of America. Reportable segments for PMI are organized and managed by geographic region. PMI’s reportable segments are European Union; Eastern Europe, Middle East & Africa; Asia; and Latin America & Canada. PMI records net revenues and operating companies income to its segments based upon the geographic area in which the customer resides.

PMI’s management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Segment data were as follows:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Net revenues:
European Union	$	12,276		$	14,448		$	6,336		$	7,829
Eastern Europe, Middle East & Africa	9,423			10,236			4,994			5,674
Asia	9,803			9,572			5,039			5,097
Latin America & Canada	4,613			4,574			2,394			2,451
Net revenues	$	36,115		$	38,830		$	18,763		$	21,051
Earnings before income taxes:
Operating companies income:
European Union	$	1,890		$	1,689		$	977		$	711
Eastern Europe, Middle East & Africa	1,761			2,014			881			1,087
Asia	1,731			1,815			797			900
Latin America & Canada	555			467			325			265
Amortization of intangibles	(43		)	(44		)	(21		)	(22		)
General corporate expenses	(82		)	(80		)	(41		)	(40		)
Less:
Equity (income)/loss in unconsolidated subsidiaries, net	(49		)	(36		)	(26		)	(27		)
Operating income	5,763			5,825			2,892			2,874
Interest expense, net	(534		)	(522		)	(259		)	(254		)
Earnings before income taxes	$	5,229		$	5,303		$	2,633		$	2,620

Items affecting the comparability of results from operations are asset impairment and exit costs. See Note 2. Asset Impairment and Exit Costs for a breakdown of these costs by segment.

Note 9. Contingencies:

Tobacco-Related Litigation

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

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

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

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is

- 20-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any. Legal defense costs are expensed as incurred.

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

To date, we have paid one judgment in a tobacco-related case. That judgment, including costs, was approximately €1,400 (approximately $1,500), and that payment was made in order to appeal an Italian small claims case, which was subsequently reversed on appeal. To date, no tobacco-related case has been finally resolved in favor of a plaintiff against us, our subsidiaries or indemnitees.

The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of July 29, 2015, July 30, 2014 and August 1, 2013:

Type of Case	Number of Cases Pending as of July 29, 2015	Number of Cases Pending as of July 30, 2014	Number of Cases Pending as of August 1, 2013
Individual Smoking and Health Cases	65	63	63
Smoking and Health Class Actions	11	11	11
Health Care Cost Recovery Actions	16	15	15
Lights Class Actions	—	1	1
Individual Lights Cases	2	2	1
Public Civil Actions	2	2	4

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 436 Smoking and Health, Lights, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor. Twelve cases have had decisions in favor of plaintiffs. Nine of these cases have subsequently reached final resolution in our favor and three remain on appeal.

- 21-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The table below lists the verdict and post-trial developments in the three pending cases where a verdict was returned in favor of the plaintiff:

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 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 $340) 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 appealed the decision. In February 2015, the appellate court unanimously dismissed plaintiff's appeal. Plaintiff may further appeal. 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.

- 22-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Cecilia Letourneau	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Letourneau class on liability and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days. The trial court found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered a briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of CAD 46 million (approximately $35.3 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

- 23-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion including pre-judgment interest (approximately $2.38 billion)). The trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion. The trial court ordered a briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of approximately CAD 200 million (approximately $154 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

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

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

- 24-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.

As of July 29, 2015, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 65 cases brought by individual plaintiffs in Argentina (26), Brazil (22), Canada (2), Chile (7), Costa Rica (2), Greece (1), Italy (2), Morocco (1), the Philippines (1) and Scotland (1), compared with 63 such cases on July 30, 2014, and 63 cases on August 1, 2013; and

• 11 cases brought on behalf of classes of individual plaintiffs in Brazil (2) and Canada (9), compared with 11 such cases on July 30, 2014 and 11 such cases on August 1, 2013.

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

In the second class action pending in Brazil, Public Prosecutor of São Paulo v. Philip Morris Brasil Industria e Comercio Ltda., Civil Court of the City of São Paulo, Brazil, filed August 6, 2007, our subsidiary is a defendant. The plaintiff, the Public Prosecutor of the State of São Paulo, is seeking (i) damages on behalf of all smokers nationwide, former smokers, and their relatives; (ii) damages on behalf of people exposed to environmental tobacco smoke nationwide, and their relatives; and (iii) reimbursement of the health care costs allegedly incurred for the treatment of tobacco-related diseases by all Brazilian States and Municipalities, and the Federal District. In an interim ruling issued in December 2007, the trial court limited the scope of this claim to the State of São Paulo only. In December 2008, the Seventh Civil Court of São Paulo issued a decision declaring that it lacked jurisdiction because the case involved issues similar to the ADESF case discussed above and should be transferred to the Nineteenth Lower Civil Court in São Paulo where the ADESF case is pending. The court further stated that these cases should be consolidated for the purposes of judgment. In April 2010, the São Paulo Court of Appeals reversed the Seventh Civil Court's decision that consolidated the cases, finding that they are based on different legal claims and are progressing at different stages of proceedings. This case was returned to the Seventh Civil Court of São Paulo, and our subsidiary filed its closing arguments in December 2010. In March 2012, the trial court dismissed the case on the merits. In January 2014, the São Paulo Court of Appeals rejected plaintiff’s appeal and affirmed the trial court decision. In July 2014, plaintiff appealed to the Superior Court of Justice.

In the first class action pending in Canada, Cecilia Letourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiff, an individual smoker, sought compensatory and punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005.  Trial began in March 2012 and concluded in December 2014. The trial court issued its judgment on May 27, 2015. The trial court found our subsidiary and two other Canadian manufacturers liable and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court found that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking. The trial court also found that defendants conspired to prevent consumers from learning the dangers of smoking. The trial court further held that these civil faults were a cause of the class members’ addiction. The trial court rejected other grounds of fault advanced by the class, holding that: (i) the evidence was insufficient to show that defendants marketed to youth, (ii) defendants’ advertising did not convey false information about the characteristics of cigarettes, and (iii) defendants did not commit a fault by using the descriptors light or mild for cigarettes with a lower tar delivery. The trial court estimated the size of the addiction class at 918,000 members but declined to award compensatory damages to the addiction class because the evidence did not establish the claims with sufficient accuracy. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days and found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs. On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription of appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust within 60 days notwithstanding appeal. On July 23, 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days. A case management conference is scheduled for September 3, 2015, to establish a briefing schedule before the Court of Appeal on our subsidiary's merits appeal. Our subsidiary and PMI believe that the findings of liability

- 25-

Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

and damages were incorrect and should ultimately be set aside on any one of many grounds, including the following: (i) holding that defendants violated Quebec law by failing to warn class members of the risks of smoking even after the court found that class members knew, or should have known, of the risks, (ii) finding that plaintiffs were not required to prove that defendants’ alleged misconduct caused injury to each class member in direct contravention of binding precedent, (iii) creating a factual presumption, without any evidence from class members or otherwise, that defendants’ alleged misconduct caused all smoking by all class members, (iv) holding that the addiction class members’ claims for punitive damages were not time-barred even though the case was filed more than three years after a prominent addiction warning appeared on all packages, and (v) awarding punitive damages to punish defendants without proper consideration as to whether punitive damages were necessary to deter future misconduct.

In the second class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Ltd.,Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiffs, an anti-smoking organization and an individual smoker, sought compensatory and punitive damages for each member of the class who allegedly suffers from certain smoking-related diseases. The class was certified in 2005. Trial began in March 2012 and concluded in December 2014. The trial court issued its judgment on May 27, 2015. The trial court found our subsidiary and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion, including pre-judgment interest (approximately $2.38 billion). In addition, the trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary and found that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking. The trial court also found that defendants conspired to prevent consumers from learning the dangers of smoking. The trial court further held that these civil faults were a cause of the class members’ diseases. The trial court rejected other grounds of fault advanced by the class, holding that: (i) the evidence was insufficient to show that defendants marketed to youth, (ii) defendants’ advertising did not convey false information about the characteristics of cigarettes, and (iii) defendants did not commit a fault by using the descriptors light or mild for cigarettes with a lower tar delivery. The trial court estimated the disease class at 99,957 members. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion and ordered briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs. On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription of appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust within 60 days notwithstanding appeal. On July 23, 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days. A case management conference is scheduled for September 3, 2015, to establish a briefing schedule before the Court of Appeal on our subsidiary's merits appeal. Our subsidiary and PMI believe that the findings of liability and damages were incorrect and should ultimately be set aside on any one of many grounds, including the following: (i) holding that defendants violated Quebec law by failing to warn class members of the risks of smoking even after the court found that class members knew, or should have known, of the risks, (ii) finding that plaintiffs were not required to prove that defendants’ alleged misconduct caused injury to each class member in direct contravention of binding precedent, (iii) creating a factual presumption, without any evidence from class members or otherwise, that defendants’ alleged misconduct caused all smoking by all class members, (iv) relying on epidemiological evidence that did not meet recognized scientific standards, and (v) awarding punitive damages to punish defendants without proper consideration as to whether punitive damages were necessary to deter future misconduct.

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

In the fourth class action pending in Canada, Adams v. Canadian Tobacco Manufacturers' Council, et al.,The Queen's Bench, Saskatchewan, Canada, filed July 10, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits. Preliminary motions are pending.

In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al.,The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

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

In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed. In December 2014, the plaintiff filed an amended statement of claim.

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

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

As of July 29, 2015, there were 16 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Canada (10), Korea (1) and Nigeria (5), compared with 15 such cases on July 30, 2014 and 15 such cases on August 1, 2013.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, our subsidiaries, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.” The Supreme Court of Canada has held that the statute is constitutional. We and certain other non-Canadian defendants challenged the jurisdiction of the court. The court rejected the jurisdictional challenge. Pre-trial discovery is ongoing.

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

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

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

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, our subsidiary, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in December 2014 and July 2015. Pre-trial discovery is ongoing.

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

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in September 2014. Discovery is scheduled to begin in 2017.

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

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in February 2015. Discovery is scheduled to begin in 2017.

In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in February 2015. Discovery is scheduled to begin in 2017.

In the tenth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Nova Scotia v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Nova Scotia, Canada, filed January 2, 2015, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Nova Scotia based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” In January 2015, we, our subsidiaries, and our indemnitees were served with the statement of claim. Defendants filed their defenses in July 2015. Discovery is scheduled to begin in 2017.

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

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

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

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

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

In the health care cost recovery case in Korea, the National Health Insurance Service v. KT&G, et. al., filed April 14, 2014, our subsidiary and other Korean manufacturers are defendants. Plaintiff alleges that defendants concealed the health hazards of smoking, marketed to youth, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes. The National Health Insurance Service seeks to recover

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

approximately $53.7 million allegedly incurred in treating 3,484 patients with small cell lung cancer, squamous cell lung cancer, and squamous cell laryngeal cancer from 2003 to 2012. The case is now in the evidentiary phase.

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

As of July 29, 2015, there were 2 lights cases brought by individual plaintiffs pending against our subsidiaries or indemnitees in Chile (1) and Italy (1), compared with 2 such cases on July 30, 2014, and 1 such case on August 1, 2013.

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

As of July 29, 2015, there were 2 public civil actions pending against our subsidiaries in Argentina (1) and Venezuela (1), compared with 2 such cases on July 30, 2014, and 4 such cases on August 1, 2013.

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

In the public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties. In February 2013, our subsidiary answered the complaint.

Other Litigation

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

Note 10. Income Taxes:

Income tax provisions for jurisdictions outside the United States of America, as well as state and local income tax provisions, were determined on a separate company basis and the related assets and liabilities were recorded in PMI’s condensed consolidated balance sheets.

PMI’s effective tax rates for the six months and three months ended June 30,2015 were 29.2% and 28.2%, respectively. PMI’s effective tax rates for the six months and three months ended June 30,2014 were 28.8% and 28.7%, respectively. PMI estimates that its full-year 2015 effective tax rate will be approximately 29%. The effective tax rate for the six months ended June 30,2015

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

was unfavorably impacted by changes to repatriation assertions on certain foreign subsidiary historical earnings ($58 million). Excluding the effect of the 2015 repatriation assertion changes, the change in the effective tax rate for the six months ended June 30,2015, as compared to the six months ended June 30,2014, was primarily due to earnings mix by taxing jurisdiction and repatriation cost differences.

The effective tax rates are based on PMI’s full-year earnings mix projections by taxing jurisdiction and cash repatriation plans. Changes in earnings mix by taxing jurisdiction or in cash repatriation plans could have an impact on the effective tax rates, which PMI monitors each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2007 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years.

It is reasonably possible that, within the next 12 months, certain tax examinations will close, which could result in a change in unrecognized tax benefits, along with related interest and penalties. An estimate of any possible change cannot be made at this time.

Note 11. Indebtedness:

Short-term Borrowings:

At June 30, 2015 and December 31, 2014, PMI’s short-term borrowings, consisting of commercial paper and bank loans to certain PMI subsidiaries, had a carrying value of $1,710 million and $1,208 million, respectively. The fair value of PMI’s short-term borrowings, based on current market interest rates, approximates carrying value.

Long-term Debt:

At June 30, 2015 and December 31, 2014, PMI’s long-term debt consisted of the following:

(in millions)	June 30, 2015		December 31, 2014
U.S. dollar notes, 1.125% to 6.375% (average interest rate 3.874%), due through 2044	$	16,841	$	17,229
Foreign currency obligations:
Euro notes, 1.750% to 5.875% (average interest rate 3.104%), due through 2033	8,389		9,161
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.217%), due through 2024	1,792		1,690
Other (average interest rate 3.111%), due through 2024	470		167
	27,492		28,247
Less current portion of long-term debt	2,926		1,318
	$	24,566	$	26,929

Other foreign currency debt above includes mortgage debt in Switzerland and capital lease obligations at June 30, 2015 and December 31, 2014.

Credit Facilities:

On January 23, 2015, PMI entered into an agreement to extend the term of its existing $2.0 billion 364-day revolving credit facility, effective February 10, 2015, from February 10, 2015 to February 9, 2016.  On January 23, 2015, PMI also entered into an agreement to extend the term of its existing $2.5 billion multi-year revolving credit facility, effective February 28, 2015, from February 28, 2019 to February 28, 2020.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

At June 30, 2015, PMI's total committed credit facilities were as follows:

(in billions)

Type	Committed Credit Facilities
364-day revolving credit, expiring February 9, 2016	$	2.0
Multi-year revolving credit, expiring February 28, 2020	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	8.0

At June 30, 2015, there were no borrowings under these committed credit facilities, and the entire committed amounts were available for borrowing.

Note 12. Fair Value Measurements:

The authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of input that may be used to measure fair value, which are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

PMI's policy is to reflect transfers between hierarchy levels at the end of the reporting period.

Derivative Financial Instruments

PMI assesses the fair value of its foreign exchange contracts and interest rate contracts using standard valuation models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. PMI’s derivative financial instruments have been classified within Level 2 in the table shown below. See Note 6. Financial Instruments for an additional discussion of derivative financial instruments.

Debt

The fair value of PMI’s outstanding debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $13 million of capital lease obligations, was $27,479 million at June 30, 2015. The fair value of PMI’s outstanding debt, excluding the aforementioned short-term borrowings and capital lease obligations, has been classified within Level 1 and Level 2 in the table shown below.

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(Unaudited)

Contingent Consideration

The fair value of PMI's contingent consideration relating to acquisitions is determined utilizing a discounted cash flow approach using various probability weighted scenarios. The significant unobservable inputs used in calculating the fair value of the contingent consideration includes financial performance scenarios, the probability of achieving those scenarios, and the discount rate. PMI's contingent consideration has been classified within Level 3 in the table shown below. For additional information, see Note 16. Acquisitions and Other Business Arrangements.

The aggregate fair values of PMI’s derivative financial instruments, debt and contingent consideration as of June 30, 2015, were as follows:

(in millions)	Fair Value at June 30, 2015		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	$	559	$	—	$	559	$	—
Total assets	$	559	$	—	$	559	$	—
Liabilities:
Debt	$	28,847	$	28,362	$	485	$	—
Foreign exchange contracts	141		—		141		—
Contingent consideration	23		—		—		23
Total liabilities	$	29,011	$	28,362	$	626	$	23

Note 13. Accumulated Other Comprehensive Losses:

PMI’s accumulated other comprehensive losses, net of taxes, consisted of the following:

(in millions)	At June 30, 2015			At December 31, 2014			At June 30, 2014
Currency translation adjustments	$	(5,320	)	$	(3,929	)	$	(2,323	)
Pension and other benefits	(2,910		)	(3,020		)	(2,006		)
Derivatives accounted for as hedges	123			123			15
Total accumulated other comprehensive losses	$	(8,107	)	$	(6,826	)	$	(4,314	)

Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement are shown on the condensed consolidated statements of comprehensive earnings for the six months and three months ended June 30,2015 and 2014. For additional information, see Note 4. Benefit Plans and Note 6. Financial Instruments for disclosures related to PMI's pension and other benefits, and derivative financial instruments, respectively.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 14. Balance Sheet Offsetting:

Derivative Financial Instruments

PMI uses foreign exchange contracts and interest rate contracts to mitigate its exposure to changes in exchange and interest rates from third-party and intercompany actual and forecasted transactions. Substantially all of PMI's derivative financial instruments are subject to master netting arrangements, whereby the right to offset occurs in the event of default by a participating party. While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the condensed consolidated balance sheets. Collateral associated with these arrangements is in the form of cash and is unrestricted. See Note 6. Financial Instruments for disclosures related to PMI's derivative financial instruments.

The effects of these derivative financial instrument assets and liabilities on PMI's condensed consolidated balance sheets were as follows:

(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Condensed Consolidated Balance Sheet		Net Amounts Presented in the Condensed Consolidated Balance Sheet		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
							Financial Instruments			Cash Collateral Received/Pledged
													Net Amount
At June 30, 2015
Assets
Foreign exchange contracts	$	559	$	—	$	559	$	(114	)	$	(403	)	$	42
Liabilities
Foreign exchange contracts	$	141	$	—	$	141	$	(114	)	$	(10	)	$	17
At December 31, 2014
Assets
Foreign exchange contracts	$	406	$	—	$	406	$	(77	)	$	(306	)	$	23
Liabilities
Foreign exchange contracts	$	151	$	—	$	151	$	(77	)	$	(63	)	$	11

Note 15. Investments in Unconsolidated Subsidiaries:

At June 30, 2015 and December 31, 2014, PMI had total investments in unconsolidated subsidiaries of $1,020 million and $1,083 million, respectively, which were accounted for under the equity method of accounting. Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses and movements in currency translation adjustments. The carrying value of our equity method investments at the acquisition date exceeded our share of the unconsolidated subsidiaries' book value by $1,417 million, including $1,264 million attributable to goodwill. The difference between the investment carrying value and the amount of underlying equity in net assets, excluding the $1,264 million attributable to goodwill, is being amortized on a straight-line basis over the underlying assets' estimated useful lives of 3 to 20 years. At June 30, 2015 and December 31, 2014, PMI received year-to-date dividends from unconsolidated subsidiaries of $86 million and $107 million, respectively.

On September 30, 2013, PMI acquired a 49% equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”), formerly Arab Investors-TA (FZC), for approximately $625 million. As a result of this transaction, PMI holds an approximate 25% economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture that is 51% owned by EITA and 49% by the Algerian state-owned enterprise Société Nationale des Tabacs et Allumettes SpA. STAEM manufactures and distributes under license some of PMI’s brands. The initial investment in EITA was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

On December 12, 2013, PMI acquired from Megapolis Investment BV a 20% equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis ("Megapolis"), PMI's distributor in Russia, for a purchase price of $760 million. An

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

additional payment of up to $100 million, which is contingent on Megapolis's operational performance over the four fiscal years following the closing of the transaction, will also be made by PMI if the performance criteria are satisfied. PMI has also agreed to provide Megapolis Investment BV with a $100 million interest-bearing loan. PMI and Megapolis Investment BV have agreed to set off any future contingent payments owed by PMI against the future repayments due under the loan agreement. Any loan repayments in excess of the contingent consideration earned by the performance of Megapolis are due to be repaid, in cash, to PMI on March 31, 2017. At December 31, 2013, PMI had recorded a $100 million asset related to the loan receivable and a discounted liability of $86 million related to the contingent consideration. The initial investment in Megapolis was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

At June 30, 2015 and December 31, 2014, PMI's investments in other unconsolidated subsidiaries were $39 million and $38 million, respectively, with ownership percentages ranging from 40% to 50%.

PMI’s earnings activity from unconsolidated subsidiaries was as follows:

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2015		2014		2015		2014
Net revenues	$	2,218	$	2,606	$	1,322	$	1,420

PMI’s balance sheet activity related to unconsolidated subsidiaries was as follows:

(in millions)	At June 30, 2015		At December 31, 2014
Receivables	$	488	$	407
Notes receivable	$	104	$	100
Other liabilities	$	97	$	93

The activity primarily related to agreements with PMI’s unconsolidated subsidiaries within the Eastern Europe, Middle East & Africa segment. These agreements, which are in the ordinary course of business, are primarily for distribution, contract manufacturing and licenses. PMI eliminated its respective share of all significant intercompany transactions with the equity method investees.

Note 16. Acquisitions and Other Business Arrangements:

In June 2014, PMI acquired 100% of Nicocigs Limited, a leading U.K.-based e-vapor company, for the final purchase price of $103 million, net of cash acquired, with additional contingent payments of up to $77 million, primarily relating to performance targets over a three-year period. At June 30, 2015, the additional contingent payments were up to $63 million over the remaining two-year period. For additional information regarding this contingent consideration, see Note 12. Fair Value Measurements.

In May 2013, PMI announced that Grupo Carso, S.A.B. de C.V. ("Grupo Carso") would sell to PMI its remaining 20% interest in PMI's Mexican tobacco business. The sale was completed on September 30, 2013, for $703 million. As a result, PMI now owns 100% of its Mexican tobacco business. A former director of PMI, whose term expired at the Annual Meeting of Shareholders in May 2015, had an affiliation with Grupo Carso. The final purchase price was subject to an adjustment based on the actual performance of the Mexican tobacco business over the three-year period ending two fiscal years after the closing of the purchase. In May 2015, PMI received a payment of $113 million from Grupo Carso as the final purchase price adjustment. This resulted in a total net purchase price of $590 million. In addition, PMI agreed to pay a dividend of approximately $38 million to Grupo Carso related to the earnings of the Mexican tobacco business for the nine months ended September 30, 2013. In March 2014, the dividend was declared and paid. The purchase of the remaining 20% interest resulted in a net decrease to PMI's additional paid-in capital of $559 million.

The effects of these and other smaller acquisitions were not material to PMI's condensed consolidated financial position, results of operations or operating cash flows in any of the periods presented.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 17. New Accounting Standards:

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 contains principles that an entity will need to apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

Entities can apply the final standard using one of the following two methods:

1. retrospectively to each prior period presented; or

2. retrospectively, with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application, with additional disclosures in reporting periods that include the date of initial application.

ASU 2014-09 is effective for interim and annual reporting periods beginning on or after January 1, 2017. In July 2015, the FASB approved a proposal which allows for a deferral of the implementation until January 1, 2018 and permits early application, but not before the original effective date of January 1, 2017. PMI is currently assessing the impact that the adoption of ASU 2014-09 will have on its financial position or results of operations.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Description of Our Company

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

• European Union;

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

• Asia; and

• Latin America & Canada.

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

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

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

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

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Executive Summary

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

Consolidated Operating Results for the Six Months Ended June 30,2015 – The changes in our reported diluted earnings per share (“diluted EPS”) for the six months ended June 30,2015, from the comparable 2014 amounts, were as follows:

	Diluted EPS			% Growth
For the six months ended June 30, 2014	$	2.35
2014 Asset impairment and exit costs	0.25
2014 Tax items	—
Subtotal of 2014 items	0.25
2015 Asset impairment and exit costs	—
2015 Tax items	—
Subtotal of 2015 items	—
Currency	(0.64		)
Interest	(0.03		)
Change in tax rate	(0.04		)
Impact of lower shares outstanding and share-based payments	0.05
Operations	0.43
For the six months ended June 30, 2015	$	2.37		0.9	%

Asset Impairment and Exit Costs – During the six months ended June 30,2014, we recorded pre-tax asset impairment and exit costs of $512 million ($400 million after tax or $0.25 per share) related to the factory closures in the Netherlands and Australia.

On April 4, 2014, we announced the initiation by our affiliate, Philip Morris Holland B.V. ("PMH"), of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH reached an agreement with the trade unions and their members on a social plan, and ceased cigarette production on September 1, 2014. For the six months ended June 30, 2014, we recorded pre-tax asset impairment and exist costs of $488 million. For further details, see the "Asset Impairment and Exit Costs" section of the following "Discussion and Analysis."

Income Taxes – Our effective income tax rate for the six months ended June 30,2015increased by 0.4 percentage points to 29.2%. The change in tax rate that decreased our diluted EPS by $0.04 per share in 2015 was primarily due to changes to repatriation assertions on certain foreign subsidiary historical earnings ($58 million), as well as earnings mix by taxing jurisdiction and repatriation cost differences. We estimate that our full-year 2015 effective tax rate will be approximately 29%.

Currency – The unfavorable currency impact during the reporting period results from the strengthening of the U.S. dollar, especially against the Euro, Indonesian rupiah, Japanese yen, Russian ruble and the Ukraine hryvnia. This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

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

Lower Shares Outstanding and Share-Based Payments – The favorable diluted EPS impact was due to the repurchase of our common stock in 2014 pursuant to our share repurchase program.

Operations – The increase in diluted EPS of $0.43 from our operations in the table above was due to the following segments:

• EEMA: Higher pricing, favorable volume/mix and higher equity income in unconsolidated subsidiaries derived from our investments in North Africa and Russia, partially offset by higher marketing, administration and research costs and higher manufacturing costs;

• European Union: Higher pricing and lower manufacturing costs, partially offset by higher marketing, administration and research costs and unfavorable volume/mix;

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• Latin America & Canada: Higher pricing and lower marketing, administration and research costs, partially offset by unfavorable volume/mix and higher manufacturing costs; and

• Asia: Higher pricing, partially offset by unfavorable volume/mix, higher manufacturing costs and higher marketing, administration and research costs.

Consolidated Operating Results for the Three Months Ended June 30,2015 – The changes in our reported diluted EPS for the three months ended June 30,2015, from the comparable 2014 amounts, were as follows:

	Diluted EPS			% Growth
For the three months ended June 30, 2014	$	1.17
2014 Asset impairment and exit costs	0.24
2014 Tax items	—
Subtotal of 2014 items	0.24
2015 Asset impairment and exit costs	—
2015 Tax items	—
Subtotal of 2015 items	—
Currency	(0.33		)
Interest	(0.02		)
Change in tax rate	(0.01		)
Impact of lower shares outstanding and share-based payments	0.02
Operations	0.14
For the three months ended June 30, 2015	$	1.21		3.4	%

Asset Impairment and Exit Costs – During the second quarter of 2014, we recorded pre-tax asset impairment and exit costs of $489 million ($384 million after tax or $0.24 per share) related to the factory closures in the Netherlands and Australia.

As previously discussed, on April 4, 2014, we announced the initiation by our affiliate, PMH, of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH reached an agreement with the trade unions and their members on a social plan, and ceased cigarette production on September 1, 2014. For the three months ended June 30, 2014, we recorded pre-tax asset impairment and exist costs of $488 million. For further details, see the "Asset Impairment and Exit Costs" section of the following "Discussion and Analysis."

Income Taxes – Our effective income tax rate for the three months ended June 30,2015decreased by 0.5 percentage points to 28.2%. The effective tax rate for the three months ended June 30, 2014 was unfavorably impacted by the asset impairment and exit costs related to the factory closures. Excluding the impact of this item, the change in tax rate that decreased our diluted EPS by $0.01 per share in 2015, was primarily due to earnings mix by taxing jurisdiction and repatriation cost differences.

Currency – The unfavorable currency impact during the reporting period results from the strengthening of the U.S. dollar, especially against the Euro, Indonesian rupiah, Japanese yen, Russian ruble and the Ukraine hryvnia. This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

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

Lower Shares Outstanding and Share-Based Payments – The favorable diluted EPS impact was due to the repurchase of our common stock in 2014 pursuant to our share repurchase program.

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Operations – The increase in diluted EPS of $0.14 from our operations in the table above was due primarily to the following segments:

• Latin America & Canada: Higher pricing and lower marketing, administration and research costs, partially offset by unfavorable volume/mix and higher manufacturing costs;

• European Union: Higher pricing, partially offset by unfavorable volume/mix and higher marketing, administration and research costs; and

• EEMA: Higher pricing, partially offset by higher marketing, administration and research costs, unfavorable volume/mix and higher manufacturing costs.

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

2015 Forecasted Results - On July 16, 2015, we reaffirmed our 2015 full-year reported diluted EPS forecast to be in a range of $4.32 to $4.42, at prevailing exchange rates at that time, versus $4.76 in 2014. Excluding an unfavorable currency impact, at then-prevailing exchange rates, of approximately $1.15 per share for the full-year 2015, the reported diluted earnings per share range represents a projected increase of 9% to 11% versus adjusted diluted earnings per share of $5.02 in 2014. We also announced that we anticipate our currency-neutral 2015 full-year adjusted diluted EPS growth rate to be toward the upper end of our projected increase of 9% to 11%. This forecast includes incremental investment during the second half of the year to support the deployment of iQOS in Japan, Italy and additional 2015 launch markets. Our guidance now also includes accelerated spending in the fourth quarter behind planned iQOS launches in 2016, as well as incremental marketing investments in the second half to further reinforce the favorable momentum of our combustible business. This forecast does not include any share repurchases in 2015.

We calculated 2014 adjusted diluted EPS as reported diluted EPS of $4.76, plus the $0.26 per share charge related to asset impairment and exit costs.

Adjusted diluted EPS is not a measure under accounting principles generally accepted in the United States of America ("U.S. GAAP"). We define adjusted diluted EPS as reported diluted EPS adjusted for asset impairment and exit costs, discrete tax items and unusual items. We believe it is appropriate to disclose this measure as it represents core earnings, improves comparability and helps investors analyze business performance and trends. Adjusted diluted EPS should be considered neither in isolation nor as a substitute for reported diluted EPS prepared in accordance with U.S. GAAP.

This 2015 guidance excludes the impact of any future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates and any unusual events. The factors described in the "Cautionary Factors That May Affect Future Results" section of the following "Discussion and Analysis" represent continuing risks to this forecast.

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Discussion and Analysis

Consolidated Operating Results

See pages 73-77 for a discussion of our "Cautionary Factors That May Affect Future Results." Our cigarette volume, net revenues, excise taxes on products and operating companies income by segment were as follows:

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2015			2014			2015			2014
Cigarette volume:
European Union	90,880			91,618			48,159			49,913
Eastern Europe, Middle East & Africa	138,550			136,176			73,829			74,170
Asia	145,381			146,454			75,256			75,653
Latin America & Canada	43,779			44,514			22,589			23,065
Total cigarette volume	418,590			418,762			219,833			222,801
Net revenues:
European Union	$	12,276		$	14,448		$	6,336		$	7,829
Eastern Europe, Middle East & Africa	9,423			10,236			4,994			5,674
Asia	9,803			9,572			5,039			5,097
Latin America & Canada	4,613			4,574			2,394			2,451
Net revenues	$	36,115		$	38,830		$	18,763		$	21,051
Excise taxes on products:
European Union	$	8,396		$	10,042		$	4,348		$	5,436
Eastern Europe, Middle East & Africa	5,661			5,944			3,075			3,391
Asia	5,503			5,079			2,894			2,786
Latin America & Canada	3,080			3,051			1,587			1,641
Excise taxes on products	$	22,640		$	24,116		$	11,904		$	13,254
Operating income:
Operating companies income:
European Union	$	1,890		$	1,689		$	977		$	711
Eastern Europe, Middle East & Africa	1,761			2,014			881			1,087
Asia	1,731			1,815			797			900
Latin America & Canada	555			467			325			265
Amortization of intangibles	(43		)	(44		)	(21		)	(22		)
General corporate expenses	(82		)	(80		)	(41		)	(40		)
Less:
Equity (income)/loss in unconsolidated subsidiaries, net	(49		)	(36		)	(26		)	(27		)
Operating income	$	5,763		$	5,825		$	2,892		$	2,874

As discussed in Note 8. Segment Reporting to our condensed consolidated financial statements, we evaluate segment performance and allocate resources based on operating companies income, which we define as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. We believe it is appropriate to disclose this measure to help investors analyze the business performance and trends of our various business segments.

References to total international cigarette market, total cigarette market, total market and market shares throughout this "Discussion and Analysis" reflect our best estimates of tax-paid volumes based on a number of internal and external sources.

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Consolidated Operating Results for theSix Months Ended June 30,2015

The following discussion compares our consolidated operating results for the six months ended June 30,2015, with the six months ended June 30,2014.

Our cigarette shipment volume of 418.6 billion units was essentially flat as growth in:

• EEMA, driven principally by Russia and Saudi Arabia, was offset by declines in the:

• European Union, mainly Italy;

• Asia, largely due to Korea and the Philippines, partially offset by Indonesia; and

• Latin America & Canada, mainly due to Argentina.

Excluding acquisitions, our cigarette shipment volume was down by 0.1%. Estimated net inventory movements for the six months ended June 30, 2015 were favorable, driven mainly by Japan. Excluding these inventory movements, our total cigarette shipment volume decreased by 1.0%.

Our cigarette market share increased in a number of key markets, including Algeria, Argentina, Austria, Belgium, Brazil, Egypt, France, Germany, Hong Kong, Indonesia, Korea, Poland, Russia, Saudi Arabia, Singapore, Spain and Switzerland.

Our cigarette shipment volume by brand is shown in the table below:

PMI Cigarette Shipment Volume by Brand (Million Units)
	Six Months Year-to-Date
	2015	2014	Change
Marlboro	139,569	139,032	0.4	%
L&M	47,224	45,154	4.6	%
Parliament	21,084	22,307	(5.5	)%
Bond Street	20,957	20,415	2.7	%
Chesterfield	20,151	20,583	(2.1	)%
Philip Morris	16,593	15,808	5.0	%
Lark	14,714	13,706	7.4	%
Others	138,298	141,757	(2.4	)%
Total PMI	418,590	418,762	—	%

For the six months ended June 30, 2015, the increase in cigarette shipment volume of Marlboro reflected growth in: the European Union, notably France and Spain, partly offset by Italy; and EEMA, notably Turkey and Saudi Arabia, partly offset by Egypt and Ukraine. Cigarette shipment volume of Marlboro decreased in: Asia, mainly due to Japan and Korea, partly offset by the Philippines; and Latin America & Canada, mainly due to Argentina.

The increase in cigarette shipment volume of L&M was driven by growth in EEMA, notably Egypt, Turkey and Ukraine, partly offset by a decline in the European Union, mainly Spain. The decrease in cigarette shipment volume of Parliament was primarily due to Japan, Korea and Ukraine, partly offset by Turkey. The increase in cigarette shipment volume of Bond Street was predominantly driven by Australia and Russia, partly offset by Kazakhstan and Ukraine. The decrease in cigarette shipment volume of Chesterfield was primarily due to EEMA, mainly Russia, Turkey and Ukraine, partly offset by the European Union, mainly Italy. The increase in cigarette shipment volume of Philip Morris primarily reflects the morphing from Diana in Italy, partly offset by the morphing to Lark in Japan. The increase in cigarette shipment volume of Lark was predominantly driven by Japan, benefiting from trade inventory movements, partly offset by Korea and Turkey.

Our other tobacco products ("OTP") primarily include tobacco for roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos. Total shipment volume of OTP, in cigarette equivalent units, increased by 2.7% to 16.9 billion cigarette equivalent units.

Total shipment volume for cigarettes and OTP, in cigarette equivalent units, was flat, excluding acquisitions.

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

	For the Six Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	36,115	$	38,830	$	(2,715	)	(7.0	)%
Excise taxes on products	22,640		24,116		(1,476		)	(6.1	)%
Net revenues, excluding excise taxes on products	$	13,475	$	14,714	$	(1,239	)	(8.4	)%

Net revenues, which include excise taxes billed to customers, decreased by $2.7 billion (7.0%). Excluding excise taxes, net revenues decreased by $1.2 billion (8.4%) to $13.5 billion. This decrease was due to:

• unfavorable currency ($2.2 billion) and

• unfavorable volume/mix ($89 million), partly offset by

• price increases ($1.1 billion) and

• the impact of acquisitions ($16 million).

Currency movements decreased net revenues by $6.1 billion and net revenues, excluding excise taxes on products by $2.2 billion. The $2.2 billion decrease was due primarily to the Argentine peso, Australian dollar, Canadian dollar, Euro, Indonesian rupiah, Japanese yen, Mexican peso, Polish zloty, Russian ruble, Turkish lira and the Ukraine hryvnia.

Net revenues include $898 million in 2015 and $991 million in 2014 related to sales of OTP. These net revenue amounts include excise taxes billed to customers. Excluding excises taxes, net revenues for OTP were $332 million in 2015 and $368 million in 2014.

Excise taxes on products decreased by $1.5 billion (6.1%), due primarily to:

• favorable currency ($3.9 billion) and

• lower excise taxes resulting from unfavorable volume/mix ($175 million), partly offset by

• higher excise taxes resulting from changes in retail prices and tax rates ($2.6 billion).

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

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

	For the Six Months Ended June 30,
(in millions)	2015		2014		Variance			%
Cost of sales	$	4,607	$	5,070	$	(463	)	(9.1	)%
Marketing, administration and research costs	3,062		3,263		(201		)	(6.2	)%
Operating income	5,763		5,825		(62		)	(1.1	)%

Cost of sales decreased$463 million (9.1%), due primarily to:

• favorable currency ($635 million), partly offset by

• higher manufacturing costs ($114 million, principally in our EEMA and Asia segments) and

• higher cost of sales resulting from volume/mix ($49 million).

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Marketing, administration and research costs decreased by $201 million (6.2%), due primarily to:

• favorable currency ($351 million), partly offset by

• higher expenses ($143 million, primarily higher marketing and selling expenses).

Operating income decreased by $62 million (1.1%). This decrease was due primarily to:

• unfavorable currency ($1.2 billion),

• higher marketing, administration and research costs ($143 million),

• unfavorable volume/mix ($138 million) and

• higher manufacturing costs ($114 million), partly offset by

• price increases ($1.1 billion) and

• the non-recurrence of the 2014 pre-tax charges for asset impairment and exit costs ($512 million, primarily related to the decision to discontinue cigarette production in the Netherlands).

Interest expense, net, of $534 millionincreased by $12 million, due primarily to higher average debt levels, partially offset by lower average interest rates on debt.

Our effective tax rate increased by 0.4 percentage points to 29.2%. We estimate that our full-year 2015 effective tax rate will be approximately 29%. The effective tax rate for the six months ended June 30, 2015 was unfavorably impacted by changes to repatriation assertions on certain foreign subsidiary historical earnings ($58 million). The effective tax rate is based on our full-year earnings mix by taxing jurisdiction and cash repatriation plans. Changes in our cash repatriation plans could have an impact on the effective tax rate, which we monitor each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

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

Equity (income)/loss in unconsolidated subsidiaries, net, of $(49) million increased by $13 million, due primarily to higher earnings from our investments in North Africa and Russia, which are reflected in the EEMA segment.

Net earnings attributable to PMI of $3.7 billiondecreased by $44 million (1.2%). This decrease was due primarily to lower operating income as discussed above. Diluted and basic EPS of $2.37increased by 0.9%. Excluding an unfavorable currency impact of $0.64, diluted EPS increased by 28.1%.

Consolidated Operating Results for theThree Months Ended June 30,2015

The following discussion compares our consolidated operating results for the three months ended June 30,2015, with the three months ended June 30,2014.

Our cigarette shipment volume of 219.8 billion units decreased by 1.3%. This decrease was due principally to the:

• European Union, mainly Italy, Poland and Spain, partly offset by France;

• EEMA, principally due to Kazakhstan and Ukraine, partly offset by Russia and Saudi Arabia;

• Asia, largely due to Australia, Indonesia, Korea and the Philippines, partly offset by Japan; and

• Latin America & Canada, mainly Argentina and Mexico.

Excluding acquisitions, our cigarette shipment volume decreased by 1.4%. Estimated net inventory movements for the three months ended June 30, 2015 were favorable, driven mainly by Japan, reflecting a positive comparison with the same period in 2014, which was impacted by retail trade inventory reductions following the consumption tax-driven retail price increases of April 1, 2014. Excluding these inventory movements, our total cigarette shipment volume decreased by 1.6%.

Our cigarette market share increased in a number of key markets, including Algeria, Argentina, Austria, Belgium, Brazil, Egypt, France, Germany, Hong Kong, Indonesia, Korea, Russia, Saudi Arabia, Singapore, Spain and Switzerland.

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Our cigarette shipment volume by brand is shown in the table below:

PMI Cigarette Shipment Volume by Brand (Million Units)
	Second-Quarter
	2015	2014	Change
Marlboro	72,322	73,151	(1.1	)%
L&M	24,546	24,201	1.4	%
Parliament	11,514	12,394	(7.1	)%
Bond Street	11,777	11,137	5.8	%
Chesterfield	10,611	11,797	(10.1	)%
Philip Morris	8,831	7,779	13.5	%
Lark	8,270	6,879	20.2	%
Others	71,962	75,463	(4.6	)%
Total PMI	219,833	222,801	(1.3	)%

For the three months ended June 30, 2015, the decrease in cigarette shipment volume of Marlboro reflected declines in: the European Union, notably Italy and the United Kingdom, partly offset by France and Spain; EEMA, notably North Africa and Ukraine, partly offset by Saudi Arabia and Turkey; and Latin America & Canada, mainly Argentina, Brazil and Mexico. Cigarette shipment volume of Marlboro increased in Asia, driven by the Philippines and Vietnam, partly offset by Indonesia and Japan.

The increase in cigarette shipment volume of L&M was driven by growth in EEMA, notably Egypt, Turkey and Ukraine, partly offset by a decline in the European Union, mainly Spain, and in Asia, mainly Thailand. The decrease in cigarette shipment volume of Parliament was primarily due to Japan, Korea and Ukraine. The increase in cigarette shipment volume of Bond Street was predominantly driven by Australia and Russia, partly offset by Kazakhstan and Ukraine. The decrease in cigarette shipment volume of Chesterfield was primarily due to the European Union, mainly Italy and Spain, and EEMA, mainly Russia, Turkey and Ukraine. The increase in cigarette shipment volume of Philip Morris primarily reflects the morphing from Diana in Italy. The increase in cigarette shipment volume of Lark was predominantly driven by Japan, benefiting from trade inventory movements, partly offset by Korea and Turkey.

Total shipment volume of OTP, in cigarette equivalent units, increased by 3.3% to 8.7 billion cigarette equivalent units.

Total shipment volume for cigarettes and OTP, in cigarette equivalent units, decreased by 1.2%, excluding acquisitions.

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

	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	18,763	$	21,051	$	(2,288	)	(10.9	)%
Excise taxes on products	11,904		13,254		(1,350		)	(10.2	)%
Net revenues, excluding excise taxes on products	$	6,859	$	7,797	$	(938	)	(12.0	)%

Net revenues, which include excise taxes billed to customers, decreased by $2.3 billion(10.9)%. Excluding excise taxes, net revenues decreased by $938 million(12.0)% to $6.9 billion. This decrease was due primarily to:

• unfavorable currency ($1.3 billion) and

• unfavorable volume/mix ($167 million), partly offset by

• price increases ($514 million).

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Currency movements decreased net revenues by $3.7 billion and net revenues, excluding excise taxes on products, by $1.3 billion. The $1.3 billion decrease was due primarily to the Argentine peso, Australian dollar, Brazilian real, Canadian dollar, Euro, Indonesian rupiah, Japanese yen, Mexican peso, Polish zloty, Russian ruble, Turkish lira and the Ukraine hryvnia.

Net revenues include $455 million in 2015 and $521 million in 2014 related to sales of OTP. These net revenue amounts include excise taxes billed to customers. Excluding excise taxes, net revenues for OTP were $168 million in 2015 and $191 million in 2014.

Excise taxes on products decreased by $1.4 billion(10.2)%, due primarily to:

• favorable currency ($2.4 billion) and

• lower excise taxes resulting from unfavorable volume/mix ($318 million), partly offset by

• higher excise taxes resulting from changes in retail prices and tax rates ($1.4 billion).

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

	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Cost of sales	$	2,378	$	2,696	$	(318	)	(11.8	)%
Marketing, administration and research costs	1,568		1,716		(148		)	(8.6	)%
Operating income	2,892		2,874		18			0.6	%

Cost of sales decreased by $318 million (11.8%), due primarily to:

• favorable currency ($378 million), partly offset by

• higher manufacturing costs ($51 million, principally in our EEMA and Asia segments).

Marketing, administration and research costs decreased by $148 million (8.6%), due primarily to:

• favorable currency ($240 million), partly offset by

• higher expenses ($88 million, primarily higher marketing and selling expenses).

Operating income increased by $18 million (0.6%), due primarily to:

• price increases ($514 million) and

• the non-recurrence of the 2014 pre-tax charges for asset impairment and exit costs ($489 million, primarily related to the decision to discontinue cigarette production in the Netherlands), partly offset by

• unfavorable currency ($673 million),

• unfavorable volume/mix ($171 million),

• higher marketing, administration and research costs ($88 million) and

• higher manufacturing costs ($51 million).

Interest expense, net, of $259 millionincreased by $5 million, due primarily to higher average debt levels, partially offset by lower average interest rates on debt.

Our effective tax rate decreased by 0.5 percentage points to 28.2%. The effective tax rate is based on our full-year earnings mix by taxing jurisdiction and cash repatriation plans. Changes in our cash repatriation plans could have an impact on the effective tax rate, which we monitor each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

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Net earnings attributable to PMI of $1.9 billionincreased by $36 million (1.9%). This increase was due primarily to higher operating income as discussed above. Diluted and basic EPS of $1.21increased by 3.4%. Excluding an unfavorable currency impact of $0.33, diluted EPS increased by 31.6%.

Operating Results by Business Segment

Business Environment

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

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

• fiscal challenges, such as excise tax increases and discriminatory tax structures;

• actual and proposed extreme regulatory requirements, including regulation of the packaging, marketing and sale of tobacco products, as well as the products themselves, that may reduce our competitiveness, eliminate our ability to communicate with adult smokers, ban certain of our products, limit our ability to differentiate our products from those of our competitors, and interfere with our intellectual property rights;

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

• intense competition, including from non-tax paid volume by certain local manufacturers;

• pending and threatened litigation as discussed in Note 9. Contingencies; and

• governmental investigations.

FCTC: The World Health Organization's (“WHO”) Framework Convention on Tobacco Control (“FCTC”), an international public health treaty with the objective of reducing tobacco use, drives much of the regulation that shapes the business environment in which we operate. The treaty, to which 179 countries and the European Union are Parties, requires Parties to have in place various tobacco control measures and recommends others.

We support many of the regulatory policies required by the FCTC, including measures that strictly prohibit the sale of tobacco products to minors, limit public smoking, require health warnings on tobacco packaging, and regulate product content to prevent increased adverse health effects of smoking. We advocate measures that establish a regulatory framework for Reduced-Risk Products. We also support the use of tax and price policies to achieve public health objectives, as long as such policies are not discriminatory or excessive, and do not result in increased illicit trade.

However, the FCTC governing body, the Conference of the Parties (“CoP”), has adopted non-binding guidelines and policy recommendations related to certain articles of the FCTC, some of which we strongly oppose, including extreme measures such as point-of-sale display bans, plain packaging, bans on all forms of communications with adult smokers, ingredient restrictions or bans based on the concepts of palatability or attractiveness, and excessive taxation. Among other things, these measures would limit our ability to differentiate our products and disrupt competition, are not based on sound evidence of a public health benefit, are likely to lead to adverse consequences such as increased illicit trade and, in some cases, result in the expropriation of our trademarks and violate international treaties.

It is not possible to predict whether or to what extent measures recommended in the FCTC guidelines will be implemented. In some instances where these extreme measures have been adopted by national governments, we have commenced legal proceedings challenging them.

Excise, Sales and Other Taxes: Excessive and disruptive tax increases and discriminatory tax structures are expected to continue to have an adverse impact on our profitability, due to lower consumption and consumer down-trading from premium to non-premium, discount, other low-price or low-taxed tobacco products, such as fine cut tobacco and illicit products. In addition, in certain jurisdictions, our products are subject to tax structures that discriminate against premium-price products and manufactured cigarettes. We believe that such tax structures undermine public health by encouraging consumers to turn to the illicit trade for cheaper tobacco products and ultimately undercut government revenue objectives, disrupt the competitive environment, and

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encourage criminal activity. Other jurisdictions have imposed, or are seeking to impose, levies or other taxes on tobacco companies. We oppose such extreme and discriminatory tax measures.

EU Tobacco Products Directive: In April 2014, the EU adopted the text of a significantly revised EU Tobacco Products Directive that, among other things, provides for:

• health warnings covering 65% of the front and back panels of packs with specific health warning dimensions that will in effect prohibit various pack formats, such as certain packs for slim cigarettes, even though the agreed text does not ban slim cigarettes. Member States would also have the option to further standardize tobacco packaging, including, under certain conditions, by introducing plain packaging;

• a ban on packs of fewer than 20 cigarettes;

• a ban on characterizing flavors in some tobacco products, with a transition period for menthol expiring in May 2020;

• tracking and tracing measures requiring tracking at pack level down to retail, which we believe will provide no incremental benefit in the fight against illicit trade; and

• a framework for the regulation of novel tobacco products and e-cigarettes (except for those found to be medicines or medical devices), including requirements for health warnings and information leaflets, prohibiting product packaging text related to reduced risk, and introducing notification requirements in advance of commercialization.

The revised Directive entered into force in May 2014. Member States are required to implement the Directive by May 2016.

In June 2014, two of our subsidiaries filed papers in the English High Court seeking judicial review of whether the Directive complies with existing EU Treaties. In November 2014, the English High Court referred the case to the Court of Justice of the European Union ("CJEU") and requested that the CJEU issue a judgment in advance of May 2016. In July 2014, the government of Poland filed a complaint with the CJEU challenging the validity of various provisions in the Directive that ban menthol cigarettes. It is not possible to predict the outcome of these legal proceedings.

Plain Packaging:To date, only Australia has implemented plain packaging. Its regulation, which came into force in December 2012, bans the use of branding, logos and colors on packaging of all tobacco products other than the brand name and variant, which may be printed only in specified locations and in a uniform font. The remainder of the pack is reserved for health warnings and government messages about cessation. The branding of individual cigarettes is also prohibited under this regulation.

Ireland and the U.K. have adopted plain packaging legislation, with implementation scheduled to begin no later than May 2016 and full compliance at retail required as of May 2017. In Ireland, implementation is subject to a Ministerial Commencement Order, which has yet to be issued.

In May 2015, three of our subsidiaries filed papers in the English High Court seeking judicial review of the U.K.’s plain packaging legislation. It is not possible to predict the outcome of these legal proceedings.

In other countries, including France and New Zealand, proposals to implement plain packaging are in various stages of the legislative process. Additionally, several countries, including Finland, Hungary, Norway and Turkey are considering plain packaging, but no legislative proposals have been published. It is not possible to predict whether any of these countries will implement plain packaging.

Australia’s plain packaging legislation triggered three legal challenges. First, major tobacco manufacturers, including our Australian subsidiary, challenged the legislation’s constitutionality in the High Court of Australia. Although the High Court found the legislation constitutional, a majority of the Justices concluded that plain packaging deprives tobacco manufacturers of their property, raising serious questions about the legality of similar proposals in other jurisdictions. Second, our Hong Kong subsidiary initiated arbitration proceedings against the Australian government pursuant to the Hong Kong-Australia Bilateral Investment Treaty and is seeking substantial compensation for the deprivation of its investments in Australia. Third, several countries have initiated World Trade Organization ("WTO") dispute settlement proceedings against Australia. The ongoing legal challenges may take several years to complete, and it is not possible to predict their outcomes.

We oppose plain packaging because it expropriates our valuable intellectual property by taking away our trademarks and moves the industry much closer to a commodity business where there is no distinction among brands and, therefore, the ability to compete for adult smoker market share is greatly reduced. Several studies, including industry-commissioned studies as well as data released by Australian state governments, show that there is no sound basis to conclude that the implementation of plain packaging in Australia has had any impact on smoking prevalence among adults or youth. Data from Australia also appear to confirm that,

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since the implementation of plain packaging, down-trading to lower price and lower margin brands has accelerated and the illicit trade has increased.

In the event any particular jurisdiction adopts plain packaging regulation, we will consider all available options, including litigation, to ensure the protection of our intellectual property.

Restrictions and Bans on the Use of Ingredients:Currently, the WHO and others in the public health community recommend restrictions or total bans on the use of some or all ingredients in tobacco products, including menthol. Some regulators have considered and rejected such proposals, while others have proposed and, in a few cases, adopted restrictions or bans. In particular, as mentioned above, the European Union has adopted a ban of characterizing flavors in tobacco products, subject to an exemption until May 2020 for menthol. Furthermore, Turkey has adopted a ban of menthol as of May 2020. Sweeping ingredient bans have been adopted only by Canada and Brazil.

While the Canadian ingredient ban exempts menthol on the national level, some Canadian provinces have adopted or are in the process of adopting provincial menthol bans.

The Brazil ingredients ban, which, as originally drafted, would prohibit the use of virtually all ingredients with flavoring or aromatic properties, is not in force due to a legal challenge by a tobacco industry union, of which our Brazilian subsidiary is a member. It is not possible to predict the outcome of this legal proceeding.

Broad restrictions and bans on the use of ingredients would require us to reformulate our American Blend tobacco products and could reduce our ability to differentiate these products in the market in the long term. Menthol bans would eliminate the entire category of mentholated tobacco products. We oppose broad bans or sweeping restrictions on the use of ingredients, as they are often based on the subjective and scientifically unsupported notion that ingredients make tobacco products more “attractive” or “palatable” and therefore could encourage tobacco consumption, and also because prohibiting entire categories of cigarettes, such as menthol, is likely to lead to a massive increase in illicit trade.

Many countries have enacted or proposed legislation or regulations that require cigarette manufacturers to disclose to governments and to the public the ingredients used in the manufacture of tobacco products and, in certain cases, to provide toxicological information about those ingredients. We have made, and will continue to make, full disclosures where adequate assurances of trade secret protection are provided.

Bans on Display of Tobacco Products at Retail: In a few of our markets, governments have banned or propose to ban the display of tobacco products at the point of retail sale. Other countries have rejected display ban proposals. We oppose display bans because they restrict competition by favoring established brands and encourage illicit trade, while not reducing smoking or otherwise benefiting public health. In some markets, our subsidiaries and, in some cases, individual retailers have commenced legal proceedings to overturn display bans.

Health Warning Requirements:In most countries, governments require large and often graphic health warnings covering at least 30% of the front and back of cigarette packs (the size mandated by the FCTC). A growing number of countries require warnings covering 50% of the front and back of the pack, and a small number of countries require larger warnings, such as Australia (75% front and 90% back), Mexico (30% front and 100% back), Uruguay (80% front and back) and Canada (75% front and back).

In March 2013, the Ministry of Public Health in Thailand issued a regulation mandating health warnings covering 85% of the front and back of cigarette packs. While a lower court suspended this requirement pending the outcome of legal challenges by two of our affiliates, Thailand’s Supreme Administrative Court recently overturned this order and allowed the regulation to be implemented during the pendency of our affiliates’ claims. The legal challenges by our affiliates are still pending. It is not possible to predict the outcome of these proceedings.

We support health warning requirements designed to inform consumers of the risks of smoking. In fact, where health warnings are not required, we place them on packaging voluntarily in the official language or languages of the country. We defer to governments on the content of warnings except for content that vilifies tobacco companies or does not fairly represent the actual effects of smoking. However, we oppose excessively large health warnings, i.e., larger than 50%. The data show that disproportionately increasing the size of health warnings does not effectively reduce tobacco consumption. Yet, such health warnings impede our ability to compete in the market by leaving insufficient space for our distinctive trademarks and pack designs.

Other Packaging Restrictions: Some governments have passed, or are seeking to pass, restrictions on packaging and labeling, including standardizing the shape, format and lay-out of packaging, as well as imposing broad restrictions on how the space left for branding and product descriptions can be used. Examples include prohibitions on (1) the use of colors that are alleged to

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suggest that one brand is less harmful than others, (2) specific descriptive phrases deemed to be misleading, including, for example, “premium,” “full flavor,” “international,” “gold,” “silver,” and “menthol,” and (3), in one country, all but one variant per brand. We oppose broad packaging restrictions because they unnecessarily limit brand and product differentiation, are anticompetitive, prevent us from providing consumers with information about our products, unduly restrict our intellectual property rights, and violate international trade agreements. In some instances, we have commenced litigation challenging such regulations. It is not possible to predict the outcome of these proceedings.

Bans and Restrictions on Advertising, Marketing, Promotions and Sponsorships:For many years, the FCTC has called for, and countries have imposed, partial or total bans on tobacco advertising, marketing, promotions and sponsorships, including bans and restrictions on advertising on radio and television, in print and on the Internet. The FCTC also requires disclosure of expenditures on advertising, promotion and sponsorship where such activities are not prohibited. The FCTC guidelines recommend that governments adopt extreme and sweeping prohibitions, including all forms of communication to adult smokers. Where restrictions on advertising prevent us from communicating directly and effectively with adult smokers, they impede our ability to compete in the market. For this reason, and because we believe that the available evidence does not show that marketing restrictions effectively reduce smoking, we oppose complete bans on advertising and communication that do not allow manufacturers to communicate directly and effectively with adult smokers.

Restrictions on Product Design: Anti-tobacco organizations and some regulators are calling for the further standardization of tobacco products by requiring, for example, that cigarettes have a certain minimum diameter, which amounts to a ban on slim cigarettes, or requiring the use of standardized filter and cigarette paper designs. We oppose such restrictions because they limit our ability to differentiate our products and because we believe that there is no correlation, let alone a causal link, between product design variations and smoking rates, nor is there any scientific evidence that these restrictions would improve public health.

Reduced cigarette ignition propensity ("RCIP") standards are recommended by the FCTC guidelines, have been adopted in several of our markets (e.g., Australia, Canada, South Africa, South Korea, and the EU), and are being considered in several others. While the available evidence (namely, from two provinces in Canada and the State of New York) so far suggests that the implementation of RCIP standards did not result in the predicted reduction of smoking related fires, RCIP standards do increase production costs.

Restrictions on Public Smoking:The pace and scope of public smoking restrictions have increased significantly in most of our markets. Many countries around the world have adopted, or are likely to adopt, regulations that restrict or ban smoking in public and/or work places, restaurants, bars and nightclubs. Some public health groups have called for, and some regional governments and municipalities have adopted or proposed, bans on smoking in outdoor places, as well as bans on smoking in cars (typically when minors are present) and private homes. The FCTC requires Parties to adopt restrictions on public smoking, and the guidelines call for broad bans in all indoor public places but limit their recommendations on private place smoking, such as in cars and private homes, to increased education on the risk of exposure to environmental tobacco smoke.

While we believe outright bans are appropriate in many public places, such as schools, playgrounds, youth facilities, and many indoor public places, governments can and should seek a balance between the desire to protect non-smokers from environmental tobacco smoke and allowing adults who choose to smoke to do so. Owners of restaurants, bars, cafes, and other entertainment establishments should have the flexibility to permit, restrict, or prohibit smoking, and workplaces should be permitted to provide designated smoking rooms for adult smokers. Finally, we oppose bans on smoking outdoors (beyond places and facilities for children) and in private places.

Restrictions on the sale of innovative tobacco products:In Singapore, the Ministry of Health issued a ban on the sale of “emerging” tobacco products, including novel tobacco or nicotine products, such as smokeless tobacco -- where no combustion takes place and no smoke is produced -- dissolvable tobacco products or nicotine, and nicotine delivery systems (i.e., e-cigarettes) as of December 2015.  According to the Ministry of Health, the ban is a pre-emptive measure to protect public health against the known and potential harms of such products. As written, the preemptive ban appears to foreclose consumer access even to products that might be shown to present significantly less risk of harm than existing products. By contrast, we support regulation that sets strict standards and propels innovation to benefit consumer and public health.

Other Regulatory Issues: Some regulators are considering, or in some cases have adopted, regulatory measures designed to reduce the supply of tobacco products. These include regulations intended to reduce the number of retailers selling tobacco products by, for example, reducing the overall number of tobacco retail licenses available or banning the sale of tobacco within arbitrary distances of certain public facilities. We oppose such measures because they stimulate illicit trade and could arbitrarily deprive business owners and their employees of their livelihood with no indication that such restrictions would improve public health.

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Regulators in some countries have also called for the exclusion of tobacco from certain basic provisions of trade and investment agreements, such as the Trans-Pacific Partnership Agreement, which is under negotiation. This could limit our ability to protect investments and intellectual property, would constitute unfair discrimination against a legal industry, and would be at odds with fundamental principles of international trade.

In a limited number of markets, most notably Japan and Argentina, we are dependent on governmental approvals that may limit our pricing flexibility.

Illicit Trade:The illicit tobacco trade creates a cheap and unregulated supply of tobacco products, undermines efforts to reduce smoking, especially among youth, damages legitimate businesses, stimulates organized crime, increases corruption and reduces government tax revenue. Illicit trade may account for as much as 10% of global cigarette consumption; this includes counterfeit, contraband and the growing problem of "illicit whites," which are unique cigarette brands manufactured predominantly for smuggling. We estimate that illicit trade in the European Union accounted for more than 10% of total cigarette consumption in 2014.

A number of jurisdictions are considering regulatory measures and government action to prevent illicit trade. In November 2012, the FCTC adopted the Protocol to Eliminate Illicit Trade in Tobacco Products (the “Protocol”), which includes supply chain control measures, such as licensing of manufacturers and distributors, enforcement in free trade zones, controls on duty free and Internet sales and the implementation of tracking and tracing technologies. The Protocol, which we support, will come into force once the fortieth country ratifies it, after which countries must implement its measures via national legislation. To date, eight countries have ratified the Protocol. It is not possible to predict whether other countries will do so.

Additionally, we and our subsidiaries have entered into cooperation agreements with governments and authorities to support their anti-illicit trade efforts. For example, in 2004, we entered into a 12-year cooperation agreement with the EU and its member states that provides for cooperation with European law enforcement agencies on anti-contraband and on anti-counterfeit efforts. Under the terms of this agreement we make financial contributions of approximately $75 million per year (recorded as an expense in cost of sales when product is shipped) to support these efforts. We are also required to pay the excise taxes, VAT and customs duties on qualifying seizures of up to 450 million genuine PMI products in the EU in a given year, and five times the applicable taxes and duties if seizures exceed this threshold in a given year. To date, our payments for product seizures have been immaterial.

In 2009, our Colombian subsidiaries entered into an Investment and Cooperation Agreement with the national and regional governments of Colombia to promote investment in, and cooperation on, anti-contraband and anti-counterfeit efforts. The agreement provides $200 million in funding over a 20-year period to address issues such as combating the illegal cigarette trade and increasing the quality and quantity of locally grown tobacco.

Reduced-Risk Products: We use the term Reduced-Risk Products (“RRPs”) to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible tobacco products such as cigarettes. One of our strategic priorities is to develop, assess and commercialize a portfolio of innovative RRPs. Our RRPs are in various stages of development and commercialization, and we are conducting extensive and rigorous scientific studies to determine whether they reduce exposure to harmful and potentially harmful constituents and ultimately reduce disease risk, compared to cigarettes. Any claims we make are based on a full set of data from the relevant scientific studies and may also be subject to government review and approval, as is the case in the U.S. today. We draw upon a team of world-class scientists from a broad spectrum of scientific disciplines, and our efforts are guided by the following three key objectives:

• to develop RRPs that provide adult smokers the taste, sensory experience, nicotine delivery profile and ritual characteristics that are similar to those currently provided by cigarettes;

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

• to advocate for the development of science-based regulatory frameworks for the development and commercialization of RRPs, including the communication to adult smokers of scientifically substantiated reduced exposure or reduced risk claims.

Our product development is based on the elimination of combustion via tobacco heating and other innovative systems for aerosol generation, which we believe is the most promising path to reduce risk.

Our approach to individual risk assessment is to use cessation as the benchmark because the short-term and long-term effects of smoking cessation on risk reduction are well known.

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Four RRP platforms are in various stages of development and commercialization readiness:

• Platform 1, as discussed below, uses a precisely controlled heating device that we are commercializing under the iQOS brand name, into which a specially designed tobacco product under the Marlboro and HeatSticks brand names is inserted to generate an aerosol. Six short-term clinical studies have been completed. The study results show a substantial reduction in relevant biomarkers of exposure in adult consumers who switched to iQOS compared to adult consumers who continued to smoke cigarettes over a five-day period. The conduct phase of two three-month clinical studies for Platform 1 has been completed. The final report of the two three-month clinical studies will be completed in the second half of 2015. We also initiated a longer term clinical study in December 2014, with the final results anticipated in the second half of 2016.

• Platform 2 uses a pressed carbon heat source to generate an aerosol by heating tobacco. Clinical testing of Platform 2 started in the second quarter of 2015.

• Platform 3 is based on technology we acquired from Professor Jed Rose of Duke University and his co-inventors in May 2011. This product creates an aerosol of nicotine salt formed by the chemical reaction of nicotine with a weak organic acid. We are exploring two routes for this platform, one with electronics and one without. The product replicates the feel and ritual of smoking without tobacco and without burning. We have begun pre-clinical testing of this product and plan to begin clinical trials as of the second half of 2015.

• Platform 4 covers e-vapor products, which are battery powered devices that produce an aerosol by vaporizing a liquid nicotine solution. Our e-vapor products comprise devices using current generation technology, and we are working on developing the next generation of e-vapor technologies to address the challenges presented by the e-vapor products currently on the market, ranging from consumer satisfaction to manufacturing processes and product consistency.

We are also developing other potential product platforms.

We are proceeding with the commercialization of RRPs. In January 2014, we announced an investment of up to €500 million over three years in our first manufacturing facility in the European Union and an associated pilot plant near Bologna, Italy, to produce our RRPs. We plan for the factory to initially manufacture Platform 1 tobacco sticks (HeatSticks). When fully operational by 2016, and together with the pilot plant that was opened for production in October 2014, we expect to reach an annual production capacity of up to 30 billion units.

In the United States of America, an established regulatory framework for assessing “Modified Risk Tobacco Products” (“MRTPs”) exists under the jurisdiction of the Food and Drug Administration (“FDA”). We expect that future FDA actions are likely to influence the regulatory approach of other interested governments. Our assessment approach and the studies conducted to date reflect the rigorous evidentiary package contemplated in the FDA’s Draft Guidance for Modified Risk Tobacco Product Applications (2012). We have shared our approach and studies with the FDA’s Center for Tobacco Products. In parallel, we are engaging with regulators in several EU member states, as well as in a number of other countries. We plan to submit a Modified Risk Tobacco Product application for Platform 1 when we believe we have the evidentiary package contemplated in the Draft Guidance.

As we work to develop evidence to substantiate the risk reduction potential of our products, we will review our ability to make claims of reduced exposure or risk based on applicable laws and regulations and, as we are already doing, engage with regulators and share the evidence with them. We are also engaging with the scientific community, sharing our assessment approach and the results we have generated. There can be no assurance that we will succeed in our efforts or that regulators will permit the marketing of our RRPs with substantiated claims of reduced formation, exposure, individual risk or population harm.

In 2014, we introduced the iQOS system in pilot city launches in Nagoya, Japan, and in Milan, Italy, and plan to commence national expansion in those two countries in 2015. We will launch iQOS in Switzerland in August 2015 andplan to launch the product in several other markets thereafter. To date, the product has not been marketed with claims of reduced risk.

In December 2013, we established a strategic framework with Altria Group, Inc. ("Altria") under which Altria will make available its e-vapor products exclusively to us for commercialization outside the United States of America, and we will make available two of our RRPs exclusively to Altria for commercialization in the United States of America. In March 2015, we launched Solaris, a Platform 4 e-vapor product licensed from Altria, in Spain. In July 2015, we extended the strategic framework with Altria to include a Joint Research, Development and Technology Sharing Agreement. The additional agreement provides the framework under which PMI and Altria will collaborate to develop the next generation of e-vapor products for commercialization in the United States of America by Altria and in markets outside the United States of America by PMI. The collaboration between PMI and Altria in this endeavor is enabled by exclusive technology cross licenses and technical information sharing. The agreements

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also provide for cooperation on the scientific assessment of, and for the sharing of improvements to, the existing generation of licensed products.

In June 2014, we acquired 100% of Nicocigs Limited, a leading U.K.-based e-vapor company whose principal brand is Nicolites. This acquisition provided PMI with immediate access to, and a significant presence in, the U.K. e-vapor market.

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

In Germany, in October 2013, the Administrative District Office Munich, acting under the policy supervision of the Bavarian Ministry of Health and Environment, sent our German affiliate an order alleging that certain components of its Marlboro advertising campaign do not comply with the applicable tobacco advertising law, and requiring our affiliate to stop this particular campaign throughout Germany and to remove all outdoor advertisements within one month from the effective date of the order and point-of-sale materials within three months. Our affiliate did not believe the allegations properly reflected the facts and the law and filed a challenge in the Munich Administrative Court, which was granted in part and denied in part. At an appeals hearing in April 2014, before the Bavarian Higher Administrative Court, the parties agreed that our affiliate could continue the campaign with certain limitations on image visuals and text slogans for the duration of the court proceedings. In April 2015, the Administrative District Office Munich issued a revised order, which again requires our affiliate to stop using core elements of this particular campaign within one to three months from the effective date of the order. Our affiliate has challenged the revised order in the Munich Administrative Court.

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

Governmental Investigations

From time to time, we are subject to governmental investigations on a range of matters. As part of an investigation by the Department of Special Investigations (“DSI”) of the government of Thailand into alleged under declaration of import prices by Thai cigarette importers, the DSI proposed to bring charges against our subsidiary, Philip Morris (Thailand) Limited, Thailand Branch (“PM Thailand”) for alleged underpayment of customs duties and excise taxes of approximately $2 billion covering the period from July 28, 2003, to February 20, 2007 (“2003-2007 Investigation”). In September 2009, the DSI submitted the case file to the Public Prosecutor for review. The DSI also commenced an informal inquiry alleging underpayment by PM Thailand of customs duties and excise taxes of approximately $1.8 billion, covering the period 2000-2003. In early 2011, the Public Prosecutor's office issued a non-prosecution order in the 2003-2007 Investigation. In August 2011, the Director-General of DSI publicly announced that he disagreed with the non-prosecution order. Thus, the matter was referred for resolution to the Attorney General, whose deputy subsequently stated that the Attorney General has made a ruling to proceed with a prosecution order. Based on available information, it is probable that criminal charges will be filed. PM Thailand has been cooperating with the Thai authorities and believes that its declared import prices are in compliance with the Customs Valuation Agreement of the WTO and Thai law.

Additionally, in November 2010, a WTO panel issued its decision in a dispute relating to facts that arose from August 2006 between the Philippines and Thailand concerning a series of Thai customs and tax measures affecting cigarettes imported by PM Thailand into Thailand from the Philippines. The WTO panel decision, which was upheld by the WTO Appellate Body, concluded that Thailand had no basis to find that PM Thailand's declared customs values and taxes paid were too low, as alleged by the DSI in 2009. The decision also created obligations for Thailand to revise its laws, regulations, or practices affecting the customs valuation and tax treatment of future cigarette imports. Thailand agreed in September 2011 to comply with the decision by October 2012. The Philippines contends that to date Thailand has not fully complied and is pursuing bilateral discussions with Thailand to address the outstanding issues. At WTO meetings, the Philippines has repeatedly expressed concerns with ongoing investigations by Thailand of PM Thailand, noting that these investigations appear to be based on grounds not supported by WTO customs valuation rules and inconsistent with several decisions already taken by Thai Customs and other Thai governmental agencies.

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Acquisitions and Other Business Arrangements

In July 2015, we dissolved our exclusive joint venture agreement with Swedish Match AB ("SWMA") to commercialize Swedish snus and other smoke-free tobacco products worldwide, outside of Scandinavia and the United States. The dissolution, mutually agreed with SWMA, means that both companies will now focus on independent strategies for the commercialization of these products and the trademarks and intellectual property licensed to the joint venture by the companies will revert to their original owners. The two companies have concurrently entered into transitional agreements under which SWMA will contract manufacture snus products for us in certain markets, including Canada and Russia, and we will distribute Swedish Match's brand General in Canada and Russia. The dissolution of this agreement was not material to our consolidated financial position, results of operations or cash flows in any of the periods presented.

In June 2015, we announced that our subsidiary, PT HM Sampoerna ("Sampoerna"), of which we hold a 98.18% interest, will explore options to comply with the January 30, 2014 Indonesian Stock Exchange regulation requiring all listed public companies to have at least a 7.5% public shareholding by January 30, 2016. Sampoerna has engaged investment banks to assist with the evaluation of various strategic options, including potential capital market transactions, to fulfill this requirement.

In June 2014, we acquired 100% of Nicocigs Limited, a leading U.K.-based e-vapor company, for the final purchase price of $103 million, net of cash acquired, with additional contingent payments of up to $77 million, primarily relating to performance targets over a three-year period. As of June 30, 2015, the additional contingent payments were up to $63 million over the remaining two-year period. For additional information, see Note 12. Fair Value Measurements to our condensed consolidated financial statements. The effect of this acquisition was not material to our consolidated financial position, results of operations or cash flows in any of the periods presented.

In September 2013, Grupo Carso, S.A.B. de C.V. ("Grupo Carso") sold to us its remaining 20% interest in our Mexican tobacco business for $703 million. As a result, we own 100% of the Mexican tobacco business. A former director of PMI, whose term expired at the Annual Meeting of Shareholders in May 2015, had an affiliation with Grupo Carso. The final purchase price was subject to an adjustment based on the actual performance of the Mexican tobacco business over the three-year period ending two fiscal years after the closing of the purchase. In May 2015, we received a payment of $113 million from Grupo Carso as the final purchase price adjustment. This resulted in a total net purchase price of $590 million. In addition, we agreed to pay a dividend of approximately $38 million to Grupo Carso related to the earnings of the Mexican tobacco business for the nine months ended September 30, 2013. In March 2014, the dividend was declared and paid. The purchase of the remaining 20% interest resulted in a net decrease to our additional paid-in capital of $559 million.

Investments in Unconsolidated Subsidiaries

On September 30, 2013, we acquired a 49% equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”), formerly Arab Investors-TA (FZC), for approximately $625 million. As a result of this transaction, we hold an approximate 25% economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture which is 51% owned by EITA and 49% by the Algerian state-owned enterprise Société Nationale des Tabacs et Allumettes SpA. STAEM manufactures and distributes under license some of our brands. The initial investment in EITA was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

On December 12, 2013, we acquired from Megapolis Investment BV a 20% equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis ("Megapolis"), our distributor in Russia, for a purchase price of $760 million. An additional payment of up to $100 million, which is contingent on Megapolis's operational performance over the four fiscal years following the closing of the transaction, will also be made by us if the performance criteria are satisfied. We have also agreed to provide Megapolis Investment BV with a $100 million interest-bearing loan. We and Megapolis Investment BV have agreed to set off any future contingent payments owed by us against the future repayments due under the loan agreement. Any loan repayments in excess of the contingent consideration earned by the performance of Megapolis are due to be repaid, in cash, to us on March 31, 2017. At December 31, 2013, we recorded a $100 million asset related to the loan receivable and a discounted liability of $86 million related to the contingent consideration. The initial investment in Megapolis was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

Asset Impairment and Exit Costs

On April 4, 2014, we announced the initiation by our affiliate, Philip Morris Holland B.V. ("PMH"), of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH reached an agreement with the trade unions and their members on a social plan, and ceased cigarette production on September 1,

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2014. In total, we expect to incur a total pre-tax charge of approximately $547 million for the program. During 2014, we recorded pre-tax asset impairment and exit costs of $489 million. This amount included employee separation costs of $343 million, asset impairment costs of $139 million and other separation costs of $7 million. In addition, as part of the total program, up to $58 million of pre-tax implementation costs, primarily related to notice period payments, will be reflected in cost of sales and marketing, administration and research costs in our consolidated statement of earnings. During 2014, $50 million of these pre-tax implementations costs were reflected in our consolidated statements of earnings. Excluding asset impairment costs, substantially all of these charges will result in cash expenditures expected to be paid by the end of 2015.

Trade Policy

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

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

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

To our knowledge, none of our commercial arrangements result in the governments of any country identified by the U.S. government as a state sponsor of terrorism, nor entities controlled by those governments, receiving cash or acting as intermediaries in violation of U.S. laws. We do not sell products in Iran and Syria.

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

Operating Results – Six Months and Three Months Ended June 30, 2015

The following discussion compares operating results within each of our reportable segments for the six months and three months ended June 30, 2015, with the six months and three months ended June 30, 2014.

European Union:

European Union	For the Six Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	12,276	$	14,448	$	(2,172	)	(15.0	)%
Excise taxes on products	8,396		10,042		(1,646		)	(16.4	)%
Net revenues, excluding excise taxes on products	3,880		4,406		(526		)	(11.9	)%
Operating companies income	1,890		1,689		201			11.9	%

For the six months ended June 30, 2015, net revenues, which include excise taxes billed to customers, decreased by $2.2 billion. Excluding excise taxes, net revenues decreased by $526 million due to:

• unfavorable currency ($766 million) and

• unfavorable volume/mix ($18 million), partly offset by

• price increases ($247 million).

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The net revenues of the European Union segment include $713 million in 2015 and $819 million in 2014 related to sales of OTP. Excluding excise taxes, OTP net revenues for the European Union segment were $251 million in 2015 and $282 million in 2014.

Operating companies income increased by $201 million during the six months ended June 30, 2015. This increase was due primarily to:

• the non-recurrence of the 2014 pre-tax charge for asset impairment and exit costs ($488 million) related to the decision to discontinue cigarette production in the Netherlands,

• price increases ($247 million) and

• lower manufacturing costs ($17 million), partly offset by

• unfavorable currency ($470 million),

• higher marketing, administration and research costs ($53 million) and

• unfavorable volume/mix ($24 million).

European Union	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	6,336	$	7,829	$	(1,493	)	(19.1	)%
Excise taxes on products	4,348		5,436		(1,088		)	(20.0	)%
Net revenues, excluding excise taxes on products	1,988		2,393		(405		)	(16.9	)%
Operating companies income	977		$	711	266			37.4	%

For the three months ended June 30, 2015, net revenues decreased by $1.5 billion. Excluding excise taxes, net revenues decreased by $405 million due primarily to:

• unfavorable currency ($488 million) and

• unfavorable volume/mix ($60 million), partly offset by

• price increases ($139 million).

The net revenues of the European Union segment include $363 million in 2015 and $432 million in 2014 related to sales of OTP. Excluding excise taxes, OTP net revenues for the European Union segment were $127 million in 2015 and $148 million in 2014.

Operating companies income increased by $266 million during the three months ended June 30, 2015. This increase was due primarily to:

• the non-recurrence of the 2014 pre-tax charge for asset impairment and exit costs ($488 million) related to the decision to discontinue cigarette production in the Netherlands,

• price increases ($139 million), partly offset by

• unfavorable currency ($279 million),

• unfavorable volume/mix ($53 million) and

• higher marketing, administration and research costs ($33 million).

European Union - Industry Volume

The total cigarette market in the European Union of 117.1 billion units decreased by 3.0% in the second quarter and by 2.3% to 221.8 billion units for the six months year-to-date. Excluding the impact of estimated trade inventory movements, the total cigarette market declined by 2.3% in the second quarter and by 2.5% for the six months year-to-date, reflecting, in certain key geographies, improving economies, a moderation in the level of illicit trade, lower out-switching to the fine cut category and a lower prevalence of e-vapor products. In 2015, the total cigarette market in the European Union is now forecast to decrease by approximately 3.0% to 3.5%.

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The total OTP market in the European Union in the second quarter of 41.5 billion cigarette equivalent units decreased by 0.5%, reflecting a lower total fine cut market, down by 0.1% to 36.2 billion cigarette equivalent units. For the six months year-to-date, the total OTP market in the European Union of 79.2 billion cigarette equivalent units decreased by 1.1%, reflecting a lower total fine cut market, down by 1.0% to 69.2 billion cigarette equivalent units.

European Union - Shipment Volume and Market Share

Our cigarette shipment volume and market share performance by brand are shown in the tables below:

European Union Cigarette Shipment Volume by Brand (Million Units)
	Second-Quarter				Six Months Year-to-Date
	2015	2014	Change		2015	2014	Change
Marlboro	23,554	23,913	(1.5	)%	44,346	44,144	0.5	%
L&M	8,528	8,717	(2.2	)%	15,926	16,122	(1.2	)%
Chesterfield	6,905	7,501	(7.9	)%	13,210	12,908	2.3	%
Philip Morris	3,634	2,590	40.3	%	6,016	4,941	21.8	%
Others	5,538	7,192	(23.0	)%	11,382	13,503	(15.7	)%
Total EU	48,159	49,913	(3.5	)%	90,880	91,618	(0.8	)%

European Union Cigarette Market Shares by Brand
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		p.p.		2015		2014		p.p.
Marlboro	19.6	%	19.4	%	0.2		19.4	%	19.3	%	0.1
L&M	7.3	%	7.2	%	0.1		7.2	%	7.1	%	0.1
Chesterfield	5.8	%	5.7	%	0.1		5.8	%	5.4	%	0.4
Philip Morris	2.5	%	2.2	%	0.3		2.4	%	2.1	%	0.3
Others	5.2	%	5.9	%	(0.7	)	5.2	%	5.9	%	(0.7	)
Total EU	40.4	%	40.4	%	—		40.0	%	39.8	%	0.2

In the second quarter, our cigarette shipment volume of 48.2 billion units decreased by 3.5%, or by 2.9% excluding inventory movements, mainly due to Italy and Spain, partly offset by France. Market share was flat at 40.4%, with gains, mainly in France, Germany and Spain, mainly offset by Italy.

In the second quarter, our shipments of OTP of 6.1 billion cigarette equivalent units increased by 3.6%, driven principally by higher market share. Our total OTP market share increased by 0.2 points to 14.5%, reflecting a gain in the fine cut category.

For the six months year-to-date, our cigarette shipment volume of 90.9 billion units decreased by 0.8%, or by 1.4% excluding inventory movements, notably due to Italy, partly offset by France and Spain. Market share increased by 0.2 points to 40.0%, driven notably by France, Germany and Spain, partly offset by the United Kingdom.

For the six months year-to-date, our shipments of OTP of 11.6 billion cigarette equivalent units increased by 3.7%, driven principally by higher market share. Our total OTP market share increased by 0.2 points to 14.4%, reflecting a slight gain in the fine cut category.

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European Union - Market Discussions

In France, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	France Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	11.8		11.8		0.1	%	22.4		22.3		0.3	%
PMI Shipments (million units)	5,126		4,816		6.4	%	9,704		9,378		3.5	%
PMI Cigarette Market Share
Marlboro	25.9	%	25.5	%	0.4		25.7	%	25.3	%	0.4
Philip Morris	9.6	%	9.4	%	0.2		9.6	%	9.4	%	0.2
Chesterfield	3.3	%	3.4	%	(0.1	)	3.3	%	3.4	%	(0.1	)
Others	3.0	%	3.1	%	(0.1	)	2.9	%	3.1	%	(0.2	)
Total	41.8	%	41.4	%	0.4		41.5	%	41.2	%	0.3

In the second quarter, the total cigarette market was essentially flat, reflecting its general recovery since the second half of 2014 and a lower prevalence of e-vapor products. Excluding the net impact of inventory movements, our cigarette shipment volume increased by 0.9%, reflecting market share growth, notably of premium brands Marlboro and Philip Morris. The total industry fine cut category of 3.7 billion cigarette equivalent units increased by 7.2%. Our market share of the category decreased by 1.6 points to 25.0%.

For the six months year-to-date, the increase in the total cigarette market reflected the same dynamics as in the quarter. Excluding the net impact of inventory movements, our cigarette shipment volume increased by 1.2%, reflecting market share growth, notably of premium brands Marlboro and Philip Morris. The total industry fine cut category of 7.0 billion cigarette equivalent units increased by 6.2%. Our market share of the category decreased by 1.3 points to 25.0%.

In Germany, industry size, PMI cigarette shipment volume and market share performance are shown in the tablebelow.

	Germany Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	19.9		20.9		(5.0	)%	38.0		39.1		(2.7	)%
PMI Shipments (million units)	7,756		7,732		0.3	%	14,501		14,440		0.4	%
PMI Cigarette Market Share
Marlboro	23.0	%	21.8	%	1.2		22.5	%	21.9	%	0.6
L&M	12.7	%	11.9	%	0.8		12.5	%	11.8	%	0.7
Chesterfield	1.8	%	1.7	%	0.1		1.7	%	1.7	%	—
Others	1.5	%	1.5	%	—		1.4	%	1.5	%	(0.1	)
Total	39.0	%	36.9	%	2.1		38.1	%	36.9	%	1.2

In the second quarter, the decline of the total cigarette market was mainly due to unfavorable trade inventory movements. Excluding these inventory movements, the total cigarette market declined by 2.2%, mainly due to the annualized impact of price increases in the third quarter of 2014, partly offset by a lower prevalence of illicit trade. The increase in our market share was driven by Marlboro, mainly reflecting the positive impact of the new 2.0 Architecture, and L&M, benefiting from a rounded retail price

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point of €5.00 per pack. While the total industry fine cut category of 10.2 billion cigarette equivalent units decreased by 2.2%, our market share of the category increased by 0.4 points to 13.4%.

For the six months year-to-date, the decline of the total cigarette market was partly due to unfavorable trade inventory movements. Excluding these inventory movements, the total cigarette market declined by 2.1%, reflecting the same dynamics as in the second quarter. The increase in our market share was driven by the same factors as in the second quarter. While the total industry fine cut category of 19.7 billion cigarette equivalent units decreased by 2.9%, our market share of the category was flat at 13.0%.

In Italy, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Italy Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	18.9		19.2		(1.6	)%	35.4		36.0		(1.7	)%
PMI Shipments (million units)	10,564		11,402		(7.3	)%	20,214		20,469		(1.2	)%
PMI Cigarette Market Share
Marlboro	24.1	%	25.0	%	(0.9	)	24.2	%	25.3	%	(1.1	)
Chesterfield	10.8	%	10.0	%	0.8		10.7	%	7.7	%	3.0
Diana	6.2	%	8.5	%	(2.3	)	6.9	%	9.2	%	(2.3	)
Others	12.7	%	11.8	%	0.9		12.1	%	12.0	%	0.1
Total	53.8	%	55.3	%	(1.5	)	53.9	%	54.2	%	(0.3	)

In the second quarter and for the six months year-to-date, the decline in the total cigarette market was mainly due to the tax-driven price increases in January 2015 and out-switching to less expensive other tobacco product categories, particularly fine cut, partly offset by a lower prevalence of illicit trade and e-vapor products. Excluding the net impact of inventory movements, our cigarette shipment volume decreased by 4.0% in the second quarter and by 2.2% for the six months year-to-date, reflecting market share loss, notably of Marlboro,largely due to its price increase in the first quarter of 2015 to €5.20 per pack from its round retail price point of €5.00 per pack, and low-price Diana, which is currently being morphed into Philip Morris, and which had been impacted by the growth of the super-low price segment, partly offset by Chesterfield, reflecting the annualized impact of the brand's repositioning into the super-low price segment. In the second quarter, the total industry fine cut category of 1.6 billion cigarette equivalent units increased by 6.2%. Our market share of the category decreased by 0.9 points to 41.3%. For the six months year-to-date, the total industry fine cut category of 3.1 billion cigarette equivalent units increased by 5.2%. Our market share of the category decreased by 0.3 points to 41.4%.

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In Poland, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Poland Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	10.6		11.1		(4.7	)%	20.3		21.6		(5.7	)%
PMI Shipments (million units)	4,266		4,489		(5.0	)%	8,023		8,159		(1.7	)%
PMI Cigarette Market Share
Marlboro	11.4	%	10.9	%	0.5		11.0	%	10.6	%	0.4
L&M	17.9	%	17.8	%	0.1		17.7	%	17.1	%	0.6
Chesterfield	8.6	%	7.9	%	0.7		8.3	%	7.5	%	0.8
Others	2.4	%	3.8	%	(1.4	)	2.4	%	3.6	%	(1.2	)
Total	40.3	%	40.4	%	(0.1	)	39.4	%	38.8	%	0.6

In the second quarter and for the six months year-to-date, the decline in the total cigarette market was mainly due the prevalence of e-vapor products, illicit trade and non-duty paid OTP products. While our cigarette shipment volume in the quarter and year-to-date decreased, reflecting a lower total market, market share was essentially flat in the second quarter, and up by 0.6 points for the six months year-to-date, with declines from super-low price brands Red & White and RGD offset by Marlboro, partly reflecting the positive impact of the new 2.0 Architecture, L&M, driven by new product launches,and Chesterfield, partly driven by its round corner box super-slims variants. In the second quarter, the total industry fine cut category of 1.0 billion cigarette equivalent units increased by 12.7%. Our market share of the category decreased by 2.2 points to 33.1%. For the six months year-to-date, the total industry fine cut category of 2.0 billion cigarette equivalent units increased by 5.1%. Our market share of the category decreased by 1.7 points to 33.4%.

In Spain, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Spain Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	11.8		12.3		(4.1	)%	22.3		22.8		(2.4	)%
PMI Shipments (million units)	4,121		4,337		(5.0	)%	7,688		7,524		2.2	%
PMI Cigarette Market Share
Marlboro	16.8	%	15.8	%	1.0		16.4	%	15.5	%	0.9
Chesterfield	9.1	%	9.2	%	(0.1	)	9.3	%	9.3	%	—
L&M	5.9	%	6.1	%	(0.2	)	5.9	%	6.2	%	(0.3	)
Others	1.4	%	0.9	%	0.5		1.4	%	0.7	%	0.7
Total	33.2	%	32.0	%	1.2		33.0	%	31.7	%	1.3

In the second quarter and for the six months year-to-date, the decline of the total cigarette market was mainly due to unfavorable trade inventory movements. Excluding these inventory movements, the total cigarette market declined by 0.5% in the second quarter and by 1.0% for the six months year-to-date, mainly due to the impact of price increases in the second half of 2014 and the first quarter of 2015, partly offset by an improving economy, a lower prevalence of illicit trade and e-vapor products, and in-switching from fine cut. Excluding inventory movements, our cigarette shipment volume decreased by 0.4% in the second quarter and increased by 1.6% for the six months year-to-date. The increase in our market share in the second quarter and for the six months year-to-date was driven mainly by Marlboro, benefiting from a round price point in the vending channel, the new 2.0 Architecture, and an improving economy. In the second quarter, the total industry fine cut category of 2.5 billion cigarette equivalent

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units decreased by 2.2%. Our market share of the fine cut category decreased by 1.2 points to 13.5%. For the six months year-to-date, the total industry fine cut category of 4.7 billion cigarette equivalent units decreased by 1.5%. Our market share of the fine cut category decreased by 1.3 points to 13.9%.

Eastern Europe, Middle East & Africa:

Eastern Europe, Middle East & Africa	For the Six Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	9,423	$	10,236	$	(813	)	(7.9	)%
Excise taxes on products	5,661		5,944		(283		)	(4.8	)%
Net revenues, excluding excise taxes on products	3,762		4,292		(530		)	(12.3	)%
Operating companies income	1,761		2,014		(253		)	(12.6	)%

For the six months ended June 30, 2015, net revenues, which include excise taxes billed to customers, decreased by $813 million. Excluding excise taxes, net revenues decreased by $530 million due primarily to:

• unfavorable currency ($909 million), partly offset by

• price increases ($311 million) and

• favorable volume/mix ($67 million).

Operating companies income decreased by $253 million during the six months ended June 30, 2015. This decrease was due primarily to:

• unfavorable currency ($524 million),

• higher marketing, administration and research costs ($67 million) and

• higher manufacturing costs ($38 million), partially offset by

• price increases ($311 million),

• favorable volume/mix ($35 million) and

• higher equity income in unconsolidated subsidiaries ($31 million).

Eastern Europe, Middle East & Africa	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	4,994	$	5,674	$	(680	)	(12.0	)%
Excise taxes on products	3,075		3,391		(316		)	(9.3	)%
Net revenues, excluding excise taxes on products	1,919		2,283		(364		)	(15.9	)%
Operating companies income	881		$	1,087	(206		)	(19.0	)%

For the three months ended June 30, 2015, net revenues decreased by $680 million. Excluding excise taxes, net revenues decreased by $364 million due primarily to:

• unfavorable currency ($464 million) and

• unfavorable volume/mix ($43 million), partly offset by

• price increases ($142 million).

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Operating companies income decreased by $206 million during the three months ended June 30, 2015. This decrease was due primarily to:

• unfavorable currency ($253 million),

• higher marketing, administration and research costs ($47 million),

• unfavorable volume/mix ($39 million) and

• higher manufacturing costs ($14 million), partly offset by

• price increases ($142 million).

Eastern Europe Middle East & Africa - PMI Cigarette Shipment Volume

In the second quarter, our cigarette shipment volume of 73.8 billion units decreased by 0.5%, or by 0.6% excluding acquisitions. The decline was principally due to Kazakhstan, reflecting a lower total market and share, and Ukraine, partly offset by Russia and the Middle East, notably Saudi Arabia. Our cigarette shipment volume of premium brands decreased by 2.5%, mainly due to: Marlboro, down by 3.1% to 21.1 billion units, principally due to Egypt and Ukraine, partly offset by Saudi Arabia, and Turkey; and Parliament, down by 2.1% to 8.8 billion units, mainly due to Ukraine. Our cigarette shipment volume of L&M increased by 5.4% to 13.2 billion units, driven by Egypt, Turkey and Ukraine, partially offset by Russia.

For the six months year-to-date, our cigarette shipment volume of 138.6 billion units increased by 1.7%, or by 1.6% excluding acquisitions, mainly driven by Russia and the Middle East, notably Saudi Arabia, partly offset by Kazakhstan and Ukraine. Our cigarette shipment volume of premium brands increased by 1.8%, mainly driven by: Marlboro, up by 2.8% to 41.4 billion units, driven notably by Saudi Arabia and Turkey, partly offset by Egypt and Ukraine; and Parliament, up by 0.2% to 16.2 billion units, driven principally by Turkey, partly offset by Ukraine. Our cigarette shipment volume of L&M increased by 9.6% to 25.5 billion units, driven by Egypt, Turkey and Ukraine.

Eastern Europe Middle East & Africa - Market Discussions

In North Africa (defined as Algeria, Egypt, Libya, Morocco and Tunisia), estimated industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	North Africa Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	34.8		36.1		(3.8	)%	67.1		70.6		(4.9	)%
PMI Shipments (million units)	8,806		9,204		(4.3	)%	18,008		17,760		1.4	%
PMI Cigarette Market Share
Marlboro	13.9	%	14.2	%	(0.3	)	14.3	%	14.7	%	(0.4	)
L&M	10.6	%	8.4	%	2.2		10.7	%	8.2	%	2.5
Others	1.8	%	1.8	%	—		1.9	%	1.8	%	0.1
Total	26.3	%	24.4	%	1.9		26.9	%	24.7	%	2.2

In the second quarter, the decline of the estimated total market was due principally to Algeria, Egypt, mainly reflecting the impact of excise tax-driven price increases in July 2014 and February 2015, partly offset by Libya and Tunisia. For the six months year-to-date, the estimated total market decreased by 4.9%, due to Algeria, Egypt, Libya and Morocco, partly offset by Tunisia. The decline in our cigarette shipment volume in the second quarter mainly reflected the lower total market, notably in Egypt, partly offset by higher market share. Our cigarette shipment volume for the six months year-to-date increased by 1.4%. Our market share growth in the second quarter and for the six months year-to-date was driven mainly by L&M in Egypt, reflecting improved territorial coverage, brand building activities and the growth of round corner box versions, partly offset by Marlboro, mainly in Egypt.

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In Russia, estimated industry size, PMI cigarette shipment volume and market share performance, as measured by Nielsen, are shown in the table below.

	Russia Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	77.2		80.6		(4.2	)%	138.6		148.3		(6.5	)%
PMI Shipments (million units)	23,075		21,906		5.3	%	42,084		40,495		3.9	%
PMI Cigarette Market Share
Marlboro	1.4	%	1.6	%	(0.2	)	1.4	%	1.6	%	(0.2	)
Parliament	3.9	%	3.6	%	0.3		3.9	%	3.6	%	0.3
Bond Street	8.1	%	7.4	%	0.7		8.0	%	7.2	%	0.8
Others	14.4	%	14.3	%	0.1		14.4	%	14.5	%	(0.1	)
Total	27.8	%	26.9	%	0.9		27.7	%	26.9	%	0.8

In the quarter and year-to-date, the decline of the estimated total cigarette market was mainly due to the unfavorable impact of tax-driven price increases and lower consumer purchasing power as a result of a weak economy. The increase in our cigarette shipment volume in the second quarter and six months year-to-date largely reflected market share growth. The increase in our market share in the quarter and year-to-date was driven by above premium price Parliament and low price Bond Street.

In Turkey, estimated industry size, PMI cigarette shipment volume and market share performance, as measured by Nielsen, are shown in the table below.

	Turkey Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	25.8		24.1		7.2	%	45.8		42.2		8.5	%
PMI Shipments (million units)	12,012		12,248		(1.9	)%	21,283		21,205		0.4	%
PMI Cigarette Market Share
Marlboro	9.3	%	8.5	%	0.8		9.1	%	8.5	%	0.6
Parliament	11.6	%	10.9	%	0.7		11.6	%	10.7	%	0.9
Lark	7.5	%	9.7	%	(2.2	)	7.4	%	10.0	%	(2.6	)
Others	15.0	%	15.3	%	(0.3	)	15.2	%	15.2	%	—
Total	43.4	%	44.4	%	(1.0	)	43.3	%	44.4	%	(1.1	)

In the second quarter, the increase in the estimated total cigarette market mainly reflected an increase in the adult population and a lower prevalence of illicit trade. For the six months year-to-date, the increase in the total cigarette market reflected the same dynamics as in the second quarter, as well as the favorable net impact of estimated trade inventory movements. Excluding these inventory movements, the total cigarette market increased by 6.8%. The decrease in our cigarette shipment volume in the second quarter was mainly due to market share loss in the low price segment. Our cigarette shipment volume for the six months year-to-date increased by 0.4%. In the quarter and year-to-date, the decrease in our market share was primarily due to low-price Lark, reflecting the impact of price repositioning by our principal competitor in May 2014. The decline was partly offset by our premium brands, notably Parliament, reflecting its strengthening brand equity, and by up-trading from the mid-price segment.

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In Ukraine, estimated industry size, PMI cigarette shipment volume and market share performance, as measured by Nielsen, are shown in the table below.

	Ukraine Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	18.9		20.4		(7.5	)%	33.6		34.7		(3.1	)%
PMI Shipments (million units)	5,070		6,176		(17.9	)%	9,678		11,287		(14.3	)%
PMI Cigarette Market Share
Marlboro	3.8	%	4.8	%	(1.0	)	4.1	%	5.0	%	(0.9	)
Parliament	2.7	%	2.9	%	(0.2	)	2.8	%	3.0	%	(0.2	)
Bond Street	8.0	%	9.1	%	(1.1	)	7.9	%	9.2	%	(1.3	)
Others	15.4	%	15.8	%	(0.4	)	16.1	%	15.6	%	0.5
Total	29.9	%	32.6	%	(2.7	)	30.9	%	32.8	%	(1.9	)

In the quarter and year-to-date, the decline of the estimated total cigarette market was mainly due to lower consumer purchasing power as a result of a weak economy, and continued business disruption due to the political instability in the east of the country, partly offset by a lower prevalence of illicit trade. The decrease in our cigarette shipment volume in the second quarter and six months year-to-date largely reflected a lower total market and market share loss. The decrease in our market share in the quarter and year-to-date was due to Marlboro, reflecting the impact of lower consumer purchasing power, and Bond Street, mainly resulting from competitive price pressure in the low price segment. The year-to-date share growth of "Others" was mainly driven by growth of low-price L&M and super low-price President, partly offset by mid-price Chesterfield and super low-price Optima.

Asia:

Asia	For the Six Months Ended June 30,
(in millions)	2015			2014		Variance			%
Net revenues	$	9,803		$	9,572	$	231		2.4	%
Excise taxes on products	5,503		10,527	5,079		424			8.3	%
Net revenues, excluding excise taxes on products	4,300			4,493		(193		)	(4.3	)%
Operating companies income	1,731			1,815		(84		)	(4.6	)%

For the six months ended June 30, 2015, net revenues, which include excise taxes billed to customers, increased by $231 million. Excluding excise taxes, net revenues decreased by $193 million due to:

• unfavorable currency ($357 million) and

• unfavorable volume/mix ($92 million), partly offset by

• price increases ($256 million).

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Operating companies income decreased by $84 million during the six months ended June 30, 2015. This decrease was due primarily to:

• unfavorable currency ($176 million),

• unfavorable volume/mix ($99 million),

• higher manufacturing costs ($60 million, mainly due to higher costs in Indonesia) and

• higher marketing, administration and research costs ($27 million), partly offset by

• price increases ($256 million) and

• the non-recurrence of the 2014 pre-tax charges for asset impairment and exit costs ($24 million) due to the factory closure in Australia.

Asia	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	5,039	$	5,097	$	(58	)	(1.1	)%
Excise taxes on products	2,894		2,786		108			3.9	%
Net revenues, excluding excise taxes on products	2,145		2,311		(166		)	(7.2	)%
Operating companies income	797		900		(103		)	(11.4	)%

For the three months ended June 30, 2015, net revenues decreased by $58 million. Excluding excise taxes, net revenues decreased by $166 million due to:

• unfavorable currency ($229 million) and

• unfavorable volume/mix ($42 million), partly offset by

• price increases ($105 million).

Operating companies income decreased by $103 million during the three months ended June 30, 2015. This decrease was due primarily to:

• unfavorable currency ($97 million),

• unfavorable volume/mix ($55 million),

• higher marketing, administration and research costs ($28 million) and

• higher manufacturing costs ($27 million, mainly due to higher costs in Indonesia), partly offset by

• price increases ($105 million).

Asia - PMI Cigarette Shipment Volume

In the second quarter, our cigarette shipment volume of 75.3 billion units decreased by 0.5%, largely due to Australia, mainly reflecting the lower total market, Indonesia, Korea and the Philippines. The decrease was partly offset by higher cigarette shipment volume in Japan, mainly driven by a higher total market and favorable net trade inventory movements. Excluding these inventory movements, our cigarette shipment volume decreased by 1.8%. Cigarette shipment volume of Marlboro of 18.9 billion units increased by 2.2%, predominantly driven by the Philippines and Vietnam, partly offset by Indonesia and Japan. Cigarette shipment volume of Parliament of 2.4 billion units decreased by 21.8%, due to Japan and Korea. Cigarette shipment volume of Lark of 5.7 billion units increased by 53.3%, driven by Japan, benefiting from trade inventory movements.

For the six months year-to-date, our cigarette shipment volume of 145.4 billion units decreased by 0.7%, mainly due to Korea and the Philippines, partly offset by Indonesia. Estimated net inventory movements year-to-date were favorable, driven by Japan. Excluding these inventory movements, our cigarette volume decreased by 1.4%. Cigarette shipment volume of Marlboro of 36.9 billion units decreased by 1.6%, predominantly due to Japan and Korea, partly offset by the Philippines. Cigarette shipment volume of Parliament of 4.3 billion units decreased by 22.5%, due to Japan and Korea. Cigarette shipment volume of Lark of 10.2 billion units increased by 23.2%, driven by Japan, benefiting from trade inventory movements.

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Asia - Market Discussions

In Indonesia, estimated industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Indonesia Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	78.6		82.4		(4.6	)%	156.9		156.2		0.4	%
PMI Shipments (million units)	27,659		28,598		(3.3	)%	55,343		54,133		2.2	%
PMI Cigarette Market Share
Sampoerna A	15.0	%	14.1	%	0.9		15.0	%	14.2	%	0.8
Dji Sam Soe	7.0	%	6.2	%	0.8		7.0	%	5.9	%	1.1
U Mild	4.9	%	5.6	%	(0.7	)	5.0	%	5.4	%	(0.4	)
Others	8.3	%	8.8	%	(0.5	)	8.3	%	9.1	%	(0.8	)
Total	35.2	%	34.7	%	0.5		35.3	%	34.6	%	0.7

In the second quarter, the decline of the estimated total market was mainly due to a soft economic environment. For the six months year-to-date, the estimated total market increased by 0.4%. The decline in our cigarette shipment volume in the second quarter mainly reflected U Mild's crossing a critical price point ahead of competition earlier in the year, and the impact of the softer macro-economic environment. The increase in our cigarette shipment volume for the six months year-to-date mainly reflected market share growth. Our market share growth in the second quarter and six months year-to-date was driven by a strong performance from our machine-made kretek brands, notably Sampoerna A, Dji Sam Soe Magnum and Dji Sam Soe Magnum Blue, partly offset by U Mild and a decline in our hand-rolled kretek portfolio, notably due to Sampoerna Hijau in "Others," down by 0.5 points to 2.9%, largely reflecting the decline of the total segment. While Marlboro's market share decreased slightly by 0.1 point to 5.1%, its share of the “white” cigarettes segment, which represented 6.2% of the total cigarette market, increased by 2.0 points to 81.3%. The machine-made kretek segment, representing 75.0% of the total cigarette market, increased by 1.6 points and PMI's share of the segment increased by 1.1 points to 30.7%. The hand-rolled kretek segment, representing 18.8% of the total cigarette market, decreased by 1.3 points. Our share of the segment decreased by 1.1 points to 37.9%.

In Japan, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Japan Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	46.0		41.5		11.0	%	88.5		90.9		(2.5	)%
PMI Shipments (million units)	13,552		11,750		15.3	%	25,398		25,237		0.6	%
PMI Cigarette Market Share
Marlboro	11.3	%	11.5	%	(0.2	)	11.4	%	11.7	%	(0.3	)
Parliament	2.3	%	2.4	%	(0.1	)	2.3	%	2.2	%	0.1
Lark	10.0	%	10.4	%	(0.4	)	10.0	%	9.8	%	0.2
Others	1.8	%	2.1	%	(0.3	)	1.8	%	2.2	%	(0.4	)
Total	25.4	%	26.4	%	(1.0	)	25.5	%	25.9	%	(0.4	)

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In the second quarter, the increase of the total cigarette market primarily reflected a favorable comparison with the second quarter of 2014 in which the total market decreased by 14.4%, mainly driven by unfavorable estimated retail trade inventory movements following the consumption tax-driven retail price increases of April, 2014. Excluding the impact of these inventory movements, the total cigarette market declined by 1.7%, mainly reflecting the unfavorable impact of price increases. For the six months year-to-date, the total market declined by 2.5% and 2.6% excluding estimated retail trade inventory movements. The increase of our cigarette shipment volume in the second quarter mainly reflected the higher total market and favorable trade inventory movements. Our cigarette shipment volume for the six months year-to-date increased by 0.6%. Excluding the impact of estimated trade inventory movements, our market share in the second quarter and for the six months year-to-date declined by 0.4 and 0.3 points, respectively.

In Korea, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Korea Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	18.1		22.4		(19.2	)%	30.7		41.8		(26.6	)%
PMI Shipments (million units)	3,732		4,404		(15.3	)%	6,190		8,230		(24.8	)%
PMI Cigarette Market Share
Marlboro	9.2	%	7.6	%	1.6		9.2	%	7.8	%	1.4
Parliament	7.1	%	7.2	%	(0.1	)	6.9	%	7.2	%	(0.3	)
Virginia S.	3.8	%	4.0	%	(0.2	)	3.8	%	4.0	%	(0.2	)
Others	0.6	%	0.8	%	(0.2	)	0.5	%	0.7	%	(0.2	)
Total	20.7	%	19.6	%	1.1		20.4	%	19.7	%	0.7

In the second quarter, the decline of the total cigarette market reflected the impact of the January 2015 excise tax increase and related retail price increases. For the six months year-to-date, the total market declined by 26.6%, or by 20.2% excluding the impact of estimated inventory movements associated with the timing of the excise tax increase. The decline in our cigarette shipment volume in the second quarter and the six months year-to-date was in line with the lower total market, partly offset by share growth, driven by Marlboro, reflecting the positive impact of line-pricing to our principal domestic competitor's main brands.

In the Philippines, estimated tax-paid industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Philippines Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	21.2		20.0		6.0	%	39.8		38.8		2.7	%
PMI Shipments (million units)	16,725		17,243		(3.0	)%	32,629		33,408		(2.3	)%
PMI Cigarette Market Share
Marlboro	20.2	%	18.1	%	2.1		21.1	%	18.7	%	2.4
Fortune	32.1	%	36.0	%	(3.9	)	32.5	%	34.7	%	(2.2	)
Jackpot	13.7	%	17.6	%	(3.9	)	15.2	%	17.7	%	(2.5	)
Others	12.9	%	14.5	%	(1.6	)	13.2	%	15.1	%	(1.9	)
Total	78.9	%	86.2	%	(7.3	)	82.0	%	86.2	%	(4.2	)

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In the second quarter and the six months year-to-date, the increase in the estimated total tax-paid industry cigarette volume reflected higher estimated duty-paid volume by our principal domestic competitor. The decline in our cigarette shipment volume in both periods was mainly due to lower consumption of low and super-low price brands, following consecutive price increases in late 2014 and early 2015, partly offset by the growth of Marlboro, reflecting the narrowing of retail price gaps with brands at the bottom end of the market.

Latin America & Canada:

Latin America & Canada	For the Six Months Ended June 30,
(in millions)	2015		2014		Variance		%
Net revenues	$	4,613	$	4,574	$	39	0.9	%
Excise taxes on products	3,080		3,051		29		1.0	%
Net revenues, excluding excise taxes on products	1,533		1,523		10		0.7	%
Operating companies income	555		467		88		18.8	%

For the six months ended June 30, 2015, net revenues, which include excise taxes billed to customers, increased by $39 million. Excluding excise taxes, net revenues increased by $10 million due primarily to:

• price increases ($252 million), partly offset by

• unfavorable currency ($200 million) and

• unfavorable volume/mix ($46 million).

Operating companies income increased by $88 million during the six months ended June 30, 2015. This increase was due primarily to:

• price increases ($252 million) and

• lower marketing, administration and research costs ($11 million), partly offset by

• unfavorable currency ($95 million),

• unfavorable volume/mix ($50 million) and

• higher manufacturing costs ($33 million).

Latin America & Canada	For the Three Months Ended June 30,
(in millions)	2015		2014		Variance			%
Net revenues	$	2,394	$	2,451	$	(57	)	(2.3	)%
Excise taxes on products	1,587		1,641		(54		)	(3.3	)%
Net revenues, excluding excise taxes on products	807		810		(3		)	(0.4	)%
Operating companies income	325		265		60			22.6	%

For the three months ended June 30, 2015, net revenues decreased by $57 million. Excluding excise taxes, net revenues decreased by $3 million due primarily to:

• unfavorable currency ($112 million) and

• unfavorable volume/mix ($22 million), partly offset by

• price increases ($128 million).

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Operating companies income increased by $60 million during the three months ended June 30, 2015. This increase was due primarily to:

• price increases ($128 million) and

• lower marketing, administration and research costs ($24 million), partly offset by

• unfavorable currency ($51 million),

• unfavorable volume/mix ($24 million) and

• higher manufacturing costs ($19 million).

Latin America & Canada - PMI Cigarette Shipment Volume and Market share

In the second quarter, our cigarette shipment volume of 22.6 billion units decreasedby 2.1%, notably due to Argentina and Mexico. Although shipment volume of Marlboro of 8.8 billion units decreased by 2.1%, our Latin America & Canada segment market share increased by 0.2 points to an estimated 14.9%. Market share of Marlboro increased notably in Argentina, Brazil and Colombia, by 0.5, 0.2 and 1.4 points to 24.3%, 9.4% and 9.1%, respectively. Shipment volume of Philip Morris of 4.6 billion units increased by 2.2%, driven notably by Canada.

For the six months year-to-date, our cigarette shipment volume of 43.8 billion units decreasedby 1.7%, largely due to Argentina and Canada. Although shipment volume of Marlboro of 17.0 billion units decreased by 1.3%, our Latin America & Canada segment market share increased by 0.4 points to an estimated 14.8%. Market share of Marlboro increased notably in Argentina, Brazil and Colombia, by 0.4, 0.7 and 1.4 points to 24.4%, 9.5% and 9.0%, respectively. Shipment volume of Philip Morris of 9.4 billion units increased by 1.6%, driven notably by Canada.

Latin America & Canada - Market Discussions

In Argentina, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Argentina Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	9.4		10.0		(5.3	)%	19.7		20.6		(4.4	)%
PMI Shipments (million units)	7,463		7,656		(2.5	)%	15,586		15,935		(2.2	)%
PMI Cigarette Market Share
Marlboro	24.3	%	23.8	%	0.5		24.4	%	24.0	%	0.4
Parliament	2.1	%	2.1	%	—		2.1	%	2.1	%	—
Philip Morris	45.3	%	42.9	%	2.4		44.9	%	43.1	%	1.8
Others	7.1	%	7.5	%	(0.4	)	7.3	%	7.5	%	(0.2	)
Total	78.8	%	76.3	%	2.5		78.7	%	76.7	%	2.0

In the second quarter and the six months year-to-date, the decline of the total cigarette market was mainly due to the cumulative impact of price increases in 2014 and 2015 and a challenging economic environment. The decrease in our shipment volume in the second quarter and six months year-to-date reflected a lower total market, partly offset by market share growth, driven by Marlboro and Philip Morris, reflecting the positive impact of the latter's capsule variants.

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In Canada, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Canada Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	7.3		7.3		0.6	%	12.8		13.1		(2.2	)%
PMI Shipments (million units)	2,647		2,707		(2.2	)%	4,700		4,932		(4.7	)%
PMI Cigarette Market Share
Belmont	3.2	%	2.9	%	0.3		3.1	%	2.9	%	0.2
Canadian Classics	10.2	%	10.3	%	(0.1	)	10.4	%	10.7	%	(0.3	)
Next	10.3	%	10.7	%	(0.4	)	10.4	%	10.8	%	(0.4	)
Others	12.5	%	13.3	%	(0.8	)	12.8	%	13.4	%	(0.6	)
Total	36.2	%	37.2	%	(1.0	)	36.7	%	37.8	%	(1.1	)

In the second quarter, the increase of the total cigarette market was mainly driven by favorable estimated trade inventory movements of competitors' products. Excluding the impact of these inventory movements, the total cigarette market declined by 0.7%. For the six months year-to-date, the total market declined by 2.2% or by 5.3% excluding estimated trade inventory movements, mainly due to the impact of tax-driven price increases in 2014 and 2015. The decrease in our cigarette shipment volume in the second quarter was mainly due to market share declines of our low price brands, notably Next and Quebec Classic, partially offset by share growth of premium Belmont and super-low price Philip Morris. The decrease in our cigarette shipment volume for the six months year-to-date was mainly due to the same factors as in the second quarter, as well as a lower total market.

In Mexico, industry size, PMI cigarette shipment volume and market share performance are shown in the table below.

	Mexico Key Market Data
	Second-Quarter						Six Months Year-to-Date
					Change						Change
	2015		2014		% / p.p.		2015		2014		% / p.p.
Total Cigarette Market (billion units)	8.6		8.4		1.9	%	16.1		15.6		3.2	%
PMI Shipments (million units)	5,891		5,991		(1.7	)%	10,887		10,862		0.2	%
PMI Cigarette Market Share
Marlboro	47.5	%	49.3	%	(1.8	)	46.5	%	48.2	%	(1.7	)
Delicados	10.7	%	11.5	%	(0.8	)	10.8	%	11.1	%	(0.3	)
Benson & Hedges	4.6	%	5.2	%	(0.6	)	4.6	%	5.2	%	(0.6	)
Others	5.7	%	5.0	%	0.7		5.6	%	5.0	%	0.6
Total	68.5	%	71.0	%	(2.5	)	67.5	%	69.5	%	(2.0	)

In the second quarter, the increase of the total cigarette market was unfavorably impacted by the timing of estimated trade inventory movements compared to the second quarter of 2014. Excluding the impact of these inventory movements, the total cigarette market increased by 3.2%. For the six months year-to-date, the total market increased by 3.2% or by 1.3% excluding estimated trade inventory movements. The decrease in our cigarette shipment volume in the second quarter was mainly due to market share declines. Our cigarette shipment volume for the six months year-to-date increased by 0.2%. The decline in our market share in the second quarter and six months year-to-date was mainly due to Marlboro, reflecting adult smoker down-trading and the timing of price increases by our principal competitor in the first quarter of 2015, partly offset by gains for certain low price local trademark brands.

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Financial Review

Net Cash Provided by Operating Activities

During the first six months of 2015, net cash provided by operating activities of $3.3 billion decreased by $120 million compared with the first six months of 2014. The change was due primarily to unfavorable currency movements of $1.6 billion, partly offset by lower working capital requirements and earnings growth, excluding currency.

Excluding currency, the favorable movements in working capital were due primarily to the following:

• more cash provided by accounts receivable, primarily due to the timing of sales and cash collections; and

• less cash used for income taxes, primarily due to the timing of payments.

Net Cash Used in Investing Activities

During the first six months of 2015, net cash used in investing activities of $224 million decreased by $320 million compared with the first six months of 2014. The change was due primarily to higher net cash received related to derivatives designated as net investment hedges and the 2014 purchase of Nicocigs Limited.

In June 2014, we acquired 100% of Nicocigs Limited, a leading U.K.-based e-vapor company, for the final purchase price of $103 million, net of cash acquired, with additional contingent payments of up to $77 million, primarily relating to performance targets over a three-year period. For further details, see Note 16. Acquisitions and Other Business Arrangements to our condensed consolidated financial statements.

Our capital expenditures were $413 million and $508 million during the six months ended June 30,2015 and 2014, respectively. The 2015 expenditures were primarily related to investments in Reduced-Risk Products, productivity-enhancing programs, and equipment for new products.

Net Cash Used in Financing Activities

During the first six months of 2015, net cash used in financing activities of $2.6 billion decreased by $847 million compared with the first six months of 2014. The change was due primarily to the cash used in 2014 to repurchase our common stock pursuant to our share repurchase program and short-term borrowing activity, partially offset by lower net cash proceeds in 2015 from long-term debt. On February 5, 2015 we announced that we do not plan any share repurchases in 2015.

Dividends paid in the first six months of 2015 and 2014 were $3.1 billion and $3.0 billion, respectively. The increase reflects a higher dividend rate in 2015, partially offset by lower shares outstanding as a result of our share repurchases in 2014.

Debt and Liquidity

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

Credit Ratings – The cost and terms of our financing arrangements as well as our access to commercial paper markets may be affected by applicable credit ratings. At June 30, 2015, our credit ratings and outlook by major credit rating agencies were as follows:

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

On July 10, 2015, Fitch affirmed our long-term credit rating at "A" and short-term at "F1", but it revised our outlook to Negative from Stable. We do not expect the Fitch negative outlook to have an impact on our borrowing costs. On July 17, 2015, Standard & Poor's affirmed our long-term credit rating at "A" and short-term at "A-1", as well as our "Stable" outlook.

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Credit Facilities – On January 23, 2015, we entered into an agreement to extend the term of our existing $2.0 billion 364-day revolving credit facility effective February 10, 2015, from February 10, 2015 to February 9, 2016.  On January 23, 2015, we also entered into an agreement to extend the term of our existing $2.5 billion multi-year revolving credit facility, effective February 28, 2015, from February 28, 2019 to February 28, 2020.

At June 30, 2015, our committed credit facilities and commercial paper outstanding were as follows:

(in billions)
Type	Committed Credit Facilities		Commercial Paper
364-day revolving credit, expiring February 9, 2016	$	2.0
Multi-year revolving credit, expiring February 28, 2020	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	8.0
Commercial paper outstanding			$	0.8

At June 30, 2015, there were no borrowings under the committed credit facilities, and the entire committed amounts were available for borrowing.

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

Each of these facilities requires us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“consolidated EBITDA”) to consolidated interest expense of not less than 3.5 to 1.0 on a rolling four-quarter basis. At June 30, 2015, our ratio calculated in accordance with the agreements was 11.5 to 1.0. These facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require us to post collateral. We expect to continue to meet our covenants. The terms “consolidated EBITDA” and “consolidated interest expense,” both of which include certain adjustments, are defined in the facility agreements previously filed with the U.S. Securities and Exchange Commission.

In addition to the committed credit facilities discussed above, certain of our subsidiaries maintain short-term credit arrangements to meet their respective working capital needs. These credit arrangements, which amounted to approximately $2.4 billion at June 30, 2015 and $3.2 billion at December 31, 2014, are for the sole use of our subsidiaries. Borrowings under these arrangements amounted to $898 million at June 30, 2015, and $1.2 billion at December 31, 2014.

Commercial Paper Program – We have commercial paper programs in place in the U.S. and in Europe. Our commercial paper programs in place in the U.S. and in Europe currently have an aggregate issuance capacity of $8.0 billion.

At June 30, 2015 we had $813 million in commercial paper outstanding. At December 31, 2014, we had no commercial paper outstanding.

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

Debt – Our total debt was $29.2 billion at June 30, 2015 and $29.5 billion at December 31, 2014.

On February 21, 2014, we filed a shelf registration statement with the U.S. Securities and Exchange Commission, under which we may from time to time sell debt securities and/or warrants to purchase debt securities over a three-year period.

Guarantees – At June 30, 2015, we were contingently liable for $0.8 billion of guarantees of our own performance, which were primarily related to excise taxes on the shipment of our products. There is no liability in the condensed consolidated financial statements associated with these guarantees. At June 30, 2015, our third-party guarantees were insignificant.

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Equity and Dividends

As discussed in Note 3. Stock Plans to our condensed consolidated financial statements, during the six months ended June 30,2015, we granted 1.5 million shares of deferred stock awards to eligible employees at a grant date fair value of $82.28 per share. Equity awards generally vest three or more years after the date of the award, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

In May 2012, our stockholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the “2012 Plan”). The 2012 Plan replaced the 2008 Performance Incentive Plan (the “2008 Plan”) and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, we may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. Up to 30 million shares of our common stock may be issued under the 2012 Plan. At June 30, 2015, shares available for grant under the 2012 Plan were 23,252,170.

On August 1, 2012, we began repurchasing shares under a three-year $18.0 billion share repurchase program that was authorized by our Board of Directors in June 2012. From August 1, 2012 through June 30, 2015, we repurchased 144.6 million shares of our common stock at a cost of $12.7 billion under this repurchase program. During the first six months of 2015, we did not repurchase our common stock. On February 5, 2015, we announced that we do not plan any share repurchases in 2015. During the first six months of 2014, we repurchased 27.0 million shares at a cost of $2.25 billion. During the second quarter of 2014, we repurchased 11.6 million shares at a cost of $1.0 billion.

Dividends paid in the first six months of 2015 were $3.1 billion. During the third quarter of 2014, our Board of Directors approved a 6.4% increase in the quarterly dividend to $1.00 per common share. As a result, the present annualized dividend rate is $4.00 per common share.

Market Risk

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

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

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

See Note 6. Financial Instruments, Note 12. Fair Value Measurements,and Note 14. Balance Sheet Offsetting to our condensed consolidated financial statements for further details on our derivative financial instruments and the related collateral arrangements.

Contingencies

See Note 9. Contingencies to our condensed consolidated financial statements for a discussion of contingencies.

Cautionary Factors That May Affect Future Results

Forward-Looking and Cautionary Statements

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

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or

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

Risks Related to Our Business and Industry

Consumption of tax-paid cigarettes continues to decline in many of our markets.

This decline is due to multiple factors, including increased taxes and pricing, governmental actions, the diminishing social acceptance of smoking, continuing economic and geopolitical uncertainty, and the continuing prevalence of illicit products. These factors and their potential consequences are discussed more fully below and in the "Business Environment" section.

Cigarettes are subject to substantial taxes. Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions. These tax increases may disproportionately affect our profitability and make us less competitive versus certain of our competitors.

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

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

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

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

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

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

• restrictions or bans on advertising, marketing and sponsorship;

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

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

• restrictions on packaging and cigarette formats and dimensions;

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

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

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• 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;

• restrictions on the sale of potentially reduced-risk tobacco products and other nicotine-containing products;

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

• encouraging litigation against tobacco companies.

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

Litigation related to tobacco use and exposure to environmental tobacco smoke could substantially reduce our profitability and could severely impair our liquidity.

There is litigation related to tobacco products pending in certain jurisdictions. Damages claimed in some tobacco-related litigation are significant and, in certain cases in Brazil, Canada and Nigeria, range into the billions of U.S. dollars. We anticipate that new cases will continue to be filed. The FCTC encourages litigation against tobacco product manufacturers. It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Please see Note 9. Contingencies to our condensed consolidated financial statements for a discussion of pending litigation.

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

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

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

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

There is an increasing number of conflicts, including in the Middle East and Ukraine. Political uncertainty, including potential effects from economic sanctions by the U.S. or other governments, could lead to significant disruptions to our business.

In certain markets, we are dependent on governmental approvals of various actions such as price changes, and failure to obtain such approvals could impair growth in our profitability.

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

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

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

• promote brand equity successfully;

• anticipate and respond to new consumer trends;

• develop new products and markets and broaden brand portfolios;

• improve productivity; and

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

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

We lose revenues as a result of counterfeiting, contraband, cross-border purchases and non-tax-paid volume produced by local manufacturers.

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

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

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

We may be unsuccessful in our attempts to introduce Reduced-Risk Products, and regulators may not permit reduced exposure or risk claims or the commercialization of these products.

We continue to seek ways to develop commercially viable new product technologies with the potential to reduce exposure to harmful constituents in smoke and individual risk and population harm, all in comparison to smoking combustible cigarettes. Our goal is to develop products whose potential to reduce exposure, individual risk and population harm can be substantiated by rigorous scientific studies and that provide adult smokers the taste, sensory experience, nicotine delivery profile and ritual characteristics that are similar to those currently provided by combustible cigarettes. We may not succeed in these efforts. If we do not succeed, but others do, we may be at a competitive disadvantage. Furthermore, we cannot predict whether regulators will permit the marketing of tobacco products or other nicotine-containing products with claims of reduced exposure or risk as compared with combustible cigarettes. A prohibition on any such claims could significantly undermine the commercial viability of these products.

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

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

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

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

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

Our profit growth may suffer if we are unable to introduce new products or enter new markets successfully, to raise prices or to improve the proportion of our sales of higher margin products and in higher margin geographies.

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

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

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

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

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

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

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

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

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

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

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Item 4. Controls and Procedures.

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

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 9. Contingencies of the Notes to the Condensed Consolidated Financial Statements included in Part I – Item 1 of this report for a discussion of legal proceedings pending against Philip Morris International Inc. and its subsidiaries.

Item 1A. Risk Factors.

Information regarding Risk Factors appears in “MD&A – Cautionary Factors That May Affect Future Results,” in Part I – Item 2 of this Form 10-Q and in Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Our share repurchase activity for each of the three months in the quarter ended June 30, 2015 was as follows:

Period	Total Number of Shares Repurchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
April 1, 2015 – April 30, 2015 (1)	—	$	—	144,643,396	$	5,347,045,761
May 1, 2015 – May 31, 2015 (1)	—	$	—	144,643,396	$	5,347,045,761
June 1, 2015 – June 30, 2015 (1)	—	$	—	144,643,396	$	5,347,045,761
Pursuant to Publicly   Announced Plans   or Programs	—	$	—
April 1, 2015 – April 30, 2015 (3)	16,398	$	83.66
May 1, 2015 – May 31, 2015 (3)	897	$	83.00
June 1, 2015 – June 30, 2015 (3)	363	$	82.92
For the Quarter Ended June 30, 2015	17,658	$	83.61

(1) On June 13, 2012, our Board of Directors authorized a share repurchase program of $18 billion over three years. The program commenced on August 1, 2012 after the completion of the three-year $12 billion program in July 2012. These share repurchases have been made pursuant to the $18 billion program. On February 5, 2015, we announced that we do not plan any share repurchases in 2015.

(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 deferred stock awards and used shares to pay all, or a portion of, the related taxes.

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Item 6. Exhibits.

3.1	Amended and Restated By-Laws of Philip Morris International Inc., effective immediately prior to the 2015 Annual Meeting of Shareholders (incorporated by reference to Exhibit 3.1 to the Current Report on From 8-K filed March 13, 2015).
10.1	Summary of Supplemental Pension Plan of Philip Morris in Switzerland.
10.2	Supplemental Equalization Plan (amended and restated as of June 29, 2015).
12	Statement regarding computation of ratios of earnings to fixed charges.
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.

- 81-

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PHILIP MORRIS INTERNATIONAL INC.

/s/ JACEK OLCZAK

Jacek Olczak

Chief Financial Officer

July 30, 2015

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EX-10.1

Exhibit 10.1

FONDATION DE FINANCEMENT PHILIP MORRIS EN SUISSE

Supplemental Plan of Philip Morris in Switzerland

Plan Summary

Overview

The supplemental plan is a non-qualified plan that provides retirement, disability and death benefits to executives whose benefits would otherwise be limited by the compensation cap under the Swiss social security legislation. The purpose of this plan is to provide an employee with the same benefits the employee would have been entitled to receive from the Philip Morris Pension Fund in Switzerland (Main plan and IC pension plan) without taking into consideration the cap, and it is not intended to otherwise increase the benefits promised under the Pension Fund.

Eligible population

Swiss-based employees either in salary grade 24 or above (22 for employee in this grade on 01.04.2014) or with Main plan pensionable earnings in excess of the salary limit described in article 79c of the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (LPP), currently CHF 846’000.- per year.

Benefits

Benefits from the supplemental plan are generally equal to:

• the benefits from the Pension Fund without taking into account the salary cap

• less the benefits entitlement from the Pension Fund

• less the unpaid personal contribution due to the salary cap.

Employee contribution

None.

Company contribution

100% funded by the company under a non-qualified trust arrangement (separate legal entity).

Time and form of payment

Lump sum payment, generally 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.

ADMINISTRATION OF THE

FONDATION DE FINANCEMENT PHILIP MORRIS EN SUISSE

/s/ ANNICK PERRENOUD

Annick Perrenoud

c/o Pension Fund Philip Morris in Switzerland    Neuchâtel, 30.04.2015

Quai Jeanrenaud 3    Phone    (++4158) 242 1241

CH - 2000 Neuchâtel    Fax    (++4158) 242 8003

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED PLAN DOCUMENT

AS OF JUNE 29, 2015

SUPPLEMENTAL EQUALIZATION PLAN

AS AMENDED AND RESTATED EFFECTIVE AS OF

JANUARY 1, 2008

1

Exhibit 10.2

ARTICLE I

INTRODUCTION

1.1Restatement of Plan. PMI Global Services Inc. (“PMIGS”) hereby adopts this amended and restated Supplemental Equalization Plan (the “Plan”), effective as of January 1, 2008, to provide certain benefits to the beneficiaries of eligible participants as set forth herein.

1.2History and Purpose of Plan. Altria Client Services Inc. (“Altria”) and certain of its affiliates established and maintain the Retirement Plan for Salaried Employees and the Deferred Profit-Sharing Plan for Salaried Employees for the benefit of certain employees, including certain employees of Philip Morris International Inc. (“PMI”) and its subsidiaries before the spin off of PMI by Altria Group, Inc. Both plans are qualified retirement plans under sections 501(a) and 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and, as such, are subject to certain statutory limitations on amounts that can be contributed to and paid from such plans and other nondiscrimination requirements.

Altria and certain of its affiliates also established and maintain the Benefit Equalization Plan (the “Altria BEP”) and the Supplemental Management Employees’ Retirement Plan (the “Altria SERP”) for the benefit of certain employees, including certain employees of PMI and its subsidiaries before the spin off. These supplemental plans are nonqualified retirement plans that provide deferred compensation for eligible employees. Specifically, the Altria BEP is intended, in part, to provide benefits that cannot be paid due to certain statutory limitations on the amount of contributions to and payments from Altria’s qualified plans. The Altria SERP is intended to provide certain additional benefits that cannot be provided under Altria’s qualified plans or the Altria BEP.

Effective as of January 1, 2005, certain participants in the Altria BEP and Altria SERP, including certain employees of PMI and its subsidiaries, ceased active participation in those plans. In lieu of accruing additional deferred compensation under those plans, these employees entered into Supplemental Enrollment Agreements and received annual “target payments” as current compensation for the services that they provided to Altria and its affiliates during the year. Altria and its affiliates retained the right to terminate the Supplemental Enrollment Agreements and discontinue making target payments at any time.

Effective as of January 1, 2008, PMIGS established the Philip Morris International Retirement Plan and the Philip Morris International Deferred Profit-Sharing Plan, both of which are qualified retirement plans. Effective as of the same date, PMIGS also established the Philip Morris International Benefit Equalization Plan (the “PMI BEP”) and the Philip Morris International Supplemental Management Employees’ Retirement Plan (the “PMI SERP”). The PMI BEP and the PMI SERP are nonqualified retirement plans that provide deferred compensation for eligible employees of PMI and its subsidiaries. In connection with the spin off of PMI, the assets and liabilities associated with the employees of PMI and its subsidiaries under Altria’s qualified plans were transferred to the qualified plans of PMIGS, and the liabilities associated with the employees of PMI and its subsidiaries under the Altria BEP and Altria SERP were transferred to PMI and its affiliates under the PMI BEP and the PMI SERP, respectively. Also effective as of January 1, 2008, both Altria and PMI discontinued making

2

Exhibit 10.2

target payments with respect to services of their employees performed after December 31, 2007, and PMIGS and its participating affiliates established this Plan.

Under the terms of the PMI BEP and the PMI SERP, employees of PMI and its subsidiaries who received target payments pursuant to a Supplemental Enrollment Agreement are not eligible to participate in those supplemental plans with respect to services provided after December 31, 2004, but, instead, are eligible to accrue future benefits under this Plan, except that an employee who is first designated to participate in the PMI SERP effective after December 31, 2007, may participate in the PMI SERP. It is intended that the benefits provided under the Plan will not duplicate benefits provided under the PMI BEP or the PMI SERP or amounts previously paid as current compensation under the terms of the Supplemental Enrollment Agreements.

The Plan is comprised of three separate plans, programs or arrangements, and each portion of the Plan shall be treated as a separate plan, program or arrangement from the other portions. One portion of the Plan provides benefits to Eligible Employees (or their Spouses or other Beneficiaries) solely in excess of limitations on benefits and contributions under Section 415 of the Code. The second portion of the Plan provides benefits to Eligible Employees attributable solely to the limitation under Section 401(a)(17) of the Code on annual compensation that may be taken into account under qualified plans. All other benefits are provided under the third portion of the Plan.

ARTICLE II

DEFINITIONS

2.1Actuarial Equivalent. The term “Actuarial Equivalent” shall mean a benefit that is equivalent in value to the benefit otherwise identified under the Plan based on the actuarial principles and assumptions set forth in Exhibit 1 to the PMI Retirement Plan, including, to the extent applicable, the Early Retirement Factors for Altria Transferee’s Assumed Kraft Pension Liability.

2.2After-Tax SEP Benefit. The term “After-Tax SEP Benefit” shall have the meaning set forth in Section 3.1(d).

2.3Altria. The term “Altria” shall mean Altria Client Services Inc.

2.4Altria BEP. The term “Altria BEP” shall mean the Benefit Equalization Plan, maintained by Altria and certain of its affiliates.

2.5Altria Profit-Sharing Plan. The term “Altria Profit-Sharing Plan” shall mean the Deferred Profit-Sharing Plan for Salaried Employees, maintained by Altria and certain of its affiliates.

2.6Altria Retirement Plan. The term “Altria Retirement Plan” shall mean the Retirement Plan for Salaried Employees, maintained by Altria and certain of its affiliates.

2.7Altria SERP. The term “Altria SERP” shall mean the Supplemental Management Employees’ Retirement Plan, maintained by Altria and certain of its affiliates.

3

Exhibit 10.2

2.8Assumed Trust Account TP. The term “Assumed Trust Account TP” shall mean the assumed trust account established pursuant to an Eligible Employee’s Supplemental Enrollment Agreement.

2.9Base SEP Pension Benefit. The Term “Base SEP Pension Benefit” shall have the meaning set forth in Section (e) of Appendix 2.

2.10Beneficiary. The term “Beneficiary” shall mean the person or persons (including a trust created by the Eligible Employee during his lifetime or by will) designated by the Eligible Employee to receive his DPS Beneficiary Benefit or SEP Pension Beneficiary Benefit, as applicable, in the event of his death as set forth in Article III, which designations shall be made on beneficiary designation forms filed with the Administrator. If the Eligible Employee is married on the date of the filing of any such beneficiary designation form, his Spouse must consent in writing before a notary public or a duly authorized representative of the Plan to the designation of any Beneficiary other than the Spouse. If an Eligible Employee fails to designate a Beneficiary for a DPS Beneficiary Benefit or SEP Pension Beneficiary Benefit pursuant to the foregoing, the Eligible Employee’s Beneficiary for such benefit shall be:

(a)if the Eligible Employee is married on the date of his death, the Eligible Employee’s Spouse; and

(b)if the Eligible Employee is not married on the date of his death, the Eligible Employee’s estate.

2.11Benefit Equalization Retirement Allowance. The term “Benefit Equalization Retirement Allowance” shall have the meaning set forth in the PMI BEP or, if so specified herein, the Altria BEP.

2.12Change of Control. The term “Change of Control” shall have the meaning set forth in the PMI BEP with respect to an Eligible Employee’s Benefit Equalization Retirement Allowance that is not a Grandfathered Benefit Equalization Retirement Allowance (as defined in the PMI BEP).

2.13Code. The term “Code” shall mean the Internal Revenue Code of 1986, as amended.

2.14Company Account. The term “Company Account” shall mean the Company Account under the PMI Profit-Sharing Plan or the Altria Profit-Sharing Plan, as applicable.

2.15Designation of Participation. The term “Designation of Participation” shall mean the document or documents that designated an Eligible Employee as a participant in the Altria SERP effective prior to January 1, 2005 and set forth the terms of the Eligible Employee’s benefits under the Altria SERP (and that now apply under the PMI SERP and this Plan).

4

Exhibit 10.2

2.16DPS Beneficiary Benefit. The term “DPS Beneficiary Benefit” shall have the meaning set forth in Section 3.2.

2.17Early Retirement Grandfathered Pension Benefit. The term “Early Retirement Grandfathered Pension Benefit” shall have the meaning set forth in Section 3.1(a)(iv) of the Plan or Section (d) of Appendix 2, as applicable.

2.18Early Retirement Pension Benefit. The term “Early Retirement Pension Benefit” shall have the meaning set forth in Section 3.1(a)(ii) of the Plan or Section (b) of Appendix 2, as applicable.

2.19Eligible Employee. The term “Eligible Employee” shall mean any of the individuals listed in Appendix 1, as amended from time to time by the Administrator.

2.20Fund. The term “Fund” shall mean the Fund under the PMI Profit-Sharing Plan or the Altria Profit-Sharing Plan, as applicable.

2.21Gross After-Tax SEP Benefit. The term “Gross After-Tax SEP Benefit” shall have the meaning set forth in Section 3.1(c).

2.22Kraft Retirement Plan. The term “Kraft Retirement Plan” shall mean the Kraft Foods Global, Inc. Retirement Plan, maintained by Kraft Foods Global, Inc., or any predecessor, successor or replacement to such plan, as applicable.

2.23Kraft Supplemental Plan Benefit. The term “Kraft Supplemental Plan Benefit” shall mean the defined benefit portion of the supplemental benefit payable to an Eligible Employee under the Kraft Foods Global, Inc. Supplemental Plan I, maintained by Kraft Foods Global, Inc., or any predecessor, successor or replacement to such plan, as applicable.

2.24Lump-Sum Equivalent. The term “Lump-Sum Equivalent” shall mean a single-sum amount that is equivalent in value to the benefit otherwise identified under the Plan based on the actuarial principles and assumptions set forth in Exhibit A to the PMI BEP; provided, however, that if an Eligible Employee is a Secular Trust Participant, the term “Lump-Sum Equivalent” shall mean the greater of (i) the amount determined pursuant to the foregoing provisions of this Section and (ii) the amount required to purchase a joint and 50% survivor annuity equal to the benefit otherwise identified under the Plan from a licensed commercial insurance company, as determined in the sole discretion of the Administrator.

2.25Normal Grandfathered Pension Benefit. The term “Normal Grandfathered Pension Benefit” shall have the meaning set forth in Section 3.1(a)(iii) of the Plan or Section (c) of Appendix 2, as applicable.

2.26Normal Pension Benefit. The term “Normal Pension Benefit” shall have the meaning set forth in Section 3.1(a)(i) of the Plan or Section (a) of Appendix 2, as applicable.

5

Exhibit 10.2

2.27Participating Company(ies). The term “Participating Company(ies)” shall have the meaning set forth in the PMI Retirement Plan, and a Participating Company under the PMI Retirement Plan that employs an Eligible Employee shall be a Participating Company under the Plan.

2.28PMI. The term “PMI” shall mean Philip Morris International Inc.

2.29PMI BEP. The term “PMI BEP” shall mean the Philip Morris International Benefit Equalization Plan, maintained by PMIGS and certain of its affiliates, in effect as of January 1, 2008 and as thereafter amended from time to time. Provisions in other plans or arrangements that refer to the PMI BEP shall be deemed to apply to this Plan in the manner and to the extent reasonably determined by the Administrator in its sole discretion.

2.30PMI Profit-Sharing Plan. The term “PMI Profit-Sharing Plan” shall mean the Philip Morris International Deferred Profit-Sharing Plan, maintained by PMIGS and certain of its affiliates, as amended from time to time.

2.31PMI Retirement Plan. The term “PMI Retirement Plan” shall mean the Philip Morris International Retirement Plan, maintained by PMIGS and certain of its affiliates, as amended from time to time.

2.32PMI SERP. The term “PMI SERP” shall mean the Philip Morris International Supplemental Management Employees’ Retirement Plan, maintained by PMIGS and certain of its affiliates, in effect as of January 1, 2008 and as thereafter amended from time to time. Provisions in other plans or arrangements that refer to the PMI SERP shall be deemed to apply to this Plan in the manner and to the extent reasonably determined by the Administrator in its sole discretion.

2.33PMIGS. The term “PMIGS” shall mean PMI Global Services Inc.

2.34Secular Trust Participant. The term “Secular Trust Participant” shall mean an Eligible Employee who is identified as a Secular Trust Participant in Appendix 1.

2.35SEP Benefit. The term “SEP Benefit” shall mean the benefit payable to an Eligible Employee under the terms of the Plan, as set forth in Section 3.1(e).

2.36SEP DPS Benefit. The term “SEP DPS Benefit” shall have the meaning set forth in Section 3.1(b).

2.37SEP Pension Benefit. The term “SEP Pension Benefit” shall have the meaning set forth in Section 3.1(a) or Appendix 2, as applicable.

2.38SEP Pension Beneficiary Benefit. The term “SEP Pension Beneficiary Benefit” shall have the meaning set forth in Section 3.4.

2.39SEP Spousal Survivor Benefit. The term “SEP Spousal Survivor Benefit” shall have the meaning set forth in Section 3.3.

6

Exhibit 10.2

2.40SERP Compensation. The term “SERP Compensation” shall have the meaning set forth in Section (a) of Appendix 2.

2.41SERP Service. The term “SERP Service” shall have the meaning set forth in Section (a) of Appendix 2.

2.42Supplemental Enrollment Agreement. The term “Supplemental Enrollment Agreement” shall mean the most recent of any Supplemental Employee Grantor Trust Enrollment Agreements and Supplemental Cash Enrollment Agreements between the Eligible Employee and Altria or PMIGS or any of its or their affiliates or predecessors.

2.43Trust Account TP. The term “Trust Account TP” shall mean the trust subaccount established pursuant to an Eligible Employee’s Supplemental Enrollment Agreement and to which target payments have been credited.

2.44Trust Account TP Value. The term “Trust Account TP Value” shall mean,

(a)with respect to an Eligible Employee for whom a Trust Account TP has been established, the sum of the amounts credited to the Eligible Employee’s Assumed Trust Account TP and Trust Account TP as of the earliest of the date

(i)on which the Eligible Employee’s Trust Account TP is terminated and distributed in accordance with the procedures established by the Administrator,

(ii)that is 60 days after the Eligible Employee’s Separation from Service, or

(iii)on which a Change of Control occurs, and

(b)with respect to an Eligible Employee for whom a Trust Account TP has not been established, the amounts credited to the Eligible Employee’s Assumed Trust Account TP as of the earlier of the date

(i)    of the Eligible Employee’s Separation from Service, or

(ii)    on which a Change of Control occurs,

in each case, reduced by the estimated amount of any taxes that would be attributable to income or assumed income from these accounts assuming liquidation of the accounts as of the applicable determination date set out above, but which have not been paid or deducted from these accounts, calculated using the income tax rate assumptions set forth in Appendix 3, and disregarding any withholding for the Eligible Employee’s share of employment taxes.

The following terms, as used herein, shall have the meanings attributed to them in the PMI Retirement Plan: “Accredited Service,” “Assumed Kraft Pension Plan Liability,” “Deferred Retirement Allowance,” “Early Retirement Allowance,” “Full Retirement

7

Exhibit 10.2

Allowance,” “Kraft Pension Plans,” “Retained Kraft Pension Plan Liability,” “Retirement Allowance,” “Spouse” and “Vested Retirement Allowance.”

The following terms, as used herein, shall have the meanings attributed to them in the PMI BEP: “Administrator,” “Benefits Committee,” “Latest Payment Date,” “Payment Date,” “Separation from Service,” “Statutory Limitations,” “Survivor Benefit Latest Payment Date” and “Survivor Benefit Payment Date.”

The masculine pronoun shall include the feminine pronoun unless the context clearly requires otherwise.

ARTICLE III

BENEFITS

3.1SEP Benefit. An Eligible Employee shall be entitled to a SEP Benefit, which shall be determined by adding the Eligible Employee’s SEP Pension Benefit to the Eligible Employee’s SEP DPS Benefit, converting the sum of such amounts to an after-tax amount, reducing such after-tax amount by the Eligible Employee’s Trust Account TP Value, and then converting the result back to a pre-tax amount, all in the manner set forth in this Section 3.1. If an Eligible Employee dies before his SEP Benefit is paid, the SEP Benefit shall cease to be payable, and neither the Eligible Employee’s Spouse nor the Eligible Employee’s Beneficiary(ies) shall have any right to the SEP Benefit.

(a)SEP Pension Benefit. Unless an Eligible Employee’s SEP Pension Benefit is determined under Appendix 2 pursuant to the terms thereof, the SEP Pension Benefit for an Eligible Employee shall be determined as set forth in Section 3.1(a)(v). For purposes of determining the SEP Pension Benefit of an Eligible Employee who is a Secular Trust Participant (and whose SEP Pension Benefit is determined under this Section 3.1(a), rather than Appendix 2), the term “joint and 50% survivor annuity” shall be substituted for the term “single life annuity” in each place that such term appears in this Section 3.1(a).

(i)Normal Pension Benefit. An Eligible Employee’s Normal Pension Benefit shall be the amount by which

(A)the Retirement Allowance determined for the Eligible Employee under the PMI Retirement Plan based on all of the Eligible Employee’s Accredited Service, but without regard to the Statutory Limitations and without regard to any Actuarial Equivalent reduction for early commencement, expressed in the form of a single life annuity, exceeds

(B)the Retirement Allowance determined for the Eligible Employee under the PMI Retirement Plan based on all of the Eligible Employee’s Accredited Service and taking into account any applicable Statutory Limitations, but without regard to any Actuarial

8

Exhibit 10.2

Equivalent reduction for early commencement, expressed in the form of a single life annuity.

For the avoidance of doubt, in determining the Normal Pension Benefit, the amount by which the Assumed Kraft Pension Plan Liability exceeds the Retained Kraft Pension Plan Liability shall be taken into account in the manner set forth in the PMI Retirement Plan in calculating the Retirement Allowances described in Sections 3.1(a)(i)(A) and (B) above.

(ii)Early Retirement Pension Benefit. The Early Retirement Pension Benefit of an Eligible Employee who is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible to receive a Full or Deferred Retirement Allowance) under the PMI Retirement Plan as of the Eligible Employee’s Separation from Service or, in the discretion of the Administrator, the end of the Eligible Employee’s policy severance shall be the Actuarial Equivalent of the Eligible Employee’s Normal Pension Benefit, computed as though such benefit were payable under the terms of the PMI Retirement Plan as a single life annuity commencing on the first day of the month coincident with or next following the Eligible Employee’s Separation from Service or, in the discretion of the Administrator, the end of the Eligible Employee’s policy severance.

(iii)Normal Grandfathered Pension Benefit. An Eligible Employee’s Normal Grandfathered Pension Benefit shall equal the Benefit Equalization Retirement Allowance to which the Eligible Employee would have been entitled under the Altria BEP (and which is now payable under the PMI BEP) if the Eligible Employee had voluntarily terminated employment without cause on December 31, 2004 and received payment of such benefit on the earliest permissible date following termination of employment in the form with the greatest value, expressed for purposes of this calculation as a single life annuity commencing at age 65.

(iv)Early Retirement Grandfathered Pension Benefit. The Early Retirement Grandfathered Pension Benefit of an Eligible Employee who is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible for a Full or Deferred Retirement Allowance) under the PMI Retirement Plan as of the Eligible Employee’s Separation from Service or, in the discretion of the Administrator, the end of the Eligible Employee’s policy severance shall be the Actuarial Equivalent of the Eligible Employee’s Normal Grandfathered Pension Benefit, computed as though such benefit were payable under the terms of the PMI Retirement Plan in the form of a single life annuity commencing on the first day of the month coincident with or next following the Eligible Employee’s Separation from Service or, in the discretion of the Administrator, the end of the Eligible Employee’s policy severance; provided, however, that solely for purposes of the determining the early retirement factor to be applied in determining the Actuarial Equivalent of such benefit, the earliest date on which the Eligible Employee shall be treated as being entitled to an unreduced benefit under the PMI Retirement Plan for purposes of Exhibit 1 to the PMI Retirement Plan shall be the earliest date on which the Eligible Employee would have been entitled to an unreduced

9

Exhibit 10.2

benefit if the Eligible Employee had voluntarily terminated employment on December 31, 2004.

(v)Determination of SEP Pension Benefit. Unless an Eligible Employee’s SEP Pension Benefit is determined under Appendix 2 pursuant to the terms thereof, the Eligible Employee’s “SEP Pension Benefit” shall be,

(A)for an Eligible Employee who is eligible to receive a Full, Deferred or Vested Retirement Allowance as of the date of his Separation from Service or, in the discretion of the Administrator, the end of the Eligible Employee’s policy severance, the Lump-Sum Equivalent of the amount by which the Eligible Employee’s Normal Pension Benefit exceeds his Normal Grandfathered Pension Benefit; and

(B)for an Eligible Employee who is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible for a Full or Deferred Retirement Allowance) on the date of his Separation from Service or, in the discretion of the Administrator, at the end of the Eligible Employee’s policy severance, the Lump-Sum Equivalent of the amount by which the Eligible Employee’s Early Retirement Pension Benefit exceeds his Early Retirement Grandfathered Pension Benefit.

(b)SEP DPS Benefit. An Eligible Employee’s SEP DPS Benefit shall equal the amounts that would have been credited to the Eligible Employee’s Company Account after December 31, 2004, but were not credited to his Company Account as a result of the Statutory Limitations. Such amounts shall be deemed to have been invested in Part A of the Fund and valued in accordance with the provisions of the PMI Profit-Sharing Plan or Altria Profit-Sharing Plan, as applicable.

(c)Gross After-Tax SEP Benefit. An Eligible Employee’s Gross After-Tax SEP Benefit shall equal the amount that would remain if income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, were withheld on the sum of the Eligible Employee’s (i) SEP Pension Benefit and (ii) SEP DPS Benefit.

(d)After-Tax SEP Benefit. The Eligible Employee’s After-Tax SEP Benefit shall equal the amount by which (i) the Gross After-Tax SEP Benefit exceeds (ii) the Eligible Employee’s Trust Account TP Value.

(e)SEP Benefit. The Eligible Employee’s SEP Benefit shall equal the After-Tax SEP Benefit converted to a pre-tax amount. Such pre-tax amount shall be an amount that is sufficient to cause the amount remaining after withholding of income taxes to equal the After-Tax SEP Benefit, with the amount for withholding determined as if withholding for federal, state and local income taxes were effected at the rates specified

10

Exhibit 10.2

in Appendix 3, and disregarding any withholding for the Eligible Employee’s share of employment taxes.

3.2DPS Beneficiary Benefit. If an Eligible Employee dies before his SEP Benefit is paid, the Eligible Employee’s Beneficiary shall be eligible to receive a DPS Beneficiary Benefit in an amount calculated as follows:

(a)Determine the amount that would remain if income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, were withheld on the Eligible Employee’s SEP DPS Benefit.

(b)Determine the amount, if any, by which (i) the amount determined under Section 3.2(a) exceeds (ii) the Eligible Employee’s Trust Account TP Value.

(c)The DPS Beneficiary Benefit payable under this Section shall be an amount that is sufficient to cause the amount remaining after withholding of income taxes to equal the amount, if any, determined under Section 3.2(b), with the amount for withholding determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3, and disregarding any withholding for the Eligible Employee’s share of employment taxes.

3.3SEP Spousal Survivor Benefit. If an Eligible Employee dies before his SEP Benefit is paid and the Eligible Employee’s Beneficiary is not entitled to a SEP Pension Beneficiary Benefit pursuant to Section 3.4, the Eligible Employee’s Spouse, if any, on his date of death shall be eligible to receive a SEP Spousal Survivor Benefit. The SEP Spousal Survivor Benefit shall be the amount calculated as follows:

(a)Determine the amount, if any, by which (i) the Eligible Employee’s Trust Account TP Value exceeds (ii) the amount calculated under Section 3.2(a) above.

(b)If the Eligible Employee dies before terminating employment with PMI and its affiliates, determine one half of the amount that would be the Eligible Employee’s SEP Pension Benefit if (i) the Eligible Employee had survived and had a Separation from Service on his date of death and (ii) the term “Actuarial Equivalent joint and 50% survivor annuity” were substituted for the term “single life annuity” in each place that such term appears in Section 3.1(a).

(c)Determine the amount that would remain if income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, were withheld on the amount determined under Section 3.3(b).

(d)If the Eligible Employee dies after terminating employment with PMI and its affiliates but before his SEP Benefit is paid, determine the amount that would

11

Exhibit 10.2

remain if income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, were withheld on the Eligible Employee’s SEP Pension Benefit.

(e)The SEP Spousal Survivor Benefit shall equal an amount sufficient to cause the amount remaining after withholding of income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, to equal

(i)If the Eligible Employee dies before terminating employment with PMI and its affiliates, the amount by which (A) the amount determined under Section 3.3(c) exceeds (ii) the remaining Trust Account TP Value, if any, determined under Section 3.3(a); or

(ii)If the Eligible Employee dies after terminating employment with PMI and its affiliates but before his SEP Benefit is paid, the amount by which (A) the amount determined under Section 3.3(d) exceeds (ii) the remaining Trust Account TP Value, if any, determined under Section 3.3(a).

3.4SEP Pension Beneficiary Benefit. If an Eligible Employee dies before his SEP Benefit has been paid and a beneficiary of the Eligible Employee is entitled to a payment pursuant to Article IIC(1)(a), Article IIC(1)(b) or Article IIC(2)(f) of the PMI BEP, the Eligible Employee’s Beneficiary shall be eligible to receive a SEP Pension Beneficiary Benefit. The SEP Pension Beneficiary Benefit shall be the amount calculated as follows:

(a)Determine the amount, if any, by which (i) the Eligible Employee’s Trust Account TP Value exceeds (ii) the amount calculated under Section 3.2(a) above.

(b)Determine the amount that would remain if income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, were withheld on the Eligible Employee’s SEP Pension Benefit.

(c)The SEP Pension Beneficiary Benefit shall equal an amount sufficient to cause the amount remaining after withholding of income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 3), but disregarding any withholding for the Eligible Employee’s share of employment taxes, to equal the amount by which (A) the amount determined under Section 3.4(b) exceeds (ii) the remaining Trust Account TP Value, if any, determined under Section 3.4(a).

12

Exhibit 10.2

ARTICLE IV

TIME AND FORM OF PAYMENT

4.1Form of Payment. All benefits under the Plan will be paid in one or more lump-sum payments, as determined by the Administrator, subject to any applicable tax withholding. Notwithstanding any provision of the Plan, effective June 29, 2015, an Eligible Employee who is a Secular Trust Participant may elect to have the lump-sum payment(s) under the preceding sentence that remain after applicable tax is withheld from such payments(s) applied to purchase one or more life annuities, including a joint and survivor annuity, from one or more licensed commercial insurance companies. An Eligible Employee may make such an election no earlier than fifteen (15) days prior to the Payment Date in the manner prescribed by the Administrator. Any such annuity contract shall not be subject to the claims of general creditors of PMIGS, PMI, a Participating Company or any affiliate of any of them.

4.2Time of Payment.

(a)SEP Benefit. An Eligible Employee’s SEP Benefit shall be paid on the Payment Date, but not later than the Latest Payment Date.

(b)DPS Beneficiary Benefit. An Eligible Employee’s DPS Beneficiary Benefit shall be paid on the Payment Date, but not later than the Latest Payment Date.

(c)SEP Spousal Survivor Benefit. An Eligible Employee’s SEP Spousal Survivor Benefit shall be paid on the Survivor Allowance Benefit Payment Date, but not later than the Survivor Allowance Benefit Latest Payment Date.

(d)SEP Pension Beneficiary Benefit. An Eligible Employee’s SEP Pension Beneficiary Benefit shall be paid on the Survivor Allowance Benefit Payment Date, but not later than the Survivor Allowance Benefit Latest Payment Date.

4.3Allocation of Payments. The Administrator may use any reasonable method, as determined in its sole discretion, to designate amounts paid under the Plan as supplemental defined contribution payments or supplemental defined benefit payments and to allocate benefits among the three plans, programs or arrangements that constitute the Plan as described in Article I.

13

Exhibit 10.2

ARTICLE V

FUNDS FROM WHICH SEP BENEFITS ARE PAYABLE

Individual accounts shall be established for the benefit of each Eligible Employee (or Spouse or Beneficiary) under the Plan. Any benefits payable from an individual account shall be payable solely to the Eligible Employee (or Spouse or Beneficiary) for whom such account was established. The Plan shall be unfunded. All benefits intended to be provided under the Plan shall be paid from time to time from the general assets of the Eligible Employee’s Participating Company and paid in accordance with the provisions of the Plan; provided, however, that the Participating Companies reserve the right to meet the obligations created under the Plan through one or more trusts or other agreements. In no event shall any such trust or trusts be outside of the United States. The contributions or allocations by each Participating Company on behalf of its Eligible Employees to the individual accounts established pursuant to the provisions of the Plan, whether in trust or otherwise, shall be in an amount which such Participating Company, with the advice of an actuary, determines to be sufficient to provide for the payment of the benefits under the Plan.

ARTICLE VI

THE ADMINISTRATOR; CLAIMS PROCEDURES; INTERPRETATION OF PROVISIONS

The general administration of the Plan shall be vested in the Administrator. The powers, rights, duties and responsibilities of the Administrator shall be the same as the powers, rights, duties and responsibilities of the Administrator under the PMI BEP.

The procedures applicable to claims for benefits made under the Plan shall be the same as the procedures applicable to claims made under the PMI Retirement Plan.

The Plan is intended to comply with the requirements of Section 409A of the Code. Accordingly, where applicable, this Plan shall at all times be construed and administered in a manner consistent with the requirements of Section 409A of the Code and applicable regulations, without any diminution in the value of benefits. If the Internal Revenue Service or a court of competent jurisdiction makes a determination that has become final that the Plan fails to comply with Section 409A of the Code with respect to one or more Eligible Employees and imposes any additional taxes, penalties or interest as a result of such violation that would not otherwise be payable, the Participating Companies shall pay to the Eligible Employee, Spouse or Beneficiary on whom such additional taxes, penalties or interest are imposed an amount sufficient to cause the amount remaining after withholding of income taxes (determined as if withholding for federal, state and local income taxes were effected at the rates specified in Appendix 2), and any withholding for the Eligible Employee’s share of employment taxes, to equal the amount of any such additional taxes, penalties or interest; provided, however, that an Eligible Employee shall be entitled to such payment only if he informs PMIGS of any notice of an intent to impose such additional taxes, penalties or interest within 30 days of his receipt thereof and cooperates fully with the Participating Companies in opposing the imposition of such additional taxes, penalties or interest.

14

Exhibit 10.2

ARTICLE VII

AMENDMENT AND DISCONTINUANCE OF THE PLAN

The Plan can be amended or discontinued in the same manner as the PMI BEP can be amended or discontinued; provided, however, that the Benefits Committee can amend the Plan at any time to prevent the payment of benefits that duplicate benefits provided under any other plan or program, as reasonably determined in the sole discretion of the Benefits Committee.

ARTICLE VIII

FORMS; COMMUNICATIONS

The Administrator shall provide such appropriate forms as it may deem expedient in the administration of the Plan, and no action to be taken under the Plan for which a form is so provided shall be valid unless upon such form. Any Plan communication may be made by electronic medium to the extent allowed by applicable law.

All communications concerning the Plan shall be in writing addressed to the Administrator at such address as may from time to time be designated. No such communication shall be effective for any purposes unless received by the Administrator.

ARTICLE IX

CHANGE OF CONTROL PROVISIONS

In the event of a Change of Control, each Eligible Employee shall be fully vested in his SEP Benefit and any other benefit accrued under the Plan through the date of the Change of Control. Each Eligible Employee shall be entitled to a lump-sum payment in cash within 30 days of a Change of Control equal to his SEP Benefit, determined as if the date of the Change of Control was the date of the Eligible Employee’s Separation from Service.

ARTICLE X

MISCELLANEOUS

The Plan shall be construed and administered in accordance with the laws of the State of New York to the extent not preempted by federal law.

15

Exhibit 10.2

APPENDIX 1

ELIGIBLE EMPLOYEES

Philip Morris International

Secular Trust
Active Participants
Last Name	First Name	Funding Payment Account(s)	Target Payment Account(s)
Camilleri	Louis C.	FP Trust Account / FP Assumed Account	TP Trust Account / TP Assumed Account
Total ST Participants: 1

Executive Trust Arrangement
Last Name	First Name	Funding Payment Account(s)	Target Payment Account(s)
Rolli	Nicholas M.	FP Trust Account / FP Assumed Account	TP Trust Account / TP Assumed Account
Lindon	Timothy	FP Trust Account / FP Assumed Account	TP Trust Account / TP Assumed Account
Total ETA Participants: 2

16

Exhibit 10.2

APPENDIX 2

SEP PENSION BENEFIT

FOR MR. LOUIS C. CAMILLERI

SEP Pension Benefit. The SEP Pension Benefit for Louis C. Camilleri (“Mr. Camilleri”) shall be determined as set forth in Section (f) of this Appendix 2, rather than Section 3.1(a), in the manner described below:

(a)Normal Pension Benefit. Mr. Camilleri’s Normal Pension Benefit shall be the amount by which

(i)the Retirement Allowance that would be determined for Mr. Camilleri under the PMI Retirement Plan based on Mr. Camilleri’s SERP Service (as defined below) and SERP Compensation (as defined below), but without regard to the Statutory Limitations and without regard to any Actuarial Equivalent reduction for early commencement, expressed in the form of a joint and 50% survivor annuity that is the Actuarial Equivalent of a single life annuity, exceeds

(ii)the sum of Mr. Camilleri’s:

(A)Retirement Allowance determined under the PMI Retirement Plan based on Mr. Camilleri’s Accredited Service and taking into account any applicable Statutory Limitations, but without regard to any Actuarial Equivalent reduction for early commencement, expressed in the form of a joint and 50% survivor annuity that is the Actuarial Equivalent of a single life annuity;

(B)retirement benefit under the Kraft Retirement Plan payable with respect to service that is also treated as SERP Service and taking into account all applicable statutory and plan limitations on such benefit, but without regard to any actuarial reduction for early commencement, expressed in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the applicable actuarial factors under the Kraft Retirement Plan; and

(C)Kraft Supplemental Plan Benefit payable with respect to service that is also treated as SERP Service, but without regard to any actuarial equivalent reduction for early commencement, expressed in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the applicable actuarial factors under the Kraft Foods Global, Inc. Supplemental Benefits Plan I.

For purposes of this Appendix 2, the term “SERP Service” shall mean Mr. Camilleri’s Accredited Service plus, without duplication, any additional service set forth in his Designation of Participation, without regard to Mr. Camilleri’s eligibility to participate in the PMI SERP or the Altria SERP for any year; provided, however, that such SERP Service shall not exceed thirty-five years.

17

Exhibit 10.2

For purposes of this Appendix 2, the term “SERP Compensation” shall mean (i) for calendar years before 2007, “Compensation” as such term is defined in the PMI Retirement Plan, (ii) for the 2007 calendar year, the lesser of Mr. Camilleri’s (A) base salary plus actual annual incentive compensation and (B) base salary plus annual incentive compensation at a business rating of 100 and individual performance rating of “Exceeds,” and (iii) for calendar years 2008 and thereafter, the lesser of Mr. Camilleri's (A) base salary plus actual annual incentive compensation, and (B) base salary plus $2,887,500.

For the avoidance of doubt, in determining the Normal Pension Benefit, the amount by which the Assumed Kraft Pension Plan Liability exceeds the Retained Kraft Pension Plan Liability shall be taken into account in the manner set forth in the PMI Retirement Plan in calculating the Retirement Allowances described in Sections (a)(i) and (a)(ii)(A) of this Appendix 2 above.

(b)Early Retirement Pension Benefit. If Mr. Camilleri is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible to receive a Full or Deferred Retirement Allowance) under the PMI Retirement Plan as of his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, his Early Retirement Pension Benefit shall be the amount by which

(i)the Actuarial Equivalent, reflecting any reduction for early commencement, of the Retirement Allowance determined under Section (a)(i) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, exceeds

(ii)the sum of:

(A)the Actuarial Equivalent, reflecting any reduction for early commencement, of the Retirement Allowance determined under Section (a)(ii)(A) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance;

(B)the Kraft Retirement Plan benefit determined under Section (a)(ii)(B) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, as reduced for such early commencement based on the applicable actuarial factors under the Kraft Retirement Plan; and

(C)the Kraft Supplemental Plan Benefit determined under Section (a)(ii)(C) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance,

18

Exhibit 10.2

as reduced for such early commencement based on the applicable actuarial factors under the Kraft Foods Global, Inc. Supplemental Benefits Plan I.

(c)Normal Grandfathered Pension Benefit. Mr. Camilleri’s Normal Grandfathered Pension Benefit shall be the amount by which

(i)the retirement benefit to which Mr. Camilleri would have been entitled under the Altria Retirement Plan based on his SERP Service and SERP Compensation, but without regard to any applicable statutory or plan limits on such benefit, and without regard to any actuarial reduction for early commencement, if he had voluntarily terminated employment on December 31, 2004, expressed for purposes of this calculation in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the then applicable actuarial factors under the Altria Retirement Plan, exceeds

(ii)the sum of:

(A)the retirement benefit to which Mr. Camilleri would have been entitled under the Altria Retirement Plan (which is now payable under the PMI Retirement Plan), taking into account all applicable statutory and plan limits on such benefit, but without regard to any actuarial reduction for early commencement, if he had voluntarily terminated employment on December 31, 2004, expressed for purposes of this calculation in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the then applicable actuarial factors under the Altria Retirement Plan;

(B)the retirement benefit to which Mr. Camilleri would have been entitled under the Kraft Retirement Plan, taking into account all applicable statutory and plan limitations on such benefit, but without regard to any actuarial reduction for early commencement, if he had voluntarily terminated employment on December 31, 2004, expressed for purposes of this calculation in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the then applicable actuarial factors under the Kraft Retirement Plan; and

(C)the Kraft Supplemental Plan Benefit to which Mr. Camilleri would have been entitled under the Kraft Foods Global, Inc. Supplemental Plan I, but without regard to any actuarial reduction for early commencement, if he had voluntarily terminated employment on December 31, 2004, expressed for purposes of this calculation in the form of a joint and 50% survivor annuity, as adjusted for such form of payment based on the then applicable actuarial factors under such plan.

For the avoidance of doubt, the amount determined under Section (c)(i) of this Appendix 2 shall be determined based only on SERP Service and SERP

19

Exhibit 10.2

Compensation to which Mr. Camilleri would have been entitled under the terms of the Altria SERP if he had voluntarily terminated employment on December 31, 2004.

(d)Early Retirement Grandfathered Pension Benefit. If Mr. Camilleri is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible to receive a Full or Deferred Retirement Allowance) under the PMI Retirement Plan as of his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, his Early Retirement Grandfathered Pension Benefit shall be the amount by which

(i)the retirement benefit determined under Section (c)(i) of this Appendix 2, commencing on the first day of the month coincident with or next following Mr. Camilleri’s Separation from Service or, in the discretion of the Administrator, the end of his policy severance, as reduced for such early commencement, if applicable, based on the early retirement factors under the Altria Retirement Plan, exceeds

(ii)the sum of

(A)the retirement benefit payable under the Altria Retirement Plan (and now payable under the PMI Retirement Plan) determined under Section (c)(ii)(A) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, as reduced for such early commencement, if applicable, based on the early retirement factors under the Altria Retirement Plan;

(B)the Kraft Retirement Plan benefit determined under Section (c)(ii)(B) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, as reduced for such early commencement, if applicable, based on the applicable actuarial factors under the Kraft Retirement Plan; and

(C)the Kraft Supplemental Plan Benefit determined under Section (c)(ii)(C) of this Appendix 2 commencing on the first day of the month coincident with or next following his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, as reduced for such commencement, if applicable, based on the applicable actuarial factors under the Kraft Foods Global, Inc. Supplemental Benefits Plan I,

provided, however, that solely for purposes of determining the early retirement reductions required under this Section (d) of Appendix 2 for the early commencement of benefits, the early retirement or other factors to be used for each benefit shall be the actuarial factors that would have applied under the applicable plan treating the earliest date on which Mr. Camilleri would become entitled to an unreduced benefit as the date

20

Exhibit 10.2

that would have applied if he had voluntarily terminated employment on December 31, 2004.

(e)Base SEP Pension Benefit. Mr. Camilleri’s Base SEP Pension Benefit shall be calculated as follows:

(i)If Mr. Camilleri is eligible for an Early Retirement Allowance, whether reduced or unreduced, (but is not eligible for a Full or Deferred Retirement Allowance) on the date of his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, his Base SEP Pension Benefit shall be the Lump-Sum Equivalent of the amount by which his Early Retirement Pension Benefit exceeds his Early Retirement Grandfathered Pension Benefit; and

(ii)If Mr. Camilleri is eligible to receive a Full, Deferred or Vested Retirement Allowance as of the date of his Separation from Service or, in the discretion of the Administrator, the end of his policy severance, his Base SEP Pension Benefit shall be the Lump-Sum Equivalent of the amount by which his Normal Pension Benefit exceeds his Normal Grandfathered Pension Benefit.

(f)SEP Pension Benefit. Mr. Camilleri’s SEP Pension Benefit under this Appendix 2 shall be his Base SEP Pension Benefit plus, if Mr. Camilleri retires as of January 2012, the excess, if any, of

(i)$36,500,000 over

(ii)the present value of the amount determined under Section (a)(i) of this Appendix 2, less the amounts determined under Sections (a)(ii)(B) and (a)(ii)(C) of this Appendix 2 and any amounts determined under Section (a)(ii)(D) of this Appendix 2 that would not be payable by PMI or its affiliates.

21

Exhibit 10.2

APPENDIX 3

TAX ASSUMPTIONS

Federal income tax rate: The highest marginal Federal income tax rate as adjusted for the Federal deduction of state and local taxes and the phase out of Federal deductions under current law (or as adjusted under any subsequently enacted similar provisions of the Internal Revenue Code).

State income tax rate: Except with respect to additional benefits attributable to the provisions of an Eligible Employee’s Designation of Participation, the highest adjusted marginal state income tax rate based on the Eligible Employee’s state of residence on the date of the Eligible Employee’s Separation from Service. With respect to those additional benefits that are attributable to the provisions of an Eligible Employee’s Designation of Participation, the highest marginal state income tax rate based on the state in which the Eligible Employee is or was employed by a Participating Company on the date of his Separation from Service.

Local income tax rate: Except with respect to additional benefits attributable to the provisions of an Eligible Employee’s Designation of Participation, the highest adjusted marginal local income tax rate (taking into account the Eligible Employee’s resident or nonresident status) based on the Eligible Employee’s locality of residence on the date of the Eligible Employee’s Separation from Service. With respect to those additional benefits that are attributable to the provisions of an Eligible Employee’s Designation of Participation, the highest marginal state income tax rate (taking into account the Eligible Employee’s resident or nonresident status) based on the locality in which the Eligible Employee is or was employed by a Participating Company on the date of his Separation from Service.

Exception: In the case of an Eligible Employee who is an expatriate, income taxes shall generally be computed as follows: Expatriate taxes will be calculated assuming the highest marginal Federal income tax rate as adjusted for the Federal deduction of state and local taxes and the phase out of Federal deductions under current law (or as adjusted under any subsequently enacted similar provisions of the Code). The applicable state and local tax rates will be adjusted to reflect an Eligible Employee’s expatriate status to the extent appropriate.

Capital Gains: The ordinary income or capital gains character of items of trust investment income or deemed investment income shall be taken into account as relevant.

The above principles shall generally be applied in determining tax-rate assumptions for the relevant purpose, but the Administrator shall have the authority in its discretion to alter the assumptions made as deemed appropriate to take into account particular facts and circumstances.

22

EX-12

Exhibit 12

PHILIP MORRIS INTERNATIONAL INC. AND SUBSIDIARIES

Computation of Ratios of Earnings to Fixed Charges

(in millions of dollars)

	Six Months Ended June 30, 2015			Three Months Ended June 30, 2015
Earnings before income taxes	$	5,229		$	2,633
Add (deduct):
Dividends from less than 50% owned affiliates	86			86
Fixed charges	645			311
Interest capitalized, net of amortization	(1		)	(1		)
Earnings available for fixed charges	$	5,959		$	3,029
Fixed charges:
Interest incurred	$	589		$	283
Portion of rent expense deemed to represent interest factor	56			28
Fixed charges	$	645		$	311
Ratio of earnings to fixed charges	9.2			9.7

- 1 -

Exhibit 12

PHILIP MORRIS INTERNATIONAL INC. AND SUBSIDIARIES

Computation of Ratios of Earnings to Fixed Charges

(in millions of dollars)

	For the Years Ended December 31,
	2014		2013		2012		2011			2010
Earnings before income taxes	$	10,650	$	12,542	$	13,004	$	12,542		$	10,332
Add (deduct):
Dividends from less than 50% owned affiliates	107		1		—		—			—
Fixed charges	1,284		1,216		1,115		1,042			1,069
Interest capitalized, net of amortization	1		4		2		(2		)	1
Earnings available for fixed charges	$	12,042	$	13,763	$	14,121	$	13,582		$	11,402
Fixed charges:
Interest incurred	$	1,172	$	1,105	$	1,009	$	940		$	976
Portion of rent expense deemed to represent interest factor	112		111		106		102			93
Fixed charges	$	1,284	$	1,216	$	1,115	$	1,042		$	1,069
Ratio of earnings to fixed charges	9.4		11.3		12.7		13.0			10.7

- 2 -

EX-31.1

Exhibit 31.1

Certifications

I, André Calantzopoulos, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Philip Morris International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 30, 2015

/s/ ANDRÉ CALANTZOPOULOS

André Calantzopoulos

Chief Executive Officer

-1-

EX-31.2

Exhibit 31.2

Certifications

I, Jacek Olczak, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Philip Morris International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 30, 2015

/s/ JACEK OLCZAK

Jacek Olczak

Chief Financial Officer

- 1 -

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Philip Morris International Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, André Calantzopoulos, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)        the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ANDRÉ CALANTZOPOULOS

André Calantzopoulos

Chief Executive Officer

July 30, 2015

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Philip Morris International Inc. and will be retained by Philip Morris International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

-1-

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Philip Morris International Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jacek Olczak, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)        the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JACEK OLCZAK

Jacek Olczak

Chief Financial Officer

July 30, 2015

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Philip Morris International Inc. and will be retained by Philip Morris International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

-1-

XML

Investments in Unconsolidated Subsidiaries (Tables)

6 Months Ended

Jun. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Earnings and Balance Sheet Activities with Unconsolidated Subsidiaries

PMI’s earnings activity from unconsolidated subsidiaries was as follows:

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2015		2014		2015		2014
Net revenues	$	2,218	$	2,606	$	1,322	$	1,420

PMI’s balance sheet activity related to unconsolidated subsidiaries was as follows:

(in millions)	At June 30, 2015		At December 31, 2014
Receivables	$	488	$	407
Notes receivable	$	104	$	100
Other liabilities	$	97	$	93

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Financial Instruments (Qualifying Hedging Activity Reported in Accumulated Other Comprehensive Earnings (Losses) Net of Income Taxes) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Hedging Activity, Affecting Accumulated Other Comprehensive Income [Roll Forward]
Gain at beginning of period			$ 123
Derivative gains transferred to earnings	$ 39	$ 6	66	$ 13
Change in fair value	41	(11)	66	(35)
Gain as of June 30,	123	15	123	15
Foreign Exchange Contract [Member]
Hedging Activity, Affecting Accumulated Other Comprehensive Income [Roll Forward]
Derivative gains transferred to earnings	(44)	(7)	(74)	(15)
Change in fair value	(32)	(2)	281	(4)
Other Comprehensive Income (Loss) [Member] | Foreign Exchange Contract [Member]
Hedging Activity, Affecting Accumulated Other Comprehensive Income [Roll Forward]
Gain at beginning of period	121	32	123	63
Derivative gains transferred to earnings	(39)	(6)	(66)	(13)
Change in fair value	41	(11)	66	(35)
Gain as of June 30,	$ 123	$ 15	$ 123	$ 15

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Goodwill and Other Intangible Assets, net (Other Intangible Assets) (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Non-amortizable intangible assets, gross carrying amount	$ 1,608	$ 1,704
Amortizable intangible assets, gross carrying amount	1,704	1,877
Total other intangible assets, gross carrying amount	3,312	3,581
Accumulated Amortization	$ 505	$ 596

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Accumulated Other Comprehensive Losses (Components of Accumulated Other Comprehensive Earnings (Losses), Net of Tax) (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Currency translation adjustments	$ (5,320)	$ (3,929)	$ (2,323)
Pension and other benefits	(2,910)	(3,020)	(2,006)
Derivatives accounted for as hedges	123	123	15
Total accumulated other comprehensive losses	$ (8,107)	$ (6,826)	$ (4,314)

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Earnings Per Share (Calculation of Basic and Diluted EPS) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net earnings attributable to PMI	$ 1,887	$ 1,851	$ 3,682	$ 3,726
Less distributed and undistributed earnings attributable to share-based payment awards	6	9	13	17
Net earnings for basic and diluted EPS	$ 1,881	$ 1,842	$ 3,669	$ 3,709
Weighted-average shares for basic and diluted EPS (in shares)	1,549,000,000	1,571,000,000	1,549,000,000	1,577,000,000
Antidilutive stock options	0	0	0	0

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Goodwill and Other Intangible Assets, net (Goodwill and Other Intangible Assets, by Segment) (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Goodwill and Other Intangible Assets, net [Line Items]
Goodwill	$ 7,914	$ 8,388
Other Intangible Assets, net	2,807	2,985
European Union [Member]
Goodwill and Other Intangible Assets, net [Line Items]
Goodwill	1,311	1,398
Other Intangible Assets, net	551	582
Eastern Europe, Middle East & Africa [Member]
Goodwill and Other Intangible Assets, net [Line Items]
Goodwill	486	517
Other Intangible Assets, net	210	215
Asia [Member]
Goodwill and Other Intangible Assets, net [Line Items]
Goodwill	3,701	3,904
Other Intangible Assets, net	1,131	1,207
Latin America & Canada [Member]
Goodwill and Other Intangible Assets, net [Line Items]
Goodwill	2,416	2,569
Other Intangible Assets, net	$ 915	$ 981

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Data

Segment data were as follows:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Net revenues:
European Union	$	12,276		$	14,448		$	6,336		$	7,829
Eastern Europe, Middle East & Africa	9,423			10,236			4,994			5,674
Asia	9,803			9,572			5,039			5,097
Latin America & Canada	4,613			4,574			2,394			2,451
Net revenues	$	36,115		$	38,830		$	18,763		$	21,051
Earnings before income taxes:
Operating companies income:
European Union	$	1,890		$	1,689		$	977		$	711
Eastern Europe, Middle East & Africa	1,761			2,014			881			1,087
Asia	1,731			1,815			797			900
Latin America & Canada	555			467			325			265
Amortization of intangibles	(43		)	(44		)	(21		)	(22		)
General corporate expenses	(82		)	(80		)	(41		)	(40		)
Less:
Equity (income)/loss in unconsolidated subsidiaries, net	(49		)	(36		)	(26		)	(27		)
Operating income	5,763			5,825			2,892			2,874
Interest expense, net	(534		)	(522		)	(259		)	(254		)
Earnings before income taxes	$	5,229		$	5,303		$	2,633		$	2,620

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Investments in Unconsolidated Subsidiaries - (Balance sheet and earnings activity) (Details) - Equity Method Investments [Member] - Eastern Europe Middle East And Africa [Member] - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Schedule of Equity Method Investments [Line Items]
Net revenues	$ 1,322	$ 1,420	$ 2,218	$ 2,606
Receivables	488		488		$ 407
Notes receivable	104		104		100
Other Liabilities [Member]
Schedule of Equity Method Investments [Line Items]
Other liabilities	$ 97		$ 97		$ 93

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Contingencies (Tobacco-Related Litigation) (Details) - Jul. 29, 2015 - Subsequent Event [Member]	EUR (€) litigation_case	USD ($) litigation_case
Loss Contingencies [Line Items]
Number of judgments paid to date	1
Case Decided In Favor Of Plaintiff [Member]
Loss Contingencies [Line Items]
Number of cases decided	12	12
Case Decided In Favor Of Plaintiff [Member] | Cases Remaining On Appeal [Member]
Loss Contingencies [Line Items]
Cases brought against PM	3	3
Final Resolution In Favor Of Company [Member]
Loss Contingencies [Line Items]
Number of cases decided	436	436
Final Resolution In Favor Of Company [Member] | Case Decided In Favor Of Plaintiff [Member]
Loss Contingencies [Line Items]
Number of cases decided	9	9
Italy [Member] | Cases With Costs [Member] | Individual Lights Cases Small Claims Court [Member]
Loss Contingencies [Line Items]
Payments for total judgments including costs	€ 1,400	$ 1,500

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Balance Sheet Offsetting (Details) - Foreign Exchange Contract [Member] - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Assets
Gross Amounts Recognized	$ 559	$ 406
Gross Amount Offset in the Condensed Consolidated Balance Sheet	0	0
Net Amounts Presented in the Condensed Consolidated Balance Sheet	559	406
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet, Financial Instruments	(114)	(77)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet, Cash Collateral Received/Pledged	(403)	(306)
Net Amount	42	23
Liabilities
Gross Amounts Recognized	141	151
Gross Amount Offset in the Condensed Consolidated Balance Sheet	0	0
Net Amounts Presented in the Condensed Consolidated Balance Sheet	141	151
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet, Financial Instruments	(114)	(77)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet, Cash Collateral Received/Pledged	(10)	(63)
Net Amount	$ 17	$ 11

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Acquisitions and Other Business Arrangements

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Acquisitions and Other Business Arrangements

Acquisitions and Other Business Arrangements:

In June 2014, PMI acquired 100% of Nicocigs Limited, a leading U.K.-based e-vapor company, for the final purchase price of $103 million, net of cash acquired, with additional contingent payments of up to $77 million, primarily relating to performance targets over a three-year period. At June 30, 2015, the additional contingent payments were up to $63 million over the remaining two-year period. For additional information regarding this contingent consideration, see Note 12. Fair Value Measurements.

In May 2013, PMI announced that Grupo Carso, S.A.B. de C.V. ("Grupo Carso") would sell to PMI its remaining 20% interest in PMI's Mexican tobacco business. The sale was completed on September 30, 2013, for $703 million. As a result, PMI now owns 100% of its Mexican tobacco business. A former director of PMI, whose term expired at the Annual Meeting of Shareholders in May 2015, had an affiliation with Grupo Carso. The final purchase price was subject to an adjustment based on the actual performance of the Mexican tobacco business over the three-year period ending two fiscal years after the closing of the purchase. In May 2015, PMI received a payment of $113 million from Grupo Carso as the final purchase price adjustment. This resulted in a total net purchase price of $590 million. In addition, PMI agreed to pay a dividend of approximately $38 million to Grupo Carso related to the earnings of the Mexican tobacco business for the nine months ended September 30, 2013. In March 2014, the dividend was declared and paid. The purchase of the remaining 20% interest resulted in a net decrease to PMI's additional paid-in capital of $559 million.

The effects of these and other smaller acquisitions were not material to PMI's condensed consolidated financial position, results of operations or operating cash flows in any of the periods presented.

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Goodwill and Other Intangible Assets, net (Narrative) (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets, pre-tax amortization expense	$ 21,000,000		$ 22,000,000	$ 43,000,000	$ 44,000,000
Estimated Amortization Expense, Year One, assuming no additional transactions occur that require the amortization of intangible assets	72,000,000			72,000,000
Estimated Amortization Expense, Year Two, assuming no additional transactions occur that require the amortization of intangible assets	72,000,000			72,000,000
Estimated Amortization Expense, Year Three, assuming no additional transactions occur that require the amortization of intangible assets	72,000,000			72,000,000
Estimated Amortization Expense, Year Four, assuming no additional transactions occur that require the amortization of intangible assets	72,000,000			72,000,000
Estimated Amortization Expense, Year Five, assuming no additional transactions occur that require the amortization of intangible assets	$ 72,000,000			$ 72,000,000
Goodwill and Intangible Asset Impairment		$ 0

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Asset Impairment and Exit Costs (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Restructuring and Related Activities [Abstract]
Cash payments related to exit costs	$ 44	$ 30	$ 204	$ 230
Restructuring Reserve	52		52		$ 270
Restructuring Cost and Reserve [Line Items]
Asset impairment and exit costs	0	489	0	512
Employee separation costs	0	360	0	383
Asset Impairment Charges	0	129	0	129
European Union [Member]
Restructuring Cost and Reserve [Line Items]
Employee separation costs	0	359	0	359
European Union [Member] | Facility Closing [Member]
Restructuring Cost and Reserve [Line Items]
Asset impairment and exit costs		488		488
Employee separation costs		359		359
Asset Impairment Charges	$ 0	$ 129	$ 0	$ 129

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Accumulated Other Comprehensive Losses (Tables)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Components of Accumulated Other Comprehensive Earnings (Losses), Net of Taxes

PMI’s accumulated other comprehensive losses, net of taxes, consisted of the following:

(in millions)	At June 30, 2015			At December 31, 2014			At June 30, 2014
Currency translation adjustments	$	(5,320	)	$	(3,929	)	$	(2,323	)
Pension and other benefits	(2,910		)	(3,020		)	(2,006		)
Derivatives accounted for as hedges	123			123			15
Total accumulated other comprehensive losses	$	(8,107	)	$	(6,826	)	$	(4,314	)

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Financial Instruments (Fair Value of Foreign Exchange Contracts) (Details) - Foreign Exchange Contract [Member] - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Derivative asset fair value	$ 559	$ 406
Derivative liability fair value	141	151
Designated as Hedging Instrument [Member] | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset fair value	318	248
Designated as Hedging Instrument [Member] | Other Accrued Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability fair value	2	0
Designated as Hedging Instrument [Member] | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset fair value	173	122
Designated as Hedging Instrument [Member] | Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability fair value	61	25
Not Designated as Hedging Instrument [Member] | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset fair value	21	34
Not Designated as Hedging Instrument [Member] | Other Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability fair value	78	126
Not Designated as Hedging Instrument [Member] | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset fair value	$ 47	$ 2
Not Designated as Hedging Instrument [Member] | Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability fair value

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Indebtedness (Credit Facilities) (Details)	Jun. 30, 2015 USD ($)
Line of Credit Facility [Line Items]
Committed credit facilities	$ 8,000,000,000
Revolving Credit Expiring February Ninth Two Thousand Sixteen [Member]
Line of Credit Facility [Line Items]
Committed credit facilities	2,000,000,000
Multi-year revolving credit, expiring February 28, 2020 [Member]
Line of Credit Facility [Line Items]
Committed credit facilities	2,500,000,000
Multi-year revolving credit, expiring October 25, 2016 [Member]
Line of Credit Facility [Line Items]
Committed credit facilities	$ 3,500,000,000

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Contingencies (Health Care Cost Recovery Litigation) (Details) - Health Care Cost Recovery Actions [Member] $ in Millions	Apr. 14, 2014 USD ($) patient	Oct. 17, 2008	Mar. 13, 2008	Feb. 26, 2008	May. 25, 2007	May. 09, 2007	Jul. 29, 2015 litigation_case	Jul. 30, 2014 litigation_case	Aug. 01, 2013 litigation_case
Loss Contingencies [Line Items]
Cases brought against PM								15	15
Korea [Member]
Loss Contingencies [Line Items]
Damages sought, value | $	$ 53.7
Damages sought, number of patients | patient	3,484
Subsequent Event [Member]
Loss Contingencies [Line Items]
Cases brought against PM							16
Subsequent Event [Member] | Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM							10
Subsequent Event [Member] | Korea [Member]
Loss Contingencies [Line Items]
Cases brought against PM							1
Subsequent Event [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Cases brought against PM							5
Pending Litigation [Member] | The Attorney General Of Lagos State [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Damages sought, period of past reimbursements			20 years
Damages sought, period of future reimbursements			20 years
Pending Litigation [Member] | The Attorney General Of Kano State [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Damages sought, period of past reimbursements						20 years
Damages sought, period of future reimbursements						20 years
Pending Litigation [Member] | The Attorney General Of Gombe State [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Damages sought, period of past reimbursements		20 years
Damages sought, period of future reimbursements		20 years
Pending Litigation [Member] | The Attorney General Of Ovo State [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Damages sought, period of past reimbursements					20 years
Damages sought, period of future reimbursements					20 years
Pending Litigation [Member] | The Attorney General Of Ogun State [Member] | Nigeria [Member]
Loss Contingencies [Line Items]
Damages sought, period of past reimbursements				20 years
Damages sought, period of future reimbursements				20 years

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Goodwill and Other Intangible Assets, net (Movement In Goodwill) (Details) $ in Millions	6 Months Ended
	Jun. 30, 2015 USD ($)
Goodwill [Roll Forward]
Balances, December 31, 2014	$ 8,388
Changes due to:
Currency	(474)
Balances, June 30, 2015	7,914
European Union [Member]
Goodwill [Roll Forward]
Balances, December 31, 2014	1,398
Changes due to:
Currency	(87)
Balances, June 30, 2015	1,311
Eastern Europe, Middle East & Africa [Member]
Goodwill [Roll Forward]
Balances, December 31, 2014	517
Changes due to:
Currency	(31)
Balances, June 30, 2015	486
Asia [Member]
Goodwill [Roll Forward]
Balances, December 31, 2014	3,904
Changes due to:
Currency	(203)
Balances, June 30, 2015	3,701
Latin America & Canada [Member]
Goodwill [Roll Forward]
Balances, December 31, 2014	2,569
Changes due to:
Currency	(153)
Balances, June 30, 2015	$ 2,416

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings	$ 3,750	$ 3,811
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	377	427
Deferred income tax provision	146	81
Asset impairment and exit costs, net of cash paid	(204)	282
Cash effects of changes, net of the effects from acquired companies:
Receivables, net	62	(245)
Inventories	809	1,484
Accounts payable	38	2
Income taxes	(379)	(675)
Accrued liabilities and other current assets	(1,461)	(1,666)
Pension plan contributions	(20)	(82)
Other	182	1
Net cash provided by operating activities	3,300	3,420
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures	(413)	(508)
Purchase of businesses, net of acquired cash	0	(103)
Investments in unconsolidated subsidiaries	(11)	(16)
Other	200	83
Net cash used in investing activities	(224)	(544)
Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less	513	(255)
Issuances - maturities longer than 90 days	73	921
Repayments - maturities longer than 90 days	(13)	(1,094)
Long-term debt proceeds	302	3,632
Long-term debt repaid	(400)	(1,240)
Repurchases of common stock	(48)	(2,281)
Dividends paid	(3,110)	(2,993)
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)	113	0
Other	(70)	(177)
Net cash used in financing activities	(2,640)	(3,487)
Effect of exchange rate changes on cash and cash equivalents	(280)	(2)
Cash and cash equivalents:
Increase (Decrease)	156	(613)
Balance at beginning of period	1,682	2,154
Balance at end of period	$ 1,838	$ 1,541

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Contingencies (Lights Cases) (Details) - Individual Lights Cases [Member] - litigation_case	Jul. 29, 2015	Jul. 30, 2014	Aug. 01, 2013
Loss Contingencies [Line Items]
Cases brought against PM		2	1
Subsequent Event [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Subsequent Event [Member] | Chile [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Subsequent Event [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1

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Stock Plans (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	May. 31, 2012	Dec. 31, 2008
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Minimum Retirement Age			58 years
Deferred Compensation, Share-based Payments [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Number of shares of stock awards granted during period (in shares)			1,500,000	2,400,000
Weighted average grant date fair value of stock awards, per share (in dollars per share)			$ 82.28	$ 77.74
Compensation expense for stock awards	$ 36	$ 47	$ 94	$ 113
Unrecognized compensation cost related to non-vested stock awards	$ 212		$ 212
Stock awards vested during period (in shares)			2,500,000
Deferred Compensation, Share-based Payments [Member] | Grant Date Fair Value [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Fair value of vested stock awards			$ 202
Deferred Compensation, Share-based Payments [Member] | Total Fair Value [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Fair value of vested stock awards			$ 209
Deferred Compensation, Share-based Payments [Member] | Minimum [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Expected period for recognition of unamortized compensation expense, in years			3 years
2012 Performance Incentive Plan [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Estimated common stock to be awarded under a stock benefit plan, maximum limit (in shares)					30,000,000
Shares available for grant under the plan (in shares)	23,252,170		23,252,170
Non Employee Directors Plan [Member]
Employee Service Share Based Compensation Allocation of Recognized Period Costs [Line Items]
Estimated common stock to be awarded under a stock benefit plan, maximum limit (in shares)						1,000,000
Shares available for grant under the plan (in shares)	691,432		691,432
Percentage of voting shares that PMI may own, used in determining non-employee director status			50.00%

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Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following:

	U.S. Plans						Non-U.S. Plans
	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	3		$	3		$	101		$	104
Interest cost	9			8			72			103
Expected return on plan assets	(7		)	(8		)	(164		)	(177		)
Amortization:
Net loss	5			3			90			57
Prior service cost	—			—			2			4
Net periodic pension cost	$	10		$	6		$	101		$	91

	U.S. Plans						Non-U.S. Plans
	For the Three Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	2		$	2		$	50		$	52
Interest cost	4			4			36			52
Expected return on plan assets	(3		)	(4		)	(81		)	(89		)
Amortization:
Net loss	2			1			44			29
Prior service cost	—			—			1			2
Net periodic pension cost	$	5		$	3		$	50		$	46

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Asset Impairment and Exit Costs (Tables)

6 Months Ended

Jun. 30, 2015

Restructuring and Related Activities [Abstract]

Schedule of Asset Impairment and Exit Costs

Pre-tax asset impairment and exit costs consisted of the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Separation programs:
European Union	$	—	$	359	$	—	$	359
Asia	—		24		—		1
Total separation programs	—		383		—		360
Asset impairment charges:
European Union	—		129		—		129
Total asset impairment charges	—		129		—		129
Asset impairment and exit costs	$	—	$	512	$	—	$	489

Movement in the Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30,2015 was as follows:

(in millions)
Liability balance, January 1, 2015	$	270
Charges, net	—
Cash spent	(204		)
Currency/other	(14		)
Liability balance, June 30, 2015	$	52

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Segment Reporting (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Net revenues	$ 18,763	$ 21,051	$ 36,115	$ 38,830
Amortization of intangibles	(21)	(22)	(43)	(44)
Equity (income)/loss in unconsolidated subsidiaries, net	(26)	(27)	(49)	(36)
Operating income	2,892	2,874	5,763	5,825
Interest expense, net	(259)	(254)	(534)	(522)
Earnings before income taxes	2,633	2,620	5,229	5,303
Operating Segments [Member] | European Union [Member]
Segment Reporting Information [Line Items]
Net revenues	6,336	7,829	12,276	14,448
Operating companies income:	977	711	1,890	1,689
Operating Segments [Member] | Eastern Europe, Middle East & Africa [Member]
Segment Reporting Information [Line Items]
Net revenues	4,994	5,674	9,423	10,236
Operating companies income:	881	1,087	1,761	2,014
Operating Segments [Member] | Asia [Member]
Segment Reporting Information [Line Items]
Net revenues	5,039	5,097	9,803	9,572
Operating companies income:	797	900	1,731	1,815
Operating Segments [Member] | Latin America & Canada [Member]
Segment Reporting Information [Line Items]
Net revenues	2,394	2,451	4,613	4,574
Operating companies income:	325	265	555	467
Corporate, Non-Segment [Member]
Segment Reporting Information [Line Items]
Amortization of intangibles	(21)	(22)	(43)	(44)
General corporate expenses	(41)	(40)	(82)	(80)
Equity (income)/loss in unconsolidated subsidiaries, net	(26)	(27)	(49)	(36)
Interest expense, net	$ (259)	$ (254)	$ (534)	$ (522)

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Benefit Plans (Components of Net Periodic Benefit Cost) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 2	$ 2	$ 3	$ 3
Interest cost	4	4	9	8
Expected return on plan assets	(3)	(4)	(7)	(8)
Amortization:
Net loss	2	1	5	3
Prior service cost	0	0	0	0
Net periodic pension cost	5	3	10	6
Non-U.S. Plans - Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	50	52	101	104
Interest cost	36	52	72	103
Expected return on plan assets	(81)	(89)	(164)	(177)
Amortization:
Net loss	44	29	90	57
Prior service cost	1	2	2	4
Net periodic pension cost	$ 50	$ 46	$ 101	$ 91

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Goodwill and Other Intangible Assets, net (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill and Intangible Assets, Net, by Segment or Major Class

Additional details of other intangible assets were as follows:

	June 30, 2015				December 31, 2014
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	1,608			$	1,704
Amortizable intangible assets	1,704		$	505	1,877		$	596
Total other intangible assets	$	3,312	$	505	$	3,581	$	596

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

	Goodwill				Other Intangible Assets, net
(in millions)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
European Union	$	1,311	$	1,398	$	551	$	582
Eastern Europe, Middle East & Africa	486		517		210		215
Asia	3,701		3,904		1,131		1,207
Latin America & Canada	2,416		2,569		915		981
Total	$	7,914	$	8,388	$	2,807	$	2,985

Movements in Goodwill

The movements in goodwill from December 31, 2014, were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balances, December 31, 2014	$	1,398		$	517		$	3,904		$	2,569		$	8,388
Changes due to:
Currency	(87		)	(31		)	(203		)	(153		)	(474		)
Balances, June 30, 2015	$	1,311		$	486		$	3,701		$	2,416		$	7,914

Gross Carrying Amount, Range of Useful Lives and Weighted-Average Remaining Useful Life of Amortizable Intangible Assets

The gross carrying amount, the range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at June 30, 2015, were as follows:

(dollars in millions)	Gross Carrying Amount		Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	$	1,452	2 - 40 years	23 years
Distribution networks	161		5 - 30 years	12 years
Other (including farmer   contracts and intellectual property rights)	91		4 - 17 years	11 years
	$	1,704

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

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 condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, were as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
(in millions)	Balance Sheet Classification	At June 30, 2015		At December 31, 2014		Balance Sheet Classification	At June 30, 2015		At December 31, 2014
Foreign exchange contracts designated as hedging instruments	Other current assets	$	318	$	248	Other accrued liabilities	$	2	$	—
	Other assets	173		122		Other liabilities	$	61	$	25
Foreign exchange contracts not designated as hedging instruments	Other current assets	21		34		Other accrued liabilities	78		126
	Other assets	47		2
Total derivatives		$	559	$	406		$	141	$	151

Cash Flow and Net Investment Hedging Activities Effect on Condensed Consolidated Statements of Earnings and Other Comprehensive Earnings

For the six months and three months ended June 30,2015 and 2014, PMI's cash flow and net investment hedging instruments impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, millions)	For the Six Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives					Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015		2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	72	$	(40	)
						Net revenues	$	75		$	32
						Marketing, administration and research costs	16			(1		)
						Interest expense, net	(17		)	(16		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	209		36
Total	$	281	$	(4	)		$	74		$	15

(pre-tax, millions)	For the Three Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives						Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015			2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	45		$	(13	)
							Net revenues	$	45		$	17
							Marketing, administration and research costs	9			(1		)
							Interest expense, net	(10		)	(9		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	(77		)	11
Total	$	(32	)	$	(2	)		$	44		$	7

Qualifying 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:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Gain at beginning of period	$	123		$	63		$	121		$	32
Derivative gains transferred to earnings	(66		)	(13		)	(39		)	(6		)
Change in fair value	66			(35		)	41			(11		)
Gain as of June 30,	$	123		$	15		$	123		$	15

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Condensed Consolidated Statements of Stockholders' (Deficit) Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 1.00	$ 0.94	$ 2.00	$ 1.88

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Calculation of Basic and Diluted EPS

Basic and diluted earnings per share (“EPS”) were calculated using the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Net earnings attributable to PMI	$	3,682	$	3,726	$	1,887	$	1,851
Less distributed and undistributed earnings attributable to share-based payment awards	13		17		6		9
Net earnings for basic and diluted EPS	$	3,669	$	3,709	$	1,881	$	1,842
Weighted-average shares for basic and diluted EPS	1,549		1,577		1,549		1,571

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Asset Impairment and Exit Costs (Schedule of Asset Impairment and Exit Costs) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Restructuring Cost and Reserve [Line Items]
Total separation programs	$ 0	$ 360	$ 0	$ 383
Asset Impairment Charges	0	129	0	129
Asset impairment and exit costs	0	489	0	512
European Union [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs	0	359	0	359
Asia [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs	0	1	0	24
Facility Closing [Member] | European Union [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs		359		359
Asset Impairment Charges	$ 0	129	$ 0	129
Asset impairment and exit costs		488		488
Facility Closing [Member] | Asia [Member]
Restructuring Cost and Reserve [Line Items]
Total separation programs		$ 1		$ 24

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Financial Instruments (Cash Flow and Net Investment Hedging Activities Effect on Condensed Consolidated Statements of Earnings and Other Comprehensive Earnings) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	$ 41	$ (11)	$ 66	$ (35)
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	(39)	(6)	(66)	(13)
Foreign Exchange Contract [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	(32)	(2)	281	(4)
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	44	7	74	15
Foreign Exchange Contract [Member] | Cash Flow Hedges [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	45	(13)	72	(40)
Foreign Exchange Contract [Member] | Cash Flow Hedges [Member] | Sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	45	17	75	32
Foreign Exchange Contract [Member] | Cash Flow Hedges [Member] | Marketing Administration And Research Costs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	9	(1)	16	(1)
Foreign Exchange Contract [Member] | Cash Flow Hedges [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	(10)	(9)	(17)	(16)
Foreign Exchange Contract [Member] | Net Investment Hedges [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives	$ (77)	$ 11	$ 209	$ 36

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Investments in Unconsolidated Subsidiaries (Narrative) (Details) - USD ($) $ in Millions			6 Months Ended	12 Months Ended
	Dec. 12, 2013	Sep. 30, 2013	Jun. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated subsidiaries			$ 1,020	$ 1,083
Dividends from unconsolidated subsidiaries			86	107
Equity Method Investments [Member]
Schedule of Equity Method Investments [Line Items]
Difference between equity method investment carrying value and book value			$ 1,417
Equity Method Investments [Member] | Minimum [Member]
Schedule of Equity Method Investments [Line Items]
Difference between equity method investment carrying value and book value, amortization period			3 years
Equity Method Investments [Member] | Maximum [Member]
Schedule of Equity Method Investments [Line Items]
Difference between equity method investment carrying value and book value, amortization period			20 years
Equity Method Investment Goodwill [Member]
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated subsidiaries			$ 1,264
EITA [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage		49.00%
Purchase Price of Equity Method Investments		$ 625
STAEM [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage		25.00%
AITA Ownership Percentage in Société des Tabacs Algéro-Emiratie (“STAEM”) [Member] | Joint Venture [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage		51.00%
Societe Nationale des Tabacs et Allumettes SpA [Member] | Joint Venture [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage		49.00%
Megapolis [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	20.00%
Purchase Price of Equity Method Investments	$ 760
Additional contingent consideration (up to $100 million)	$ 100
Additional contingent consideration measurement period	4 years
Notes receivable to unconsolidated subsidiaries	$ 100				$ 100
Discounted liability					$ 86
Other Affiliates [Member]
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated subsidiaries			$ 39	$ 38
Other Affiliates [Member] | Minimum [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage			40.00%
Other Affiliates [Member] | Maximum [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage			50.00%

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 1,838	$ 1,682
Receivables (less allowances of $72 in 2015 and $50 in 2014)	3,619	4,004
Inventories:
Leaf tobacco	3,154	3,135
Other raw materials	1,671	1,696
Finished product	2,382	3,761
Total inventory, net	7,207	8,592
Deferred income taxes	428	533
Other current assets	680	673
Total current assets	13,772	15,484
Property, plant and equipment, at cost	12,327	12,759
Less: accumulated depreciation	6,512	6,688
Total property, plant and equipment, net	5,815	6,071
Goodwill (Note 5)	7,914	8,388
Other intangible assets, net (Note 5)	2,807	2,985
Investments in unconsolidated subsidiaries (Note 15)	1,020	1,083
Other assets	1,385	1,176
TOTAL ASSETS	32,713	35,187
LIABILITIES
Short-term borrowings (Note 11)	1,710	1,208
Current portion of long-term debt (Note 11)	2,926	1,318
Accounts payable	1,089	1,242
Accrued liabilities:
Marketing and selling	476	549
Taxes, except income taxes	4,546	5,490
Employment costs	834	1,135
Dividends payable	1,558	1,559
Other	1,366	1,375
Income taxes	651	1,078
Deferred income taxes	230	158
Total current liabilities	15,386	15,112
Long-term debt (Note 11)	24,566	26,929
Deferred income taxes	1,799	1,549
Employment costs	2,124	2,202
Other liabilities	636	598
Total liabilities	$ 44,511	$ 46,390
Contingencies (Note 9)
STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, no par value (2,109,316,331 shares issued in 2015 and 2014)	$ 0	$ 0
Additional paid-in capital	757	710
Earnings reinvested in the business	29,822	29,249
Accumulated other comprehensive losses	(8,107)	(6,826)
Total stockholders' equity before treasury stock	22,472	23,133
Less: cost of repurchased stock (560,140,316 and 562,416,635 shares in 2015 and 2014, respectively)	35,623	35,762
Total PMI stockholders’ deficit	(13,151)	(12,629)
Noncontrolling interests	1,353	1,426
Total stockholders’ deficit	(11,798)	(11,203)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$ 32,713	$ 35,187

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Benefit Plans (Narrative) (Details) $ in Millions	6 Months Ended
	Jun. 30, 2015 USD ($)
Compensation and Retirement Disclosure [Abstract]
Employer Contributions	$ 20
Anticipated additional employer contributions during the remainder of the current fiscal year	$ 138

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Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Income taxes on Currency translation adjustments	$ 104	$ (55)	$ (330)	$ (59)
Income taxes on Net Losses and Prior Service Costs	0	3	0	3
Income taxes on Amortization of net losses, prior service costs and net transition costs	(12)	(14)	(24)	(26)
Income taxes on (loss)/gain recognized from fair value of derivatives accounted for as hedges	(4)	2	(6)	5
Income taxes on (loss)/gain transferred from earnings from fair value of derivatives accounted for as hedges	$ 5	$ 1	$ 8	$ 2

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Contingencies (Verdicts and Post-Trial Developments) (Details)						1 Months Ended		6 Months Ended
	Jul. 23, 2015	Jun. 26, 2015 CAD	Jun. 26, 2015 USD ($)	May. 27, 2015 CAD	May. 27, 2015 USD ($)	Apr. 30, 2004 USD ($)	Apr. 30, 2004 BRL	Jun. 30, 2015
Smoking And Health Class Actions [Member] | The Smoker Health Defense Association (ADESF) [Member]
Loss Contingencies [Line Items]
Smoking and health loss contingency interest rate (percentage per month)						1.00%	1.00%
Smoking And Health Class Actions [Member] | Award per smoker per year [Member] | The Smoker Health Defense Association (ADESF) [Member]
Loss Contingencies [Line Items]
Amount Loss Contingency, Actions Taken By Court, Arbitrator Or Mediator						$ 340	BRL 1,000
Brazil [Member] | Smoking And Health Class Actions [Member] | Cases With Verdicts And Post Trial Developments [Member] | The Smoker Health Defense Association (ADESF) [Member]
Loss Contingencies [Line Items]
Date								February 2004
Verdict								The Civil Court of São Paulo found defendants liable without hearing evidence. The court did not assess actual damages, which were to be assessed in a second phase of the case. The size of the class was not defined in the ruling.
Post-Trial Developments								In April 2004, the court clarified its ruling, awarding “moral damages” of R$1,000 (approximately $340) 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 appealed the decision. In February 2015, the appellate court unanimously dismissed plaintiff's appeal. Plaintiff may further appeal. 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.
Canada [Member] | Cecilia Letourneau [Member] | Judicial Ruling [Member] | Imperial Tobacco Ltd., Rothmans, Benson And Hedges Inc., And JTI Macdonald Corp. [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 131,000,000	$ 100,500,000
Canada [Member] | Cecilia Letourneau [Member] | Judicial Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 46,000,000	$ 35,300,000
Payment period for awarded punitive damages to be deposited into trust				60 days	60 days
Canada [Member] | Cecilia Letourneau [Member] | Pending Litigation [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member]
Loss Contingencies [Line Items]
Punitive damages awarded		CAD 46,000,000	$ 35,300,000
Payment period for awarded punitive damages to be deposited into trust		60 days	60 days
Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Judicial Ruling [Member]
Loss Contingencies [Line Items]
Payment period for awarded punitive damages to be deposited into trust				60 days	60 days
Payment period for compensatory damages to be deposited into trust				60 days	60 days
Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Judicial Ruling [Member] | Imperial Tobacco Ltd., Rothmans, Benson And Hedges Inc., And JTI Macdonald Corp. [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 90,000	$ 69,000
Awarded punitive damages that are to be deposited into trust				90,000	72,000
Compensatory damages awarded				15,500,000,000	11,900,000,000
Awarded compensatory damages that are to be deposited into trust				1,000,000,000	770,000,000
Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Judicial Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				30,000	23,000
Awarded punitive damages that are to be deposited into trust				30,000	23,000
Compensatory damages awarded				CAD 3,100,000,000	$ 2,380,000,000
Damages allocated to subsidiary (percent)				20.00%	20.00%
Awarded compensatory damages that are to be deposited into trust				CAD 200,000,000	$ 154,000,000
Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Pending Litigation [Member]
Loss Contingencies [Line Items]
Payment period for compensatory damages to be deposited into trust		60 days	60 days
Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Pending Litigation [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member]
Loss Contingencies [Line Items]
Awarded compensatory damages that are to be deposited into trust		CAD 200,000,000	$ 154,000,000
Payment period for compensatory damages to be deposited into trust		60 days	60 days
Canada [Member] | Smoking And Health Class Actions [Member] | Cases With Verdicts And Post Trial Developments [Member] | Cecilia Letourneau [Member]
Loss Contingencies [Line Items]
Date								May 27, 2015
Verdict								On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Letourneau class on liability and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days. The trial court found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered a briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs.
Post-Trial Developments								On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of CAD 46 million (approximately $35.3 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.
Canada [Member] | Smoking And Health Class Actions [Member] | Cases With Verdicts And Post Trial Developments [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member]
Loss Contingencies [Line Items]
Date								May 27, 2015
Verdict								On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion including pre-judgment interest (approximately $2.38 billion)). The trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion. The trial court ordered a briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs.
Post-Trial Developments								On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of approximately CAD 200 million (approximately $154 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.
Subsequent Event [Member] | Canada [Member] | Cecilia Letourneau [Member] | Appellate Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member]
Loss Contingencies [Line Items]
Payment period for awarded punitive damages to be deposited into trust	60 days
Subsequent Event [Member] | Canada [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Appellate Ruling [Member]
Loss Contingencies [Line Items]
Payment period for compensatory damages to be deposited into trust	60 days

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Indebtedness (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Long-Term Debt

At June 30, 2015 and December 31, 2014, PMI’s long-term debt consisted of the following:

(in millions)	June 30, 2015		December 31, 2014
U.S. dollar notes, 1.125% to 6.375% (average interest rate 3.874%), due through 2044	$	16,841	$	17,229
Foreign currency obligations:
Euro notes, 1.750% to 5.875% (average interest rate 3.104%), due through 2033	8,389		9,161
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.217%), due through 2024	1,792		1,690
Other (average interest rate 3.111%), due through 2024	470		167
	27,492		28,247
Less current portion of long-term debt	2,926		1,318
	$	24,566	$	26,929

Schedule of Committed Credit Facilities

At June 30, 2015, PMI's total committed credit facilities were as follows:

(in billions)

Type	Committed Credit Facilities
364-day revolving credit, expiring February 9, 2016	$	2.0
Multi-year revolving credit, expiring February 28, 2020	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	8.0

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Indebtedness (Narrative) (Details) - USD ($)	Jun. 30, 2015	Jan. 23, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Short-term borrowings, carrying value	$ 1,710,000,000		$ 1,208,000,000
Borrowings under committed credit facilities	$ 0
Revolving Credit Expiring February Tenth Two Thousand Fifteen [Member]
Line of Credit Facility [Line Items]
Credit Facilities No Longer Available		$ 2,000,000,000
Multi Year Revolving Credit Expiring February Twenty Eight, Two Thousand Nineteen [Member]
Line of Credit Facility [Line Items]
Credit Facilities No Longer Available		$ 2,500,000,000.0

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Accumulated Other Comprehensive Losses

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Losses

Accumulated Other Comprehensive Losses:

PMI’s accumulated other comprehensive losses, net of taxes, consisted of the following:

(in millions)	At June 30, 2015			At December 31, 2014			At June 30, 2014
Currency translation adjustments	$	(5,320	)	$	(3,929	)	$	(2,323	)
Pension and other benefits	(2,910		)	(3,020		)	(2,006		)
Derivatives accounted for as hedges	123			123			15
Total accumulated other comprehensive losses	$	(8,107	)	$	(6,826	)	$	(4,314	)

Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement are shown on the condensed consolidated statements of comprehensive earnings for the six months and three months ended June 30,2015 and 2014. For additional information, see Note 4. Benefit Plans and Note 6. Financial Instruments for disclosures related to PMI's pension and other benefits, and derivative financial instruments, respectively.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Aggregate Fair Values of Derivative Financial Instruments, Debt and Contingent Consideration

The aggregate fair values of PMI’s derivative financial instruments, debt and contingent consideration as of June 30, 2015, were as follows:

(in millions)	Fair Value at June 30, 2015		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	$	559	$	—	$	559	$	—
Total assets	$	559	$	—	$	559	$	—
Liabilities:
Debt	$	28,847	$	28,362	$	485	$	—
Foreign exchange contracts	141		—		141		—
Contingent consideration	23		—		—		23
Total liabilities	$	29,011	$	28,362	$	626	$	23

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Investments in Unconsolidated Subsidiaries

6 Months Ended

Jun. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Subsidiaries

Investments in Unconsolidated Subsidiaries:

At June 30, 2015 and December 31, 2014, PMI had total investments in unconsolidated subsidiaries of $1,020 million and $1,083 million, respectively, which were accounted for under the equity method of accounting. Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses and movements in currency translation adjustments. The carrying value of our equity method investments at the acquisition date exceeded our share of the unconsolidated subsidiaries' book value by $1,417 million, including $1,264 million attributable to goodwill. The difference between the investment carrying value and the amount of underlying equity in net assets, excluding the $1,264 million attributable to goodwill, is being amortized on a straight-line basis over the underlying assets' estimated useful lives of 3 to 20 years. At June 30, 2015 and December 31, 2014, PMI received year-to-date dividends from unconsolidated subsidiaries of $86 million and $107 million, respectively.

On September 30, 2013, PMI acquired a 49% equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”), formerly Arab Investors-TA (FZC), for approximately $625 million. As a result of this transaction, PMI holds an approximate 25% economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture that is 51% owned by EITA and 49% by the Algerian state-owned enterprise Société Nationale des Tabacs et Allumettes SpA. STAEM manufactures and distributes under license some of PMI’s brands. The initial investment in EITA was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

On December 12, 2013, PMI acquired from Megapolis Investment BV a 20% equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis ("Megapolis"), PMI's distributor in Russia, for a purchase price of $760 million. An additional payment of up to $100 million, which is contingent on Megapolis's operational performance over the four fiscal years following the closing of the transaction, will also be made by PMI if the performance criteria are satisfied. PMI has also agreed to provide Megapolis Investment BV with a $100 million interest-bearing loan. PMI and Megapolis Investment BV have agreed to set off any future contingent payments owed by PMI against the future repayments due under the loan agreement. Any loan repayments in excess of the contingent consideration earned by the performance of Megapolis are due to be repaid, in cash, to PMI on March 31, 2017. At December 31, 2013, PMI had recorded a $100 million asset related to the loan receivable and a discounted liability of $86 million related to the contingent consideration. The initial investment in Megapolis was recorded at cost and is included in investments in unconsolidated subsidiaries on the condensed consolidated balance sheets.

At June 30, 2015 and December 31, 2014, PMI's investments in other unconsolidated subsidiaries were $39 million and $38 million, respectively, with ownership percentages ranging from 40% to 50%.

PMI’s earnings activity from unconsolidated subsidiaries was as follows:

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2015		2014		2015		2014
Net revenues	$	2,218	$	2,606	$	1,322	$	1,420

PMI’s balance sheet activity related to unconsolidated subsidiaries was as follows:

(in millions)	At June 30, 2015		At December 31, 2014
Receivables	$	488	$	407
Notes receivable	$	104	$	100
Other liabilities	$	97	$	93

The activity primarily related to agreements with PMI’s unconsolidated subsidiaries within the Eastern Europe, Middle East & Africa segment. These agreements, which are in the ordinary course of business, are primarily for distribution, contract manufacturing and licenses. PMI eliminated its respective share of all significant intercompany transactions with the equity method investees.

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Fair Value Measurements (Narrative) (Details) $ in Millions	Jun. 30, 2015 USD ($)
Fair Value Disclosures [Abstract]
Capital lease obligations, carrying value	$ 13
Debt excluding short-term borrowings and capital lease obligations, carrying value	$ 27,479

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Condensed Consolidated Statements of Stockholders' (Deficit) Equity (Unaudited) - USD ($) $ in Millions	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Earnings Reinvested in the Business [Member]	Accumulated Other Comprehensive Losses [Member]	Cost of Repurchased Stock [Member]	Noncontrolling Interests [Member]
Beginning balance at Dec. 31, 2013	$ (6,274)	$ 0	$ 723	$ 27,843	$ (4,190)	$ (32,142)	$ 1,492
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	3,811			3,726			85
Other comprehensive earnings (losses), net of income taxes	(122)				(124)		2
Issuance of stock awards and exercise of stock options	90		(74)			164
Dividends declared ($1.88 and $2.00 per share for the six months ended June 30, 2014 and 2015, respectively)	(2,968)			(2,968)
Payments to noncontrolling interests	(134)						(134)
Common stock repurchased	(2,250)					(2,250)
Ending balance at Jun. 30, 2014	(7,847)	0	649	28,601	(4,314)	(34,228)	1,445
Beginning balance at Dec. 31, 2014	(11,203)	0	710	29,249	(6,826)	(35,762)	1,426
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	3,750			3,682			68
Other comprehensive earnings (losses), net of income taxes	(1,307)				$ (1,281)		(26)
Issuance of stock awards and exercise of stock options	73		(66)			139
Dividends declared ($1.88 and $2.00 per share for the six months ended June 30, 2014 and 2015, respectively)	(3,109)			(3,109)
Payments to noncontrolling interests	(115)						$ (115)
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)	113		113
Ending balance at Jun. 30, 2015	$ (11,798)	$ 0	$ 757	$ 29,822	$ (8,107)	$ (35,623)	$ 1,353

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions, None in scaling factor is -9223372036854775296	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Receivables, allowances	$ 72	$ 50
Common stock, no par value (in dollars per share)
Common stock, shares issued (in shares)	2,109,316,331	2,109,316,331
Repurchased stock, shares (in shares)	560,140,316	562,416,635

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Segment Reporting

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting:

PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States of America. Reportable segments for PMI are organized and managed by geographic region. PMI’s reportable segments are European Union; Eastern Europe, Middle East & Africa; Asia; and Latin America & Canada. PMI records net revenues and operating companies income to its segments based upon the geographic area in which the customer resides.

PMI’s management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management.

Segment data were as follows:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Net revenues:
European Union	$	12,276		$	14,448		$	6,336		$	7,829
Eastern Europe, Middle East & Africa	9,423			10,236			4,994			5,674
Asia	9,803			9,572			5,039			5,097
Latin America & Canada	4,613			4,574			2,394			2,451
Net revenues	$	36,115		$	38,830		$	18,763		$	21,051
Earnings before income taxes:
Operating companies income:
European Union	$	1,890		$	1,689		$	977		$	711
Eastern Europe, Middle East & Africa	1,761			2,014			881			1,087
Asia	1,731			1,815			797			900
Latin America & Canada	555			467			325			265
Amortization of intangibles	(43		)	(44		)	(21		)	(22		)
General corporate expenses	(82		)	(80		)	(41		)	(40		)
Less:
Equity (income)/loss in unconsolidated subsidiaries, net	(49		)	(36		)	(26		)	(27		)
Operating income	5,763			5,825			2,892			2,874
Interest expense, net	(534		)	(522		)	(259		)	(254		)
Earnings before income taxes	$	5,229		$	5,303		$	2,633		$	2,620

Items affecting the comparability of results from operations are asset impairment and exit costs. See Note 2. Asset Impairment and Exit Costs for a breakdown of these costs by segment.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 28, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	Philip Morris International Inc.
Entity Central Index Key	0001413329
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Period Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		1,549,185,692

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Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies:

Tobacco-Related Litigation

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

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

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

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

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

To date, we have paid one judgment in a tobacco-related case. That judgment, including costs, was approximately €1,400 (approximately $1,500), and that payment was made in order to appeal an Italian small claims case, which was subsequently reversed on appeal. To date, no tobacco-related case has been finally resolved in favor of a plaintiff against us, our subsidiaries or indemnitees.

The table below lists the number of tobacco-related cases pending against us and/or our subsidiaries or indemnitees as of July 29, 2015, July 30, 2014 and August 1, 2013:

Type of Case	Number of Cases Pending as of July 29, 2015	Number of Cases Pending as of July 30, 2014	Number of Cases Pending as of August 1, 2013
Individual Smoking and Health Cases	65	63	63
Smoking and Health Class Actions	11	11	11
Health Care Cost Recovery Actions	16	15	15
Lights Class Actions	—	1	1
Individual Lights Cases	2	2	1
Public Civil Actions	2	2	4

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 436 Smoking and Health, Lights, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor. Twelve cases have had decisions in favor of plaintiffs. Nine of these cases have subsequently reached final resolution in our favor and three remain on appeal.

The table below lists the verdict and post-trial developments in the three pending cases where a verdict was returned in favor of the plaintiff:

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 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 $340) 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 appealed the decision. In February 2015, the appellate court unanimously dismissed plaintiff's appeal. Plaintiff may further appeal. 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.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Cecilia Letourneau	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Letourneau class on liability and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days. The trial court found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered a briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of CAD 46 million (approximately $35.3 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion including pre-judgment interest (approximately $2.38 billion)). The trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion. The trial court ordered a briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of approximately CAD 200 million (approximately $154 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

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

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

As of July 29, 2015, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 65 cases brought by individual plaintiffs in Argentina (26), Brazil (22), Canada (2), Chile (7), Costa Rica (2), Greece (1), Italy (2), Morocco (1), the Philippines (1) and Scotland (1), compared with 63 such cases on July 30, 2014, and 63 cases on August 1, 2013; and

• 11 cases brought on behalf of classes of individual plaintiffs in Brazil (2) and Canada (9), compared with 11 such cases on July 30, 2014 and 11 such cases on August 1, 2013.

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

In the second class action pending in Brazil, Public Prosecutor of São Paulo v. Philip Morris Brasil Industria e Comercio Ltda., Civil Court of the City of São Paulo, Brazil, filed August 6, 2007, our subsidiary is a defendant. The plaintiff, the Public Prosecutor of the State of São Paulo, is seeking (i) damages on behalf of all smokers nationwide, former smokers, and their relatives; (ii) damages on behalf of people exposed to environmental tobacco smoke nationwide, and their relatives; and (iii) reimbursement of the health care costs allegedly incurred for the treatment of tobacco-related diseases by all Brazilian States and Municipalities, and the Federal District. In an interim ruling issued in December 2007, the trial court limited the scope of this claim to the State of São Paulo only. In December 2008, the Seventh Civil Court of São Paulo issued a decision declaring that it lacked jurisdiction because the case involved issues similar to the ADESF case discussed above and should be transferred to the Nineteenth Lower Civil Court in São Paulo where the ADESF case is pending. The court further stated that these cases should be consolidated for the purposes of judgment. In April 2010, the São Paulo Court of Appeals reversed the Seventh Civil Court's decision that consolidated the cases, finding that they are based on different legal claims and are progressing at different stages of proceedings. This case was returned to the Seventh Civil Court of São Paulo, and our subsidiary filed its closing arguments in December 2010. In March 2012, the trial court dismissed the case on the merits. In January 2014, the São Paulo Court of Appeals rejected plaintiff’s appeal and affirmed the trial court decision. In July 2014, plaintiff appealed to the Superior Court of Justice.

In the first class action pending in Canada, Cecilia Letourneau v. Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in September 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiff, an individual smoker, sought compensatory and punitive damages for each member of the class who is deemed addicted to smoking. The class was certified in 2005.  Trial began in March 2012 and concluded in December 2014. The trial court issued its judgment on May 27, 2015. The trial court found our subsidiary and two other Canadian manufacturers liable and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court found that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking. The trial court also found that defendants conspired to prevent consumers from learning the dangers of smoking. The trial court further held that these civil faults were a cause of the class members’ addiction. The trial court rejected other grounds of fault advanced by the class, holding that: (i) the evidence was insufficient to show that defendants marketed to youth, (ii) defendants’ advertising did not convey false information about the characteristics of cigarettes, and (iii) defendants did not commit a fault by using the descriptors light or mild for cigarettes with a lower tar delivery. The trial court estimated the size of the addiction class at 918,000 members but declined to award compensatory damages to the addiction class because the evidence did not establish the claims with sufficient accuracy. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days and found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs. On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription of appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust within 60 days notwithstanding appeal. On July 23, 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days. A case management conference is scheduled for September 3, 2015, to establish a briefing schedule before the Court of Appeal on our subsidiary's merits appeal. Our subsidiary and PMI believe that the findings of liability and damages were incorrect and should ultimately be set aside on any one of many grounds, including the following: (i) holding that defendants violated Quebec law by failing to warn class members of the risks of smoking even after the court found that class members knew, or should have known, of the risks, (ii) finding that plaintiffs were not required to prove that defendants’ alleged misconduct caused injury to each class member in direct contravention of binding precedent, (iii) creating a factual presumption, without any evidence from class members or otherwise, that defendants’ alleged misconduct caused all smoking by all class members, (iv) holding that the addiction class members’ claims for punitive damages were not time-barred even though the case was filed more than three years after a prominent addiction warning appeared on all packages, and (v) awarding punitive damages to punish defendants without proper consideration as to whether punitive damages were necessary to deter future misconduct.

In the second class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v. Imperial Tobacco Ltd.,Rothmans, Benson & Hedges Inc. and JTI Macdonald Corp., Quebec Superior Court, Canada, filed in November 1998, our subsidiary and other Canadian manufacturers are defendants. The plaintiffs, an anti-smoking organization and an individual smoker, sought compensatory and punitive damages for each member of the class who allegedly suffers from certain smoking-related diseases. The class was certified in 2005. Trial began in March 2012 and concluded in December 2014. The trial court issued its judgment on May 27, 2015. The trial court found our subsidiary and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion, including pre-judgment interest (approximately $2.38 billion). In addition, the trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary and found that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking. The trial court also found that defendants conspired to prevent consumers from learning the dangers of smoking. The trial court further held that these civil faults were a cause of the class members’ diseases. The trial court rejected other grounds of fault advanced by the class, holding that: (i) the evidence was insufficient to show that defendants marketed to youth, (ii) defendants’ advertising did not convey false information about the characteristics of cigarettes, and (iii) defendants did not commit a fault by using the descriptors light or mild for cigarettes with a lower tar delivery. The trial court estimated the disease class at 99,957 members. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion and ordered briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs. On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription of appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment into a trust within 60 days notwithstanding appeal. On July 23, 2015, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days. A case management conference is scheduled for September 3, 2015, to establish a briefing schedule before the Court of Appeal on our subsidiary's merits appeal. Our subsidiary and PMI believe that the findings of liability and damages were incorrect and should ultimately be set aside on any one of many grounds, including the following: (i) holding that defendants violated Quebec law by failing to warn class members of the risks of smoking even after the court found that class members knew, or should have known, of the risks, (ii) finding that plaintiffs were not required to prove that defendants’ alleged misconduct caused injury to each class member in direct contravention of binding precedent, (iii) creating a factual presumption, without any evidence from class members or otherwise, that defendants’ alleged misconduct caused all smoking by all class members, (iv) relying on epidemiological evidence that did not meet recognized scientific standards, and (v) awarding punitive damages to punish defendants without proper consideration as to whether punitive damages were necessary to deter future misconduct.

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

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

In the fifth class action pending in Canada, Semple v. Canadian Tobacco Manufacturers' Council, et al.,The Supreme Court (trial court), Nova Scotia, Canada, filed June 18, 2009, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and COPD resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products. No activity in this case is anticipated while plaintiff's counsel pursues the class action filed in Saskatchewan (see description of Adams, above).

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

In the seventh class action pending in Canada, McDermid v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products. He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In the eighth class action pending in Canada, Bourassa v. Imperial Tobacco Canada Limited, et al.,Supreme Court, British Columbia, Canada, filed June 25, 2010, we, our subsidiaries, and our indemnitees (PM USA and Altria), and other members of the industry are defendants. The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products. She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed. In December 2014, the plaintiff filed an amended statement of claim.

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

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

As of July 29, 2015, there were 16 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Canada (10), Korea (1) and Nigeria (5), compared with 15 such cases on July 30, 2014 and 15 such cases on August 1, 2013.

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v. Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, our subsidiaries, our indemnitee (PM USA), and other members of the industry are defendants. The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.” The Supreme Court of Canada has held that the statute is constitutional. We and certain other non-Canadian defendants challenged the jurisdiction of the court. The court rejected the jurisdictional challenge. Pre-trial discovery is ongoing.

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

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

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

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v. Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada, filed June 8, 2012, we, our subsidiary, our indemnitee (PM USA), and other members of the industry are defendants. The claim was filed by the government of the province of Quebec based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in December 2014 and July 2015. Pre-trial discovery is ongoing.

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

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v. Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada, filed May 31, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in September 2014. Discovery is scheduled to begin in 2017.

In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v. Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada, filed June 8, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Saskatchewan based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in February 2015. Discovery is scheduled to begin in 2017.

In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada, filed September 10, 2012, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Prince Edward Island based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” Defendants filed their defenses in February 2015. Discovery is scheduled to begin in 2017.

In the tenth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Nova Scotia v. Rothmans, Benson & Hedges Inc., et al., Supreme Court of Nova Scotia, Canada, filed January 2, 2015, we, our subsidiaries, our indemnitees (PM USA and Altria), and other members of the industry are defendants. The claim was filed by the government of the province of Nova Scotia based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces. The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.” In January 2015, we, our subsidiaries, and our indemnitees were served with the statement of claim. Defendants filed their defenses in July 2015. Discovery is scheduled to begin in 2017.

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

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

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

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

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

In the health care cost recovery case in Korea, the National Health Insurance Service v. KT&G, et. al., filed April 14, 2014, our subsidiary and other Korean manufacturers are defendants. Plaintiff alleges that defendants concealed the health hazards of smoking, marketed to youth, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes. The National Health Insurance Service seeks to recover approximately $53.7 million allegedly incurred in treating 3,484 patients with small cell lung cancer, squamous cell lung cancer, and squamous cell laryngeal cancer from 2003 to 2012. The case is now in the evidentiary phase.

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

As of July 29, 2015, there were 2 lights cases brought by individual plaintiffs pending against our subsidiaries or indemnitees in Chile (1) and Italy (1), compared with 2 such cases on July 30, 2014, and 1 such case on August 1, 2013.

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

As of July 29, 2015, there were 2 public civil actions pending against our subsidiaries in Argentina (1) and Venezuela (1), compared with 2 such cases on July 30, 2014, and 4 such cases on August 1, 2013.

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

In the public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties. In February 2013, our subsidiary answered the complaint.

Other Litigation

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

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Condensed Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Net revenues	$ 18,763	$ 21,051	$ 36,115	$ 38,830
Cost of sales	2,378	2,696	4,607	5,070
Excise taxes on products	11,904	13,254	22,640	24,116
Gross profit	4,481	5,101	8,868	9,644
Marketing, administration and research costs	1,568	1,716	3,062	3,263
Asset impairment and exit costs (Note 2)	0	489	0	512
Amortization of intangibles	21	22	43	44
Operating income	2,892	2,874	5,763	5,825
Interest expense, net	259	254	534	522
Earnings before income taxes	2,633	2,620	5,229	5,303
Provision for income taxes	743	752	1,528	1,528
Equity (income)/loss in unconsolidated subsidiaries, net	(26)	(27)	(49)	(36)
Net earnings	1,916	1,895	3,750	3,811
Net earnings attributable to noncontrolling interests	29	44	68	85
Net earnings attributable to PMI	$ 1,887	$ 1,851	$ 3,682	$ 3,726
Per share data (Note 7):
Basic earnings per share (in dollars per share)	$ 1.21	$ 1.17	$ 2.37	$ 2.35
Diluted earnings per share (in dollars per share)	1.21	1.17	2.37	2.35
Dividends declared (in dollars per share)	$ 1.00	$ 0.94	$ 2.00	$ 1.88

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Stock Plans

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Plans

Stock Plans:

In May 2012, PMI’s shareholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the “2012 Plan”). The 2012 Plan replaced the 2008 Performance Incentive Plan (the “2008 Plan”) and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, PMI may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. Up to 30 million shares of PMI’s common stock may be issued under the 2012 Plan. At June 30, 2015, shares available for grant under the 2012 Plan were 23,252,170.

In 2008, PMI adopted the Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (the “Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the Non-Employee Directors Plan. At June 30, 2015, shares available for grant under the plan were 691,432.

During the six months ended June 30,2015, PMI granted 1.5 million shares of deferred stock awards to eligible employees at a grant date fair value of $82.28 per share. During the six months ended June 30,2014, PMI granted 2.4 million shares of deferred stock awards to eligible employees at a weighted-average grant date fair value of $77.74 per share. PMI recorded compensation expense related to stock awards of $94 million and $113 million during the six months ended June 30, 2015 and 2014, respectively, and $36 million and $47 million during the three months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, PMI had $212 million of total unrecognized compensation cost related to non-vested deferred stock awards. The cost is recognized over the original restriction period of the awards, which is typically three or more years after the date of the award, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.

During the six months ended June 30,2015, 2.5 million shares of PMI deferred stock awards vested. The grant date fair value of all the vested shares was approximately $202 million. The total fair value of deferred stock awards that vested during the six months ended June 30,2015 was approximately $209 million.

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Asset Impairment and Exit Costs

6 Months Ended

Jun. 30, 2015

Restructuring and Related Activities [Abstract]

Asset Impairment and Exit Costs

Asset Impairment and Exit Costs:

Pre-tax asset impairment and exit costs consisted of the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Separation programs:
European Union	$	—	$	359	$	—	$	359
Asia	—		24		—		1
Total separation programs	—		383		—		360
Asset impairment charges:
European Union	—		129		—		129
Total asset impairment charges	—		129		—		129
Asset impairment and exit costs	$	—	$	512	$	—	$	489

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30,2015 was as follows:

(in millions)
Liability balance, January 1, 2015	$	270
Charges, net	—
Cash spent	(204		)
Currency/other	(14		)
Liability balance, June 30, 2015	$	52

Cash payments related to exit costs at PMI were $204 million and $44 million for the six months and three months ended June 30,2015, respectively, and $230 million and $30 million for the six months and three months ended June 30, 2014, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $52 million, and will be substantially paid by the end of 2015.

The pre-tax asset impairment and exit costs shown above are primarily a result of the following:

The Netherlands

On April 4, 2014, PMI announced the initiation by its affiliate, Philip Morris Holland B.V. (“PMH”), of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH reached an agreement with the trade unions and their members on a social plan and ceased cigarette production on September 1, 2014. For the six months and three months ended June 30, 2014, total pre-tax asset impairment and exit costs of $488 million were recorded for this program in the European Union segment. This amount includes employee separation costs of $359 million and asset impairment costs of $129 million.

Other

Separation Program Charges

PMI recorded other pre-tax separation program charges of $24 million and $1 million for the six months and three months ended June 30, 2014, respectively, related to severance costs for a factory closure in Australia.

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Balance Sheet Offsetting

6 Months Ended

Jun. 30, 2015

Offsetting [Abstract]

Balance Sheet Offsetting

Balance Sheet Offsetting:

Derivative Financial Instruments

PMI uses foreign exchange contracts and interest rate contracts to mitigate its exposure to changes in exchange and interest rates from third-party and intercompany actual and forecasted transactions. Substantially all of PMI's derivative financial instruments are subject to master netting arrangements, whereby the right to offset occurs in the event of default by a participating party. While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the condensed consolidated balance sheets. Collateral associated with these arrangements is in the form of cash and is unrestricted. See Note 6. Financial Instruments for disclosures related to PMI's derivative financial instruments.

The effects of these derivative financial instrument assets and liabilities on PMI's condensed consolidated balance sheets were as follows:

(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Condensed Consolidated Balance Sheet		Net Amounts Presented in the Condensed Consolidated Balance Sheet		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
							Financial Instruments			Cash Collateral Received/Pledged
													Net Amount
At June 30, 2015
Assets
Foreign exchange contracts	$	559	$	—	$	559	$	(114	)	$	(403	)	$	42
Liabilities
Foreign exchange contracts	$	141	$	—	$	141	$	(114	)	$	(10	)	$	17
At December 31, 2014
Assets
Foreign exchange contracts	$	406	$	—	$	406	$	(77	)	$	(306	)	$	23
Liabilities
Foreign exchange contracts	$	151	$	—	$	151	$	(77	)	$	(63	)	$	11

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes:

Income tax provisions for jurisdictions outside the United States of America, as well as state and local income tax provisions, were determined on a separate company basis and the related assets and liabilities were recorded in PMI’s condensed consolidated balance sheets.

PMI’s effective tax rates for the six months and three months ended June 30,2015 were 29.2% and 28.2%, respectively. PMI’s effective tax rates for the six months and three months ended June 30,2014 were 28.8% and 28.7%, respectively. PMI estimates that its full-year 2015 effective tax rate will be approximately 29%. The effective tax rate for the six months ended June 30,2015 was unfavorably impacted by changes to repatriation assertions on certain foreign subsidiary historical earnings ($58 million). Excluding the effect of the 2015 repatriation assertion changes, the change in the effective tax rate for the six months ended June 30,2015, as compared to the six months ended June 30,2014, was primarily due to earnings mix by taxing jurisdiction and repatriation cost differences.

The effective tax rates are based on PMI’s full-year earnings mix projections by taxing jurisdiction and cash repatriation plans. Changes in earnings mix by taxing jurisdiction or in cash repatriation plans could have an impact on the effective tax rates, which PMI monitors each quarter. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2007 and onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years.

It is reasonably possible that, within the next 12 months, certain tax examinations will close, which could result in a change in unrecognized tax benefits, along with related interest and penalties. An estimate of any possible change cannot be made at this time.

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Financial Instruments

6 Months Ended

Jun. 30, 2015

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 and interest rate exposure. Derivative financial instruments are used by PMI principally to reduce exposures to market risks resulting from fluctuations in foreign currency exchange and interest 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 condensed consolidated statements of earnings.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, collectively referred to as foreign exchange contracts ("foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in exchange and interest rates from third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Australian dollar, Euro, Indonesian rupiah, Japanese yen, Mexican peso, Russian ruble, Swiss franc and Turkish lira. At June 30, 2015, PMI had contracts with aggregate notional amounts of $22.6 billion of which $2.6 billion related to cash flow hedges, $4.9 billion related to hedges of net investments in foreign operations and $15.1 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 condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, were as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
(in millions)	Balance Sheet Classification	At June 30, 2015		At December 31, 2014		Balance Sheet Classification	At June 30, 2015		At December 31, 2014
Foreign exchange contracts designated as hedging instruments	Other current assets	$	318	$	248	Other accrued liabilities	$	2	$	—
	Other assets	173		122		Other liabilities	$	61	$	25
Foreign exchange contracts not designated as hedging instruments	Other current assets	21		34		Other accrued liabilities	78		126
	Other assets	47		2
Total derivatives		$	559	$	406		$	141	$	151

For the six months and three months ended June 30,2015 and 2014, PMI's cash flow and net investment hedging instruments impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, millions)	For the Six Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives					Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015		2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	72	$	(40	)
						Net revenues	$	75		$	32
						Marketing, administration and research costs	16			(1		)
						Interest expense, net	(17		)	(16		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	209		36
Total	$	281	$	(4	)		$	74		$	15

(pre-tax, millions)	For the Three Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives						Statement of Earnings Classification of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings
	2015			2014				2015			2014
Derivatives in Cash Flow Hedging Relationship
Foreign exchange contracts	$	45		$	(13	)
							Net revenues	$	45		$	17
							Marketing, administration and research costs	9			(1		)
							Interest expense, net	(10		)	(9		)
Derivatives in Net Investment Hedging Relationship
Foreign exchange contracts	(77		)	11
Total	$	(32	)	$	(2	)		$	44		$	7

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 condensed consolidated statements of earnings. During the six months and three months ended June 30,2015 and 2014, ineffectiveness related to cash flow hedges was not material. As of June 30, 2015, PMI has hedged forecasted transactions for periods not exceeding the next eighteen months with the exception of one foreign exchange contract that expires in May 2024. The impact of these hedges is primarily included in operating cash flows on PMI’s condensed consolidated statement of cash flows.

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 six months ended June 30,2015 and 2014, these hedges of net investments resulted in gains, net of income taxes, of $642 million and $93 million, respectively. For the three months ended June 30,2015 and 2014, these hedges of net investments resulted in gains (losses), net of income taxes, of $(193) million and $76 million, respectively. These gains (losses) were reported as a component of accumulated other comprehensive losses within currency translation adjustments. For the six months and three months ended June 30,2015 and 2014, ineffectiveness related to net investment hedges was not material. Other investing cash flows on PMI’s condensed consolidated statements of cash flows include the premiums paid for, and settlements of, net investment hedges.

Other Derivatives

PMI has entered into foreign exchange contracts to hedge the foreign currency exchange and interest rate 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 condensed consolidated statement of earnings. For the six months ended June 30,2015 and 2014, the gains (losses) from contracts for which PMI did not apply hedge accounting were $(735) million and $94 million, respectively. For the three months ended June 30,2015 and 2014, the gains from contracts for which PMI did not apply hedge accounting were $16 million and $142 million, respectively. The gains (losses) from these contracts substantially offset the gains (losses) generated by the underlying intercompany and third-party loans being hedged.

For the six months and three months ended June 30,2015 and 2014, the net impact of these contracts on the condensed consolidated statements of earnings was not material.

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:

(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Gain at beginning of period	$	123		$	63		$	121		$	32
Derivative gains transferred to earnings	(66		)	(13		)	(39		)	(6		)
Change in fair value	66			(35		)	41			(11		)
Gain as of June 30,	$	123		$	15		$	123		$	15

At June 30, 2015, PMI expects $81 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed 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 less any cash collateral received or pledged. 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 12. Fair Value Measurements and Note 14. Balance Sheet Offsetting for additional discussion of derivative financial instruments.

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Contingencies (Smoking And Health Litigation) (Details) $ in Thousands	Jul. 23, 2015	Jun. 26, 2015 CAD	Jun. 26, 2015 USD ($)	May. 27, 2015 CAD manufacturer plaintiff	May. 27, 2015 USD ($) manufacturer plaintiff	Jun. 20, 2012 cigarette	Jul. 10, 2009 cigarette	Jul. 29, 2015 litigation_case	Jul. 30, 2014 litigation_case	Aug. 01, 2013 litigation_case
Individual Smoking And Health Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM									63	63
Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM									11	11
Subsequent Event [Member] | Individual Smoking And Health Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM								65
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Argentina [Member]
Loss Contingencies [Line Items]
Cases brought against PM								26
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Brazil [Member]
Loss Contingencies [Line Items]
Cases brought against PM								22
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM								2
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Chile [Member]
Loss Contingencies [Line Items]
Cases brought against PM								7
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Costa Rica [Member]
Loss Contingencies [Line Items]
Cases brought against PM								2
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Greece [Member]
Loss Contingencies [Line Items]
Cases brought against PM								1
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Italy [Member]
Loss Contingencies [Line Items]
Cases brought against PM								2
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Morocco [Member]
Loss Contingencies [Line Items]
Cases brought against PM								1
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Philippines [Member]
Loss Contingencies [Line Items]
Cases brought against PM								1
Subsequent Event [Member] | Individual Smoking And Health Cases [Member] | Scotland [Member]
Loss Contingencies [Line Items]
Cases brought against PM								1
Subsequent Event [Member] | Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM								11
Subsequent Event [Member] | Smoking And Health Class Actions [Member] | Brazil [Member]
Loss Contingencies [Line Items]
Cases brought against PM								2
Subsequent Event [Member] | Smoking And Health Class Actions [Member] | Canada [Member]
Loss Contingencies [Line Items]
Cases brought against PM								9
Cecilia Letourneau [Member] | Canada [Member]
Loss Contingencies [Line Items]
Number of additional manufacturers found liable | manufacturer				2	2
Estimated number of members in class | plaintiff				918,000	918,000
Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Number of additional manufacturers found liable | manufacturer				2	2
Estimated number of members in class | plaintiff				99,957	99,957
Judicial Ruling [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Payment period for awarded punitive damages to be deposited into trust				60 days	60 days
Payment period for compensatory damages to be deposited into trust				60 days	60 days
Judicial Ruling [Member] | Imperial Tobacco Ltd., Rothmans, Benson And Hedges Inc., And JTI Macdonald Corp. [Member] | Cecilia Letourneau [Member] | Canada [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 131,000,000	$ 100,500
Judicial Ruling [Member] | Imperial Tobacco Ltd., Rothmans, Benson And Hedges Inc., And JTI Macdonald Corp. [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				90,000	69
Compensatory damages awarded				15,500,000,000	11,900,000
Awarded compensatory damages that are to be deposited into trust				1,000,000,000	770,000
Awarded punitive damages that are to be deposited into trust				90,000	72
Judicial Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member] | Cecilia Letourneau [Member] | Canada [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 46,000,000	$ 35,300
Payment period for awarded punitive damages to be deposited into trust				60 days	60 days
Judicial Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Punitive damages awarded				CAD 30,000	$ 23
Compensatory damages awarded				CAD 3,100,000,000	$ 2,380,000
Damages allocated to subsidiary (percent)				20.00%	20.00%
Awarded compensatory damages that are to be deposited into trust				CAD 200,000,000	$ 154,000
Awarded punitive damages that are to be deposited into trust				CAD 30,000	$ 23
Appellate Ruling [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Subsequent Event [Member] | Canada [Member]
Loss Contingencies [Line Items]
Payment period for compensatory damages to be deposited into trust	60 days
Appellate Ruling [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member] | Cecilia Letourneau [Member] | Subsequent Event [Member] | Canada [Member]
Loss Contingencies [Line Items]
Payment period for awarded punitive damages to be deposited into trust	60 days
Pending Litigation [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Payment period for compensatory damages to be deposited into trust		60 days	60 days
Pending Litigation [Member] | Adams [Member] | Canada [Member]
Loss Contingencies [Line Items]
Plaintiff requirement, Minimum number of cigarettes smoked | cigarette							25,000
Pending Litigation [Member] | Suzanne Jacklin [Member] | Canada [Member]
Loss Contingencies [Line Items]
Plaintiff requirement, Minimum number of cigarettes smoked | cigarette						25,000
Pending Litigation [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member] | Cecilia Letourneau [Member] | Canada [Member]
Loss Contingencies [Line Items]
Punitive damages awarded		CAD 46,000,000	$ 35,300
Payment period for awarded punitive damages to be deposited into trust		60 days	60 days
Period between addiction warning and claim				3 years	3 years
Pending Litigation [Member] | Rothmans, Benson, And Hedges Inc. (RBH) [Member] | Conseil Quebecois Sur Le Tabac Et La Sante and Jean-Yves Blais [Member] | Canada [Member]
Loss Contingencies [Line Items]
Awarded compensatory damages that are to be deposited into trust		CAD 200,000,000	$ 154,000
Payment period for compensatory damages to be deposited into trust		60 days	60 days

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Benefit Plans

6 Months Ended

Jun. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Benefit Plans

Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to substantially all U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

Pension Plans

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following:

	U.S. Plans						Non-U.S. Plans
	For the Six Months Ended June 30,						For the Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	3		$	3		$	101		$	104
Interest cost	9			8			72			103
Expected return on plan assets	(7		)	(8		)	(164		)	(177		)
Amortization:
Net loss	5			3			90			57
Prior service cost	—			—			2			4
Net periodic pension cost	$	10		$	6		$	101		$	91

	U.S. Plans						Non-U.S. Plans
	For the Three Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2015			2014			2015			2014
Service cost	$	2		$	2		$	50		$	52
Interest cost	4			4			36			52
Expected return on plan assets	(3		)	(4		)	(81		)	(89		)
Amortization:
Net loss	2			1			44			29
Prior service cost	—			—			1			2
Net periodic pension cost	$	5		$	3		$	50		$	46

Employer Contributions

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and to meet specific funding requirements of its funded U.S. and non-U.S. plans. Employer contributions of $20 million were made to the pension plans during the six months ended June 30,2015. Currently, PMI anticipates making additional contributions during the remainder of 2015 of approximately $138 million to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest rates.

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Goodwill and Other Intangible Assets, net

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, net

Goodwill and Other Intangible Assets, net:

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

	Goodwill				Other Intangible Assets, net
(in millions)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
European Union	$	1,311	$	1,398	$	551	$	582
Eastern Europe, Middle East & Africa	486		517		210		215
Asia	3,701		3,904		1,131		1,207
Latin America & Canada	2,416		2,569		915		981
Total	$	7,914	$	8,388	$	2,807	$	2,985

Goodwill primarily reflects PMI’s acquisitions in Canada, Colombia, Greece, Indonesia, Mexico, Pakistan and Serbia, as well as the business combination in the Philippines. The movements in goodwill from December 31, 2014, were as follows:

(in millions)	European Union			Eastern Europe, Middle East & Africa			Asia			Latin America & Canada			Total
Balances, December 31, 2014	$	1,398		$	517		$	3,904		$	2,569		$	8,388
Changes due to:
Currency	(87		)	(31		)	(203		)	(153		)	(474		)
Balances, June 30, 2015	$	1,311		$	486		$	3,701		$	2,416		$	7,914

Additional details of other intangible assets were as follows:

	June 30, 2015				December 31, 2014
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizable intangible assets	$	1,608			$	1,704
Amortizable intangible assets	1,704		$	505	1,877		$	596
Total other intangible assets	$	3,312	$	505	$	3,581	$	596

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia in 2005 and Mexico in 2007. Amortizable intangible assets primarily consist of certain trademarks and distribution networks associated with business combinations. The gross carrying amount, the range of useful lives as well as the weighted-average remaining useful life of amortizable intangible assets at June 30, 2015, were as follows:

(dollars in millions)	Gross Carrying Amount		Initial Estimated Useful Lives	Weighted-Average Remaining Useful Life
Trademarks	$	1,452	2 - 40 years	23 years
Distribution networks	161		5 - 30 years	12 years
Other (including farmer   contracts and intellectual property rights)	91		4 - 17 years	11 years
	$	1,704

Pre-tax amortization expense for intangible assets during the six months ended June 30,2015 and 2014 was $43 million and $44 million, respectively, and $21 million and $22 million for the three months ended June 30,2015 and 2014, respectively. Amortization expense for each of the next five years is estimated to be $72 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

The decrease in the gross carrying amount of other intangible assets from December 31, 2014, was due to currency movements and the retirement of fully amortized intangible assets.

During the first quarter of 2015, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment, and no impairment charges were required as a result of this review.

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Earnings Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share:

Basic and diluted earnings per share (“EPS”) were calculated using the following:

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Net earnings attributable to PMI	$	3,682	$	3,726	$	1,887	$	1,851
Less distributed and undistributed earnings attributable to share-based payment awards	13		17		6		9
Net earnings for basic and diluted EPS	$	3,669	$	3,709	$	1,881	$	1,842
Weighted-average shares for basic and diluted EPS	1,549		1,577		1,549		1,571

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

For the 2015 and 2014 computations, there were no antidilutive stock options.

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2015
Income Taxes [Line Items]
Effective tax rate	28.20%	28.70%	29.20%	28.80%
Impact on effective tax rate related to changes to repatriation assertions on certain foreign subsidiary historical earnings			$ 58
United States [Member]
Income Taxes [Line Items]
Open Tax Year			2007 and onward
Scenario, Forecast [Member]
Income Taxes [Line Items]
Effective tax rate					29.00%

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Indebtedness (Long-Term Debt) (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 27,492	$ 28,247
Less current portion of long-term debt	2,926	1,318
Long-term Debt	24,566	26,929
U.S. Dollar Notes [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 16,841	17,229
Due through	2044
Interest rate, minimum	1.125%
Interest rate, maximum	6.375%
Interest rate, average	3.874%
Euro Notes [Member] | Foreign Currency Obligations [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 8,389	9,161
Due through	2033
Interest rate, minimum	1.75%
Interest rate, maximum	5.875%
Interest rate, average	3.104%
Swiss Franc Notes [Member] | Foreign Currency Obligations [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 1,792	1,690
Due through	2024
Interest rate, minimum	0.75%
Interest rate, maximum	2.00%
Interest rate, average	1.217%
Other [Member] | Foreign Currency Obligations [Member]
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 470	$ 167
Due through	2024
Interest rate, average	3.111%

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Contingencies (Public Civil Actions) (Details) - Public Civil Actions [Member] - litigation_case	Jul. 29, 2015	Jul. 30, 2014	Aug. 01, 2013
Loss Contingencies [Line Items]
Cases brought against PM		2	4
Subsequent Event [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Subsequent Event [Member] | Argentina [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1
Subsequent Event [Member] | Venezuela [Member]
Loss Contingencies [Line Items]
Cases brought against PM	1

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Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

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 July 29, 2015, July 30, 2014 and August 1, 2013:

Type of Case	Number of Cases Pending as of July 29, 2015	Number of Cases Pending as of July 30, 2014	Number of Cases Pending as of August 1, 2013
Individual Smoking and Health Cases	65	63	63
Smoking and Health Class Actions	11	11	11
Health Care Cost Recovery Actions	16	15	15
Lights Class Actions	—	1	1
Individual Lights Cases	2	2	1
Public Civil Actions	2	2	4

Schedule of Verdicts and Post-Trial Developments

The table below lists the verdict and post-trial developments in the three pending cases where a verdict was returned in favor of the plaintiff:

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 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 $340) 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 appealed the decision. In February 2015, the appellate court unanimously dismissed plaintiff's appeal. Plaintiff may further appeal. 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.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Cecilia Letourneau	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Letourneau class on liability and awarded a total of CAD 131 million (approximately $100.5 million) in punitive damages, allocating CAD 46 million (approximately $35.3 million) to our subsidiary. The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days. The trial court found that a claims process to allocate the awarded damages to individual class members would be too expensive and difficult to administer. The trial court ordered a briefing on the proposed process for the distribution of sums remaining from the punitive damage award after payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of CAD 46 million (approximately $35.3 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

Date	Location of Court/Name of Plaintiff	Type of Case	Verdict	Post-Trial Developments
May 27, 2015	Canada/Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais	Class Action	On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $11.9 billion), including pre-judgment interest. The trial court awarded compensatory damages on a joint and several liability basis, allocating 20% to our subsidiary (approximately CAD 3.1 billion including pre-judgment interest (approximately $2.38 billion)). The trial court awarded CAD 90,000 (approximately $69,000) in punitive damages, allocating CAD 30,000 (approximately $23,000) to our subsidiary. The trial court ordered defendants to pay CAD 1 billion (approximately $770 million) of the compensatory damage award into a trust within 60 days, CAD $200 million (approximately $154 million) of which is our subsidiary’s portion, and the full punitive damage award into a trust within 60 days, CAD 30,000 (approximately $23,000) of which is our subsidiary’s portion. The trial court ordered a briefing on a proposed claims process for the distribution of damages to individual class members and for payment of attorneys’ fees and legal costs.	On June 26, 2015, our subsidiary commenced the appellate process by filing its inscription in appeal of the trial court’s judgment with the Court of Appeal of Quebec. Our subsidiary also filed a motion to cancel the trial court’s order for payment of approximately CAD 200 million (approximately $154 million) into a trust within 60 days notwithstanding appeal. On July 23, the Court of Appeal granted the motion to cancel and overturned the trial court’s ruling that our subsidiary make an initial payment within 60 days.

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Financial Instruments (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative [Line Items]
Maturity of Foreign Currency Derivatives - Cash Flow Hedges			May 31, 2024
Unrealized gain (loss) on hedges of net investments	$ (74)	$ (77)	$ (1,417)	$ (114)
Foreign Exchange Contract [Member]
Derivative [Line Items]
Derivative, Notional Amount	22,600		$ 22,600
Maximum length of time hedged in a Cash Flow Hedge			18 months
Derivative Instruments, gains to be reclassified to earnings.	81		$ 81
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, Notional Amount	15,100		15,100
Gain (Loss) on derivatives not designated as hedging instruments	16	142	(735)	94
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Derivative, Notional Amount	2,600		2,600
Foreign Exchange Contract [Member] | Net Investment Hedging [Member]
Derivative [Line Items]
Derivative, Notional Amount	4,900		4,900
Unrealized gain (loss) on hedges of net investments	$ (193)	$ 76	$ 642	$ 93

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Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements:

The authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of input that may be used to measure fair value, which are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

PMI's policy is to reflect transfers between hierarchy levels at the end of the reporting period.

Derivative Financial Instruments

PMI assesses the fair value of its foreign exchange contracts and interest rate contracts using standard valuation models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the instruments. The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates. PMI’s derivative financial instruments have been classified within Level 2 in the table shown below. See Note 6. Financial Instruments for an additional discussion of derivative financial instruments.

Debt

The fair value of PMI’s outstanding debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. The aggregate carrying value of PMI’s debt, excluding short-term borrowings and $13 million of capital lease obligations, was $27,479 million at June 30, 2015. The fair value of PMI’s outstanding debt, excluding the aforementioned short-term borrowings and capital lease obligations, has been classified within Level 1 and Level 2 in the table shown below.

Contingent Consideration

The fair value of PMI's contingent consideration relating to acquisitions is determined utilizing a discounted cash flow approach using various probability weighted scenarios. The significant unobservable inputs used in calculating the fair value of the contingent consideration includes financial performance scenarios, the probability of achieving those scenarios, and the discount rate. PMI's contingent consideration has been classified within Level 3 in the table shown below. For additional information, see Note 16. Acquisitions and Other Business Arrangements.

The aggregate fair values of PMI’s derivative financial instruments, debt and contingent consideration as of June 30, 2015, were as follows:

(in millions)	Fair Value at June 30, 2015		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	$	559	$	—	$	559	$	—
Total assets	$	559	$	—	$	559	$	—
Liabilities:
Debt	$	28,847	$	28,362	$	485	$	—
Foreign exchange contracts	141		—		141		—
Contingent consideration	23		—		—		23
Total liabilities	$	29,011	$	28,362	$	626	$	23

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New Accounting Standards

6 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

New Accounting Standards

New Accounting Standards:

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 contains principles that an entity will need to apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

Entities can apply the final standard using one of the following two methods:

1. retrospectively to each prior period presented; or

2. retrospectively, with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application, with additional disclosures in reporting periods that include the date of initial application.

ASU 2014-09 is effective for interim and annual reporting periods beginning on or after January 1, 2017. In July 2015, the FASB approved a proposal which allows for a deferral of the implementation until January 1, 2018 and permits early application, but not before the original effective date of January 1, 2017. PMI is currently assessing the impact that the adoption of ASU 2014-09 will have on its financial position or results of operations.

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Goodwill and Other Intangible Assets, net (Range of Useful Lives and Weighted-Average Remaining Useful Lives of Amortizable Intangible Assets) (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,704	$ 1,877
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,452
Weighted-Average Remaining Useful Life	23 years
Trademarks [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	2 years
Trademarks [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	40 years
Distribution Networks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 161
Weighted-Average Remaining Useful Life	12 years
Distribution Networks [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	5 years
Distribution Networks [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	30 years
Other (Including Farmer Contracts and Intellectual Property Rights) [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 91
Weighted-Average Remaining Useful Life	11 years
Other (Including Farmer Contracts and Intellectual Property Rights) [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	4 years
Other (Including Farmer Contracts and Intellectual Property Rights) [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Initial Estimated Useful Lives	17 years

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Asset Impairment and Exit Costs (Movement In The Exit Cost Liabilities) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Restructuring Reserve [Roll Forward]
Liability beginning balance			$ 270
Charges, net			0
Cash spent	$ (44)	$ (30)	(204)	$ (230)
Currency/other			(14)
Liability ending balance	$ 52		$ 52

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Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net earnings	$ 1,916	$ 1,895	$ 3,750	$ 3,811
Change in currency translation adjustments:
Unrealized losses, net of income taxes of ($330) and ($59) for the six months ended June 30, 2015 and 2014, and ($104) and ($55) for the three months ended June 30, 2015 and 2014	(74)	(77)	(1,417)	(114)
Change in net loss and prior service cost:
Net losses and prior service costs, net of income taxes of $3 for the six months ended June 30, 2014, and $3 for the three months ended June 30, 2014	0	(41)	0	(41)
Amortization of net losses, prior service costs and net transition costs, net of income taxes of ($24) and ($26) for the six months ended June 30, 2015 and 2014, and ($12) and ($14) for the three months ended June 30, 2015 and 2014	54	43	110	81
Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of ($6) and $5 for the six months ended June 30, 2015 and 2014, and ($4) and $2 for the three months ended June 30, 2015 and 2014	41	(11)	66	(35)
Gains transferred to earnings, net of income taxes of $8 and $2 for the six months ended June 30, 2015 and 2014, and $5 and $1 for the three months ended June 30, 2015 and 2014	(39)	(6)	(66)	(13)
Total other comprehensive losses	(18)	(92)	(1,307)	(122)
Total comprehensive earnings	1,898	1,803	2,443	3,689
Less comprehensive earnings attributable to:
Noncontrolling interests	28	53	42	87
Comprehensive earnings attributable to PMI	$ 1,870	$ 1,750	$ 2,401	$ 3,602

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Background and Basis of Presentation

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background and Basis of Presentation

Background and Basis of Presentation:

Background

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

Basis of Presentation

The interim condensed consolidated financial statements of PMI are unaudited. These interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and such principles are applied on a consistent basis. It is the opinion of PMI’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings attributable to PMI for any interim period are not necessarily indicative of results that may be expected for the entire year.

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Contingencies (Number of Tobacco Related Cases Pending Against Us and/or Our Subsidiaries or Indemnitees) (Details) - litigation_case	Jul. 29, 2015	Jul. 30, 2014	Aug. 01, 2013
Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM		11	11
Health Care Cost Recovery Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM		15	15
Lights Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM		1	1
Individual Lights Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM		2	1
Public Civil Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM		2	4
Subsequent Event [Member] | Smoking And Health Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	11
Subsequent Event [Member] | Health Care Cost Recovery Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	16
Subsequent Event [Member] | Lights Class Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	0
Subsequent Event [Member] | Individual Lights Cases [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2
Subsequent Event [Member] | Public Civil Actions [Member]
Loss Contingencies [Line Items]
Cases brought against PM	2

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Fair Value Measurements (Aggregate Fair Value of Derivative Financial Instruments, Debt and Contingent Consideration) (Details) $ in Millions	Jun. 30, 2015 USD ($)
Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member]
Assets:
Foreign exchange contracts	$ 0
Total assets	0
Liabilities:
Debt	28,362
Foreign exchange contracts	0
Contingent consideration	0
Total liabilities	28,362
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Foreign exchange contracts	559
Total assets	559
Liabilities:
Debt	485
Foreign exchange contracts	141
Contingent consideration	0
Total liabilities	626
Significant Unobservable Inputs (Level 3) [Member]
Assets:
Foreign exchange contracts	0
Total assets	0
Liabilities:
Debt	0
Foreign exchange contracts	0
Contingent consideration	23
Total liabilities	23
Fair Value [Member]
Assets:
Foreign exchange contracts	559
Total assets	559
Liabilities:
Debt	28,847
Foreign exchange contracts	141
Contingent consideration	23
Total liabilities	$ 29,011

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New Accounting Standards (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

New Accounting Standards

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 contains principles that an entity will need to apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

Entities can apply the final standard using one of the following two methods:

1. retrospectively to each prior period presented; or

2. retrospectively, with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application, with additional disclosures in reporting periods that include the date of initial application.

ASU 2014-09 is effective for interim and annual reporting periods beginning on or after January 1, 2017. In July 2015, the FASB approved a proposal which allows for a deferral of the implementation until January 1, 2018 and permits early application, but not before the original effective date of January 1, 2017. PMI is currently assessing the impact that the adoption of ASU 2014-09 will have on its financial position or results of operations.

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Acquisitions and Other Business Arrangements (Details) - USD ($) $ in Millions		1 Months Ended				6 Months Ended
	Sep. 30, 2013	May. 31, 2015	Jun. 30, 2014	Mar. 31, 2014	May. 31, 2013	Jun. 30, 2015	Jun. 30, 2014
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Payment to acquire business						$ 0	$ 103
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)						$ 113	$ 0
Grupo Carso [Member] | Mexican tobacco business [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Ownership percentage by parent	100.00%
Estimated dividend payment to noncontrolling interest	$ 38
Dividends declared and paid				$ 38
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests					$ 559
Grupo Carso [Member] | Mexican tobacco business [Member] | Affiliated Entity [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Payments to acquire additional interest in subsidiaries	$ 703
Purchase price adjustment period	3 years
Purchase price adjustment period, after close of purchase	2 years
Purchase price activity for subsidiary shares from noncontrolling interests (Note 16)		$ 113
Additional Interest In Subsidiaries, Adjusted Purchase Price		$ 590
Nicocigs Limited [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Period of consideration for performance targets related to acquisition			3 years			2 years
Nicocigs Limited [Member] | United Kingdom [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Business acquisition, percentage of interest acquired			100.00%				100.00%
Payment to acquire business			$ 103
Additional contingent payment, maximum			$ 77			$ 63	$ 77
Grupo Carso [Member] | Mexican tobacco business [Member] | Affiliated Entity [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Ownership percentage by noncontrolling owners					20.00%

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Balance Sheet Offsetting (Tables)

6 Months Ended

Jun. 30, 2015

Offsetting [Abstract]

Offsetting Assets and Liabilities

The effects of these derivative financial instrument assets and liabilities on PMI's condensed consolidated balance sheets were as follows:

(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Condensed Consolidated Balance Sheet		Net Amounts Presented in the Condensed Consolidated Balance Sheet		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
							Financial Instruments			Cash Collateral Received/Pledged
													Net Amount
At June 30, 2015
Assets
Foreign exchange contracts	$	559	$	—	$	559	$	(114	)	$	(403	)	$	42
Liabilities
Foreign exchange contracts	$	141	$	—	$	141	$	(114	)	$	(10	)	$	17
At December 31, 2014
Assets
Foreign exchange contracts	$	406	$	—	$	406	$	(77	)	$	(306	)	$	23
Liabilities
Foreign exchange contracts	$	151	$	—	$	151	$	(77	)	$	(63	)	$	11

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Indebtedness

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Indebtedness

Indebtedness:

Short-term Borrowings:

At June 30, 2015 and December 31, 2014, PMI’s short-term borrowings, consisting of commercial paper and bank loans to certain PMI subsidiaries, had a carrying value of $1,710 million and $1,208 million, respectively. The fair value of PMI’s short-term borrowings, based on current market interest rates, approximates carrying value.

Long-term Debt:

At June 30, 2015 and December 31, 2014, PMI’s long-term debt consisted of the following:

(in millions)	June 30, 2015		December 31, 2014
U.S. dollar notes, 1.125% to 6.375% (average interest rate 3.874%), due through 2044	$	16,841	$	17,229
Foreign currency obligations:
Euro notes, 1.750% to 5.875% (average interest rate 3.104%), due through 2033	8,389		9,161
Swiss franc notes, 0.750% to 2.000% (average interest rate 1.217%), due through 2024	1,792		1,690
Other (average interest rate 3.111%), due through 2024	470		167
	27,492		28,247
Less current portion of long-term debt	2,926		1,318
	$	24,566	$	26,929

Other foreign currency debt above includes mortgage debt in Switzerland and capital lease obligations at June 30, 2015 and December 31, 2014.

Credit Facilities:

On January 23, 2015, PMI entered into an agreement to extend the term of its existing $2.0 billion 364-day revolving credit facility, effective February 10, 2015, from February 10, 2015 to February 9, 2016.  On January 23, 2015, PMI also entered into an agreement to extend the term of its existing $2.5 billion multi-year revolving credit facility, effective February 28, 2015, from February 28, 2019 to February 28, 2020.

At June 30, 2015, PMI's total committed credit facilities were as follows:

(in billions)

Type	Committed Credit Facilities
364-day revolving credit, expiring February 9, 2016	$	2.0
Multi-year revolving credit, expiring February 28, 2020	2.5
Multi-year revolving credit, expiring October 25, 2016	3.5
Total facilities	$	8.0

At June 30, 2015, there were no borrowings under these committed credit facilities, and the entire committed amounts were available for borrowing.