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Segment Reporting
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting:

PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes and other nicotine-containing products, including RRPs, in markets outside of the United States of America. Reportable segments for PMI are organized by geographic region and managed by segment managers who are responsible for the operating and financial results of the regions inclusive of all product categories sold in the region. Effective January 1, 2018, PMI began managing its business in six reportable segments. PMI’s reportable segments are the European Union; Eastern Europe; Middle East & Africa; South & Southeast Asia; East Asia & Australia; and Latin America & Canada. PMI records net revenues and operating income to its segments based upon the geographic area in which the customer resides.

PMI’s chief operating decision maker evaluates segment performance and allocates resources based on regional operating income, which includes results from all product categories sold in each region. Effective January 1, 2018, PMI began using operating income to evaluate business segment performance and allocate resources, replacing operating companies income used previously.

On January 1, 2018, PMI adopted Financial Accounting Standards Update ASU 2014-09, "Revenue from Contracts with Customers." PMI adopted this standard retrospectively to each prior period presented. For further details on this standard and its impact on PMI, see Note 18. New Accounting Standards. The amounts presented for the reportable segments reflect this adoption.
 
PMI disaggregates its net revenue from contracts with customers by both geographic location and product category for each of PMI's six reportable segments, as PMI believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Segment data were as follows:
(in millions)
For the Six Months Ended June 30,
 
For the Three Months Ended June 30,
 
2018
2017
 
2018
2017
Net revenues:
 
 
 
 
 
European Union
$
4,491

$
3,850

 
$
2,503

$
2,110

Eastern Europe
1,327

1,213

 
760

697

Middle East & Africa
1,983

1,939

 
1,022

978

South & Southeast Asia
2,237

2,077

 
1,156

1,046

East Asia & Australia
3,069

2,548

 
1,478

1,338

Latin America & Canada
1,515

1,354

 
807

748

Net revenues
$
14,622

$
12,981

 
$
7,726

$
6,917

Operating income:
 
 
 
 
 
European Union
$
1,917

$
1,692

 
$
1,177

$
944

Eastern Europe
412

383

 
261

224

Middle East & Africa
777

968

 
403

477

South & Southeast Asia
869

689

 
440

319

East Asia & Australia
1,013

982

 
498

510

Latin America & Canada
531

439

 
314

263

Operating income
$
5,519

$
5,153

 
$
3,093

$
2,737


PMI's net revenues by product category were as follows:
(in millions)
For the Six Months Ended June 30,
 
For the Three Months Ended June 30,
 
2018
2017
 
2018
2017
Net revenues:
 
 
 
 
 
Combustible products:
 
 
 
 
 
European Union
$
4,157

$
3,770

 
$
2,321

$
2,060

Eastern Europe
1,222

1,204

 
695

691

Middle East & Africa
1,794

1,925

 
910

968

South & Southeast Asia
2,237

2,077

 
1,156

1,046

East Asia & Australia
1,559

1,603

 
822

790

Latin America & Canada
1,506

1,353

 
802

748

Total combustible products
$
12,475

$
11,931

 
$
6,706

$
6,302

Reduced-risk products:
 
 
 
 
 
European Union
$
334

$
81

 
$
182

50

Eastern Europe
105

9

 
65

6

Middle East & Africa
189

14

 
112

10

South & Southeast Asia


 


East Asia & Australia
1,510

945

 
656

549

Latin America & Canada
9

1

 
5

1

Total reduced-risk products
$
2,147

$
1,050

 
$
1,020

615

 
 
 
 
 
 
Total PMI net revenues
$
14,622

$
12,981

 
$
7,726

6,917


Note: Sum of product categories or Regions might not foot to total PMI due to roundings.

Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products combined. Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include reduced-risk products.

Net revenues related to reduced-risk products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of PMI's heated tobacco units, IQOS devices and related accessories, and other nicotine-containing products, which primarily include our e-vapor products.

PMI recognizes revenue, when control is transferred to the customer, typically either upon shipment or delivery of goods.