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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) 
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
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)
Virginia13-3435103
(State or other jurisdiction of
    incorporation or organization)		(I.R.S. Employer
    Identification No.)
120 Park AvenueNew YorkNew York10017
(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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class                    Trading Symbol(s)Name of each exchange on which registered
Common Stock, no par valuePMNew York Stock Exchange
1.875% Notes due 2021PM21BNew York Stock Exchange
1.875% Notes due 2021PM21CNew York Stock Exchange
4.125% Notes due 2021PM21New York Stock Exchange
2.900% Notes due 2021PM21ANew York Stock Exchange
2.625% Notes due 2022PM22ANew York Stock Exchange
2.375% Notes due 2022PM22BNew York Stock Exchange
2.500% Notes due 2022PM22New York Stock Exchange
2.500% Notes due 2022PM22CNew York Stock Exchange
2.625% Notes due 2023PM23New York Stock Exchange
2.125% Notes due 2023PM23BNew York Stock Exchange
3.600% Notes due 2023PM23ANew York Stock Exchange
2.875% Notes due 2024PM24New York Stock Exchange
2.875% Notes due 2024PM24CNew York Stock Exchange
0.625% Notes due 2024PM24BNew York Stock Exchange
3.250% Notes due 2024PM24ANew York Stock Exchange
Title of each class                    Trading Symbol(s)Name of each exchange on which registered
2.750% Notes due 2025PM25New York Stock Exchange
3.375% Notes due 2025PM25ANew York Stock Exchange
2.750% Notes due 2026PM26ANew York Stock Exchange
2.875% Notes due 2026PM26New York Stock Exchange
0.125% Notes due 2026PM26BNew York Stock Exchange
3.125% Notes due 2027PM27New York Stock Exchange
3.125% Notes due 2028PM28New York Stock Exchange
2.875% Notes due 2029PM29New York Stock Exchange
3.375% Notes due 2029PM29ANew York Stock Exchange
0.800% Notes due 2031PM31New York Stock Exchange
3.125% Notes due 2033PM33New York Stock Exchange
2.000% Notes due 2036PM36New York Stock Exchange
1.875% Notes due 2037PM37ANew York Stock Exchange
6.375% Notes due 2038PM38New York Stock Exchange
1.450% Notes due 2039PM39New York Stock Exchange
4.375% Notes due 2041PM41New York Stock Exchange
4.500% Notes due 2042PM42New York Stock Exchange
3.875% Notes due 2042PM42ANew York Stock Exchange
4.125% Notes due 2043PM43New York Stock Exchange
4.875% Notes due 2043PM43ANew York Stock Exchange
4.250% Notes due 2044PM44New York Stock Exchange
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 every Interactive Data File required to be submitted 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 such files).    Yes  þ        No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer    þ                        Accelerated filer            ☐  
Non-accelerated filer    ☐                         Smaller reporting company    ☐
                                    Emerging growth company    ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 October 22, 2020, there were 1,557,315,937 shares outstanding of the registrant’s common stock, no par value per share.
1
Table of Contents

PHILIP MORRIS INTERNATIONAL INC.
TABLE OF CONTENTS
 
  Page No.
PART I -
Item 1.
Condensed Consolidated Statements of Earnings for the
Nine Months Ended September 30, 2020 and 2019
Three Months Ended September 30, 2020 and 2019
Condensed Consolidated Statements of Comprehensive Earnings for the
Nine Months Ended September 30, 2020 and 2019
Three Months Ended September 30, 2020 and 2019
Condensed Consolidated Balance Sheets at
September 30, 2020 and December 31, 2019
7 – 8
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2020 and 2019
9 – 10
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
Nine Months Ended September 30, 2020 and 2019
Three Months Ended September 30, 2020 and 2019
13 – 46
Item 2.
47 – 97
Item 4.
PART II -
Item 1.
Item 1A.
Item 2.
Item 6.

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

Trademarks and service marks in this report are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc. and are italicized.
2
Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)
 For the Nine Months Ended September 30,
 20202019
Revenues including excise taxes$56,516 $58,072 
Excise taxes on products35,266 35,980 
Net revenues21,250 22,092 
Cost of sales6,997 7,735 
Gross profit14,253 14,357 
Marketing, administration and research costs (Notes 8, 18 & 19)5,435 6,282 
Amortization of intangibles55 50 
Operating income8,763 8,025 
Interest expense, net454 434 
Pension and other employee benefit costs (Note 3)68 61 
Earnings before income taxes8,241 7,530 
Provision for income taxes1,764 1,670 
Equity investments and securities (income)/loss, net4 (86)
Net earnings$6,473 $5,946 
Net earnings attributable to noncontrolling interests393 377 
Net earnings attributable to PMI$6,080 $5,569 

Per share data (Note 6):
Basic earnings per share$3.90 $3.57 
Diluted earnings per share$3.90 $3.57 









See notes to condensed consolidated financial statements.
3
Table of Contents

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 September 30,
 20202019
Revenues including excise taxes$20,444 $20,380 
Excise taxes on products12,998 12,738 
Net revenues7,446 7,642 
Cost of sales2,416 2,605 
Gross profit5,030 5,037 
Marketing, administration and research costs (Notes 8 & 18)1,769 2,234 
Amortization of intangibles18 15 
Operating income3,243 2,788 
Interest expense, net163 132 
Pension and other employee benefit costs (Note 3)23 20 
Earnings before income taxes3,057 2,636 
Provision for income taxes640 635 
Equity investments and securities (income)/loss, net(20)(45)
Net earnings2,437 2,046 
Net earnings attributable to noncontrolling interests130 150 
Net earnings attributable to PMI$2,307 $1,896 

Per share data (Note 6):
Basic earnings per share$1.48 $1.22 
Diluted earnings per share$1.48 $1.22 








See notes to condensed consolidated financial statements.
4
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)

For the Nine Months Ended September 30,
20202019
Net earnings$6,473 $5,946 
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $38 in 2020 and $(230) in 2019
(1,373)363 
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $0 in 2020 and 2019 (Note 19)
— 502 

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2020 and $133 in 2019
— 133 
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(49) in 2020 and $(43) in 2019
223 180 
(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $0 in 2020 and $(15) in 2019 (Note 19)
— 27 

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $8 in 2020 and $5 in 2019
(37)(34)
(Gains) losses transferred to earnings, net of income taxes of $1 in 2020 and $3 in 2019
(17)(12)
Total other comprehensive earnings (losses)(1,204)1,159 
Total comprehensive earnings5,269 7,105 
Less comprehensive earnings attributable to:
Noncontrolling interests393 391 
Comprehensive earnings attributable to PMI$4,876 $6,714 













See notes to condensed consolidated financial statements.
5
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
(Unaudited)
For the Three Months Ended September 30,
20202019
Net earnings$2,437 $2,046 
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $78 in 2020 and $(163) in 2019
(588)12 

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2020 and $(2) in 2019
— (2)
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(15) in 2020 and $(13) in 2019
74 61 

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $7 in 2020 and $2 in 2019
(31)(14)
(Gains) losses transferred to earnings, net of income taxes of $(1) in 2020 and $0 in 2019
(2)13 
Total other comprehensive earnings (losses)(547)70 
Total comprehensive earnings
1,890 2,116 
Less comprehensive earnings attributable to:
Noncontrolling interests141 135 
Comprehensive earnings attributable to PMI$1,749 $1,981 
















See notes to condensed consolidated financial statements.
6
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
 
September 30,
2020		December 31,
2019
ASSETS
Cash and cash equivalents$4,821 $6,861 
Trade receivables (less allowances of $21 in 2020 and $20 in 2019)
3,080 3,080 
Other receivables632 637 

Inventories:
Leaf tobacco1,996 2,052 
Other raw materials1,757 1,596 
Finished product4,407 5,587 
8,160 9,235 
Other current assets760 701 

Total current assets		17,453 20,514 

Property, plant and equipment, at cost		14,293 14,446 
Less: accumulated depreciation8,159 7,815 
6,134 6,631 
Goodwill (Note 4)5,647 5,858 
Other intangible assets, net (Note 4)1,926 2,113 
Investments in unconsolidated subsidiaries and equity securities (Notes 11&14)4,579 4,635 
Deferred income taxes1,225 1,153 
Other assets2,165 1,971 
TOTAL ASSETS$39,129 $42,875 









See notes to condensed consolidated financial statements.
Continued
7
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share data)
(Unaudited)
 
September 30,
2020		December 31,
2019
LIABILITIES
Short-term borrowings (Note 10)$152 $338 
Current portion of long-term debt (Note 10)1,992 4,051 
Accounts payable2,155 2,299 
Accrued liabilities:
Marketing and selling752 666 
Taxes, except income taxes4,870 5,837 
Employment costs981 1,042 
Dividends payable1,879 1,831 
Other1,897 1,973 
Income taxes847 796 
Total current liabilities15,525 18,833 

Long-term debt (Note 10)		27,346 26,656 
Deferred income taxes661 908 
Employment costs3,589 3,634 
Income taxes and other liabilities2,253 2,443 
Total liabilities49,374 52,474 

Contingencies (Note 8)

STOCKHOLDERS’ (DEFICIT) EQUITY

Common stock, no par value
   (2,109,316,331 shares issued in 2020 and 2019)
— — 
Additional paid-in capital2,071 2,019 
Earnings reinvested in the business31,537 30,987 
Accumulated other comprehensive losses(10,567)(9,363)
23,041 23,643 
Less: cost of repurchased stock
   (552,016,777 and 553,421,668 shares in 2020 and 2019, respectively)
35,133 35,220 
Total PMI stockholders’ deficit(12,092)(11,577)
Noncontrolling interests1,847 1,978 
Total stockholders’ deficit(10,245)(9,599)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY$39,129 $42,875 





See notes to condensed consolidated financial statements.
8
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)
 
 For the Nine Months Ended September 30,
 20202019
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net earnings$6,473 $5,946 
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization709 709 
Deferred income tax (benefit) provision(187)(124)
Asset impairment and exit costs, net of cash paid (Note 18)(44)42 
Cash effects of changes in:
Receivables, net(141)(506)
Inventories823 (64)
Accounts payable(22)(31)
Accrued liabilities and other current assets(1,026)292 
Income taxes(181)(6)
Pension plan contributions(62)(89)
Other308 597 
(1)
Net cash provided by operating activities6,650 6,766 
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures(462)(696)
Investments in unconsolidated subsidiaries and equity securities(3)(31)
Deconsolidation of RBH (Note 19)— (1,346)
(2)
Net investment hedges(138)429 
Other35 17 
Net cash used in investing activities(568)(1,627)
 















See notes to condensed consolidated financial statements.

Continued
9
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
(Unaudited)
 
 For the Nine Months Ended September 30,
 20202019
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Short-term borrowing activity by original maturity:
    Net issuances (repayments) - maturities of 90 days or less$(159)$(340)
    Issuances - maturities longer than 90 days45 989 
    Repayments - maturities longer than 90 days(45)(989)
Long-term debt proceeds2,230 3,819 
Long-term debt repaid(3,999)(2,971)
Dividends paid(5,485)(5,336)
Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 3 47 
Other(621)(321)
Net cash used in financing activities(8,031)(5,102)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(89)(146)
Cash, cash equivalents and restricted cash(3):
Increase (Decrease)(2,038)(109)
Balance at beginning of period6,865 6,620 
Balance at end of period$4,827 $6,511 

(1) Includes the Loss on Deconsolidation of RBH ($239 million) and the Canadian tobacco litigation-related charge ($194 million) that were included in marketing, administration and research costs in the condensed consolidated statements of earnings for the nine months ended September 30, 2019. For further details on these charges, see Note 19. Deconsolidation of RBH.

(2) Includes deconsolidation of RBH cash and cash equivalents of $1,323 million and restricted cash of $23 million.

(3) The amounts for cash and cash equivalents shown above include restricted cash of $6 million and $4 million as of September 30, 2020 and 2019, respectively, and $4 million and $27 million as of December 31, 2019, and 2018, respectively, which were included in other current assets in the condensed consolidated balance sheets.



See notes to condensed consolidated financial statements.
10
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Nine Months Ended September 30, 2020 and 2019
(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, 2019$— $1,939 $31,014 $(10,111)$(35,301)$1,720 $(10,739)
Net earnings5,569 377 5,946 
Other comprehensive earnings (losses), net of income taxes616 14 630 
Issuance of stock awards 44 79 123 
Dividends declared ($3.45 per share)
(5,386)(5,386)
Payments to noncontrolling interests(305)(305)
Deconsolidation of RBH (Note 19)529 529 
Other(2)49 47 
Balances, September 30, 2019$— $1,981 $31,197 $(8,966)$(35,222)$1,855 $(9,155)
Balances, January 1, 2020$— $2,019 $30,987 $(9,363)$(35,220)$1,978 $(9,599)
Net earnings6,080 393 6,473 
Other comprehensive earnings (losses), net of income taxes(1,204)— (1,204)
Issuance of stock awards 35 87 122 
Dividends declared ($3.54 per share)
(5,530)(5,530)
Payments to noncontrolling interests(510)(510)
Other 17 — (14)3 
Balances, September 30, 2020$— $2,071 $31,537 $(10,567)$(35,133)$1,847 $(10,245)




See notes to condensed consolidated financial statements.
11
Table of Contents

Philip Morris International Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended September 30, 2020 and 2019
(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, July 1, 2019$— $1,948 $31,128 $(9,051)