Philip Morris was a British tobacconist and a cigarette importer whose name was later used for Philip Morris Inc. Ltd. established in New York in 1902. Philip Morris International, commonly known as PMI is the world’s largest tobacco company. The head quarter of PMI is in New York in the United States, but they are operationally based in Lausanne, Switzerland. Until 28 March 2008, PMI was a subsidiary of the Altria Group INC. According to the press, Altria decided PMI to be separated and they wanted to separate its international operation in order to “clear the international tobacco business from the legal and regulatory constraints facing its domestic counterpart, Philip Morris USA. Philip Morris strongly believes that its employees are the key to PMI’s success. They have over 81,000 strong and different language speaking workers. They say that their main priority is to attract, support, and retain people from every corner of the planet, regardless of their age, gender, religion, sexual orientation, or physical ability. Philip Morris’s International Employee Reviews about "compensation and benefits" are really up to the mark and they have a very good record so far. Besides for the information relating to the executive officers set forth in Item 1 and the information relating to equity compensation plans set forth in Item 2, the information called for by Items 10-14 is hereby incorporated by reference to PMI’s definitive proxy statement for use in connection with its annual meeting of stockholders. Their scientific assessment program, outlined in their dedicated website at www.pmiscience.com, continued to make substantial progress last year.
Philip Morris International, commonly known as PMI is the world’s largest tobacco company. The head quarter of PMI is in New York in the United States, but they are operationally based in Lausanne, Switzerland. They first started their journey in 1847. The man Philip Morris first opened a shop on London’s Bond Street, which used to sell tobacco and cigarettes. Philip Morris’s son, Leopard Morris, established the company “Philip Morris " company and Grunebaum Ltd” in 1881. Then in 1885 they changed their name to “Philip Morris " Co. Ltd”.
William Curtis Thomson and his family began to control the company in 1894. In 1902 the company was incorporated in New York. In 1919, the company was acquired in the United States and was incorporated as "Philip Morris " Co, Ltd, Inc." in Virginia. Philip Morris (Australia) became the first affiliate of Philip Morris " Co. Ltd, Inc. outside the U.S in 1954. The journey went by and in 1972 the company’s Marlboro became the world’s top selling cigarette brand.
The operations center of PMI was transferred from Rye Brook, New york, to Lausanne, Switzerland in 2001.Philip Morris Companies Inc. formally changed its name to the Altria Group, on January 27, 2003 and was a subsidiary of Altria group till 28 March 2008.
In 2015, the company sold 850 billion cigarettes which made it rank 17th among the most valuable tobacco brands of 2017 on Brand Finance website.
Philip Morris International is one of the leading international tobacco companies, with a diverse workforce of around 81,000 people. They claim to be committed to being a great employer and a good corporate citizen. Their motto is also to be environmentally and socially responsible. They claim to be dedicated to fighting the illegal cigarette trade.
Six of the world’s top international 15 brands, spanning more than 180 markets, are under PMI, including Marlboro, the world's number one. They operate and they own 46 production facilities.150 million consumers worldwide chose their products, and for those who choose to continue to smoke, PMI continued to offer them the best quality products. But that’s not where their vision for smokers ends.
Their target is to replace cigarettes with the smoke-free products that they’re developing and selling.
They have a total of over 400 dedicated scientists, engineers, and technicians developing less harmful alternatives to cigarettes at two of their Research " Development sites in Switzerland and Singapore. It can be the biggest shift in their history.
Philip Morris International has six multi-billion USD brands including:
Dji Sam Soe 234 was launched in 1913. It is a brand of Kretek cigarettes. It is the best seller of Kretek cigarettes in Indonesia.
L"M was launched by Liggett " Myers in 1953 with the tagline: "American cigarettes of the highest quality with the best filter/.
Longbeach included in Australia and Indonesia in 1999. Longbeach variant include: Longbeach Filter and Longbeach Mild.
Marlboro was launched in 1904. Marlboro is the premium brand. Marlboro variants include: Marlboro Special, Marlboro Menthol, Marlboro Lights, Marlboro Lights Menthol, Marlboro Mix-9 Filter Kretek, Marlboro Flavor Plus, Marlboro Black Menthol, and Heatsticks, a heated tobacco product.
ST Dupont Paris is the brand cigarette designed by Simon Tissot Dupont in 1902. With the black packaging. ST Dupont Paris variants include: filter, lights, menthol, and menthol lights.
U Mild was launched in Indonesia in 22 May 1998 after Indonesian revolution. U Mild is a Mild Kretek cigarette sold in Indonesia.
Scientific Assessment, Engagement and Research " Development (Best practices)-
Their scientific assessment program is built on best practices and guidelines. They cohere to the internationally recognized Good Clinical Practices and Good Laboratory Practices. They continuously share their data with the public for their approval and thoughts about those. This way they also keep themselves engaged with the mass community who smoke and also those want to quit smoking.
Definition and Limitations of Internal Control over Financial Reporting-
PMI’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting.
A company’s internal control over financial reporting includes those policies and procedures that (i) involve to the maintenance of records that, in reasonable detail; accurately and fairly. This must reflect the transactions and dispositions of the assets of the company.
(ii) Dispense rational assurance that transactions are recorded as necessary to permit preparation of monetary statements in accordance with generally accepted accounting principles, and that receipts and overheads of the company are being made only in accordance with authorizations of management; and
(iii) Bear logical assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets. All of that could have a material effect on the monetary statements.
Employees-
PMI employed around 80,600 employees on 31 December, 2017. The number includes full time, part time and also contractual members. They were hired from different countries. At December 31, 2017, we employed approximately 80,600 people worldwide, including full time, temporary and part-time staff. Our businesses are subject to a number of laws and regulations relating to our relationship with our employees. Generally, these laws and regulations are specific to the location of each business. In addition, in accordance with European Union requirements, we have established a European Works Council composed of management and elected members of our workforce. We believe that our relations with our employees and their representative organizations are excellent.
Compensation-
In May 2017, the shareholders of PMI approved their incentive plan (“2017 plan”), which actually replaced the 2012 plan. Under the new plan, PMI mentioned that they may concede to eligible workers restricted share and restricted share units, performance based s cash, and equity awards. They also approved the stock compensation plan which replaced the 2008 plan for Non-Employee Directors, and there will be no additional grants under the replaced plan.
Restricted share unit (RSU) awards
Performance share unit (PSU) awards
Postemployment Benefit Plans
Pension and Postretirement Benefit Plans
Comprehensive Earnings
v Restricted share unit (RSU) awards-
PMI also decided to grant RSU awards to the workers who are eligible for that. Recipients may not sell, assign, pledge or otherwise impede such award. In 2017 they the RSU award was followed and it’s in chart 1. In chart 2 the weighted-average grant date fair value of the RSU awards granted to PMI employees and the recorded compensation expense related to RSU awards are mentioned. In chart 3 share and fair value information for PMI RSU awards that vested are mentioned.
v Performance share unit (PSU) awards-
PMI decided that they may grant PSU awards to certain executives. This award requires the achievement of certain performance factors, which are predetermined at the time of grant, over a 3 year performance cycle. PMI’s PSU awards in 2017 and the grant date fair value of the PSU awards granted to PMI employees and the recorded compensation expense are given in chart 4 " 5. As of December31, 2017 PMI had $34 million of total unrecognized compensation cost related to non-vested PSU awards. This cost was over a weighted-average performance cycle period of two years, or upon death, disability or reaching the age of 58. PMI did not grant any PSU awards during 2015.
v Pension and Postretirement Benefit Plans-
For pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $7,287 million, $6,953 million and $5,835 million, respectively, as of December 31, 2017. The projected plan assets were $6,934 million, $6,622 million and $5,009 million, respectively, as of December 31, 2016 (chart 6).
v Postemployment Benefit Plans-
PMI was certain of its sponsor postemployment benefit plans covering considerably all salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. $144 million was the Net postemployment costs for December 31, 2017. The no was $166 million and $187 million for the years ended December 31, 2016 and 2015, respectively. The estimated net loss for the postemployment benefit plans that will be amortized from accumulated other comprehensive losses into net postemployment costs during 2018 is approximately $60 million. the amounts recognized in resulted postemployment costs on PMI's consolidated balance sheets at December 31, 2017 and 2016, were $671 million and $727 million.
v Comprehensive Earnings (Losses)-
The amounts recorded in accumulated other comprehensive losses at December 31, 2017 mentioned in chart 7.
The greatest contribution PMI can ever make is to replace cigarettes with less-harmful alternatives, which is why I like PMI as a brand. Though they are working with a harmful thing but they are considering changing the situation by replacing it with something better. They are trying to transform from a cigarette maker company to a smoke-free technology leader. Their groundbreaking research, which they have developed and are commercializing smoke-free products that are enjoyable for adult smokers and are a much better choice than cigarette smoking which is attracting a lot of executives to work with them.
Charts
Chart- 1
During 2017, the activity for RSU awards was as follows:
Number of
Shares
Weighted-
Average Grant
Date Fair Value
Per Share
Balance at January 1, 2017
4,500,990 $
82.08
Granted
1,210,210
98.59
Vested
(2,022,856)
78.19
Forfeited
(75,944)
88.82
Balance at December 31, 2017
3,612,400 $
89.65
Chart- 2
RSU awards to
employees " the recorded compensation expense related to RSU awards were as follows:
(in millions, except per RSU
award granted)
Total Weighted-
Average Grant
Date Fair Value of
RSU Awards
Granted
Weighted-
Average Grant
Date Fair Value
Per RSU Award
Granted
Compensation
Expense related
to RSU Awards
2017
$ 119
98.59 $
111
2016
$ 108
89.03 $
126
2015
$ 126
82.28 $
166
Chart -3
MI RSU awards that vested were as
Follows:
(Dollars in million)
Shares of RSU
Awards that Vested
Grant Date Fair
Value of Vested
Shares of RSU
Awards
Total Fair Value
of RSU Awards
that Vested
2017
2,022,856 $
158$
208
2016
2,3.2,525 $
202$
210
2015
2,711,974 $
217$
224
Chart-4
During 2017, the activity for PSU awards was as follows:
Number of
Shares
Grant Date
Fair Value
Subject to TSR
Performance
Factor
Per Share
Grant Date
Fair Value
Subject to Other
Performance
Factors
Per Share
Balance at January1, 2017
427,570 $
104.60 $
89.02
Granted
393,460
128.72
98.29
Vested
Forfeited
Balance at December 31,2017
821,030 $
116.16 $
93.46
Chart- 5
(2017 and 2016)grant date fair value of the PSU awards granted to PMI employees and the
recorded compensation expense related to PSU awards were as follows:
(in millions, except per PSU award
granted)
PSU Grant Date Fair Value
Subject to TSR
Performance Factor(
PSU Grant Date Fair Value
Subject to Other
Performance Factors
Compensation
Expense related
to PSU Awards
Total
Per PSU award
Total
Per PSU award
Total
2017
$ 25
$ 128.72 $
19 $
98.29 $
37
2016
$ 22
$ 104.60
19 $
89.02 $
27
Chart- 6
Pension
2017
2018
Retirement
2017
2018
Discount rate
1.51%
1.52%
3.79%
3.68%
Rate of compensation increase
1.65
1.68
Healthcare cost trend rate assumed for next year
6.17
7.15
Ultimate trend rate
4.62
5.08
Year that rate reaches the ultimate trend rate
2029
2029
Chart- 7
Number of
Shares
Grant Date
Fair Value
Subject to TSR
Performance
Factor
Per Share(
Grant Date
Fair Value
Subject to Other
Performance
Factors
Per Share(
Balance at January 1, 2017
427,570 $
104.60 $
89.02
Granted
393,460 $
128.72
98.29
Vested
-----
-----
-----
Forfeited
-----
-----
-----
Balance at December 31, 2017
821,030 $
116.16 $
93.46
REFERENCES
Philip Morris Int. Ltd
www.pmi.com/who-we-are
www.en.wikipedia.org/wiki/Philip_Morris_International
The management structure and leadership at PMI
https://www.pmi.com/our-business/about-us/corporate-governance
Compensation Practice of Philip Morris
www.glassdoor.com/Reviews/Philip-Morris-International-compensation-and-benefits-Reviews-EI_IE7745.0,27_KH28,53.htm
Business " compensation strategies
https://www1.salary.com/PHILIP-MORRIS-INTERNATIONAL-Executive-Salaries.html
https://www.payscale.com/research/US/Employer=Philip_Morris_USA/Hourly_Rate
Compensation related challenges
https://www.pmi.com/our-business/about-us/corporate-governance/board-committees
