Segment Reporting:
PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes and other tobacco 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; accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 3. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.
Segment data were as follows:
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| | | | | | | | | | | |
| For the Years Ended December 31, |
(in millions) | 2013 | | 2012 | | 2011 |
Net revenues: | | | | | |
European Union | $ | 28,303 |
| | $ | 27,338 |
| | $ | 29,768 |
|
Eastern Europe, Middle East & Africa | 20,695 |
| | 19,272 |
| | 17,452 |
|
Asia | 20,987 |
| | 21,071 |
| | 19,590 |
|
Latin America & Canada | 10,044 |
| | 9,712 |
| | 9,536 |
|
Net revenues(1) | $ | 80,029 |
| | $ | 77,393 |
| | $ | 76,346 |
|
Earnings before income taxes: | | | | | |
Operating companies income: | | | | | |
European Union | $ | 4,238 |
| | $ | 4,187 |
| | $ | 4,560 |
|
Eastern Europe, Middle East & Africa | 3,779 |
| | 3,726 |
| | 3,229 |
|
Asia | 4,622 |
| | 5,197 |
| | 4,836 |
|
Latin America & Canada | 1,134 |
| | 1,043 |
| | 988 |
|
Amortization of intangibles | (93 | ) | | (97 | ) | | (98 | ) |
General corporate expenses | (187 | ) | | (210 | ) | | (183 | ) |
Less: | | | | | |
Equity (income)/loss in unconsolidated subsidiaries, net | 22 |
| | 17 |
| | 10 |
|
Operating income | 13,515 |
| | 13,863 |
| | 13,342 |
|
Interest expense, net | (973 | ) | | (859 | ) | | (800 | ) |
Earnings before income taxes | $ | 12,542 |
| | $ | 13,004 |
| | $ | 12,542 |
|
(1) Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.8 billion, $7.7 billion and $8.1 billion for the years ended December 31, 2013, 2012 and 2011, respectively.
55
|
| | | | | | | | | | | |
| For the Years Ended December 31, |
(in millions) | 2013 | | 2012 | | 2011 |
Depreciation expense: | | | | | |
European Union | $ | 190 |
| | $ | 181 |
| | $ | 210 |
|
Eastern Europe, Middle East & Africa | 227 |
| | 211 |
| | 227 |
|
Asia | 277 |
| | 315 |
| | 358 |
|
Latin America & Canada | 85 |
| | 84 |
| | 90 |
|
| 779 |
| | 791 |
| | 885 |
|
Other | 10 |
| | 10 |
| | 10 |
|
Total depreciation expense | $ | 789 |
| | $ | 801 |
| | $ | 895 |
|
Capital expenditures: | | | | | |
European Union | $ | 480 |
| | $ | 391 |
| | $ | 382 |
|
Eastern Europe, Middle East & Africa | 247 |
| | 197 |
| | 133 |
|
Asia | 317 |
| | 277 |
| | 208 |
|
Latin America & Canada | 156 |
| | 127 |
| | 140 |
|
| 1,200 |
| | 992 |
| | 863 |
|
Other | — |
| | 64 |
| | 34 |
|
Total capital expenditures | $ | 1,200 |
| | $ | 1,056 |
| | $ | 897 |
|
|
| | | | | | | | | | | |
| At December 31, |
(in millions) | 2013 | | 2012 | | 2011 |
Long-lived assets: | | | | | |
European Union | $ | 3,403 |
| | $ | 3,065 |
| | $ | 2,938 |
|
Eastern Europe, Middle East & Africa | 1,265 |
| | 1,215 |
| | 1,094 |
|
Asia | 1,758 |
| | 1,824 |
| | 1,681 |
|
Latin America & Canada | 759 |
| | 719 |
| | 678 |
|
| 7,185 |
| | 6,823 |
| | 6,391 |
|
Other | 208 |
| | 139 |
| | 146 |
|
Total long-lived assets | $ | 7,393 |
| | $ | 6,962 |
| | $ | 6,537 |
|
Long-lived assets consist of non-current assets other than goodwill; other intangible assets, net; deferred tax assets, and investments in unconsolidated subsidiaries. PMI’s largest market in terms of long-lived assets is Switzerland. Total long-lived assets located in Switzerland, which is reflected in the European Union segment above, were $1.1 billion, $1.1 billion and $1.0 billion at December 31, 2013, 2012 and 2011, respectively.
Items affecting the comparability of results from operations were as follows:
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• | Asset Impairment and Exit Costs - See Note 5. Asset Impairment and Exit Costs for a breakdown of asset impairment and exit costs by segment. |
| |
• | Acquisitions and Other Business Arrangements - For further details, see Note 6. Acquisitions and Other Business Arrangements. |
