UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
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¨ Preliminary Proxy Statement |
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¨ Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
x Definitive Proxy Statement |
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¨ Definitive Additional Materials | ||
¨ Soliciting Material Under Rule 14a-12 |
Philip Morris International Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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(4) | Date Filed: March 27, 2014 |
2014 PROXY STATEMENT
And Notice of Annual Meeting of Shareholders
To be held on Wednesday, May 7, 2014
March 27, 2014
Dear Fellow Shareholder,
You are cordially invited to join us at the 2014 Annual Meeting of Shareholders of Philip Morris International Inc. (PMI or the Company) to be held on Wednesday, May 7, 2014 at 9:00 a.m., in the Empire State Ballroom at the Grand Hyatt New York, 109 East 42nd Street, New York, New York 10017-5579.
At this years meeting, we will vote on the election of ten directors, the ratification of the selection of PricewaterhouseCoopers SA as the Companys independent auditors, an advisory say-on-pay vote approving executive compensation and, if properly presented, two proposals from shareholders. There will also be a report on the Companys business, and shareholders will have an opportunity to ask questions.
We anticipate that a large number of shareholders will attend the meeting. Because seating is limited, you may bring only one immediate family member as a guest. To attend the meeting, you must present an admission ticket and government-issued photographic identification. To request an admission ticket, please follow the instructions set forth on page 65 in response to Question 4.
The meeting facilities will open at 7:30 a.m. on May 7, 2014. We suggest you arrive early to facilitate your registration and security clearance. Those needing special assistance at the meeting are requested to write to the Companys Corporate Secretary at 120 Park Avenue, New York, New York 10017-5579. For your comfort and security, you will not be permitted to bring any packages, briefcases, large pocketbooks or bags into the meeting. Also, cellular and digital phones, audio tape recorders, laptops and other portable electronic devices, video and still cameras, pagers and pets will not be permitted into the meeting. We thank you in advance for your patience and cooperation with these rules, which assist us in conducting a safe and orderly meeting.
Attached you will find a notice of meeting and proxy statement that contains additional information about the meeting, including the methods that you can use to vote your proxy, such as the telephone or Internet. As we did last year, we are mailing to certain of our shareholders a Notice of Internet Availability of Proxy Materials. This Notice contains instructions on how to access our proxy statement and 2013 Annual Report to Shareholders and vote online. Those shareholders who do not receive the Notice will receive a paper copy of the proxy materials by mail. By furnishing this Notice, we are lowering costs and reducing the environmental impact of our Annual Meeting.
You will note that Mathis Cabiallavetta and Dudley Fishburn have decided not to stand for re-election at the Annual Meeting and to retire from the Board of Directors. Both have been exemplary Directors who have provided invaluable service to our Company. Our heartfelt gratitude goes out to them for their years of dedicated commitment to our Company and its prior parent.
Very sadly, Graham Mackay passed away last December. A real gentleman in every sense of the word, his absence and insightful contributions are sorely missed by all of us.
Your vote is important. I encourage you to sign and return your proxy card, or use telephone or Internet voting prior to the meeting, so that your shares of common stock will be represented and voted at the meeting even if you cannot attend.
Sincerely, |
Sincerely, | |
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LOUIS C. CAMILLERI CHAIRMAN OF THE BOARD |
ANDRÉ CALANTZOPOULOS CHIEF EXECUTIVE OFFICER |
For further information about the Annual Meeting, please call toll-free 1-866-713-8075.
PMI 2014 Proxy Statement 1
PHILIP MORRIS INTERNATIONAL INC. |
NOTICE OF 2014 ANNUAL MEETING OF SHAREHOLDERS
Date and Time | 9:00 a.m. on Wednesday, May 7, 2014 | |
Place | Empire State Ballroom Grand Hyatt New York 109 East 42nd Street New York, New York 10017-5579 | |
Items of Business | (1) To elect ten directors. | |
(2) To ratify the selection of PricewaterhouseCoopers SA as independent auditors for the Company for the fiscal year ending December 31, 2014. | ||
(3) To vote on an advisory resolution approving executive compensation. | ||
(4) To vote on two shareholder proposals, if properly presented at the meeting. | ||
(5) To transact other business properly coming before the meeting. | ||
Who Can Vote | Only shareholders of record of shares of common stock at the close of business on March 14, 2014 (the Record Date) are entitled to notice of and to vote at the meeting, or at any adjournments or postponements of the meeting. Each shareholder of record on the Record Date is entitled to one vote for each share of common stock held. On March 14, 2014, there were 1,580,406,677 shares of common stock issued and outstanding. | |
Voting of Proxies and Deadline for Receipt |
All properly executed written proxies, and all properly completed proxies submitted by telephone or Internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy, unless the proxy is revoked before the meeting. Proxies submitted by telephone or Internet must be received by 11:59 p.m., EDT, on May 6, 2014. | |
2013 Annual Report | A copy of our 2013 Annual Report is enclosed. | |
Date of Mailing | This notice and the proxy statement are first being mailed to shareholders on or about March 27, 2014. |
Jerry Whitson
Deputy General Counsel and Corporate Secretary
March 27, 2014
WE URGE EACH SHAREHOLDER TO PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY CARD OR TO USE TELEPHONE OR INTERNET VOTING. SEE THE QUESTION AND ANSWER SECTION FOR INFORMATION ABOUT VOTING BY TELEPHONE OR INTERNET, HOW TO REVOKE A PROXY, AND HOW TO VOTE YOUR SHARES OF COMMON STOCK IN PERSON. PLEASE NOTE THAT YOU MUST OBTAIN AN ADMISSION TICKET IN ORDER TO ATTEND THE MEETING. TO OBTAIN AN ADMISSION TICKET, PLEASE FOLLOW THE INSTRUCTIONS SET FORTH ON PAGE 65 IN RESPONSE TO QUESTION 4.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 7, 2014: The Companys Proxy Statement and 2013 Annual Report to Shareholders are available at www.pmi.com/investors.
2 PMI 2014 Proxy Statement
TABLE OF CONTENTS |
PMI 2014 Proxy Statement 3
PROXY STATEMENT SUMMARY |
This proxy statement contains proposals to be voted on at our Annual Meeting, and other information about our Company and our corporate governance practices. We provide below a brief summary of certain information contained in this proxy statement. The summary does not contain all of the information you should consider. Please read the entire proxy statement carefully before voting.
2013 Business Performance Highlights
We met or exceeded two of our performance target ranges in 2013, narrowly missed our target for adjusted diluted earnings per share (while we met our mid to long-term growth target of 10.0% to 12.0%, our 10.0% constant currency growth fell marginally below the target of 10.5% to 12.5% that the Compensation Committee had set for 2013), and fell short of three measures as we encountered an extremely harsh operating environment characterized by persistent macro-economic weakness and resulting total market volume declines in certain geographies, as well as a particularly difficult market dynamic in the Philippines.
2013 Performance Targets and Results
Further Highlights:
¡ | Dividend increased by 10.6% to an annualized rate of $3.76 per share |
¡ | Share Repurchases of $6.0 billion |
¡ | 2011-2013 Total Shareholder Return (TSR) up by 67.7% |
¡ | Substantial progress in achieving strategic goals (see page 31) |
4 PMI 2014 Proxy Statement
PROXY STATEMENT SUMMARY |
2013 Executive Compensation Highlights
¡ | Our shareholders approved, on an advisory basis, our 2012 executive compensation by a vote of 96.78% of the votes cast. |
¡ | Approximately 83% of the total direct compensation delivered to our Chairman, our CEO and our other named executive officers was variable and tied to performance. |
¡ | For cash bonus purposes, the Compensation and Leadership Development Committee assigned PMI an incentive compensation business rating of 85 for 2013 versus our ratings of 110 for 2012 and 140 for 2011. For equity award purposes, the Committee assigned a stock business rating of 95 for 2013 versus our ratings of 120 for 2012 and 130 for 2011. The lower business ratings in 2013 reflect our results in the difficult operating environment and the Committees commitment to linking pay to performance. |
¡ | When Mr. Calantzopoulos was promoted to CEO on May 8, 2013, his base salary was not increased and his annual incentive compensation award target was set one-third lower than the level previously associated with the Chairman and CEO position, from 300% to 200%. |
¡ | When Mr. Camilleri stepped down from the CEO position on May 8, 2013, he remained as Chairman of the Board, his base salary was reduced from $1,750,000 to $1,000,000, and he ceased to be eligible for annual incentive compensation awards thereafter. |
¡ | The Committee determined to review increases to base salaries of executive officers every two years instead of annually. In addition, for the second year in a row, the Committee determined not to increase the base salaries of the Swiss-based executive officers. |
¡ | The Committee realigned the variable compensation mix for senior management to increase the equity component relative to the cash component to better reflect market practices and to further enhance the focus of senior executives on longer-term performance, while remaining mindful of our objective to minimize equity dilution. |
¡ | The Committee also reduced total variable compensation targets, effective January 1, 2014, resulting in average reductions in total targeted direct compensation (base salary, cash incentives and equity awards) of approximately 9%-10% for the most senior executives. |
¡ | Company executives continued to increase their dialogue with investors on the subjects of corporate governance and executive compensation and to report the results of those conversations to the Committee. |
PMI 2014 Proxy Statement 5
PROXY STATEMENT SUMMARY |
Shareholder Agenda Items
Item 1 Election of Directors
It is proposed that ten directors be elected to hold office until the next Annual Meeting of Shareholders and until their successors have been elected. Under the heading Election of Directors you will find important information concerning the nominees, including their experience, skills and qualifications, and strengths they bring to the Board, and the process by which the Nominating and Corporate Governance Committee has recommended to the Board, and the Board has approved, the persons named.
Item 2 Ratification of the Selection of Independent Auditors
The Audit Committee has selected PricewaterhouseCoopers SA as the Companys independent auditors for the fiscal year ending December 31, 2014, and has directed that management submit the selection of independent auditors to shareholders for ratification at the Annual Meeting. Shareholder ratification of the selection of PricewaterhouseCoopers SA as the Companys independent auditors is not required by the Companys by-laws or otherwise. However, we are submitting the selection of PricewaterhouseCoopers SA to the shareholders for ratification as a matter of good corporate practice.
Item 3 Advisory Vote Approving Executive Compensation
We are asking our shareholders to approve, on an advisory basis, our named executive officers compensation as described in this proxy statement. This annual say-on-pay resolution gives our shareholders the opportunity to express their views on our named executive officers compensation at each Annual Meeting of Shareholders.
Item 4 Shareholder Proposal on Lobbying
Item 5 Shareholder Proposal on Animal Testing
2014 Shareholder Vote Recommendations
The Board of Directors makes the following recommendations to shareholders:
Boards Recommendation | Page | |||
FOR each nominee | 12 | |||
Item 2: Ratification of the Selection of Independent Auditors |
FOR | 57 | ||
FOR | 58 | |||
AGAINST | 59 | |||
AGAINST | 60 |
6 PMI 2014 Proxy Statement
BOARD OPERATIONS AND GOVERNANCE |
PMI 2014 Proxy Statement 7
BOARD OPERATIONS AND GOVERNANCE |
Committees and 2013 Meetings |
Current Members | Purpose, Authority and Responsibilities | ||
AUDIT
2013 Meetings: 9 |
- Lucio A. Noto (Incoming Chair) - Mathis Cabiallavetta - J. Dudley Fishburn (Outgoing Chair) - Jennifer Li - Sergio Marchionne - Stephen M. Wolf |
Purpose: to assist the Board in its oversight of: ¡ the integrity of the financial statements and financial reporting processes and systems of internal control; ¡ the qualifications, independence and performance of the independent auditors; ¡ the internal audit function; and ¡ the Companys compliance with legal and regulatory requirements.
Authority and Responsibilities: ¡ sole authority for appointing, compensating, retaining and overseeing the work of the independent auditors; ¡ evaluate the internal audit function; ¡ evaluate the compliance function; ¡ review financial risk assessment and management; and ¡ establish whistleblower procedures and review claims of improper conduct. |
8 PMI 2014 Proxy Statement
BOARD OPERATIONS AND GOVERNANCE |
Committees and 2013 Meetings |
Current Members | Purpose, Authority and Responsibilities | ||
COMPENSATION AND LEADERSHIP DEVELOPMENT
2013 Meetings: 5 |
- Stephen M. Wolf (Chair) - Harold Brown - J. Dudley Fishburn - Sergio Marchionne - Robert B. Polet |
Purpose: ¡ discharge the Boards responsibilities relating to executive compensation; ¡ produce a report for inclusion in the proxy statement; and ¡ review succession plans for the CEO and other senior executives.
Authority and Responsibilities: ¡ review and approve the Companys overall compensation philosophy and design; ¡ review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate his performance and determine and approve his compensation; ¡ review and approve the compensation of all executive officers; ¡ recommend to the Board compensation plans and administer and make awards under such plans and review the cumulative effect of its actions; ¡ monitor compliance by executives with our stock ownership requirements; ¡ review and assist the development of executive succession plans, evaluate and make recommendations to the Board regarding potential CEO candidates and evaluate and approve candidates to fill other senior executive positions; ¡ review and discuss with management proposed disclosures regarding executive compensation matters; and ¡ recommend to the Board whether the Compensation Discussion and Analysis should be accepted for inclusion in the proxy statement and annual report. | ||
FINANCE
2013 Meetings: 4 |
- Jennifer Li (Incoming Chair) - Harold Brown - Mathis Cabiallavetta (Outgoing Chair) - J. Dudley Fishburn - Sergio Marchionne - Kalpana Morparia - Lucio A. Noto - Robert B. Polet - Carlos Slim Helú - Stephen M. Wolf |
Purpose, Authority and Responsibilities: ¡ monitor PMIs financial performance and condition; ¡ oversee sources and uses of cash flow and capital structure; ¡ advise the Board on dividends, share repurchases and other financial matters; ¡ advise the Board on PMIs long-term financing plans, short-term financing plans and credit facilities; ¡ monitor PMIs cash management function; ¡ monitor PMIs pension plans, including funded status and performance; and ¡ monitor PMIs investor relations and stock market performance. | ||
NOMINATING AND CORPORATE GOVERNANCE
2013 Meetings: 3 |
- Kalpana Morparia (Chair) - Mathis Cabiallavetta - J. Dudley Fishburn - Jennifer Li - Sergio Marchionne - Lucio A. Noto - Robert B. Polet - Stephen M. Wolf |
Purpose: ¡ identify qualified candidates for Board membership; ¡ recommend nominees for election at the annual meeting; ¡ advise the Board on corporate governance matters; and ¡ oversee self-evaluation of the Board and each Committee.
Authority and Responsibilities: ¡ review qualifications of prospective candidates for director; ¡ consider performance of incumbent directors; ¡ make recommendations to the Board regarding director independence and the function, composition and structure of the Board and its Committees; ¡ recommend corporate governance guidelines; and ¡ review director compensation. | ||
PRODUCT INNOVATION AND REGULATORY AFFAIRS
2013 Meetings: 4 |
- Harold Brown (Chair) - Mathis Cabiallavetta - J. Dudley Fishburn - Kalpana Morparia - Robert B. Polet - Carlos Slim Helú - Stephen M. Wolf |
Purpose, Authority and Responsibilities: ¡ monitor and review the development of new product strategies, with a particular focus on products that have the potential to reduce the risk of smoking-related diseases in comparison to cigarettes; ¡ monitor and review key legislative, regulatory and public policy issues; ¡ monitor and review the Companys programs on societal alignment issues; and ¡ meet with PMIs Scientific Advisory Board to review scientific developments. |
PMI 2014 Proxy Statement 9
BOARD OPERATIONS AND GOVERNANCE |
10 PMI 2014 Proxy Statement
BOARD OPERATIONS AND GOVERNANCE |
Summary of Corporate Governance Practices
The Nominating and Corporate Governance Committee of the Board reviews our corporate governance practices regularly and proposes modifications to our principles and other key governance practices as warranted for adoption by the Board. The following summarizes our key principles and practices and refers you to the pages of this proxy statement where you will find a more detailed discussion of various items:
¡ | the Board has a policy providing that all directors are elected annually and by majority vote rather than by a plurality (see page 13); |
¡ | the Audit, Compensation and Leadership Development, and Nominating and Corporate Governance Committees consist entirely of independent directors, all other Board Committees consist entirely of non-management directors, and the Board has no executive committee; |
¡ | the Board elects the Chairman annually; |
¡ | the non-management directors elect the Presiding Director annually (see page 7); |
¡ | directors may be removed with or without cause; |
¡ | the non-management directors meet in executive session regularly without any members of management being present; |
¡ | the Board assesses its performance and the performance of Board Committees annually; |
¡ | PMI has not adopted a poison pill rights plan; |
¡ | the Board has adopted a clawback policy providing for the recovery of bonuses and incentive compensation in appropriate circumstances (see page 37); |
¡ | the Board has adopted stock ownership requirements and an anti-hedging policy for executives intended to align their interests with those of our shareholders and to protect against inappropriate risk taking (see page 37); |
¡ | we do not gross up our named executive officers to offset their taxes on imputed income on the limited perquisites we provide; |
¡ | the Philip Morris International Inc. 2012 Performance Incentive Plan includes a double-trigger feature to the vesting provisions following a change in control as described on page 53; and |
¡ | as its primary long-term incentive tool and its only form of equity award, the Board uses deferred stock awards that are awarded on the basis of a rolling prior three-year total shareholder return and generally vest three years after grant these awards are substantially less dilutive than stock options and the amount of the annual awards is based on completed performance and awards are valued on the grant date which, by design, is the date we release our annual earnings information. |
PMI 2014 Proxy Statement 11
ELECTION OF DIRECTORS |
12 PMI 2014 Proxy Statement
ELECTION OF DIRECTORS |
PMI 2014 Proxy Statement 13
ELECTION OF DIRECTORS |
Current Committee Membership | ||||||||||||||||||
Nominee | Director Since |
Nationality | Experience and Highlights |
Independent | Audit | Compensation and Leadership Development |
Finance | Nominating and Corporate Governance |
Product Innovation and Regulatory Affairs | |||||||||
Harold Brown |
2008 | USA |
¡ Civic Leadership ¡ Geopolitical and Governmental Affairs ¡ Science and Technology ¡ Academic and Research |
ü | ü | ü | Chair | |||||||||||
André Calantzopoulos |
2013 | Greece / Switzerland |
¡ Senior Executive ¡ Tobacco Industry ¡ Operations ¡ Global Business |
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Louis C. Camilleri |
2008 | UK |
¡ Senior Executive ¡ Tobacco Industry ¡ Operations ¡ Global Business ¡ Financial |
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Jennifer Li |
2010 | China |
¡ Senior Executive ¡ Financial ¡ High-Tech ¡ Global Business |
ü | ü | Chair (following Annual Meeting) |
ü | |||||||||||
Sergio Marchionne |
2008 | Italy / Canada |
¡ Senior Executive ¡ Financial ¡ Law ¡ Global Consumer Products |
ü | ü | ü | ü | ü | ||||||||||
Kalpana Morparia |
2011 | India |
¡ Senior Executive ¡ Global Finance ¡ Law ¡ Risk Management |
ü | ü | Chair | ü | |||||||||||
Lucio A. Noto |
2008 | USA |
¡ Senior Executive ¡ Operations ¡ Financial ¡ Global Business |
Presiding Director |
Chair (following |
ü | ü | |||||||||||
Robert B. Polet |
2011 | Netherlands |
¡ Senior Executive ¡ Global Luxury Products ¡ Marketing |
ü | ü | ü | ü | ü | ||||||||||
Carlos Slim Helú |
2008 | Mexico |
¡ Senior Executive ¡ Civic Leadership ¡ Global Business ¡ Tobacco Industry |
ü | ü | |||||||||||||
Stephen M. Wolf |
2008 | USA |
¡ Senior Executive ¡ Global Business ¡ Operations |
ü | ü | Chair | ü | ü | ü |
14 PMI 2014 Proxy Statement
ELECTION OF DIRECTORS |
Director Nominees
HAROLD BROWN | ||
Primary Occupation: Counselor, Center for Strategic and International Studies Washington, DC
Director since: 2008
Age: 86 |
Professional Experience: Dr. Brown has been a Counselor at the Center for Strategic and International Studies since 1992. He was a partner of Warburg Pincus, a leading private equity firm, from 1990 until he retired from the firm in January 2007. Previously, he was Chairman of the Foreign Policy Institute at The Johns Hopkins University School of Advanced International Studies. Dr. Brown is President Emeritus of the California Institute of Technology and served as Secretary of Defense for the United States from 1977 through 1981.
Other Directorships and Associations: Dr. Brown is a member of the board of directors of Chemical Partners, Inc. and is an emeritus trustee of the California Institute of Technology, of the Trilateral Commission (North America) and of the RAND Corporation. Dr. Brown served as a director of Altria Group, Inc. from 1983 to April 2003, and again from December 2004 to March 2008.
PMI Board Committees: Dr. Brown is Chair of the Product Innovation and Regulatory Affairs Committee and a member of the Compensation and Leadership Development and Finance Committees.
Director Qualifications: Dr. Brown combines a scientists intellect with an extensive knowledge and unique experience of international geopolitical and governmental affairs that are of particular benefit to the Board in his role as Chair of the Product Innovation and Regulatory Affairs Committee.
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ANDRÉ CALANTZOPOULOS | ||
Primary Occupation: Chief Executive Officer
Directors since: 2013
Age: 56 |
Professional Experience: Mr. Calantzopoulos became our Chief Executive Officer immediately following our Annual Meeting of Shareholders on May 8, 2013. He served as our Chief Operating Officer since our spin-off on March 28, 2008. Mr. Calantzopoulos served as PMIs President and Chief Executive Officer between 2002 and the date of our spin-off. He joined the Company in 1985 and worked extensively across Central Europe, including as Managing Director of PM Poland and President of the Eastern European Region.
Director Qualifications: Mr. Calantzopouloss intellect and all-encompassing knowledge of the Company serve him well as CEO and as a member of the Board. He has played an instrumental role in numerous key initiatives, including critical innovative developments such as the new architecture that has revitalized the Marlboro brand, new product development and revamped consumer engagement activities that drove our broad-based market share gains in both OECD and non-OECD markets.
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PMI 2014 Proxy Statement 15
ELECTION OF DIRECTORS |
LOUIS C. CAMILLERI | ||
Primary Occupation: Chairman
Director since: 2008
Age: 59 |
Professional Experience: Mr. Camilleri is our Chairman, having served as our Chairman and Chief Executive Officer from our spin-off in 2008 until last years Annual Meeting of Shareholders. Previously, he was Chairman and Chief Executive Officer of Altria Group, Inc., positions he had held since 2002. From November 1996 to April 2002, he served as Senior Vice President and Chief Financial Officer of Altria Group, Inc. He had been employed continuously by Altria Group, Inc. and its subsidiaries (including Philip Morris International Inc.) in various capacities since 1978.
Other Directorships and Associations: Mr. Camilleri was appointed to the Board of Directors of América Móvil, S.A.B. de C.V. in April 2011, and previously served on the Board of Telmex International SAB from December 2009 to April 2011. Mr. Camilleri was a director of Kraft Foods Inc. from March 2001 to December 2007 and was Krafts Chairman from September 2002 to March 2007.
Director Qualifications: Mr. Camilleris extensive and detailed knowledge of the Company and the tobacco industry and an incisive strategic view, combined with his transparency and open-mindedness, serve him well in his ongoing role as Chairman of the Board.
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JENNIFER LI | ||
Primary Occupation: Chief Financial Officer, Baidu Inc., China
Director since: 2010
Age: 46 |
Professional Experience: Ms. Li joined Baidu Inc., the largest Internet search engine in China and the third largest independent search engine in the world, in March 2008, as Chief Financial Officer, responsible for a wide range of corporate functions, including Finance, Human Resources, International Operations, Marketing, Communications and Purchasing. Previously, from 1994 to 2008, she held a number of senior finance positions at various General Motors companies in China, Singapore, the United States and Canada, rising to Chief Financial Officer of GMs business in China and Financial Controller of the North American Operations of GMAC.
PMI Board Committees: Ms. Li is the incoming Chair of the Finance Committee and a member of the Audit and Nominating and Corporate Governance Committees.
Director Qualifications: Ms. Lis strong financial expertise, experience in a fast growing, high-tech business and Asian background strengthen the Boards depth and global perspective.
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16 PMI 2014 Proxy Statement
ELECTION OF DIRECTORS |
SERGIO MARCHIONNE | ||
Primary Occupation: Chief Executive Officer, Fiat S.p.A., Italy Chairman, CNH Industrial N.V., Italy
Director since: 2008
Age: 61 |
Professional Experience: Mr. Marchionne has been Chief Executive Officer of Fiat S.p.A. since June 2004, on whose Board of Directors he has served since May 2003. He is also Chairman of CNH Industrial N.V. Mr. Marchionne has been a member of the Board of SGS S.A. since May 2001, serving as the Chief Executive and Managing Director from 2002 to 2004 and Chairman since March 2006. Mr. Marchionne is expected to step down from the SGS Board in the near future. Mr. Marchionne is a director of Exor S.p.A., an investment company that, directly or indirectly, holds significant equity investments in Fiat and CNH. Mr. Marchionne is a chartered accountant and lawyer who, since beginning his career in 1983, has held executive positions at several firms prior to assuming his current positions.
Other Directorships and Associations: Mr. Marchionne was a member of the Supervisory Board of Hochtief AG from 2006 to 2007 and a member of the Board of Directors of UBS from 2007 to 2010.
PMI Board Committees: Mr. Marchionne serves on the Audit, Compensation and Leadership Development, Finance, and Nominating and Corporate Governance Committees.
Director Qualifications: Trained as both a lawyer and an accountant and currently the chief executive of an international automotive manufacturer, Mr. Marchionne brings strategic insights and a hands-on multi-disciplinary approach to the Board, along with experience in many of the same international markets in which the Company does business.
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KALPANA MORPARIA | ||
Primary Occupation: Chief Executive Officer, J.P. Morgan India Private Ltd., India
Director since: 2011
Age: 64 |
Professional Experience: Ms. Morparia assumed her current position with J.P. Morgan India Private Ltd. in 2008, and is a member of J.P. Morgans Asia Pacific Executive Committee. Prior to joining J.P. Morgan India, Ms. Morparia served as Joint Managing Director of ICICI Bank, Indias second largest bank, from 2001 to 2008 and the Vice Chair of ICICIs insurance and asset management business from 2007 to 2008.
Other Directorships and Associations: Ms. Morparia is a director of Dr. Reddys Laboratories Ltd. and CMC Ltd.
PMI Board Committees: Ms. Morparia is Chair of the Nominating and Corporate Governance Committee and is a member of the Finance and Product Innovation and Regulatory Affairs Committees.
Director Qualifications: With her strong executive leadership experience in finance, and her deep knowledge of international business, Ms. Morparia provides a keen perspective on economies in Asia, the Companys largest region.
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PMI 2014 Proxy Statement 17
ELECTION OF DIRECTORS |
LUCIO A. NOTO | ||
Primary Occupation: Managing Partner, Midstream Partners, LLC, New York
Director since: 2008
Age: 75 |
Professional Experience: Mr. Noto assumed his current position with Midstream Partners, LLC in March 2001. He retired as Vice Chairman of ExxonMobil Corporation in January 2001, a position he had held since the merger of the Exxon and Mobil companies in November 1999. Before the merger, Mr. Noto was Chairman and Chief Executive Officer of Mobil Corporation. Mr. Noto had been employed by Mobil continuously since 1962.
Other Directorships and Associations: Mr. Noto is a director of Penske Automotive Group, Inc. and RHJ International. He also served on the boards of IBM from 1995 to 2008, Altria Group, Inc. from 1998 to 2008, Shinsei Bank from 2005 to 2008 and Commercial International Bank (Cairo) from 2006 to 2009.
PMI Board Committees: Mr. Noto is the Presiding Director, the incoming Chair of the Audit Committee and a member of the Finance and Nominating and Corporate Governance Committees.
Director Qualifications: As the former chief financial officer and chief executive officer of a large, multi-national oil company, together with his past governance experience serving on the boards and audit committees of a number of major international companies, Mr. Noto brings an extensive knowledge of internal controls and risk assessment to his Audit Committee role and a strong hands-on approach as Presiding Director.
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ROBERT B. POLET | ||
Primary Occupation: Chairman, Safilo Group S.p.A., Italy
Director since: 2011
Age: 58 |
Professional Experience: Mr. Polet is currently serving as Chairman of Safilo Group S.p.A. He was President, Chief Executive Officer and Chairman of the Management Board of the Gucci Group from 2004 until March 2011. Previously, Mr. Polet spent 26 years in the Unilever Group in a variety of executive roles, including President of Unilevers Worldwide Ice Cream and Frozen Foods division, Chairman of Unilever Malaysia, Chairman of Van den Bergh and Executive Vice President of Unilevers European Home and Personal Care division.
Other Directorships and Associations: Mr. Polet is a director of Reed Elsevier PLC/NV, William Grant & Sons and Crown Topco Limited, parent company of Vertu.
PMI Board Committees: Mr. Polet serves on the Compensation and Leadership Development, Finance, Nominating and Corporate Governance, and Product Innovation and Regulatory Affairs Committees.
Director Qualifications: In his previous position, Mr. Polet was responsible for managing such global luxury brands as Gucci, Bottega Veneta, Yves Saint Laurent, Boucheron, Balenciaga, Sergio Rossi, Alexander McQueen and Stella McCartney. He brings to the Board his considerable entrepreneurial business experience in the global luxury business and his deep executive background running major consumer packaged goods businesses, as well as his extensive knowledge of global markets.
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18 PMI 2014 Proxy Statement
ELECTION OF DIRECTORS |
CARLOS SLIM HELÚ | ||
Primary Occupation: Chairman, Carso Infraestructura y Construcción, S.A.B. de C.V., Mexico
Director since: 2008
Age: 74 |
Professional Experience: Mr. Slim has served as Chairman of Carso Infraestructura y Construcción, S.A.B. de C.V. since 2005. Mr. Slim previously served as Chairman of Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V., Chairman and, later, Chairman Emeritus of Grupo Carso, S.A. de C.V., as well as Chairman of Teléfonos de México, S.A. de C.V. and Carso Global Telecom, S.A. de C.V., México.
Other Directorships and Associations: From 1997 to 2006, Mr. Slim served as a director of Altria Group, Inc. Mr. Slim served as Chairman Emeritus of Grupo Financiero Inbursa, S.A.B. de C.V. from 2004 to 2007. He also has served as Chairman Emeritus of América Móvil, S.A.B. de C.V. since 2005. He is also Chairman of Fundación Telemex, A.C. and Fundación Carlos Slim, A.C.
PMI Board Committees: Mr. Slim serves on the Finance and Product Innovation and Regulatory Affairs Committees.
Director Qualifications: One of the worlds most successful businessmen, Mr. Slim provides the Board with an entrepreneurial point of view and unique perspective on the complexities of operating successfully in both developed and emerging economies.
|
STEPHEN M. WOLF | ||
Primary Occupation: Chairman, R.R. Donnelley & Sons Company, Chicago, IL
Director since: 2008
Age: 72 |
Professional Experience: Mr. Wolf has been Chairman of R.R. Donnelley & Sons Company since March 2004. He has been Managing Partner of Alpilles, LLC since April 2003. Previously, he was Chairman of US Airways Group from November 2001 to April 2003, and Chief Executive Officer of US Airways, Inc. from January 1996 to November 1998. Prior to joining US Airways, he had served since August 1994 as senior advisor in the investment banking firm of Lazard Frères & Co., LLC. From 1987 to July 1994, he was Chairman and Chief Executive Officer of UAL Corporation and United Air Lines, Inc.
Other Directorships and Associations: Mr. Wolf is Chairman of the Advisory Board of Trilantic Capital Partners, and a director of Chrysler Group LLC. From 1993 to 2008, Mr. Wolf served as a director of Altria Group, Inc. He is a trustee emeritus of the Brookings Institute.
PMI Board Committees: Mr. Wolf is Chair of the Compensation and Leadership Development Committee and a member of the Audit, Finance, Nominating and Corporate Governance, and the Product Innovation and Regulatory Affairs Committees.
Director Qualifications: As a former chief executive officer of four New York Stock Exchange listed companies, and with experience on the boards of a number of companies, Mr. Wolf provides a strong focus in his position as Chair of the Compensation and Leadership Development Committee in ensuring that the Company has the right compensation processes in place and programs to develop future leaders.
|
PMI 2014 Proxy Statement 19
COMPENSATION OF DIRECTORS |
Directors who are full-time employees of the Company receive no additional compensation for services as a director. With respect to non-employee directors, the Companys philosophy is to provide competitive compensation necessary to attract and retain high-quality non-employee directors. The Board believes that a substantial portion of director compensation should consist of equity-based compensation to assist in aligning directors interests with the interests of shareholders.
The Nominating and Corporate Governance Committee periodically benchmarks director compensation against the Companys Compensation Survey Group (defined on page 36, considers the appropriateness of the form and amount of director compensation and makes recommendations to the Board concerning such compensation with a view toward attracting and retaining qualified directors. Based on the latest available data, total compensation for the Companys non-employee directors ranked in the top quartile of the Companys Compensation Survey Group.
Non-employee directors receive an annual cash retainer of $125,000 and a retainer of $5,000 for each Committee of which they are a member. The Presiding Director receives an annual retainer of $25,000 and the chairs of each Committee receive an annual retainer of $35,000 for additional services rendered in connection with those responsibilities. Directors do not receive meeting fees. |
Summary of Directors Compensation
PMI provides competitive compensation levels to attract and retain high-quality non-employee directors, and it uses a substantial component of equity-based compensation.
Compensation levels are benchmarked to our Compensation Survey Group.
|
| ||||||
Annual cash retainer: |
$125,000 | |||||||
Annual equity award: |
$175,000 | |||||||
Presiding Director retainer: |
$25,000 | |||||||
Committee Chair retainer: |
$35,000 | |||||||
Committee member retainer: |
$5,000 | |||||||
Committee meeting fees: |
None | |||||||
Stock Options: |
|
None
|
|
Pursuant to the 2008 PMI Stock Compensation Plan for Non-Employee Directors, each non-employee director then in office received an annual share award on May 8, 2013 of that number of shares of common stock having an aggregate fair market value of $175,000 on the date of grant (1,862 shares of common stock with a fair market value of $94.015 per share).
The following table presents the compensation received by the non-employee directors for fiscal year 2013.
Name | Fees Earned or Paid in Cash ($) |
Stock ($) |
All Other ($) |
Total ($) | ||||
Harold Brown |
170,000 | 175,000 | 5,575 | 350,575 | ||||
Mathis Cabiallavetta |
175,000 | 175,000 | _ | 350,000 | ||||
J. Dudley Fishburn |
180,000 | 175,000 | 12,509 | 367,509 | ||||
Jennifer Li |
137,500 | 175,000 | _ | 312,500 | ||||
Graham Mackay |
137,500 | 175,000 | _ | 312,500 | ||||
Sergio Marchionne |
142,500 | 175,000 | _ | 317,500 | ||||
Kalpana Morparia |
163,750 | 175,000 | _ | 338,750 | ||||
Lucio A. Noto |
168,750 | 175,000 | _ | 343,750 | ||||
Robert B. Polet |
141,250 | 175,000 | _ | 316,250 | ||||
Carlos Slim Helú |
132,500 | 175,000 | _ | 307,500 | ||||
Stephen M. Wolf |
180,000 | 175,000 | _ | 355,000 |
(1) | The Board believes it is important every two years to invite a family member to accompany non-employee directors at the Boards offsite meeting to enhance the collegiality of the Board. The Company reimburses the cost of such attendance and the cost of resulting income taxes. |
20 PMI 2014 Proxy Statement
COMPENSATION OF DIRECTORS |
PMI 2014 Proxy Statement 21
STOCK OWNERSHIP INFORMATION |
Ownership of Equity Securities
The following table shows the number of shares of common stock beneficially owned as of March 14, 2014, by each director, nominee for director and executive officer named in the Summary Compensation Table and the directors and executive officers of the Company as a group. Unless otherwise indicated, each of the named individuals has sole voting and investment power with respect to the shares shown. The beneficial ownership of each director, nominee for director and executive officer, and of the directors, nominees for director and executive officers as a group, is less than 1% of the outstanding shares.
Name | Amount and Nature of Beneficial Ownership (1) |
|||
Harold Brown |
42,762 | |||
Mathis Cabiallavetta |
42,004 | |||
André Calantzopoulos |
735,370 | |||
Louis C. Camilleri |
1,464,307 | |||
Marc Firestone |
170,710 | |||
J. Dudley Fishburn |
25,952 | |||
Jennifer Li |
9,817 | |||
Sergio Marchionne |
53,687 | |||
Kalpana Morparia |
4,775 | |||
Lucio A. Noto |
82,789 | |||
Jacek Olczak |
201,676 | |||
Matteo Pellegrini |
265,573 | |||
Robert B. Polet |
6,304 | |||
Carlos Slim Helú |
317,429 | |||
Stephen M. Wolf |
67,742 | |||
Miroslaw Zielinski |
197,557 | |||
Group (27 persons) |
4,714,469 |
(1) | Includes shares of deferred stock as follows: Dr. Brown, 28,900; Mr. Cabiallavetta, 42,004; Mr. Calantzopoulos, 255,940; Mr. Camilleri, 439,790; Mr. Firestone, 153,710; Mr. Fishburn, 25,952; Mr. Noto, 43,211; Mr. Olczak, 112,490; Mr. Pellegrini, 82,920; Mr. Slim, 11,368; Mr. Wolf, 44,420; Mr. Zielinski, 89,230; and group, 1,839,105. Also includes 17,085 shares as to which beneficial ownership is disclaimed by Mr. Noto (shares held by spouse). Also includes 300,000 shares as to which Mr. Slim shares voting and/or investment power with others and has disclaimed beneficial ownership except to the extent of his pecuniary interest therein. Also includes 13,862 shares held in trust as to which Dr. Brown shares voting and/or investment power with others and as to which he has not disclaimed beneficial ownership. |
In addition to the shares shown in the table above, as of March 14, 2014, those directors who participate in the Companys director deferred fee program had the following PMI share equivalents allocated to their accounts: Mr. Noto, 69,525; Mr. Slim, 6,028; and Mr. Wolf, 25,534. See Compensation of Directors on page 21 for a description of the deferred fee program for directors.
22 PMI 2014 Proxy Statement
STOCK OWNERSHIP INFORMATION |
The following table sets forth information regarding persons or groups known to the Company to be beneficial owners of more than 5% of the outstanding common stock.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned |
Percent of Common March 14, 2014 |
||||||
Capital Research Global Investors A division of Capital Research and Management Company (CRMC) 33 South Hope Street Los Angeles, CA 90071 |
97,570,982 | (1) | 6.17 | % | ||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 |
89,132,748 | (2) | 5.64 | % |
(1) | According to a Schedule 13G/A, dated February 7, 2014, filed with the U.S. Securities and Exchange Commission on February 13, 2014, by Capital Research and Management Company presenting the number of shares as of December 31, 2013. |
(2) | According to a Schedule 13G/A, dated February 6, 2014, filed with the U.S. Securities and Exchange Commission on February 10, 2014, by BlackRock, Inc. presenting the number of shares as of December 31, 2013. |
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 2013 all reports for the Companys executive officers and directors that were required to be filed under Section 16 of the Securities Exchange Act of 1934 were filed on a timely basis, except that Mr. Robert B. Polet inadvertently failed to timely file forms to report seven purchases of shares of the Companys common stock as the result of a brokers purchasing the shares from the proceeds of cash dividends on the Companys common stock without the knowledge of Mr. Polet. When Mr. Polet was subsequently advised of these transactions, he promptly reported them.
PMI 2014 Proxy Statement 23
COMPENSATION DISCUSSION AND ANALYSIS |
Our Compensation Discussion and Analysis outlines the design of our executive compensation program components, the objectives and principles upon which they are based, our 2013 performance and the resulting decisions of the Compensation and Leadership Development Committee to reflect that performance in setting compensation for the Chairman and for the Chief Executive Officer, the named executive officers identified in the Summary Compensation Table on page 40 and the other members of our senior management team.
Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee consists entirely of non-management directors, all of whom our Board has determined are independent within the meaning of the listing standards of the New York Stock Exchange. Its responsibilities are described below and set forth in the Compensation and Leadership Development Committee Charter, which is available on the Companys Web site at www.pmi.com/governance. The members of the Committee are: Stephen M. Wolf (Chair), Harold Brown, J. Dudley Fishburn, Sergio Marchionne and Robert B. Polet. The Committee met five times in 2013. The Chair of the Committee, in consultation with the other members, sets meeting agendas. The Committee reports its actions and recommendations to the Board.
Program Design, Philosophy and Objectives
24 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Components of our Total Direct Compensation Program
Component | Key Characteristics | Key Objective | ||
Base Salary | ¡Fixed component of compensation reflecting the scope of the executives role, performance and market pay practices. |
¡Intended to provide sufficient competitive base pay to attract, develop and retain world-class leaders. | ||
Incentive Compensation (IC) Awards | ¡Annual performance-based variable cash award for meeting pre-established performance goals. ¡Performance is assessed against annual operating targets, progress towards strategic initiatives and the executives individual performance. ¡Final award is based on the Committees assessment of Company performance and the executives individual performance factor. |
¡Intended to motivate executives to meet or exceed our performance goals and strategic objectives in a given fiscal year. | ||
Equity Awards | ¡Performance-based long-term variable equity award based on the executives contribution to increasing shareholder value. ¡Contributes to all five of the Committees program design objectives while minimizing share dilution and protecting against excessive risk taking. ¡Amount of each annual award is based on the Committees assessment of our total shareholder return (TSR) over the previous three-year period relative to the performance of our Compensation Survey Group, our tobacco peer group and the S&P 500 Index and the executives individual performance factor. ¡Equity awards generally vest three years after being granted. |
¡Intended to motivate our executives to achieve superior returns for our shareholders over the long term. |
PMI 2014 Proxy Statement 25
COMPENSATION DISCUSSION AND ANALYSIS |
Changes in Compensation Structure
26 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Target Compensation Mix
Source: Towers Watson
PMI 2014 Proxy Statement 27
COMPENSATION DISCUSSION AND ANALYSIS |
Methodology for Linking Pay to Performance
28 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
PMI 2014 Proxy Statement 29
COMPENSATION DISCUSSION AND ANALYSIS |
30 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
In addition to these six quantitative performance measures, the Committee also evaluated our performance qualitatively on the following key strategic initiatives:
¡ | our product innovation initiatives, which resulted in significant share gains for Marlboro and other major brands; |
¡ | the continued deployment of our new strategic framework for adult consumer-focused marketing and sales and improved trade engagement, which are proving to be highly successful in key markets; |
¡ | significant progress achieved in our plans to develop and commercialize reduced-risk products, including our new plans to market an e-cigarette by the end of 2014 and the acceleration of our anticipated launch dates for other reduced-risk product platforms; |
¡ | sustained progress towards improving tax structures, which continued to gain momentum in most of the world; |
¡ | the successful completion of key business development initiatives, including the purchase of the 20% remaining equity interest in our Mexican cigarette business, an equity purchase that brought our interest in the Algerian cigarette business to 25%, the acquisition of a 20% interest in our distributor in Russia, and the restructuring of our business in Egypt to enhance profitability and growth prospects; |
¡ | our continued efforts to pursue comprehensive, evidence-based regulation governing the manufacture, marketing, sale, use and taxation of tobacco products, but also acknowledging intensifying regulatory challenges; |
¡ | our headquarters restructuring and the management compensation reductions discussed on page 26; |
¡ | our initiation of a comprehensive plan to further improve organizational effectiveness; |
¡ | achieving our 2013 gross productivity and cost savings target of $300 million; |
¡ | our efforts and results in improving our health and safety record, with a record improvement in our lost-time injury rate; |
¡ | our continued efforts and results in improving our environmental record, particularly noting that we were one of only five Global 500 Consumer Staples companies to qualify for the Carbon Performance Leadership Index and that our score increased six points over 2012 to 97%, the highest rating in the tobacco sector; |
¡ | our continued progress in addressing child and migrant labor issues associated with tobacco farming; |
¡ | our continued progress in nurturing and developing our talent pool and future leadership and increasing our diversity; and |
¡ | our robust control, compliance and integrity programs. |
The Committee also considered our setbacks, including share loss in Japan, lower share growth in Indonesia, and the continued growth in illicit trade.
PMI 2014 Proxy Statement 31
COMPENSATION DISCUSSION AND ANALYSIS |
Analysis of 2013 Stock Business Rating: For purposes of determining the Company performance rating for equity awards, the Committee considered total shareholder return (TSR) relative to the returns of our Compensation Survey Group, our tobacco peer group and the S&P 500 Index. While the Committee assesses the Companys annual performance each year to set annual incentive compensation awards, it takes a longer-term view and considers our TSR over a rolling three-year period to set equity awards. From January 1, 2011 through December 31, 2013, as shown in the table below, our TSR was 67.7%, somewhat below the TSR of our tobacco peer group, which includes the major American tobacco companies with U.S. dollar earnings that were not comparably affected by currency exchange rates, somewhat above our Compensation Survey Group, and comfortably ahead of the S&P 500 Index.
Source: FactSet.
Note: Peer groups represent the market weighted average return of the group.
(1) | The tobacco peer group consists of Altria, BAT, Imperial Tobacco, Japan Tobacco, Lorillard and Reynolds American. |
(2) | The PMI Compensation Survey Group consists of the following companies with substantial global sales that are direct competitors; or have similar market capitalization; or are primarily focused on consumer products (excluding high technology and financial services); and are companies for which comparative executive compensation data are readily available: Bayer AG, British American Tobacco p.l.c., The Coca-Cola Company, Diageo plc, GlaxoSmithKline, Heineken N.V., Imperial Tobacco Group PLC, Johnson & Johnson, McDonalds Corp., Mondelēz International, Inc., Nestlé S.A., Novartis AG, PepsiCo, Inc., Pfizer Inc., Roche Holding AG, Unilever NV and PLC and Vodafone Group Plc. Compensation Survey Group TSR weights Mondelēzs TSR at 65% of Krafts market capitalization on January 1, 2011, based on Mondelēzs initial market capitalization relative to the combined market capitalization of Mondelēz and Kraft on October 2, 2012, reflecting the split of those two companies via a spin-off. |
32 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Alternative CEO Pay Disclosure: The chart below illustrates the total direct compensation paid to our CEO with respect to performance in 2011, 2012 and 2013, together with the Companys rolling three-year TSRs and IC business ratings for such periods. Effective immediately after the 2013 Annual Meeting of Shareholders, Mr. Calantzopoulos succeeded Mr. Camilleri as CEO. The compensation amounts included in the chart for 2013 are the amounts earned by Mr. Calantzopoulos in his capacity as CEO, annualized to show what his 2013 compensation would have been had he been CEO for the entire year, rather than the proration actually applied. The chart is not a substitute for the SEC required disclosure included in the Summary Compensation Table on page 40. The Summary Compensation Table, in accordance with SEC rules, reflects the equity award paid in the year shown but determined with respect to the prior years performance (i.e., the amount of the equity award paid in 2013 is based on 2012 performance). In contrast, the following chart reflects the equity awards granted for the performance year and is intended to convey the decisions of the Committee with respect to linking the components of total direct compensation to a given years performance.
(1) | The following table sets forth the amount for each component of total direct compensation shown in the chart above. 2013 annualized total direct compensation for Mr. Calantzopoulos has been converted to USD at an average exchange rate for 2013 of $1.00 = 0.9268 CHF. |
Year | Base Salary ($) |
IC Award ($) |
Equity Award ($) |
Total Direct ($) |
||||||||||||
2011 |
1,750,000 | 8,820,000 | 15,015,789 | 25,585,789 | ||||||||||||
2012 |
1,750,000 | 7,500,000 | 14,500,816 | 23,750,816 | ||||||||||||
2013 |
1,596,151 | 2,680,578 | 8,987,823 | 13,264,552 |
PMI 2014 Proxy Statement 33
COMPENSATION DISCUSSION AND ANALYSIS |
2013 Individual Performance and Compensation Decisions
34 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
PMI 2014 Proxy Statement 35
COMPENSATION DISCUSSION AND ANALYSIS |
Additional Compensation Policies and Processes
Use of External Market Data
Compensation Survey Group: To ensure that our compensation program remains competitive and aligned with our overall philosophy and objectives, the Committee compares our compensation and benefit practices and levels of pay to a Compensation Survey Group consisting of companies with substantial global sales that compete with us for talent and:
¡ | are primarily focused on consumer products (excluding high technology and financial services); or |
¡ | have similar market capitalization; or |
¡ | are direct competitors; and |
¡ | are companies for which comparative executive compensation data are readily available. |
Using these characteristics as our guide, the following 17 companies have been selected as our Compensation Survey Group:
¡ Bayer AG |
¡ British American Tobacco p.l.c. | |
¡ The Coca-Cola Company |
¡ Diageo plc | |
¡ GlaxoSmithKline |
¡ Heineken N.V. | |
¡ Imperial Tobacco Group PLC |
¡ Johnson & Johnson | |
¡ McDonalds Corp. |
¡ Mondelēz International, Inc. | |
¡ Nestlé S.A. |
¡ Novartis AG | |
¡ PepsiCo, Inc. |
¡ Pfizer Inc. | |
¡ Roche Holding AG |
¡ Unilever NV and PLC | |
¡ Vodafone Group Plc |
This survey group consists of companies that are multinationals based in the U.S. and in several European countries, reflecting the fact that, while we are headquartered in the U.S., the core of our businesses, employees and competitors is global in nature. We believe that the resulting data we use to benchmark our program appropriately reflect the geographic locations in which we operate and we supplement this data with local market data in each area where we have significant operations to ensure we have an informed view of both local and global pay practices.
The Committee regularly reviews this survey group to ensure its appropriateness. There has been no change to this survey group in 2013.
36 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
PMI 2014 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS |
38 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
PMI 2014 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS |
The following table sets forth information concerning the cash and non-cash compensation awarded by PMI to our named executive officers: the Chief Executive Officer, Chief Financial Officer and the four most highly compensated officers serving as executive officers on December 31, 2013. These amounts are based on the compensation earned by these officers while employed by PMI for each year. The compensation for Messrs. Firestone, Olczak and Zielinski for 2011 is not shown because they were not named executive officers in that year.
Name and Principal Position | Year | Salary (1) ($) |
Bonus ($) |
Stock ($) |
Non-Equity ($) |
Change in ($) |
All Other ($) |
Total ($) |
||||||||||||||||||||||||
André Calantzopoulos, Chief Executive Officer |
2013 | 1,596,151 | - | 6,566,441 | 2,659,872 | - | 84,148 | 10,906,612 | ||||||||||||||||||||||||
2012 | 1,567,014 | - | 6,894,017 | 3,992,790 | 4,390,062 | 30,361 | 16,874,244 | |||||||||||||||||||||||||
2011 | 1,620,019 | - | 5,396,036 | 5,582,347 | 2,580,045 | 30,503 | 15,208,950 | |||||||||||||||||||||||||
Louis C. Camilleri, Chairman |
2013 | 1,260,959 | - | 14,500,816 | 1,500,000 | - | 293,558 | 17,555,333 | ||||||||||||||||||||||||
2012 | 1,750,000 | - | 15,015,789 | 7,500,000 | 5,578,063 | 460,239 | 30,304,091 | |||||||||||||||||||||||||
2011 | 1,750,000 | - | 9,119,509 | 8,820,000 | 1,456,642 | 483,966 | 21,630,117 | |||||||||||||||||||||||||
Marc Firestone, Senior Vice President and General Counsel |
|
2013 2012 |
|
|
1,079,165 758,366 |
|
|
- 250,000 |
|
|
4,268,275 5,412,373 |
|
|
2,127,898 2,594,494 |
|
|
529,778 254,962 |
|
|
28,013 216,109 |
|
|
8,033,129 9,486,304 |
| ||||||||
Jacek Olczak, Chief Financial Officer |
2013 | 1,033,904 | - | 3,720,924 | 1,875,910 | - | 34,041 | 6,664,779 | ||||||||||||||||||||||||
2012 | 972,358 | - | 2,555,575 | 2,184,837 | 2,714,181 | 42,997 | 8,469,948 | |||||||||||||||||||||||||
Matteo Pellegrini, President, Asia Region |
2013 | 1,017,664 | - | 2,444,952 | 750,364 | - | 541,655 | 4,754,635 | ||||||||||||||||||||||||
2012 | 997,858 | - | 2,802,556 | 1,626,611 | 2,639,670 | 551,879 | 8,618,574 | |||||||||||||||||||||||||
2011 | 1,031,253 | - | 2,541,513 | 2,281,846 | 1,522,063 | 458,311 | 7,834,986 | |||||||||||||||||||||||||
Miroslaw Zielinski, President, EEMA Region & PMI Duty Free |
2013 | 1,001,473 | - | 2,788,041 | 1,175,944 | - | 65,732 | 5,031,190 | ||||||||||||||||||||||||
2012 | 983,679 | - | 2,655,638 | 1,867,490 | 2,363,898 | 46,588 | 7,917,293 | |||||||||||||||||||||||||
(1) | The 2013 base salaries earned in Swiss francs for Messrs. Calantzopoulos, Firestone, Olczak, Pellegrini and Zielinski are converted to U.S. dollars using an average conversion rate for 2013 of $1.00 = 0.9268 CHF. Year-to-year variations in the salaries and other amounts reported for our Swiss payroll-based officers (Messrs. Calantzopoulos, Firestone, Olczak, Pellegrini and Zielinski) result in part from year-to-year variations in exchange rates. |
(2) | The amounts shown in this column represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The number of shares awarded in 2013, together with the grant date values of each award, is disclosed in the Grants of Plan-Based Awards during 2013 table on page 43. |
(3) | Annual incentive compensation awards for our Swiss payroll-based officers are converted to U.S. dollars using the exchange rate on December 31, 2013 of $1.00 = 0.8929 CHF. |
(4) | The amounts shown reflect the change in the present value of benefits under the pension plans listed in the Pension Benefits table. The amounts for all of our named executive officers with the exception of Mr. Firestone are shown as $0 due to a decrease in present value of pension benefits in 2013. The decrease was significantly driven by the mandated use of higher interest rates to discount projected future benefits. Such decreases would reverse in the event lower interest rates are used in future periods. The aggregated amount of decrease is as follows: Mr. Calantzopoulos, ($128,682); Mr. Camilleri, ($4,789,997); Mr. Olczak, ($397,227); Mr. Pellegrini, ($364,293); and Mr. Zielinski, ($295,948). |
(5) | Details of All Other Compensation for each of the named executive officers appear on the following page. |
40 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Name and Principal Position | Year | Allocation ($) |
International ($) |
Personal ($) |
Car ($) |
Tax ($) |
Security (f) ($) |
Totals ($) | ||||||||||||
André Calantzopoulos, |
2013 | - | - | 49,012 | 35,136 | - | - | 84,148 | ||||||||||||
Chief Executive Officer |
2012 | - | - | - | 30,361 | - | - | 30,361 | ||||||||||||
2011 | - | - | - | 30,503 | - | - | 30,503 | |||||||||||||
Louis C. Camilleri, |
2013 | 88,779 | - | 190,948 | 13,831 | - | - | 293,558 | ||||||||||||
Chairman |
2012 | 262,500 | - | 178,137 | 19,602 | - | - | 460,239 | ||||||||||||
2011 | 262,500 | - | 189,838 | 24,329 | - | 7,299 | 483,966 | |||||||||||||
Marc Firestone, |
2013 | - | - | - | 11,218 | 16,795 | - | 28,013 | ||||||||||||
Senior Vice President and General Counsel |
2012 | - | 175,415 | - | 16,829 | 23,865 | - | 216,109 | ||||||||||||
Jacek Olczak, |
2013 | - | - | - | 28,240 | 5,801 | - | 34,041 | ||||||||||||
Chief Financial Officer |
2012 | - | - | - | 27,697 | 15,300 | - | 42,997 | ||||||||||||
Matteo Pellegrini, |
2013 | - | 513,721 | - | 27,934 | - | - | 541,655 | ||||||||||||
President, Asia Region |
2012 | - | 528,342 | - | 23,537 | - | - | 551,879 | ||||||||||||
2011 | - | 431,937 | - | 26,374 | - | - | 458,311 | |||||||||||||
Miroslaw Zielinski, |
2013 | - | - | - | 29,111 | 36,621 | - | 65,732 | ||||||||||||
President, EEMA Region & PMI Duty Free |
2012 | - | - | - | 25,702 | 20,886 | - | 46,588 |
(a) | The amounts shown for all years include contributions to tax-qualified defined contribution plans and contribution credits to the defined contribution component of the unfunded non-qualified plans and are consistent with contributions to all eligible employees. |
(b) | The amounts shown include payments or reimbursements made pursuant to PMIs Long Term Assignment Guidelines, which are designed to facilitate the relocation of employees to positions in other countries by covering expenses over and above those that the employees would have incurred had they remained in their home countries. International assignments and relocations provide a key means for the Company to meet its global employee development and resource needs, and the Long Term Assignment Guidelines ensure that employees have the necessary financial support to help meet cost differences associated with these assignments. The Long Term Assignment Guidelines cover housing, home leave, relocation and education expenses, as well as other program allowances. Currently, there are approximately 980 participants in the program. |
(c) | For reasons of security and personal safety, PMI requires Messrs. Calantzopoulos and Camilleri to use Company aircraft for all travel. The amounts shown are the incremental cost of personal use of Company aircraft to PMI and include the cost of trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hourly maintenance contract costs, hangar or aircraft parking costs, fuel costs based on the average annual cost of fuel per hour flown, and other smaller variable costs. Fixed costs that would be incurred in any event to operate Company aircraft (e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips, and flight crew salaries) are not included. Messrs. Calantzopoulos and Camilleri have each agreed to reimburse the Company for his personal usage of Company aircraft to the extent that the aggregate incremental cost of such usage exceeds $200,000 per fiscal year; each is responsible for his own taxes on any imputed taxable income resulting from personal use of Company aircraft. |
(d) | Amounts shown for Messrs. Calantzopoulos and Camilleri include the incremental cost of personal use of driver services that PMI provided for reasons of security and personal safety. With respect to Messrs. Calantzopoulos, Firestone, Olczak, Pellegrini and Zielinski, amounts include the cost, amortized over a 5-year period, of a vehicle, including insurance, maintenance, repairs and taxes. Executives are responsible for their own taxes on any imputed taxable income resulting from car expenses. |
(e) | The tax preparation services are pursuant to PMI policies that apply to all Swiss payroll-based management employees. |
(f) | These amounts include the costs associated with Company-provided home security systems. |
PMI 2014 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS |
The following are the specific amounts paid by the Company under the Long Term Assignment Guidelines:
Name and Principal Position | Year | Housing ($) |
Home ($) |
Relocation ($) |
Education ($) |
Other ($) |
Totals ($) | |||||||||
Marc Firestone, |
2013 | - | - | - | - | - | - | |||||||||
Senior Vice President and General Counsel |
2012 | - | - | 165,301 | - | 10,114 | 175,415 | |||||||||
Matteo Pellegrini, |
2013 | 416,728 | 42,452 | - | 47,208 | 7,333 | 513,721 | |||||||||
President, Asia Region |
2012 | 391,748 | 81,118 | - | 42,526 | 12,950 | 528,342 | |||||||||
2011 | 332,177 | 38,953 | - | 52,040 | 8,767 | 431,937 |
Amounts that were paid or incurred in currency other than U.S. dollars are converted to U.S. dollars using average conversion rates for 2013 of $1.00 = 0.9268 CHF and $1.00 = 7.7567 HKD. |
(a) | Other Program Allowances include tax preparation services paid by the Company under the Long Term Assignment Guidelines. |
42 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Grants of Plan-Based Awards During 2013
Estimated Possible Payouts Under Non-Equity Annual Incentive Plan (1) |
||||||||||||||||||||
Name and Principal Position | Grant Date | Threshold ($) |
Target ($) |
Maximum ($) |
All Other Stock Awards: Number of Shares of Stock or Units (2) (#) |
Grant Date ($) |
||||||||||||||
André Calantzopoulos, |
2013 | 0 | 3,191,372 | 7,180,587 | ||||||||||||||||
Chief Executive Officer |
2/7/2013 | 74,260 | 6,566,441 | |||||||||||||||||
Louis C. Camilleri, |
2013 | 0 | 1,826,712 | 4,110,102 | ||||||||||||||||
Chairman |
2/7/2013 | 163,990 | 14,500,816 | |||||||||||||||||
Marc Firestone, |
2013 | 0 | 2,015,927 | 4,535,837 | ||||||||||||||||
Senior Vice President and General Counsel |
2/7/2013 | 48,270 | 4,268,275 | |||||||||||||||||
Jacek Olczak, |
2013 | 0 | 1,923,182 | 4,327,160 | ||||||||||||||||
Chief Financial Officer |
2/7/2013 | 42,080 | 3,720,924 | |||||||||||||||||
Matteo Pellegrini, |
2013 | 0 | 1,263,310 | 2,842,448 | ||||||||||||||||
President, Asia Region |
2/7/2013 | 27,650 | 2,444,952 | |||||||||||||||||
Miroslaw Zielinski, |
2013 | 0 | 1,243,143 | 2,797,072 | ||||||||||||||||
President, EEMA Region & PMI Duty Free |
2/7/2013 | 31,530 | 2,788,041 |
(1) | The estimated possible payouts for Messrs. Calantzopoulos and Camilleri are prorated to reflect the different roles during 2013. The estimated possible payouts for Messrs. Calantzopoulos, Firestone, Olczak, Pellegrini and Zielinski are converted to U.S. dollars using the exchange rate on December 31, 2013 of $1.00 = 0.8929 CHF. The numbers in these columns represent the range of potential cash awards as of the time of the grant. Actual awards paid under these plans for 2013 are found in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
(2) | On February 7, 2013, each of our named executive officers, received equity awards in the form of deferred shares. The number of shares awarded was based on the grant date fair market value, determined by using the average of the high and the low trading prices of PMI stock on that date of $88.425. The closing price of PMI stock on that date was $89.82. These equity awards are scheduled to vest on February 17, 2016. Dividend equivalents are payable on a quarterly basis throughout the vesting restriction period. |
On February 6, 2014, the following named executive officers received equity awards, which will vest on February 15, 2017, with a fair market value on the grant date as follows: Mr. Calantzopoulos, 94,870 shares, $7,373,771; Mr. Camilleri, 86,720 shares, $6,740,312; Mr. Firestone, 43,510 shares, $3,381,815; Mr. Olczak, 38,230 shares, $2,971,427; Mr. Pellegrini, 19,980 shares, $1,552,946; and Mr. Zielinski, 24,260 shares, $1,885,609. The amount of these awards was determined based on 2013 performance. Awards for Messrs. Calantzopoulos and Camilleri were prorated to reflect the different roles during 2013. |
PMI 2014 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS |
Outstanding Equity Awards as of December 31, 2013
Stock Awards | |||||||||||||||
Name and Principal Position | Stock Award Grant Date |
Number of Shares or Units of Stock that Have not (#) |
Market Value of Have not Vested (3) ($) | ||||||||||||
André Calantzopoulos, Chief Executive Officer |
2/7/2013 | 74,260 | 6,470,274 | ||||||||||||
2/9/2012 | 86,810 | 7,563,755 | |||||||||||||
2/10/2011 | 90,850 | 7,915,761 | |||||||||||||
2/4/2009 | 25,000 | (4) | 2,178,250 | ||||||||||||
Louis C. Camilleri, Chairman |
2/7/2013 | 163,990 | 14,288,449 | ||||||||||||
2/9/2012 | 189,080 | 16,474,540 | |||||||||||||
2/10/2011 | 153,540 | 13,377,940 | |||||||||||||
Marc Firestone, Senior Vice President and General Counsel |
2/7/2013 | 48,270 | 4,205,765 | ||||||||||||
4/16/2012 | 61,930 | (5) | 5,395,961 | ||||||||||||
Jacek Olczak, Chief Financial Officer |
2/7/2013 | 42,080 | 3,666,430 | ||||||||||||
2/9/2012 | 32,180 | 2,803,843 | |||||||||||||
2/10/2011 | 35,630 | 3,104,442 | |||||||||||||
Matteo Pellegrini, President, Asia Region |
2/7/2013 | 27,650 | 2,409,145 | ||||||||||||
2/9/2012 | 35,290 | 3,074,818 | |||||||||||||
2/10/2011 | 42,790 | 3,728,293 | |||||||||||||
Miroslaw Zielinski, President, EEMA Region & PMI Duty Free |
2/7/2013 | 31,530 | 2,747,209 | ||||||||||||
2/9/2012 | 33,440 | 2,913,627 | |||||||||||||
2/10/2011 | 38,640 | 3,366,703 |
(1) | Except as stated in footnotes (4) and (5) below, these awards vest according to the following schedule: |
Grant Date |
Vesting Schedule | |
2/07/2013 |
100% of award vests on 2/17/2016. | |
2/09/2012 |
100% of award vests on 2/18/2015. | |
2/10/2011 |
100% of award vests on 2/19/2014. |
(2) | Dividends and dividend equivalents paid in 2013 on outstanding restricted and deferred stock awards for each of our named executive officers were as follows: Mr. Calantzopoulos, $981,208; Mr. Camilleri, $1,817,754; Mr. Firestone, $345,175; Mr. Olczak, $382,162; Mr. Pellegrini, $385,024; and Mr. Zielinski, $376,183. |
(3) | Based on the closing market price of PMI common stock on December 31, 2013 of $87.13. |
(4) | Special grant that subsequently vested on February 13, 2014. |
(5) | Hiring grant that will vest on April 16, 2015. |
44 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Stock Option Exercises (1) and Stock Vested During 2013
Stock Awards | ||||||||||
Name and Principal Position | Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) | ||||||||
André Calantzopoulos, Chief Executive Officer |
88,900 | 8,038,249 | ||||||||
Louis C. Camilleri, Chairman |
222,440 | 20,112,802 | ||||||||
Marc Firestone, Senior Vice President and General Counsel |
- | - | ||||||||
Jacek Olczak, Chief Financial Officer |
39,277 | (2) | 3,529,080 | |||||||
Matteo Pellegrini, President, Asia Region |
45,647 | (2) | 4,105,049 | |||||||
Miroslaw Zielinski, President, EEMA Region & PMI Duty Free |
47,827 | (2) | 4,302,162 |
(1) | The Company does not issue stock options. |
(2) | Includes a special award of 9,357 shares granted in 2008. |
On February 13, 2014, vesting restrictions lapsed on a special deferred stock award granted in 2009 of 25,000 shares for Mr. Calantzopoulos.
On February 19, 2014, vesting restrictions lapsed for the following restricted and deferred stock awards granted in 2011: Mr. Calantzopoulos, 90,850 shares; Mr. Camilleri, 153,540 shares; Mr. Olczak, 35,630 shares; Mr. Pellegrini, 42,790 shares; and Mr. Zielinski, 38,640 shares.
PMI 2014 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS |
The Pension Benefits table and the Non-Qualified Deferred Compensation table below generally reflect amounts accumulated as a result of the named executive officers service over their full careers with us, our prior parent company and affiliates. The increments related to 2013 are reflected in the Change in Pension Value column of the Summary Compensation Table above or, in the case of defined contribution plans, in the All Other Compensation footnote. Our plans providing pension benefits are described below the Pension Benefits table, and our defined contribution plans are described below in the Non-Qualified Deferred Compensation table.
Name and Principal Position | Plan Name | Number of (#) |
Present Value ($) |
Payments During Last Fiscal Year ($) | ||||||
André Calantzopoulos, Chief Executive Officer |
Pension Fund of Philip Morris in Switzerland | 32.00 | 12,134,671 | - | ||||||
IC Pension Plan of Philip Morris in Switzerland | 8.92 | 2,059,442 | - | |||||||
Supplemental Plan of Philip Morris in Switzerland | 8.00 | 5,529,310 | - | |||||||
Louis C. Camilleri, Chairman |
Retirement Plan for Salaried Employees | 18.50 | 1,046,747 | - | ||||||
Benefit Equalization Plan (BEP) | 9.50 | 4,064,642 | - | |||||||
Supplemental Management Employees Retirement Plan (SERP) | 26.33 | 7,520,350 | - | |||||||
Supplemental Equalization Plan (SEP) | 35.00 | 39,256,372 | - | |||||||
Marc Firestone, Senior Vice President and General Counsel |
Pension Fund of Philip Morris in Switzerland | 1.75 | 490,671 | - | ||||||
IC Pension Plan of Philip Morris in Switzerland | 0.92 | 34,649 | - | |||||||
Supplemental Plan of Philip Morris in Switzerland | 1.75 | 259,419 | - | |||||||
Jacek Olczak, Chief Financial Officer |
Pension Fund of Philip Morris in Switzerland | 24.00 | 5,795,954 | - | ||||||
IC Pension Plan of Philip Morris in Switzerland | 7.92 | 381,354 | - | |||||||
Supplemental Plan of Philip Morris in Switzerland | 5.00 | 1,311,829 | - | |||||||
Matteo Pellegrini, President, Asia Region |
Pension Fund of Philip Morris in Switzerland | 27.00 | 6,656,450 | - | ||||||
IC Pension Plan of Philip Morris in Switzerland | 8.92 | 1,929,972 | - | |||||||
Supplemental Plan of Philip Morris in Switzerland | 8.00 | 1,603,199 | - | |||||||
Miroslaw Zielinski, President, EEMA Region & PMI Duty Free |
Pension Fund of Philip Morris in Switzerland | 28.00 | 7,026,869 | - | ||||||
IC Pension Plan of Philip Morris in Switzerland | 8.92 | 829,621 | - | |||||||
Supplemental Plan of Philip Morris in Switzerland | 8.00 | 1,477,704 | - |
(1) | As of December 31, 2013, each named executive officers total years of service with PMI or its affiliates were as follows: Mr. Calantzopoulos, 28.92 years; Mr. Camilleri, 35.33 years; Mr. Firestone, 1.71 years; Mr. Olczak, 20.79 years; Mr. Pellegrini, 22.46 years; and Mr. Zielinski, 22.33 years; the years shown in this column are the years credited under the named plan for purposes of benefit accrual. Additional years may count for purposes of vesting or early retirement eligibility. Differences between each named executive officers total service and the credited service shown for each plan result from prior transfers between entities sponsoring various plans, including, in the case of Mr. Camilleri, from individual agreements entered into under the Supplemental Management Employees Retirement Plan, or SERP, to reflect his prior service with PMI in Switzerland and with affiliated companies, as further described below. All years of service are taken into account under the Supplemental Equalization Plan, or SEP, formula, but the benefits provided under that plan are reduced by benefits provided under other plans or arrangements to avoid duplication. The Pension Fund of Philip Morris in Switzerland allows employees to purchase additional service credit with contributions from their own funds, and Messrs. Calantzopoulos, Olczak, Pellegrini and Zielinski have purchased 3.08, 15.67, 4.50 and 13.83 years, respectively. |
(2) | The amounts shown in this column for Mr. Camilleri are based on a single life annuity (or, for the SEP, a lump sum payment) using the same assumptions applied for year-end 2013 financial disclosure under FASB ASC Topic 715, except that (i) the SEP lump sum is the amount required to purchase an annuity providing the after-tax equivalent of the pension component of that plan assuming an annuity interest rate of 3.75%, and (ii) in accordance with SEC requirements, benefits are assumed to commence at the earliest date on which, assuming continued employment, the individual would be eligible for benefits that are not reduced for early commencement. |
See Note 13 to our Consolidated Financial Statements for a description of our FASB ASC Topic 715 assumptions. Like all present value amounts, the amounts shown in this column change as the interest rate used to discount projected future benefits is adjusted, with lower interest rates producing higher present values and higher interest rates producing lower present values. |
Our liability to Mr. Camilleri for pension benefits under the BEP, SERP and SEP will be less than the amounts shown in this column as a result of payments made in prior years to a trust that he had established. As of December 31, 2013, these trust amounts would offset our liability for BEP and SERP pension benefits by $5,270,992 and would reduce our liability for SEP pension benefits by $8,902,841. These trust amounts will fluctuate over time with investment performance and as amounts are distributed to cover taxes on trust earnings. For further discussion, see Payments to Trusts on page 49. |
46 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
The amounts shown in this column for Messrs. Calantzopoulos, Firestone, Olczak, Pellegrini and Zielinski are based on a 60% joint and survivor annuity commencing at age 62 (the earliest date on which, assuming continued employment, the individual would be eligible for benefits that are not reduced for early commencement) and the following actuarial assumptions: discount rate 2.30%, mortality table LPP 2010 with a 2013 adjustment of 1.20% for expected improvements in mortality and interest rate on account balances of 4.0%. Present value amounts in Swiss francs are converted to U.S. dollars using the exchange rate on December 31, 2013 of $1.00 = 0.8929 CHF. |
(3) | In addition to the benefits reflected in this column, we generally provide a survivor income benefit allowance, or SIB allowance, to the surviving spouse and children of U.S. payroll-based employees who die while covered by our Retirement Plan for Salaried Employees. Following the death of a retiree who has a spouse and whose retirement benefits are being paid as a single life annuity, the surviving spouse becomes entitled to a SIB allowance four years after the retirees death, in an amount equal to the amount the spouse would have received if the participant had elected to receive monthly payments under the Retirement Plan (and the BEP and SERP, if applicable) in the form of a 50% joint and survivor annuity. The surviving spouse of a participant who dies prior to retirement and prior to age 61 becomes entitled to receive 25% of the base salary of the deceased employee commencing four years after the participants death, provided the spouse has not remarried, and continuing until the deceased employee would have reached age 65. At that time, the surviving spouse receives the same survivor benefit he or she would have received if the deceased employee continued to work until age 65 earning the same base salary as in effect at the time of death. These benefits are reduced by any death benefits payable from the Retirement Plan, the BEP and the SEP. If there is no surviving spouse, SIB allowances for each child equal 10% of the base salary of the deceased employee (to a maximum of 30% of base salary), become payable monthly beginning four years after the employees death, and continue until the child reaches age 25 if a full-time student (age 19 if not). |
PMI 2014 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS |
48 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
PMI 2014 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS |
50 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Non-Qualified Deferred Compensation
Name and Principal Position | Plan Name | Executive ($) |
Registrant ($) |
Aggregate ($) |
Aggregate ($) |
Aggregate ($) | ||||||||
Louis C. Camilleri, Chairman |
Benefit Equalization Plan, Deferred Profit-Sharing (BEP) | 0 | 0 | 23,625 | 0 | 1,831,376 | ||||||||
Supplemental Equalization Plan, Deferred Profit-Sharing (SEP) | 0 | 70,929 | 25,203 | 0 | 2,060,333 |
(1) | The amounts shown as Registrant Contributions in 2013 are contribution allocations under the SEP in 2014 for service during 2013, and in accordance with applicable disclosure rules are also included in the All Other Compensation footnote to the Summary Compensation Table. |
(2) | The amounts in this column consist of amounts credited as earnings for 2013 on account balances attributable to pre-2005 participation under the defined contribution portion of the BEP and earnings credited for 2013 under the SEP with respect to the deemed defined contribution credits and accumulated earnings for 2005 and subsequent years. These amounts do not constitute above-market earnings and, accordingly, are not included in amounts reported in the Summary Compensation Table above. |
(3) | As a result of payments made to Mr. Camilleris trust accounts, as described above and as reported in prior years, our liability to Mr. Camilleri is less than the amount shown in this column. |
Deferred Profit-Sharing, Benefit Equalization and Supplemental Equalization Plans
PMI 2014 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS |
52 PMI 2014 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Employment Contracts, Termination of Employment and Change in Control Arrangements
PMI 2014 Proxy Statement 53
COMPENSATION DISCUSSION AND ANALYSIS |
54 PMI 2014 Proxy Statement
AUDIT COMMITTEE MATTERS |
PMI 2014 Proxy Statement 55
AUDIT COMMITTEE MATTERS |
Independent Auditors Fees
Aggregate fees, including out-of-pocket expenses, paid to our independent auditors, PricewaterhouseCoopers SA, consisted of the following (in millions):
2013 | 2012 | |||||||
Audit Fees (1) |
$ | 23.49 | $ | 22.57 | ||||
Audit-Related Fees (2) |
0.92 | 0.75 | ||||||
Tax Fees (3) |
6.99 | 6.79 | ||||||
All Other Fees (4) |
1.72 | 0.98 | ||||||
TOTAL |
$ | 33.12 | $ | 31.09 |
(1) | Fees and expenses associated with professional services in connection with (i) the audit of the Companys consolidated financial statements and internal control over financial reporting, including statutory audits of the financial statements of the Companys affiliates; (ii) reviews of the Companys unaudited condensed consolidated interim financial statements; and (iii) reviews of documents filed with the Securities and Exchange Commission. |
(2) | Fees and expenses for professional services for audit-related services, which include due diligence related to acquisitions and divestitures, employee benefit plan audits, accounting consultations and procedures relating to various other audit and special reports. |
(3) | Fees and expenses for professional services in connection with U.S. and foreign tax compliance assistance, consultation and advice on various foreign tax matters, transfer pricing documentation for compliance purposes and advice relating to customs and duties compliance matters. |
(4) | Fees and expenses for professional services relating to market analysis and other professional services. |
Pre-Approval Policy
56 PMI 2014 Proxy Statement
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS |
The Board recommends a vote FOR the ratification of the selection of
PricewaterhouseCoopers SA as the Companys independent auditors.
PMI 2014 Proxy Statement 57
ADVISORY VOTE APPROVING EXECUTIVE COMPENSATION |
The Board recommends a vote FOR the resolution approving the compensation of
our named executive officers.
58 PMI 2014 Proxy Statement
SHAREHOLDER PROPOSALS |
PMI 2014 Proxy Statement 59
SHAREHOLDER PROPOSALS |
60 PMI 2014 Proxy Statement
SHAREHOLDER PROPOSALS |
PMI 2014 Proxy Statement 61
SHAREHOLDER PROPOSALS |
62 PMI 2014 Proxy Statement
RELATED PERSON TRANSACTIONS AND CODE OF CONDUCT |
PMI 2014 Proxy Statement 63
AVAILABILITY OF REPORTS, OTHER MATTERS AND 2015 ANNUAL MEETING |
64 PMI 2014 Proxy Statement
EXHIBIT A: QUESTIONS & ANSWERS |
1. | WHAT IS A PROXY? |
It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. André Calantzopoulos, Louis C. Camilleri and Jerry Whitson have each been designated as proxies for the 2014 Annual Meeting of Shareholders.
2. | WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN? |
The Record Date for the 2014 Annual Meeting of Shareholders is March 14, 2014. The Record Date is established by the Board of Directors as required by Virginia law. Shareholders of record (registered shareholders and street name holders) at the close of business on the Record Date are entitled to:
a) | receive notice of the meeting; and |
b) | vote at the meeting and any adjournments or postponements of the meeting. |
3. | WHAT IS THE DIFFERENCE BETWEEN A REGISTERED SHAREHOLDER AND A SHAREHOLDER WHO HOLDS STOCK IN STREET NAME? |
If your shares of stock are registered in your name on the books and records of our transfer agent, you are a registered shareholder.
If your shares of stock are held for you in the name of a broker or bank, then your shares are held in street name. The organization holding your shares of stock is considered the shareholder of record for purposes of voting at the Annual Meeting. The answer to Question 16 describes brokers discretionary voting authority and when your broker or bank is permitted to vote your shares of stock without instruction from you.
4. | HOW DO I OBTAIN ADMISSION TO THE MEETING? |
To obtain admission to the meeting, you must have an admission ticket. Because seating is limited, you may bring only one immediate family member as a guest. In addition, all meeting attendees must present government-issued photographic identification at the meeting. Please submit your request for an admission ticket by Friday, April 18, 2014, by sending an e-mail to asmticket@pmi.com or by mailing or faxing a request to the Companys Corporate Secretary at 120 Park Avenue, New York, New York 10017-5579, facsimile: 1-877-744-5412 (from within the United States) or 1-212-867-1801 (from outside the United States). Please include the following information with your ticket request:
a) | your name and mailing address; |
b) | whether you need special assistance at the meeting; |
c) | the name of your immediate family member, if one will accompany you; and |
d) | if your shares are held for you in the name of your broker or bank, evidence of your stock ownership (such as a letter from your broker or bank or a photocopy of a current brokerage or other account statement) as of March 14, 2014. |
PMI 2014 Proxy Statement 65
EXHIBIT A: QUESTIONS & ANSWERS |
5. | WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK? |
a) | In Writing: All shareholders of record can vote by mailing their completed and signed proxy card (in the case of registered shareholders) or their completed and signed voting instruction form (in the case of street name holders). |
b) | By Telephone and Internet Proxy: All shareholders of record also can vote their shares of common stock by touch-tone telephone using the telephone number on the proxy card, or by Internet, using the procedures and instructions described on the proxy card and other enclosures. Street name holders of record may vote by telephone or Internet if their brokers or banks make those methods available. If that is the case, each broker or bank will enclose instructions with the proxy statement. The telephone and Internet voting procedures, including the use of control numbers, are designed to authenticate shareholders identities, to allow shareholders to vote their shares, and to confirm that their instructions have been properly recorded. Proxies submitted by Internet or telephone must be received by 11:59 p.m., EDT, on May 6, 2014. |
c) | In Person: All shareholders may vote in person at the meeting (unless they are street name holders without a legal proxy). |
6. | HOW CAN I REVOKE A PROXY? |
You can revoke a proxy prior to the completion of voting at the meeting by:
a) | giving written notice to the Corporate Secretary of the Company; |
b) | delivering a later-dated proxy; or |
c) | voting in person at the meeting. |
7. | ARE VOTES CONFIDENTIAL? WHO COUNTS THE VOTES? |
We have established and will maintain a practice of holding the votes of individual shareholders in confidence except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in case of a contested proxy solicitation; (c) if a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or (d) to allow the independent inspectors of election to certify the results of the vote. We will retain an independent tabulator to receive and tabulate the proxies and independent inspectors of election to certify the results.
8. | WHAT ARE THE CHOICES WHEN VOTING ON DIRECTOR NOMINEES, AND WHAT VOTE IS NEEDED TO ELECT DIRECTORS? |
Shareholders may:
a) | vote in favor of a nominee; |
b) | vote against a nominee; or |
c) | abstain from voting on a nominee. |
Directors will be elected by a majority of the votes cast, which will occur if the number of votes cast FOR a director nominee exceeds the number of votes AGAINST that nominee. See Election of Directors Majority Vote Standard in Uncontested Elections on page 13.
The Board recommends a vote FOR all of the nominees.
66 PMI 2014 Proxy Statement
EXHIBIT A: QUESTIONS & ANSWERS |
9. | WHAT ARE THE CHOICES WHEN VOTING ON THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS SA AS THE COMPANYS INDEPENDENT AUDITORS, AND WHAT VOTE IS NEEDED TO RATIFY THEIR SELECTION? |
Shareholders may:
a) | vote in favor of the ratification; |
b) | vote against the ratification; or |
c) | abstain from voting on the ratification. |
The selection of the independent auditors will be ratified if the votes cast FOR exceed the votes cast AGAINST.
The Board recommends a vote FOR this proposal.
10. | WHAT ARE THE CHOICES WHEN VOTING ON THE ADVISORY SAY-ON-PAY RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS? |
Shareholders may:
a) | vote in favor of the resolution; |
b) | vote against the resolution; or |
c) | abstain from voting on the resolution. |
The resolution will be approved if the votes cast FOR exceed the votes cast AGAINST.
The Board recommends a vote FOR this resolution.
The advisory vote on this matter is non-binding. However, the Board of Directors and the Compensation and Leadership Development Committee value the opinions of our shareholders and will consider the outcome of the vote when making future executive compensation decisions.
11. | WHAT ARE THE CHOICES WHEN VOTING ON EACH SHAREHOLDER PROPOSAL PROPERLY PRESENTED AT THE MEETING, AND WHAT VOTE IS NEEDED TO APPROVE ANY OF THE SHAREHOLDER PROPOSALS? |
A separate vote will be held on each shareholder proposal that is properly presented at the meeting. When voting on each of the proposals, shareholders may:
(a) | vote in favor of the proposal; |
(b) | vote against the proposal; or |
(c) | abstain from voting on the proposal. |
A shareholder proposal will be approved if the votes cast FOR the proposal exceed the votes cast AGAINST.
The Board recommends a vote AGAINST each of the shareholder proposals.
12. | WHAT IF A SHAREHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY? |
Shareholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given, proxies that are signed and returned will be voted FOR the election of all director nominees, FOR the proposal to ratify the selection of PricewaterhouseCoopers SA as the Companys independent auditors, FOR the advisory say-on-pay resolution approving the compensation of our named executive officers, and AGAINST each of the shareholder proposals.
PMI 2014 Proxy Statement 67
EXHIBIT A: QUESTIONS & ANSWERS |
13. | WHO IS ENTITLED TO VOTE? |
You may vote if you owned stock as of the close of business on March 14, 2014. Each share of common stock is entitled to one vote. As of March 14, 2014, the Company had 1,580,406,677 shares of common stock outstanding.
14. | HOW DO I VOTE IF I PARTICIPATE IN THE DIVIDEND REINVESTMENT PLAN? |
The proxy card you have received includes your dividend reinvestment plan shares. You may vote your shares through the Internet, by telephone or by mail, all as described on the enclosed proxy card.
15. | WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD? |
It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 or you can reach Computershare at 1-877-745-9350 (from within the United States or Canada) or 1-781-575-4310 (from outside the United States or Canada), or via e-mail at pmi@computershare.com.
16. | WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY? |
If you are a street name holder of shares, you should have received a voting instruction form with the proxy statement sent from your broker or bank. Your shares held in street name may be voted only on certain routine matters when you do not provide your broker or bank with voting instructions. For example, the ratification of the selection of PricewaterhouseCoopers SA as independent auditors of the Company is considered a routine matter for which brokers or banks may vote uninstructed shares. When a proposal is not a routine matter (such as the election of director nominees, say-on-pay advisory votes and shareholder proposals) and the broker or bank has not received voting instructions from the street name holder with respect to that proposal, that broker or bank cannot vote the shares on that proposal. This is called a broker non-vote. Therefore, it is important that you provide instructions to your broker or bank with respect to your vote on these non-routine matters.
17. | ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED? |
Abstentions and broker non-votes will not be included in vote totals and will not affect the outcome of the vote.
18. | MAY SHAREHOLDERS ASK QUESTIONS AT THE MEETING? |
Yes. The Chairman will answer shareholders questions of general interest during a designated portion of the meeting. In order to provide an opportunity for everyone who wishes to speak, shareholders will be limited to two minutes. Shareholders may speak a second time only after all others who wish to speak have had their turn. When speaking, shareholders must direct questions and comments to the Chairman and confine their remarks to matters that relate directly to the business of the meeting.
19. | HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING? |
Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to conduct our meeting, a majority of our outstanding shares of common stock as of March 14, 2014, must be present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and shares of record held by a broker, bank or other agent (Broker Shares) that are voted on any matter are included in determining the number of votes present. Broker Shares that are not voted on any matter will not be included in determining whether a quorum is present.
68 PMI 2014 Proxy Statement
EXHIBIT B: RECONCILIATIONS |
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments to Net Revenues for the Impact of Currency and Acquisitions
For the Years Ended December 31,
($ in millions)
(Unaudited)
Reported Net Revenues |
Less Excise Taxes |
Reported Net Revenues excluding Excise Taxes |
Less Currency |
Less Acquisi- tions |
Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions |
% Change in Reported Net Revenues excluding Excise Taxes |
||||||||||||||||||||||||||||||
Reported | Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||
2013 Reconciliation: |
||||||||||||||||||||||||||||||||||||
European Union |
$ | 28,303 | $ | 19,707 | $ | 8,596 | $ | 205 | $ | - | $ | 8,391 | 0.8 | % | (1.6 | )% | (1.6 | )% | ||||||||||||||||||
EEMA |
20,695 | 11,929 | 8,766 | (98 | ) | - | 8,864 | 5.2 | % | 6.4 | % | 6.4 | % | |||||||||||||||||||||||
Asia |
20,987 | 10,486 | 10,501 | (726 | ) | - | 11,227 | (6.2 | )% | 0.3 | % | 0.3 | % | |||||||||||||||||||||||
Latin America & Canada |
10,044 | 6,690 | 3,354 | (146 | ) | - | 3,500 | 1.0 | % | 5.4 | % | 5.4 | % | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total |
$ | 80,029 | $ | 48,812 | $ | 31,217 | $ | (765 | ) | $ | - | $ | 31,982 | (0.5 | )% | 1.9 | % | 1.9 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
2012 Reconciliation: |
||||||||||||||||||||||||||||||||||||
European Union |
$ | 27,338 | $ | 18,812 | $ | 8,526 | ||||||||||||||||||||||||||||||
EEMA |
19,272 | 10,940 | 8,332 | |||||||||||||||||||||||||||||||||
Asia |
21,071 | 9,873 | 11,198 | |||||||||||||||||||||||||||||||||
Latin America & Canada |
9,712 | 6,391 | 3,321 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Total |
$ | 77,393 | $ | 46,016 | $ | 31,377 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
Adjustments to Operating Companies Income for the Impact of Currency and Acquisitions
For the Years Ended December 31,
($ in millions)
(Unaudited)
Reported Operating Companies Income |
Less Currency |
Less Acquisi- tions |
Reported Operating Companies Income excluding Currency & Acquisitions |
% Change in Reported Operating Companies Income |
||||||||||||||||||||||||||||
Reported | Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||
2013 Reconciliation: |
||||||||||||||||||||||||||||||||
European Union |
$ | 4,238 | $ | 92 | $ | - | $ | 4,146 | 1.2 | % | (1.0 | )% | (1.0 | )% | ||||||||||||||||||
EEMA |
3,779 | (122 | ) | - | 3,901 | 1.4 | % | 4.7 | % | 4.7 | % | |||||||||||||||||||||
Asia |
4,622 | (548 | ) | - | 5,170 | (11.1 | )% | (0.5 | )% | (0.5 | )% | |||||||||||||||||||||
Latin America & Canada |
1,134 | (64 | ) | - | 1,198 | 8.7 | % | 14.9 | % | 14.9 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total |
$ | 13,773 | $ | (642 | ) | $ | - | $ | 14,415 | (2.7 | )% | 1.9 | % | 1.9 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
2012 Reconciliation: |
||||||||||||||||||||||||||||||||
European Union |
$ | 4,187 | ||||||||||||||||||||||||||||||
EEMA |
3,726 | |||||||||||||||||||||||||||||||
Asia |
5,197 | |||||||||||||||||||||||||||||||
Latin America & Canada |
1,043 | |||||||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||||||
Total |
$ | 14,153 | ||||||||||||||||||||||||||||||
|
|
|
PMI 2014 Proxy Statement 69
EXHIBIT B: RECONCILIATIONS |
Reconciliation of Operating Companies Income to Operating Income
For the Years Ended December 31,
($ in millions)
(Unaudited)
2013 | 2012 | % Change | ||||||||||
Operating companies income |
$ | 13,773 | $ | 14,153 | (2.7 | )% | ||||||
Amortization of intangibles |
(93 | ) | (97 | ) | ||||||||
General corporate expenses |
(187 | ) | (210 | ) | ||||||||
Equity (income)/loss in unconsolidated subsidiaries, net |
22 | 17 | ||||||||||
|
|
|
|
|||||||||
Operating income |
$ | 13,515 | $ | 13,863 | (2.5 | )% | ||||||
|
|
|
|
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income,
excluding Currency and Acquisitions
For the Years Ended December 31,
($ in millions)
(Unaudited)
Reported Operating Companies Income |
Less Asset Impairment & Exit Costs |
Adjusted Operating Companies Income |
Less Currency |
Less Acquisi- tions |
Adjusted Operating Companies Income excluding Currency & Acquisitions |
% Change in Adjusted Operating Companies Income |
||||||||||||||||||||||||||
Adjusted | Adjusted excluding Currency & Acquisitions |
|||||||||||||||||||||||||||||||
2013 Reconciliation: |
||||||||||||||||||||||||||||||||
European Union |
$ | 4,238 | $ | (13 | ) | $ | 4,251 | $ | 92 | $ | - | $ | 4,159 | 1.4 | % | (0.8 | )% | |||||||||||||||
EEMA |
3,779 | (264 | ) | 4,043 | (122 | ) | - | 4,165 | 8.4 | % | 11.6 | % | ||||||||||||||||||||
Asia |
4,622 | (27 | ) | 4,649 | (548 | ) | - | 5,197 | (11.2 | )% | (0.7 | )% | ||||||||||||||||||||
Latin America & Canada |
1,134 | (5 | ) | 1,139 | (64 | ) | - | 1,203 | 5.8 | % | 11.7 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Total |
$ | 13,773 | $ | (309 | ) | $ | 14,082 | $ | (642 | ) | $ | - | $ | 14,724 | (1.1 | )% | 3.4 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
2012 Reconciliation: |
||||||||||||||||||||||||||||||||
European Union |
$ | 4,187 | $ | (5 | ) | $ | 4,192 | |||||||||||||||||||||||||
EEMA |
3,726 | (5 | ) | 3,731 | ||||||||||||||||||||||||||||
Asia |
5,197 | (39 | ) | 5,236 | ||||||||||||||||||||||||||||
Latin America & Canada |
1,043 | (34 | ) | 1,077 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total |
$ | 14,153 | $ | (83 | ) | $ | 14,236 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
70 PMI 2014 Proxy Statement
EXHIBIT B: RECONCILIATIONS |
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
and Adjusted Diluted EPS, excluding Currency
For the Years Ended December 31,
(Unaudited)
2013 | 2012 | % Change | ||||||||||
Reported Diluted EPS |
$ | 5.26 | $ | 5.17 | 1.7 | % | ||||||
Adjustments: |
||||||||||||
Asset impairment and exit costs |
0.12 | 0.03 | ||||||||||
Tax items |
0.02 | 0.02 | ||||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS |
$ | 5.40 | $ | 5.22 | 3.4 | % | ||||||
Less: |
||||||||||||
Currency Impact |
(0.34 | ) | ||||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS, excluding Currency |
$ | 5.74 | $ | 5.22 | 10.0 | % | ||||||
|
|
|
|
Reconciliation of Operating Cash Flow to Free Cash Flow, and
Free Cash Flow, excluding Currency
For the Years Ended December 31,
($ in millions)
(Unaudited)
2013 | 2012 | % Change | ||||||||||
Net cash provided by operating activities (operating cash flow) |
$ | 10,135 | $ | 9,421 | 7.6 | % | ||||||
Less: |
||||||||||||
Capital expenditures |
1,200 | 1,056 | ||||||||||
|
|
|
|
|||||||||
Free cash flow |
$ | 8,935 | $ | 8,365 | 6.8 | % | ||||||
Less: |
||||||||||||
Currency impact (a) |
(276 | ) | ||||||||||
|
|
|
|
|||||||||
Free cash flow, excluding currency |
$ | 9,211 | $ | 8,365 | 10.1 | % | ||||||
|
|
|
|
(a) | Represents impact of changes in currency exchange rates from the rates assumed in establishing the free cash flow performance target range. |
PMI 2014 Proxy Statement 71
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 7, 2014
AND PROXY STATEMENT
Printed on Recycled Paper
IMPORTANT ANNUAL MEETING INFORMATION 000004
ENDORSEMENTLINE SACKPACK
MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
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C123456789
000000000.000000 ext 000000000.000000 ext
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000000000.000000 ext 000000000.000000 ext
Vote by Internet
Vote by telephone
Annual Meeting Proxy Card 1234 5678 9012 345
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING.
The Board recommends a vote FOR all nominees, FOR Proposals 2 and 3 and AGAINST Proposals 4 and 5.
You can Vote by Internet or telephone! Available 24 hours a day, 7 days a Week!
Proxies submitted by Internet or telephone must be received by 11:59 p.m., EDT, on May 6, 2014.
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Go to www.investorvote.com/pm; or
Scan the QR code with your smartphone.
Follow the steps outlined on the secure Web site.
Call toll free 1-800-652-VOTE (8683) within the USA, U.S. territories & Canada on a touch-tone telephone.
Outside USA, U.S. territories & Canada, call 1-781-575-2300 on a touch-tone telephone.
Follow the instructions provided by the recorded message.
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.
The Board of Directors recommends a vote FOR:
1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain
01 - Harold Brown 05 - Sergio Marchionne 09 - Carlos Slim Helú
02 - André Calantzopoulos 06 - Kalpana Morparia 10 - Stephen M. Wolf
03 - Louis C. Camilleri 07 - Lucio A. Noto
04 - Jennifer Li 08 - Robert B. Polet
The Board of Directors recommends a vote FOR: The Board of Directors recommends a vote AGAINST:
For Against Abstain For Against Abstain
2. Ratification of the Selection of Independent Auditors 4. Shareholder Proposal 1 Lobbying
3. Advisory Vote Approving Executive Compensation 5. Shareholder Proposal 2 Animal Testing
Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
Please sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full
title as such. The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof.
Date (mm/dd/yyyy) Please print date below.
Signature 1 Please keep signature within the box.
Signature 2 Please keep signature within the box.
JNT
C 1234567890
1UPX 1875221
002CSP0053 01RVTD
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
PHILIP MORRIS INTERNATIONAL INC.
2014 ANNUAL MEETING OF
SHAREHOLDERS DIRECTIONS Wednesday, May 7, 2014
You may request directions by calling 1-866-713-8075.
9:00 A.M., EDT
Grand Hyatt New York
Empire State Ballroom, Fourth Floor
109 East 42nd Street
New York, NY 10017
In order to attend the Meeting you must have an admission ticket. To request an admission ticket, please follow the instructions set forth in the accompanying proxy statement in response to Question #4 in Exhibit A.
It is important that your shares are represented at this Meeting, whether or not you attend the Meeting in person. To make sure your shares are represented, we urge you to complete and mail this proxy card OR vote your shares over the Internet or by telephone in accordance with the instructions provided on the reverse side.
Sign Up Today For Electronic Delivery
If you prefer to receive your future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet, sign up today at www.computershare.com/pmi.
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING.
Philip Morris International Inc. Proxy Solicited on Behalf of the Board of Directors Annual Meeting of Shareholders - May 7, 2014
André Calantzopoulos, Louis C. Camilleri and Jerry Whitson, and each of them, are appointed attorneys, with power of substitution, to vote, as indicated on the matters set forth on the reverse hereof and in their discretion upon such other business as may properly come before the Meeting, all shares of Common Stock held by the undersigned in Philip Morris International Inc. (the Company) at the Annual Meeting of Shareholders to be held at the Grand Hyatt New York, Empire State Ballroom, May 7, 2014, at 9:00 a.m. EDT, and at all adjournments thereof.
This proxy when properly executed will be voted as specified. If no specification is made, this proxy will be voted FOR all nominees, FOR Proposals 2 and 3 and AGAINST Proposals 4 and 5.
This card also serves to instruct the administrator of the Companys Direct Stock Purchase and Dividend Reinvestment Plan and the trustee of each defined contribution plan sponsored by the Company or any of its subsidiaries how to vote shares held for a participant in any such plan. Unless your proxy for your defined contribution plan shares is received by May 2, 2014, the trustee of such defined contribution plan will vote your plan shares in the same proportion as those plan shares for which instructions have been received, unless contrary to law.
If you have voted by Internet or telephone, please DO NOT mail back this proxy card.
THANK YOU FOR VOTING