Stock Analysis on Net
Stock Analysis on Net
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Philip Morris International Inc. (NYSE:PM)

Analysis of Goodwill and Intangible Assets

Advanced level


Goodwill and Intangible Asset Disclosure

Philip Morris International Inc., balance sheet: goodwill and intangible assets

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Trademarks 1,217  1,488  1,559  1,364  1,374 
Distribution networks 113  141  152  147  149 
Other, including farmer contracts and intellectual property rights 106  107  87  87  86 
Amortizable intangible assets, gross carrying amount 1,436  1,736  1,798  1,598  1,609 
Accumulated amortization (642) (727) (689) (583) (513)
Amortizable intangible assets, net 794  1,009  1,109  1,015  1,096 
Non-amortizable intangible assets 1,319  1,269  1,323  1,455  1,527 
Other intangible assets, net 2,113  2,278  2,432  2,470  2,623 
Goodwill 5,858  7,189  7,666  7,324  7,415 
Goodwill and other intangible assets, net 7,971  9,467  10,098  9,794  10,038 

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

Item Description The company
Other intangible assets, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Philip Morris International Inc.’s other intangible assets, net decreased from 2017 to 2018 and from 2018 to 2019.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Philip Morris International Inc.’s goodwill decreased from 2017 to 2018 and from 2018 to 2019.
Goodwill and other intangible assets, net Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Philip Morris International Inc.’s goodwill and other intangible assets, net decreased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Goodwill

Philip Morris International Inc., adjustments to financial statements

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported) 42,875  39,801  42,968  36,851  33,956 
Less: Goodwill 5,858  7,189  7,666  7,324  7,415 
Total assets (adjusted) 37,017  32,612  35,302  29,527  26,541 
Adjustment to Total PMI Stockholders’ Deficit
Total PMI stockholders’ deficit (as reported) (11,577) (12,459) (12,086) (12,688) (13,244)
Less: Goodwill 5,858  7,189  7,666  7,324  7,415 
Total PMI stockholders’ deficit (adjusted) (17,435) (19,648) (19,752) (20,012) (20,659)

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).


Philip Morris International Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Philip Morris International Inc., adjusted financial ratios

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Total Asset Turnover
Reported total asset turnover 1.82 2.01 1.82 2.03 2.18
Adjusted total asset turnover 2.11 2.45 2.21 2.54 2.78
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA 16.76% 19.88% 14.05% 18.91% 20.24%
Adjusted ROA 19.41% 24.26% 17.10% 23.60% 25.90%

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Philip Morris International Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Philip Morris International Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Philip Morris International Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Revenues including excise taxes 77,921  79,823  78,098  74,953  73,908 
Total assets 42,875  39,801  42,968  36,851  33,956 
Activity Ratio
Total asset turnover1 1.82 2.01 1.82 2.03 2.18
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenues including excise taxes 77,921  79,823  78,098  74,953  73,908 
Adjusted total assets 37,017  32,612  35,302  29,527  26,541 
Activity Ratio
Adjusted total asset turnover2 2.11 2.45 2.21 2.54 2.78

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

2019 Calculations

1 Total asset turnover = Revenues including excise taxes ÷ Total assets
= 77,921 ÷ 42,875 = 1.82

2 Adjusted total asset turnover = Revenues including excise taxes ÷ Adjusted total assets
= 77,921 ÷ 37,017 = 2.11

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Philip Morris International Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets 42,875  39,801  42,968  36,851  33,956 
Total PMI stockholders’ deficit (11,577) (12,459) (12,086) (12,688) (13,244)
Solvency Ratio
Financial leverage1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 37,017  32,612  35,302  29,527  26,541 
Adjusted total PMI stockholders’ deficit (17,435) (19,648) (19,752) (20,012) (20,659)
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

2019 Calculations

1 Financial leverage = Total assets ÷ Total PMI stockholders’ deficit
= 42,875 ÷ -11,577 =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total PMI stockholders’ deficit
= 37,017 ÷ -17,435 =

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net earnings attributable to PMI 7,185  7,911  6,035  6,967  6,873 
Total PMI stockholders’ deficit (11,577) (12,459) (12,086) (12,688) (13,244)
Profitability Ratio
ROE1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net earnings attributable to PMI 7,185  7,911  6,035  6,967  6,873 
Adjusted total PMI stockholders’ deficit (17,435) (19,648) (19,752) (20,012) (20,659)
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

2019 Calculations

1 ROE = 100 × Net earnings attributable to PMI ÷ Total PMI stockholders’ deficit
= 100 × 7,185 ÷ -11,577 =

2 Adjusted ROE = 100 × Net earnings attributable to PMI ÷ Adjusted total PMI stockholders’ deficit
= 100 × 7,185 ÷ -17,435 =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net earnings attributable to PMI 7,185  7,911  6,035  6,967  6,873 
Total assets 42,875  39,801  42,968  36,851  33,956 
Profitability Ratio
ROA1 16.76% 19.88% 14.05% 18.91% 20.24%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net earnings attributable to PMI 7,185  7,911  6,035  6,967  6,873 
Adjusted total assets 37,017  32,612  35,302  29,527  26,541 
Profitability Ratio
Adjusted ROA2 19.41% 24.26% 17.10% 23.60% 25.90%

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

2019 Calculations

1 ROA = 100 × Net earnings attributable to PMI ÷ Total assets
= 100 × 7,185 ÷ 42,875 = 16.76%

2 Adjusted ROA = 100 × Net earnings attributable to PMI ÷ Adjusted total assets
= 100 × 7,185 ÷ 37,017 = 19.41%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Philip Morris International Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.