UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 21, 2011
Philip Morris International Inc.
(Exact name of registrant as specified in its charter)
Virginia | 1-33708 | 13-3435103 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
120 Park Avenue, New York, New York | 10017-5592 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (917) 663-2000
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
On July 21, 2011, Philip Morris International Inc. (the Company) issued a press release announcing its financial results for the quarter ended June 30, 2011 and held a live audio webcast to discuss such results. In connection with this webcast, the Company is furnishing to the Securities and Exchange Commission the following documents attached as exhibits to this Current Report on Form 8-K and incorporated herein by reference to this Item 2.02: the earnings release attached as Exhibit 99.1 hereto, the conference call transcript attached as Exhibit 99.2 hereto and the webcast slides attached as Exhibit 99.3 hereto.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1, 99.2 and 99.3, shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 2.02 of this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as may be expressly set forth by specific reference in such filing or document.
Item | 9.01. Financial Statements and Exhibits. |
(d) | Exhibits |
99.1 | Philip Morris International Inc. Press Release dated July 21, 2011 (furnished pursuant to Item 2.02) | |
99.2 | Conference Call Transcript dated July 21, 2011 (furnished pursuant to Item 2.02) | |
99.3 | Webcast Slides dated July 21, 2011 (furnished pursuant to Item 2.02) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PHILIP MORRIS INTERNATIONAL INC. | ||
By: | /s/ JERRY WHITSON | |
Name: | Jerry Whitson | |
Title: | Deputy General Counsel and Corporate Secretary |
DATE: July 21, 2011
EXHIBIT INDEX
Exhibit No. |
Description | |
99.1 | Philip Morris International Inc. Press Release dated July 21, 2011 (furnished pursuant to Item 2.02) | |
99.2 | Conference Call Transcript dated July 21, 2011 (furnished pursuant to Item 2.02) | |
99.3 | Webcast Slides dated July 21, 2011 (furnished pursuant to Item 2.02) |
Exhibit 99.1
PHILIP MORRIS INTERNATIONAL INC. (PMI) REPORTS 2011 SECOND-QUARTER RESULTS;
INCREASES 2011 EPS GUIDANCE BY $0.15 TO A RANGE OF $4.70 TO $4.80
| Reported diluted earnings per share of $1.35, up by 26.2%, or by 14.0% excluding currency, versus $1.07 in 2010 |
| Adjusted diluted earnings per share of $1.34, as detailed in the attached Schedule 12, up by 34.0%, or by 21.0% excluding currency, versus $1.00 in 2010 |
| Reported net revenues, excluding excise taxes, up by 17.2% to $8.3 billion, or by 10.2% excluding currency |
| Reported operating companies income up by 27.1% to $3.8 billion, or by 16.5% excluding currency |
| Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, up by 27.2% to $3.8 billion, or by 16.5% excluding currency |
| Operating income up by 27.7% to $3.7 billion |
| Free cash flow for the first half of the year, defined as net cash provided by operating activities less capital expenditures, up by 20.5% to $6.2 billion, or by 15.4% excluding currency, as detailed in the attached Schedule 19 |
| Repurchased 22.7 million shares of its common stock for $1.5 billion during the quarter |
| PMI increases its forecast for 2011 full-year reported diluted earnings per share by $0.15 to a range of $4.70 to $4.80, up by approximately 20% to 22.5% versus $3.92 in 2010 |
| Approximately $0.10 of the increased guidance are attributable to an improved business outlook, driven largely by Japan, and approximately $0.05 reflect favorable currency at prevailing rates |
| Excluding a total favorable currency impact of approximately $0.25 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 13.5% to 16.0%, or by approximately 15.0% to 17.5% versus adjusted diluted earnings per share of $3.87 in 2010 |
NEW YORK, July 21, 2011 Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2011 second-quarter results.
Our strong second-quarter results are testament to our continued growth momentum, particularly in Asia, strong pricing in numerous key markets and our excellent executional capability, as exemplified by our performance in Japan, said Louis C. Camilleri, Chairman and Chief Executive Officer.
Our progress is such that we are again raising our EPS guidance for 2011, reflecting our confidence in the future.
Conference Call
A conference call, hosted by Hermann Waldemer, Chief Financial Officer, with members of the investment community and news media, will be webcast at 9:00 a.m., Eastern Time, on July 21, 2011. Access is available at www.pmi.com.
Dividends and Share Repurchase Program
During the second quarter, PMI spent $1.5 billion to repurchase 22.7 million shares of its common stock, as shown in the table below.
Current $12 Billion, Three-Year Program
Value | Shares | |||||||
($ Mio.) | 000 | |||||||
May-December 2010 |
2,953 | 55,933 | ||||||
January-March 2011 |
1,356 | 22,154 | ||||||
April-June 2011 |
1,548 | 22,660 | ||||||
Total Under Program |
5,857 | 100,747 |
PMIs 2011 full-year forecast includes planned share repurchases of approximately $5.0 billion against its previously communicated three-year share repurchase program of $12 billion, initiated in May 2010.
Since May 2008, when PMI began its first share repurchase program, the company has spent an aggregate of $18.9 billion to repurchase 378.4 million shares, or 17.9% of the shares outstanding at the time of the spin-off in March 2008.
2011 Full-Year Forecast
PMI increases its forecast for 2011 full-year reported diluted earnings per share by $0.15 to a range of $4.70 to $4.80, up by approximately 20% to 22.5% versus $3.92 in 2010. Approximately $0.10 of the increased guidance are attributable to an improved business outlook, driven largely by Japan, and approximately $0.05 reflect favorable currency at prevailing rates. Excluding a total favorable currency impact of approximately $0.25 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 13.5% to 16.0%, or by approximately 15.0% to 17.5% versus adjusted diluted earnings per share of $3.87 in 2010.
This guidance excludes the impact of any potential future acquisitions, asset impairment and exit cost charges, and any unusual events. The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
2011 SECOND-QUARTER CONSOLIDATED RESULTS
Management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and to allocate resources. In the following discussion, the term net revenues refers to net revenues, excluding excise taxes, unless otherwise stated. Management also reviews OCI, operating margins and EPS on an adjusted basis (which may exclude the impact of currency and other items such as acquisitions or asset impairment and exit costs), EBITDA, free cash flow and net debt. Management believes it is appropriate to disclose these measures to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed Statements of Earnings provided with
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this release. Reconciliations of non-GAAP measures to corresponding GAAP measures are also provided with this release. References to total international cigarette market, total cigarette market, total market and market shares are PMI estimates based on latest available data from a number of sources. Comparisons are to the same prior-year period unless otherwise stated.
NET REVENUES
PMI Net Revenues ($ Millions) | ||||||||||||||||||||||||||||||||
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||||||||||
2011 | 2010 | Change | Excl. Curr. |
2011 | 2010 | Change | Excl. Curr. |
|||||||||||||||||||||||||
European Union |
$ | 2,497 | $ | 2,295 | 8.8 | % | 0.7 | % | $ | 4,498 | $ | 4,479 | 0.4 | % | (1.4 | )% | ||||||||||||||||
Eastern Europe, Middle East & Africa |
2,012 | 1,889 | 6.5 | % | 3.6 | % | 3,699 | 3,635 | 1.8 | % | 1.0 | % | ||||||||||||||||||||
Asia |
2,936 | 2,123 | 38.3 | % | 27.8 | % | 5,259 | 3,996 | 31.6 | % | 22.8 | % | ||||||||||||||||||||
Latin America & Canada |
828 | 754 | 9.8 | % | 5.8 | % | 1,608 | 1,447 | 11.1 | % | 7.4 | % | ||||||||||||||||||||
Total PMI |
$ | 8,273 | $ | 7,061 | 17.2 | % | 10.2 | % | $ | 15,064 | $ | 13,557 | 11.1 | % | 7.3 | % |
Net revenues of $8.3 billion were up by 17.2%, including favorable currency of $494 million. Excluding currency, net revenues increased by 10.2%, primarily driven by favorable pricing of $617 million, primarily in Asia, and favorable volume/mix of $98 million. The favorable volume/mix was driven by Asia, mainly Indonesia, Japan and Korea, and was partly offset by: in the EU, mainly Greece, Portugal and Spain; and, in Latin America & Canada, primarily Brazil, Canada and Mexico. Volume/mix in EEMA was essentially flat. Excluding currency and acquisitions, net revenues increased by 10.1%.
OPERATING COMPANIES INCOME
PMI Operating Companies Income ($ Millions) | ||||||||||||||||||||||||||||||||
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||||||||||
2011 | 2010 | Change | Excl. Curr. |
2011 | 2010 | Change | Excl. Curr. |
|||||||||||||||||||||||||
European Union |
$ | 1,280 | $ | 1,105 | 15.8 | % | 2.1 | % | $ | 2,286 | $ | 2,167 | 5.5 | % | (0.6 | )% | ||||||||||||||||
Eastern Europe, Middle East & Africa |
835 | 786 | 6.2 | % | 4.8 | % | 1,557 | 1,556 | 0.1 | % | 0.1 | % | ||||||||||||||||||||
Asia |
1,398 | 845 | 65.4 | % | 48.3 | % | 2,491 | 1,569 | 58.8 | % | 43.0 | % | ||||||||||||||||||||
Latin America & Canada |
268 | 238 | 12.6 | % | 8.8 | % | 519 | 455 | 14.1 | % | 11.9 | % | ||||||||||||||||||||
Total PMI |
$ | 3,781 | $ | 2,974 | 27.1 | % | 16.5 | % | $ | 6,853 | $ | 5,747 | 19.2 | % | 12.5 | % |
Operating income increased by 27.7% to $3.7 billion. Reported operating companies income was up by 27.1% to $3.8 billion, including favorable currency of $317 million. Excluding currency and acquisitions, operating companies income was up by 16.5%, primarily driven by higher pricing and favorable volume/mix, partly offset by unfavorable costs, mostly related to airfreight of product to Japan in response to in-market shortages of competitors products.
Adjusted operating companies income grew by 27.2% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 16.5%.
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PMI Operating Companies Income ($ Millions)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 3,781 | $ | 2,974 | 27.1 | % | $ | 6,853 | $ | 5,747 | 19.2 | % | ||||||||||||
Asset impairment & exit costs |
(1 | ) | 0 | (17 | ) | 0 | ||||||||||||||||||
Adjusted OCI |
$ | 3,782 | $ | 2,974 | 27.2 | % | $ | 6,870 | $ | 5,747 | 19.5 | % | ||||||||||||
Adjusted OCI Margin* |
45.7 | % | 42.1 | % | 3.6p.p. | 45.6 | % | 42.4 | % | 3.2p.p. |
* | Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes. |
Adjusted operating companies income margin, excluding the impact of currency, was up by 2.4 percentage points to 44.5%, as detailed on Schedule 11. Excluding currency and acquisitions, adjusted operating companies income margin was up by 2.5 percentage points to 44.6%.
SHIPMENT VOLUME & MARKET SHARE
PMI Cigarette Shipment Volume by Segment (Million Units)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
European Union |
57,193 | 59,024 | (3.1 | )% | 105,715 | 111,353 | (5.1 | )% | ||||||||||||||||
Eastern Europe, Middle East & Africa |
75,336 | 77,892 | (3.3 | )% | 138,979 | 142,037 | (2.2 | )% | ||||||||||||||||
Asia |
84,042 | 78,185 | 7.5 | % | 156,134 | 141,400 | 10.4 | % | ||||||||||||||||
Latin America & Canada |
24,606 | 25,858 | (4.8 | )% | 48,269 | 50,904 | (5.2 | )% | ||||||||||||||||
Total PMI |
241,177 | 240,959 | 0.1 | % | 449,097 | 445,694 | 0.8 | % |
PMIs cigarette shipment volume of 241.2 billion units was up slightly by 0.1%. In the EU, cigarette shipment volume decreased by 3.1%, predominantly due to lower total markets, mainly in Spain, lower market share, mainly in Poland, and unfavorable distributor inventory movements, partly offset by total market growth in Germany. In EEMA, cigarette shipment volume declined by 3.3%, primarily due to: a lower total market in Russia and a lower total market and share in Ukraine; the suspension of our business activities following the imposition of sanctions in Libya; and an unfavorable comparison with the second quarter of 2010 in Ukraine, impacted by trade inventory movements; partly offset by growth in Algeria and Turkey. In Asia, PMIs cigarette shipment volume increased by 7.5%, primarily driven by double-digit growth in Indonesia, Japan and Korea. In Latin America & Canada, cigarette shipment volume decreased by 4.8%, due mainly to: Mexico, reflecting a lower total market resulting from the significant January 1, 2011, excise tax increase; and Brazil, reflecting the depletion of trade inventories established ahead of the April 2011 price increase; partly offset by growth in Argentina.
On an organic basis, which excludes acquisitions, PMIs cigarette shipment volume was up slightly by 0.1%.
Total cigarette shipments of Marlboro of 78.1 billion units were up by 0.2%, driven primarily by growth in EEMA of 0.9%, in particular in Algeria, and in Asia of 5.9%, notably in Indonesia, Japan, Korea and Vietnam. The growth was partly offset by decreases: in the EU of 3.3%, reflecting mainly lower total markets and share, primarily in Portugal and Spain; and in Latin America & Canada of 2.8%, due mainly to the unfavorable impact of the aforementioned excise tax increase in Mexico.
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Total cigarette shipments of L&M of 23.9 billion units were up by 3.1%, driven by growth in the EU of 5.4%, notably in Germany and Greece, and in EEMA of 3.6%, led by Turkey.
Total cigarette shipments of Chesterfield of 9.8 billion units were down by 4.9%, with declines, primarily in Spain and Ukraine, partly offset by growth, mainly in Portugal. Total cigarette shipments of Parliament of 10.3 billion units were up by 4.9%, driven by growth in the EU, EEMA and Latin America & Canada.
Total cigarette shipments of Lark of 10.1 billion units increased by 10.2%, due primarily to growth in Japan, partly offset by a decline in Turkey. Total cigarette shipments of Bond Street of 12.0 billion units decreased by 2.3%, due mainly to declines in Turkey and Ukraine, partly offset by growth in Russia and Kazakhstan.
Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, excluding acquisitions, grew by 7.9%, notably in Belgium, France and Germany. Total shipment volume for cigarettes and OTP combined was up by 0.2%, excluding acquisitions.
PMIs market share performance was stable, or registered growth, in a number of key markets, including Algeria, Austria, Belgium, Canada, Egypt, France, Germany, Hong Kong, Indonesia, Japan, Korea, Mexico, the Netherlands, the Philippines, Singapore, Thailand and Turkey.
EUROPEAN UNION REGION (EU)
2011 Second-Quarter Results
In the EU, net revenues increased by 8.8% to $2.5 billion, including favorable currency of $187 million. Excluding currency, net revenues grew by 0.7%, primarily reflecting higher pricing of $49 million, driven mainly by France, Italy and Poland, partly offset by Spain. The favorable pricing variance more than offset the unfavorable volume/mix of $34 million. The unfavorable volume/mix was primarily attributable to a lower total market and share in Greece, Portugal, Spain and the UK, partly offset by a higher total market in Germany.
Operating companies income increased by 15.8% to $1.3 billion, due predominantly to favorable pricing, and favorable currency of $152 million, partly offset by unfavorable volume/mix of $28 million. Excluding the impact of currency, operating companies income was up by 2.1%.
Adjusted operating companies income increased by 15.9%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 2.3%.
EU Operating Companies Income ($ Millions)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 1,280 | $ | 1,105 | 15.8 | % | $ | 2,286 | $ | 2,167 | 5.5 | % | ||||||||||||
Asset impairment & exit costs |
(1 | ) | 0 | (12 | ) | 0 | ||||||||||||||||||
Adjusted OCI |
$ | 1,281 | $ | 1,105 | 15.9 | % | $ | 2,298 | $ | 2,167 | 6.0 | % | ||||||||||||
Adjusted OCI Margin* |
51.3 | % | 48.1 | % | 3.2 p.p. | 51.1 | % | 48.4 | % | 2.7 p.p. |
* | Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes. |
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Excluding the favorable impact of currency, adjusted operating companies income margin was up by 0.8 percentage points to 48.9%, as detailed on Schedule 11.
The total cigarette market in the EU declined by 1.7%, due mainly to Spain, reflecting the unfavorable impact of continued adverse economic conditions. Excluding Spain, the total cigarette market in the EU grew slightly by 0.2%.
PMIs cigarette shipment volume in the EU declined by 3.1%, due primarily to the impact of the lower total market in Spain, lower share, mainly in Poland, and unfavorable distributor inventory movements, mainly in Austria, France and Spain, partly offset by total market growth in Germany. Shipment volume of Marlboro decreased by 3.3%, due mainly to lower total markets, unfavorable distributor inventory movements, and lower share, primarily in Portugal and Spain, the former reflecting the impact of price increases in July and November 2010 and January 2011. Shipment volume of L&M was up by 5.4%, driven mainly by higher share in Germany.
PMIs market share in the EU was down slightly by 0.2 share points to 38.6% as gains, primarily in Belgium, France, Germany, the Netherlands and the Nordics, were more than offset by share declines, mainly in the Czech Republic, Italy, Poland and Portugal. While Marlboros share in the EU was flat at 18.1%, reflecting a higher share in Belgium, the Czech Republic, Greece, Hungary and the Netherlands, offset by lower share in Germany, Italy, Portugal and the UK, it grew by 0.3 points compared to the first quarter 2011. L&Ms market share in the EU grew by 0.3 points to 6.6%, its best performance since the spin-off in March 2008, primarily driven by gains in Germany, Poland and Spain.
EU Key Market Commentaries
In the Czech Republic, the total cigarette market was up by 3.3%. PMIs shipments were down by 2.5%. Market share was down by 2.7 points to 45.5%, reflecting continued share declines for lower-margin local brands, partly offset by a higher share for Marlboro, up by 0.6 points to 7.5%, and for Red & White, up by 0.6 points to 13.1%.
In France, the total cigarette market was up by 1.8%. Whilst PMIs shipments were down slightly by 0.5%, unfavorably impacted by distributor inventory movements, market share was up slightly by 0.1 point to 40.9%, reflecting a higher share for the premium Philip Morris brand, up by 0.5 points to 8.3%, partly offset by a lower share for Marlboro, down by 0.3 points to 26.0%. Compared to the first quarter 2011, PMIs market share was up by 0.5 points, driven by Marlboro, up by 0.5 points.
In Germany, the total cigarette market was up by 4.6%. PMIs shipments were up by 5.3% and market share was up by 0.2 points to 36.1%, driven by L&M, up by 1.0 points to 10.4%. Compared to the first quarter of 2011, PMIs market share was up by 0.4 points. Although share of Marlboro in the second quarter was down by 0.5 points to 21.1%, it was essentially flat compared to the first quarter of 2011.
In Italy, the total cigarette market was up by 0.2%. PMIs shipments were down by 0.9%. Although PMIs market share declined by 0.7 points to 53.4%, share was essentially flat compared to the first quarter of 2011. Marlboros market share in the second quarter of 2011 of 22.7% was down by 0.3 points compared to the second quarter 2010, but up by 0.2 points compared to the first quarter 2011.
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In Poland, the total cigarette market was down by 1.5%, reflecting the unfavorable impact of tax-driven price increases in the fourth quarter of 2010 and second quarter of 2011, and the introduction of an indoor public smoking ban in the fourth quarter of 2010. PMIs shipments were down by 9.7%. Whilst PMIs market share was down by 3.2 points to 34.9%, due mainly to lower share of low-price Red & White, down by 3.3 points to 5.1%, share of Marlboro was up slightly by 0.1 point to 10.3%, and share of L&M grew by 0.8 points to 15.9%.
In Spain, the total cigarette market was down by 14.6%, largely due to the continuing adverse economic environment, the impact of the June 2010 VAT-driven price increase and the December 2010 excise tax-driven price increase, and the introduction of a total indoor public smoking ban in January 2011. PMIs shipments were down by 17.6%. PMIs market share was down by 0.2 points to 31.0%, due mainly to a lower share of Chesterfield, down by 0.5 points to 8.4%. Share of Marlboro was essentially flat at 14.6%. PMIs market share was up by 0.6 points versus the first quarter 2011, driven by Marlboro, up by 0.5 points, reflecting the positive consumer reaction to the price movements of May and June 2011.
EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)
2011 Second-Quarter Results
In EEMA, net revenues increased by 6.5% to $2.0 billion, including favorable currency of $55 million. Excluding the impact of currency, net revenues increased by 3.6%, primarily due to favorable pricing of $69 million, primarily in Russia and Ukraine.
Operating companies income increased by 6.2% to $835 million, including favorable currency of $11 million. Excluding the impact of currency, operating companies income increased by 4.8%, due primarily to higher pricing and favorable volume/mix, partly offset by higher costs, principally related to business building initiatives in Russia. Adjusted operating companies income increased by 6.2%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 4.8%.
EEMA Operating Companies Income ($ Millions)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 835 | $ | 786 | 6.2 | % | $ | 1,557 | $ | 1,556 | 0.1 | % | ||||||||||||
Asset impairment & exit costs |
0 | 0 | (2 | ) | 0 | |||||||||||||||||||
Adjusted OCI |
$ | 835 | $ | 786 | 6.2 | % | $ | 1,559 | $ | 1,556 | 0.2 | % | ||||||||||||
Adjusted OCI Margin* |
41.5 | % | 41.6 | % | (0.1 | ) p.p. | 42.1 | % | 42.8 | % | (0.7 | ) p.p. |
* | Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes. |
Excluding the favorable impact of currency, adjusted operating companies income margin was up by 0.5 percentage points to 42.1%, as detailed on Schedule 11.
PMIs cigarette shipment volume in EEMA decreased by 3.3%, principally due to: Libya, reflecting the imposition of sanctions; Russia, primarily reflecting a lower total market; and Ukraine, due to an unfavorable comparison with the second quarter of 2010, impacted by trade inventory movements ahead of
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the July 2010 excise tax-driven price increase, a lower total market and lower share. These declines were partly offset by growth in Algeria and Turkey.
PMIs cigarette shipment volume of premium brands grew by 2.7% in EEMA, driven by Marlboro and Parliament, up by 0.9% and 10.0%, respectively, reflecting the second consecutive quarter of growth following eight quarters of decline.
EEMA Key Market Commentaries
In Russia, the total cigarette market declined by an estimated annualized rate of 2-3%. PMIs shipment volume decreased by 4.1%. Whilst shipment volume of PMIs premium portfolio was down by 1.7%, primarily due to a decline in Marlboro of 7.3%, shipment volume of above premium Parliament was up by 1.9%. In the mid-price segment, shipment volume was down by 3.3%, with growth in Chesterfield, up by 0.6%, more than offset by a decline in L&M, down by 8.3%. In the low price segment, shipment volume of Bond Street was up by 2.1%. PMIs quarter-to-date May market share of 25.4%, as measured by A.C. Nielsen, was essentially flat. Market share for Parliament, in the above premium segment, was up slightly by 0.1 point; Marlboro, in the premium segment, was down by 0.2 points; L&M in the mid-price segment was down by 0.4 share points; Chesterfield in the mid-price segment was up slightly by 0.1 share point; and Bond Street in the low-price segment was up by 0.4 share points.
In Turkey, the total cigarette market declined by an estimated 0.8%, having stabilized following the steep January 2010 excise tax increase. PMIs shipment volume increased by 12.1%. PMIs quarter-to-date May market share, as measured by A.C. Nielsen, grew by 3.8 points to 44.6%, driven by Parliament, Muratti and L&M, up by 1.1, 0.5 and 4.3 share points, respectively, partly offset by declines in Lark and Bond Street, down by 1.3 and 0.8 points, respectively. Market share of Marlboro was flat at 9.1%.
In Ukraine, the total cigarette market declined by an estimated 15.0%, due mainly to: an unfavorable comparison with the second quarter of 2010 which was impacted by trade inventory movements ahead of the July 2010 excise tax-driven price increase; the unfavorable impact of excise tax-driven price increases in July 2010 and January 2011; and the underlying market decline. PMIs shipment volume decreased by 24.8%, reflecting the aforementioned factors, as well as lower share driven by low-price competition. Whilst PMIs market share, as measured by A.C. Nielsen, was down by 3.5 points to 32.1%, shares for premium Marlboro and Parliament were up by 0.3 and 0.2 points, respectively.
ASIA REGION
2011 Second-Quarter Results
In Asia, net revenues increased strongly by 38.3% to $2.9 billion, including favorable currency of $222 million. Excluding the impact of currency, net revenues increased by 27.8%, reflecting the favorable impact of pricing of $413 million, primarily in Australia, Indonesia, Japan and the Philippines, and favorable volume/mix of $175 million, mainly in Japan, reflecting increased shipments in response to in-market shortages of competitors products, Indonesia and Korea. Excluding the impact of currency and acquisitions, net revenues increased by 27.7%.
Operating companies income surged by 65.4% to reach $1.4 billion, despite significant costs related to airfreight of product to Japan. Excluding the favorable impact of currency of $145 million, operating
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companies income increased by 48.3%, driven by strong growth in Australia, Indonesia, Japan and the Philippines. Excluding the impact of currency and acquisitions, operating companies income increased by 48.2%. Adjusted operating companies income increased by 65.4% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 48.3%, or by 48.2% excluding both currency and acquisitions.
Asia Operating Companies Income ($ Millions)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 1,398 | $ | 845 | 65.4 | % | $ | 2,491 | $ | 1,569 | 58.8 | % | ||||||||||||
Asset impairment & exit costs |
0 | 0 | (2 | ) | 0 | |||||||||||||||||||
Adjusted OCI |
$ | 1,398 | $ | 845 | 65.4 | % | $ | 2,493 | $ | 1,569 | 58.9 | % | ||||||||||||
Adjusted OCI Margin* |
47.6 | % | 39.8 | % | 7.8 p.p. | 47.4 | % | 39.3 | % | 8.1 p.p. |
* | Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes. |
Excluding the impact of currency and acquisitions, adjusted operating companies income margin was up by 6.4 percentage points to 46.2%, as detailed on Schedule 11.
PMIs cigarette shipment volume in Asia increased by 7.5%, predominantly due to growth in Indonesia, Japan and Korea. The growth was partly offset by a decline in Pakistan of 6.6% due to the continued growth of illicit products.
Shipment volume of Marlboro was up by 5.9%, driven mainly by growth in Indonesia, Japan, Korea and Vietnam.
Asia Key Market Commentaries
In Indonesia, the total cigarette market was up by 13.9%, driven mainly by growth in the low-price segment and moderate price increases compared to 2010. PMIs shipment volume increased by 20.7%, with all key brand families recording growth. Market share was up by 1.6 points to a record 30.2%, driven by growth from premium Sampoerna A, mid-price Sampoerna Kretek and low-price U Mild and Vegas Mild. Although Marlboros market share declined by 0.3 points to 4.2%, shipments grew by 6.7% and share of the white cigarettes segment increased by 3.3 points to 64.2%.
In Japan, the total cigarette market decreased by 19.1%, reflecting the unfavorable impact of the significant October 1, 2010, tax-driven price increases and the underlying market decline. PMIs shipment volume was up by 11.0%, driven by increased trade purchases compensating for in-market shortages of competitors products. Market share of 42.0% was up by 17.7 points, reflecting growth of Marlboro, Lark and the Philip Morris brand by 5.6, 7.7 and 1.6 points, to 16.4%, 14.4% and 4.0%, respectively.
In Korea, the total cigarette market declined by 1.9%. PMIs shipment volume increased by 17.6%, driven by market share increases. PMIs market share reached a record 19.9%, up by 3.3 points, driven by Marlboro and Parliament, up by 1.8 and 1.2 points, respectively.
In the Philippines, the total market declined by 2.9%, partly reflecting the impact of PMFTC Inc.s excise-tax driven price increase of its key brand variants in January 2011. PMIs shipments were down by
9
1.5%. PMIs market share was up by 1.3 points to 94.1%. Share of Marlboro increased by 0.4 points to 21.1%.
LATIN AMERICA & CANADA REGION
2011 Second-Quarter Results
In Latin America & Canada, net revenues increased by 9.8% to $828 million, including favorable currency of $30 million. Excluding the impact of currency, net revenues increased by 5.8%, reflecting favorable pricing of $86 million, primarily in Argentina, Brazil, Canada and Mexico, that more than offset unfavorable volume/mix of $42 million.
Operating companies income increased by 12.6% to $268 million. Excluding the impact of currency, operating companies income increased by 8.8%, primarily reflecting favorable pricing. Adjusted operating companies income grew by 12.6% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, grew by 8.8%.
Latin America & Canada Operating Companies Income ($ Millions)
Second-Quarter | Six Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 268 | $ | 238 | 12.6 | % | $ | 519 | $ | 455 | 14.1 | % | ||||||||||||
Asset impairment & exit costs |
0 | 0 | (1 | ) | 0 | |||||||||||||||||||
Adjusted OCI |
$ | 268 | $ | 238 | 12.6 | % | $ | 520 | $ | 455 | 14.3 | % | ||||||||||||
Adjusted OCI Margin* |
32.4 | % | 31.6 | % | 0.8 p.p. | 32.3 | % | 31.4 | % | 0.9 p.p. |
* | Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes. |
Excluding the impact of currency, adjusted operating companies income margin increased by 0.9 percentage points to 32.5%, as detailed on Schedule 11.
PMIs cigarette shipment volume in Latin America & Canada decreased by 4.8%, due mainly to Mexico and Brazil, partly offset by an increase in Argentina. Shipment volume of Marlboro decreased by 2.8%.
Latin America & Canada Key Market Commentaries
In Argentina, the total cigarette market grew by 8.7%. PMIs cigarette shipment volume increased by 8.4%. Although PMIs market share was down by 0.4 points to 74.4%, share of Marlboro was up by 0.6 points to 24.0%, offset by the mid-price Philip Morris brand, down by 0.4 share points to 37.9%, and low-price Next, down by 0.2 points to 3.7%.
In Canada, the total tax-paid cigarette market was down by 4.5%, due mainly to trade inventory movements in June 2010 in anticipation of harmonized sales tax implementation in the provinces of Ontario and British Columbia and a lower total market. Although PMIs cigarette shipment volume decreased by 1.9%, market share grew by 1.0 point to 34.0%, with low-price brands Next and Quebec Classique, up by 2.7 and 0.3 share points, respectively, partly offset by mid-price Number 7 and Canadian Classics, and low-
10
price Accord, down by 0.5, 0.5 and 0.8 share points, respectively. Market share of premium Belmont was up slightly by 0.1 point to 1.8%.
In Mexico, the total cigarette market was down by 13.2%, primarily due to the significant January 1, 2011, excise tax increase which drove a 26.7% increase in the retail price of Marlboro. Although PMIs cigarette shipment volume decreased by 10.3%, market share grew by 2.3 points to 72.2%, led by Marlboro, up by 3.8 share points to a quarterly record 52.0%, and Benson & Hedges, up by 0.5 points to 6.1%. Market share of low-price Delicados, the second best-selling brand in the market, declined by 1.1 points to 11.1%.
Philip Morris International Inc. Profile
Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the worlds top 15 international brands, including Marlboro, the number one cigarette brand worldwide. PMIs products are sold in approximately 180 countries. In 2010, the company held an estimated 16.0% share of the total international cigarette market outside of the U.S., or 27.6% excluding the Peoples Republic of China and the U.S. For more information, see www.pmi.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.
Philip Morris International Inc. and its tobacco subsidiaries (PMI) are subject to intense price competition; changes in consumer preferences and demand for their products; fluctuations in levels of customer inventories; increases in raw material costs; the effects of global economic developments and individual country economic and market conditions; unfavorable currency movements and changes to income tax laws. Their results are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios in order to compete effectively; to be able to protect and enhance margins through price increases; and to improve productivity.
PMI is also subject to legislation and governmental regulation, including actual and potential excise tax increases; discriminatory excise tax structures; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases on consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; privately imposed smoking restrictions; and governmental investigations.
PMI is subject to litigation, including risks associated with adverse jury and judicial determinations, and courts reaching conclusions at variance with PMIs understanding of applicable law.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended March 31, 2011. PMI cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make, except in the normal course of its public disclosure obligations.
###
11
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended June 30,
($ in millions, except per share data)
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Net revenues |
$ | 20,234 | $ | 17,383 | 16.4 | % | ||||||
Cost of sales |
2,844 | 2,550 | 11.5 | % | ||||||||
Excise taxes on products (1) |
11,961 | 10,322 | 15.9 | % | ||||||||
Gross profit |
5,429 | 4,511 | 20.4 | % | ||||||||
Marketing, administration and research costs |
1,647 | 1,537 | ||||||||||
Asset impairment and exit costs |
1 | | ||||||||||
Operating companies income |
3,781 | 2,974 | 27.1 | % | ||||||||
Amortization of intangibles |
24 | 23 | ||||||||||
General corporate expenses |
45 | 45 | ||||||||||
Operating income |
3,712 | 2,906 | 27.7 | % | ||||||||
Interest expense, net |
208 | 223 | ||||||||||
Earnings before income taxes |
3,504 | 2,683 | 30.6 | % | ||||||||
Provision for income taxes |
1,019 | 641 | 59.0 | % | ||||||||
Net earnings |
2,485 | 2,042 | 21.7 | % | ||||||||
Net earnings attributable to noncontrolling interests |
76 | 60 | ||||||||||
Net earnings attributable to PMI |
$ | 2,409 | $ | 1,982 | 21.5 | % | ||||||
Per share data:(2) |
||||||||||||
Basic earnings per share |
$ | 1.35 | $ | 1.07 | 26.2 | % | ||||||
Diluted earnings per share |
$ | 1.35 | $ | 1.07 | 26.2 | % | ||||||
(1) | The segment detail of excise taxes on products sold for the quarters ended June 30, 2011 and 2010 is shown on Schedule 2. |
(2) | Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the quarters ended June 30, 2011 and 2010 are shown on Schedule 4, Footnote 1. |
Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes | ||||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||||
2011 |
Net Revenues (1) |
$ | 8,080 | $ | 4,603 | $ | 5,146 | $ | 2,405 | $ | 20,234 | |||||||||||
Excise Taxes on Products |
(5,583 | ) | (2,591 | ) | (2,210 | ) | (1,577 | ) | (11,961 | ) | ||||||||||||
Net Revenues excluding Excise Taxes |
2,497 | 2,012 | 2,936 | 828 | 8,273 | |||||||||||||||||
2010 |
Net Revenues |
$ | 7,260 | $ | 4,125 | $ | 3,903 | $ | 2,095 | $ | 17,383 | |||||||||||
Excise Taxes on Products |
(4,965 | ) | (2,236 | ) | (1,780 | ) | (1,341 | ) | (10,322 | ) | ||||||||||||
Net Revenues excluding Excise Taxes |
2,295 | 1,889 | 2,123 | 754 | 7,061 | |||||||||||||||||
Variance |
Currency |
187 | 55 | 222 | 30 | 494 | ||||||||||||||||
Acquisitions |
| | 3 | | 3 | |||||||||||||||||
Operations |
15 | 68 | 588 | 44 | 715 | |||||||||||||||||
Variance Total |
202 | 123 | 813 | 74 | 1,212 | |||||||||||||||||
Variance Total (%) |
8.8 | % | 6.5 | % | 38.3 | % | 9.8 | % | 17.2 | % | ||||||||||||
Variance excluding Currency |
15 | 68 | 591 | 44 | 718 | |||||||||||||||||
Variance excluding Currency (%) |
0.7 | % | 3.6 | % | 27.8 | % | 5.8 | % | 10.2 | % | ||||||||||||
Variance excluding Currency & Acquisitions |
15 | 68 | 588 | 44 | 715 | |||||||||||||||||
Variance excluding Currency & Acquisitions (%) |
0.7 | % | 3.6 | % | 27.7 | % | 5.8 | % | 10.1 | % | ||||||||||||
(1) 2011 Currency increased net revenues as follows: |
| |||||||||||||||||||||
European Union |
$ | 609 | ||||||||||||||||||||
EEMA |
94 | |||||||||||||||||||||
Asia |
368 | |||||||||||||||||||||
Latin America & Canada |
76 | |||||||||||||||||||||
$ | 1,147 | |||||||||||||||||||||
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
Operating Companies Income | ||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||
2011 |
$ | 1,280 | $ | 835 | $ | 1,398 | $ | 268 | $ | 3,781 | ||||||||||
2010 |
1,105 | 786 | 845 | 238 | 2,974 | |||||||||||||||
% Change |
15.8 | % | 6.2 | % | 65.4 | % | 12.6 | % | 27.1 | % | ||||||||||
Reconciliation: |
||||||||||||||||||||
For the quarter ended June 30, 2010 |
$ | 1,105 | $ | 786 | $ | 845 | $ | 238 | $ | 2,974 | ||||||||||
2010 Asset impairment and exit costs |
| | | | | |||||||||||||||
2011 Asset impairment and exit costs |
(1 | ) | | | | (1 | ) | |||||||||||||
Acquired businesses |
(1 | ) | | 1 | | | ||||||||||||||
Currency |
152 | 11 | 145 | 9 | 317 | |||||||||||||||
Operations |
25 | 38 | 407 | 21 | 491 | |||||||||||||||
For the quarter ended June 30, 2011 |
$ | 1,280 | $ | 835 | $ | 1,398 | $ | 268 | $ | 3,781 | ||||||||||
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings Attributable to PMI and Diluted Earnings Per Share
For the Quarters Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Earnings Attributable to PMI |
Diluted E.P.S. |
|||||||
2011 Net Earnings Attributable to PMI |
$ | 2,409 | $ | 1.35 | (1) | |||
2010 Net Earnings Attributable to PMI |
$ | 1,982 | $ | 1.07 | (1) | |||
% Change |
21.5 | % | 26.2 | % | ||||
Reconciliation: |
||||||||
2010 Net Earnings Attributable to PMI |
$ | 1,982 | $ | 1.07 | (1) | |||
Special Items: |
||||||||
2011 Asset impairment and exit costs |
(1 | ) | | |||||
2011 Tax items |
15 | 0.01 | ||||||
2010 Asset impairment and exit costs |
| | ||||||
2010 Tax items |
(121 | ) | (0.07 | ) | ||||
Currency |
235 | 0.13 | ||||||
Interest |
15 | 0.01 | ||||||
Change in tax rate |
(35 | ) | (0.02 | ) | ||||
Impact of lower shares outstanding and share-based payments |
5 | 0.05 | ||||||
Operations |
314 | 0.17 | ||||||
2011 Net Earnings Attributable to PMI |
$ | 2,409 | $ | 1.35 | (1) | |||
(1) Basic and diluted EPS were calculated using the following (in millions): |
||||||||
Q2 2011 |
Q2 2010 |
|||||||
Net earnings attributable to PMI |
$ | 2,409 | $ | 1,982 | ||||
Less distributed and undistributed earnings attributable to share-based payment awards |
14 | 9 | ||||||
Net earnings for basic and diluted EPS |
$ | 2,395 | $ | 1,973 | ||||
Weighted-average shares for basic EPS |
1,772 | 1,846 | ||||||
Plus incremental shares from assumed conversions: |
||||||||
Stock Options |
| 3 | ||||||
Weighted-average shares for diluted EPS |
1,772 | 1,849 | ||||||
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Six Months Ended June 30,
($ in millions, except per share data)
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Net revenues |
$ | 36,764 | $ | 32,970 | 11.5 | % | ||||||
Cost of sales |
5,139 | 4,922 | 4.4 | % | ||||||||
Excise taxes on products (1) |
21,700 | 19,413 | 11.8 | % | ||||||||
Gross profit |
9,925 | 8,635 | 14.9 | % | ||||||||
Marketing, administration and research costs |
3,055 | 2,888 | ||||||||||
Asset impairment and exit costs |
17 | | ||||||||||
Operating companies income |
6,853 | 5,747 | 19.2 | % | ||||||||
Amortization of intangibles |
48 | 43 | ||||||||||
General corporate expenses |
86 | 83 | ||||||||||
Operating income |
6,719 | 5,621 | 19.5 | % | ||||||||
Interest expense, net |
421 | 446 | ||||||||||
Earnings before income taxes |
6,298 | 5,175 | 21.7 | % | ||||||||
Provision for income taxes |
1,826 | 1,379 | 32.4 | % | ||||||||
Net earnings |
4,472 | 3,796 | 17.8 | % | ||||||||
Net earnings attributable to noncontrolling interests |
144 | 111 | ||||||||||
Net earnings attributable to PMI |
$ | 4,328 | $ | 3,685 | 17.4 | % | ||||||
Per share data:(2) |
||||||||||||
Basic earnings per share |
$ | 2.42 | $ | 1.97 | 22.8 | % | ||||||
Diluted earnings per share |
$ | 2.42 | $ | 1.97 | 22.8 | % | ||||||
(1) | The segment detail of excise taxes on products sold for the six months ended June 30, 2011 and 2010 is shown on Schedule 6. |
(2) | Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the six months ended June 30, 2011 and 2010 are shown on Schedule 8, Footnote 1. |
Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Six Months Ended June 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes | ||||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||||
2011 |
Net Revenues (1) |
$ | 14,495 | $ | 8,274 | $ | 9,434 | $ | 4,561 | $ | 36,764 | |||||||||||
Excise Taxes on Products |
(9,997 | ) | (4,575 | ) | (4,175 | ) | (2,953 | ) | (21,700 | ) | ||||||||||||
Net Revenues excluding Excise Taxes | 4,498 | 3,699 | 5,259 | 1,608 | 15,064 | |||||||||||||||||
2010 |
Net Revenues |
$ | 14,008 | $ | 7,481 | $ | 7,465 | $ | 4,016 | $ | 32,970 | |||||||||||
Excise Taxes on Products |
(9,529 | ) | (3,846 | ) | (3,469 | ) | (2,569 | ) | (19,413 | ) | ||||||||||||
Net Revenues excluding Excise Taxes | 4,479 | 3,635 | 3,996 | 1,447 | 13,557 | |||||||||||||||||
Variance |
Currency |
81 | 26 | 350 | 54 | 511 | ||||||||||||||||
Acquisitions |
| | 108 | | 108 | |||||||||||||||||
Operations |
(62 | ) | 38 | 805 | 107 | 888 | ||||||||||||||||
Variance Total | 19 | 64 | 1,263 | 161 | 1,507 | |||||||||||||||||
Variance Total (%) |
0.4 | % | 1.8 | % | 31.6 | % | 11.1 | % | 11.1 | % | ||||||||||||
Variance excluding Currency |
(62 | ) | 38 | 913 | 107 | 996 | ||||||||||||||||
Variance excluding Currency (%) |
(1.4 | )% | 1.0 | % | 22.8 | % | 7.4 | % | 7.3 | % | ||||||||||||
Variance excluding Currency & Acquisitions |
(62 | ) | 38 | 805 | 107 | 888 | ||||||||||||||||
Variance excluding Currency & Acquisitions (%) |
(1.4 | )% | 1.0 | % | 20.1 | % | 7.4 | % | 6.6 | % | ||||||||||||
(1) 2011 Currency increased net revenues as follows: |
|
|||||||||||||||||||||
European Union |
$ | 281 | ||||||||||||||||||||
EEMA |
8 | |||||||||||||||||||||
Asia |
603 | |||||||||||||||||||||
Latin America & Canada |
130 | |||||||||||||||||||||
$ | 1,022 | |||||||||||||||||||||
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Six Months Ended June 30,
($ in millions)
(Unaudited)
Operating Companies Income | ||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||
2011 |
$ | 2,286 | $ | 1,557 | $ | 2,491 | $ | 519 | $ | 6,853 | ||||||||||
2010 |
2,167 | 1,556 | 1,569 | 455 | 5,747 | |||||||||||||||
% Change |
5.5 | % | 0.1 | % | 58.8 | % | 14.1 | % | 19.2 | % | ||||||||||
Reconciliation: |
||||||||||||||||||||
For the six months ended June 30, 2010 |
$ | 2,167 | $ | 1,556 | $ | 1,569 | $ | 455 | $ | 5,747 | ||||||||||
2010 Asset impairment and exit costs |
| | | | | |||||||||||||||
2011 Asset impairment and exit costs |
(12 | ) | (2 | ) | (2 | ) | (1 | ) | (17 | ) | ||||||||||
Acquired businesses |
(1 | ) | | 24 | | 23 | ||||||||||||||
Currency |
131 | (1 | ) | 247 | 10 | 387 | ||||||||||||||
Operations |
1 | 4 | 653 | 55 | 713 | |||||||||||||||
For the six months ended June 30, 2011 |
$ | 2,286 | $ | 1,557 | $ | 2,491 | $ | 519 | $ | 6,853 | ||||||||||
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings Attributable to PMI and Diluted Earnings Per Share
For the Six Months Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Earnings Attributable to PMI |
Diluted E.P.S. |
|||||||
2011 Net Earnings Attributable to PMI |
$ | 4,328 | $ | 2.42 | (1) | |||
2010 Net Earnings Attributable to PMI |
$ | 3,685 | $ | 1.97 | (1) | |||
% Change |
17.4 | % | 22.8 | % | ||||
Reconciliation: |
||||||||
2010 Net Earnings Attributable to PMI |
$ | 3,685 | $ | 1.97 | (1) | |||
Special Items: |
||||||||
2011 Asset impairment and exit costs |
(11 | ) | (0.01 | ) | ||||
2011 Tax items |
26 | 0.02 | ||||||
2010 Asset impairment and exit costs |
| | ||||||
2010 Tax items |
(121 | ) | (0.07 | ) | ||||
Currency |
291 | 0.16 | ||||||
Interest |
19 | 0.01 | ||||||
Change in tax rate |
(26 | ) | (0.01 | ) | ||||
Impact of lower shares outstanding and share-based payments |
7 | 0.10 | ||||||
Operations |
458 | 0.25 | ||||||
2011 Net Earnings Attributable to PMI |
$ | 4,328 | $ | 2.42 | (1) | |||
(1) Basic and diluted EPS were calculated using the following (in millions): | ||||||||
YTD June 2011 |
YTD June 2010 |
|||||||
Net earnings attributable to PMI |
$ | 4,328 | $ | 3,685 | ||||
Less distributed and undistributed earnings attributable to share-based payment awards |
24 | 17 | ||||||
Net earnings for basic and diluted EPS |
$ | 4,304 | $ | 3,668 | ||||
Weighted-average shares for basic EPS |
1,782 | 1,860 | ||||||
Plus incremental shares from assumed conversions: |
||||||||
Stock Options |
| 3 | ||||||
Weighted-average shares for diluted EPS |
1,782 | 1,863 | ||||||
Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)
June 30, 2011 |
December 31, 2010 |
|||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 2,178 | $ | 1,703 | ||||
All other current assets |
12,155 | 12,053 | ||||||
Property, plant and equipment, net |
6,793 | 6,499 | ||||||
Goodwill |
10,652 | 10,161 | ||||||
Other intangible assets, net |
4,020 | 3,873 | ||||||
Other assets |
996 | 761 | ||||||
Total assets |
$ | 36,794 | $ | 35,050 | ||||
Liabilities and Stockholders Equity |
||||||||
Short-term borrowings |
$ | 570 | $ | 1,747 | ||||
Current portion of long-term debt |
3,314 | 1,385 | ||||||
All other current liabilities |
10,879 | 9,672 | ||||||
Long-term debt |
13,037 | 13,370 | ||||||
Deferred income taxes |
2,067 | 2,027 | ||||||
Other long-term liabilities |
1,747 | 1,728 | ||||||
Total liabilities |
31,614 | 29,929 | ||||||
Redeemable noncontrolling interest |
1,204 | 1,188 | ||||||
Total PMI stockholders equity |
3,669 | 3,506 | ||||||
Noncontrolling interests |
307 | 427 | ||||||
Total stockholders equity |
3,976 | 3,933 | ||||||
Total liabilities and stockholders equity |
$ | 36,794 | $ | 35,050 | ||||
Total debt |
$ | 16,921 | $ | 16,502 | ||||
Total debt to EBITDA |
1.28 | (1) | 1.36 | (1) | ||||
Net debt to EBITDA |
1.11 | (1) | 1.22 | (1) |
(1) | For the calculation of Total Debt to EBITDA and Net Debt to EBITDA ratios, refer to Schedule 18. |
Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in Reported Net Revenues excluding Excise Taxes |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Net Revenues |
Less Excise Taxes |
Reported Net Revenues excluding Excise Taxes |
Less Currency |
Reported Net Revenues excluding Excise Taxes & Currency |
Less Acquisi- tions |
Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions |
Reported Net Revenues |
Less Excise Taxes |
Reported Net Revenues excluding Excise Taxes |
Reported | Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||
$ | 8,080 | $ | 5,583 | $ | 2,497 | $ | 187 | $ | 2,310 | $ | | $ | 2,310 | European Union | $ | 7,260 | $ | 4,965 | $ | 2,295 | 8.8 | % | 0.7 | % | 0.7 | % | ||||||||||||||||||||||||||
4,603 | 2,591 | 2,012 | 55 | 1,957 | | 1,957 | EEMA | 4,125 | 2,236 | 1,889 | 6.5 | % | 3.6 | % | 3.6 | % | ||||||||||||||||||||||||||||||||||||
5,146 | 2,210 | 2,936 | 222 | 2,714 | 3 | 2,711 | Asia | 3,903 | 1,780 | 2,123 | 38.3 | % | 27.8 | % | 27.7 | % | ||||||||||||||||||||||||||||||||||||
2,405 | 1,577 | 828 | 30 | 798 | | 798 | Latin America & Canada | 2,095 | 1,341 | 754 | 9.8 | % | 5.8 | % | 5.8 | % | ||||||||||||||||||||||||||||||||||||
$ | 20,234 | $ | 11,961 | $ | 8,273 | $ | 494 | $ | 7,779 | $ | 3 | $ | 7,776 | PMI Total | $ | 17,383 | $ | 10,322 | $ | 7,061 | 17.2 | % | 10.2 | % | 10.1 | % | ||||||||||||||||||||||||||
2011 | 2010 | % Change in Reported Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Operating Companies Income |
Less Currency |
Reported Operating Companies Income excluding Currency |
Less Acquisi- tions |
Reported Operating Companies Income excluding Currency & Acquisitions |
Reported Operating Companies Income |
Reported | Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||||||
$ | 1,280 | $ | 152 | $ | 1,128 | $ | (1 | ) | $ | 1,129 | European Union | $ | 1,105 | 15.8 | % | 2.1 | % | 2.2 | % | |||||||||||||||||||||||||||||||||
835 | 11 | 824 | | 824 | EEMA | 786 | 6.2 | % | 4.8 | % | 4.8 | % | ||||||||||||||||||||||||||||||||||||||||
1,398 | 145 | 1,253 | 1 | 1,252 | Asia | 845 | 65.4 | % | 48.3 | % | 48.2 | % | ||||||||||||||||||||||||||||||||||||||||
268 | 9 | 259 | | 259 | Latin America & Canada | 238 | 12.6 | % | 8.8 | % | 8.8 | % | ||||||||||||||||||||||||||||||||||||||||
$ | 3,781 | $ | 317 | $ | 3,464 | $ | | $ | 3,464 | PMI Total | $ | 2,974 | 27.1 | % | 16.5 | % | 16.5 | % | ||||||||||||||||||||||||||||||||||
Schedule 11
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in Adjusted Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Operating Companies Income |
Less Asset Impairment & Exit Costs |
Adjusted Operating Companies Income |
Less Currency |
Adjusted Operating Companies Income excluding Currency |
Less Acquisi- tions |
Adjusted Operating Companies Income excluding Currency & Acquisitions |
Reported Operating Companies Income |
Less Asset Impairment & Exit Costs |
Adjusted Operating Companies Income |
Adjusted | Adjusted excluding Currency |
Adjusted excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||
$ | 1,280 | $ | (1 | ) | $ | 1,281 | $ | 152 | $ | 1,129 | $ | (1 | ) | $ | 1,130 | European Union | $ | 1,105 | $ | | $ | 1,105 | 15.9 | % | 2.2 | % | 2.3 | % | ||||||||||||||||||||||||
835 | | 835 | 11 | 824 | | 824 | EEMA | 786 | | 786 | 6.2 | % | 4.8 | % | 4.8 | % | ||||||||||||||||||||||||||||||||||||
1,398 | | 1,398 | 145 | 1,253 | 1 | 1,252 | Asia | 845 | | 845 | 65.4 | % | 48.3 | % | 48.2 | % | ||||||||||||||||||||||||||||||||||||
268 | | 268 | 9 | 259 | | 259 | Latin America & Canada | 238 | | 238 | 12.6 | % | 8.8 | % | 8.8 | % | ||||||||||||||||||||||||||||||||||||
$ | 3,781 | $ | (1 | ) | $ | 3,782 | $ | 317 | $ | 3,465 | $ | | $ | 3,465 | PMI Total | $ | 2,974 | $ | | $ | 2,974 | 27.2 | % | 16.5 | % | 16.5 | % | |||||||||||||||||||||||||
2011 | 2010 | % Points Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted Operating Companies Income excluding Currency |
Net Revenues excluding Excise Taxes & Currency(1) |
Adjusted Operating Companies Income Margin excluding Currency |
Adjusted Operating Companies Income excluding Currency & Acquisitions |
Net Revenues excluding Excise Taxes, Currency & Acquisitions(1) |
Adjusted Operating Companies Income Margin excluding Currency & Acquisitions |
Adjusted Operating Companies Income |
Net Revenues excluding Excise Taxes(1) |
Adjusted Operating Companies Income Margin |
Adjusted Operating Companies Income Margin excluding Currency |
Adjusted Operating Companies Income Margin excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||||
$ | 1,129 | $ | 2,310 | 48.9 | % | $ | 1,130 | $ | 2,310 | 48.9 | % | European Union | $ | 1,105 | $ | 2,295 | 48.1 | % | 0.8 | 0.8 | ||||||||||||||||||||||||||||||||
824 | 1,957 | 42.1 | % | 824 | 1,957 | 42.1 | % | EEMA | 786 | 1,889 | 41.6 | % | 0.5 | 0.5 | ||||||||||||||||||||||||||||||||||||||
1,253 | 2,714 | 46.2 | % | 1,252 | 2,711 | 46.2 | % | Asia | 845 | 2,123 | 39.8 | % | 6.4 | 6.4 | ||||||||||||||||||||||||||||||||||||||
259 | 798 | 32.5 | % | 259 | 798 | 32.5 | % | Latin America & Canada | 238 | 754 | 31.6 | % | 0.9 | 0.9 | ||||||||||||||||||||||||||||||||||||||
$ | 3,465 | $ | 7,779 | 44.5 | % | $ | 3,465 | $ | 7,776 | 44.6 | % | PMI Total | $ | 2,974 | $ | 7,061 | 42.1 | % | 2.4 | 2.5 | ||||||||||||||||||||||||||||||||
(1) | For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 10. |
Schedule 12
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency
For the Quarters Ended June 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 1.35 | $ | 1.07 | 26.2 | % | ||||||
Adjustments: |
||||||||||||
Asset impairment and exit costs |
| | ||||||||||
Tax items |
(0.01 | ) | (0.07 | ) | ||||||||
Adjusted Diluted EPS |
$ | 1.34 | $ | 1.00 | 34.0 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.13 | |||||||||||
Adjusted Diluted EPS, excluding Currency |
$ | 1.21 | $ | 1.00 | 21.0 | % | ||||||
Schedule 13
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency
For the Quarters Ended June 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 1.35 | $ | 1.07 | 26.2 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.13 | |||||||||||
Reported Diluted EPS, excluding Currency |
$ | 1.22 | $ | 1.07 | 14.0 | % | ||||||
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Six Months Ended June 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in Reported Net Revenues excluding Excise Taxes |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Net |
Less Excise Taxes |
Reported Net Revenues excluding Excise Taxes |
Less Currency |
Reported Net Revenues excluding Excise Taxes & Currency |
Less Acquisi- tions |
Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions |
Reported Net Revenues |
Less Excise Taxes |
Reported Net Revenues excluding Excise Taxes |
Reported |
Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||
$ | 14,495 | $ | 9,997 | $ | 4,498 | $ | 81 | $ | 4,417 | $ | | $ | 4,417 | European Union | $ | 14,008 | $ | 9,529 | $ | 4,479 | 0.4 | % | (1.4 | )% | (1.4 | )% | ||||||||||||||||||||||||||
8,274 | 4,575 | 3,699 | 26 | 3,673 | | 3,673 | EEMA | 7,481 | 3,846 | 3,635 | 1.8 | % | 1.0 | % | 1.0 | % | ||||||||||||||||||||||||||||||||||||
9,434 | 4,175 | 5,259 | 350 | 4,909 | 108 | (1) | 4,801 | Asia | 7,465 | 3,469 | 3,996 | 31.6 | % | 22.8 | % | 20.1 | % | |||||||||||||||||||||||||||||||||||
4,561 | 2,953 | 1,608 | 54 | 1,554 | | 1,554 | Latin America & Canada | 4,016 | 2,569 | 1,447 | 11.1 | % | 7.4 | % | 7.4 | % | ||||||||||||||||||||||||||||||||||||
$ | 36,764 | $ | 21,700 | $ | 15,064 | $ | 511 | $ | 14,553 | $ | 108 | $ | 14,445 | PMI Total | $ | 32,970 | $ | 19,413 | $ | 13,557 | 11.1 | % | 7.3 | % | 6.6 | % | ||||||||||||||||||||||||||
2011 | 2010 | % Change in Reported Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported |
Less Currency |
Reported Operating Companies Income excluding Currency |
Less Acquisi- tions |
Reported Operating Companies Income excluding Currency & Acquisitions |
Reported Operating Companies Income |
Reported |
Reported excluding Currency |
Reported excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||||||
$ | 2,286 | $ | 131 | $ | 2,155 | $ | (1 | ) | $ | 2,156 | European Union | $ | 2,167 | 5.5 | % | (0.6 | )% | (0.5 | )% | |||||||||||||||||||||||||||||||||
1,557 | (1 | ) | 1,558 | | 1,558 | EEMA | 1,556 | 0.1 | % | 0.1 | % | 0.1 | % | |||||||||||||||||||||||||||||||||||||||
2,491 | 247 | 2,244 | 24 | (2) | 2,220 | Asia | 1,569 | 58.8 | % | 43.0 | % | 41.5 | % | |||||||||||||||||||||||||||||||||||||||
519 | 10 | 509 | | 509 | Latin America & Canada | 455 | 14.1 | % | 11.9 | % | 11.9 | % | ||||||||||||||||||||||||||||||||||||||||
$ | 6,853 | $ | 387 | $ | 6,466 | $ | 23 | $ | 6,443 | PMI Total | $ | 5,747 | 19.2 | % | 12.5 | % | 12.1 | % | ||||||||||||||||||||||||||||||||||
(1) | Includes the business combination in the Philippines ($105). |
(2) | Includes the business combination in the Philippines ($23). |
Schedule 15
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Six Months Ended June 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in Adjusted Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported |
Less Asset Impairment & Exit Costs |
Adjusted Operating Companies Income |
Less Currency |
Adjusted Operating Companies Income excluding Currency |
Less Acquisi- tions |
Adjusted Operating Companies Income excluding Currency & Acquisitions |
Reported Operating Companies Income |
Less Asset Impairment & Exit Costs |
Adjusted Operating Companies Income |
Adjusted |
Adjusted excluding Currency |
Adjusted excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||
$ | 2,286 | $ | (12 | ) | $ | 2,298 | $ | 131 | $ | 2,167 | $ | (1 | ) | $ | 2,168 | European Union | $ | 2,167 | $ | | $ | 2,167 | 6.0 | % | | % | | % | ||||||||||||||||||||||||
1,557 | (2 | ) | 1,559 | (1 | ) | 1,560 | | 1,560 | EEMA | 1,556 | | 1,556 | 0.2 | % | 0.3 | % | 0.3 | % | ||||||||||||||||||||||||||||||||||
2,491 | (2 | ) | 2,493 | 247 | 2,246 | 24 | (1) | 2,222 | Asia | 1,569 | | 1,569 | 58.9 | % | 43.1 | % | 41.6 | % | ||||||||||||||||||||||||||||||||||
519 | (1 | ) | 520 | 10 | 510 | | 510 | Latin America & Canada |
455 | | 455 | 14.3 | % | 12.1 | % | 12.1 | % | |||||||||||||||||||||||||||||||||||
$ | 6,853 | $ | (17 | ) | $ | 6,870 | $ | 387 | $ | 6,483 | $ | 23 | $ | 6,460 | PMI Total | $ | 5,747 | $ | | $ | 5,747 | 19.5 | % | 12.8 | % | 12.4 | % | |||||||||||||||||||||||||
2011 | 2010 | % Points Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted |
Net Revenues excluding Excise Taxes & Currency(2) |
Adjusted Operating Companies Income Margin excluding Currency |
Adjusted Operating Companies Income excluding Currency & Acquisitions |
Net Revenues excluding Excise Taxes, Currency & Acquisitions(2) |
Adjusted Operating Companies Income Margin excluding Currency & Acquisitions |
Adjusted Operating Companies Income |
Net Revenues excluding Excise Taxes(2) |
Adjusted Operating Companies Income Margin |
Adjusted Operating Companies Income Margin excluding Currency |
Adjusted Operating Companies Income Margin excluding Currency & Acquisitions |
||||||||||||||||||||||||||||||||||||||||||
$ | 2,167 | $ | 4,417 | 49.1 | % | $ | 2,168 | $ | 4,417 | 49.1 | % | European Union | $ | 2,167 | $ | 4,479 | 48.4 | % | 0.7 | 0.7 | ||||||||||||||||||||||||||||||||
1,560 | 3,673 | 42.5 | % | 1,560 | 3,673 | 42.5 | % | EEMA | 1,556 | 3,635 | 42.8 | % | (0.3 | ) | (0.3 | ) | ||||||||||||||||||||||||||||||||||||
2,246 | 4,909 | 45.8 | % | 2,222 | 4,801 | 46.3 | % | Asia | 1,569 | 3,996 | 39.3 | % | 6.5 | 7.0 | ||||||||||||||||||||||||||||||||||||||
510 | 1,554 | 32.8 | % | 510 | 1,554 | 32.8 | % | Latin America & Canada | 455 | 1,447 | 31.4 | % | 1.4 | 1.4 | ||||||||||||||||||||||||||||||||||||||
$ | 6,483 | $ | 14,553 | 44.5 | % | $ | 6,460 | $ | 14,445 | 44.7 | % | PMI Total | $ | 5,747 | $ | 13,557 | 42.4 | % | 2.1 | 2.3 | ||||||||||||||||||||||||||||||||
(1) | Includes the business combination in the Philippines ($23). |
(2) | For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 14. |
Schedule 16
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency
For the Six Months Ended June 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 2.42 | $ | 1.97 | 22.8 | % | ||||||
Adjustments: |
||||||||||||
Asset impairment and exit costs |
0.01 | | ||||||||||
Tax items |
(0.02 | ) | (0.07 | ) | ||||||||
Adjusted Diluted EPS |
$ | 2.41 | $ | 1.90 | 26.8 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.16 | |||||||||||
Adjusted Diluted EPS, excluding Currency |
$ | 2.25 | $ | 1.90 | 18.4 | % | ||||||
Schedule17
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency
For the Six Months Ended June 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 2.42 | $ | 1.97 | 22.8 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.16 | |||||||||||
Reported Diluted EPS, excluding Currency |
$ | 2.26 | $ | 1.97 | 14.7 | % | ||||||
Schedule 18
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios
($ in millions, except ratios)
(Unaudited)
For the Year
Ended June 30, 2011 |
For the Year Ended December 31, 2010 |
|||||||||||||||
July ~ December | January ~ June | 12 months | ||||||||||||||
2010 | 2011 | rolling | ||||||||||||||
Earnings before income taxes |
$ | 5,149 | $ | 6,298 | $ | 11,447 | $ | 10,324 | ||||||||
Interest expense, net |
430 | 421 | 851 | 876 | ||||||||||||
Depreciation and amortization |
485 | 488 | 973 | 932 | ||||||||||||
EBITDA |
$ | 6,064 | $ | 7,207 | $ | 13,271 | $ | 12,132 | ||||||||
June 30, 2011 |
December 31, 2010 |
|||||||||||||||
Short-term borrowings |
$ | 570 | $ | 1,747 | ||||||||||||
Current portion of long-term debt |
3,314 | 1,385 | ||||||||||||||
Long-term debt |
13,037 | 13,370 | ||||||||||||||
Total Debt |
$ | 16,921 | $ | 16,502 | ||||||||||||
Less: Cash and cash equivalents |
2,178 | 1,703 | ||||||||||||||
Net Debt |
$ | 14,743 | $ | 14,799 | ||||||||||||
Ratios |
||||||||||||||||
Total Debt to EBITDA |
1.28 | 1.36 | ||||||||||||||
Net Debt to EBITDA |
1.11 | 1.22 | ||||||||||||||
Schedule 19
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Cash Flow to Free Cash Flow and Free Cash Flow, excluding Currency
Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency
For the Quarters and Six Months Ended June 30,
($ in millions)
(Unaudited)
For the Quarters
Ended June 30, |
For the Six Months
Ended June 30, |
|||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Net cash provided by operating activities(a) |
$ | 4,120 | $ | 3,465 | 18.9 | % | $ | 6,515 | $ | 5,439 | 19.8 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Capital expenditures |
186 | 169 | 345 | 319 | ||||||||||||||||||||
Free cash flow |
$ | 3,934 | $ | 3,296 | 19.4 | % | $ | 6,170 | $ | 5,120 | 20.5 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Currency impact |
236 | 264 | ||||||||||||||||||||||
Free cash flow, excluding currency |
$ | 3,698 | $ | 3,296 | 12.2 | % | $ | 5,906 | $ | 5,120 | 15.4 | % | ||||||||||||
For the Quarters Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Net cash provided by operating activities(a) |
$ | 4,120 | $ | 3,465 | 18.9 | % | $ | 6,515 | $ | 5,439 | 19.8 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Currency impact |
250 | 279 | ||||||||||||||||||||||
Net cash provided by operating activities, excluding currency |
$ | 3,870 | $ | 3,465 | 11.7 | % | $ | 6,236 | $ | 5,439 | 14.7 | % | ||||||||||||
(a) | Operating cash flow. |
Schedule 20
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
For the Year Ended December 31,
(Unaudited)
2010 | ||||
Reported Diluted EPS |
$ | 3.92 | ||
Adjustments: |
||||
Tax items |
(0.07 | ) | ||
Asset impairment and exit costs |
0.02 | |||
Adjusted Diluted EPS |
$ | 3.87 | ||
Exhibit 99.2
Philip Morris International Inc.
2011 Second-Quarter Results Conference Call
July 21, 2011
NICK ROLLI
(SLIDE 1.)
Welcome. Thank you for joining us. Earlier today, we issued a news release containing detailed information on our 2011 second-quarter results. You may access the release on our web site at www.pmi.com.
(SLIDE 2.)
During our call today, we will be talking about results for the second-quarter 2011 and comparing them with the same period in 2010 unless otherwise stated. References to PMI volumes are for PMI shipments. Industry volume and market shares are the latest data available from a number of internal and external sources. Organic volume refers to volume excluding acquisitions. Net revenues exclude excise taxes. Operating Companies Income, or OCI, is defined as operating income before general corporate expenses and the amortization of intangibles.
You will find data tables showing how we made adjustments to net revenues and OCI for currency, acquisitions, asset impairment, exit and other costs, free cash flow calculations, and adjustments to Earnings per Share, or EPS, as well as reconciliations to U.S. GAAP measures, at the end of todays web cast slides, which are posted on our web site.
(SLIDE 3.)
Todays remarks contain forward-looking statements and projections of future results, and I direct your attention to the Forward-Looking and Cautionary Statements disclosure in todays presentation and news release for a review of the various factors that could cause actual results to differ materially from projections.
Its now my pleasure to introduce Hermann Waldemer, Chief Financial Officer.
Hermann.
HERMANN WALDEMER
(SLIDE 4.)
1
Welcome, ladies and gentlemen. We reported another very strong performance during the second quarter. We achieved stable organic cigarette volumes; net revenues, excluding currency and acquisitions, grew by a strong 10.1%; adjusted OCI, excluding currency and acquisitions, surged 16.5%; and adjusted diluted EPS were 21.0% above the prior years level, excluding currency.
These excellent results can be attributed in particular to the Asia Region, with Indonesia, Japan, Korea and the Philippines all performing very strongly, and higher prices in a wide range of markets.
(SLIDE 5.)
During the second quarter, our pricing variance reached $617 million, for a total of $1.1 billion during the first half of the year. In the last three months, we implemented or announced price increases in markets such as Algeria, Argentina, Australia, Canada, Egypt, Germany, Italy, the Netherlands, Russia and Saudi Arabia, thus reinforcing our strong pricing momentum. Furthermore, the pricing situation in Spain improved in July.
(SLIDE 6.)
We also have strong overall business momentum. Our share in the second quarter for our top 30 OCI markets was up 2.3 points to 38.5%.
(SLIDE 7.)
Marlboro had stable volume in the quarter on a global PMI basis, as higher volume in the Asia and EEMA Regions offset the impact of lower industry volume in the EU and Latin America & Canada Regions. The brands share was up or stable in all four Regions and its global share, excluding China and the USA, grew by 0.4 points to 9.3%.
(SLIDE 8.)
During the second quarter, L&M, our second largest brand, increased its volume by 3.1%, accelerating its growth in the EU Region and part of the EEMA Region. These results were achieved by strong share growth in a wide range of markets, including Egypt, Germany, the Netherlands, Poland, Slovakia, and Turkey.
(SLIDE 9.)
In light of our excellent results, strong pricing and good share and business momentum going into the second half of the year, as well as a more favorable currency outlook at prevailing exchange rates, we announced today a further 15 cents increase in our reported diluted EPS guidance for 2011. Ten cents of the increased guidance relate to the business, the improvement being largely attributable to Japan. Five cents relate to currency, though it should be noted that exchange rates may still experience some volatility over the balance of the year.
2
The new guidance range is $4.70 to $4.80. Compared to our adjusted diluted EPS of $3.87 in 2010, this corresponds to an increase of approximately 21.5-24% at prevailing exchange rates, and approximately 15-17.5% excluding currency.
(SLIDE 10.)
Our excellent results in the first half and our favorable outlook for the second half of 2011 demonstrate the benefits of our global footprint and highlight our success with attractive acquisitions and organic volume growth over the last ten years in Asia, where half of the world population lives. Our strong results in the second quarter reflect the strength of our management teams in these markets and especially in Japan, where they took the calculated risk to commit around $100 million in air freight when the extent of the additional demand for our brands was still difficult to judge. Our efficient, yet flexible, global manufacturing footprint and effective market response enabled us to fill the void caused by the shortage of JT and, more recently, BAT products.
In the second quarter, net revenues in the Asia Region grew by 27.7%, excluding currency and acquisitions, and adjusted OCI was 48.2% higher on the same basis. As a result, the Region is now our largest contributor to these measures, accounting for 35% and 36%, respectively, of PMIs net revenues and adjusted OCI during the first half of this year, and this contribution is expected to increase further as our business in the Region continues to expand.
(SLIDE 11.)
During the second quarter, PMI shipments to Japan reached 19.5 billion units, up 1.9 billion, or 11.0%, compared to the same period last year. This increase was achieved despite the unfavorable impact of the large October 2010 tax-driven price increases and the boost to our shipments that occurred in the second quarter of last year ahead of that increase. Our market share reached 42.0%, 17.7 points above the prior year level and 16.4 points above our share in the first quarter of 2011. As we ensured full product availability throughout the period, all our brands gained share, and in particular Lark and Marlboro.
Determining exactly how the rest of the year will pan out remains very difficult due to the complex interaction of multiple factors. These include the impact of the tax-driven price increase in October last year, the consumer and trades prior year loading and subsequent de-loading patterns, the underlying market decline trend, the price elasticity and whether it will diminish over time, the disruption of JT supplies and shortages of certain BAT products, the precise impact of our efficient response, and our level of smoker share retention once a full range of competitive products are available. The new trend for industry volume and the new base for PMIs future market share growth will not be clear until the fourth quarter of this year at the earliest.
(SLIDE 12.)
3
Our business is also doing very well in Indonesia. Thanks to a strong economy and a favorable comparison with a relatively soft second quarter 2010, industry volume grew an exceptional 13.9% in the second quarter of this year. For the full year, we expect the annual growth rate to be in a range of 4-6%.
Our volume in the quarter was up by 20.7% to 22.6 billion units, and our market share grew by 1.6 points to 30.2%, with all our kretek brands gaining or maintaining their market share and Marlboro increasing its volume and its share within the white cigarette segment, despite a reduction in its overall market share.
The growing volume, along with continual moderate price increases, is driving strong profitability growth in Asias second largest cigarette market after China.
(SLIDE 13.)
In Korea, we continued to achieve strong volume and share growth behind Marlboro and Parliament. Our market share grew by 3.3 points to 19.9% in the quarter, with a 1.0 share point contribution from innovative Marlboro menthol line extensions. Korea is one of the few key markets worldwide where we have not increased retail prices in the past year, in light of the more important need to secure excise tax reform for the long term.
(SLIDE 14.)
PMIs organic volume in the EEMA Region declined by 3.4% in the second quarter, due primarily to Ukraine. For the full year, we expect our volume to be stable in the Region.
Net revenues were up by 3.6% during Q2, excluding currency and acquisitions. Adjusted OCI was 4.8% higher, excluding currency and acquisitions, driven primarily by increased volumes in Turkey and North Africa and higher prices across many markets, in particular Russia. This was partly offset by lower volumes in Eastern Europe and additional investments in business building initiatives in Russia.
(SLIDE 15.)
These investments will further boost the momentum of Parliament, Chesterfield and Bond Street in Russia, while addressing the issues surrounding Marlboro. These efforts will, however, take some time to have a measurable impact on our market share, which declined by 0.1 point to 25.4% in the second quarter through the end of May, due mainly to a temporary price disadvantage to competitive products.
At the beginning of this month, we announced to the trade a further price increase of 3 Rubles on Marlboro and 2 Rubles on average across the rest of our portfolio. Our lowest price in the market will now be 21 Rubles a pack for Optima, up 27% from a year ago.
These price increases, along with lower disposable incomes, as wage increases have failed to keep pace with inflation, are limiting the extent of consumer uptrading. Industry
4
volume, meanwhile, is expected to decline at an annualized rate of some 2-3% this year, in line with 2010.
Earlier this month, the Russian Government approved its Tax Policy Guidelines, or TPG, for the period 2012 through 2014, including a detailed three-year excise tax development plan for tobacco products. The TPG foresees that excise taxes will be indexed periodically in line with inflation and economic conditions in Russia. In addition to the excise tax increases already foreseen for January 2012 in the current law, the TPG calls for an additional increase in July 2012 of 8.3% in the specific element to 390 Rubles per thousand and 10.9% in the Minimum Excise Tax to 510 Rubles per thousand. While the proposed increases are significant, we believe they should be manageable. It should, however, be highlighted that this is the first step in the process and that the plan needs to be submitted to the Duma and the Federation Council for approval. The final adoption of the law is not expected to take place until November this year.
(SLIDE 16.)
In Ukraine, the estimated 15% decline in industry volume in the second quarter masks an improving underlying trend, as the data is distorted by the heavy trade loading that took place in the same period last year ahead of tax-driven price increases. We expect the market to stabilize during the second half of the year.
The Ukrainian market is tending to polarize with the premium and the super-low price segments both expanding, while several small local manufacturers and illicit trade continue to grow volume. PMIs market share was down 3.5 points in the quarter to 32.1%, as we are under-represented in the super-low price segment. We have reduced the price gap between Bond Street and the bottom of the market to address this issue. Meanwhile, both Parliament and Marlboro are performing well and increased their market share during the quarter.
(SLIDE 17.)
Overall, the Turkish cigarette market has now stabilized. Our volume grew by 12.1% in the second quarter, though it remains below the levels prior to the tax increase of January 2010. Our market share reached 44.6% in the quarter through the end of May, up 3.8 points. This impressive share improvement covers all three price segments, and is led by premium Parliament, mid-price Muratti and low-price L&M.
(SLIDE 18.)
Despite the issues that continued to impact Spain and to a lesser extent Greece, the results in the EU Region in the second quarter were more positive from a number of standpoints. Industry volume declined by a modest 1.7% and was actually up in markets such as the Czech Republic, France and Germany. PMI volume was 3.1% lower due to an 8.4% decline in Greece, a 17.6% reduction in Spain and a decrease of 9.7% in Poland, where we shed share at the lowest and least profitable end of the market. Our key brands,
5
Marlboro and L&M performed well: Marlboros Regional share was stable at 18.1% and L&Ms grew a further 0.3 points to 6.6%.
Net revenues and adjusted OCI were up 0.7% and 2.3% respectively, excluding currency and acquisitions. While we are not entirely satisfied with the situation, there are some clear signs for renewed optimism concerning the future contribution of the EU Region to PMIs profitability growth going forward.
(SLIDE 19.)
Germany has again become one of the strongest tobacco markets in the EU. During the first half of the year, industry volume was up 1.9% for cigarettes and 4.8% for fine cut. PMI increased its market share by 0.3 and 0.4 points, to 35.9% and 14.8%, respectively, during this period. L&M continues to perform very strongly, gaining a further 1.0 points in the second quarter to reach a cigarette share of 10.4%. Unit margin-enhancing price increases have been implemented. A remaining concern is the growth of discounted larger pack sizes. While the market share of big packs, defined as 22 to 25 cigarettes per pack, appears to have stabilized, the share of maxi packs, that is packs with over 26 cigarettes, continues to increase and may receive a boost from the recent introduction of packs of 40 cigarettes.
(SLIDE 20.)
The Spanish economy continues to suffer from high unemployment levels with few signs of improvement. Consequently, cigarette industry volumes have been contracting at double-digit rates and consumers have been downtrading to cheaper brands and illicit trade products. This is the special context in which price competition was exacerbated in May/June this year. However, recent developments indicate the situation has improved.
(SLIDE 21.)
Industry volume increased 1.8% in France and was stable in Italy during the second quarter. Our cigarette market share was up slightly in France to 40.9%, as the continued growth of the Philip Morris brand, also positioned in the premium segment, more than offset a slight decline of Marlboros share. At the same time, following the entry of Marlboro into the category, we also became the market leader in fine cut with a quarterly share of 25.0%, up 5.6 points.
Our market share in Italy was down 0.7 points to 53.4%, with Marlboro down 0.3 points. This was attributable to the relative decline of the premium segment, where PMI has a 95% share. Our profitability, however, continued to improve in both markets, with high single digit increases in the quarter. Furthermore, we recently announced a 10 Euro Cent price increase across our portfolio in Italy.
(SLIDE 22.)
6
After increasing the specific to total component in its excise tax last December, earlier this month the Greek Government increased the Minimum Excise Tax from 75% to 100% of the excise tax levied on the Weighted Average Price. This implies a pass-on of nearly 50 Euro Cents for 20 cigarettes at the very bottom end of the market, where cigarettes retail at 2.40. PMI has announced an increase in the price of its main low-price brand, L&M 25s, from 3.20 to 3.70 per pack. The reduction in price gaps should help the continued recovery of Marlboros market share in Greece.
(SLIDE 23.)
Our volume in the Latin America & Canada Region was 4.8% lower in the quarter, driven by a double digit market contraction in Mexico following the large tax-driven price increases at the end of last year, and by the timing of shipments in Brazil. Despite a challenging pricing environment, our market share in Mexico reached 72.2%, with Marlboro surging 3.8 points to reach a 52.0% share. Our business in Argentina performed very well, with volume growth of over 8% and gains for Marlboro, which added 0.6 points to reach a 24.0% market share.
Net revenues for the Region increased by 5.8% in the quarter, excluding currency and acquisitions, and adjusted OCI was 8.8% higher on the same basis.
(SLIDE 24.)
On the regulatory front, the main focus remains on plain packaging. Although certain other governments have expressed their opposition to such a measure, the Australian Government continues to appear intent on mandating the implementation of plain packaging in 2012 and has submitted a proposed bill to Parliament.
Plain packaging will result in the illegal confiscation of our very valuable trademarks and branded assets, in violation of international trade laws and treaties. We have, therefore, served notice of our intention to file an arbitration claim against the Australian Government under the Hong Kong Australia Bilateral Investment Treaty. We are now in a mandatory three month period set aside for negotiation under this procedure. Consequently, we have written to the Government seeking a meeting.
(SLIDE 25.)
Strong pricing and very moderate increases in tobacco and non-tobacco material costs, as well as our continued focus on productivity improvements, resulted in a 2.5 point increase in PMIs adjusted OCI margin, excluding currency and acquisitions, during the second quarter.
(SLIDE 26.)
Our free cash flow increased by $638 million, or 19.4% in the quarter to $3.9 billion. Excluding currency, the increase was $402 million, or 12.2%. The increase was driven
7
mainly by our excellent business results. During the first half of the year, our free cash flow was up more than $1 billion to nearly $6.2 billion.
(SLIDE 27.)
During the second quarter, we spent $1.5 billion to repurchase 22.7 million shares at an average price of $68.32. Since the March 2008 spin, we have now repurchased 17.9% of the shares outstanding at that time.
(SLIDE 28.)
In conclusion, PMI had an excellent quarter. Our adjusted diluted EPS growth reached 21.0%, excluding currency. Our outlook is promising, with strong market share and business momentum. Pricing remains a very strong driver of profitability, with Spain a special case. We are not under any significant input cost pressures and expect to exceed our annual productivity savings target of $250 million this year.
We have increased our 2011 EPS guidance by a further 15 cents, bringing it to a range of $4.70 to $4.80. Compared to an adjusted diluted EPS of $3.87 in 2010, this corresponds to an increase of approximately 21.5-24% at prevailing exchange rates, and approximately 15-17.5% excluding currency.
And finally, and most importantly, our cash flow continues to grow and we are focused on generously rewarding our shareholders through dividends and share repurchases.
(SLIDE 29.)
Thank you. I will now be happy to answer your questions.
NICK ROLLI
Well, thank you for joining us. That concludes our call today. If you have any follow-up questions, please contact the investor relations team here in Lausanne.
Thank you again and have a nice day.
8
![]() 2011
Second-Quarter Earnings Results
July 21, 2011
Exhibit 99.3 |
![]() 2
Introduction
Unless otherwise stated, we will be talking about results for the
second-quarter 2011 and comparing them with the same period in
2010
References to PMI volumes refer to PMI shipment data, unless
otherwise stated
Industry volume and market shares are the latest data available from
a number of internal and external sources
Organic volume refers to volume excluding acquisitions
Net revenues exclude excise taxes
OCI stands for Operating Companies Income, which is defined as
operating income before general corporate expenses and the
amortization of intangibles. OCI growth rates are on an adjusted
basis, which excludes asset impairment, exit and other costs
Data tables showing adjustments to net revenues and OCI for
currency, acquisitions, asset impairment, exit and other costs, free
cash flow calculations, adjustments to EPS, and reconciliations to
U.S. GAAP measures are at the end of todays web cast slides and
are posted on our web site |
![]() 3
Forward-Looking and Cautionary Statements
This presentation and related discussion contain statements that, to
the extent they do not relate strictly to historical or current facts,
constitute forward-looking statements
within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are based on current plans, estimates and expectations,
and are not guarantees of future performance. They are based on
managements expectations that involve a number of business risks
and uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the forward-looking
statements. PMI undertakes no obligation to publicly update or revise
any forward-looking statements, except in the normal course of its
public disclosure obligations. The risks and uncertainties relating to
the forward-looking statements in this presentation include those
described
under
Item
1A.
Risk
Factors
in
PMIs
Form
10-Q
for
the
quarter ended March 31, 2011, filed with the Securities and Exchange
Commission |
![]() 4
Second-Quarter 2011 Results
Very strong financial performance:
Key drivers:
Excellent results in the Asia Region, led by Indonesia, Japan,
Korea and the Philippines
Higher prices in a wide range of markets
Q2,
2011
Results
(a)
Organic Cigarette Volume
+0.1%
Net
Revenues
+10.1%
Adjusted OCI
+16.5%
Adjusted Diluted EPS
+21.0%
(a)
All financial growth rates exclude currency. Net revenues and OCI growth rates also exclude
acquisitions Source: PMI Financials |
![]() 5
Pricing Variance
Pricing remains the key
driver of our increased
profitability
During the last three
months, PMI implemented
or announced price
increases in numerous
markets
Pricing situation in Spain
improved in July
Source: PMI Financials
($ mio)
790
1,070
Q2
Q1
449
453
341
617
0
600
1,200
2010
2011 |
![]() 6
PMI Market Share Developments
(%)
Top 30 PMI OCI Markets
Source: PMI Financials and estimates
36.2
38.5
30
35
40
Q2, 2010
Q2, 2011 |
![]() 7
Marlboro
Market Share Developments
Market Shares
Q2, 2010
Q2, 2011
Variance
EU
18.1 %
18.1 %
-
pp
EEMA
6.3
6.9
0.6
Asia
(a)
6.0
6.7
0.7
LA&C
13.6
13.7
0.1
Total
(a)(b)
8.9
9.3
0.4
(a)
Excluding PRC
(b)
Also excluding the USA
Source: PMI estimates |
![]() 8
L&M
Market Share Developments
Market Share Increases
Q2, 2011 vs. Q2, 2010
(pp)
Turkey
(a)
Netherlands
Germany
Poland
Slovakia
Egypt
4.3
1.6
0.8
1.0
0.8
0.4
(a)
QTD May
Source: A.C. Nielsen and PMI estimates
0
5 |
![]() 9
2011 EPS Guidance
Reported diluted EPS guidance for 2011 is being raised
by a further 15 cents to $4.70 to $4.80
Ten cents of the increase are attributable to
improvements in the business, largely Japan
Five cents relate to a more favorable currency outlook at
prevailing exchange rates
Compared to our adjusted diluted EPS of $3.87 in 2010,
this corresponds to a growth rate of approximately 21.5 to
24% at prevailing exchange rates, and approximately
15% to 17.5% excluding currency
Source: PMI forecasts |
![]() 10
PMI Results by Region
Asia
(a)
Eastern Europe, Middle East & Africa Region
Source: PMI Financials
H1, 2011 Net Revenues:
$15.1 billion
H1, 2011 Adjusted OCI:
$6.9 billion
EEMA
(a)
EU
Latin America
& Canada
Latin America
& Canada
Asia
EU
EEMA
(a)
24%
35%
30%
11%
23%
36%
33%
8% |
![]() 11
Japan
Source: PMI Financials and Tobacco Institute of Japan
Total PMI
PMI shipments to Japan
reached 19.5 billion units
in Q2, 2011, up 1.9 billion,
or 11.0%
Second half impact subject
to complex interaction of
multiple factors
New base for industry
volume and PMI share will
not be clear until Q4, 2011,
at the earliest
Other
Lark
Marlboro
24.3
42.0
2010
2011
(%)
PMI Market Share
10.8
16.4
6.7
14.4
11.2
6.8
0
50
Q2
Q2 |
![]() 12
Indonesia
Strong economy and
relatively soft Q2, 2010,
drove industry volume up
13.9% in Q2, 2011
PMI volume up 20.7% to
22.6 billion units in the
same period
Strong profitability growth
in Asias second largest
market after China
Source: PMI estimates and PMI Financials
2010
2011
Other
Marlboro
Dji Sam Soe
Sampoerna A
28.6
30.2
(%)
PMI Market Share
Total PMI
11.7
11.8
7.3
7.3
4.2
4.5
0
30
Q2
Q2 |
![]() 13
Korea
Strong volume and share
growth momentum
continued, driven by
Marlboro
and
Parliament
Innovative Marlboro
menthol line extensions
contributed 1.0 share
points in Q2, 2011
PMI seeking to secure
excise tax reform
Source: PMI Financials and Hankook Research
(%)
2010
2011
Other
Parliament
Marlboro
16.6
19.9
Total PMI
PMI Market Share
6.8
8.6
5.5
6.7
0
20
Q2
Q2 |
![]() 14
EEMA Region
PMIs organic volume declined by 3.4% due primarily to
Ukraine
Full-year Regional volume expected to be stable
Net revenues and adjusted OCI, excluding currency and
acquisitions, were up 3.6% and 4.8%, respectively in Q2
Profitability improvement driven by:
Increased volumes in Turkey and North Africa, and
Higher prices across the Region, most notably in Russia,
partly offset by
Lower volumes in Eastern Europe, and
Increased investments in business building initiatives in Russia
Source: PMI Financials |
![]() 15
Russia
Investments to support strong
performance of Parliament,
Chesterfield
and Bond Street,
and address Marlboro
issues
Market share down 0.1pp QTD
May, 2011, to 25.4%
PMI price increase announced
earlier this month
Limited consumer uptrading and
expected overall market decline
of 2-3% this year, in line with
2010
Russian Government has
approved new road map for
excise taxes
Source: A.C. Nielsen, PMI estimates and Russian Ministry of Finance |
![]() 16
Ukraine
Estimated industry volume
decline of 15% distorted by
trade loading in Q2, 2010
Total market expected to
stabilize during second half
PMI share down 3.5pp to
32.1% in the second quarter,
due to under-representation in
super-low segment. Issue
being addressed through
more attractive pricing of
Bond Street
Market
shares
of
Parliament
and
Marlboro
are
growing
Source: PMI estimates and A.C. Nielsen
(%)
2010
2011
Industry Price Segments
Premium
Mid/Low
2010
Super-
Low
44.9
45.7
46.5
42.1
40.5
39.5
13.8
14.0
13.0
0
100
H1
H2
H1 |
![]() 17
Turkey
Total market has stabilized
PMI volume up 12.1% in Q2,
2011
PMI reached a market share
of 44.6% in QTD May, 2011,
up 3.8pp
PMI share improvement in
all three price segments, led
by Parliament, Muratti
and
L&M
(%)
2010
2011
Total
PMI
Premium
Mid
Low
40.8
44.6
PMI Market Share
(a)
QTD May
Source: PMI estimates, PMI Financials and A.C. Nielsen
(a)
19.0
21.4
5.8
6.2
17.0
16.0
0
45
Q2
Q3
Q4
Q1
Q2 |
![]() 18
EU Region
Despite the issues that continued to impact Spain and to
a lesser extent Greece, the results in the second quarter
were more positive:
-
Industry volume declined by a modest 1.7%
-
PMI volume was 3.1% lower due to Greece, Poland and Spain
-
further 0.3pp to 6.6%
-
Net revenues and adjusted OCI were up 0.7% and 2.3%,
respectively, excluding currency and acquisitions
Source: PMI estimates and PMI Financials
Marlboros Regional
share
was
stable
at
18.1%
and
L&M
grew
a |
![]() 19
Cigarettes
Fine cut
Germany
Total industry volumes of
cigarettes and fine cut have
increased this year
PMI cigarette and fine cut
market shares are growing
Very strong performance of
L&M
Unit margin-enhancing price
increases implemented
Continued growth of maxi
pack segment
(a) Big packs (22-25 cigs) and Maxi packs (26+ cigs)
Source: PMI estimates
(%)
2011
2010
PMI Market Share
2011
(%)
Big and Maxi Packs
(a)
SoM
Maxi
Big
35.6
35.9
14.4
14.8
2009
2010
36.4
40.5
40.2
5.2
7.1
10.0
0
50
FY
FY
H1
0
40
H1
H1 |
![]() 20
Spain
Source: PMI estimates
(%)
2010
2011
PMI Market Share
High unemployment
Cigarette industry contracting at
double-digit rate and consumer
downtrading
Price competition exacerbated in
May/June this year
Recent developments indicate the
situation has improved
BUT
31.2
31.3
31.0
30.4
32.6
31.6
25
35
Q1
Q2
Q3
Q4
Q1
Q2 |
![]() 21
France and Italy
Industry cigarette volume up
1.8% in France and stable in
Italy during Q2, 2011
Following entry of Marlboro,
PMI became market leader in
fine cut in France in Q2 with a
share of 25.0%, up 5.6pp
High single digit profitability
increases in both markets
PMI has announced a price
increase of 0.10/pack in Italy
Source: PMI estimates
Other
Marlboro
40.8
40.9
(%)
54.1
53.4
2010
2011
2010
2011
France
France
Italy
PMI Market Shares
Total
PMI
26.3
26.0
23.0
22.7
14.5
14.9
31.1
30.7
0
60
Q2
Q2
Q2
Q2 |
![]() 22
Greece
Government has increased
Minimum Excise Tax from
75% to 100% of excise tax on
WAP
(Weighted Average
Price)
Tax pass-on at bottom of the
market (2.40/20) is almost
0.50/20
PMI has announced price
increase on L&M
25s from
3.20 to 3.70 per pack
Price gap reduction should
help spur Marlboro
share
recovery
Source: Greek Ministry of Finance and PMI estimates
2010
2011
Marlboro
Market Share
(%)
19.7
19.4
18.7
20.0
19.3
21.7
15
25
Q1
Q2
Q3
Q4
Q1
Q2 |
![]() 23
Latin America & Canada Region
Regional volume down
4.8%, driven by impact of
tax-driven price increases
in Mexico and timing of
shipments in Brazil
Strong Marlboro
performance
Regional net revenues
grew by 5.8% and
adjusted OCI was up
8.8%, both excluding
currency and acquisitions
Source: PMI Financials and PMI estimates
(%)
2010
2011
Mexico
Marlboro
Market Share
Argentina
Marlboro
Market Share
(%)
2010
2011
48.2
52.0
45
50
55
Q2
Q2
23.4
24.0
20
25
Q2
Q2 |
![]() 24
Australia -
Plain Packaging
Australian Government appears intent on mandating the
implementation of plain packaging
Plain packaging will result in the illegal confiscation of our
very valuable trademarks and branded assets
PMI has served notice of its intention to file an arbitration
claim for compensation under the Hong Kong
Australia
Bilateral Investment Treaty |
![]() 25
Adjusted OCI Margins
Second-Quarter
2011
(a)
2010
Variance
(a)
EU
48.9 %
48.1 %
0.8 pp
EEMA
42.1
41.6
0.5
Asia
46.2
39.8
6.4
LA&C
32.5
31.6
0.9
Total
44.6
42.1
2.5
(a)
Excluding currency and acquisitions
Source: PMI Financials |
![]() 26
Free Cash
Flow
(a)
Free cash flow equals net cash provided by operating activities less capital expenditures
Source: PMI Financials
Free Cash Flow
(a)
($ million)
+19.4%
Quarterly increase of $402
million, or 12.2%,
excluding currency
Driven mainly by our
excellent business results
For the first half, free cash
flow is up more than $1
billion to nearly $6.2 billion
Currency
3,296
3,934
236
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Q2, 2010
Q2, 2011 |
![]() 27
Share Repurchases
During the second quarter, PMI spent $1.5 billion to
purchase a further 22.7 million shares at an average price
of $68.32 per share
Since the March 2008 spin, 17.9% of shares outstanding
at that time have been repurchased
Source: PMI Financials |
![]() 28
Summary
Very strong second-quarter results
Adjusted diluted EPS growth of 21.0%, excluding
currency
Outlook is promising, with strong market share and
business momentum
Pricing remains the key driver of profitability, with Spain a
special case
Very limited input cost pressures and we expect to
exceed our $250 million annual productivity target
2011 reported diluted EPS guidance raised by another 15
cents to a range of $4.70-$4.80
We continue to use our growing cash flow to generously
reward our shareholders
Source: PMI Financials |
![]() Questions & Answers
2011 Second-Quarter Results |
![]() 30
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
Reported Net
Revenues
Less
Excise
Taxes
Reported Net
Revenues
excluding
Excise Taxes
Less
Currency
Reported Net
Revenues
excluding
Excise Taxes &
Currency
Less
Acquisi-
tions
Reported Net
Revenues
excluding
Excise Taxes,
Currency &
Acquisitions
Reported
Net
Revenues
Less
Excise
Taxes
Reported Net
Revenues
excluding
Excise Taxes
Reported
Reported
excluding
Currency
Reported
excluding
Currency &
Acquisitions
8,080
$
5,583
$
2,497
$
187
$
2,310
$
-
$
2,310
$
European Union
7,260
$
4,965
$
2,295
$
8.8%
0.7%
0.7%
4,603
2,591
2,012
55
1,957
-
1,957
EEMA
4,125
2,236
1,889
6.5%
3.6%
3.6%
5,146
2,210
2,936
222
2,714
3
2,711
Asia
3,903
1,780
2,123
38.3%
27.8%
27.7%
2,405
1,577
828
30
798
-
798
Latin America & Canada
2,095
1,341
754
9.8%
5.8%
5.8%
20,234
$
11,961
$
8,273
$
494
$
7,779
$
3
$
7,776
$
PMI Total
17,383
$
10,322
$
7,061
$
17.2%
10.2%
10.1%
Reported
Operating
Companies
Income
Less
Currency
Reported
Operating
Companies
Income
excluding
Currency
Less
Acquisi-
tions
Reported
Operating
Companies
Income
excluding
Currency &
Acquisitions
Reported
Operating
Companies
Income
Reported
Reported
excluding
Currency
Reported
excluding
Currency &
Acquisitions
1,280
$
152
$
1,128
$
(1)
$
1,129
$
European Union
1,105
$
15.8%
2.1%
2.2%
835
11
824
-
824
EEMA
786
6.2%
4.8%
4.8%
1,398
145
1,253
1
1,252
Asia
845
65.4%
48.3%
48.2%
268
9
259
-
259
Latin America & Canada
238
12.6%
8.8%
8.8%
3,781
$
317
$
3,464
$
-
$
3,464
$
PMI Total
2,974
$
27.1%
16.5%
16.5%
2011
2010
% Change in Reported Operating
Companies Income
2011
2010
% Change in Reported Net Revenues
excluding Excise Taxes |
![]() 31
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating
Companies Income & Reconciliation of Adjusted Operating Companies Income
Margin, excluding Currency and Acquisitions For the Quarters Ended June
30, ($ in millions)
(Unaudited)
(a) For the calculation of net revenues excluding excise taxes, currency and
acquisitions, refer to previous slide Reported
Operating
Companies
Income
Less
Asset
Impairment &
Exit Costs
Adjusted
Operating
Companies
Income
Less
Currency
Adjusted
Operating
Companies
Income
excluding
Currency
Less
Acquisi-
tions
Adjusted
Operating
Companies
Income
excluding
Currency &
Acquisitions
Reported
Operating
Companies
Income
Less
Asset Impairment &
Exit Costs
Adjusted
Operating
Companies
Income
Adjusted
Adjusted
excluding
Currency
Adjusted
excluding
Currency &
Acquisitions
1,280
$
(1)
$
1,281
$
152
$
1,129
$
(1)
$
1,130
$
European Union
1,105
$
-
$
1,105
$
15.9%
2.2%
2.3%
835
-
835
11
824
-
824
EEMA
786
-
786
6.2%
4.8%
4.8%
1,398
-
1,398
145
1,253
1
1,252
Asia
845
-
845
65.4%
48.3%
48.2%
268
-
268
9
259
-
259
Latin America & Canada
238
-
238
12.6%
8.8%
8.8%
3,781
$
(1)
$
3,782
$
317
$
3,465
$
-
$
3,465
$
PMI Total
2,974
$
-
$
2,974
$
27.2%
16.5%
16.5%
% Points Change
Adjusted
Operating
Companies
Income
excluding
Currency
Net Revenues
excluding
Excise Taxes &
Currency
(a)
Adjusted
Operating
Companies
Income
Margin
excluding
Currency
Adjusted
Operating
Companies
Income
excluding
Currency &
Acquisitions
Net Revenues
excluding
Excise Taxes,
Currency &
Acquisitions
(a)
Adjusted
Operating
Companies
Income Margin
excluding
Currency &
Acquisitions
Adjusted
Operating
Companies
Income
Net Revenues
excluding Excise
Taxes
(a)
Adjusted
Operating
Companies
Income
Margin
Adjusted
Operating
Companies
Income
Margin
excluding
Currency
Adjusted
Operating
Companies
Income Margin
excluding
Currency &
Acquisitions
1,129
$
2,310
$
48.9%
1,130
$
2,310
$
48.9%
European Union
1,105
$
2,295
$
48.1%
0.8
0.8
824
1,957
42.1%
824
1,957
42.1%
EEMA
786
1,889
41.6%
0.5
0.5
1,253
2,714
46.2%
1,252
2,711
46.2%
Asia
845
2,123
39.8%
6.4
6.4
259
798
32.5%
259
798
32.5%
Latin America & Canada
238
754
31.6%
0.9
0.9
3,465
$
7,779
$
44.5%
3,465
$
7,776
$
44.6%
PMI Total
2,974
$
7,061
$
42.1%
2.4
2.5
% Change in Adjusted Operating
Companies Income
2010
2011
2010
2011 |
![]() 32
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted
Diluted EPS, excluding Currency For the Quarters Ended June 30,
(Unaudited)
2011
2010
% Change
Reported Diluted EPS
1.35
$
1.07
$
26.2%
Adjustments:
Asset impairment and exit costs
-
-
Tax items
(0.01)
(0.07)
Adjusted Diluted EPS
1.34
$
1.00
$
34.0%
Less:
Currency impact
0.13
Adjusted Diluted EPS, excluding Currency
1.21
$
1.00
$
21.0% |
![]() For
the Quarters Ended For the Six Months Ended
June 30,
June 30,
2011
2010
% Change
2011
2010
% Change
Net
cash
provided
by
operating
activities
(a)
4,120
$
3,465
$
18.9%
6,515
$
5,439
$
19.8%
Less:
Capital expenditures
186
169
345
319
Free cash flow
3,934
$
3,296
$
19.4%
6,170
$
5,120
$
20.5%
Less:
Currency impact
236
264
Free cash flow, excluding currency
3,698
$
3,296
$
12.2%
5,906
$
5,120
$
15.4%
33
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation
of
Operating
Cash
Flow
to
Free
Cash
Flow
and
Free
Cash
Flow,
excluding
Currency
For the Quarters and Six Months Ended June 30,
($ in millions)
(Unaudited)
(a) Operating Cash Flow |
![]() 34
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Six Months Ended June 30,
($ in millions)
(Unaudited)
(a) Includes the business combination in the Philippines ($105)
(b) Includes the business combination in the Philippines ($23)
Reported Net
Revenues
Less
Excise
Taxes
Reported Net
Revenues
excluding
Excise Taxes
Less
Currency
Reported Net
Revenues
excluding
Excise Taxes &
Currency
Less
Acquisi-
tions
Reported Net
Revenues
excluding
Excise Taxes,
Currency &
Acquisitions
Reported
Net
Revenues
Less
Excise
Taxes
Reported Net
Revenues
excluding
Excise Taxes
Reported
Reported
excluding
Currency
Reported
excluding
Currency &
Acquisitions
14,495
$
9,997
$
4,498
$
81
$
4,417
$
-
$
4,417
$
European Union
14,008
$
9,529
$
4,479
$
0.4%
(1.4)%
(1.4)%
8,274
4,575
3,699
26
3,673
-
3,673
EEMA
7,481
3,846
3,635
1.8%
1.0%
1.0%
9,434
4,175
5,259
350
4,909
108
(a)
4,801
Asia
7,465
3,469
3,996
31.6%
22.8%
20.1%
4,561
2,953
1,608
54
1,554
-
1,554
Latin America & Canada
4,016
2,569
1,447
11.1%
7.4%
7.4%
36,764
$
21,700
$
15,064
$
511
$
14,553
$
108
$
14,445
$
PMI Total
32,970
$
19,413
$
13,557
$
11.1%
7.3%
6.6%
Reported
Operating
Companies
Income
Less
Currency
Reported
Operating
Companies
Income
excluding
Currency
Less
Acquisi-
tions
Reported
Operating
Companies
Income
excluding
Currency &
Acquisitions
Reported
Operating
Companies
Income
Reported
Reported
excluding
Currency
Reported
excluding
Currency &
Acquisitions
2,286
$
131
$
2,155
$
(1)
$
2,156
$
European Union
2,167
$
5.5%
(0.6)%
(0.5)%
1,557
(1)
1,558
-
1,558
EEMA
1,556
0.1%
0.1%
0.1%
2,491
247
2,244
24
(b)
2,220
Asia
1,569
58.8%
43.0%
41.5%
519
10
509
-
509
Latin America & Canada
455
14.1%
11.9%
11.9%
6,853
$
387
$
6,466
$
23
$
6,443
$
PMI Total
5,747
$
19.2%
12.5%
12.1%
% Change in Reported Net Revenues
excluding Excise Taxes
2011
2010
% Change in Reported Operating
Companies Income
2011
2010 |
![]() 35
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating
Companies Income & Reconciliation of Adjusted Operating Companies Income
Margin, excluding Currency and Acquisitions For the Six Months Ended June
30, ($ in millions)
(Unaudited)
(a) Includes the business combination in the Philippines ($23)
(b) For the calculation of net revenues excluding excise taxes, currency and
acquisitions, refer to previous slide Reported
Operating
Companies
Income
Less
Asset
Impairment &
Exit Costs
Adjusted
Operating
Companies
Income
Less
Currency
Adjusted
Operating
Companies
Income
excluding
Currency
Less
Acquisi-
tions
Adjusted
Operating
Companies
Income
excluding
Currency &
Acquisitions
Reported
Operating
Companies
Income
Less
Asset Impairment &
Exit Costs
Adjusted
Operating
Companies
Income
Adjusted
Adjusted
excluding
Currency
Adjusted
excluding
Currency &
Acquisitions
2,286
$
(12)
$
2,298
$
131
$
2,167
$
(1)
$
2,168
$
European Union
2,167
$
-
$
2,167
$
6.0%
-
%
-
%
1,557
(2)
1,559
(1)
1,560
-
1,560
EEMA
1,556
-
1,556
0.2%
0.3%
0.3%
2,491
(2)
2,493
247
2,246
24
(a)
2,222
Asia
1,569
-
1,569
58.9%
43.1%
41.6%
519
(1)
520
10
510
-
510
Latin America & Canada
455
-
455
14.3%
12.1%
12.1%
6,853
$
(17)
$
6,870
$
387
$
6,483
$
23
$
6,460
$
PMI Total
5,747
$
-
$
5,747
$
19.5%
12.8%
12.4%
% Points Change
Adjusted
Operating
Companies
Income
excluding
Currency
Net Revenues
excluding
Excise Taxes &
Currency
(b)
Adjusted
Operating
Companies
Income
Margin
excluding
Currency
Adjusted
Operating
Companies
Income
excluding
Currency &
Acquisitions
Net Revenues
excluding
Excise Taxes,
Currency &
Acquisitions
(b)
Adjusted
Operating
Companies
Income Margin
excluding
Currency &
Acquisitions
Adjusted
Operating
Companies
Income
Net Revenues
excluding Excise
Taxes
(b)
Adjusted
Operating
Companies
Income
Margin
Adjusted
Operating
Companies
Income
Margin
excluding
Currency
Adjusted
Operating
Companies
Income Margin
excluding
Currency &
Acquisitions
2,167
$
4,417
$
49.1%
2,168
$
4,417
$
49.1%
European Union
2,167
$
4,479
$
48.4%
0.7
0.7
1,560
3,673
42.5%
1,560
3,673
42.5%
EEMA
1,556
3,635
42.8%
(0.3)
(0.3)
2,246
4,909
45.8%
2,222
4,801
46.3%
Asia
1,569
3,996
39.3%
6.5
7.0
510
1,554
32.8%
510
1,554
32.8%
Latin America & Canada
455
1,447
31.4%
1.4
1.4
6,483
$
14,553
$
44.5%
6,460
$
14,445
$
44.7%
PMI Total
5,747
$
13,557
$
42.4%
2.1
2.3
2010
2011
2010
2011
% Change in Adjusted Operating
Companies Income |
![]() 36
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
For the Year Ended December 31,
(Unaudited)
2010
Reported Diluted EPS
3.92
$
Adjustments:
Tax items
(0.07)
Asset impairment and exit costs
0.02
Adjusted Diluted EPS
3.87
$
|
![]() 2011
Second-Quarter Results July 21, 2011 |
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