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): October 20, 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 October 20, 2011, Philip Morris International Inc. (the Company) issued a press release announcing its financial results for the quarter ended September 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 October 20, 2011 (furnished pursuant to Item 2.02) | |
99.2 | Conference Call Transcript dated October 20, 2011 (furnished pursuant to Item 2.02) | |
99.3 | Webcast Slides dated October 20, 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: October 20, 2011
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Philip Morris International Inc. Press Release dated October 20, 2011 (furnished pursuant to Item 2.02) | |
99.2 | Conference Call Transcript dated October 20, 2011 (furnished pursuant to Item 2.02) | |
99.3 | Webcast Slides dated October 20, 2011 (furnished pursuant to Item 2.02) |
Exhibit 99.1
PHILIP MORRIS INTERNATIONAL INC. (PMI) REPORTS 2011 THIRD-QUARTER RESULTS;
NARROWS 2011 EPS GUIDANCE TO A RANGE OF $4.75 TO $4.80
| Reported diluted earnings per share of $1.35, up by 36.4%, or by 32.3% excluding currency, versus $0.99 in 2010 |
| Adjusted diluted earnings per share of $1.37, as detailed in the attached Schedule 12, up by 37.0%, or by 33.0% excluding currency, versus $1.00 in 2010 |
| Cigarette shipment volume growth of 4.4%, excluding acquisitions |
| Reported net revenues, excluding excise taxes, up by 26.4% to $8.4 billion, or by 15.9% excluding currency |
| Reported operating companies income up by 29.2% to $3.8 billion, or by 23.1% excluding currency |
| Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, up by 29.8% to $3.8 billion, or by 23.7% excluding currency and acquisitions |
| Operating income up by 29.7% to $3.7 billion |
| Free cash flow, defined as net cash provided by operating activities less capital expenditures: |
| Up for the quarter by 25.6% to $2.8 billion, or by 16.1% to $2.6 billion excluding currency, as detailed in the attached Schedule 19 |
| Up for the first nine months of the year by 22.1% to $9.0 billion, or by 15.6% to $8.5 billion excluding currency, as detailed in the attached Schedule 19 |
| Increased its regular quarterly dividend during the quarter by 20.3% to an annualized rate of $3.08 per common share |
| Repurchased 21.2 million shares of its common stock for $1.4 billion during the quarter |
| PMI narrows its forecast for 2011 full-year reported diluted earnings per share to a range of $4.75 to $4.80, up by approximately 21% to 22.5% versus $3.92 in 2010 |
| Excluding a forecasted total favorable currency impact of approximately $0.20 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 16% to 17.5% versus $3.92 in 2010, or by approximately 17.5% to 19% versus adjusted diluted earnings per share of $3.87 in 2010 as detailed in the attached Schedule 20 |
NEW YORK, October 20, 2011 Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2011 third-quarter results.
While we benefited from a relatively undemanding comparison, our results this quarter were simply superb on each and every key performance measure. Our business in Japan was a key driver of our stellar results, but elsewhere we enjoyed very solid growth and improving trends in virtually all geographies, said Louis C. Camilleri, Chairman and Chief Executive Officer.
It is heartening to witness that the efforts deployed by all our employees are being rewarded by such significant progress and continued strong momentum.
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 October 20, 2011. Access is available at www.pmi.com.
Dividends and Share Repurchase Program
PMI increased its regular quarterly dividend during the quarter to $0.77, up 20.3% from $0.64, which represents an annualized rate of $3.08 per common share. Since its spin-off in March 2008, PMI has increased its regular quarterly dividend by 67.4% from the initial annualized dividend rate of $1.84 per common share.
During the third quarter, PMI spent $1.4 billion to repurchase 21.2 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 | ||||||
July-September 2011 |
1,448 | 21,210 | ||||||
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Total Under Program |
7,305 | 121,957 |
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 $20.3 billion to repurchase 399.6 million shares at an average price of $50.81, or 18.9% of the shares outstanding at the time of the spin-off in March 2008.
2011 Full-Year Forecast
PMI narrows its forecast for 2011 full-year reported diluted earnings per share from its previous guidance range of $4.70 to $4.80 to a range of $4.75 to $4.80, up by approximately 21% to 22.5% versus $3.92 in 2010. Excluding a forecasted total favorable currency impact of approximately $0.20 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 16% to 17.5% versus $3.92 in 2010, or by approximately 17.5% to 19% versus adjusted diluted earnings per share of $3.87 in 2010 as detailed in the attached Schedule 20.
This guidance excludes the impact of any potential future acquisitions, asset impairment and exit cost charges, and any unusual events. The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
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2011 THIRD-QUARTER CONSOLIDATED RESULTS
Management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and to allocate resources. In the following discussion, the term net revenues refers to net revenues, excluding excise taxes, unless otherwise stated. Management also reviews OCI, operating margins and EPS on an adjusted basis (which may exclude the impact of currency and other items such as acquisitions or asset impairment and exit costs), EBITDA, free cash flow and net debt. Management believes it is appropriate to disclose these measures to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed Statements of Earnings provided with this release. Reconciliations of non-GAAP measures to corresponding GAAP measures are also provided with this release. References to total international cigarette market, total cigarette market, total market and market shares are PMI estimates based on latest available data from a number of sources. Comparisons are to the same prior-year period unless otherwise stated.
NET REVENUES
PMI Net Revenues ($ Millions) | ||||||||||||||||||||||||||||||||
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||||||||||
Excl. | Excl. | |||||||||||||||||||||||||||||||
2011 | 2010 | Change | Curr. | 2011 | 2010 | Change | Curr. | |||||||||||||||||||||||||
European Union |
$ | 2,506 | $ | 2,139 | 17.2 | % | 2.2 | % | $ | 7,004 | $ | 6,618 | 5.8 | % | (0.2 | )% | ||||||||||||||||
Eastern Europe, Middle East & Africa |
2,210 | 1,896 | 16.6 | % | 11.9 | % | 5,909 | 5,531 | 6.8 | % | 4.8 | % | ||||||||||||||||||||
Asia |
2,799 | 1,833 | 52.7 | % | 39.2 | % | 8,058 | 5,829 | 38.2 | % | 28.0 | % | ||||||||||||||||||||
Latin America & Canada |
847 | 746 | 13.5 | % | 8.3 | % | 2,455 | 2,193 | 11.9 | % | 7.7 | % | ||||||||||||||||||||
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Total PMI |
$ | 8,362 | $ | 6,614 | 26.4 | % | 15.9 | % | $ | 23,426 | $ | 20,171 | 16.1 | % | 10.1 | % |
Net revenues of $8.4 billion were up by 26.4%, including favorable currency of $697 million. Excluding currency, net revenues increased by 15.9%, primarily driven by favorable pricing of $564 million across all Regions, primarily in Asia, and favorable volume/mix of $472 million that benefited from a favorable comparison with 2010, particularly in Japan and Ukraine. The favorable volume/mix was driven by Asia, mainly Indonesia, Japan and Korea, and EEMA, and was partly offset by the EU, mainly Portugal and Spain. Volume/mix in Latin America & Canada was flat due to an erosion in Mexico. Excluding currency and acquisitions, PMIs net revenues increased by 15.7%.
3
OPERATING COMPANIES INCOME
PMI Operating Companies Income ($ Millions) | ||||||||||||||||||||||||||||||||
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||||||||||
Excl. | Excl. | |||||||||||||||||||||||||||||||
2011 | 2010 | Change | Curr. | 2011 | 2010 | Change | Curr. | |||||||||||||||||||||||||
European Union |
$ | 1,262 | $ | 1,113 | 13.4 | % | 4.0 | % | $ | 3,548 | $ | 3,280 | 8.2 | % | 1.0 | % | ||||||||||||||||
Eastern Europe, Middle East & Africa |
925 | 856 | 8.1 | % | 11.8 | % | 2,482 | 2,412 | 2.9 | % | 4.3 | % | ||||||||||||||||||||
Asia |
1,309 | 690 | 89.7 | % | 74.6 | % | 3,800 | 2,259 | 68.2 | % | 52.7 | % | ||||||||||||||||||||
Latin America & Canada |
255 | 244 | 4.5 | % | 4.5 | % | 774 | 699 | 10.7 | % | 9.3 | % | ||||||||||||||||||||
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Total PMI |
$ | 3,751 | $ | 2,903 | 29.2 | % | 23.1 | % | $ | 10,604 | $ | 8,650 | 22.6 | % | 16.1 | % |
Reported operating companies income was up by 29.2% to $3.8 billion, including favorable currency of $177 million. Excluding currency and acquisitions, operating companies income was up by 23.5%, primarily driven by higher pricing and favorable volume/mix, partly offset by unfavorable costs, partially related to airfreight of product to Japan in response to in-market shortages of competitors products.
Adjusted operating companies income grew by 29.8% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 23.7%.
PMI Operating Companies Income ($ Millions)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 3,751 | $ | 2,903 | 29.2 | % | $ | 10,604 | $ | 8,650 | 22.6 | % | ||||||||||||
Asset impairment & exit costs |
(43 | ) | (20 | ) | (60 | ) | (20 | ) | ||||||||||||||||
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Adjusted OCI |
$ | 3,794 | $ | 2,923 | 29.8 | % | $ | 10,664 | $ | 8,670 | 23.0 | % | ||||||||||||
Adjusted OCI Margin* |
45.4 | % | 44.2 | % | 1.2 p.p. | 45.5 | % | 43.0 | % | 2.5 p.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 3.0 percentage points to 47.2%, as detailed on Schedule 11. Excluding currency and acquisitions, adjusted operating companies income margin was up by 3.1 percentage points to 47.3%.
SHIPMENT VOLUME & MARKET SHARE
PMI Cigarette Shipment Volume by Segment (Million Units)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
European Union |
56,198 | 58,264 | (3.5 | )% | 161,913 | 169,617 | (4.5 | )% | ||||||||||||||||
Eastern Europe, Middle East & Africa |
79,053 | 75,228 | 5.1 | % | 218,032 | 217,265 | 0.4 | % | ||||||||||||||||
Asia |
79,053 | 70,188 | 12.6 | % | 235,187 | 211,588 | 11.2 | % | ||||||||||||||||
Latin America & Canada |
25,243 | 25,532 | (1.1 | )% | 73,512 | 76,436 | (3.8 | )% | ||||||||||||||||
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Total PMI |
239,547 | 229,212 | 4.5 | % | 688,644 | 674,906 | 2.0 | % |
4
Excluding acquisitions, PMIs cigarette shipment volume was up by 4.4% for the quarter, or by 0.5% on a nine-month year-to-date basis, driven by growth from each of PMIs top ten brands.
In the EU, cigarette shipment volume decreased by 3.5%, predominantly due to lower total markets, mainly in Spain, and lower market share, mostly in Poland. In EEMA, cigarette shipment volume grew by 5.1%, primarily driven by growing total markets in the Middle East, market share gains in North Africa and Turkey, and a favorable comparison in Ukraine due to trade inventory movements in 2010. In Asia, PMIs cigarette shipment volume increased by 12.6%, fueled by double-digit growth in Indonesia, Japan, benefiting from the timing of shipments in 2010, and Korea. In Latin America & Canada, cigarette shipment volume decreased by 1.1%, mainly due to Mexico, reflecting a lower total market, partly offset by growth in Argentina, Brazil, Canada and Colombia.
Total cigarette shipments of Marlboro of 78.9 billion units were up by 3.9%, driven primarily by growth in EEMA of 10.2%, in particular in the Middle East and North Africa, and in Asia of 11.8%, notably in Indonesia, Japan and Korea. The growth was partly offset by a decline: in the EU of 3.4%, mainly reflecting lower total markets and share, primarily in Poland and Spain, partly offset by growth in France; and in Latin America & Canada of 3.0%, mainly due to a lower total market in Mexico, partly offset by growth in Argentina and Brazil.
Total cigarette shipments of L&M of 23.8 billion units were up by 3.9%, driven by growth in all four Regions. Total cigarette shipments of Bond Street of 12.4 billion units increased by 6.8%, led mainly by growth in Russia and Ukraine. Total cigarette shipments of Philip Morris of 9.8 billion units increased by 1.8%, mainly reflecting growth in Argentina, France and Japan. Total cigarette shipments of Chesterfield of 10.0 billion units were up by 7.0%, driven by growth in the EU, mainly in Portugal. Total cigarette shipments of Parliament of 10.6 billion units were up by 16.2%, fueled by growth in all four Regions. Total cigarette shipments of Lark of 9.7 billion units increased by 44.1%, driven primarily by growth in Japan.
Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, excluding acquisitions, grew by 10.0%, notably in Belgium, France and Germany. Total shipment volume for cigarettes and OTP combined was up by 4.6%, excluding acquisitions.
PMIs market share performance was stable, or registered growth, in a number of key markets, including Algeria, Argentina, Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Indonesia, Japan, Korea, Mexico, the Netherlands, Russia, Singapore, Turkey and the United Kingdom.
EUROPEAN UNION REGION (EU)
2011 Third-Quarter Results
In the EU, net revenues increased by 17.2% to $2.5 billion, including favorable currency of $321 million. Excluding currency, net revenues grew by 2.2%, primarily reflecting higher pricing of $95 million, driven by France, Germany and Italy. The favorable pricing variance more than offset the unfavorable volume/mix of $49 million, primarily attributable to the adverse economic environment in the south of Europe, notably Greece, Portugal and Spain, and to a lower total market and share in Poland.
5
Operating companies income increased by 13.4% to $1.3 billion, due predominantly to favorable pricing, and favorable currency of $105 million, partly offset by unfavorable volume/mix. Excluding the favorable impact of currency, operating companies income was up by 4.0%.
Adjusted operating companies income increased by 12.4%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 3.1%.
EU Operating Companies Income ($ Millions)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 1,262 | $ | 1,113 | 13.4 | % | $ | 3,548 | $ | 3,280 | 8.2 | % | ||||||||||||
Asset impairment & exit costs |
(11 | ) | (20 | ) | (23 | ) | (20 | ) | ||||||||||||||||
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Adjusted OCI |
$ | 1,273 | $ | 1,133 | 12.4 | % | $ | 3,571 | $ | 3,300 | 8.2 | % | ||||||||||||
Adjusted OCI Margin* |
50.8 | % | 53.0 | % | (2.2) p.p. | 51.0 | % | 49.9 | % | 1.1 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 was up by 0.5 percentage points to 53.5%, as detailed on Schedule 11.
The total cigarette market in the EU declined by 3.7%, due primarily to the impact of a lower total market: in Greece, reflecting the continuing adverse economic environment; in Spain, following the unfavorable impact of tax-driven price increases in June and December of 2010, the implementation of stricter indoor public smoking bans in January 2011, and continuing adverse economic conditions; and in Poland, reflecting excise-tax driven price increases in October 2010 and May 2011 combined with the implementation of a smoking ban in November 2010. Excluding Spain, the total cigarette market in the EU declined by 2.8%.
PMIs cigarette shipment volume in the EU declined by 3.5%, due mainly to the aforementioned reasons, partly offset by favorable distributor inventory movements, primarily in Spain. Shipment volume of Marlboro decreased by 3.4%, mainly due to lower total markets, particularly in Spain, and to lower share, primarily in Germany, Italy and Poland, partially offset by higher share in France and Hungary. Shipment volume of L&M was up by 1.5%, driven predominantly by higher share in Germany.
PMIs market share in the EU was down by 0.7 share points to 38.3% as gains, notably in France, Germany and the Netherlands, were more than offset by declines, mainly in the Czech Republic, Italy, Poland, Portugal and Spain. Marlboros share in the EU was down by 0.4 points to 18.0%, reflecting a higher share mainly in the Czech Republic, France, Greece, Hungary and the Netherlands, which was more than offset by lower share in Germany, Italy, Poland, Portugal and Spain. Compared to the second quarter of 2011, Marlboros share was down slightly by 0.1 point. L&Ms market share in the EU was up slightly by 0.1 point to 6.5%, primarily driven by gains in Germany, the Netherlands and Poland. Complementing L&M, market share of Chesterfield in the EU was up by 0.3 points to 3.2%.
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EU Key Market Commentaries
In the Czech Republic, the total cigarette market was down by 2.3%, reflecting the unfavorable impact of excise tax-driven price increases in the first quarter of 2011. PMIs shipments were down by 9.1%. Market share was down by 3.3 points to 44.5%, principally reflecting continued share declines for lower-margin local brands, Start, Petra and Sparta, down by 3.2 points. This decline was partly offset by a higher share for Marlboro, up by 0.2 points to 7.2%, assisted by the April 2011 launch of Marlboro Core Flavor and Marlboro Gold Touch, and a higher share for Red & White, up by 0.7 points to 13.4%.
In France, the total cigarette market was down by 2.0%. PMIs shipments were up by 4.0%, and market share was up by 0.4 points to 40.4%, mainly reflecting a higher share for Marlboro and the premium Philip Morris brand, up by 0.2 and 0.5 points to 25.9% and 8.2%, respectively, as well as a higher share for Chesterfield, up by 0.2 points to 3.0%.
In Germany, the total cigarette market was up by 0.3%. PMIs shipments were up by 1.2% and market share grew by 0.3 points to 35.2%, driven by L&M, up by 1.1 points to 10.3%. Share of Marlboro was down by 0.8 points to 20.3%.
In Italy, the total cigarette market was down by 1.4%, reflecting the unfavorable impact of excise tax-driven price increases in the third quarter of 2010, price increases in July 2011, and a VAT-driven price increase of 0.20 per pack in September 2011. PMIs shipments were down by 1.0% and market share declined by 1.1 points to 53.0%. While Marlboros market share of 22.7% was down by 0.5 points compared to the third quarter of 2010, it was flat compared to the second quarter of 2011.
In Poland, the total cigarette market was down by 5.0%, reflecting the unfavorable impact of excise tax-driven price increases in the fourth quarter of 2010 and second quarter of 2011, as well as the introduction of an indoor public smoking ban in November of 2010. PMIs shipments were down by 11.3%. PMIs market share was down by 2.5 points to 35.1%, due mainly to lower share of Marlboro, down by 1.3 points to 9.7%, and low-price Red & White, down by 1.5 points to 5.1%, partially offset by L&M, up by 0.9 points to 16.9%, supported by the launch of L&M Forward in April 2011. Compared to the second quarter of 2011, PMIs market share was up by 0.2 points.
In Spain, the total cigarette market was down by 10.5%, largely due to the continuing adverse economic environment and the introduction of a total indoor public smoking ban in January 2011. PMIs shipments were down by 6.9%. PMIs market share was down by 1.4 points to 31.2%, reflecting lower trade purchases of PMI products in September as a result of the timing of competitive price increases later the same month. By comparison, PMIs market share in July and August was up by 1.1 points versus the same period in 2010. Share of Marlboro in the quarter of 15.1% was up by 0.5 points compared to the second quarter of 2011.
EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)
2011 Third-Quarter Results
In EEMA, net revenues increased by 16.6% to $2.2 billion, including favorable currency of $89 million. Excluding the impact of currency and acquisitions, net revenues increased by 11.2%, primarily due to favorable pricing of $65 million, primarily in the Middle East and Russia, and favorable volume/mix of $147 million.
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Operating companies income increased by 8.1% to $925 million, despite unfavorable currency of $32 million that was largely due to the appreciation of the Euro, particularly in regard to manufacturing costs. Excluding the impact of currency and acquisitions, operating companies income increased by 13.3%, due primarily to higher pricing and favorable volume/mix, partly offset by higher costs, principally related to business building initiatives in Russia. Adjusted operating companies income increased by 9.9%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 13.8%.
EEMA Operating Companies Income ($ Millions)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 925 | $ | 856 | 8.1 | % | $ | 2,482 | $ | 2,412 | 2.9 | % | ||||||||||||
Asset impairment & exit costs |
(16 | ) | 0 | (18 | ) | 0 | ||||||||||||||||||
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Adjusted OCI |
$ | 941 | $ | 856 | 9.9 | % | $ | 2,500 | $ | 2,412 | 3.6 | % | ||||||||||||
Adjusted OCI Margin* |
42.6 | % | 45.1 | % | (2.5 | ) p.p. | 42.3 | % | 43.6 | % | (1.3 | ) 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 1.1 percentage points to 46.2%, as detailed on Schedule 11.
PMIs cigarette shipment volume in EEMA increased by 5.1%, predominantly due to: the Middle East, primarily Saudi Arabia, mainly reflecting favorable distributor inventory movements; North Africa, mainly Algeria driven by a higher total market and share growth; Turkey, reflecting share growth; and Ukraine, reflecting favorable trade inventory movements. This increase was partly offset by a decline in Russia due to unfavorable distributor inventory movements and a lower total market.
PMIs cigarette shipment volume of premium brands grew by 10.5% in EEMA, driven by Marlboro and Parliament, up by 10.2% and 15.9%, respectively.
EEMA Key Market Commentaries
In Russia, PMIs shipment volume decreased by 3.5%. While shipment volume of PMIs premium portfolio was down by 7.1%, primarily due to a decline in Marlboro of 19.6%, shipment volume of Parliament was up by 0.4%. In the mid-price segment, shipment volume was down by 5.5%, due mainly to Chesterfield, down by 4.1%, and L&M, down by 3.2%. In the low-price segment, shipment volume of Bond Street was up by 3.0%. PMIs quarter-to-date August market share of 25.8%, as measured by A.C. Nielsen, was up slightly by 0.1 point. Market share for Parliament, in the 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 by 0.2 share points; and Bond Street in the low-price segment was up by 0.4 share points.
In Turkey, the total cigarette market was up by 5.6%, reflecting a recovery following the steep January 2010 excise tax increase. PMIs shipment volume increased by 21.6%. PMIs market share, as measured by A.C. Nielsen, grew by 3.9 points to a record 45.7%, driven by Parliament, Muratti and L&M, up
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by 1.3, 0.6 and 4.4 share points, respectively, partly offset by declines in Lark and Bond Street, down by 1.6 and 0.7 points, respectively. Market share of Marlboro was flat at 9.5% and up by 0.4 points compared to the second quarter of 2011.
In Ukraine, the total cigarette market grew by an estimated 8.6%, reflecting a favorable comparison with the third quarter of 2010 impacted by trade inventory movements following the excise tax increase of July 2010 and the favorable impact of competitive trade inventory movements in the third quarter of 2011. PMIs shipment volume increased by 10.2%. While PMIs market share, as measured by A.C. Nielsen, was down by 2.4 points to 32.4%, largely due to declines in PMIs medium and low-price segments, share for premium Parliament was up by 0.4 points to 2.8%. Share of Marlboro was flat at 5.6%.
ASIA REGION
2011 Third-Quarter Results
In Asia, net revenues increased strongly by 52.7% to $2.8 billion, including favorable currency of $248 million. Excluding the impact of currency, net revenues increased by 39.2%, reflecting the favorable impact of pricing of $342 million, primarily in Australia, Indonesia, Japan and the Philippines, and favorable volume/mix of $374 million, mainly in Japan, reflecting a weak prior year quarter resulting from the payback of distributor inventories built up in the second quarter of 2010 in anticipation of increased trade and consumer purchases, as well as in Indonesia and Korea. Excluding the impact of currency and acquisitions, net revenues increased by 39.1%.
Operating companies income surged by 89.7% to reach $1.3 billion. Excluding the favorable impact of currency of $104 million, operating companies income increased by 74.6%, driven by strong growth in Australia, Indonesia, Japan, Korea and the Philippines. Excluding the impact of currency and acquisitions, operating companies income increased by 74.3%. Adjusted operating companies income increased by 90.4% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 75.1%.
Asia Operating Companies Income ($ Millions)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 1,309 | $ | 690 | 89.7 | % | $ | 3,800 | $ | 2,259 | 68.2 | % | ||||||||||||
Asset impairment & exit costs |
(5 | ) | 0 | (7 | ) | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Adjusted OCI |
$ | 1,314 | $ | 690 | 90.4 | % | $ | 3,807 | $ | 2,259 | 68.5 | % | ||||||||||||
Adjusted OCI Margin* |
46.9 | % | 37.6 | % | 9.3 p.p. | 47.2 | % | 38.8 | % | 8.4 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 9.8 percentage points to 47.4%, as detailed on Schedule 11.
PMIs cigarette shipment volume in Asia increased by 12.6%, predominantly due to growth in Indonesia, Japan and Korea. The growth was partly offset by declines in Pakistan of 18.9%, due to the
9
continued growth of illicit products, and in the Philippines of 3.0%, reflecting the unfavorable impact of excise tax-driven price increases in January 2011 and extreme weather conditions.
Shipment volume of Marlboro was up by 11.8%, driven mainly by growth in Indonesia, Japan, Korea and Vietnam.
Asia Key Market Commentaries
In Indonesia, the total cigarette market was up by 14.5%, driven mainly by growth in the low-price segment and moderate price increases compared to 2010. PMIs shipment volume increased by 22.5%, with all key brand families recording growth. Market share was up by 2.0 points to a record 31.2%, driven by growth from premium Sampoerna A and low-price U Mild, Vegas Mild and Trend Mild. Although Marlboros market share was down by 0.2 points to 4.2%, shipments grew by 8.9% and share of the white cigarettes segment increased by 3.6 points to 65.4%.
In Japan, the total cigarette market decreased by 29.5%, reflecting: an unfavorable comparison with the third quarter of 2010 which witnessed strong trade and consumer demand ahead of the October 1, 2010 tax-driven price increases; the subsequent unfavorable impact of these price increases; and the underlying market decline. PMIs shipment volume was up by 47.1%, driven mainly by a favorable comparison to the third quarter of 2010 which witnessed the payback of distributor inventories built up in the second quarter of 2010 in anticipation of the aforementioned tax-driven price increases, as well as by increased trade purchases compensating for in-market shortages of competitors products in July 2011. Market share of 27.9% was up by 3.9 points, reflecting growth of Marlboro, Lark, the Philip Morris brand and Virginia S. by 1.0, 2.3, 0.2 and 0.3 points, to 12.0%, 8.7%, 2.5% and 2.1%, respectively.
In Korea, the total cigarette market declined by 0.5%. PMIs shipment volume increased by 22.4%, driven by market share increases. PMIs market share reached a record 21.1%, up by 4.1 points, driven by Marlboro and Parliament, up by 2.5 and 1.4 points to 9.4% and 7.1%, respectively.
In the Philippines, the total market declined by 1.8%, reflecting the impact of PMFTC Inc.s excise-tax driven price increase of its key brand variants in January 2011 and extreme weather conditions. PMIs shipment volume was down by 3.0%. PMIs market share was down by 1.2 points to 93.4%. Share of Marlboro was down by 0.7 points to 21.1%.
LATIN AMERICA & CANADA REGION
2011 Third-Quarter Results
In Latin America & Canada, net revenues increased by 13.5% to $847 million, including favorable currency of $39 million. Excluding the impact of currency, net revenues increased by 8.3%, reflecting favorable pricing of $62 million, primarily in Argentina, Brazil, Canada and Mexico. Volume/mix was flat.
Operating companies income increased by 4.5% to $255 million, primarily reflecting favorable pricing. Adjusted operating companies income grew by 9.0% as shown in the table below and detailed on Schedule 11, and by the same percentage excluding currency.
10
Latin America & Canada Operating Companies Income ($ Millions)
Third-Quarter | Nine Months Year-To-Date | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Reported OCI |
$ | 255 | $ | 244 | 4.5 | % | $ | 774 | $ | 699 | 10.7 | % | ||||||||||||
Asset impairment & exit costs |
(11 | ) | 0 | (12 | ) | 0 | ||||||||||||||||||
|
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|
|
|
|
|
|
|||||||||||||||||
Adjusted OCI |
$ | 266 | $ | 244 | 9.0 | % | $ | 786 | $ | 699 | 12.4 | % | ||||||||||||
Adjusted OCI Margin* |
31.4 | % | 32.7 | % | (1.3) p.p. | 32.0 | % | 31.9 | % | 0.1 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 0.2 percentage points to 32.9%, as detailed on Schedule 11.
PMIs cigarette shipment volume in Latin America & Canada decreased by 1.1%, due mainly to Mexico, partly offset by increases in Argentina, Brazil, Canada and Colombia. Shipment volume of Marlboro decreased by 3.0% due to Mexico.
Latin America & Canada Key Market Commentaries
In Argentina, the total cigarette market grew by 3.2%, reflecting growth in the economy. PMIs cigarette shipment volume increased by 4.0%. PMIs market share was up by 0.5 points to 74.3%, reflecting growth of Marlboro, up by 0.7 points to 24.2%, and of the mid-price Philip Morris brand, up by 0.2 share points to 37.8%. Share of low-price Next was down by 0.2 points to 3.5%.
In Canada, the total tax-paid cigarette market was up by 1.3%, due mainly to a favorable comparison with the third quarter of 2010, which included the payback of trade inventory movements in June 2010 in anticipation of the harmonized sales tax implementation in the provinces of Ontario and British Columbia. PMIs cigarette shipment volume increased by 5.2%. PMIs market share grew by 1.3 points to 34.3%, with premium brand Belmont up by 0.2 points to 1.9% and low-price brand Next up by 2.7 points to 7.0%, partly offset by mid-price Number 7 and Canadian Classics, and low-price Accord, down by 0.3, 0.3 and 0.7 share points, to 4.1%, 8.8% and 3.5%, respectively.
In Mexico, the total cigarette market was down by 18.0%, primarily due to the significant January 1, 2011, excise tax increase which resulted in a 26.7% increase in the retail price of Marlboro and a surge in the availability of illicit products. Although PMIs cigarette shipment volume decreased by 15.1%, market share grew by 2.6 points to 73.2%, led by Marlboro, up by 3.1 share points to a quarterly record of 52.8%, 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 0.7 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.
11
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 June 30, 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.
###
12
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended September 30,
($ in millions, except per share data)
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Net revenues |
$ | 20,706 | $ | 16,936 | 22.3 | % | ||||||
Cost of sales |
2,847 | 2,290 | 24.3 | % | ||||||||
Excise taxes on products (1) |
12,344 | 10,322 | 19.6 | % | ||||||||
|
|
|
|
|||||||||
Gross profit |
5,515 | 4,324 | 27.5 | % | ||||||||
Marketing, administration and research costs |
1,721 | 1,401 | ||||||||||
Asset impairment and exit costs |
43 | 20 | ||||||||||
|
|
|
|
|||||||||
Operating companies income |
3,751 | 2,903 | 29.2 | % | ||||||||
Amortization of intangibles |
25 | 22 | ||||||||||
General corporate expenses |
49 | 45 | ||||||||||
|
|
|
|
|||||||||
Operating income |
3,677 | 2,836 | 29.7 | % | ||||||||
Interest expense, net |
192 | 214 | ||||||||||
|
|
|
|
|||||||||
Earnings before income taxes |
3,485 | 2,622 | 32.9 | % | ||||||||
Provision for income taxes |
1,024 | 730 | 40.3 | % | ||||||||
|
|
|
|
|||||||||
Net earnings |
2,461 | 1,892 | 30.1 | % | ||||||||
Net earnings attributable to noncontrolling interests |
84 | 70 | ||||||||||
|
|
|
|
|||||||||
Net earnings attributable to PMI |
$ | 2,377 | $ | 1,822 | 30.5 | % | ||||||
|
|
|
|
|||||||||
Per share data:(2) |
||||||||||||
Basic earnings per share |
$ | 1.35 | $ | 0.99 | 36.4 | % | ||||||
|
|
|
|
|||||||||
Diluted earnings per share |
$ | 1.35 | $ | 0.99 | 36.4 | % | ||||||
|
|
|
|
(1) | The segment detail of excise taxes on products sold for the quarters ended September 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 September 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 September 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes | ||||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||||
2011 |
Net Revenues (1) | $ | 8,155 | $ | 4,921 | $ | 5,143 | $ | 2,487 | $ | 20,706 | |||||||||||
Excise Taxes on Products | (5,649 | ) | (2,711 | ) | (2,344 | ) | (1,640 | ) | (12,344 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Revenues excluding Excise Taxes | 2,506 | 2,210 | 2,799 | 847 | 8,362 | |||||||||||||||||
2010 |
Net Revenues | $ | 7,045 | $ | 4,184 | $ | 3,629 | $ | 2,078 | $ | 16,936 | |||||||||||
Excise Taxes on Products | (4,906 | ) | (2,288 | ) | (1,796 | ) | (1,332 | ) | (10,322 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Revenues excluding Excise Taxes | 2,139 | 1,896 | 1,833 | 746 | 6,614 | |||||||||||||||||
Variance |
Currency | 321 | 89 | 248 | 39 | 697 | ||||||||||||||||
Acquisitions | | 13 | 2 | | 15 | |||||||||||||||||
Operations | 46 | 212 | 716 | 62 | 1,036 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Variance Total | 367 | 314 | 966 | 101 | 1,748 | |||||||||||||||||
Variance Total (%) | 17.2 | % | 16.6 | % | 52.7 | % | 13.5 | % | 26.4 | % | ||||||||||||
Variance excluding Currency | 46 | 225 | 718 | 62 | 1,051 | |||||||||||||||||
Variance excluding Currency (%) | 2.2 | % | 11.9 | % | 39.2 | % | 8.3 | % | 15.9 | % | ||||||||||||
Variance excluding Currency & Acquisitions | 46 | 212 | 716 | 62 | 1,036 | |||||||||||||||||
Variance excluding Currency & Acquisitions (%) | 2.2 | % | 11.2 | % | 39.1 | % | 8.3 | % | 15.7 | % | ||||||||||||
(1) 2011 Currency increased net revenues as follows: |
||||||||||||||||||||||
European Union |
$ | 1,061 | ||||||||||||||||||||
EEMA |
108 | |||||||||||||||||||||
Asia |
467 | |||||||||||||||||||||
Latin America & Canada |
109 | |||||||||||||||||||||
|
|
|||||||||||||||||||||
$ | 1,745 | |||||||||||||||||||||
|
|
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
($ in millions)
(Unaudited)
Operating Companies Income | ||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||
2011 |
$ | 1,262 | $ | 925 | $ | 1,309 | $ | 255 | $ | 3,751 | ||||||||||
2010 |
1,113 | 856 | 690 | 244 | 2,903 | |||||||||||||||
% Change |
13.4 | % | 8.1 | % | 89.7 | % | 4.5 | % | 29.2 | % | ||||||||||
Reconciliation: | ||||||||||||||||||||
For the quarter ended September 30, 2010 |
$ | 1,113 | $ | 856 | $ | 690 | $ | 244 | $ | 2,903 | ||||||||||
2010 Asset impairment and exit costs |
20 | | | | 20 | |||||||||||||||
2011 Asset impairment and exit costs |
(11 | ) | (16 | ) | (5 | ) | (11 | ) | (43 | ) | ||||||||||
Acquired businesses |
| (1 | ) | 2 | | 1 | ||||||||||||||
Currency |
105 | (32 | ) | 104 | | 177 | ||||||||||||||
Operations |
35 | 118 | 518 | 22 | 693 | |||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
For the quarter ended September 30, 2011 |
$ | 1,262 | $ | 925 | $ | 1,309 | $ | 255 | $ | 3,751 | ||||||||||
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|
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Quarters Ended September 30,
($ in millions, except per share data)
(Unaudited)
Diluted | ||||
E.P.S. | ||||
2011 Diluted Earnings Per Share |
$ | 1.35 | (1) | |
2010 Diluted Earnings Per Share |
$ | 0.99 | (1) | |
Change |
$ | 0.36 | ||
% Change |
36.4 | % | ||
Reconciliation: | ||||
2010 Diluted Earnings Per Share |
$ | 0.99 | (1) | |
Special Items: | ||||
2011 Asset impairment and exit costs |
(0.02 | ) | ||
2011 Tax items |
| |||
2010 Asset impairment and exit costs |
0.01 | |||
2010 Tax items |
| |||
Currency |
0.04 | |||
Interest |
0.01 | |||
Change in tax rate |
(0.03 | ) | ||
Impact of lower shares outstanding and share-based payments |
0.06 | |||
Operations |
0.29 | |||
|
|
|||
2011 Diluted Earnings Per Share |
$ | 1.35 | (1) | |
|
|
(1) | Basic and diluted EPS were calculated using the following (in millions): |
Q3 2011 |
Q3 2010 |
|||||||
Net earnings attributable to PMI |
$ | 2,377 | $ | 1,822 | ||||
Less distributed and undistributed earnings attributable to share-based payment awards |
14 | 8 | ||||||
|
|
|
|
|||||
Net earnings for basic and diluted EPS |
$ | 2,363 | $ | 1,814 | ||||
|
|
|
|
|||||
Weighted-average shares for basic EPS |
1,749 | 1,828 | ||||||
Plus incremental shares from assumed conversions: |
||||||||
Stock Options |
| 2 | ||||||
|
|
|
|
|||||
Weighted-average shares for diluted EPS |
1,749 | 1,830 | ||||||
|
|
|
|
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Nine Months Ended September 30,
($ in millions, except per share data)
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Net revenues |
$ | 57,470 | $ | 49,906 | 15.2 | % | ||||||
Cost of sales |
7,986 | 7,212 | 10.7 | % | ||||||||
Excise taxes on products (1) |
34,044 | 29,735 | 14.5 | % | ||||||||
|
|
|
|
|||||||||
Gross profit |
15,440 | 12,959 | 19.1 | % | ||||||||
Marketing, administration and research costs |
4,776 | 4,289 | ||||||||||
Asset impairment and exit costs |
60 | 20 | ||||||||||
|
|
|
|
|||||||||
Operating companies income |
10,604 | 8,650 | 22.6 | % | ||||||||
Amortization of intangibles |
73 | 65 | ||||||||||
General corporate expenses |
135 | 128 | ||||||||||
|
|
|
|
|||||||||
Operating income |
10,396 | 8,457 | 22.9 | % | ||||||||
Interest expense, net |
613 | 660 | ||||||||||
|
|
|
|
|||||||||
Earnings before income taxes |
9,783 | 7,797 | 25.5 | % | ||||||||
Provision for income taxes |
2,850 | 2,109 | 35.1 | % | ||||||||
|
|
|
|
|||||||||
Net earnings |
6,933 | 5,688 | 21.9 | % | ||||||||
Net earnings attributable to noncontrolling interests |
228 | 181 | ||||||||||
|
|
|
|
|||||||||
Net earnings attributable to PMI |
$ | 6,705 | $ | 5,507 | 21.8 | % | ||||||
|
|
|
|
|||||||||
Per share data:(2) |
||||||||||||
Basic earnings per share |
$ | 3.76 | $ | 2.96 | 27.0 | % | ||||||
|
|
|
|
|||||||||
Diluted earnings per share |
$ | 3.76 | $ | 2.96 | 27.0 | % | ||||||
|
|
|
|
(1) | The segment detail of excise taxes on products sold for the nine months ended September 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 nine months ended September 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 Nine Months Ended September 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes | ||||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||||
2011 |
Net Revenues (1) | $ | 22,650 | $ | 13,195 | $ | 14,577 | $ | 7,048 | $ | 57,470 | |||||||||||
Excise Taxes on Products | (15,646 | ) | (7,286 | ) | (6,519 | ) | (4,593 | ) | (34,044 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Revenues excluding Excise Taxes | 7,004 | 5,909 | 8,058 | 2,455 | 23,426 | |||||||||||||||||
2010 |
Net Revenues | $ | 21,053 | $ | 11,665 | $ | 11,094 | $ | 6,094 | $ | 49,906 | |||||||||||
Excise Taxes on Products | (14,435 | ) | (6,134 | ) | (5,265 | ) | (3,901 | ) | (29,735 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Revenues excluding Excise Taxes | 6,618 | 5,531 | 5,829 | 2,193 | 20,171 | |||||||||||||||||
Variance |
Currency | 402 | 115 | 598 | 93 | 1,208 | ||||||||||||||||
Acquisitions | | 13 | 110 | | 123 | |||||||||||||||||
Operations | (16 | ) | 250 | 1,521 | 169 | 1,924 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Variance Total | 386 | 378 | 2,229 | 262 | 3,255 | |||||||||||||||||
Variance Total (%) | 5.8 | % | 6.8 | % | 38.2 | % | 11.9 | % | 16.1 | % | ||||||||||||
Variance excluding Currency | (16 | ) | 263 | 1,631 | 169 | 2,047 | ||||||||||||||||
Variance excluding Currency (%) | (0.2 | )% | 4.8 | % | 28.0 | % | 7.7 | % | 10.1 | % | ||||||||||||
Variance excluding Currency & Acquisitions | (16 | ) | 250 | 1,521 | 169 | 1,924 | ||||||||||||||||
Variance excluding Currency & Acquisitions (%) | (0.2 | )% | 4.5 | % | 26.1 | % | 7.7 | % | 9.5 | % | ||||||||||||
(1) 2011 Currency increased net revenues as follows: |
| |||||||||||||||||||||
European Union |
$ | 1,342 | ||||||||||||||||||||
EEMA |
116 | |||||||||||||||||||||
Asia |
1,070 | |||||||||||||||||||||
Latin America & Canada |
239 | |||||||||||||||||||||
|
|
|||||||||||||||||||||
$ | 2,767 | |||||||||||||||||||||
|
|
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
($ in millions)
(Unaudited)
Operating Companies Income | ||||||||||||||||||||
European Union |
EEMA | Asia | Latin America & Canada |
Total | ||||||||||||||||
2011 |
$ | 3,548 | $ | 2,482 | $ | 3,800 | $ | 774 | $ | 10,604 | ||||||||||
2010 |
3,280 | 2,412 | 2,259 | 699 | 8,650 | |||||||||||||||
% Change |
8.2 | % | 2.9 | % | 68.2 | % | 10.7 | % | 22.6 | % | ||||||||||
Reconciliation: | ||||||||||||||||||||
For the nine months ended September 30, 2010 |
$ | 3,280 | $ | 2,412 | $ | 2,259 | $ | 699 | $ | 8,650 | ||||||||||
2010 Asset impairment and exit costs |
20 | | | | 20 | |||||||||||||||
2011 Asset impairment and exit costs |
(23 | ) | (18 | ) | (7 | ) | (12 | ) | (60 | ) | ||||||||||
Acquired businesses |
(1 | ) | (1 | ) | 26 | | 24 | |||||||||||||
Currency |
236 | (33 | ) | 351 | 10 | 564 | ||||||||||||||
Operations |
36 | 122 | 1,171 | 77 | 1,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
For the nine months ended September 30, 2011 |
$ | 3,548 | $ | 2,482 | $ | 3,800 | $ | 774 | $ | 10,604 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Nine Months Ended September 30,
($ in millions, except per share data)
(Unaudited)
Diluted | ||||
E.P.S. | ||||
2011 Diluted Earnings Per Share |
$ | 3.76 | (1) | |
2010 Diluted Earnings Per Share |
$ | 2.96 | (1) | |
Change |
$ | 0.80 | ||
% Change |
27.0 | % | ||
Reconciliation: | ||||
2010 Diluted Earnings Per Share |
$ | 2.96 | (1) | |
Special Items: | ||||
2011 Asset impairment and exit costs |
(0.03 | ) | ||
2011 Tax items |
0.02 | |||
2010 Asset impairment and exit costs |
0.01 | |||
2010 Tax items |
(0.07 | ) | ||
Currency |
0.19 | |||
Interest |
0.02 | |||
Change in tax rate |
(0.04 | ) | ||
Impact of lower shares outstanding and share-based payments |
0.17 | |||
Operations |
0.53 | |||
|
|
|||
2011 Diluted Earnings per Share |
$ | 3.76 | (1) | |
|
|
(1) | Basic and diluted EPS were calculated using the following (in millions): |
YTD September 2011 |
YTD September 2010 |
|||||||
Net earnings attributable to PMI |
$ | 6,705 | $ | 5,507 | ||||
Less distributed and undistributed earnings attributable to share-based payment awards |
38 | 25 | ||||||
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|
|||||
Net earnings for basic and diluted EPS |
$ | 6,667 | $ | 5,482 | ||||
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|
|
|||||
Weighted-average shares for basic EPS |
1,771 | 1,849 | ||||||
Plus incremental shares from assumed conversions: |
||||||||
Stock Options |
| 3 | ||||||
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|
|
|||||
Weighted-average shares for diluted EPS |
1,771 | 1,852 | ||||||
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Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 3,391 | $ | 1,703 | ||||
All other current assets |
11,699 | 12,053 | ||||||
Property, plant and equipment, net |
6,411 | 6,499 | ||||||
Goodwill |
10,087 | 10,161 | ||||||
Other intangible assets, net |
3,774 | 3,873 | ||||||
Other assets |
858 | 761 | ||||||
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|
|
|
|||||
Total assets |
$ | 36,220 | $ | 35,050 | ||||
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|
|||||
Liabilities and Stockholders Equity |
||||||||
Short-term borrowings |
$ | 2,563 | $ | 1,747 | ||||
Current portion of long-term debt |
2,326 | 1,385 | ||||||
All other current liabilities |
11,161 | 9,672 | ||||||
Long-term debt |
12,870 | 13,370 | ||||||
Deferred income taxes |
1,983 | 2,027 | ||||||
Other long-term liabilities |
1,663 | 1,728 | ||||||
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|
|||||
Total liabilities |
32,566 | 29,929 | ||||||
Redeemable noncontrolling interest |
1,216 | 1,188 | ||||||
Total PMI stockholders equity |
2,130 | 3,506 | ||||||
Noncontrolling interests |
308 | 427 | ||||||
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|
|||||
Total stockholders equity |
2,438 | 3,933 | ||||||
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|
|||||
Total liabilities and stockholders equity |
$ | 36,220 | $ | 35,050 | ||||
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|
|||||
Total debt |
$ | 17,759 | $ | 16,502 | ||||
Total debt to EBITDA |
1.26 | (1) | 1.36 | (1) | ||||
Net debt to EBITDA |
1.02 | (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 September 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in Reported Net Revenues excluding Excise Taxes |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Net |
Less Excise Taxes |
Reported Net |
Less Currency |
Reported Net |
Less Acquisi- tions |
Reported Net |
Reported Net |
Less Excise Taxes |
Reported Net |
Reported |
Reported |
Reported |
||||||||||||||||||||||||||||||||||||||||
$ | 8,155 | $ | 5,649 | $ | 2,506 | $ | 321 | $ | 2,185 | $ | | $ | 2,185 | European Union | $ | 7,045 | $ | 4,906 | $ | 2,139 | 17.2 | % | 2.2 | % | 2.2 | % | ||||||||||||||||||||||||||
4,921 | 2,711 | 2,210 | 89 | 2,121 | 13 | 2,108 | EEMA | 4,184 | 2,288 | 1,896 | 16.6 | % | 11.9 | % | 11.2 | % | ||||||||||||||||||||||||||||||||||||
5,143 | 2,344 | 2,799 | 248 | 2,551 | 2 | 2,549 | Asia | 3,629 | 1,796 | 1,833 | 52.7 | % | 39.2 | % | 39.1 | % | ||||||||||||||||||||||||||||||||||||
2,487 | 1,640 | 847 | 39 | 808 | | 808 | Latin America & Canada | 2,078 | 1,332 | 746 | 13.5 | % | 8.3 | % | 8.3 | % | ||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
$ | 20,706 | $ | 12,344 | $ | 8,362 | $ | 697 | $ | 7,665 | $ | 15 | $ | 7,650 | PMI Total | $ | 16,936 | $ | 10,322 | $ | 6,614 | 26.4 | % | 15.9 | % | 15.7 | % | ||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
2011 | 2010 | % Change in Reported Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported Operating Companies Income |
|
|
Less Currency |
Reported |
Less Acquisi- tions |
Reported |
Reported |
Reported |
Reported |
Reported |
||||||||||||||||||||||||||||||||||||||||||
$ | 1,262 | $ | 105 | $ | 1,157 | $ | | $ | 1,157 | European Union | $ | 1,113 | 13.4 | % | 4.0 | % | 4.0 | % | ||||||||||||||||||||||||||||||||||
925 | (32 | ) | 957 | (13 | ) | 970 | EEMA | 856 | 8.1 | % | 11.8 | % | 13.3 | % | ||||||||||||||||||||||||||||||||||||||
1,309 | 104 | 1,205 | 2 | 1,203 | Asia | 690 | 89.7 | % | 74.6 | % | 74.3 | % | ||||||||||||||||||||||||||||||||||||||||
255 | | 255 | | 255 | Latin America & Canada | 244 | 4.5 | % | 4.5 | % | 4.5 | % | ||||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||||||||||
$ | 3,751 | $ | 177 | $ | 3,574 | $ | (11 | ) | $ | 3,585 | PMI Total | $ | 2,903 | 29.2 | % | 23.1 | % | 23.5 | % | |||||||||||||||||||||||||||||||||
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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 September 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 Acquisitions |
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 |
||||||||||||||||||||||||||||||||||||||||
$ | 1,262 | $ | (11 | ) | $ | 1,273 | $ | 105 | $ | 1,168 | $ | | $ | 1,168 | European Union | $ | 1,113 | $ | (20 | ) | $ | 1,133 | 12.4% | 3.1% | 3.1% | |||||||||||||||||||||||||||
925 | (16 | ) | 941 | (32 | ) | 973 | (1 | ) | 974 | EEMA | 856 | | 856 | 9.9% | 13.7% | 13.8% | ||||||||||||||||||||||||||||||||||||
1,309 | (5 | ) | 1,314 | 104 | 1,210 | 2 | 1,208 | Asia | 690 | | 690 | 90.4% | 75.4% | 75.1% | ||||||||||||||||||||||||||||||||||||||
255 | (11 | ) | 266 | | 266 | | 266 | Latin America & Canada | 244 | | 244 | 9.0% | 9.0% | 9.0% | ||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
$ | 3,751 | $ | (43 | ) | $ | 3,794 | $ | 177 | $ | 3,617 | $ | 1 | $ | 3,616 | PMI Total | $ | 2,903 | $ | (20 | ) | $ | 2,923 | 29.8% | 23.7% | 23.7% | |||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
2011 | 2010 | % Points Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted |
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 |
||||||||||||||||||||||||||||||||||||||||||
$ | 1,168 | $ | 2,185 | 53.5% | $ | 1,168 | $ | 2,185 | 53.5% | European Union | $ | 1,133 | $ | 2,139 | 53.0% | 0.5 | 0.5 | |||||||||||||||||||||||||||||||||||
973 | 2,121 | 45.9% | 974 | 2,108 | 46.2% | EEMA | 856 | 1,896 | 45.1% | 0.8 | 1.1 | |||||||||||||||||||||||||||||||||||||||||
1,210 | 2,551 | 47.4% | 1,208 | 2,549 | 47.4% | Asia | 690 | 1,833 | 37.6% | 9.8 | 9.8 | |||||||||||||||||||||||||||||||||||||||||
266 | 808 | 32.9% | 266 | 808 | 32.9% | Latin America & Canada | 244 | 746 | 32.7% | 0.2 | 0.2 | |||||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||||||||||
$ | 3,617 | $ | 7,665 | 47.2% | $ | 3,616 | $ | 7,650 | 47.3% | PMI Total | $ | 2,923 | $ | 6,614 | 44.2% | 3.0 | 3.1 | |||||||||||||||||||||||||||||||||||
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(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 September 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 1.35 | $ | 0.99 | 36.4 | % | ||||||
Adjustments: |
||||||||||||
Asset impairment and exit costs |
0.02 | 0.01 | ||||||||||
Tax items |
| | ||||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS |
$ | 1.37 | $ | 1.00 | 37.0 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.04 | |||||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS, excluding Currency |
$ | 1.33 | $ | 1.00 | 33.0 | % | ||||||
|
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|
|
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 September 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 1.35 | $ | 0.99 | 36.4 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.04 | |||||||||||
|
|
|
|
|||||||||
Reported Diluted EPS, excluding Currency |
$ | 1.31 | $ | 0.99 | 32.3 | % | ||||||
|
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|
|
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Nine Months Ended September 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 |
||||||||||||||||||||||||||||||||||||||||
$ | 22,650 | $ | 15,646 | $ | 7,004 | $ | 402 | $ | 6,602 | $ | | $ | 6,602 | European Union | $ | 21,053 | $ | 14,435 | $ | 6,618 | 5.8 | % | (0.2 | )% | (0.2 | )% | ||||||||||||||||||||||||||
13,195 | 7,286 | 5,909 | 115 | 5,794 | 13 | 5,781 | EEMA | 11,665 | 6,134 | 5,531 | 6.8 | % | 4.8 | % | 4.5 | % | ||||||||||||||||||||||||||||||||||||
14,577 | 6,519 | 8,058 | 598 | 7,460 | 110 | (1) | 7,350 | Asia | 11,094 | 5,265 | 5,829 | 38.2 | % | 28.0 | % | 26.1 | % | |||||||||||||||||||||||||||||||||||
7,048 | 4,593 | 2,455 | 93 | 2,362 | | 2,362 | Latin America & Canada | 6,094 | 3,901 | 2,193 | 11.9 | % | 7.7 | % | 7.7 | % | ||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
$ | 57,470 | $ | 34,044 | $ | 23,426 | $ | 1,208 | $ | 22,218 | $ | 123 | $ | 22,095 | PMI Total | $ | 49,906 | $ | 29,735 | $ | 20,171 | 16.1 | % | 10.1 | % | 9.5 | % | ||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
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 |
||||||||||||||||||||||||||||||||||||||||||||
$ | 3,548 | $ | 236 | $ | 3,312 | $ | (1 | ) | $ | 3,313 | European Union | $ | 3,280 | 8.2 | % | 1.0 | % | 1.0 | % | |||||||||||||||||||||||||||||||||
2,482 | (33 | ) | 2,515 | (13 | ) | 2,528 | EEMA | 2,412 | 2.9 | % | 4.3 | % | 4.8 | % | ||||||||||||||||||||||||||||||||||||||
3,800 | 351 | 3,449 | 26 | (2) | 3,423 | Asia | 2,259 | 68.2 | % | 52.7 | % | 51.5 | % | |||||||||||||||||||||||||||||||||||||||
774 | 10 | 764 | | 764 | Latin America & Canada | 699 | 10.7 | % | 9.3 | % | 9.3 | % | ||||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||||||||||
$ | 10,604 | $ | 564 | $ | 10,040 | $ | 12 | $ | 10,028 | PMI Total | $ | 8,650 | 22.6 | % | 16.1 | % | 15.9 | % | ||||||||||||||||||||||||||||||||||
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|
(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 Nine Months Ended September 30,
($ in millions)
(Unaudited)
2011 | 2010 | % Change in
Adjusted Operating Companies Income |
||||||||||||||||||||||||||||||||||||||||||||||||||
Reported |
Less Asset |
Adjusted |
Less Currency |
Adjusted |
Less Acquisitions |
Adjusted |
Reported |
Less Asset |
Adjusted |
Adjusted |
Adjusted |
Adjusted |
||||||||||||||||||||||||||||||||||||||||
$ | 3,548 | $ | (23 | ) | $ | 3,571 | $ | 236 | $ | 3,335 | $ | (1 | ) | $ | 3,336 | European Union | $ | 3,280 | $ | (20 | ) | $ | 3,300 | 8.2% | 1.1% | 1.1% | ||||||||||||||||||||||||||
2,482 | (18 | ) | 2,500 | (33 | ) | 2,533 | (1 | ) | 2,534 | EEMA | 2,412 | | 2,412 | 3.6% | 5.0% | 5.1% | ||||||||||||||||||||||||||||||||||||
3,800 | (7 | ) | 3,807 | 351 | 3,456 | 26 | (1) | 3,430 | Asia | 2,259 | | 2,259 | 68.5% | 53.0% | 51.8% | |||||||||||||||||||||||||||||||||||||
774 | (12 | ) | 786 | 10 | 776 | | 776 | Latin America & Canada | 699 | | 699 | 12.4% | 11.0% | 11.0% | ||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
$ | 10,604 | $ | (60 | ) | $ | 10,664 | $ | 564 | $ | 10,100 | $ | 24 | $ | 10,076 | PMI Total | $ | 8,650 | $ | (20 | ) | $ | 8,670 | 23.0% | 16.5% | 16.2% | |||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||
2011 | 2010 | % Points Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted |
Net Taxes & |
Adjusted |
Adjusted |
Net Revenues Taxes, |
Adjusted |
Adjusted |
Net |
Adjusted |
Adjusted |
Adjusted |
||||||||||||||||||||||||||||||||||||||||||
$ | 3,335 | $ | 6,602 | 50.5% | $ | 3,336 | $ | 6,602 | 50.5% | European Union | $ | 3,300 | $ | 6,618 | 49.9% | 0.6 | 0.6 | |||||||||||||||||||||||||||||||||||
2,533 | 5,794 | 43.7% | 2,534 | 5,781 | 43.8% | EEMA | 2,412 | 5,531 | 43.6% | 0.1 | 0.2 | |||||||||||||||||||||||||||||||||||||||||
3,456 | 7,460 | 46.3% | 3,430 | 7,350 | 46.7% | Asia | 2,259 | 5,829 | 38.8% | 7.5 | 7.9 | |||||||||||||||||||||||||||||||||||||||||
776 | 2,362 | 32.9% | 776 | 2,362 | 32.9% | Latin America & Canada | 699 | 2,193 | 31.9% | 1.0 | 1.0 | |||||||||||||||||||||||||||||||||||||||||
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||||||||||||||||||||||||||||||||||||||||
$ | 10,100 | $ | 22,218 | 45.5% | $ | 10,076 | $ | 22,095 | 45.6% | PMI Total | $ | 8,670 | $ | 20,171 | 43.0% | 2.5 | 2.6 | |||||||||||||||||||||||||||||||||||
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(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 Nine Months Ended September 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 3.76 | $ | 2.96 | 27.0 | % | ||||||
Adjustments: |
||||||||||||
Asset impairment and exit costs |
0.03 | 0.01 | ||||||||||
Tax items |
(0.02 | ) | (0.07 | ) | ||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS |
$ | 3.77 | $ | 2.90 | 30.0 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.19 | |||||||||||
|
|
|
|
|||||||||
Adjusted Diluted EPS, excluding Currency |
$ | 3.58 | $ | 2.90 | 23.4 | % | ||||||
|
|
|
|
Schedule 17
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency
For the Nine Months Ended September 30,
(Unaudited)
2011 | 2010 | % Change | ||||||||||
Reported Diluted EPS |
$ | 3.76 | $ | 2.96 | 27.0 | % | ||||||
Less: |
||||||||||||
Currency impact |
0.19 | |||||||||||
|
|
|
|
|||||||||
Reported Diluted EPS, excluding Currency |
$ | 3.57 | $ | 2.96 | 20.6 | % | ||||||
|
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|
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 | For the Year Ended | |||||||||||||||
September 30, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
October ~ December | January ~ September | 12 months | ||||||||||||||
2010 | 2011 | rolling | ||||||||||||||
Earnings before income taxes |
$ | 2,527 | $ | 9,783 | $ | 12,310 | $ | 10,324 | ||||||||
Interest expense, net |
216 | 613 | 829 | 876 | ||||||||||||
Depreciation and amortization |
255 | 743 | 998 | 932 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
$ | 2,998 | $ | 11,139 | $ | 14,137 | $ | 12,132 | ||||||||
September 30, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Short-term borrowings |
$ | 2,563 | $ | 1,747 | ||||||||||||
Current portion of long-term debt |
2,326 | 1,385 | ||||||||||||||
Long-term debt |
12,870 | 13,370 | ||||||||||||||
|
|
|
|
|||||||||||||
Total Debt |
$ | 17,759 | $ | 16,502 | ||||||||||||
Less: Cash and cash equivalents |
3,391 | 1,703 | ||||||||||||||
|
|
|
|
|||||||||||||
Net Debt |
$ | 14,368 | $ | 14,799 | ||||||||||||
Ratios |
||||||||||||||||
Total Debt to EBITDA |
1.26 | 1.36 | ||||||||||||||
|
|
|
|
|||||||||||||
Net Debt to EBITDA |
1.02 | 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 Nine Months Ended September 30,
($ in millions)
(Unaudited)
For the Quarters Ended | For the Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Net cash provided by operating activities(a) |
$ | 3,053 | $ | 2,417 | 26.3 | % | $ | 9,568 | $ | 7,856 | 21.8 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Capital expenditures |
223 | 164 | 568 | 483 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Free cash flow |
$ | 2,830 | $ | 2,253 | 25.6 | % | $ | 9,000 | $ | 7,373 | 22.1 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Currency impact |
214 | 478 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Free cash flow, excluding currency |
$ | 2,616 | $ | 2,253 | 16.1 | % | $ | 8,522 | $ | 7,373 | 15.6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
Net cash provided by operating activities(a) |
$ | 3,053 | $ | 2,417 | 26.3 | % | $ | 9,568 | $ | 7,856 | 21.8 | % | ||||||||||||
Less: |
||||||||||||||||||||||||
Currency impact |
236 | 515 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net cash provided by operating activities, excluding currency |
$ | 2,817 | $ | 2,417 | 16.5 | % | $ | 9,053 | $ | 7,856 | 15.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
(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 Third-Quarter Results Conference Call
October 20, 2011
NICK ROLLI
(SLIDE 1.)
Welcome. Thank you for joining us. Earlier today, we issued a news release containing detailed information on our 2011 third-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 third-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.)
Welcome ladies and gentlemen. I am extremely pleased to report that we achieved outstanding financial results in the third quarter. Net revenues, excluding currency and
1
acquisitions, increased by 15.7% and adjusted OCI, excluding currency and acquisitions, was 23.7% higher. Finally, adjusted diluted EPS reached $1.37 per share and grew by a remarkable 33.0%, excluding currency. While these results were boosted by relatively easy year-on-year comparisons, in the third quarter, we comfortably surpassed all our mid to long-term currency neutral targets even excluding the whole of our business in Japan, and, year-to-date, we are well within these targets.
(SLIDE 5.)
Our business outlook has further improved since July, fully compensating recent unfavorable currency movements. This has enabled us to narrow our 2011 reported diluted EPS guidance to the upper half of our previous range, namely to $4.75 to $4.80. Compared to our adjusted diluted EPS of $3.87 in 2010, this translates into an improved growth rate excluding currency of approximately 17.5% to 19.0%, well above our mid to long-term currency neutral growth target, and approximately 22.5% to 24.0% at prevailing exchange rates.
(SLIDE 6.)
Our third quarter volume was exceptionally strong. We achieved an organic cigarette volume growth of 4.4%, led by the Asia Region with an increase of 12.6% and EEMA with 4.8%. On a year-to-date September basis, we have achieved organic volume growth of 0.5%.
While there has been a lot of focus on Japan volume, I would like to emphasize that we achieved organic volume growth of 2.3%, excluding Japan, in the third quarter. Furthermore, on a year-to-date basis, the combined increase in our volume in Indonesia and Korea was nearly double that of Japan.
(SLIDE 7.)
Our entire brand portfolio has performed very well. Every single one of our top ten brands achieved volume growth, both in the third quarter and year-to-date, be they international brands such as Marlboro, L&M and Parliament, or leading local brands such as Fortune in the Philippines and Sampoerna A in Indonesia. I would like to highlight the remarkable performance of Parliament, whose volume was up 16.2% in the quarter and 9.9% year-to-date.
(SLIDE 8.)
We are particularly pleased by the improved performance of Marlboro, which is gaining share on a global basis, excluding China and the USA. In the quarter, Marlboro volume increased at double-digit rates in both the Asia and EEMA Regions. On a year-to-date basis, Marlboro has gained 0.3 and 0.5 share points, respectively in these Regions.
2
Marlboros slight share decline in the EU Region reflects the pressure on the premium segment from continued economic difficulties in parts of Southern Europe, as well as a moderate share loss in Germany. However, the brand gained share or was stable notably in Belgium, the Czech Republic, France, Hungary, the Netherlands and Poland.
The share decline in the Latin America & Canada Region masks the superb momentum of Marlboro across the Region and is the result of the over-indexation of Marlboro in Mexico, where industry volume has declined at a double-digit rate since the large tax-driven price increases in December last year.
(SLIDE 9.)
This very good performance is evidenced by significant share gains in the four key Latin American markets of Argentina, Brazil, Colombia and Mexico.
(SLIDE 10.)
Our excellent business momentum is reflected in our strong overall share performance. Year-to-date, our market share in our top 30 OCI markets was up 1.4 share points to 36.3%. In the quarter, we achieved a higher share in a clear majority of these 30 markets for an overall gain of 1.2 share points.
(SLIDE 11.)
On a Regional basis, our results in Asia, the growth engine of our company, were outstanding with net revenues and adjusted OCI, both excluding currency and acquisitions, up 39.1% and 75.1%, respectively. This was driven in particular by Indonesia, Japan, Korea and the Philippines.
We also enjoyed strong performances in the other three Regions. In EEMA, net revenues grew 11.2% and adjusted OCI 13.8%, both excluding currency and acquisitions. In Latin America & Canada, they were up 8.3% and 9.0%, respectively. Our results in the EU improved, with net revenues and adjusted OCI, excluding currency and acquisitions, up 2.2% and 3.1%, respectively.
(SLIDE 12.)
During the third quarter, PMI shipments to Japan reached 16.0 billion units, up 5.1 billion, or 47.1%, compared to the same period last year. The increase reflects the higher market share that we have achieved this year, as well as easy comparisons due to the payback in 2010 of our distributor inventory build-up in the second quarter of last year in anticipation of increased trade and consumer purchases ahead of the October tax-driven price increase.
Our third quarter market share of 27.9% was distorted by competitive trade re-loading following shortages of their products through August. We do not expect shipments to the
3
trade to mirror consumer demand until at least the fourth quarter and possibly only in the first quarter next year. We remain, nevertheless, optimistic that we should be able to retain considerable additional market share. Our confidence is based on our ability to maintain a consumer off-take share in convenience stores, such as Lawson, at a level slightly above 30% in September and early October, after all competitive products were available to consumers again. This compared to a pre-earthquake share in these outlets of around 26%.
The other important element that we expect to be able to confirm in the fourth quarter is the evolution in the total market. We now forecast that industry volume will decrease this year by no more than 15%, a much lower rate of decline than the 20% forecast at the beginning of this year.
(SLIDE 13.)
Our business is also doing extremely well in Indonesia. Industry volume growth in the quarter was well over 10%, driven by increasing consumer purchasing power, limited inflation, higher consumer confidence, and positive demographic trends. Our volume rose 22.5% and our market share reached a record level of 31.2%, a gain of 2.0 share points. This very strong performance was led by Sampoerna A, which increased its market share by 0.9 points to 12.1%. Pricing remains robust and we expect the government to continue to implement plans to simplify the excise tax structure.
All these trends are very encouraging as Indonesia is a very profitable market with significant potential for further growth.
(SLIDE 14.)
Our market share in Russia was up slightly in the quarter through August to 25.8%, behind Parliament in premium, Chesterfield in the mid-price and Bond Street in the low-price segment. Our volume in the third quarter was down 3.5% due to distributor inventory adjustments, as well as the impact on the total market of recent price increases.
During the fourth quarter of this year, we expect the Russian Parliament to approve the new road map for excise taxes on tobacco products. This calls for increases that are higher than originally planned, yet still expected to be manageable, with two steps in 2012.
(SLIDE 15.)
PMI volume in Turkey rose by 21.6% in the third quarter, and our market share reached 45.7%, a gain of 3.9 points, led by Parliament in premium, Muratti in the mid-price and L&M in the low-price segment.
While the market had stabilized so far this year, we expect the recently announced excessive increase in the ad-valorem excise tax rate, along with an ineffective Minimum
4
Excise Tax, to cause considerable disruption. We will continue, therefore, to vigorously put forward our rational arguments for a more balanced excise tax structure in Turkey.
(SLIDE 16.)
Germany has benefited from more robust market volume trends this year. Total market volume in Germany was actually up 0.3% in the quarter for cigarettes and 3.8% for fine cut, continuing the positive trend of the first half of this year. Our cigarette volume grew by 1.2% in the third quarter and PMI gained 0.3 share points to reach 35.2%, thanks to the continued strong growth of L&M, which remained the fastest growing brand in the market and was able to more than offset the decline of Marlboro. PMI also gained share in the fine cut segment.
Of even greater importance, our profitability has been enhanced by the price increase that we implemented in the second quarter of this year, following the May excise tax increase. The next tax step will take place in January 2012.
(SLIDE 17.)
We have tremendous business momentum in France, where the overall market has remained stable so far this year. In the third quarter, we further increased our market share by 0.4 points to 40.4%, driven by the strong performance of our premium brands, Marlboro and Philip Morris. Furthermore, we achieved market leadership in the fine cut market with a share of 25.2%, thanks to the successful launch into this segment in February this year of Marlboro. The brand reached a 6.8% segment share in the third quarter.
Finally, we have just announced a price increase of 0.30 per pack across our whole cigarette portfolio. This should enhance our profitability going forward.
(SLIDE 18.)
Spain remains a troubled economy with very high unemployment and a difficult tobacco market. Industry cigarette volume is forecast to decline at least 15% in 2011. The pricing situation was resolved in September when we increased our retail prices by 0.25, bringing Marlboro to its previous level of 4.25 per pack and L&M to 3.75. This should enable our profitability to recover.
(SLIDE 19.)
With the temporary exception of Spain, the pricing environment continues to be very favorable. This is highlighted by the $564 million in pricing variance that we achieved in the third quarter this year and the $1.6 billion year-to-date. During 2011, we have implemented or announced price increases in the majority of our key markets, including Australia, Indonesia and the Philippines in Asia; Algeria, Russia, Saudi Arabia and
5
Ukraine in EEMA; France, Germany, Italy, Poland and Spain in the EU; and finally Argentina, Brazil and Canada in the Latin America & Canada Region.
(SLIDE 20.)
Our outlook on costs remains very favorable. Current tobacco leaf crop prices are stable to slightly declining on a worldwide average basis. Tobacco and direct material cost increases are very moderate and broadly in line with inflation, and are being offset by our continued productivity efforts. We expect to comfortably exceed our $250 million pretax target for cost savings this year.
The combination of strong pricing and limited cost increases has enabled us to continue to grow our superior adjusted OCI margins. On a PMI-wide basis, our adjusted OCI margin, excluding currency and acquisitions, reached 47.3% in the third quarter, a gain of 3.1 points.
(SLIDE 21.)
One reason for the absence of downward pressure on prices in our industry is the important role of excise taxes and the desire of governments to continue to grow revenues. This can be achieved through a judicious combination of reasonable excise tax increases, structural enhancements, and higher prices. There have been improvements in excise tax structures in several markets this year, and some countries have adopted multi-year tax plans, including Germany and Indonesia.
While government deficit financing needs point to renewed pressure on excise taxation as a source of additional revenues, most governments appear to have understood that large, disruptive excise tax increases do not improve revenue-generating capabilities over the mid to long-term. We do, however, expect some countries to seek to generate higher revenues by increasing VAT, which will push prices higher, though this should be manageable. Every year, there are nevertheless still a few governments that continue from time to time to introduce very large and disruptive excise tax increases. As I mentioned, this happened last week in Turkey and additional surprises remain possible, as it is still early in the budget process in many countries.
(SLIDE 22.)
When it comes to plain packaging, we believe that there is no sound evidence that such a regulation would reduce consumption, smoking incidence or youth smoking, or provide any other public health benefit. Indeed, plain packaging would undermine public health objectives by lowering prices and increasing illicit trade. In addition, it would violate intellectual property protections and breach international trade obligations. We, therefore, do not believe that plain packaging regulations should be widely adopted by other governments outside Australia.
6
Though the proposed Bill has not yet passed the Senate, the Australian Government seems intent on ignoring these adverse consequences and on introducing such a regulation. We are therefore vigorously pursuing several legal avenues to challenge this unreasonable proposal and protect our valuable brands.
(SLIDE 23.)
During the third quarter, our free cash flow increased by $577 million, or 25.6%, to $2.8 billion. Excluding currency, the increase was $363 million, or 16.1%. The increase was driven mainly by our excellent business results. On a year-to-date basis, our free cash flow was up more than $1.6 billion to $9.0 billion.
(SLIDE 24.)
Our confidence in the underlying strength of our business and our ability to continue to generate a growing cash flow is reflected in the 20.3% increase in our dividend that we announced last month.
As of the close on Tuesday, our dividend yield stood at a very attractive level of 4.6%. Since the spin in March 2008, we have increased the dividend by 67%, an achievement that few companies have matched over a period that included a major financial crisis, significant currency fluctuations, and an acute recession.
(SLIDE 25.)
During the third quarter, we spent $1.4 billion to repurchase a further 21.2 million shares. Since the March 2008 spin-off, we have now used over $20 billion to repurchase nearly 400 million shares at an average price of $50.81.
Over the same period, we have paid out over $14 billion in dividends, so in total we have returned nearly $35 billion to our shareholders.
(SLIDE 26.)
In conclusion, PMI had an outstanding third quarter. Organic volume grew by a remarkable 4.4%, with half this growth outside Japan. This was driven by the very strong performance of all our main brands, led by Marlboro and Parliament. Our market share momentum remained very strong. Net revenues and adjusted OCI, excluding currency and acquisitions, were up by 15.7% and 23.7%, respectively. Adjusted diluted EPS, excluding currency, increased by 33.0%. The pricing environment remains very favorable and the vast majority of governments continue to act rationally on excise taxation.
Our business outlook has improved further since July, enabling us to narrow our reported diluted 2011 EPS guidance to the upper half of our previous range, namely to $4.75 to $4.80, this despite recent unfavorable currency movements. Compared to our adjusted diluted EPS of $3.87 in 2010, this corresponds to an improved growth rate of
7
approximately 22.5% to 24.0% at prevailing exchange rates and approximately 17.5% to 19.0%, excluding currency.
And finally, and perhaps most important, we have demonstrated again our focus on shareholder returns and shown our confidence in our bright future with the Boards decision in September to increase our dividend by a further 20.3%.
(SLIDE 27.)
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
Third-Quarter Results October 20, 2011
Exhibit 99.3 |
![]() 2
Introduction
Unless otherwise stated, we will be talking about results for the
third-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 June 30, 2011, filed with the Securities and Exchange
Commission |
![]() 4
2011 Third-Quarter Results
Outstanding financial performance:
In the quarter, we comfortably surpassed all our mid to
long-term currency neutral annual growth targets even
excluding our business in Japan
Q3, 2011 Results
(a)
Net
Revenues
+15.7%
Adjusted OCI
+23.7%
Adjusted Diluted EPS
+33.0%
(a)
All financial growth rates exclude currency. Net revenues and OCI growth rates also exclude
acquisitions Source: PMI Financials |
![]() 5
2011 EPS Guidance
Business outlook further improved, fully compensating
recent unfavorable currency movements
Allows us to narrow our 2011 reported diluted EPS
guidance range to $4.75 to $4.80 (upper half of previous
range)
Compared to our adjusted diluted EPS of $3.87 in 2010,
this translates into improved growth rates of
approximately 17.5% to 19.0% excluding currency, and
approximately 22.5% to 24.0% at prevailing exchange
rates
Source: PMI forecasts |
![]() 6
PMI Organic Cigarette Volume Growth
(%)
Source: PMI Financials
2011
2011
4.4
0.5
0
5
Q3
YTD Sept |
![]() 7
PMI Brand Performance
% Volume Growth vs. Prior Year
Q3, 2011
YTD Sept, 2011
Marlboro
3.9%
0.5%
L&M
3.9
2.9
Bond Street
6.8
2.2
Fortune
10.1
9.0
(a)
Philip Morris
1.8
1.0
Parliament
16.2
9.9
Chesterfield
7.0
0.4
Sampoerna A
22.8
11.7
Lark
44.1
15.3
Dji Sam Soe
12.1
10.3
(a) March through September
Source: PMI Financials |
![]() 8
Marlboro
Market Shares
Market Shares
YTD
Sept,
2010
YTD
Sept,
2011
Variance
Asia
(a)
6.2%
6.5%
0.3pp
EEMA
(b)
5.6
6.1
0.5
EU
18.1
17.9
(0.2)
LA&C
13.8
13.5
(0.3)
Total
(a)(b)
8.8
9.0
0.2
(a)
Excluding PRC
(b)
Excluding duty-free
(c)
Also excluding the USA
Source: PMI estimates
(c) |
![]() 9
Marlboro
Market Shares
LA&C Region
Market Shares
YTD
Sept,
2010
YTD
Sept,
2011
Variance
Argentina
23.2%
24.0%
0.8pp
Brazil
6.7
7.0
0.3
Colombia
3.7
4.7
1.0
Mexico
48.9
51.8
2.9
Source: PMI estimates |
![]() 10
PMI Market Share Developments
(%)
Top 30 PMI OCI Markets
(a) Adjusted
for
Philippines
pro
forma
Jan-Feb
2010
Source: PMI Financials and estimates
(a)
34.9
36.3
32
35
38
YTD Sept, 2010
YTD Sept, 2011 |
![]() 11
2011 Third-Quarter Results
by Region
(a)
Excluding currency and acquisitions
Source: PMI Financials
Q3, 2011 Results
Asia
EEMA
LA&C
EU
Net Revenues
(a)
+39.1%
+11.2%
+8.3%
+2.2%
Adjusted
OCI
(a)
+75.1
+13.8
+9.0
+3.1 |
![]() 12
Japan
Source: PMI Financials, PMI estimates and Tobacco Institute of Japan
PMI shipments up 47.1%:
-
Higher 2011 market share
-
Payback in Q3, 2010, for Q2,
2010, distributor inventory build-
up
September C-store consumer
off-take share slightly above
30%, compared to around
26% pre-crisis
Retention share only
measurable in Q4, 2011, or
Q1, 2012
Industry volume decline not
expected to exceed 15% this
year |
![]() 13
Indonesia
PMI volume up 22.5% in
Q3, 2011
Record market share of
31.2% in Q3, 2011
Indonesian economy
remains strong and
consumer purchasing
power is increasing
Government expected to
continue to implement
plans to simplify excise tax
structure
Source: PMI Financials and PMI estimates
2010
2011
Other
Marlboro
Dji Sam Soe
Sampoerna A
29.2
31.2
(%)
PMI Market Share
Total PMI
11.2
12.1
7.9
7.7
5.7
7.2
4.2
4.4
0
35
Q3
Q3 |
![]() 14
Russia
Market share up slightly to
25.8% QTD Aug, 2011,
behind:
-
Parliament
in premium
-
Chesterfield
in mid-price, and
-
Bond Street
in low-price
segment
PMI volume down 3.5% in
Q3, 2011, due to:
-
Distributor inventory adjustments
-
Lower total market
During Q4, 2011, Russian
Parliament expected to
approve new manageable
road map for excise taxes
Source: A.C. Nielsen, PMI Finance and Russian Ministry of Finance |
![]() 15
Turkey
PMI volume up 21.6% in Q3,
2011
Strong share gains driven by:
-
Parliament
in premium
-
Muratti
in mid-price, and
-
L&M
in low-price
Total market had stabilized,
but recently announced, very
large ad-valorem excise tax
increase expected to be
disruptive
A more balanced excise tax
structure is needed
Source: PMI Financials, PMI estimates and A.C. Nielsen
Premium
Mid-price
Low-price
41.8
45.7
(%)
PMI Market Share
Total PMI
19.2
21.2
5.9
6.5
18.0
16.7
0
50
Q3, 2010
Q3, 2011 |
![]() 16
Germany
Source: PMI Financials and PMI estimates
Q3, 2010
Q3, 2011
L&M
Marlboro
Other
(%)
PMI Market Shares by Segment
Germany had benefited
from more robust market
volume trends this year
Q3, 2011, total German
market volume:
-
Cigarettes +0.3%
-
Fine cut +3.8%
PMI share gains in both
cigarette and fine cut
segments
Price increase in Q2, 2011.
Next tax step in Jan 2012
20.3
2.7
10.3
5.6
6.4
35.2
14.7
4.6
Cigarette
Fine Cut
21.1
1.3
9.2
5.6
7.3
34.9
14.2
4.6
Cigarette
Fine Cut |
![]() 17
France
Great momentum in a
stable market
Cigarette share gain of
0.4pp to 40.4%, driven by
premium Marlboro
and
Philip Morris
Strong growth in fine cut
segment since launch of
Marlboro
in Feb 2011
Cigarette price increase of
0.30/pack this month
Source: PMI estimates
Q3, 2010
Q3, 2011
40.4
Philip Morris
Marlboro
Other
(%)
PMI Market Shares by Segment
25.9
6.8
8.2
5.7
12.7
25.2
6.3
Cigarette
Fine Cut
25.7
7.7
5.7
13.3
40.0
19.0
6.6
Cigarette
Fine Cut |
![]() 18
Spain
Very high unemployment
driving decline in cigarette
industry volume of at least
15% in 2011
Pricing situation was
resolved in September:
-
Marlboro
back to previous
level of 4.25/pack
-
L&M
raised to 3.75/pack
Source: PMI estimates |
![]() 19
Pricing
The pricing environment
continues to be very
favorable
In 2011, PMI has
implemented or announced
price increases in:
-
Asia: Australia, Indonesia,
Philippines
-
EEMA: Algeria, Russia, Saudi
Arabia, Ukraine
-
EU: France, Germany, Italy,
Poland, Spain
-
LA&C: Argentina, Brazil,
Canada
Source: PMI Financials
($ mio)
Q3
Q1
Pricing Variance
Q2
449
453
341
617
292
564
1,082
1,634
0
900
1,800
2010
2011 |
![]() 20
Costs and Margins
Adjusted OCI Margins
Third-Quarter
2010
2011
(a)
Variance
(a)
Asia
37.6%
47.4%
9.8pp
EEMA
45.1
46.2
1.1
EU
53.0
53.5
0.5
LA&C
32.7
32.9
0.2
Total
44.2
47.3
3.1
(a)
Excluding currency and acquisitions
Source: PMI Financials
Stable tobacco leaf prices
Moderate cost increases offset by productivity savings
that will surpass $250 million in 2011 |
![]() 21
Excise Taxation
Excise tax structures have improved and several
countries have adopted multi-year tax plans
Most governments appear to have understood that large
excise tax increases are disruptive and do not improve
revenue generation over mid to long-term
We expect some VAT increases in 2012, but these should
be manageable
Every year, some governments introduce disruptive
excise tax increases. This happened last week in Turkey
and additional surprises remain possible |
![]() 22
Plain Packaging
We oppose such measures because:
-
No sound evidence it would reduce consumption, smoking
incidence or youth smoking, or provide any other public health
benefit
-
Undermines public health objectives by lowering prices and
increasing illicit trade
-
Violates intellectual property protections and breaches
international trade obligations
We therefore do not believe that plain packaging
regulations should be widely adopted
We are vigorously pursuing several legal avenues to
challenge the Australian Governments plain packaging
proposal |
![]() 23
($ million)
+22.1%
Currency
Free
Cash
Flow
(a)
(a)
Free cash flow equals net cash provided by operating activities less capital
expenditures Source: PMI Financials
($ million)
+25.6%
Currency
2010
2011
2010
2011
9,000
2,253
2,830
214
0
1,000
2,000
3,000
Q3
Q3
7,373
478
0
3,000
6,000
9,000
YTD Sept
YTD Sept |
![]() +10.3%
+20.3%
$3.08
$1.84
+17.4%
2008
Aug
Sept
Sept
Sept
2011
+7.4%
24
Dividend Increases Since Spin-Off
(a)
(a)
Dividends for 2008 and 2011 are annualized rates. 2008 annualized rate is based on
a quarterly dividend of $0.46 per common share, declared June 18, 2008. The
annualized rate for 2011 is based on a quarterly dividend of $0.77 per common share, declared September 14, 2011
Source: PMI Financials
2008
2009
2010
2011
+67.4% |
![]() 25
Share Repurchases and Dividends
During the third quarter, PMI spent $1.4 billion to
repurchase a further 21.2 million shares
Since the March 2008 spin:
-
Over $20 billion spent to repurchase nearly 400 million shares at
an average price of $50.81 per share
-
Over $14 billion paid out in dividends
-
Nearly $35 billion returned to our shareholders
Source: PMI Financials |
![]() 26
Summary
Outstanding third quarter:
-
Organic volume growth of 4.4%
-
Strong market share momentum and favorable pricing
environment
-
Adjusted diluted EPS, excluding currency, increased by 33.0%
-
2011 reported diluted EPS guidance range narrowed to $4.75-
$4.80, with improved business outlook offsetting recent
unfavorable currency movements
-
Compared to an adjusted diluted EPS of $3.87 in 2010, this
corresponds to an increase of approximately 22.5% to 24.0% at
prevailing exchange rates, and approximately 17.5% to 19.0%,
excluding currency
20.3% dividend increase in September demonstrates our
focus on shareholder returns and our belief in a bright
future
Source: PMI Financials |
![]() Questions & Answers
2011 Third-Quarter Results |
![]() 28
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Quarters Ended September 30,
($ 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
8,155
$
5,649
$
2,506
$
321
$
2,185
$
-
$
2,185
$
European Union
7,045
$
4,906
$
2,139
$
17.2%
2.2%
2.2%
4,921
2,711
2,210
89
2,121
13
2,108
EEMA
4,184
2,288
1,896
16.6%
11.9%
11.2%
5,143
2,344
2,799
248
2,551
2
2,549
Asia
3,629
1,796
1,833
52.7%
39.2%
39.1%
2,487
1,640
847
39
808
-
808
Latin America & Canada
2,078
1,332
746
13.5%
8.3%
8.3%
20,706
$
12,344
$
8,362
$
697
$
7,665
$
15
$
7,650
$
PMI Total
16,936
$
10,322
$
6,614
$
26.4%
15.9%
15.7%
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
1,262
$
105
$
1,157
$
-
$
1,157
$
European Union
1,113
$
13.4%
4.0%
4.0%
925
(32)
957
(13)
970
EEMA
856
8.1%
11.8%
13.3%
1,309
104
1,205
2
1,203
Asia
690
89.7%
74.6%
74.3%
255
-
255
-
255
Latin America & Canada
244
4.5%
4.5%
4.5%
3,751
$
177
$
3,574
$
(11)
$
3,585
$
PMI Total
2,903
$
29.2%
23.1%
23.5%
2011
2010
% Change in Reported Operating
Companies Income
2011
2010
% Change in Reported Net Revenues
excluding Excise Taxes |
![]() 29
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 September
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
1,262
$
(11)
$
1,273
$
105
$
1,168
$
-
$
1,168
$
European Union
1,113
$
(20)
$
1,133
$
12.4%
3.1%
3.1%
925
(16)
941
(32)
973
(1)
974
EEMA
856
-
856
9.9%
13.7%
13.8%
1,309
(5)
1,314
104
1,210
2
1,208
Asia
690
-
690
90.4%
75.4%
75.1%
255
(11)
266
-
266
-
266
Latin America & Canada
244
-
244
9.0%
9.0%
9.0%
3,751
$
(43)
$
3,794
$
177
$
3,617
$
1
$
3,616
$
PMI Total
2,903
$
(20)
$
2,923
$
29.8%
23.7%
23.7%
% 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
1,168
$
2,185
$
53.5%
1,168
$
2,185
$
53.5%
European Union
1,133
$
2,139
$
53.0%
0.5
0.5
973
2,121
45.9%
974
2,108
46.2%
EEMA
856
1,896
45.1%
0.8
1.1
1,210
2,551
47.4%
1,208
2,549
47.4%
Asia
690
1,833
37.6%
9.8
9.8
266
808
32.9%
266
808
32.9%
Latin America & Canada
244
746
32.7%
0.2
0.2
3,617
$
7,665
$
47.2%
3,616
$
7,650
$
47.3%
PMI Total
2,923
$
6,614
$
44.2%
3.0
3.1
% Change in Adjusted Operating
Companies Income
2010
2011
2010
2011 |
![]() 30
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 September 30,
(Unaudited)
2011
2010
% Change
Reported Diluted EPS
1.35
$
0.99
$
36.4%
Adjustments:
Asset impairment and exit costs
0.02
0.01
Tax items
-
-
Adjusted Diluted EPS
1.37
$
1.00
$
37.0%
Less:
Currency impact
0.04
Adjusted Diluted EPS, excluding Currency
1.33
$
1.00
$
33.0% |
![]() 31
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 Nine Months Ended September 30,
($ in millions)
(Unaudited)
(a) Operating Cash Flow
For the Quarters Ended
For the Nine Months Ended
September 30,
September 30,
2011
2010
% Change
2011
2010
% Change
Net cash provided by operating activities
(a)
3,053
$
2,417
$
26.3%
9,568
$
7,856
$
21.8%
Less:
Capital expenditures
223
164
568
483
Free cash flow
2,830
$
2,253
$
25.6%
9,000
$
7,373
$
22.1%
Less:
Currency impact
214
478
Free cash flow, excluding currency
2,616
$
2,253
$
16.1%
8,522
$
7,373
$
15.6%
For the Quarters Ended
For the Nine Months Ended
September 30,
September 30,
2011
2010
% Change
2011
2010
% Change
Net cash provided by operating activities
(a)
3,053
$
2,417
$
26.3%
9,568
$
7,856
$
21.8%
Less:
Currency impact
236
515
Net cash provided by operating activities,
excluding currency
2,817
$
2,417
$
16.5%
9,053
$
7,856
$
15.2% |
![]() 32
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
Third-Quarter Results October 20, 2011 |
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