EX-99.1 2 dex991.htm PHILIP MORRIS INTERNATIONAL INC. PRESS RELEASE DATED JULY 22, 2010 Philip Morris International Inc. Press Release dated July 22, 2010

EXHIBIT 99.1

 

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PHILIP MORRIS INTERNATIONAL INC. (PMI) REPORTS

2010 SECOND-QUARTER RESULTS

 

  •  

Reported net revenues, excluding excise taxes, up by 15.1%

 

  •  

Excluding currency, reported net revenues, excluding excise taxes, up by 8.3%

 

  •  

Reported operating companies income up by 19.5%

 

  •  

Excluding currency, reported operating companies income up by 15.0%

 

  •  

Excluding currency, adjusted operating companies income up by 9.0%, including the items detailed in the attached Schedule 11

 

  •  

Reported diluted earnings per share of $1.07, up by 35.4% versus $0.79 in 2009

 

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Excluding currency, reported diluted earnings per share up by 31.6%

 

  •  

Adjusted diluted earnings per share of $1.00, up by 20.5% versus $0.83 in 2009

 

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Excluding currency, adjusted diluted earnings per share up by 16.9%

 

  •  

Free cash flow up by 11.1% to $3.3 billion

 

  •  

Excluding currency, free cash flow up by 7.4%

 

  •  

During the quarter, repurchased 21.7 million shares of its common stock for $1.0 billion

 

  •  

Declared a regular quarterly dividend of $0.58 during the quarter

 

  •  

PMI increases its forecast for 2010 full-year reported diluted earnings per share to a range of $3.75 to $3.85, up by approximately 16% to 19% compared to $3.24 in 2009, driven by favorable currency at prevailing rates; excluding currency, reported diluted earnings per share are projected to increase by approximately 14% to 17%

NEW YORK, July 22, 2010 – Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced reported diluted earnings per share of $1.07 in the second quarter of 2010, up by 35.4% from $0.79 in the second quarter of 2009. Excluding currency, reported diluted earnings per share were up by 31.6% as detailed on Schedule 13. Adjusted diluted earnings per share of $1.00 were up by 20.5% from 2009 adjusted diluted earnings per share of $0.83, including the items detailed on the attached Schedule 12. Excluding currency, adjusted diluted earnings per share were up 16.9% as detailed on Schedule 12. Free cash flow, defined as net cash provided by operating activities less capital expenditures, increased by 11.1% to $3.3 billion, as detailed on Schedule 19.

“Though partially flattered by a timing favorability in Japan, we posted a strong quarter across all key metrics, confirming our sustained business momentum,” said Louis Camilleri, Chairman and Chief Executive Officer.

“The widespread sequential improvement in Marlboro’s market share underscores our momentum and provides further evidence that our brand architecture initiatives are working.”

“Our broad geographic footprint continues to serve us well, enabling us to deal with weakness arising in markets where economic recovery remains subdued.”

Conference Call

A conference call, hosted by Hermann Waldemer, Chief Financial Officer, with members of the investment community and news media, will be webcast at 9:00 a.m., Eastern Time, on July 22, 2010. Access is available at www.pmi.com.

Dividends and Share Repurchase Program

PMI declared a regular quarterly dividend of $0.58 during the second quarter of 2010, which represents an annualized rate of $2.32 per common share.

In April 2010, PMI completed its 2008-2010 share repurchase program of $13 billion and, in May 2010, initiated a new, three-year share repurchase program of $12 billion. During the quarter, PMI spent $1.0 billion to repurchase 21.7 million shares of its common stock as shown in the table below.

2010 Second-Quarter PMI Share Repurchases

 

     Shares
(Mio.)		    Value
($ Mio.)

$13 billion, two-year program, completed in April 2010

    5.1    257.3

$12 billion, three-year program, commenced in May 2010

    16.6    764.7
         

Total

    21.7    1,022.0

Since May 2008, when PMI began its first share repurchase program, the company has spent an aggregate total of $13.8 billion to repurchase 294.2 million shares.

2010 Full-Year Forecast

PMI increases its forecast for 2010 full-year reported diluted earnings per share to a range of $3.75 to $3.85, up by approximately 16% to 19% compared to $3.24 in 2009, driven by favorable currency at prevailing rates; excluding currency, reported diluted earnings per share are projected to increase by approximately 14% to 17%. This guidance includes $0.07 per share for the previously announced reversal of tax provisions, largely due to the completion of US tax audits, and 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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SECOND-QUARTER CONSOLIDATED RESULTS

Management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and to allocate resources. In the following discussion, the term “net revenues” refers to net revenues, excluding excise taxes, unless otherwise stated. Management also reviews OCI, operating margins and EPS on an adjusted basis (which may exclude the impact of currency and other items such as acquisitions or asset impairment and exit charges), 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 adjusted measures to corresponding GAAP measures are also provided with this release. References to total international cigarette market, total cigarette market, total market and market shares are PMI estimates based on latest available data from a number of sources. Comparisons are to the same prior-year period unless otherwise stated.

NET REVENUES

PMI Net Revenues ($ Millions)

 

     Second-Quarter  
     2010    2009    Change     Excl.
Curr.		  

European Union

    $ 2,295    $ 2,280    0.7 %    (1.2 )% 

Eastern Europe, Middle East & Africa

      1,889      1,640    15.2 %    9.7 % 

Asia

      2,123      1,573    35.0 %    21.4 % 

Latin America & Canada

      754      641    17.6 %    6.1 % 
                  

Total PMI

    $ 7,061    $ 6,134    15.1 %    8.3 % 

Net revenues of $7.1 billion were up by 15.1%, including favorable currency of $419 million. Excluding currency, net revenues increased by 8.3%, primarily driven by favorable pricing of $341 million across all business segments that more than offset unfavorable volume/mix of $14 million, and acquisitions. The favorable pricing included the unfavorable impact of a partial tax absorption in Greece, primarily on Marlboro, to mitigate the compounded impact of an unfavorable structural excise tax change in April 2010, and three excise tax and two VAT-driven price increases during the first five months of 2010. Excluding currency and acquisitions, net revenues increased by 5.3%.

OPERATING COMPANIES INCOME

PMI Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010    2009    Change     Excl.
Curr.		  

European Union

    $ 1,105    $ 1,163    (5.0 )%    (0.3 )% 

Eastern Europe, Middle East & Africa

      786      635    23.8 %    18.4 % 

Asia

      845      619    36.5 %    19.9 % 

Latin America & Canada

      238      71    +100.0 %    +100.0 % 
                  

Total PMI

    $ 2,974    $ 2,488    19.5 %    15.0 % 

 

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Operating income increased by 19.6% to $2.9 billion as shown on Schedule 1. Reported operating companies income increased by 19.5% to $3.0 billion, including favorable currency of $113 million. Excluding currency, operating companies income was up by 15.0%, driven primarily by higher pricing, partly offset by higher costs, and acquisitions. Excluding currency, and the favorable impact of acquisitions which contributed 1.7 percentage points of growth, operating companies income was up by 13.3%. Adjusted operating companies income grew by 13.3% as shown in the table below and detailed on Schedule 11.

PMI Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010     2009     Change  

Reported OCI

    $ 2,974      $ 2,488      19.5 % 

Asset impairment & exit costs

      0        1     

Colombian investment and cooperation agreement charge

      0        135     
                  

Adjusted OCI

    $ 2,974      $ 2,624      13.3 % 

Adjusted OCI Margin*

      42.1 %      42.8 %    (0.7 ) 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 0.3 percentage points to 43.1%, as detailed on Schedule 11. Excluding currency and acquisitions, adjusted operating companies income margin was up by 0.8 percentage points to 43.6%.

SHIPMENT VOLUME & MARKET SHARE

PMI Cigarette Shipment Volume by Segment (Million Units)

 

     Second-Quarter  
     2010    2009    Change  

European Union

    59,024    62,900    (6.2 )% 

Eastern Europe, Middle East & Africa

    77,892    76,650    1.6 % 

Asia

    78,185    57,979    34.9 % 

Latin America & Canada

    25,858    25,636    0.9 % 
            

Total PMI

    240,959    223,165    8.0 % 

PMI’s cigarette shipment volume of 241.0 billion units was up by 8.0%. In EEMA, cigarette shipment volume growth of 1.6% was driven by Russia, Ukraine, the Middle East and double-digit growth in North Africa, partly offset by a decline in Turkey of 19.3% due to the impact of a significant excise increase in January 2010. In Asia, cigarette shipment volume increased by 34.9%, primarily reflecting a higher distributor inventory in Japan of approximately 3.4 billion units in anticipation of increased trade and consumer purchases ahead of an announced tax increase, effective October 1, 2010; double-digit growth in Korea; and the favorable impact of the PMFTC Inc. business combination in the Philippines of 17.2 billion units; partly offset by a decline in Pakistan, mainly due to a surge in the availability of illicit cigarettes. In Latin America & Canada, cigarette shipment volume increased by 0.9%, driven mainly by double-digit growth in Canada, which was fueled by an improvement in the tax-paid market as a result of continuing anti-contraband enforcement measures. These gains offset declines in the EU, primarily due to a lower total cigarette market and share in Germany; the impact of excise tax and VAT-driven price increases in the first half of 2010 in Greece; and the economic downturn in Spain. On an organic basis, which excludes acquisitions, PMI’s cigarette shipment volume, flattered by the Japan inventory impact, was up by 0.3%.

 

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Total cigarette shipments of Marlboro of 77.9 billion units were down moderately by 0.5%, due primarily to decreases: in the EU, mainly reflecting a share decline in Germany, lower share in Greece, driven by the aforementioned excise tax and VAT-driven price increases, and the impact of the economic crisis in Spain; and, to a lesser degree, in Latin America & Canada. Cigarette shipments of Marlboro grew slightly in EEMA, primarily driven by Ukraine, the Middle East and North Africa, partly offset by Russia and Turkey; and grew strongly in Asia, primarily reflecting the aforementioned favorable distributor inventory impact in Japan, growth in the Philippines, and double-digit growth in Korea.

Total cigarette shipments of L&M of 23.2 billion units were essentially flat, with shipment growth in all regions, except EEMA, primarily due to declines in Russia, Turkey and Ukraine, partially offset by double-digit growth in Algeria and Egypt. Driven by a double-digit increase in shipments in Russia and Ukraine, total cigarette shipments of Chesterfield of 10.3 billion units grew by 6.2%. Total cigarette shipments of Parliament of 9.9 billion units were up by 2.3%, led by growth in Japan, Korea and Russia, partly offset by Turkey. Total cigarette shipments of Lark of 9.2 billion units increased by 16.2%, driven by growth in Japan and Turkey. Total cigarette shipments of Bond Street of 12.3 billion units increased by 16.4%, driven by double-digit growth in Russia and Ukraine, partly offset by Turkey.

Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, grew by 55.0%, fueled by the acquisition of Swedish Match South Africa (Proprietary) Limited. Excluding acquisitions, shipment volume of OTP was down by 2.8%, primarily due to lower volume in Poland, reflecting the impact of the excise tax alignment of pipe tobacco to roll-your-own in the first quarter of 2009. Total shipment volume for cigarettes and OTP was up by 8.8%, or up by 0.2% excluding acquisitions.

PMI’s market share performance registered a growing trend in a number of markets, including Argentina, Australia, Belgium, Egypt, Japan, Korea, Mexico, the Netherlands, the Philippines, Poland, Russia, Singapore and Switzerland.

EUROPEAN UNION REGION (EU)

In the EU, net revenues increased by 0.7% to $2.3 billion, including favorable currency of $42 million. Excluding the impact of currency, net revenues declined by 1.2%, primarily reflecting higher pricing of $119 million, which was more than offset by $146 million of unfavorable volume/mix. The higher pricing occurred across all main markets, with the exception of Greece, due to a partial tax absorption. The unfavorable volume/mix was primarily attributable to a lower total market and share in Germany, and lower total markets in Greece and Spain, reflecting the impact of adverse economic conditions and the impact of significant, largely tax driven price increases.

Operating companies income decreased by 5.0% to $1.1 billion, due predominantly to unfavorable volume/mix of $110 million and unfavorable currency of $55 million, partially offset by favorable pricing. Excluding the impact of currency, operating companies income declined slightly by 0.3%, primarily reflecting favorable pricing offset by unfavorable volume/mix and the impact of a partial excise tax absorption in Greece. Adjusted operating companies income declined by 5.1% as shown in the table below and detailed on Schedule 11.

 

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EU Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010     2009     Change  

Reported OCI

    $ 1,105      $ 1,163      (5.0 )% 

Asset impairment & exit costs

      0        1     
                  

Adjusted OCI

    $ 1,105      $ 1,164      (5.1 )% 

Adjusted OCI Margin*

      48.1 %      51.1 %    (3.0 ) 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 0.4 percentage points to 51.5%, as detailed on Schedule 11.

The total cigarette market in the EU declined by 5.2%, mainly reflecting a lower total market in Greece and Spain, principally due to the unfavorable impact of a series of largely excise tax/VAT-driven price increases, and the impact of adverse economic conditions in those markets.

PMI’s cigarette shipment volume in the EU declined by 6.2%, primarily reflecting the impact of the lower total market as described above and lower share. Shipment volume of Marlboro decreased by 8.7%, mainly due to the lower total market, unfavorable economic conditions, primarily in Greece and Spain, and lower share in Germany and Greece. Shipment volume of L&M increased by 4.5% compared to the second quarter of 2009, driven by share growth primarily in Germany and Greece.

PMI’s market share in the EU was down by 0.4 share points to 38.9% as gains, primarily in Poland, were offset by share declines, mainly in the Czech Republic, Germany and Portugal. However, market share increased by 0.5 points compared to the fourth quarter of 2009 and grew by 0.5 points compared to the first quarter of 2010. Marlboro’s share in the EU was down by 0.6 share points to 18.1%, reflecting a lower share in France, Germany, Greece and Spain, partially offset by higher share in Italy, the Netherlands, Portugal and the Central European markets, in particular Poland. Marlboro share was up 0.2 points compared to the first quarter 2010. During the quarter, the continuing roll-out of Marlboro brand initiatives included the Marlboro Red pack upgrade in Finland, Greece, Norway and Sweden, the launch of Marlboro Core Flavor in Italy, the launch of Marlboro Gold Touch in Spain, and the launch of Marlboro Gold Advance in Switzerland. L&M’s market share in the EU grew by 0.6 points to a record 6.1%, its highest since the company’s spin-off in 2008, primarily driven by gains in Germany, Greece, Slovakia and Spain.

EU Key Market Commentaries

In the Czech Republic, the total cigarette market was down by 5.8%, reflecting the impact of excise tax and VAT-driven price increases implemented in April 2010. PMI’s shipments were down by 11.5%. Although market share decreased by 3.1 points to 48.2%, mainly reflecting share declines for lower-margin local brands, shares for Marlboro and L&M were up by 0.1 point and 0.3 points, respectively.

In France, the total cigarette market was down by 2.0%, reflecting the impact of the November 2009 retail price increase. PMI’s shipments were essentially flat. Although market share decreased moderately by 0.2 points to 40.8%, share was up by 0.4 points compared to the fourth quarter of 2009 and by 0.5 points

 

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compared to the first quarter of 2010. Whilst Marlboro’s share declined in the second quarter of 2010 by 0.6 points to 26.3% compared to the second quarter of 2009, it was offset by a higher share for the premium Philip Morris brand, up by 0.8 points to 7.8%. Marlboro’s share increased by 0.2 and 0.4 points compared to the fourth quarter of 2009 and first quarter of 2010, respectively.

In Germany, the total cigarette market was down by 2.1%, flattered by favorable trade inventory movements. PMI’s shipments were down by 9.5%, due primarily to the lower total market and a lower share of 35.9%, down by 2.9 share points. Although Marlboro’s share decreased by 3.2 share points to 21.6%, reflecting the impact of price sensitivity among adult consumers, share increased by 0.3 points versus the first quarter of 2010, indicating that the roll-out of the new architecture, most recently through the introduction of the new Marlboro Red pack upgrade in February 2010, is having a stabilizing effect. L&M, the fastest growing brand in Germany on a year-to-date basis, continued its strong performance during the quarter, gaining 0.9 share points to reach 9.4%.

In Italy, the total cigarette market was down by 2.2%, primarily reflecting the impact of the December 2009 price increase. PMI’s shipments were down by 2.9%, largely due to the total market decline. Despite a slight market share decline of 0.2 points to 54.1%, share was stable compared to the full year 2009 and the first quarter of 2010. Fueled by the May 2009 and June 2010 launches of Marlboro Gold Touch and Marlboro Core Flavor, respectively, Marlboro’s share increased by 0.3% to 23.0%, and was up by 0.4 points compared to the first quarter of 2010.

In Poland, the total cigarette market was down by 2.3%, reflecting the impact of the tax-driven price increases in the third quarter of 2009 and in January 2010, partially offset by in-switching from other tobacco products as a result of excise tax harmonization in 2009. PMI’s shipments were up by 2.1%. Market share was up by 1.6 points to 38.1%, primarily reflecting higher Marlboro share, up by 0.7 share points to 10.2%.

In Spain, the total cigarette market was down by 10.1%, largely due to the adverse economic environment and the impact of the excise tax-driven price increase in June 2009, a further price increase in January 2010, and a June 2010 VAT-driven price increase of €0.25 per pack. PMI’s shipments were down by 15.4%, reflecting the lower total market and the impact of unfavorable distributor inventory movements. PMI’s market share was down by 0.5 points to 31.3%. Although Marlboro’s share decreased by 0.6 points to 14.8%, share was flat compared to the fourth quarter of 2009 and was up by 0.3 points versus the first quarter of 2010. Chesterfield’s share declined by 1.0 point to 9.0%, partially offset by the strong share gain of L&M of 0.9 share points to 6.1%.

EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)

In EEMA, net revenues increased by 15.2% to $1.9 billion, including favorable currency of $90 million. Excluding the impact of currency, net revenues increased by 9.7%, primarily driven by favorable pricing of $162 million which more than offset unfavorable volume/mix of $28 million. Excluding the impact of currency and acquisitions, net revenues grew by 8.2%.

Operating companies income increased by 23.8% to $786 million, including favorable currency of $34 million. Excluding the impact of currency, operating companies income increased by 18.4%, primarily reflecting favorable pricing that more than offset unfavorable volume/mix. Excluding the impact of currency and acquisitions, operating companies income was up by 16.9%. Adjusted operating companies income increased by 23.8% as shown in the table below and detailed on Schedule 11.

 

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EEMA Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010     2009     Change  

Reported OCI

    $ 786      $ 635      23.8 % 

Asset impairment & exit costs

      0        0     
                  

Adjusted OCI

    $ 786      $ 635      23.8 % 

Adjusted OCI Margin*

      41.6 %      38.7 %    2.9 p.p.   

 

* Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Excluding the impact of currency, adjusted operating companies income margin was up by 3.1 percentage points to 41.8%, as detailed on Schedule 11.

PMI’s cigarette shipment volume increased by 1.6%, principally due to Algeria, Egypt, the Middle East and Russia, mainly reflecting market share gains, partially offset by Turkey, driven by the significant tax-driven price increases of January, 2010, and the impact of unfavorable inventory movements. Shipment volume of Marlboro was up slightly by 0.2%, mainly reflecting strong growth in North Africa and the Middle East, partially offset by declines in Russia and Turkey.

EEMA Key Market Commentaries

In Russia, PMI’s shipment volume increased by 4.9%, the second consecutive quarter of growth since the first quarter of 2009. Whilst shipment volume of PMI’s premium portfolio was down by 4.9%, primarily due to a decline in Marlboro of 11.9%, this represented the lowest rate of segment decline since the fourth quarter of 2008. In the mid-price segment, shipment volume of Chesterfield was up by 13.3%. In the low price segment, shipment volume of Bond Street, Next and Optima was up by 31.3%, 10.4% and 4.4%, respectively. PMI’s market share of 25.5%, as measured by A.C. Nielsen, was up by 0.2 points. Market share for Parliament, in the above premium segment, was unchanged and up slightly on a year-to-date basis; Marlboro, in the premium segment, was down by 0.3 share points; Chesterfield in the mid-price segment was up by 0.3 share points; and Bond Street in the low price segment was up by 1.3 share points.

In Turkey, the total cigarette market declined by an estimated 16.0%, primarily reflecting trade inventory movements in June 2009 ahead of the July 2009 price increase and the steep January 2010 excise tax increase which, combined, have contributed to a 40% retail price hike of premium-priced Marlboro. PMI’s shipment volume declined by 19.3%. PMI’s market share, as measured by A.C. Nielsen, declined by 2.0 points to 40.8%, due to Parliament, down by 1.5 share points, Marlboro, down by 1.9 share points, and L&M, down by 1.9 share points, partially offset by Lark Recess Blue, up by 4.0 share points. Compared to the first quarter 2010, PMI’s market share was essentially flat.

In Ukraine, PMI’s shipment volume increased by 4.0%, reflecting the favorable impact of trade inventory movements in anticipation of an excise tax-driven price increase on July 1, 2010. PMI’s market share, as measured by A.C. Nielsen, was essentially flat at 35.7%, with share gains for both premium Parliament and mid-price Chesterfield offset by lower share for Marlboro and L&M. PMI’s year-to-date market share was up slightly by 0.1 point to 35.9% compared to the same period in 2009.

 

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ASIA REGION

In Asia, net revenues increased by 35.0% to $2.1 billion, including favorable currency of $213 million. Excluding the impact of currency, net revenues increased by 21.4%, reflecting: favorable volume/mix of $143 million, mainly due to a higher distributor inventory in Japan of approximately 3.4 billion units in anticipation of increased trade and consumer purchases ahead of an announced tax increase, effective October 1, 2010; the favorable impact of the new business combination in the Philippines; and pricing of $38 million, primarily in Australia, Indonesia and Pakistan. Excluding the impact of currency and the favorable impact of the new business combination in the Philippines, net revenues grew by 11.5%.

Operating companies income grew by 36.5% to reach $845 million. Excluding the impact of currency, operating companies income increased by 19.9%, mainly due to the additional distributor inventory in Japan, partly offset by higher manufacturing costs, primarily in Indonesia and Japan. Excluding the impact of currency and the favorable impact of the new business combination in the Philippines, operating companies income grew by 14.7%. Adjusted operating companies income increased by 36.5% as shown in the table below and detailed on Schedule 11.

Asia Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010     2009     Change  

Reported OCI

    $ 845      $ 619      36.5 % 

Asset impairment & exit costs

      0        0     
                  

Adjusted OCI

    $ 845      $ 619      36.5 % 

Adjusted OCI Margin*

      39.8 %      39.4 %    0.4 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 declined by 0.6 percentage points to 38.8%, as detailed on Schedule 11. Excluding currency and the impact of the new business combination in the Philippines, adjusted operating companies income margin was up by 1.1 percentage points to 40.5%, as detailed on Schedule 11.

PMI’s cigarette shipment volume increased by 20.2 billion units or 34.9%, mainly due to: gains in Japan, reflecting the distributor inventory build-up of approximately 3.4 billion units in anticipation of increased trade and consumer purchases ahead of an announced tax increase, effective October 1, 2010; 17.2 billion units from the new business combination in the Philippines; and double-digit growth in Korea, partially offset by a decline in Pakistan, reflecting the impact of multiple excise tax-driven price increases in June 2009, January and June 2010, and a surge in illicit trade. Shipment volume of Marlboro grew by 13.5%, reflecting the aforementioned inventory impact in Japan, growth in the Philippines, and higher share in Indonesia, Japan and Korea.

Asia Key Market Commentaries

In Indonesia, PMI’s shipment volume decreased by 0.3%, and market share was down by 0.3 points to 28.5%, despite growth from Marlboro and the Sampoerna A franchise.

 

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In Japan, the total cigarette market declined by 7.1%. PMI’s shipment volume was up by 20.8%, driven by the aforementioned favorable distributor inventory levels. PMI’s shipment volume is projected to decline in the second half of 2010 to adjust for these high distributor inventory levels, the continued underlying contraction of the total market and the expected unfavorable impact of tax-driven price increases in the fourth quarter of 2010. PMI’s market share of 24.3% was up by 0.3 points, representing the fifth consecutive year-on-year quarterly share gain. Marlboro’s share increased to 10.8%, up by 0.2 points, supported by the February 2010 national roll-out of Marlboro Black Gold, which recorded a 0.2% market share. Market share of Lark was up by 0.3 points to 6.7% and, for the first time since 2007, the Philip Morris brand recorded its first year-on-year share gain of 0.1 point to 2.4%.

In Korea, the total cigarette market was down by 5.3%, partly reflecting competitors’ inventory adjustments from late 2009. PMI’s shipment volume surged 15.9%, driven by market share increases. PMI’s market share reached 16.6%, up by a strong 3.0 points, driven by Marlboro and Parliament, up by 1.2 and 1.5 share points, respectively, and Virginia Slims, up by 0.4 share points.

On February 25, 2010, Philip Morris Philippines Manufacturing Inc. combined with Fortune Tobacco Corporation to form a new company called PMFTC Inc. As a result of this combination, PMI’s shipments were up by over 100% in the second quarter of 2010, and market share was an estimated 92.7%. Excluding the favorable impact of this new business combination of 17.2 billion units, cigarette shipments of PMI brands increased by 13.9%, fueled by double-digit growth of both Marlboro and the Philip Morris brand.

LATIN AMERICA & CANADA REGION

In Latin America & Canada, net revenues increased by 17.6% to $754 million, including favorable currency of $74 million. Excluding the impact of currency, net revenues increased by 6.1%, reflecting favorable pricing of $22 million, primarily in Argentina, Canada and Mexico and favorable volume/mix of $17 million.

Operating companies income increased by over 100.0% to $238 million. Adjusted operating companies income grew by 15.5% as shown in the table below and detailed on Schedule 11.

Latin America & Canada Operating Companies Income ($ Millions)

 

     Second-Quarter  
     2010     2009     Change  

Reported OCI

    $ 238      $ 71      +100.0 % 

Asset impairment & exit costs

      0        0     

Colombian investment and cooperation agreement charge

      0        135     
                  

Adjusted OCI

    $ 238      $ 206      15.5 % 

Adjusted OCI Margin*

      31.6 %      32.1 %    (0.5 ) 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 down by 1.7 percentage points to 30.4%, as detailed on Schedule 11, due primarily to higher manufacturing costs.

PMI’s cigarette shipment volume increased by 0.9%, driven mainly by growth in Canada. Shipment volume of Marlboro declined by 1.8%, mainly due to Argentina, Brazil and Mexico.

 

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Latin America & Canada Key Market Commentaries

In Argentina, whilst PMI’s cigarette shipment volume decreased by 2.0%, market share increased by 1.8 points to a record 74.8%, fueled by Marlboro, up by 0.3 share points to 23.4%, and the Philip Morris brand, up by a robust 1.9 share points to 38.3%.

In Canada, the total tax-paid cigarette market was up by 20.0%, mainly reflecting stronger government enforcement measures to reduce contraband sales. Although PMI’s cigarette shipment volume increased by 18.7%, market share declined slightly by 0.4 points to 33.0%, with gains from premium price Belmont, up by 0.1 point, and low price brands Next and Quebec Classique, up by 3.9 and 1.3 share points, respectively. These were partially offset by mid-price Number 7 and Canadian Classics, and low-price Accord, down by 1.4, 2.0 and 1.2 share points, respectively.

In Mexico, the total cigarette market was down by 1.5%. Although PMI’s cigarette shipment volume was essentially flat, market share increased by 0.9 points to 69.9%, fueled by Delicados, up by 1.0 point to 12.2%, partially offset by Benson & Hedges, down by 0.2 points to 5.6%.

Philip Morris International Inc. Profile

Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 brands, including Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in approximately 160 countries. In 2009, the company held an estimated 15.4% share of the total international cigarette market outside of the U.S., or 26.0% excluding the People’s Republic of China and the U.S. For more information, see www.pmi.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

Philip Morris International Inc. and its tobacco subsidiaries (PMI) are subject to intense price competition; changes in consumer preferences and demand for their products; fluctuations in levels of customer inventories; increases in raw material costs; the effects of foreign economies and local 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; 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 the company’s understanding of applicable law.

 

11

PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended March 31, 2010. 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 June 30,

($ in millions, except per share data)

(Unaudited)

 

     2010    2009    % Change  

Net revenues

    $ 17,383    $ 15,213    14.3 % 

Cost of sales

      2,550      2,185    16.7 % 

Excise taxes on products (1)

      10,322      9,079    13.7 % 
                

Gross profit

      4,511      3,949    14.2 % 

Marketing, administration and research costs

      1,537      1,460   

Asset impairment and exit costs

      —        1   
                

Operating companies income

      2,974      2,488    19.5 % 

Amortization of intangibles

      23      21   

General corporate expenses

      45      38   
                

Operating income

      2,906      2,429    19.6 % 

Interest expense, net

      223      193   
                

Earnings before income taxes

      2,683      2,236    20.0 % 

Provision for income taxes

      641      639    0.3 % 
                

Net earnings

      2,042      1,597    27.9 % 

Net earnings attributable to noncontrolling interests

      60      51   
                

Net earnings attributable to PMI

    $ 1,982    $ 1,546    28.2 % 
                

Per share data:(2)

         

Basic earnings per share

    $ 1.07    $ 0.79    35.4 % 
                

Diluted earnings per share

    $ 1.07    $ 0.79    35.4 % 
                

 

(1)

The segment detail of excise taxes on products sold for the quarters ended June 30, 2010 and 2009 is shown on Schedule 2.

(2)

Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the quarters ended June 30, 2010 and 2009 are shown on Schedule 4, Footnote 1.

Schedule 2

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Selected Financial Data by Business Segment

For the Quarters Ended June 30,

($ in millions)

(Unaudited)

 

          Net Revenues excluding Excise Taxes  
          European
Union		     EEMA     Asia     Latin
America &
Canada		     Total  
2010    Net Revenues (1)    $ 7,260      $ 4,125      $ 3,903      $ 2,095      $ 17,383   
   Excise Taxes on Products      (4,965 )      (2,236 )      (1,780 )      (1,341 )      (10,322 ) 
                                           
   Net Revenues excluding Excise Taxes      2,295        1,889        2,123        754        7,061   
2009    Net Revenues    $ 7,155      $ 3,400      $ 2,947      $ 1,711      $ 15,213   
   Excise Taxes on Products      (4,875 )      (1,760 )      (1,374 )      (1,070 )      (9,079 ) 
                                           
   Net Revenues excluding Excise Taxes      2,280        1,640        1,573        641        6,134   
Variance    Currency      42        90        213        74        419   
   Acquisitions      —          25        156        —          181   
   Operations      (27 )      134        181        39        327   
                                           
   Variance Total      15        249        550        113        927   
   Variance Total (%)      0.7 %      15.2 %      35.0 %      17.6 %      15.1 % 
   Variance excluding Currency      (27 )      159        337        39        508   
   Variance excluding Currency (%)      (1.2 )%      9.7 %      21.4 %      6.1 %      8.3 % 
   Variance excluding Currency & Acquisitions      (27 )      134        181        39        327   
   Variance excluding Currency & Acquisitions (%)      (1.2 )%      8.2 %      11.5 %      6.1 %      5.3 % 

(1)       2010 Currency increased net revenues as follows:

           
   European Union    $ 187           
   EEMA      215           
   Asia      487           
   Latin America & Canada      188           
                   
      $ 1,077           
                   

Schedule 3

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Selected Financial Data by Business Segment

For the Quarters Ended June 30,

($ in millions)

(Unaudited)

 

     Operating Companies Income  
     European
Union		     EEMA     Asia     Latin
America &
Canada		     Total  

2010

    $ 1,105      $ 786      $ 845      $ 238      $ 2,974   

2009

      1,163        635        619        71        2,488   

% Change

      (5.0 )%      23.8 %      36.5 %      100+ %      19.5 % 
Reconciliation:           

For the quarter ended June 30, 2009

    $ 1,163      $ 635      $ 619      $ 71      $ 2,488   

Asset impairment and exit costs - 2009

      1        —          —          —          1   

Colombian investment and cooperation agreement charge - 2009

      —          —          —          135        135   

Acquired businesses

      —          10        32        —          42   

Currency

      (55 )      34        103        31        113   

Operations

      (4 )      107        91        1        195   
                                        

For the quarter ended June 30, 2010

    $ 1,105      $ 786      $ 845      $ 238      $ 2,974   
                                        

Schedule 4

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Net Earnings Attributable to PMI and Diluted Earnings Per Share

For the Quarters Ended June 30,

($ in millions, except per share data)

(Unaudited)

 

     Net Earnings
Attributable
to PMI		     Diluted
E.P.S.		  

2010 Net Earnings Attributable to PMI

    $ 1,982      $ 1.07 (1) 

2009 Net Earnings Attributable to PMI

    $ 1,546      $ 0.79 (1) 

% Change

      28.2 %      35.4 % 
Reconciliation:     

2009 Net Earnings Attributable to PMI

    $ 1,546      $ 0.79 (1) 
Special Items:     

2010 Tax items

      121        0.07   

2009 Colombian investment and cooperation agreement charge

      93        0.04   

Currency

      61        0.03   

Interest

      (20 )      (0.01 ) 

Change in tax rate

      9        —     

Impact of lower shares outstanding and share-based payments

      3        0.06   

Operations

      169        0.09   
                

2010 Net Earnings Attributable to PMI

    $ 1,982      $ 1.07 (1) 
                

 

(1)       Basic and diluted EPS were calculated using the following (in millions):

     
     Q2 2010     Q2 2009  

Net earnings attributable to PMI

    $ 1,982      $ 1,546   

Less distributed and undistributed earnings attributable to share-based payment awards

      9        6   
                

Net earnings for basic and diluted EPS

    $ 1,973      $ 1,540   
                

Weighted-average shares for basic EPS

      1,846        1,955   

Plus incremental shares from assumed conversions:

     

Stock Options

      3        6   
                

Weighted-average shares for diluted EPS

      1,849        1,961   
                

Schedule 5

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Condensed Statements of Earnings

For the Six Months Ended June 30,

($ in millions, except per share data)

(Unaudited)

 

     2010    2009    % Change  

Net revenues

    $ 32,970    $ 28,499    15.7 % 

Cost of sales

      4,922      4,156    18.4 % 

Excise taxes on products (1)

      19,413      16,768    15.8 % 
                

Gross profit

      8,635      7,575    14.0 % 

Marketing, administration and research costs

      2,888      2,716   

Asset impairment and exit costs

      —        2   
                

Operating companies income

      5,747      4,857    18.3 % 

Amortization of intangibles

      43      36   

General corporate expenses

      83      72   
                

Operating income

      5,621      4,749    18.4 % 

Interest expense, net

      446      351   
                

Earnings before income taxes

      5,175      4,398    17.7 % 

Provision for income taxes

      1,379      1,284    7.4 % 
                

Net earnings

      3,796      3,114    21.9 % 

Net earnings attributable to noncontrolling interests

      111      92   
                

Net earnings attributable to PMI

    $ 3,685    $ 3,022    21.9 % 
                

Per share data:(2)

         

Basic earnings per share

    $ 1.97    $ 1.53    28.8 % 
                

Diluted earnings per share

    $ 1.97    $ 1.52    29.6 % 
                

 

(1)

The segment detail of excise taxes on products sold for the six months ended June 30, 2010 and 2009 is shown on Schedule 6.

(2)

Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the six months ended June 30, 2010 and 2009 are shown on Schedule 8, Footnote 1.

Schedule 6

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Selected Financial Data by Business Segment

For the Six Months Ended June 30,

($ in millions)

(Unaudited)

 

          Net Revenues excluding Excise Taxes  
          European
Union		     EEMA     Asia     Latin
America &
Canada		     Total  
2010    Net Revenues (1)    $ 14,008      $ 7,481      $ 7,465      $ 4,016      $ 32,970   
   Excise Taxes on Products      (9,529 )      (3,846 )      (3,469 )      (2,569 )      (19,413 ) 
                                           
   Net Revenues excluding Excise Taxes      4,479        3,635        3,996        1,447        13,557   
2009    Net Revenues    $ 13,205      $ 6,231      $ 5,804      $ 3,259      $ 28,499   
   Excise Taxes on Products      (8,938 )      (3,139 )      (2,641 )      (2,050 )      (16,768 ) 
                                           
   Net Revenues excluding Excise Taxes      4,267        3,092        3,163        1,209        11,731   
Variance    Currency      220        142        385        125        872   
   Acquisitions      3        51        231        —          285   
   Operations      (11 )      350        217        113        669   
                                           
   Variance Total      212        543        833        238        1,826   
   Variance Total (%)      5.0 %      17.6 %      26.3 %      19.7 %      15.6 % 
   Variance excluding Currency      (8 )      401        448        113        954   
   Variance excluding Currency (%)      (0.2 )%      13.0 %      14.2 %      9.3 %      8.1 % 
   Variance excluding Currency & Acquisitions      (11 )      350        217        113        669   
   Variance excluding Currency & Acquisitions (%)      (0.3 )%      11.3 %      6.9 %      9.3 %      5.7 % 

 

(1)       2010 Currency increased net revenues as follows:

           
  

European Union

    $ 756           
  

EEMA

      351           
  

Asia

      940           
  

Latin America & Canada

      311           
                   
      $ 2,358           
                   

Schedule 7

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Selected Financial Data by Business Segment

For the Six Months Ended June 30,

($ in millions)

(Unaudited)

 

     Operating Companies Income  
     European
Union		     EEMA     Asia     Latin
America  &
Canada		     Total  

2010

    $ 2,167      $ 1,556      $ 1,569      $ 455      $ 5,747   

2009

      2,130        1,221        1,280        226        4,857   

% Change

      1.7 %      27.4 %      22.6 %      100+ %      18.3 % 
Reconciliation:           

For the six months ended June 30, 2009

    $ 2,130      $ 1,221      $ 1,280      $ 226      $ 4,857   

Asset impairment and exit costs - 2009

      2        —          —          —          2   

Colombian investment and cooperation agreement charge - 2009

      —          —          —          135        135   

Acquired businesses

      2        19        27        —          48   

Currency

      25        42        184        54        305   

Operations

      8        274        78        40        400   
                                        

For the six months ended June 30, 2010

    $ 2,167      $ 1,556      $ 1,569      $ 455      $ 5,747   
                                        

Schedule 8

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Net Earnings Attributable to PMI and Diluted Earnings Per Share

For the Six Months Ended June 30,

($ in millions, except per share data)

(Unaudited)

 

     Net Earnings
Attributable  to
PMI		     Diluted
E.P.S.		  

2010 Net Earnings Attributable to PMI

    $ 3,685      $ 1.97 (1) 

2009 Net Earnings Attributable to PMI

    $ 3,022      $ 1.52 (1) 

% Change

      21.9 %      29.6 % 
Reconciliation:     

2009 Net Earnings Attributable to PMI

    $ 3,022      $ 1.52 (1) 
Special Items:     

2010 Tax items

      121        0.07   

2009 Asset impairment and exit costs

      1        —     

2009 Colombian investment and cooperation agreement charge

      93        0.04   

Currency

      187        0.09   

Interest

      (61 )      (0.03 ) 

Change in tax rate

      13        0.01   

Impact of lower shares outstanding and share-based payments

      6        0.12   

Operations

      303        0.15   
                

2010 Net Earnings Attributable to PMI

    $ 3,685      $ 1.97 (1) 
                

(1)       Basic and diluted EPS were calculated using the following (in millions):

          

     YTD June 2010     YTD June 2009  

Net earnings attributable to PMI

    $ 3,685      $ 3,022   

Less distributed and undistributed earnings attributable to share-based payment awards

      17        11   
                

Net earnings for basic and diluted EPS

    $ 3,668      $ 3,011   
                

Weighted-average shares for basic EPS

      1,860        1,974   

Plus incremental shares from assumed conversions:

     

Stock Options

      3        6   
                

Weighted-average shares for diluted EPS

      1,863        1,980   
                

Schedule 9

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Condensed Balance Sheets

($ in millions, except ratios)

(Unaudited)

 

     June 30,     December 31,  
     2010     2009  
Assets     

Cash and cash equivalents

    $ 1,584      $ 1,540   

All other current assets

      11,340        13,142   

Property, plant and equipment, net

      6,162        6,390   

Goodwill

      9,790        9,112   

Other intangible assets, net

      3,779        3,546   

Other assets

      669        822   
                

Total assets

    $ 33,324      $ 34,552   
                
Liabilities and Stockholders’ Equity     

Short-term borrowings

    $ 857      $ 1,662   

Current portion of long-term debt

      78        82   

All other current liabilities

      9,054        9,434   

Long-term debt

      14,296        13,672   

Deferred income taxes

      1,953        1,688   

Other long-term liabilities

      1,536        1,869   
                

Total liabilities

      27,774        28,407   

Redeemable noncontrolling interests

      1,173        —     

Total PMI stockholders’ equity

      4,065        5,716   

Noncontrolling interests

      312        429   
                

Total stockholders’ equity

      4,377        6,145   
                

Total liabilities and stockholders’ equity

    $ 33,324      $ 34,552   
                

Total debt

    $ 15,231      $ 15,416   

Total debt to EBITDA

      1.29 (1)      1.42 (1) 

Net debt to EBITDA

      1.15 (1)      1.27 (1) 

 

(1)

For the calculation of Total Debt to EBITDA and Net Debt to EBITDA ratios, refer to Schedule 18.

Schedule 10

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Adjustments for the Impact of Currency and Acquisitions

For the Quarters Ended June 30,

($ in millions)

(Unaudited)

 

2010         2009    % Change in Reported Net  Revenues
excluding Excise Taxes		  
                               Reported Net                                       
                     Reported Net         Revenues                                       
          Reported Net          Revenues         excluding                   Reported Net                Reported  
     Less    Revenues          excluding         Excise Taxes,         Reported    Less    Revenues          Reported     excluding  
Reported Net
Revenues 		   Excise
Taxes		    excluding
Excise Taxes 		   Less
Currency		     Excise Taxes
&  Currency		    Less
Acquisitions		    Currency  &
Acquisitions		         Net
Revenues		    Excise
Taxes		    excluding
Excise Taxes 		   Reported     excluding
Currency		     Currency  &
Acquisitions		  
$ 7,260    $ 4,965    $ 2,295    $ 42      $ 2,253    $ —      $ 2,253    European Union    $ 7,155    $ 4,875    $ 2,280    0.7 %    (1.2 )%    (1.2 )% 
  4,125      2,236      1,889      90        1,799      25      1,774    EEMA      3,400      1,760      1,640    15.2 %    9.7 %    8.2 % 
  3,903      1,780      2,123      213        1,910      156      1,754    Asia      2,947      1,374      1,573    35.0 %    21.4 %    11.5 % 
  2,095      1,341      754      74        680      —        680    Latin America & Canada      1,711      1,070      641    17.6 %    6.1 %    6.1 % 
                                                                               
$ 17,383    $ 10,322    $ 7,061    $ 419      $ 6,642    $ 181    $ 6,461    PMI Total    $ 15,213    $ 9,079    $ 6,134    15.1 %    8.3 %    5.3 % 
                                                                               
2010         2009    % Change in Reported Operating
Companies Income		  
                               Reported                                       
                     Reported         Operating                                       
                     Operating         Companies                                       
Reported                    Companies         Income                   Reported                Reported  
Operating
Companies
Income		              Less
Currency		     Income
excluding
Currency		    Less
Acquisitions		    excluding
Currency &
Acquisitions		                   Operating
Companies
Income		    Reported     Reported
excluding
Currency		     excluding
Currency  &
Acquisitions		  
$ 1,105          $ (55 )    $ 1,160    $ —      $ 1,160    European Union          $ 1,163    (5.0 )%    (0.3 )%    (0.3 )% 
  786            34        752      10      742    EEMA            635    23.8 %    18.4 %    16.9 % 
  845            103        742      32      710    Asia            619    36.5 %    19.9 %    14.7 % 
  238            31        207      —        207    Latin America & Canada            71    100+ %    100+ %    100+ % 
                                                               
$ 2,974          $ 113      $ 2,861    $ 42    $ 2,819    PMI Total          $ 2,488    19.5 %    15.0 %    13.3 % 
                                                               

Schedule 11

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &

Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions

For the Quarters Ended June 30,

($ in millions)

(Unaudited)

 

2010         2009     % Change in Adjusted  Operating
Companies Income		  
                              Adjusted                                        
                    Adjusted         Operating                                        
    Less               Operating         Companies             Less                          
Reported   Asset   Adjusted           Companies         Income         Reported   Asset     Adjusted                 Adjusted  
Operating
Companies
Income		   Impairment /
Exit  Costs &
Other		   Operating
Companies
Income		     Less
Currency		     Income
excluding
Currency		   Less
Acquisitions		     excluding
Currency &
Acquisitions		         Operating
Companies
Income		   Impairment /
Exit  Costs &
Other		     Operating
Companies
Income		     Adjusted     Adjusted
excluding
Currency		     excluding
Currency  &
Acquisitions		  
$ 1,105   $ —     $ 1,105      $ (55 )    $ 1,160   $ —        $ 1,160      European Union   $ 1,163   $ (1 )    $ 1,164      (5.1 )%    (0.3 )%    (0.3 )% 
  786     —       786        34        752     10        742      EEMA     635     —          635      23.8 %    18.4 %    16.9 % 
  845     —       845        103        742     32 (1)      710      Asia     619     —          619      36.5 %    19.9 %    14.7 % 
  238     —       238        31        207     —          207      Latin America & Canada     71     (135 )(2)      206      15.5 %    0.5 %    0.5 % 
                                                                               
$ 2,974   $ —     $ 2,974      $ 113      $ 2,861   $ 42      $ 2,819      PMI Total   $ 2,488   $ (136 )    $ 2,624      13.3 %    9.0 %    7.4 % 
                                                                               
2010         2009     % Points Change  
                              Adjusted                                     Adjusted  
        Adjusted           Adjusted         Operating                               Adjusted     Operating  
Adjusted       Operating           Operating         Companies                               Operating     Companies  
Operating       Companies           Companies   Net Revenues     Income                   Adjusted           Companies     Income  
Companies
Income
excluding
Currency		   Net Revenues
excluding
Excise Taxes
&  Currency(3)		   Income
Margin
excluding
Currency		           Income
excluding
Currency &
Acquisitions		   excluding
Excise Taxes,
Currency &
Acquisitions(3) 		    Margin
excluding
Currency &
Acquisitions		         Adjusted
Operating
Companies
Income		   Net  Revenues
excluding
Excise
Taxes(3) 		    Operating
Companies
Income
Margin		           Income
Margin
excluding
Currency		     Margin
excluding
Currency &
Acquisitions		  
$ 1,160   $ 2,253     51.5 %      $ 1,160   $ 2,253        51.5 %    European Union   $ 1,164   $ 2,280        51.1 %      0.4      0.4   
  752     1,799     41.8 %        742     1,774        41.8 %    EEMA     635     1,640        38.7 %      3.1      3.1   
  742     1,910     38.8 %        710     1,754        40.5 %    Asia     619     1,573        39.4 %      (0.6 )    1.1   
  207     680     30.4 %        207     680        30.4 %    Latin America & Canada     206     641        32.1 %      (1.7 )    (1.7 ) 
                                                       
$ 2,861   $ 6,642     43.1 %      $ 2,819   $ 6,461        43.6 %    PMI Total   $ 2,624   $ 6,134        42.8 %      0.3      0.8   
                                                       

 

(1)

Represents the business combination in the Philippines.

(2)

Represents 2009 Colombian investment and cooperation agreement charge.

(3)

For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 10.

Schedule 12

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency

For the Quarters Ended June 30,

(Unaudited)

 

     2010     2009    % Change  

Reported Diluted EPS

    $ 1.07      $ 0.79    35.4 % 

Adjustments:

        

Colombian investment and cooperation agreement charge

      —          0.04   

Tax items

      (0.07 )      —     
                 

Adjusted Diluted EPS

    $ 1.00      $ 0.83    20.5 % 

Less:

        

Currency Impact

      0.03        
                 

Adjusted Diluted EPS, excluding Currency

    $ 0.97      $ 0.83    16.9 % 
                 

Schedule 13

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency

For the Quarters Ended June 30,

(Unaudited)

 

     2010    2009    % Change  

Reported Diluted EPS

    $ 1.07    $ 0.79    35.4 % 

Less:

         

Currency Impact

      0.03      
                

Reported Diluted EPS, excluding Currency

    $ 1.04    $ 0.79    31.6 % 
                

Schedule 14

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Adjustments for the Impact of Currency and Acquisitions

For the Six Months Ended June 30,

($ in millions)

(Unaudited)

 

2010         2009    % 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
Acquisitions		    Reported Net
Revenues
excluding
Excise Taxes,
Currency &
Acquisitions		         Reported
Net
Revenues		    Less
Excise
Taxes		    Reported Net
Revenues
excluding
Excise Taxes		    Reported     Reported
excluding
Currency		     Reported
excluding
Currency &
Acquisitions		  
$ 14,008    $ 9,529    $ 4,479    $ 220    $ 4,259    $ 3    $ 4,256    European Union    $ 13,205    $ 8,938    $ 4,267    5.0 %    (0.2 )%    (0.3 )% 
  7,481      3,846      3,635      142      3,493      51      3,442    EEMA      6,231      3,139      3,092    17.6 %    13.0 %    11.3 % 
  7,465      3,469      3,996      385      3,611      231      3,380    Asia      5,804      2,641      3,163    26.3 %    14.2 %    6.9 % 
  4,016      2,569      1,447      125      1,322      —        1,322    Latin America & Canada      3,259      2,050      1,209    19.7 %    9.3 %    9.3 % 
                                                                              
$ 32,970    $ 19,413    $ 13,557    $ 872    $ 12,685    $ 285    $ 12,400    PMI Total    $ 28,499    $ 16,768    $ 11,731    15.6 %    8.1 %    5.7 % 
                                                                              
2010         2009    % Change in Reported Operating
Companies Income		  

Reported
Operating
Companies
Income

              Less
Currency		    Reported
Operating
Companies
Income
excluding
Currency		    Less
Acquisitions		    Reported
Operating
Companies
Income
excluding
Currency  &
Acquisitions		                   Reported
Operating
Companies
Income		    Reported     Reported
excluding
Currency		     Reported
excluding
Currency &
Acquisitions		  
$ 2,167          $ 25    $ 2,142    $ 2    $ 2,140    European Union          $ 2,130    1.7 %    0.6 %    0.5 % 
  1,556            42      1,514      19      1,495    EEMA            1,221    27.4 %    24.0 %    22.4 % 
  1,569            184      1,385      27      1,358    Asia            1,280    22.6 %    8.2 %    6.1 % 
  455            54      401      —        401    Latin America & Canada            226    100+ %    77.4 %    77.4 % 
                                                              
$ 5,747          $ 305    $ 5,442    $ 48    $ 5,394    PMI Total          $ 4,857    18.3 %    12.0 %    11.1 % 
                                                              

Schedule 15

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &

Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions

For the Six Months Ended June 30,

($ in millions)

(Unaudited)

 

2010         2009     % Change in Adjusted Operating
Companies Income		  
Reported
Operating
Companies
Income		   Less
Asset
Impairment  /
Exit Costs &
Other		   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 &
Other		     Adjusted
Operating
Companies
Income		     Adjusted     Adjusted
excluding
Currency		     Adjusted
excluding
Currency &
Acquisitions		  
$ 2,167   $ —     $ 2,167      $ 25   $ 2,142   $ 2      $ 2,140      European Union   $ 2,130   $ (2 )    $ 2,132      1.6 %    0.5 %    0.4 % 
  1,556     —       1,556        42     1,514     19        1,495      EEMA     1,221     —          1,221      27.4 %    24.0 %    22.4 % 
  1,569     —       1,569        184     1,385     27 (1)      1,358      Asia     1,280     —          1,280      22.6 %    8.2 %    6.1 % 
  455     —       455        54     401     —          401      Latin America & Canada     226     (135 )(2)      361      26.0 %    11.1 %    11.1 % 
                                                                             
$ 5,747   $ —     $ 5,747      $ 305   $ 5,442   $ 48      $ 5,394      PMI Total   $ 4,857   $ (137 )    $ 4,994      15.1 %    9.0 %    8.0 % 
                                                                             
2010         2009     % Points Change  

Adjusted
Operating
Companies
Income
excluding
Currency

   Net Revenues
excluding
Excise Taxes
& Currency(3)		   Adjusted
Operating
Companies
Income
Margin
excluding
Currency		         Adjusted
Operating
Companies
Income
excluding
Currency  &
Acquisitions		   Net Revenues
excluding
Excise Taxes,
Currency &
Acquisitions(3)		     Adjusted
Operating
Companies
Income
Margin
excluding
Currency  &
Acquisitions		         Adjusted
Operating
Companies
Income		   Net  Revenues
excluding
Excise
Taxes(3)		     Adjusted
Operating
Companies
Income
Margin		           Adjusted
Operating
Companies
Income
Margin
excluding
Currency		     Adjusted
Operating
Companies
Income
Margin
excluding
Currency  &
Acquisitions		  
$ 2,142   $ 4,259     50.3 %      $ 2,140   $ 4,256        50.3 %    European Union   $ 2,132   $ 4,267        50.0 %      0.3      0.3   
  1,514     3,493     43.3 %        1,495     3,442        43.4 %    EEMA     1,221     3,092        39.5 %      3.8      3.9   
  1,385     3,611     38.4 %        1,358     3,380        40.2 %    Asia     1,280     3,163        40.5 %      (2.1 )    (0.3 ) 
  401     1,322     30.3 %        401     1,322        30.3 %    Latin America & Canada     361     1,209        29.9 %      0.4      0.4   
                                                       
$ 5,442   $ 12,685     42.9 %      $ 5,394   $ 12,400        43.5 %    PMI Total   $ 4,994   $ 11,731        42.6 %      0.3      0.9   
                                                       

 

(1)

Represents the business combination in the Philippines.

(2)

Represents 2009 Colombian investment and cooperation agreement charge.

(3)

For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 14.

Schedule 16

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency

For the Six Months Ended June 30,

(Unaudited)

 

     2010     2009    % Change  

Reported Diluted EPS

    $ 1.97      $ 1.52    29.6 % 

Adjustments:

        

Colombian investment and cooperation agreement charge

      —          0.04   

Tax items

      (0.07 )      —     
                 

Adjusted Diluted EPS

    $ 1.90      $ 1.56    21.8 % 

Less:

        

Currency Impact

      0.09        
                 

Adjusted Diluted EPS, excluding Currency

    $ 1.81      $ 1.56    16.0 % 
                 

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 Six Months Ended June 30,

(Unaudited)

 

     2010    2009    % Change  

Reported Diluted EPS

    $ 1.97    $ 1.52    29.6 % 

Less:

         

Currency Impact

      0.09      
                

Reported Diluted EPS, excluding Currency

    $ 1.88    $ 1.52    23.7 % 
                

Schedule 18

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios

($ in millions, except ratios)

(Unaudited)

 

     June 30,
2010		    For the Year Ended
December  31,
2009
     July ~ December
2009		    January ~ June
2010		    12 months
rolling		     

Earnings before income taxes

    $ 4,845    $ 5,175    $ 10,020    $ 9,243

Interest expense, net

      446      446      892      797

Depreciation and amortization

      458      447      905      853
                           

EBITDA

    $ 5,749    $ 6,068    $ 11,817    $ 10,893

 

     June 30,
2010		    December 31,
2009

Short-term borrowings

    $ 857    $ 1,662

Current portion of long-term debt

      78      82

Long-term debt

      14,296      13,672
             

Total Debt

    $ 15,231    $ 15,416

Less: Cash and cash equivalents

      1,584      1,540
             

Net Debt

    $ 13,647    $ 13,876

Ratios

      

Total Debt to EBITDA

      1.29      1.42
             

Net Debt to EBITDA

      1.15      1.27
             

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 Ended June 30,

($ in millions)

(Unaudited)

 

     For the Quarters Ended
June 30,		       
     2010    2009    % Change  

Net cash provided by operating activities(a)

    $ 3,465    $ 3,146    10.1 % 

Less:

         

Capital expenditures

      169      178   
                

Free cash flow

    $ 3,296    $ 2,968    11.1 % 

Less:

         

Currency impact

      108      
                

Free cash flow, excluding currency

    $ 3,188    $ 2,968    7.4 % 
                

 

     
     For the Quarters Ended
June 30,		       
     2010    2009    % Change  

Net cash provided by operating activities(a)

    $ 3,465    $ 3,146    10.1 % 

Less:

         

Currency impact

      122      
                

Net cash provided by operating activities, excluding currency

    $ 3,343    $ 3,146    6.3 % 
                

 

  (a) Operating cash flow.