01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) for the fiscal year ended December 31, 2009, reported strong performance in markets outside the United States, driven by its premium brand portfolio led by Marlboro.
The company's strategy focused on selective acquisitions to strengthen its brand portfolio and geographic reach. Significant acquisitions in 2009 included Swedish Match South Africa and the agreement to purchase Protabaco Ltda. in Colombia. Despite facing increasing regulatory scrutiny and excise taxes globally, PM maintained a dominant market share in many regions, demonstrating resilience in its core business.
Financially, PM continued to emphasize shareholder returns through its share repurchase program, authorizing a new $12 billiona program to follow its existing $13 billion program. The company operates across four key geographic segments: European Union, Eastern Europe, Middle East and Africa (EEMA), Asia, and Latin America & Canada, with the EU and EEMA regions contributing the largest portions of operating companies income. The report also details ongoing litigation, primarily related to tobacco products, though the company notes historical success in defending against such claims.
02—Key points
Key Highlights
- Philip Morris International (PM) operates in approximately 160 countries outside the U.S., with a strong portfolio of international and local brands, led by Marlboro, which constituted 35% of total 2009 shipment volume.
- The company completed strategic acquisitions in 2009, including Swedish Match South Africa and Petterøes tobacco business, and entered into an agreement to acquire Productora Tabacalera de Colombia, indicating an ongoing strategy of growth through acquisitions.
- PM maintained a significant share of the international cigarette market, estimated at 15.4% (or 26.0% excluding China), demonstrating its competitive strength in a mature and regulated industry.
- The company continued its commitment to shareholder returns with a robust share repurchase program, announcing a new $12 billion program to commence in May 2010.
- Operating income contribution by segment shows the EU as the largest contributor (43.9% in 2009), followed by EEMA (25.9%), Asia (23.7%), and Latin America & Canada (6.5%).
- PMI's R&D efforts are focused on understanding smoking-related diseases and developing potentially reduced-risk products, alongside support for conventional products and exploration of alternative tobacco uses.
- The company faces significant risks, including increasing excise taxes, stringent government regulations, ongoing litigation, currency fluctuations, and competition, yet has historically managed these challenges effectively.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Philip Morris International Inc. kept $0.10.
- Revenue$62.08B100.0%
- Cost of revenue−$46.07B74.2%
- Gross profit$16.01B25.8%
- Operating costs−$5.97B9.6%
- Operating income$10.04B16.2%
- Interest, other & tax−$3.70B6.0%
- Net income$6.34B10.2%
Where FY2009 revenue went
$62.08B- Other operating costs: $42.68B, 69% of revenue
- Cost of revenue: $9.02B, 15% of revenue
- Net income: $6.34B, 10% of revenue
- R&D: $335.0M, 0.5% of revenue
- Interest, other & tax: $3.70B, 6.0% of revenue
Kept 10% as net incomeR&D $335.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $62.08B$63.64B | −2.5% |
| Cost of Revenue | $9.02B$9.33B | −3.3% |
| Gross Profit | $16.01B$16.38B | −2.2% |
| R&D Expenses | $335.00M$334.00M | +0.3% |
| Operating Income | $10.04B$10.25B | −2.0% |
| Interest Expense | $905.00M$528.00M | +71.4% |
| Net Income | $6.34B$6.89B | −8.0% |
| EPS (Basic) | $3.25$3.32 | −2.1% |
| EPS (Diluted) | $3.24$3.31 | −2.1% |
| Shares Outstanding (Basic) | 1.94B2.07B | −6.0% |
| Shares Outstanding (Diluted) | 1.95B2.08B | −6.1% |
05—Questions
Frequently Asked Questions
What is Philip Morris International's (PM) primary business and market focus?
Philip Morris International Inc. (PM) is engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Its operations span approximately 160 countries, with a strong emphasis on its international brand portfolio, led by Marlboro, and a strategy of expanding its geographic reach and brand portfolio through selective acquisitions.
What were the key strategic initiatives and acquisitions undertaken by PM in 2009?
In 2009, PM focused on strategic acquisitions to strengthen its market position. Key transactions included the acquisition of Swedish Match South Africa, the acquisition of the Petterøes tobacco business, and an agreement to purchase Productora Tabacalera de Colombia, Ltda. These moves highlight the company's strategy of inorganic growth and portfolio enhancement.
What is the company's approach to managing regulatory and legal challenges?
PM operates in a highly regulated industry and faces significant government actions aimed at reducing tobacco use, including substantial excise tax increases and marketing restrictions. The company also faces ongoing litigation related to tobacco products. PM's strategy involves rigorous compliance, engagement with regulators, and a strong defense in legal proceedings, noting a history of success in defending tobacco-related litigation.
How does PM return value to shareholders?
Philip Morris International prioritizes returning value to shareholders through substantial share repurchase programs. The company had an active $13 billion program nearing completion and announced a new $12 billion repurchase program to commence thereafter, demonstrating a consistent commitment to capital return.
06—Continue