01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its annual results for the fiscal year ended December 31, 2010, in its Form 10-K filed on February 25, 2011.
The company, a leading global tobacco products manufacturer operating outside the United States, highlighted a 4.1%a increase in total cigarette shipments to 899.9 billion units, reaching a market share of approximately 16.0% internationally (excluding China). This growth was driven by strong performance in key markets and strategic acquisitions, including the combination of its Philippine operations with Fortune Tobacco Corporation and the acquisition of Swedish Match South Africa. The company also emphasized its extensive brand portfolio, led by Marlboro, and its diversified geographic presence across four reporting segments: European Union, Eastern Europe, Middle East & Africa (EEMA), Asia, and Latin America & Canada.
Despite a generally challenging regulatory environment and ongoing litigation, PM demonstrated resilience in its market position and continued to invest in brand building and operational efficiencies. The report indicates a focus on developing potentially reduced-risk tobacco products and managing significant risks associated with tax increases, evolving regulations, currency fluctuations, and competitive pressures. The company maintained a strong liquidity position, supported by its financial performance and share repurchase programs, underscoring its commitment to shareholder value while navigating the complexities of the global tobacco industry.
02—Key points
Key Highlights
- Total cigarette shipments increased by 4.1% to 899.9 billion units in 2010.
- Philip Morris International maintained a strong international market share of approximately 16.0% (excluding China).
- Strategic business developments included the combination of Philippine operations and the acquisition of Swedish Match South Africa.
- The company operates across four key geographic segments: EU, EEMA, Asia, and Latin America & Canada, with EU and EEMA being the largest contributors to operating income.
- Marlboro remains the leading international cigarette brand, accounting for approximately 33% of total shipment volume.
- The company is actively engaged in research and development for potentially reduced-risk tobacco products.
- Philip Morris International had a robust share repurchase program in place, with $9.05 billion remaining authorized as of December 31, 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Philip Morris International Inc. kept $0.11.
- Revenue$67.71B100.0%
- Cost of revenue−$50.22B74.2%
- Gross profit$17.50B25.8%
- Operating costs−$6.29B9.3%
- Operating income$11.20B16.5%
- Interest, other & tax−$3.94B5.8%
- Net income$7.26B10.7%
Where FY2010 revenue went
$67.71B- Other operating costs: $46.41B, 69% of revenue
- Cost of revenue: $9.71B, 14% of revenue
- Net income: $7.26B, 11% of revenue
- R&D: $391.0M, 0.6% of revenue
- Interest, other & tax: $3.94B, 5.8% of revenue
Kept 11% as net incomeR&D $391.0M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $67.71B$62.08B | +9.1% |
| Cost of Revenue | $9.71B$9.02B | +7.7% |
| Gross Profit | $17.50B$16.01B | +9.3% |
| R&D Expenses | $391.00M$335.00M | +16.7% |
| Operating Income | $11.20B$10.04B | +11.6% |
| Interest Expense | $974.00M$905.00M | +7.6% |
| Net Income | $7.26B$6.34B | +14.5% |
| EPS (Basic) | $3.93$3.25 | +20.9% |
| EPS (Diluted) | $3.92$3.24 | +21.0% |
| Shares Outstanding (Basic) | 1.84B1.94B | −5.4% |
| Shares Outstanding (Diluted) | 1.84B1.95B | −5.5% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of Philip Morris International in 2010?
The company reported a 4.1% increase in total cigarette shipments to 899.9 billion units in 2010, solidifying its market position internationally. While the filing does not detail specific revenue or profit figures directly in this section, it highlights segment performance and strategic growth initiatives, indicating a focus on volume growth and market share.
What are the primary risks faced by Philip Morris International as outlined in this report?
Key risks include significant increases in cigarette taxes, stringent government regulations aimed at reducing tobacco use (driven by the WHO's Framework Convention on Tobacco Control), ongoing litigation related to smoking and health, intense competition, currency exchange rate fluctuations impacting reported results, and potential changes in consumer preferences due to economic downturns. The company also faces risks related to counterfeiting and contraband.
How does Philip Morris International manage its international operations and geographic exposure?
The company operates through four distinct geographic segments: European Union (EU), Eastern Europe, Middle East & Africa (EEMA), Asia, and Latin America & Canada. This segmentation allows for tailored strategies and financial reporting. The company also employs various distribution models (Direct Sales, Independent Distributors, Exclusive Zonified Distribution, Wholesalers) to ensure product availability across diverse markets.
What is the company's strategy regarding product innovation and potential future products?
Philip Morris International is investing in research and development focused on understanding the mechanisms of tobacco-related diseases and developing products with the potential for reduced risk. This includes research into smoke generation at lower temperatures and biotechnology. However, the success of these products depends on regulatory approval and consumer acceptance, which remain significant uncertainties.
06—Continue