01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its 2011 fiscal year results, highlighting continued global market presence and strategic growth initiatives.
The company operates in approximately 180 countries, with its premium brand, Marlboro, accounting for a significant portion of its total shipment volume. PM emphasized its market leadership and its efforts to adapt to evolving regulatory landscapes and consumer preferences. The company's diversified geographic segments, including the EU, EEMA, Asia, and Latin America & Canada, contribute to its global revenue streams, with the Asia segment showing notable growth in its contribution to operating income.
PM also detailed its ongoing efforts in research and development, particularly in exploring innovative Next Generation Products (NGPs) with the potential for reduced risk, alongside continued investment in conventional product enhancements. The company remains focused on its distribution and sales strategies, tailored to each market's characteristics, and emphasizes strong relationships with trade partners.
Key financial highlights and operational strategies are further detailed in the accompanying Management's Discussion and Analysis. The report also outlines various risk factors, including regulatory changes, litigation, currency fluctuations, and competition, which are critical considerations for investors.
02—Key points
Key Highlights
- Philip Morris International Inc. (PM) operates in approximately 180 countries, holding leading market share positions in many.
- Marlboro, the company's flagship brand, accounted for approximately 33% of total shipment volume in 2011.
- The company made strategic acquisitions in 2011, including a cigarette business in Jordan and a cigar business in Australia and New Zealand.
- PMI's reported share of the international cigarette market was approximately 16.0% in 2011.
- The Asia segment showed significant growth, increasing its contribution to operating companies income to 35.5% in 2011 from 26.6% in 2010.
- Research and development efforts are focused on innovative Next Generation Products (NGPs) with potential for reduced risk, alongside conventional product enhancements.
- The company is actively engaged in managing legal proceedings, with a history of success in defending tobacco-related litigation, though significant claims remain.
- PMI has a robust share repurchase program, with approximately $3.65 billion remaining under its $12 billion authorization as of December 31, 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Philip Morris International Inc. kept $0.11.
- Revenue$76.35B100.0%
- Cost of revenue−$55.93B73.3%
- Gross profit$20.42B26.7%
- Operating costs−$7.08B9.3%
- Operating income$13.34B17.5%
- Interest, other & tax−$4.75B6.2%
- Net income$8.59B11.3%
Where FY2011 revenue went
$76.35B- Other operating costs: $51.91B, 68% of revenue
- Cost of revenue: $10.68B, 14% of revenue
- Net income: $8.59B, 11% of revenue
- R&D: $413.0M, 0.5% of revenue
- Interest, other & tax: $4.75B, 6.2% of revenue
Kept 11% as net incomeR&D $413.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $76.35B$67.71B | +12.7% |
| Cost of Revenue | $10.68B$9.71B | +9.9% |
| Gross Profit | $20.42B$17.50B | +16.7% |
| R&D Expenses | $413.00M$391.00M | +5.6% |
| Operating Income | $13.34B$11.20B | +19.1% |
| Interest Expense | $934.00M$974.00M | −4.1% |
| Net Income | $8.59B$7.26B | +18.3% |
| EPS (Basic) | $4.85$3.93 | +23.4% |
| EPS (Diluted) | $4.85$3.92 | +23.7% |
| Shares Outstanding (Basic) | 1.76B1.84B | −4.2% |
| Shares Outstanding (Diluted) | 1.76B1.84B | −4.3% |
05—Questions
Frequently Asked Questions
What were the key drivers of Philip Morris International's performance in 2011?
In 2011, Philip Morris International's performance was driven by its strong brand portfolio, particularly Marlboro, its extensive international market presence, and strategic acquisitions and business arrangements in key regions. Growth in the Asia segment was a significant contributor to the company's overall results, alongside continued focus on operational efficiency and product innovation.
What are the main risks facing Philip Morris International, as highlighted in the 10-K?
The primary risks identified include substantial and increasing cigarette taxes globally, significant governmental actions and regulatory requirements aimed at reducing tobacco use (such as restrictions on marketing, packaging, and smoking in public places), ongoing litigation related to tobacco use and health effects, intense competition, currency exchange rate fluctuations, and the potential for adverse outcomes in governmental investigations. The company also notes the risk associated with developing and gaining regulatory approval for Next Generation Products.
How is Philip Morris International addressing the development of 'reduced-risk' products?
Philip Morris International is investing in research and development for innovative 'Next Generation Products' (NGPs) that have the potential to reduce the risk of smoking-related diseases compared to conventional cigarettes. They are employing rigorous scientific methodologies to evaluate these products and are seeking regulatory approval for marketing claims of reduced risk, though they acknowledge uncertainty regarding commercial viability and regulatory acceptance.
What is the company's strategy regarding share repurchases?
Philip Morris International has an active share repurchase program. As of December 31, 2011, it had approximately $3.65 billion remaining under its $12 billion authorization, which commenced in May 2010 following the completion of a previous $13 billion program. This demonstrates a commitment to returning capital to shareholders.
06—Continue