01—Abstract
Summary
Summary of the 10-K filed February 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International (PM) in its 2013 10-K filing for the fiscal year ended December 30, 2012, outlines its global operations as a leading manufacturer and seller of cigarettes and other tobacco products outside the United States.
The company highlights its strong market positions in over 180 markets, driven by its flagship brand, Marlboro, which accounted for approximately 33%a of its 2012 shipment volume. PM operates across four key geographic segments: European Union (EU), Eastern Europe, Middle East & Africa (EEMA), Asia, and Latin America & Canada. The company is actively managing a portfolio of international and local brands, aiming to benefit from the trend of international brands expanding their share in numerous markets.
Significant attention is given to the evolving business environment, including increasing governmental regulations, substantial tax increases on tobacco products, and ongoing litigation. PM is proactively addressing these challenges through strategic marketing, diversified distribution channels, and a focus on innovation, particularly in developing 'next generation products' (NGPs) aimed at reducing the risks associated with smoking. The company's financial health is supported by strong brand equity and a global operational footprint, though it remains susceptible to currency fluctuations and the inherent risks of the tobacco industry.
02—Key points
Key Highlights
- Philip Morris International (PM) operates in over 180 markets globally, with a strong presence and market share in many regions.
- Marlboro remains the company's leading brand, contributing approximately 33% of total shipment volume in 2012, underscoring its premium brand strength.
- The company is structured into four geographic operating segments: EU, EEMA, Asia, and Latin America & Canada, each contributing to overall revenue and operating income.
- PM is investing in 'next generation products' (NGPs) that aim to reduce the risk of smoking-related diseases, indicating a strategic shift towards potentially less harmful alternatives.
- The company faces significant risks, including increasing tobacco taxes, stringent governmental regulations (such as those influenced by the WHO's FCTC), ongoing litigation, and currency exchange rate volatility.
- PMI's total cigarette shipments increased by 1.3% in 2012, indicating modest volume growth in the international market, excluding the US.
- The company maintains a robust intellectual property portfolio, including over 3,400 granted patents worldwide, crucial for protecting its brands and innovations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Philip Morris International Inc. kept $0.11.
- Revenue$77.39B100.0%
- Cost of revenue−$56.39B72.9%
- Gross profit$21.00B27.1%
- Operating costs−$7.14B9.2%
- Operating income$13.86B17.9%
- Interest, other & tax−$5.06B6.5%
- Net income$8.80B11.4%
Where FY2012 revenue went
$77.39B- Other operating costs: $52.74B, 68% of revenue
- Cost of revenue: $10.37B, 13% of revenue
- Net income: $8.80B, 11% of revenue
- R&D: $415.0M, 0.5% of revenue
- Interest, other & tax: $5.06B, 6.5% of revenue
Kept 11% as net incomeR&D $415.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 22, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $77.39B$76.35B | +1.4% |
| Cost of Revenue | $10.37B$10.68B | −2.9% |
| Gross Profit | $21.00B$20.42B | +2.9% |
| R&D Expenses | $415.00M$413.00M | +0.5% |
| Operating Income | $13.86B$13.34B | +3.9% |
| Interest Expense | $1.01B$934.00M | +7.8% |
| Net Income | $8.80B$8.59B | +2.4% |
| EPS (Basic) | $5.17$4.85 | +6.6% |
| EPS (Diluted) | $5.17$4.85 | +6.6% |
| Shares Outstanding (Basic) | 1.69B1.76B | −3.9% |
| Shares Outstanding (Diluted) | 1.69B1.76B | −4.0% |
05—Questions
Frequently Asked Questions
What is Philip Morris International's (PM) core business and geographic focus?
Philip Morris International (PM) is primarily engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside the United States. Its operations span across more than 180 markets globally, with its business divided into four key geographic segments: the European Union (EU), Eastern Europe, Middle East & Africa (EEMA), Asia, and Latin America & Canada.
What are the main risks and challenges highlighted by PM in this filing?
PM faces several significant risks, including increasing government regulations and excise taxes on tobacco products globally, potential litigation, intense competition, currency exchange rate fluctuations affecting its international earnings, and the potential for changes in consumer preferences. The company also notes the risks associated with the development and commercialization of new reduced-risk products.
What is PM's strategy regarding product innovation and future growth?
PM is strategically focused on developing and commercializing 'next generation products' (NGPs) that have the potential to reduce the risk of smoking-related diseases compared to conventional cigarettes. These products are based on platforms that do not involve combustion. The company is also committed to supporting its conventional product business through product enhancements and innovative new products, while managing regulatory complexities.
How does PM manage its global brand portfolio?
PM manages a diverse portfolio of international and local brands, led by Marlboro, its best-selling international cigarette. The company aims to leverage the growing market share of its international brands while also maintaining strong positions with important local brands in specific markets. This diversified brand strategy allows PM to cater to different consumer segments and market dynamics across its global operations.
06—Continue