10-QPeriod: Q1 FY2009

Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 7, 2009For Securities:PM

Summary

Philip Morris International Inc. (PM) reported a decrease in net revenues and net earnings attributable to PMI for the first quarter of 2009 compared to the same period in 2008. Net revenues declined by 7.4% to $13.3 billion, and net earnings attributable to PMI fell by 11.8% to $1.5 billion. This decline was primarily attributed to unfavorable currency exchange rates, which significantly impacted reported revenues and operating income, as well as higher interest expenses due to increased debt levels. Despite the top-line and bottom-line decrease, the company maintained its diluted EPS forecast for the full year, indicating confidence in its operational performance. Despite the overall revenue decline, the company highlighted operational improvements in certain segments, particularly in Asia and Eastern Europe, Middle East & Africa, driven by price increases and volume/mix improvements. The company also completed a significant acquisition in Canada (Rothmans) in late 2008, which contributed to revenue growth in the Latin America & Canada segment, albeit offset by unfavorable currency. The balance sheet shows a decrease in total assets and total liabilities, with a notable increase in cash and cash equivalents. The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Financial Highlights

28 data points
Beta

Revenue

$13.29B

27.3% Gross Margin

Net Income

$1.48B

11.1% Net Margin

EPS (Diluted)

$0.74

Cash & Equivalents

$2.36B

Free Cash Flow

$1.28B

Financial Statements
Beta
Revenue$13.29B
Cost of Revenue$1.97B
Gross Profit$3.63B
Operating Income$2.32B
Net Income$1.48B
EPS (Basic)$0.74
EPS (Diluted)$0.74

Key Highlights

  • 1Net revenues decreased by 7.4% to $13.3 billion in Q1 2009 compared to Q1 2008, primarily driven by unfavorable currency movements (-$697 million excluding excise taxes).
  • 2Net earnings attributable to PMI decreased by 11.8% to $1.5 billion, or $0.74 per diluted share, down from $1.67 billion or $0.79 per diluted share in Q1 2008.
  • 3The company reaffirmed its full-year 2009 diluted EPS forecast of $2.85 to $3.00, excluding currency impacts, projecting a 10%-14% increase.
  • 4Total cigarette volume remained flat year-over-year at 203.4 billion units, with gains in Asia and Latin America & Canada offset by declines in the European Union.
  • 5The balance sheet shows a reduction in total assets from $33.0 billion to $30.7 billion and total liabilities from $25.1 billion to $24.6 billion, while cash and cash equivalents increased significantly from $1.5 billion to $2.4 billion.
  • 6The company repurchased $1.3 billion of its common stock in Q1 2009 as part of its ongoing $13.0 billion share repurchase program.
  • 7Long-term debt increased to $13.1 billion from $11.4 billion, reflecting new debt issuances in March 2009, mainly in Euro and Swiss Franc notes.

Frequently Asked Questions

The primary driver of the decrease in net revenues was unfavorable currency exchange rates, which reduced reported revenues by $697 million (excluding excise taxes). This was exacerbated by lower volume/mix in certain regions, partially offset by net price increases.

Net earnings attributable to PMI decreased by 11.8% to $1.5 billion, and diluted EPS fell by $0.05 to $0.74 per share. This was due to lower operating income, primarily from currency impacts and higher interest expenses, partly offset by operational improvements in some segments.

Philip Morris International reaffirmed its diluted EPS forecast for the full year 2009 to be between $2.85 and $3.00. Excluding currency impacts, the company projects a 10%-14% increase in diluted EPS, excluding potential impacts from acquisitions, asset impairments, and unusual events.

Total assets decreased from $33.0 billion to $30.7 billion, and total liabilities decreased from $25.1 billion to $24.6 billion. Notably, cash and cash equivalents saw a substantial increase, rising from $1.5 billion to $2.4 billion. Long-term debt also increased to $13.1 billion due to recent debt issuances.