10-QPeriod: Q1 FY2010

Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:PM

Summary

Philip Morris International Inc. (PM) reported strong financial results for the first quarter of 2010, with net earnings attributable to PMI increasing by 15.4% to $1.7 billion compared to the same period in 2009. Diluted Earnings Per Share (EPS) also saw a significant rise of 21.6% to $0.90. This performance was driven by a combination of net price increases, favorable currency movements, and strategic acquisitions, notably the business combination in the Philippines. Despite a slight decrease in overall cigarette shipment volume excluding acquisitions (-2.3%), the company managed to grow revenue and operating income. The company reaffirmed its 2010 full-year diluted EPS forecast of $3.75 to $3.85, with a cautious outlook due to global economic uncertainties and currency volatility. Key financial highlights include robust net revenue growth of 17.3% to $15.6 billion. Operating income increased by 17.0% to $2.7 billion. The company continued its aggressive share repurchase program, completing its $13 billion, two-year program and initiating a new $12 billion program. The company maintains a strong liquidity position with substantial committed credit facilities. Investors should note the company's continued reliance on price increases and favorable currency exchange rates to drive earnings growth, alongside ongoing efforts to manage costs and integrate acquisitions. The company's significant investments in share repurchases and dividends underscore a commitment to returning capital to shareholders.

Financial Highlights

50 data points
Beta

Revenue

$15.59B

26.5% Gross Margin

Net Income

$1.70B

10.9% Net Margin

EPS (Diluted)

$0.90

Total Assets

$34.17B

Cash & Equivalents

$850.00M

Free Cash Flow

$1.82B

Financial Statements
Beta
Revenue$15.59B
Cost of Revenue$2.37B
Gross Profit$4.12B
Operating Income$2.71B
Net Income$1.70B
EPS (Basic)$0.90
EPS (Diluted)$0.90
Shares Outstanding (Basic)1.87B
Shares Outstanding (Diluted)1.88B

Key Highlights

  • 1Net earnings attributable to PMI increased by 15.4% to $1.7 billion for Q1 2010 compared to Q1 2009.
  • 2Diluted EPS rose by 21.6% to $0.90 for Q1 2010.
  • 3Net revenues grew by 17.3% to $15.6 billion, driven by price increases, favorable currency, and acquisitions.
  • 4Operating income increased by 17.0% to $2.7 billion.
  • 5Total cigarette volume increased by 0.7% to 204.7 billion units, primarily due to growth in Asia and Latin America & Canada, and the Philippines business combination. Excluding acquisitions, volume decreased by 2.3%.
  • 6The company completed its $13 billion share repurchase program and initiated a new $12 billion program.
  • 7PMI reaffirmed its 2010 full-year diluted EPS forecast of $3.75 to $3.85.

Frequently Asked Questions

The increase in net earnings was primarily driven by higher operating income, which benefited from net price increases, favorable currency movements, and the impact of acquisitions. Higher operating income was partially offset by increased interest expense.

Total cigarette shipment volume increased by 0.7% to 204.7 billion units. This growth was mainly attributed to gains in Asia (driven by Indonesia and Korea) and Latin America & Canada, as well as the new business combination in the Philippines. However, excluding acquisitions, cigarette shipment volume declined by 2.3%, primarily due to decreases in the European Union and Eastern Europe, Middle East & Africa regions.

Philip Morris International reaffirmed its forecast for full-year 2010 reported diluted EPS to be in the range of $3.75 to $3.85. The company expressed a cautious outlook due to the fragile global economic recovery, its geographic disparity, and uncertain impacts on currency volatility. Excluding currency impacts, reported diluted EPS are projected to increase by approximately 10% to 13%.

A significant event was the business combination in the Philippines, combining Philip Morris Philippines Manufacturing Inc. with Fortune Tobacco Corporation to form PMFTC Inc. The company also continued its share repurchase program, completing its $13 billion, two-year program and initiating a new $12 billion program over three years. Additionally, PMI entered into a new $2.5 billion revolving credit facility.