10-QPeriod: Q3 FY2011

Philip Morris International Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 3, 2011For Securities:PM

Summary

Philip Morris International Inc. (PM) reported strong financial performance for the nine months and third quarter ended September 30, 2011. Net revenues grew significantly year-over-year, driven by price increases, favorable currency movements, and volume/mix improvements across its key segments, particularly in Asia and Eastern Europe, Middle East & Africa. The company also benefited from increased cigarette shipments, especially in Asia, partly due to competitor product shortages in Japan following the March 2011 earthquake and tsunami. Diluted Earnings Per Share (EPS) saw substantial growth, reflecting the robust top-line performance and ongoing share repurchase programs. The company narrowed its full-year EPS forecast, indicating continued confidence in its operational execution and market position. While facing ongoing regulatory pressures and tax increases common in the tobacco industry, PM demonstrated resilience through strategic pricing and effective market management. Significant share repurchases and dividend payments underscore a commitment to returning value to shareholders.

Financial Highlights

52 data points
Beta

Revenue

$20.71B

26.6% Gross Margin

Net Income

$2.38B

11.5% Net Margin

EPS (Diluted)

$1.35

Total Assets

$36.22B

Cash & Equivalents

$3.39B

Free Cash Flow

$2.83B

Financial Statements
Beta
Revenue$20.71B
Cost of Revenue$2.85B
Gross Profit$5.51B
Operating Income$3.68B
Net Income$2.38B
EPS (Basic)$1.35
EPS (Diluted)$1.35
Shares Outstanding (Basic)1.75B
Shares Outstanding (Diluted)1.75B

Key Highlights

  • 1Net revenues increased by 15.2% for the nine months and 22.3% for the third quarter of 2011 compared to the prior year periods.
  • 2Diluted EPS grew by 27.0% for the nine months and 36.4% for the third quarter of 2011 compared to the prior year periods.
  • 3Cigarette shipment volume increased by 2.0% for the nine months and 4.5% for the third quarter, driven by growth in Asia and EEMA.
  • 4The company narrowed its 2011 full-year reported diluted EPS forecast to a range of $4.75 to $4.80.
  • 5Share repurchases continued actively, with $4.4 billion and $1.4 billion spent in the nine months and third quarter, respectively.
  • 6Dividend payments increased, reflecting a higher quarterly dividend rate and a commitment to shareholder returns.
  • 7The company's effective income tax rate increased to 29.1% for the nine months and 29.4% for the third quarter, primarily due to the favorable impact of special tax items in the prior year.

Frequently Asked Questions

The primary drivers of the increase in net revenues were price increases, favorable currency movements, and positive volume/mix impacts across all major geographic segments, particularly in Asia and Eastern Europe, Middle East & Africa. Favorable currency movements were notable for currencies such as the Australian dollar, Euro, Japanese yen, and Russian ruble.

The company's share repurchase programs had a significant favorable impact on EPS by reducing the weighted-average number of shares outstanding. This contributed to the substantial year-over-year growth in both diluted and basic EPS.

Philip Morris International narrowed its forecast for full-year 2011 reported diluted EPS to a range of $4.75 to $4.80, representing an approximate 21% to 22.5% increase compared to 2010. This updated guidance reflects confidence in the company's operational performance and market position.

The company acknowledges ongoing significant regulatory and tax pressures common in the tobacco industry. These include proposed and enacted tobacco legislation, excise tax increases, and other governmental actions aimed at reducing tobacco consumption. PM expects these factors to continue to influence the market and its operations, but has demonstrated resilience through strategic pricing and effective market management.