01—Abstract
Summary
Summary of the 10-Q filed November 2, 2012. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its third-quarter 2012 financial results, showcasing resilience and strategic progress amidst a challenging global economic environment.
For the nine months ended September 30, 2012, the company achieved Net Earnings attributable to PMI of $6.7 billiona, resulting in a diluted EPS of $3.92, a 4.3% increase compared to the prior year. This growth, however, was partially impacted by unfavorable currency movements, which reduced diluted EPS by $0.19. The company continued its focus on strategic initiatives, including strong pricing actions across its segments, particularly in the Eastern Europe, Middle East & Africa (EEMA) and Asia regions, which helped offset volume declines in some areas and unfavorable currency impacts.
Shareholder returns remained a priority, with the company repurchasing $4.5 billionb in common stock during the first nine months and increasing its quarterly dividend. Management also provided an updated full-year 2012 diluted EPS forecast of $5.12 to $5.18, indicating expected growth despite ongoing market headwinds.
02—Key points
Key Highlights
- Net earnings attributable to PMI for the nine months ended September 30, 2012, were $6.7 billion, leading to a diluted EPS of $3.92, an increase of 4.3% year-over-year.
- Net revenues for the nine months were $57.7 billion, a slight increase of 0.3% compared to the prior year, driven by price increases and volume/mix, partially offset by unfavorable currency impacts.
- Operating income for the nine months increased by 2.3% to $10.6 billion, primarily due to higher pricing and favorable currency effects on cost of sales, which more than offset increased marketing costs and unfavorable currency translation on revenue.
- The company repurchased $4.5 billion of its common stock during the first nine months of 2012, demonstrating a commitment to returning capital to shareholders.
- PMI provided an updated full-year 2012 diluted EPS forecast of $5.12 to $5.18, projecting growth over the prior year's $4.85, excluding certain adjustments.
- Segment performance showed varied results, with EEMA and Asia segments demonstrating strong revenue growth driven by pricing and volume/mix, while the European Union segment experienced declines due to unfavorable currency and economic conditions.
- The company continues to invest in future growth, including capital expenditures for productivity enhancements and new product development, alongside a significant share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, Philip Morris International Inc. kept $0.11.
- Revenue$19.59B100.0%
- Cost of revenue−$14.26B72.8%
- Gross profit$5.34B27.2%
- Operating costs−$1.71B8.7%
- Operating income$3.62B18.5%
- Interest, other & tax−$1.40B7.1%
- Net income$2.23B11.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed November 2, 2012Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $19.59B$20.71B | −5.4% |
| Cost of Revenue | $2.58B$2.85B | −9.2% |
| Gross Profit | $5.34B$5.51B | −3.2% |
| Operating Income | $3.62B$3.68B | −1.5% |
| Net Income | $2.23B$2.38B | −6.3% |
| EPS (Basic) | $1.32$1.35 | −2.2% |
| EPS (Diluted) | $1.32$1.35 | −2.2% |
| Shares Outstanding (Basic) | 1.68B1.75B | −3.8% |
| Shares Outstanding (Diluted) | 1.68B1.75B | −3.8% |
05—Questions
Frequently Asked Questions
What was Philip Morris International's net revenue and earnings performance for the nine months ended September 30, 2012?
For the nine months ended September 30, 2012, Philip Morris International reported net revenues of $57.7 billion, a modest increase of 0.3% from the same period in 2011. Net earnings attributable to PMI were $6.7 billion, remaining flat compared to the prior year. Diluted earnings per share (EPS) were $3.92, representing a 4.3% increase year-over-year, although this was partially impacted by unfavorable currency movements.
How did currency fluctuations affect Philip Morris International's financial results?
Currency exchange rate fluctuations had a notable impact on PMI's results. For the nine months ended September 30, 2012, unfavorable currency movements decreased net revenues by $4.2 billion and operating income by $496 million. The unfavorable currency impact reduced diluted EPS by $0.19 for the nine-month period and by $0.07 for the third quarter.
What is the company's outlook for the full-year 2012?
Philip Morris International updated its full-year 2012 diluted EPS forecast to a range of $5.12 to $5.18. This guidance projected a growth of approximately 10.5% to 11.5% compared to the $4.85 reported in 2011, excluding certain incremental adjustments. The company expects to achieve its mid-to-long-term organic volume growth target of 1% for the full year.
What significant expenses did the company incur during the period, and how did they impact earnings?
During the nine months ended September 30, 2012, PMI recorded pre-tax asset impairment and exit costs of $50 million ($29 million after tax and noncontrolling interests), which translated to a $0.02 per share impact on diluted EPS. For the third quarter of 2012, these costs were $34 million ($21 million after tax and noncontrolling interests), or $0.01 per share. Additionally, an unfavorable income tax provision of $79 million related to the conclusion of an IRS examination of prior years' consolidated tax returns negatively impacted diluted EPS by $0.05 for both the nine-month and three-month periods.
06—Continue