10-QPeriod: Q3 FY2012

Philip Morris International Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 2, 2012For Securities:PM

Summary

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 billion, 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 billion 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.

Financial Highlights

52 data points
Beta

Revenue

$19.59B

27.2% Gross Margin

Net Income

$2.23B

11.4% Net Margin

EPS (Diluted)

$1.32

Total Assets

$38.31B

Cash & Equivalents

$4.82B

Free Cash Flow

$2.15B

Financial Statements
Beta
Revenue$19.59B
Cost of Revenue$2.58B
Gross Profit$5.34B
Operating Income$3.62B
Net Income$2.23B
EPS (Basic)$1.32
EPS (Diluted)$1.32
Shares Outstanding (Basic)1.68B
Shares Outstanding (Diluted)1.68B

Key Highlights

  • 1Net 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.
  • 2Net 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.
  • 3Operating 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.
  • 4The company repurchased $4.5 billion of its common stock during the first nine months of 2012, demonstrating a commitment to returning capital to shareholders.
  • 5PMI 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.
  • 6Segment 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.
  • 7The company continues to invest in future growth, including capital expenditures for productivity enhancements and new product development, alongside a significant share repurchase program.

Frequently Asked Questions

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.

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.

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.

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.