Regulatory News:
Second-Quarter 2014
- Reported diluted earnings per share of
$1.17, down by $0.13 or 10.0% versus $1.30 in 2013
- Excluding unfavorable currency of
$0.15, reported diluted earnings per share up by $0.02 or 1.5%
versus $1.30 in 2013 as detailed in the attached Schedule 13
- Adjusted diluted earnings per share of
$1.41, up by $0.11 or 8.5% versus $1.30 in 2013
- Excluding unfavorable currency of
$0.15, adjusted diluted earnings per share up by $0.26 or 20.0%
versus $1.30 in 2013 as detailed in the attached Schedule 12
- Cigarette shipment volume of 222.8
billion units, down by 2.7%
- Reported net revenues, excluding excise
taxes, of $7.8 billion, down by 1.5%
- Excluding unfavorable currency,
reported net revenues, excluding excise taxes, up by 4.5%
- Reported operating companies income of
$3.0 billion, down by 13.1%
- Excluding unfavorable currency,
reported operating companies income down by 4.6%
- Adjusted operating companies income,
reflecting the items detailed in the attached Schedule 11, of $3.5
billion, up by 1.1%
- Excluding unfavorable currency,
adjusted operating companies income up by 9.5%
- Reported operating income of $2.9
billion, down by 13.9%
- Repurchased 11.6 million shares of the
company's common stock for $1.0 billion
Six Months Year-to-Date
2014
- Reported diluted earnings per share of
$2.35, down by $0.23 or 8.9% versus $2.58 in 2013
- Excluding unfavorable currency of
$0.31, reported diluted earnings per share up by $0.08 or 3.1%
versus $2.58 in 2013 as detailed in the attached Schedule 17
- Adjusted diluted earnings per share of
$2.60, up by $0.01 or 0.4% versus $2.59 in 2013
- Excluding unfavorable currency of
$0.31, adjusted diluted earnings per share up by $0.32 or 12.4%
versus $2.59 in 2013 as detailed in the attached Schedule 16
- Cigarette shipment volume of 418.8
billion units, down by 3.5%
- Reported net revenues, excluding excise
taxes, of $14.7 billion, down by 5.1%
- Excluding unfavorable currency,
reported net revenues, excluding excise taxes, up by 1.5%
- Reported operating companies income of
$6.0 billion, down by 13.0%
- Excluding unfavorable currency,
reported operating companies income down by 4.2%
- Adjusted operating companies income,
reflecting the items detailed in the attached Schedule 15, of $6.5
billion, down by 5.7%
- Excluding unfavorable currency,
adjusted operating companies income up by 3.2%
- Reported operating income of $5.8
billion, down by 13.4%
- Repurchased 27.0 million shares of the
company's common stock for $2.25 billion
Full-Year 2014
- The company reaffirms its 2014
full-year reported diluted earnings per share forecast to be in a
range of $4.87 to $4.97 versus $5.26 in 2013, as previously
announced on June 26, 2014. On an adjusted basis, as described
below, diluted EPS are projected to increase in the range of 6% to
8% versus adjusted diluted EPS of $5.40 in 2013, as detailed in the
attached Schedule 20.
Philip Morris International Inc. (NYSE / Euronext Paris: PM)
today announced its 2014 second-quarter results.
“As we expected, we achieved strong fundamental results in the
second quarter, driven by a lower volume decline, strong pricing
and robust market share," said André Calantzopoulos, Chief
Executive Officer.
“For the second half of this year, we anticipate more
challenging quarterly comparisons, particularly in the fourth
quarter -- which, in 2013, saw currency-neutral adjusted diluted
earnings per share grow by 19.4% -- due to known business
challenges, particularly in Asia, the timing of investments behind
the commercialization of our Reduced-Risk Products and the roll-out
of Marlboro Red 2.0, as well as costs related to our manufacturing
footprint optimization initiatives.”
“We are today reaffirming our 2014 full-year reported diluted
EPS guidance. As previously communicated, down-trading and heavy
price discounting at the low end of the market in Australia, in
combination with the impact of plain packaging, could place us at
the lower end of our guidance for currency-neutral adjusted diluted
EPS growth of 6%-8% for the full year.”
Conference Call
A conference call, hosted by Jacek Olczak, Chief Financial
Officer, with members of the investor community and news media,
will be webcast at 9:00 a.m., Eastern Time, on July 17, 2014.
Access is available at www.pmi.com/webcasts.
Dividends and Share Repurchase
Program
During the quarter, PMI declared a regular quarterly dividend of
$0.94, representing an annualized rate of $3.76 per common share,
and spent $1.0 billion to repurchase 11.6 million shares. Under the
current $18 billion share repurchase program, PMI has spent $11.1
billion to repurchase 126.5 million shares, as shown in the table
below.
Current $18
Billion, Three-Year Program
Value
Shares
($
Mio.)
000
August - December 2012 $ 2,853 32,206 January - December
2013 6,000 67,231 January - March 2014 1,250 15,409 April - June
2014 1,000 11,610
Total Under Program $ 11,103
126,456
Since May 2008, when PMI began its first share repurchase
program, the company has spent an aggregate of $36.1 billion to
repurchase 583.2 million shares at an average price of $61.90 per
share, or 27.7% of the shares outstanding at the time of the
spin-off in March 2008.
Global Manufacturing Footprint
Optimization
As part of the company's ongoing review of its global
manufacturing operations, PMI announced:
On April 2, 2014, its plans to cease cigarette production in
Australia by the end of 2014 and transition all Australian
cigarette production to the company's affiliate in South Korea,
incurring an after-tax charge of $0.01 per share for asset
impairment and exit costs in the first quarter of 2014; and
On April 4, 2014, the initiation by its affiliate, Philip Morris
Holland B.V. (“PMH”), of consultations with employee
representatives on a proposal to discontinue cigarette production
at its factory located in Bergen op Zoom, the Netherlands. PMH has
reached an agreement with the Trade Unions and their members on a
social plan and, subject to the fulfillment of certain other
conditions, PMH plans to cease cigarette production by September 1,
2014. As a result, PMI incurred a pre-tax charge of $488 million,
or an after-tax charge of $0.24 per share, which was recorded as
asset impairment and exit costs in the second quarter of 2014,
reflecting $359 million related to employee separation costs and
$129 million related to asset impairment costs.
Business Development
On June 26, 2014, the company announced its acquisition of 100%
of Nicocigs Limited (“Nicocigs”), a leading U.K.-based e-vapor
company whose principal brand is Nicolites. The transaction is not
subject to regulatory approval and is not material to PMI’s 2014
consolidated financial position, results of operations or cash
flow.
The acquisition is complementary to PMI's previously announced
agreement for the license and distribution of Altria Group, Inc.’s
e-vapor products. In addition, it provides PMI with immediate
access to, and a significant presence in, the growing e-vapor
category in the U.K. market.
Nicocigs was founded in 2008 and is headquartered in Birmingham,
U.K. The company employs a field force of approximately 40 sales
representatives and distributes to more than 20,000 points of sale
within the U.K.
2014 Full-Year Forecast
The company reaffirms its 2014 full-year reported diluted
earnings per share (“EPS”) forecast to be in a range of $4.87 to
$4.97 versus $5.26 in 2013, as previously announced on June 26,
2014.
On an adjusted basis, diluted EPS are projected to increase in
the range of 6% to 8% versus adjusted diluted EPS of $5.40 in 2013,
as detailed in the attached Schedule 20. This adjustment
reflects:
- an after-tax charge of $0.01 per share
recorded as asset impairment and exit costs in the first quarter of
2014 relating to the decision to cease cigarette production in
Australia by the end of 2014;
- a pre-tax charge, related to the
decision to discontinue cigarette production in the Netherlands in
2014, of $488 million, or an after-tax charge of $0.24 per share,
recorded as asset impairment and exit costs in the second quarter
of 2014; and
- an unfavorable currency impact, at
prevailing exchange rates, of approximately $0.61 for the full-year
2014.
This forecast includes a productivity and cost savings target of
$300 million and a share repurchase target of $4.0 billion. This
forecast excludes the impact of any future acquisitions,
unanticipated asset impairment and exit cost charges, future
changes in currency exchange rates and any unusual events.
The factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
these projections.
2014 SECOND-QUARTER
CONSOLIDATED RESULTS
In this press release, “PMI” refers to Philip Morris
International Inc. and its subsidiaries. References to total
international cigarette market, defined as worldwide cigarette
volume excluding the United States, total cigarette market, total
market and market shares are PMI estimates based on the latest
available data from a number of internal and external sources and
may, in defined instances, exclude the People's Republic of China
and/or PMI's duty-free business. North Africa is defined as
Algeria, Egypt, Libya, Morocco and Tunisia. The term “net
revenues” refers to operating revenues from the sale of our
products, excluding excise taxes and net of sales and promotion
incentives. Operating companies income, or “OCI,” is defined
as operating income, excluding general corporate expenses and the
amortization of intangibles, plus equity (income)/loss in
unconsolidated subsidiaries, net. PMI's management evaluates
business segment performance and allocates resources based on OCI.
“EBITDA” is defined as earnings before interest, taxes,
depreciation and amortization. Management also reviews OCI, OCI
margins and earnings per share, or “EPS,” and EBITDA on an adjusted
basis (which may exclude the impact of currency and other items
such as acquisitions, asset impairment and exit costs, discrete tax
items and unusual items), as well as free cash flow, defined
as net cash provided by operating activities less capital
expenditures, and net debt. PMI believes it is appropriate to
disclose these measures as they improve comparability and help
investors analyze business performance and trends. Non-GAAP
measures used in this release should be considered neither in
isolation nor as a substitute for the financial measures prepared
in accordance with U.S. GAAP. Comparisons are to the same
prior-year period unless otherwise stated. For a reconciliation of
non-GAAP measures to corresponding GAAP measures, see the relevant
schedules provided with this press release. In 2013, PMI concluded
a number of business development initiatives and agreements that
were not accounted for as acquisitions; thus, non-GAAP financial
measures for 2013 that exclude acquisitions do not exclude the
impact of said initiatives and agreements. Reduced-Risk
Products, or “RRPs,” is the term the company uses to refer to
products in various stages of development for which it is
conducting extensive scientific studies to determine whether it can
support claims of reduced exposure to harmful and potentially
harmful constituents in smoke, and ultimately claims of reduced
disease risk, when compared to smoking combustible cigarettes.
Before making any such claims, the company will need not only
rigorous data to substantiate reduced risk, but may also require
government review and approval, as is the case in the USA today.
Trademarks and service marks in this press release that are the
registered property of, or licensed by, the subsidiaries of PMI,
are italicized.
NET
REVENUES
PMI Net Revenues
($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
European Union $ 2,393 $ 2,206 8.5 % 2.7 % $ 4,406 $ 4,176
5.5 % 1.2 %
Eastern Europe, Middle East & Africa 2,283
2,181 4.7 % 13.7 % 4,292 4,224 1.6 % 9.2 %
Asia 2,311 2,692
(14.2 )% (3.6 )% 4,493 5,482 (18.0 )% (6.2 )%
Latin America
& Canada 810 838 (3.3 )% 11.2 % 1,523
1,619 (5.9 )% 7.8 %
Total PMI $ 7,797
$ 7,917 (1.5 )% 4.5 %
$ 14,714 $ 15,501 (5.1 )%
1.5 %
Net revenues of $7.8 billion were down by 1.5%, including
unfavorable currency of $475 million. Excluding currency, net
revenues increased by 4.5%, driven by favorable pricing of $494
million across all Regions, led by: Russia and Indonesia; Egypt,
reflecting the impact of the change to PMI's new business structure
announced on January 29, 2014; partially offset by Italy and the
Philippines, reflecting current market dynamics. The favorable
pricing was partially offset by unfavorable volume/mix of $139
million across all Regions, except the EU, mainly due to lower
volume and market share in Japan, reflecting a lower total market
following the consumption tax-driven price increases of April 1,
2014.
OPERATING
COMPANIES INCOME
PMI Operating
Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl.
Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
European Union $ 711 $ 1,082 (34.3 )% (41.8 )% $ 1,689 $
2,020 (16.4 )% (21.8 )%
Eastern Europe, Middle East &
Africa 1,087 945 15.0 % 28.8 % 2,014 1,880 7.1 % 18.3 %
Asia 900 1,128 (20.2 )% (4.2 )% 1,815 2,470 (26.5 )% (10.5
)%
Latin America & Canada 265 255 3.9 %
27.1 % 467 509 (8.3 )% 13.6 %
Total PMI
$ 2,963 $ 3,410 (13.1 )%
(4.6 )% $ 5,985 $ 6,879
(13.0 )% (4.2 )%
Reported operating companies income of $3.0 billion was down by
13.1%, including unfavorable currency of $289 million. Excluding
currency, operating companies income decreased by 4.6%, primarily
due to: asset impairment and exit costs of $488 million related to
the decision to discontinue cigarette production in the
Netherlands, and additional costs for the factory closure in
Australia; unfavorable volume/mix of $109 million; and higher
manufacturing costs, mainly due to the impact of the change to
PMI's new business structure in Egypt; partially offset by
favorable pricing.
Adjusted operating companies income increased by 1.1% as shown
in the table below and detailed in Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, increased by
9.5%.
PMI Operating
Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 2,963 $ 3,410 (13.1 )% (4.6 )% $ 5,985 $
6,879 (13.0 )% (4.2 )% Asset impairment & exit costs (489 ) (5
) (512 ) (8 )
Adjusted OCI $ 3,452 $
3,415 1.1 % 9.5 % $
6,497 $ 6,887 (5.7 )% 3.2
% Adjusted OCI Margin* 44.3 % 43.1 % 1.2 2.1 44.2 %
44.4 % (0.2 ) 0.8
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency, increased by 2.1 points to 45.2%, as detailed
in Schedule 11.
SHIPMENT VOLUME
& MARKET SHARE
PMI Cigarette
Shipment Volume (Million Units)
Second-Quarter
Six Months
Year-to-Date
2014
2013
Change
2014
2013
Change
European Union 49,913 48,723 2.4 % 91,618 91,690 (0.1 )%
Eastern Europe, Middle East & Africa 74,170 76,298 (2.8
)% 136,176 143,132 (4.9 )%
Asia 75,653 80,588 (6.1 )%
146,454 153,207 (4.4 )%
Latin America & Canada 23,065
23,290 (1.0 )% 44,514 45,817 (2.8 )%
Total PMI 222,801 228,899 (2.7
)% 418,762 433,846 (3.5 )%
2014 Second-Quarter
PMI's cigarette shipment volume of 222.8 billion units decreased
by 2.7%, or 6.1 billion units, due principally to: EEMA, due mainly
to a lower total market in Russia partially offset by higher share,
Egypt, Serbia and Ukraine, partially offset by Algeria and Turkey;
Asia, mainly reflecting a lower market in Japan, lower share in
Pakistan due to the timing of trade inventory movements, and lower
estimated tax-paid industry cigarette volumes in the Philippines
partially offset by higher share, partially offset by Indonesia
driven by a higher total market; and Latin America & Canada,
due largely to the impact of tax-driven price increases in Canada.
PMI's cigarette shipment volume decrease in the quarter was
partially offset by a solid performance in the EU, driven notably
by Germany, Italy and the United Kingdom, partly offset by France,
Greece and Hungary.
Total cigarette shipments of Marlboro of 73.2 billion units
increased by 1.0%, driven primarily by EEMA, notably Algeria and
Saudi Arabia, and Asia, principally the Philippines. Total
cigarette shipments of Marlboro were essentially flat in the EU and
down slightly in Latin America & Canada, predominantly due to
Mexico.
Total cigarette shipments of L&M of 24.2 billion units
decreased by 3.5%, due to EEMA, mainly Egypt, Saudi Arabia and
Turkey, partially offset by growth in each of the other Regions.
Total cigarette shipments of Bond Street of 11.1 billion units
decreased by 4.0%, due predominantly to Hungary, Kazakhstan, Serbia
and Ukraine, partially offset by Russia. Total cigarette shipments
of Philip Morris of 7.8 billion units decreased by 11.1%, due
predominantly to the morphing to Lark in Japan. Total cigarette
shipments of Parliament of 12.4 billion units increased by 7.6%,
driven mainly by Turkey. Total cigarette shipments of Chesterfield
of 11.8 billion units increased by 33.2%, due primarily to Italy,
Poland and Turkey, partially offset by Russia and Ukraine. Total
cigarette shipments of Lark of 6.9 billion units decreased by
13.1%, due predominantly to the total market decline in Japan
following the consumption tax-driven retail price increases of
April 1, 2014.
Total shipment volume of Other Tobacco Products ("OTP"), in
cigarette equivalent units, increased by 4.2%, mainly reflecting
growth in the fine cut category, notably in Belgium, the Czech
Republic and Hungary, partly offset by France and Spain. Total
shipment volume for cigarettes and OTP, in cigarette equivalent
units, decreased by 2.4%.
PMI's market share increased in a number of key markets,
including Algeria, Argentina, Austria, Brazil, Canada, the Czech
Republic, France, Greece, Italy, Kazakhstan, Korea, the
Netherlands, the Philippines, Poland, Portugal, Russia, Saudi
Arabia, Spain, Thailand and the United Kingdom.
EUROPEAN UNION REGION
(EU)
2014 Second-Quarter
Net revenues of $2.4 billion increased by 8.5%. Excluding
favorable currency of $128 million, net revenues increased by 2.7%,
due to favorable volume/mix of $45 million, driven mainly by Italy,
and favorable pricing of $14 million, driven principally by Germany
and Poland, partially offset by Italy.
Operating companies income of $711 million decreased by 34.3%,
including favorable currency of $81 million. Excluding currency,
operating companies income decreased by 41.8%, mainly due to asset
impairment and exit costs of $488 million related to the
discontinuation of cigarette production in the Netherlands,
partially offset by favorable pricing and favorable volume/mix of
$37 million.
Adjusted operating companies income increased by 10.8%, as shown
in the table below and detailed on Schedule 11. Adjusted operating
companies income, excluding favorable currency, increased by
3.3%.
EU Operating
Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 711 $ 1,082 (34.3 )% (41.8 )% $ 1,689 $ 2,020
(16.4 )% (21.8 )% Asset impairment & exit costs (488 ) —
(488 ) —
Adjusted OCI $ 1,199 $
1,082 10.8 % 3.3 % $
2,177 $ 2,020 7.8 % 2.4
% Adjusted OCI Margin* 50.1 % 49.0 % 1.1 0.4 49.4 %
48.4 % 1.0 0.5
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding favorable
currency, increased by 0.4 points to 49.4%, as detailed in Schedule
11.
The total cigarette market in the EU of 120.4 billion units
decreased by 1.2%, partly reflecting, in certain key geographies:
moderating total market declines resulting from a deceleration in
the growth of the e-vapor category, relatively lower out-switching
to the fine cut category, lower price elasticity, and improved
economic conditions; and, overall, favorable estimated trade
inventory movements compared to the second quarter of 2013, notably
in Germany, Spain and the United Kingdom. Excluding the impact of
the estimated trade inventory movements, the total cigarette market
in the EU is estimated to have declined by approximately 2.4% in
the quarter and by 3.6% year-to-date. For the full-year 2014, the
total cigarette market in the EU is projected to decline by
approximately 5.0%. The total OTP market in the EU in the quarter
of 41.6 billion cigarette equivalent units increased by 1.0%,
reflecting a higher total fine cut market, up by 0.8% to 36.1
billion cigarette equivalent units.
EU Region &
Key Market Shares
Second-Quarter
Six Months
Year-to-Date
2014
2013
Change
2014
2013
Change
p.p.
p.p.
Total EU 40.4 % 39.5 % 0.9 39.9 % 38.9 % 1.0 France 41.4 % 40.5 %
0.9 41.2 % 40.3 % 0.9 Germany 36.9 % 37.6 % (0.7 ) 36.9 % 36.8 %
0.1 Italy 55.3 % 53.3 % 2.0 54.2 % 53.3 % 0.9 Poland 40.4 % 38.3 %
2.1 38.8 % 36.4 % 2.4 Spain 32.0 % 31.8 % 0.2 31.6 % 31.2 % 0.4
PMI's cigarette shipment volume of 49.9 billion units increased
by 2.4% and market share increased by 0.9 points to 40.4% as shown
in the table above. Shipment volume of Marlboro was flat at 23.9
billion units and market share increased by 0.1 point to 19.4%.
Shipment volume of L&M increased by 2.6% to 8.7 billion units
and market share increased by 0.3 points to 7.2%, driven notably by
Germany. Shipment volume of Chesterfield of 7.5 billion units
increased by 52.4% and market share increased by 1.4 points to
5.8%, driven mainly by Italy and Poland. Shipment volume of Philip
Morris of 2.6 billion units increased by 4.1% and market share
increased by 0.1 point to 2.2%.
PMI's shipments of OTP of 5.8 billion cigarette equivalent units
increased by 6.0%, driven principally by a higher total market and
share. PMI's OTP total market share was 14.3%, up by 0.6 points,
reflecting gains in the fine cut category, notably in Hungary, up
by 6.7 points to 19.0%, Italy, up by 4.4 points to 42.3%, Poland,
up by 12.9 points to 36.4%, and Spain, up by 2.0 points to 14.7%,
partially offset by Germany, down by 1.9 points to 13.0%, and
Portugal, down by 2.5 points to 30.3%.
EU Key Market
Commentaries
In France, the total cigarette market of 11.8 billion units
decreased by 4.6%, mainly reflecting the unfavorable impact of
price increases in July 2013 and January 2014 and the growth of
e-vapor products. Year-to-date, the total cigarette market
decreased by 6.7%. While PMI's shipments of 4.8 billion units
decreased by 3.1% in the quarter, market share increased by 0.9
points to 41.4%, mainly driven by Marlboro and premium Philip
Morris, up by 0.5 and 0.3 points to 25.5% and 9.4%, respectively.
Market share of L&M increased by 0.1 point to 2.6% and share of
Chesterfield was flat at 3.4%. The total industry fine cut category
of 3.5 billion cigarette equivalent units decreased by 3.9%. PMI's
market share of the category decreased by 0.5 points to 26.7%.
In Germany, the total cigarette market of 20.9 billion units
increased by 6.4%, partially reflecting a favorable comparison with
the second quarter of 2013 that witnessed a reversal of trade
purchases of competitive products made in the first quarter of
2013. Excluding the favorable impact of these estimated trade
inventory movements, the total cigarette market grew by
approximately 3.5% in the quarter and by approximately 0.8%
year-to-date. While PMI's shipments of 7.7 billion units increased
by 4.5%, market share decreased by 0.7 points to 36.9%, reflecting
the impact of the inventory movements, with Marlboro, down by 1.5
points to 21.8%, partially offset by L&M, up by 1.1 points to
11.9%. Market share of Chesterfield was flat at 1.7%. The total
industry fine cut category of 10.4 billion cigarette equivalent
units was flat. PMI's market share of the category decreased by 1.9
points to 13.0%.
In Italy, the total cigarette market of 19.2 billion units
increased by 2.5%, mainly reflecting a lower incidence of e-vapor
products and relatively lower out-switching to the fine cut
category. Year-to-date, the total cigarette market increased by
1.1%. PMI's shipments in the quarter of 11.4 billion units
increased by 8.0%. PMI's market share increased by 2.0 points to
55.3%, due primarily to: Chesterfield, up by 6.5 points to 10.0%,
benefiting from its repositioning in February 2014 into the
€4.00/pack price segment, partially offset by Marlboro, down by 0.8
points to 25.0%, and Diana in the low-price segment, down by 3.1
points to 8.5%, impacted by the growth of the super-low price
segment. Market share of Philip Morris increased by 0.1 point to
2.4%. The total industry fine cut category of 1.5 billion cigarette
equivalent units increased by 1.7% and PMI's market share of the
category increased by 4.4 points to 42.3%, driven by Marlboro.
In Poland, the total cigarette market of 11.1 billion units
decreased by 7.0%, reflecting the growth of e-vapor products and
the prevalence of non-duty paid OTP products. Year-to-date, the
total cigarette market decreased by 8.8%. PMI's shipments in the
quarter of 4.5 billion units increased by 2.4%. PMI's market share
increased by 2.1 points to 40.4%, driven by L&M, up by 0.3
points to 17.8%, and Chesterfield, up by 2.2 points to 7.9%,
benefiting from the morphing of Red & White in the fourth
quarter of 2013, partially offset by Marlboro, down by 0.9 points
to 10.9%. Although the total industry fine cut category of 848
million cigarette equivalent units decreased by 6.4%, PMI's market
share of the category increased by 12.9 points to 36.4%.
In Spain, the total cigarette market of 12.3 billion units
decreased by 1.2%, reflecting an improving economic environment and
lower out-switching to the OTP category, as well as favorable
estimated trade inventory movements compared to the second quarter
of 2013. Excluding the impact of estimated trade inventory
movements, the total cigarette market decreased by approximately
4.7% in the quarter and by approximately 3.5% year-to-date. PMI's
shipments in the quarter of 4.3 billion units increased by 0.7%.
PMI's market share increased by 0.2 points to 32.0%, driven by
higher share of Marlboro, up by 1.0 point to 15.8%, partially
offset by L&M, down by 0.5 points to 6.1%, and Chesterfield,
down by 0.5 points to 9.2%. The total industry fine cut category of
2.5 billion cigarette equivalent units decreased by 17.8%, partly
reflecting the narrowing of price gaps with the cigarette category
since July 2013. PMI's market share of the fine cut category
increased by 2.0 points to 14.7%.
EASTERN EUROPE, MIDDLE
EAST & AFRICA REGION (EEMA)
2014 Second-Quarter
Net revenues of $2.3 billion increased by 4.7%. Excluding
unfavorable currency of $196 million, net revenues increased by
13.7%, reflecting favorable pricing of $323 million, driven
principally by Russia as well as the impact of the change to PMI's
new business structure in Egypt, partially offset by unfavorable
volume/mix of $25 million, mainly due to a lower total market in
Russia and lower market share in Ukraine.
Operating companies income of $1.1 billion increased by 15.0%.
Excluding unfavorable currency of $130 million, operating companies
income increased by 28.8%, due primarily to higher pricing,
partially offset by unfavorable volume/mix of $29 million, as well
as higher costs, principally related to the impact of the change to
PMI's new business structure in Egypt.
Adjusted operating companies income increased by 15.0%, as shown
in the table below and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, increased by
28.8%.
EEMA Operating
Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 1,087 $ 945 15.0 % 28.8 % $ 2,014 $ 1,880 7.1
% 18.3 % Asset impairment & exit costs — — —
—
Adjusted OCI $ 1,087 $
945 15.0 % 28.8 % $
2,014 $ 1,880 7.1 % 18.3
% Adjusted OCI Margin* 47.6 % 43.3 % 4.3 5.8 46.9 %
44.5 % 2.4 3.7
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency, increased by 5.8 points to 49.1%, as detailed
on Schedule 11.
PMI's cigarette shipment volume of 74.2 billion units decreased
by 2.8%, mainly due to Egypt, Russia, Serbia and Ukraine, partially
offset by Algeria and Turkey.
PMI's cigarette shipment volume of premium brands increased by
3.4%, due principally to Marlboro, up by 3.6% to 21.8 billion
units, and Parliament, up by 6.5% to 9.0 billion units.
EEMA Key Market
Commentaries
In North Africa, the estimated total cigarette market increased
by 1.2% to 35.4 billion units, driven mainly by
Algeria. Year-to-date, the estimated total cigarette market
increased by 1.8%. PMI’s shipment volume in the quarter of 9.2
billion units decreased by 4.3%, principally reflecting temporarily
lower production of PMI's products in Egypt as part of the
transition to the new business structure. PMI’s market share
decreased by 2.4 points to 24.9%, due primarily to lower share in
Egypt, partially offset by gains in Algeria. Market share of
Marlboro was flat at 14.5%, and share of L&M decreased by 2.1
points to 8.6%.
In Russia, the estimated total cigarette market declined by 9.9%
to 80.4 billion units, mainly due to the unfavorable impact of the
tax-driven price increases of June 2013 and January 2014 and the
prevalence of illicit trade. Year-to-date, the estimated total
cigarette market decreased by 8.5%. PMI's shipment volume in the
quarter of 21.9 billion units decreased by 4.8%. PMI's May
quarter-to-date market share of 26.8%, as measured by Nielsen, was
up by 0.9 points. Market share of Parliament, L&M and Bond
Street increased by 0.3, 0.4 and 0.9 points to 3.6%, 3.1% and 7.4%,
respectively, partially offset by Marlboro and Chesterfield, down
by 0.1 point and 0.2 points to 1.6% and 2.8%, respectively.
In Turkey, the estimated total cigarette market increased by
2.5% to 23.8 billion units, partially reflecting lower trade
inventory movements compared to the second quarter of 2013.
Excluding the impact of estimated trade inventory movements, the
total cigarette market increased by approximately 1.6% in the
quarter and was essentially flat year-to-date. PMI's shipment
volume in the quarter of 12.2 billion units increased by 4.8%.
PMI's May quarter-to-date market share, as measured by Nielsen,
decreased by 0.2 points to 44.6%, mainly due to Marlboro, mid-price
Muratti and low-price L&M, down by 0.1, 1.2 and 1.1 points to
8.7%, 5.8% and 6.5%, respectively, partially offset by premium
Parliament, up by 1.2 points to 10.8%.
In Ukraine, the estimated total cigarette market increased by
2.8% to 21.3 billion units, mainly reflecting significant estimated
trade loading ahead of excise tax-driven price increases in July
2014, and a lower prevalence of illicit trade, partially offset by
business disruption due to the political instability in the east of
the country. Excluding the impact of estimated trade inventory
movements, the total cigarette market decreased by approximately
2.6% in the quarter and by approximately 3.6% year-to-date. PMI's
shipment volume in the quarter of 6.2 billion units decreased by
8.5% principally due to a decrease in PMI's May quarter-to-date
market share, as measured by Nielsen, down by 1.0 point to 32.5%,
with Marlboro and Parliament down by 0.7 and 0.3 points to 4.9% and
3.0%, respectively. The decrease in PMI's market share was
partially offset by growth from PMI's low-price segment brands,
Bond Street and President, up by 0.3 and 2.5 points to 9.0% and
4.7%, respectively.
ASIA
REGION
2014 Second-Quarter
Net revenues of $2.3 billion decreased by 14.2%, including
unfavorable currency of $285 million. Excluding currency, net
revenues decreased by 3.6%, due primarily to: unfavorable
volume/mix of $138 million, mainly due to Japan, principally
reflecting a lower total market and share; partially offset by
favorable pricing of $42 million, driven mainly by Australia and
Indonesia, despite the adverse impact of the Philippines.
Operating companies income of $900 million decreased by 20.2%,
including unfavorable currency of $181 million. Excluding currency,
operating companies income decreased by 4.2%, principally due to
unfavorable volume/mix of $91 million and higher costs, mainly
related to the optimization from hand-rolled to machine-made
production in Indonesia, and marketing investment in support of new
brand launches in Indonesia, partially offset by favorable
pricing.
Adjusted operating companies income decreased by 20.5% as shown
in the table below and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, decreased by
4.5%.
Asia Operating
Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 900 $ 1,128 (20.2 )% (4.2 )% $ 1,815 $ 2,470
(26.5 )% (10.5 )% Asset impairment & exit costs (1 ) (5 ) (24 )
(8 )
Adjusted OCI $ 901 $ 1,133
(20.5 )% (4.5 )% $ 1,839
$ 2,478 (25.8 )% (9.8 )%
Adjusted OCI Margin* 39.0 % 42.1 % (3.1 ) (0.4 ) 40.9 % 45.2
% (4.3 ) (1.8 )
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency, decreased by 0.4 points to 41.7%, as detailed
on Schedule 11, reflecting the impact of the aforementioned
factors.
PMI's cigarette shipment volume of 75.7 billion units decreased
by 6.1%, due primarily to: a lower total market in Japan; lower
share in Pakistan reflecting an unfavorable comparison with the
second quarter of 2013 due to the timing of trade inventory
movements; and lower estimated tax-paid industry volumes in the
Philippines, partially offset by higher market share.
Shipment volume of Marlboro of 18.5 billion units increased by
0.7%, driven by the Philippines.
Asia Key Market
Commentaries
In Indonesia, the total cigarette market increased by 4.9% to
82.0 billion units, rebounding from a decline in the first quarter
of 2014 of 1.0%. On a year-to-date basis, the total cigarette
market increased by 2.0%. For the full-year 2014, the total
cigarette market is projected to grow by up to 1.0%. PMI's shipment
volume in the quarter of 28.6 billion units increased by 1.3%.
PMI's market share decreased by 1.2 points to 34.9% predominantly
as a result of the share decline of the brand family Dji Sam Soe,
which decreased by 0.6 points to 6.3% due to the continuing decline
of the hand-rolled kretek segment, compounded by the unfavorable
impact resulting from the brand's hand-rolled variant crossing a
critical price point ahead of competition. This decline was
partially offset by the growth of machine-made Dji Sam Soe Magnum
Blue which reached a market share of 0.6% in the quarter since its
launch in April 2014. Market share of Sampoerna A, in the premium
machine-made LTLN kretek segment, was flat at 14.1%, while
mid-price U Mild was up by 1.3 points to 5.6%. Although Marlboro's
market share decreased by 0.2 points to 5.2%, its share of the
“white” cigarettes segment, which represented 6.5% of the total
cigarette market, increased by 2.7 points to 79.3%.
In Japan, the total cigarette market decreased by 14.4% to 41.5
billion units, mainly driven by unfavorable retail trade inventory
movements following the consumption tax-driven retail price
increases of April 1, 2014. The total cigarette market declined by
2.8% year-to-date. For the full-year 2014, the total cigarette
market is projected to decline by an estimated 3.0% to 3.5%. PMI's
shipment volume in the quarter of 11.8 billion units decreased by
16.4%, principally due to the lower total market. PMI's market
share decreased by 0.5 points to 26.4%, with share of Marlboro and
Virginia S. down by 0.7 and 0.2 points to 11.5% and 1.9%,
respectively. Market share of Lark grew by 0.3 points to 10.4%,
supported by the successful morphing of Philip Morris. Excluding
the impact of trade inventory movements, PMI's estimated market
share of 25.8% was essentially flat compared to the fourth quarter
of 2013 and the first quarter of 2014, indicating ongoing
stabilization.
In Korea, the total cigarette market increased by 1.7% to 22.4
billion units. On a year-to-date basis, the total cigarette market
decreased by 1.7%. PMI's shipment volume in the quarter of 4.4
billion units increased by 3.1% and market share increased by 0.1
point to 19.6%. Market share of Parliament was up by 0.2 points to
7.2%, driven by Parliament Hybrid 5mg and the successful launch in
October 2013 of Parliament Hybrid 1mg, while market share of
Marlboro was down by 0.2 points to 7.6% and share of Virginia S.
was down by 0.1 point to 4.0%.
In the Philippines, total estimated tax-paid industry cigarette
volumes decreased by 13.4% to 20.1 billion units, primarily
reflecting a lower declaration of volume for excise tax purposes by
PMI's principal local competitor. On a year-to-date basis,
excluding the impact of inventory movements, the total tax-paid
industry cigarette volume declined by an estimated 1.2%. PMI's
shipment volume in the quarter of 17.2 billion units decreased by
9.8%. PMI's market share of the total estimated tax-paid industry
of 85.9% was up by 3.4 points. Marlboro's market share increased by
3.4 points to 18.0% and share of Fortune increased by 3.3 points to
35.9%.
LATIN AMERICA &
CANADA REGION
2014 Second-Quarter
Net revenues of $810 million decreased by 3.3%, including
unfavorable currency of $122 million. Excluding currency, net
revenues increased by 11.2%, driven by favorable pricing of $115
million, principally in Argentina, Canada and Mexico, partially
offset by unfavorable volume/mix of $21 million, principally due to
a lower total market in Canada.
Operating companies income of $265 million increased by 3.9%,
including unfavorable currency of $59 million. Excluding currency,
operating companies income increased by 27.1%, reflecting favorable
pricing partially offset by unfavorable volume/mix of $26 million,
principally due to Canada.
Adjusted operating companies income increased by 3.9% as shown
in the table below and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, increased by
27.1%.
Latin America
& Canada Operating Companies Income ($ Millions)
Second-Quarter
Six Months
Year-to-Date
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 265 $ 255 3.9 % 27.1 % $ 467 $ 509 (8.3 )%
13.6 % Asset impairment & exit costs — — —
—
Adjusted OCI $ 265 $
255 3.9 % 27.1 % $
467 $ 509 (8.3 )% 13.6
% Adjusted OCI Margin* 32.7 % 30.4 % 2.3 4.4 30.7 %
31.4 % (0.7 ) 1.7
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency, increased by 4.4 points to 34.8%, as detailed
on Schedule 11, reflecting the aforementioned factors.
PMI's cigarette shipment volume of 23.1 billion units decreased
by 1.0%. Shipment volume of Marlboro of 9.0 billion units decreased
by 1.8%.
Latin America & Canada Key Market
Commentaries
In Argentina, the total cigarette market decreased by 1.2% to
10.0 billion units. On a year-to-date basis, the total cigarette
market decreased by 1.0%. PMI's cigarette shipment volume in the
quarter of 7.7 billion units increased by 0.6% and market share
increased by 1.1 points to 76.3%, driven by mid-price Philip
Morris, up by 2.0 points to 42.9%, reflecting the positive impact
of its capsule variants, partially offset by low-price Next, down
by 0.8 points to 2.0%. Share of Marlboro was flat at 23.8%.
In Canada, the total cigarette market decreased by 6.7% to 7.1
billion units, mainly due to the impact of federal and provincial
tax-driven price increases in the first and second quarters of
2014. On a year-to-date basis, the total cigarette market decreased
by 7.1%. While PMI's cigarette shipment volume of 2.7 billion units
decreased by 3.5%, market share increased by 1.4 points to 38.0%,
with premium brands Benson & Hedges flat at 2.4% and Belmont up
by 0.5 points to 3.0%. Market share of mid-price Canadian Classics
was up by 0.2 points to 10.1%. Market share of low-price Next was
up by 1.5 points to 11.0%, partially offset by mid-price Number 7
and low-price Accord, down by 0.3 and 0.4 points to 3.9% and 2.5%,
respectively.
In Mexico, the total cigarette market increased by 1.5% to 8.4
billion units, partially reflecting a lower incidence of illicit
trade. On a year-to-date basis, excluding the impact of estimated
inventory movements, the total cigarette market declined by
approximately 0.2%. PMI's cigarette shipment volume in the quarter
of 6.0 billion units decreased by 0.8%. PMI's market share
decreased by 1.6 points to 71.0%. PMI's market share of Marlboro
was down by 2.2 points to 49.3% and share of premium Benson &
Hedges was down by 0.4 points to 5.2%, reflecting consumer
down-trading and the timing of price increases by PMI's principal
competitor. PMI's share of the premium segment increased by 1.0
point to 91.4%. PMI's market share of Delicados, the second
best-selling brand in the market, increased by 0.3 points to
11.5%.
Philip Morris International Inc.
Profile
Philip Morris International Inc. (PMI) is the leading
international tobacco company, with seven of the world's top 15
international brands, including Marlboro, the number one cigarette
brand worldwide. PMI's products are sold in more than 180 markets.
In 2013, the company held an estimated 15.7% share of the total
international cigarette market outside of the U.S., or 28.3%
excluding the People's Republic of China and the U.S. For more
information, see www.pmi.com.
Forward-Looking and Cautionary
Statements
This press release contains projections of future results and
other forward-looking statements. Achievement of projected results
is subject to risks, uncertainties and inaccurate assumptions. In
the event that risks or uncertainties materialize, or underlying
assumptions prove inaccurate, actual results could vary materially
from those contained in such forward-looking statements. Pursuant
to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, PMI is identifying important factors
that, individually or in the aggregate, could cause actual results
and outcomes to differ materially from those contained in any
forward-looking statements made by PMI.
PMI's business risks include: significant increases in
cigarette-related taxes; the imposition of discriminatory excise
tax structures; fluctuations in customer inventory levels due to
increases in product taxes and prices; increasing marketing and
regulatory restrictions, often with the goal of reducing or
preventing the use of tobacco products; health concerns relating to
the use of tobacco products and exposure to environmental tobacco
smoke; litigation related to tobacco use; intense competition; the
effects of global and individual country economic, regulatory and
political developments; changes in adult smoker behavior; lost
revenues as a result of counterfeiting, contraband and cross-border
purchases; governmental investigations; unfavorable currency
exchange rates and currency devaluations; adverse changes in
applicable corporate tax laws; adverse changes in the cost and
quality of tobacco and other agricultural products and raw
materials; and the integrity of its information systems. PMI's
future profitability may also be adversely affected should it be
unsuccessful in its attempts to produce products that have the
potential to reduce individual risk and population harm; if it is
unable to successfully introduce new products, promote brand
equity, enter new markets or improve its margins through increased
prices and productivity gains; if it is unable to expand its brand
portfolio internally or through acquisitions and the development of
strategic business relationships; or if it is unable to attract and
retain the best global talent.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-Q for the
quarter ended March 31, 2014. PMI cautions that the foregoing list
of important factors is not a complete discussion of all potential
risks and uncertainties. PMI does not undertake to update any
forward-looking statement that it may make from time to time,
except in the normal course of its public disclosure
obligations.
Schedule 1 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Condensed Statements of Earnings
For the
Quarters Ended June 30, ($ in millions, except per share data)
(Unaudited)
2014 2013 (1) %
Change Net revenues $ 21,051
$ 20,483 2.8 % Cost of sales
2,696 2,701 (0.2 )% Excise taxes on products (2) 13,254
12,566 5.5 % Gross profit 5,101 5,216 (2.2 )%
Marketing, administration and research costs 1,716 1,850 Asset
impairment and exit costs 489 5 Amortization of intangibles 22
24
Operating income (3) 2,874
3,337 (13.9 )% Interest expense, net 254
246 Earnings before income taxes 2,620 3,091
(15.2 )% Provision for income taxes 752 892 (15.7 )% Equity
(income)/loss in unconsolidated subsidiaries, net (27 ) 5
Net earnings 1,895 2,194 (13.6 )% Net earnings attributable
to noncontrolling interests 44 70
Net
earnings attributable to PMI $ 1,851
$ 2,124 (12.9
)% Per share data:(4) Basic earnings per
share $ 1.17 $
1.30 (10.0 )% Diluted earnings per
share $ 1.17 $
1.30 (10.0 )%
(1) Certain amounts have been reclassified
to conform to the current year's presentation due to the separate
disclosure ofequity (income)/loss in unconsolidated subsidiaries,
net.
(2) The segment detail of excise taxes on
products sold for the quarters ended June 30, 2014 and 2013 is
shown onSchedule 2.
(3) PMI's management evaluates segment
performance and allocates resources based on operating companies
income,which PMI defines as operating income, excluding general
corporate expenses and amortization of intangibles, plusequity
(income)/loss in unconsolidated subsidiaries, net. The
reconciliation from operating income to operating companiesincome
is as follows:
2014 2013 % Change
Operating Income $ 2,874 $ 3,337
(13.9 )%
Excluding:
- Amortization of Intangibles 22 24 - General corporate expenses
(included in marketing, administration and research costs above) 40
54 Plus: Equity (income)/loss in unconsolidated subsidiaries, net
(27 ) 5
Operating Companies Income $
2,963 $ 3,410
(13.1 )%
(4) Net earnings and weighted-average
shares used in the basic and diluted earnings per share
computations for thequarters ended June 30, 2014 and 2013 are shown
on Schedule 4, Footnote 1.
Schedule 2
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Selected
Financial Data by Business Segment
For the Quarters Ended June
30, ($ in millions) (Unaudited)
Net Revenues
excluding Excise Taxes
EuropeanUnion
EEMA
Asia
LatinAmerica
&Canada
Total
2014 Net Revenues (1) $ 7,829 $ 5,674 $
5,097 $ 2,451 $ 21,051 Excise Taxes on Products (5,436 )
(3,391 ) (2,786 ) (1,641 ) (13,254 )
Net Revenues excluding Excise Taxes 2,393
2,283 2,311 810 7,797
2013 Net Revenues $ 7,245 $ 5,377 $ 5,381 $ 2,480 $ 20,483
Excise Taxes on Products (5,039 ) (3,196 ) (2,689 )
(1,642 ) (12,566 )
Net Revenues excluding Excise
Taxes 2,206 2,181 2,692 838
7,917 Variance Currency 128 (196 ) (285 ) (122
) (475 ) Acquisitions — — — — — Operations 59 298
(96 ) 94 355
Variance
Total 187 102 (381 ) (28
) (120 ) Variance Total (%) 8.5 % 4.7 % (14.2
)% (3.3 )% (1.5 )% Variance excluding Currency 59 298 (96 )
94 355 Variance excluding Currency (%) 2.7 % 13.7 % (3.6 )% 11.2 %
4.5 % Variance excluding Currency & Acquisitions 59 298
(96 ) 94 355 Variance excluding Currency & Acquisitions (%) 2.7
% 13.7 % (3.6 )% 11.2 % 4.5 % (1) 2014
Currency increased (decreased) net revenues as follows: European
Union $ 409 EEMA (617 ) Asia (578 ) Latin America & Canada (438
) $ (1,224 )
Schedule 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Selected
Financial Data by Business Segment
For the Quarters Ended June
30, ($ in millions) (Unaudited)
Operating Companies Income
European Union
EEMA Asia
LatinAmerica
&Canada
Total 2014 $ 711 $ 1,087 $ 900 $ 265 $
2,963 2013 1,082 945 1,128 255 3,410 % Change (34.3 )% 15.0
% (20.2 )% 3.9 % (13.1 )%
Reconciliation:
For the quarter ended June 30, 2013 $ 1,082
$ 945 $ 1,128 $ 255
$ 3,410 2013 Asset impairment and exit costs —
— 5 — 5 2014 Asset impairment and exit costs (488 ) — (1 ) — (489 )
Acquired businesses — — — — — Currency 81 (130 ) (181 ) (59
) (289 ) Operations 36 272 (51 )
69 326
For the quarter ended June 30,
2014 $ 711 $
1,087 $ 900
$ 265 $ 2,963
Schedule 4 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Diluted Earnings Per Share
For the Quarters Ended June 30, ($ in millions, except per
share data) (Unaudited)
Diluted E.P.S.
2014 Diluted Earnings Per Share $ 1.17 (1) 2013 Diluted
Earnings Per Share $ 1.30 (1) Change $ (0.13 ) % Change (10.0 )%
Reconciliation:
2013 Diluted Earnings Per Share $ 1.30 (1)
Special
Items:
2013 Asset impairment and exit costs — 2013 Tax items — 2014 Asset
impairment and exit costs (0.24 ) 2014 Tax items — Currency
(0.15 ) Interest — Change in tax rate 0.03 Impact of lower shares
outstanding and share-based payments 0.03 Operations 0.20
2014 Diluted Earnings Per Share $ 1.17
(1) (1) Basic and diluted EPS were calculated using
the following (in millions):
Q22014
Q22013
Net earnings attributable to PMI $ 1,851 $ 2,124 Less
distributed and undistributed earnings attributable to share-based
payment awards 9 11 Net earnings for basic and
diluted EPS $ 1,842 $ 2,113
Weighted-average shares for basic and diluted EPS 1,571
1,631 Schedule 5 PHILIP
MORRIS INTERNATIONAL INC. and Subsidiaries Condensed Statements of
Earnings
For the Six Months Ended June 30, ($ in millions,
except per share data) (Unaudited)
2014
2013 (1)
% Change
Net revenues $ 38,830 $
39,010 (0.5 )% Cost of sales 5,070 5,190 (2.3
)% Excise taxes on products (2) 24,116 23,509
2.6 % Gross profit 9,644 10,311 (6.5 )% Marketing, administration
and research costs 3,263 3,527 Asset impairment and exit costs 512
8 Amortization of intangibles 44 48
Operating income (3) 5,825 6,728 (13.4
)% Interest expense, net 522 482
Earnings before income taxes 5,303 6,246 (15.1 )% Provision for
income taxes 1,528 1,825 (16.3 )% Equity (income)/loss in
unconsolidated subsidiaries, net (36 ) 9 Net earnings
3,811 4,412 (13.6 )% Net earnings attributable to noncontrolling
interests 85 163
Net earnings attributable to
PMI $ 3,726 $
4,249 (12.3 )% Per share
data:(4) Basic earnings per share $
2.35 $ 2.58
(8.9 )% Diluted earnings per share $
2.35 $ 2.58
(8.9 )%
(1) Certain amounts have been reclassified
to conform to the current year's presentation due to the separate
disclosureof equity (income)/loss in unconsolidated subsidiaries,
net.
(2) The segment detail of excise taxes on
products sold for the six months ended 2014 and 2013 is shown
onSchedule 6.
(3) PMI's management evaluates segment
performance and allocates resources based on operating
companiesincome, which PMI defines as operating income, excluding
general corporate expenses and amortization ofintangibles, plus
equity (income)/loss in unconsolidated subsidiaries, net. The
reconciliation from operating income tooperating companies income
is as follows:
2014 2013
% Change
Operating Income $ 5,825 $ 6,728
(13.4 )%
Excluding:
- Amortization of Intangibles 44 48 - General corporate expenses
(included in marketing, administration and research costs above) 80
112 Plus: Equity (income)/loss in unconsolidated subsidiaries, net
(36 ) 9
Operating Companies Income $
5,985 $ 6,879
(13.0 )%
(4) Net earnings and weighted-average
shares used in the basic and diluted earnings per share
computations for thesix months ended 2014 and 2013 are shown on
Schedule 8, Footnote 1.
Schedule 6 PHILIP
MORRIS INTERNATIONAL INC. and Subsidiaries Selected Financial Data
by Business Segment
For the Six Months Ended June 30, ($ in
millions) (Unaudited)
Net Revenues excluding
Excise Taxes
European Union
EEMA Asia
Latin America
& Canada
Total 2014 Net Revenues (1) $ 14,448 $
10,236 $ 9,572 $ 4,574 $ 38,830 Excise Taxes
on Products (10,042 ) (5,944 ) (5,079 ) (3,051
) (24,116 )
Net Revenues excluding Excise Taxes
4,406 4,292 4,493 1,523 14,714
2013 Net Revenues $ 13,768 $ 9,800 $ 10,632 $ 4,810 $
39,010 Excise Taxes on Products (9,592 ) (5,576 )
(5,150 ) (3,191 ) (23,509 )
Net Revenues excluding
Excise Taxes 4,176 4,224 5,482
1,619 15,501 Variance Currency 179 (322
) (651 ) (223 ) (1,017 ) Acquisitions — — — — — Operations 51
390 (338 ) 127 230
Variance Total 230 68 (989
) (96 ) (787 ) Variance Total
(%) 5.5 % 1.6 % (18.0 )% (5.9 )% (5.1 )% Variance excluding
Currency 51 390 (338 ) 127 230 Variance excluding Currency (%) 1.2
% 9.2 % (6.2 )% 7.8 % 1.5 % Variance excluding Currency
& Acquisitions 51 390 (338 ) 127 230 Variance excluding
Currency & Acquisitions (%) 1.2 % 9.2 % (6.2 )% 7.8 % 1.5 %
(1) 2014 Currency increased (decreased) net
revenues as follows: European Union $ 560 EEMA (1,036 ) Asia (1,275
) Latin America & Canada (795 ) $ (2,546 )
Schedule 7 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Selected Financial Data by Business Segment
For the Six Months Ended June 30, ($ in millions)
(Unaudited)
Operating Companies Income
European Union
EEMA Asia
Latin America
& Canada
Total 2014 $ 1,689 $ 2,014 $ 1,815 $
467 $ 5,985 2013 2,020 1,880 2,470 509 6,879 % Change (16.4
)% 7.1 % (26.5 )% (8.3 )% (13.0 )%
Reconciliation:
For the six months ended June 30, 2013 $ 2,020
$ 1,880 $ 2,470 $ 509
$ 6,879 2013 Asset impairment and exit costs —
— 8 — 8 2014 Asset impairment and exit costs (488 ) — (24 ) — (512
) Acquired businesses — — — — — Currency 109 (210 ) (396 )
(111 ) (608 ) Operations 48 344 (243 )
69 218
For the six months ended June
30, 2014 $ 1,689 $
2,014 $ 1,815
$ 467 $
5,985 Schedule 8 PHILIP
MORRIS INTERNATIONAL INC. and Subsidiaries Diluted Earnings Per
Share
For the Six Months Ended June 30, ($ in millions,
except per share data) (Unaudited)
Diluted
E.P.S.
2014 Diluted Earnings Per Share $ 2.35 (1) 2013
Diluted Earnings Per Share $ 2.58 (1) Change $ (0.23 ) % Change
(8.9 )%
Reconciliation:
2013 Diluted Earnings Per Share $ 2.58 (1)
Special
Items:
2013 Asset impairment and exit costs — 2013 Tax items 0.01 2014
Asset impairment and exit costs (0.25 ) 2014 Tax items —
Currency (0.31 ) Interest (0.02 ) Change in tax rate 0.03 Impact of
lower shares outstanding and share-based payments 0.09 Operations
0.22
2014 Diluted Earnings Per Share $
2.35 (1) (1) Basic and diluted EPS were
calculated using the following (in millions):
YTD June2014
YTD June2013 Net earnings attributable to PMI
$ 3,726 $ 4,249 Less distributed and undistributed earnings
attributable to share-based payment awards 17 23 Net
earnings for basic and diluted EPS $ 3,709 $
4,226 Weighted-average shares for basic and
diluted EPS 1,577 1,639
Schedule 9 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Condensed Balance Sheets ($ in millions, except ratios)
(Unaudited)
June 30, December 31, 2014
2013
Assets
Cash and cash equivalents $ 1,541 $ 2,154 All other current
assets 13,169 14,698 Property, plant and equipment, net 6,648 6,755
Goodwill 9,085 8,893 Other intangible assets, net 3,209 3,193
Investments in unconsolidated subsidiaries 1,508 1,536 Other assets
1,165 939
Total assets $
36,325 $ 38,168
Liabilities and
Stockholders' (Deficit) Equity
Short-term borrowings $ 1,941 $ 2,400 Current portion of long-term
debt 407 1,255 All other current liabilities 11,232 13,411
Long-term debt 27,161 24,023 Deferred income taxes 1,520 1,477
Other long-term liabilities 1,911 1,876 Total
liabilities 44,172 44,442 Total PMI stockholders' deficit
(9,292 ) (7,766 ) Noncontrolling interests 1,445 1,492
Total stockholders' deficit (7,847 ) (6,274 )
Total
liabilities and stockholders' (deficit) equity $
36,325 $ 38,168 Total
debt $ 29,509 $ 27,678 Total debt to EBITDA 2.06 (1) 1.88 (1) Net
debt to EBITDA 1.96 (1) 1.74 (1) (1) For the calculation of
Total Debt to EBITDA and Net Debt to EBITDA ratios, refer to
Schedule 18. Schedule 10 PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments
for the Impact of Currency and Acquisitions
For the Quarters
Ended June 30, ($ in millions) (Unaudited)
2014 2013
% Change in Reported NetRevenues
excluding ExciseTaxes
ReportedNetRevenues
LessExciseTaxes
ReportedNetRevenuesexcludingExciseTaxes
LessCurrency
ReportedNetRevenuesexcludingExciseTaxes
&Currency
LessAcquisi-tions
Reported
NetRevenuesexcludingExcise
Taxes,Currency &Acquisitions
ReportedNetRevenues
LessExciseTaxes
Reported
NetRevenuesexcludingExcise Taxes
Reported
ReportedexcludingCurrency
ReportedexcludingCurrency
&Acquisitions
$ 7,829 $ 5,436 $ 2,393 $ 128 $ 2,265 $
—
$ 2,265 European Union $ 7,245 $ 5,039 $ 2,206 8.5 % 2.7 % 2.7 %
5,674 3,391 2,283 (196 ) 2,479 —
2,479
EEMA 5,377 3,196 2,181 4.7 % 13.7 % 13.7 % 5,097 2,786 2,311 (285 )
2,596 — 2,596 Asia 5,381 2,689 2,692 (14.2 )% (3.6 )% (3.6 )% 2,451
1,641 810 (122 ) 932 — 932 Latin America & Canada 2,480 1,642
838 (3.3 )% 11.2 % 11.2 %
$ 21,051
$ 13,254 $ 7,797 $
(475 ) $ 8,272 $ —
$ 8,272 PMI Total $
20,483 $ 12,566 $
7,917 (1.5 )% 4.5 %
4.5 % 2014 2013
% Change in Reported
OperatingCompanies Income
ReportedOperatingCompaniesIncome
LessCurrency
ReportedOperatingCompaniesIncomeexcludingCurrency
LessAcquisi-tions
ReportedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
ReportedOperatingCompaniesIncome
Reported
ReportedexcludingCurrency
ReportedexcludingCurrency
&Acquisitions
$ 711 $ 81 $ 630 $ — $ 630 European Union $ 1,082 (34.3 )%
(41.8 )% (41.8 )% 1,087 (130 ) 1,217 — 1,217 EEMA 945 15.0 % 28.8 %
28.8 % 900 (181 ) 1,081 — 1,081 Asia 1,128 (20.2 )% (4.2 )% (4.2 )%
265 (59 ) 324 — 324 Latin America & Canada 255 3.9 % 27.1 %
27.1 %
$
2,963 $ (289 ) $
3,252 $ — $ 3,252
PMI Total $ 3,410 (13.1
)% (4.6 )% (4.6 )%
Schedule 11 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures Reconciliation of Reported Operating Companies Income to
Adjusted Operating Companies Income & Reconciliation of
Adjusted Operating Companies Income Margin, excluding Currency and
Acquisitions
For the Quarters Ended June 30, ($ in millions)
(Unaudited)
2014 2013
% Change in Adjusted
OperatingCompanies Income
ReportedOperatingCompaniesIncome
LessAssetImpairment
&Exit Costs
AdjustedOperatingCompaniesIncome
LessCurrency
AdjustedOperatingCompaniesIncomeexcludingCurrency
LessAcquisi-tions
AdjustedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
ReportedOperatingCompaniesIncome
LessAssetImpairment
&Exit Costs
AdjustedOperatingCompaniesIncome
Adjusted
AdjustedexcludingCurrency
AdjustedexcludingCurrency
&Acquisitions
$ 711 $ (488 ) $ 1,199 $ 81 $ 1,118 $ — $ 1,118 European
Union $ 1,082 $ — $ 1,082 10.8 % 3.3 % 3.3 % 1,087 — 1,087 (130 )
1,217 — 1,217 EEMA 945 — 945 15.0 % 28.8 % 28.8 % 900 (1 ) 901 (181
) 1,082 — 1,082 Asia 1,128 (5 ) 1,133 (20.5 )% (4.5 )% (4.5 )% 265
— 265 (59 ) 324 — 324 Latin America & Canada 255 — 255
3.9
% 27.1 % 27.1 %
$ 2,963 $
(489 ) $ 3,452 $
(289 ) $ 3,741 $ —
$ 3,741 PMI Total $
3,410 $ (5 ) $
3,415 1.1 % 9.5 %
9.5 % 2014 2013
% Points Change
AdjustedOperatingCompaniesIncomeexcludingCurrency
Net
RevenuesexcludingExcise Taxes&
Currency(1)
AdjustedOperatingCompaniesIncome
MarginexcludingCurrency
AdjustedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
Net
RevenuesexcludingExcise Taxes,Currency
&Acquisitions(1)
AdjustedOperatingCompaniesIncome
MarginexcludingCurrency
&Acquisitions
AdjustedOperatingCompaniesIncome
NetRevenuesexcludingExciseTaxes(1)
AdjustedOperatingCompaniesIncome
Margin
AdjustedOperatingCompaniesIncomeMarginexcludingCurrency
AdjustedOperatingCompaniesIncome
MarginexcludingCurrency
&Acquisitions
$ 1,118 $ 2,265 49.4 % $ 1,118 $ 2,265 49.4 % European Union
$ 1,082 $ 2,206 49.0 % 0.4 0.4 1,217 2,479 49.1 % 1,217 2,479 49.1
% EEMA 945 2,181 43.3 % 5.8 5.8 1,082 2,596 41.7 % 1,082 2,596 41.7
% Asia 1,133 2,692 42.1 % (0.4 ) (0.4 ) 324 932 34.8 % 324 932 34.8
% Latin America & Canada 255 838 30.4 % 4.4 4.4
$ 3,741
$ 8,272 45.2 % $
3,741 $ 8,272 45.2
% PMI Total $ 3,415 $
7,917 43.1 % 2.1 2.1
(1) For the calculation of net revenues excluding excise
taxes, currency and acquisitions, refer to Schedule 10.
Schedule 12 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of
Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted
EPS, excluding Currency
For the Quarters Ended June 30,
(Unaudited)
2014 2013 %
Change Reported Diluted EPS $ 1.17
$ 1.30 (10.0 )% Adjustments:
Asset impairment and exit costs 0.24 — Tax items — —
Adjusted Diluted EPS $ 1.41 $
1.30 8.5 % Less: Currency impact (0.15
)
Adjusted Diluted EPS, excluding Currency
$ 1.56 $ 1.30 20.0
%
Schedule 13
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of
Non-GAAP Measures Reconciliation of Reported Diluted EPS to
Reported Diluted EPS, excluding Currency
For the Quarters Ended
June 30, (Unaudited)
2014
2013 % Change Reported Diluted EPS
$ 1.17 $ 1.30
(10.0 )% Less: Currency impact (0.15 )
Reported Diluted EPS, excluding Currency $
1.32 $ 1.30
1.5 % Schedule 14 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the
Six Months Ended June 30, ($ in millions) (Unaudited)
2014 2013
% Change in Reported NetRevenues
excluding ExciseTaxes
ReportedNetRevenues
LessExciseTaxes
ReportedNetRevenuesexcludingExciseTaxes
LessCurrency
ReportedNetRevenuesexcludingExciseTaxes
&Currency
LessAcquisi-tions
Reported
NetRevenuesexcludingExcise
Taxes,Currency &Acquisitions
ReportedNetRevenues
LessExciseTaxes
Reported
NetRevenuesexcludingExcise Taxes
Reported
ReportedexcludingCurrency
ReportedexcludingCurrency
&Acquisitions
$ 14,448 $ 10,042 $ 4,406 $ 179 $ 4,227 $ — $ 4,227 European Union
$ 13,768 $ 9,592 $ 4,176 5.5 % 1.2 % 1.2 % 10,236 5,944 4,292 (322
) 4,614 — 4,614 EEMA 9,800 5,576 4,224 1.6 % 9.2 % 9.2 % 9,572
5,079 4,493 (651 ) 5,144 — 5,144 Asia 10,632 5,150 5,482 (18.0 )%
(6.2 )% (6.2 )% 4,574 3,051 1,523 (223 ) 1,746 — 1,746 Latin
America & Canada 4,810 3,191 1,619 (5.9 )% 7.8 % 7.8 %
$ 38,830 $ 24,116
$ 14,714 $ (1,017 )
$ 15,731 $ — $
15,731 PMI Total $ 39,010
$ 23,509 $ 15,501
(5.1 )% 1.5 % 1.5 %
2014 2013
% Change in Reported
OperatingCompanies Income
ReportedOperatingCompaniesIncome
LessCurrency
ReportedOperatingCompaniesIncomeexcludingCurrency
LessAcquisi-tions
ReportedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
ReportedOperatingCompaniesIncome
Reported
ReportedexcludingCurrency
ReportedexcludingCurrency
&Acquisitions
$ 1,689 $ 109 $ 1,580 $ — $ 1,580 European Union $ 2,020
(16.4 )% (21.8 )% (21.8 )% 2,014 (210 ) 2,224 — 2,224 EEMA 1,880
7.1 % 18.3 % 18.3 % 1,815 (396 ) 2,211 — 2,211 Asia 2,470 (26.5 )%
(10.5 )% (10.5 )% 467 (111 ) 578 — 578 Latin America & Canada
509 (8.3 )% 13.6 % 13.6 %
$ 5,985 $ (608 )
$ 6,593 $ — $
6,593 PMI Total $ 6,879
(13.0 )% (4.2 )% (4.2 )%
Schedule 15
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of
Non-GAAP Measures Reconciliation of Reported Operating Companies
Income to Adjusted Operating Companies Income & Reconciliation
of Adjusted Operating Companies Income Margin, excluding Currency
and Acquisitions
For the Six Months Ended June 30, ($ in
millions) (Unaudited)
2014
2013
% Change in Adjusted
OperatingCompanies Income
ReportedOperatingCompaniesIncome
LessAssetImpairment
&Exit Costs
AdjustedOperatingCompaniesIncome
LessCurrency
AdjustedOperatingCompaniesIncomeexcludingCurrency
LessAcquisi-tions
AdjustedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
ReportedOperatingCompaniesIncome
LessAssetImpairment
&Exit Costs
AdjustedOperatingCompaniesIncome
Adjusted
AdjustedexcludingCurrency
AdjustedexcludingCurrency
&Acquisitions
$ 1,689 $ (488 ) $ 2,177 $ 109 $ 2,068 $ — $ 2,068 European
Union $ 2,020 $ — $ 2,020 7.8 % 2.4 % 2.4 % 2,014 — 2,014 (210 )
2,224 — 2,224 EEMA 1,880 — 1,880 7.1 % 18.3 % 18.3 % 1,815 (24 )
1,839 (396 ) 2,235 — 2,235 Asia 2,470 (8 ) 2,478 (25.8 )% (9.8 )%
(9.8 )% 467 — 467 (111 ) 578 — 578 Latin America & Canada 509 —
509 (8.3 )% 13.6 % 13.6 %
$ 5,985
$ (512 ) $ 6,497 $
(608 ) $ 7,105 $ —
$ 7,105 PMI Total $
6,879 $ (8 ) $
6,887 (5.7 )% 3.2 %
3.2 % 2014 2013
% Points Change
AdjustedOperatingCompaniesIncomeexcludingCurrency
Net
RevenuesexcludingExcise Taxes&
Currency(1)
AdjustedOperatingCompaniesIncome
MarginexcludingCurrency
AdjustedOperatingCompaniesIncomeexcludingCurrency
&Acquisitions
Net
RevenuesexcludingExcise Taxes,Currency
&Acquisitions(1)
AdjustedOperatingCompaniesIncome
MarginexcludingCurrency
&Acquisitions
AdjustedOperatingCompaniesIncome
NetRevenuesexcludingExciseTaxes(1)
AdjustedOperatingCompaniesIncome
Margin
AdjustedOperatingCompaniesIncomeMarginexcludingCurrency
AdjustedOperatingCompaniesIncomeMarginexcludingCurrency
&Acquisitions
$ 2,068 $ 4,227 48.9 % $ 2,068 $ 4,227 48.9 % European Union
$ 2,020 $ 4,176 48.4 % 0.5 0.5 2,224 4,614 48.2 % 2,224 4,614 48.2
% EEMA 1,880 4,224 44.5 % 3.7 3.7 2,235 5,144 43.4 % 2,235 5,144
43.4 % Asia 2,478 5,482 45.2 % (1.8 ) (1.8 ) 578 1,746 33.1 % 578
1,746 33.1 % Latin America & Canada 509 1,619 31.4 % 1.7 1.7
$
7,105 $ 15,731 45.2
% $ 7,105 $ 15,731
45.2 % PMI Total $ 6,887
$ 15,501 44.4 % 0.8
0.8 (1) For the calculation of net revenues excluding
excise taxes, currency and acquisitions, refer to Schedule 14.
Schedule 16 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of
Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted
EPS, excluding Currency
For the Six Months Ended June 30,
(Unaudited)
2014
2013 % Change Reported Diluted EPS
$ 2.35 $ 2.58 (8.9 )%
Adjustments: Asset impairment and exit costs 0.25 — Tax
items — 0.01
Adjusted Diluted EPS
$ 2.60 $ 2.59 0.4 %
Less: Currency impact (0.31 )
Adjusted
Diluted EPS, excluding Currency $ 2.91
$ 2.59 12.4 %
Schedule 17 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of
Reported Diluted EPS to Reported Diluted EPS, excluding Currency
For the Six Months Ended June 30, (Unaudited)
2014 2013 % Change
Reported Diluted EPS $ 2.35 $
2.58 (8.9 )% Less: Currency impact
(0.31 )
Reported Diluted EPS, excluding
Currency $ 2.66 $ 2.58
3.1 % Schedule 18 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures Calculation of Total Debt to EBITDA and Net Debt to EBITDA
Ratios ($ in millions, except ratios) (Unaudited)
For the Year Ended For the Year
Ended June 30, December 31, 2014
2013 July ~ December January ~ June 12 months 2013
2014
rolling
Earnings before income taxes $ 6,296 $ 5,303 $ 11,599
$ 12,542 Interest expense, net 491 522 1,013 973 Depreciation and
amortization 441 427 868 882 Extraordinary, unusual or
non-recurring expenses, net (1) 301 512 813
309
EBITDA $ 7,529 $ 6,764
$ 14,293 $ 14,706 June
30, December 31, 2014 2013
Short-term borrowings $ 1,941 $ 2,400 Current portion of long-term
debt 407 1,255 Long-term debt 27,161 24,023
Total
Debt $ 29,509 $ 27,678 Less: Cash
and cash equivalents 1,541 2,154
Net Debt $
27,968 $ 25,524
Ratios Total Debt to EBITDA 2.06
1.88 Net Debt to EBITDA 1.96
1.74 (1) Asset Impairment and Exit Costs at
Operating Income level. Schedule 19 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures Reconciliation of Operating Cash Flow to Free Cash Flow
and Free Cash Flow, excluding Currency Reconciliation of Operating
Cash Flow to Operating Cash Flow, excluding Currency
For the
Quarters and Six Months Ended June 30, ($ in millions)
(Unaudited)
For
the Quarters Ended For the Six Months Ended June
30, June 30, 2014 2013 % Change
2014 2013 % Change Net cash provided
by operating activities(a) $ 2,705 $
3,137 (13.8 )% $ 3,420 $
4,500 (24.0 )% Less: Capital
expenditures 252 280 508 520
Free cash flow $ 2,453 $ 2,857
(14.1 )% $ 2,912 $ 3,980
(26.8 )% Less: Currency impact (367 )
(620 )
Free cash flow, excluding currency
$ 2,820 $ 2,857
(1.3 )% $ 3,532 $
3,980 (11.3 )%
For the Quarters Ended For
the Six Months Ended June 30, June 30,
2014 2013 % Change 2014 2013
% Change Net cash provided by operating
activities(a) $ 2,705 $ 3,137
(13.8 )% $ 3,420 $ 4,500
(24.0 )% Less: Currency impact (380 )
(648 )
Net cash provided by operating
activities,excluding currency $ 3,085
$ 3,137 (1.7 )% $
4,068 $ 4,500 (9.6
)% (a) Operating cash flow. Schedule 20
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures Reconciliation of Reported
Diluted EPS to Adjusted Diluted EPS
For the Year Ended December
31, (Unaudited)
2013 Reported
Diluted EPS $ 5.26 Adjustments: Asset
impairment and exit costs 0.12 Tax items 0.02
Adjusted Diluted EPS $ 5.40
Schedule 21 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and
Adjusted Diluted EPS, excluding Currency
For the Quarters Ended
December 31, (Unaudited)
2013 2012
% Change Reported Diluted EPS $
1.24 $ 1.25 (0.8 )%
Adjustments: Asset impairment and exit costs 0.12 0.01 Tax items
0.01 (0.02 )
Adjusted Diluted EPS $
1.37 $ 1.24 10.5 % Less:
Currency impact (0.11 )
Adjusted Diluted EPS,
excluding Currency $ 1.48 $
1.24 19.4 %
Philip Morris International Inc.Investor Relations:New York: +1
(917) 663 2233Lausanne: +41 (0)58 242 4666orMedia:Lausanne: +41
(0)58 242 4500
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