Regulatory News:
2014 Full-Year
- Reported diluted earnings per share of
$4.76, down by $0.50 or 9.5% versus $5.26 in 2013
- Excluding unfavorable currency of
$0.80, reported diluted earnings per share up by $0.30 or 5.7%
versus $5.26 in 2013 as detailed in the attached Schedule 17
- Adjusted diluted earnings per share of
$5.02, down by $0.38 or 7.0% versus $5.40 in 2013
- Excluding unfavorable currency of
$0.80, adjusted diluted earnings per share up by $0.42 or 7.8%
versus $5.40 in 2013 as detailed in the attached Schedule 16
- Cigarette shipment volume of 856.0
billion units, down by 2.8% excluding acquisitions
- Reported net revenues, excluding excise
taxes, of $29.8 billion, down by 4.6%
- Excluding unfavorable currency and the
impact of acquisitions, reported net revenues, excluding excise
taxes, up by 2.0% as detailed in the attached Schedule 14
- Reported operating companies income of
$12.1 billion, down by 12.4%
- Excluding unfavorable currency and the
impact of acquisitions, reported operating companies income down by
1.6%
- Adjusted operating companies income,
reflecting the items detailed in the attached Schedule 15, of $12.6
billion, down by 10.5%
- Excluding unfavorable currency and the
impact of acquisitions, adjusted operating companies income was
flat
- Reported operating income of $11.7
billion, down by 13.4%
- Increased the regular quarterly
dividend by 6.4% to an annualized rate of $4.00 per common
share
- Repurchased 45.2 million shares of the
company's common stock for $3.8 billion
2014 Fourth-Quarter
- Reported diluted earnings per share of
$1.03, down by $0.21 or 16.9% versus $1.24 in 2013
- Excluding unfavorable currency of
$0.28, reported diluted earnings per share up by $0.07 or 5.6%
versus $1.24 in 2013 as detailed in the attached Schedule 13
- Adjusted diluted earnings per share of
$1.03, down by $0.34 or 24.8% versus $1.37 in 2013
- Excluding unfavorable currency of
$0.28, adjusted diluted earnings per share down by $0.06 or 4.4%
versus $1.37 in 2013 as detailed in the attached Schedule 12
- Cigarette shipment volume of 214.9
billion units, down by 3.8% excluding acquisitions
- Reported net revenues, excluding excise
taxes, of $7.2 billion, down by 7.6%
- Excluding unfavorable currency and the
impact of acquisitions, reported net revenues, excluding excise
taxes, up by 1.1% as detailed in the attached Schedule 10
- Reported operating companies income of
$2.6 billion, down by 18.9%
- Excluding unfavorable currency and the
impact of acquisitions, reported operating companies income down by
3.3%
- Adjusted operating companies income,
reflecting the items detailed in the attached Schedule 11, of $2.7
billion, down by 24.9%
- Excluding unfavorable currency and the
impact of acquisitions, adjusted operating companies income down by
10.6%
- Reported operating income of $2.5
billion, down by 20.6%
- Repurchased 9.3 million shares of the
company's common stock for $800 million
2015
- Forecasts 2015 full-year reported
diluted earnings per share to be in a range of $4.27 to $4.37, at
prevailing exchange rates, versus $4.76 in 2014. Excluding an
unfavorable currency impact, at prevailing exchange rates, of
approximately $1.15 for the full-year 2015, the reported diluted
earnings per share range represents a projected increase of 8% to
10% versus adjusted diluted earnings per share of $5.02 in 2014 as
detailed in the attached Schedule 16
- This forecast includes incremental
spending versus 2014 for the deployment of PMI's Reduced-Risk
Product, iQOS. The spending, which is skewed towards the second
half of the year, will support plans for national expansion in
Japan and Italy, as well as pilot or national launches in
additional markets, later in 2015
- This forecast does not include any
share repurchases in 2015. The company will revisit the potential
for repurchases as the year unfolds, depending on the currency
environment
- 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. Factors described in the Forward-Looking and
Cautionary Statements section of this release represent continuing
risks to these projections
Philip Morris International Inc. (NYSE / Euronext Paris: PM)
today announced its 2014 full-year and fourth-quarter results.
“We delivered a solid currency-neutral performance in 2014,
reflecting robust pricing, strong market share gains, notably in
the EU Region, and very substantial progress in addressing the
specific market challenges that we outlined at the beginning of the
year. We successfully executed on our key strategic initiatives,
including the pilot launches of our Reduced-Risk Product, iQOS, the
roll-out of the Marlboro 2.0 Architecture and the optimization of
our manufacturing footprint," said André Calantzopoulos, Chief
Executive Officer.
“Despite a historically high adverse currency headwind, we enter
2015 with strong business momentum that underpins our target annual
growth rates, excluding currency and acquisitions, of 4% to 6% for
net revenues, 6% to 8% for adjusted operating companies income and
8% to 10% for adjusted diluted earnings per share."
"We remain steadfast in our aim to return around 100% of our
free cash flow to our shareholders. However, given the recent
extreme currency volatility, we are focused on managing our cash
flow prudently and on maintaining our financial flexibility for
business development opportunities. Consequently, our full-year
guidance does not currently envisage any share repurchases in 2015,
although we will revisit the potential for such purchases as the
year unfolds depending on the currency environment.”
Conference Call
A conference call, hosted by André Calantzopoulos, Chief
Executive Officer, and Jacek Olczak, Chief Financial Officer, with
members of the investor community and news media, will be webcast
at 1:00 p.m., Eastern Time, on February 5, 2015. Access is
available at www.pmi.com/webcasts.
The audio webcast may also be accessed on iOS or Android devices
by downloading PMI’s free Investor Relations Mobile Application at
www.pmi.com/irapp.
Dividends and Share Repurchase
Program
PMI increased its regular quarterly dividend during 2014 to
$1.00, up by 6.4% from $0.94, which represents an annualized rate
of $4.00 per common share. Since its spin-off in March 2008, PMI
has increased its regular quarterly dividend by 117.4% from the
initial annualized rate of $1.84 per common share.
During the fourth quarter, PMI spent $800 million to repurchase
9.3 million shares. For the full-year 2014, PMI spent $3.8 billion
to repurchase 45.2 million shares. Under the current $18 billion
share repurchase program, PMI has spent $12.7 billion to repurchase
144.6 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 July - September 2014 750 8,872 October -
December 2014 800 9,315
Total Under Program $
12,653 144,643
Since May 2008, when PMI began its first share repurchase
program, the company has spent an aggregate of $37.7 billion to
repurchase 601.4 million shares, or 28.5% of the shares outstanding
at the time of the spin-off in March 2008, at an average price of
$62.61 per share.
Global Manufacturing Footprint
Restructuring
In 2014, as part of the company's ongoing efforts to enhance the
cost efficiency of its global manufacturing operations, PMI:
Ceased cigarette production in Australia, incurring an after-tax
charge of $0.01 per share for asset impairment and exit costs;
Discontinued cigarette production at its factory located in
Bergen op Zoom, the Netherlands. As a result, PMI incurred a
full-year pre-tax charge of $489 million, or an after-tax charge of
$0.24 per share, reflecting $350 million primarily related to
employee separation costs and $139 million related to asset
impairment costs; and
Closed a leaf processing facility in Brampton, Canada and
adopted, on November 5, 2014, a new leaf-buying model in the United
States, effective April 1, 2015, under which the company will
transition from directly purchasing tobacco through contracts with
U.S. growers to purchasing through two suppliers, Alliance One
International Inc. and Universal Corporation. As a result of these
two leaf initiatives, PMI incurred a combined after-tax charge of
$0.01 per share for asset impairment and exit 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 was 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.
Productivity and Cost Savings
Program
In 2014, PMI exceeded its one-year gross productivity and cost
savings target of $300 million.
In 2015, PMI's productivity and cost savings initiatives will
include, but are not limited to, the continued enhancement of
production processes, the harmonization of tobacco blends, the
streamlining of product specifications and number of brand
variants, supply chain improvements and overall spending efficiency
across the company. PMI anticipates that these initiatives,
combined with savings associated with the manufacturing footprint
restructuring implemented in 2014, notably in Australia and the
Netherlands, should result in a total company cost base increase,
excluding RRPs and currency, of approximately 1%.
2014 FULL-YEAR AND
FOURTH-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.
“Adjusted EBITDA” is defined as earnings before interest,
taxes, depreciation and amortization, excluding asset impairment
and exit costs, discrete tax items and unusual items. Management
also reviews OCI, OCI margins and earnings per share, or “EPS,” 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 neither considered 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 (“RRPs”) is the term the company uses to refer to
products with the potential to reduce individual risk and
population harm in comparison to smoking combustible cigarettes.
PMI’s RRPs are in various stages of development, and we are
conducting extensive and rigorous scientific studies to determine
whether we can support claims for such products 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, we will need
to evaluate rigorously the full set of data from the relevant
scientific studies to determine whether they substantiate reduced
exposure or risk. Any such claims may also be subject to government
review and approval, as is the case in the United States 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)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
European Union $ 2,076 $ 2,139 (2.9 )% 2.7 % $ 8,839 $ 8,596
2.8 % 1.4 %
Eastern Europe, Middle East & Africa 2,196
2,257 (2.7 )% 9.9 % 8,922 8,766 1.8 % 10.5 %
Asia 2,003
2,476 (19.1 )% (12.6 )% 8,728 10,501 (16.9 )% (7.2 )%
Latin
America & Canada 922 917 0.5 % 13.1 % 3,278 3,354 (2.3 )%
10.6 %
Total PMI $ 7,197 $ 7,789
(7.6 )% 1.1 % $ 29,767
$ 31,217 (4.6 )% 2.1 %
2014 Full-Year
Net revenues of $29.8 billion were down by 4.6%, including
unfavorable currency of $2.1 billion. Net revenues increased by
2.1%, excluding currency, or by 2.0%, excluding currency and
acquisitions, driven by favorable pricing of $1.9 billion across
all Regions, led by: Argentina, Australia, Canada, Egypt,
reflecting the impact of the change to PMI's new business structure
announced on January 29, 2014, Germany, Indonesia, Russia and
Ukraine, partially offset by Italy, reflecting the adverse
annualized impact of the October 2013 VAT increase and the price
repositioning of Chesterfield, and the Philippines, mainly
reflecting the partial absorption of the January 2014 excise tax
increase in response to competitive dynamics. The favorable pricing
was partially offset by unfavorable volume/mix of $1.3 billion,
mainly reflecting: lower volume/mix in Australia, resulting from a
lower total market following the impact of tax-driven price
increases in 2014, and lower market share, primarily due to the
unfavorable impact of current competitive dynamics; lower
volume/mix in Indonesia, mainly reflecting lower share; and lower
volume and market share in Japan resulting from a lower total
market following the consumption tax-driven price increases of
April 1, 2014, as well as the unfavorable impact of an adjustment
in distributor inventories.
2014 Fourth-Quarter
Net revenues of $7.2 billion were down by 7.6%, including
unfavorable currency of $681 million. Net revenues increased by
1.1%, excluding currency, or by the same percentage excluding
currency and acquisitions, driven by favorable pricing of $512
million across all Regions, led by: Argentina, Egypt, reflecting
the impact of the change to PMI's new business structure announced
on January 29, 2014, Indonesia and Russia, partially offset by the
Philippines, mainly reflecting the partial absorption of the
January 2014 excise tax increase in response to competitive
dynamics. The favorable pricing was partially offset by unfavorable
volume/mix of $430 million, predominantly due to: lower volume/mix
in Australia, resulting from a lower total market following the
impact of tax-driven price increases in 2014, and lower market
share, primarily due to the unfavorable impact of current
competitive dynamics; and lower volume in Japan resulting from a
lower total market following the consumption tax-driven price
increases of April 1, 2014, as well as the unfavorable impact of an
adjustment in distributor inventories.
OPERATING COMPANIES
INCOME
PMI Operating
Companies Income ($ Millions)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
European Union $ 852 $ 1,011 (15.7 )% (7.8 )% $ 3,727 $
4,238 (12.1 )% (12.9 )%
Eastern Europe, Middle East &
Africa 903 811 11.3 % 41.3 % 4,121 3,779 9.1 % 25.2 %
Asia 573 1,055 (45.7 )% (35.1 )% 3,187 4,622 (31.0 )% (16.9
)%
Latin America & Canada 296 358 (17.3 )% (0.8 )% 1,030
1,134 (9.2 )% 12.3 %
Total PMI $ 2,624
$ 3,235 (18.9 )% (3.6 )%
$ 12,065 $ 13,773 (12.4
)% (1.7 )%
2014 Full-Year
Reported operating companies income of $12.1 billion was down by
12.4%, including unfavorable currency of $1.5 billion. Excluding
currency, operating companies income decreased by 1.7%, or by 1.6%
excluding currency and acquisitions, primarily due to unfavorable
volume/mix of $1.1 billion; higher manufacturing costs in Egypt,
mainly due to the impact of the change to PMI's new business
structure; higher distribution and manufacturing costs, and
marketing investment, in Indonesia; investments related to the
launch and commercialization of the company's Reduced-Risk Product,
iQOS; and costs related to the factory closures in Australia and
the Netherlands. The decline in operating companies income,
excluding currency and acquisitions, was partly offset by favorable
pricing.
Adjusted operating companies income decreased by 10.5% as shown
in the table below and detailed in Schedule 15. Adjusted operating
companies income, excluding unfavorable currency, decreased by 0.1%
and was flat excluding currency and acquisitions. Adjusted
operating companies income margin, excluding currency and
acquisitions, decreased by 0.9 points to 44.2%, as detailed in
Schedule 15.
2014 Fourth-Quarter
Reported operating companies income of $2.6 billion was down by
18.9%, including unfavorable currency of $494 million. Excluding
currency, operating companies income decreased by 3.6%, or by 3.3%
excluding currency and acquisitions, primarily due to unfavorable
volume/mix of $414 million; higher manufacturing costs in Egypt,
mainly due to the impact of the change to PMI's new business
structure; higher manufacturing costs and marketing investment in
Indonesia; investments related to the launch and commercialization
of the company's Reduced-Risk Product, iQOS; and ongoing costs
related to the factory closures in Australia and the Netherlands.
The decline in operating companies income, excluding currency and
acquisitions, was partly offset by favorable pricing.
Adjusted operating companies income decreased by 24.9% as shown
in the table below and detailed in Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, decreased by
10.9% or by 10.6% excluding currency and the impact of
acquisitions. Adjusted operating companies income margin, excluding
currency and acquisitions, decreased by 5.3 points to 40.1%, as
detailed in Schedule 11.
PMI Operating
Companies Income ($ Millions)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 2,624 $ 3,235 (18.9 )% (3.6 )% $ 12,065 $
13,773 (12.4 )% (1.7 )% Asset impairment & exit costs (32 )
(301 ) (535 ) (309 )
Adjusted OCI $ 2,656
$ 3,536 (24.9 )% (10.9 )%
$ 12,600 $ 14,082 (10.5
)% (0.1 )% Adjusted OCI Margin* 36.9 %
45.4 % (8.5 ) (5.4 ) 42.3 % 45.1 % (2.8 ) (0.9 )
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
SHIPMENT VOLUME &
MARKET SHARE
PMI Cigarette
Shipment Volume (Million Units)
Fourth-Quarter
Full-Year
2014
2013
Change
2014
2013
Change
European Union 44,370 44,437 (0.2 )% 185,197 185,096 0.1 %
Eastern Europe, Middle East & Africa 74,495 76,428 (2.5
)% 287,923 296,462 (2.9 )%
Asia 69,322 74,821 (7.3 )%
288,128 301,324 (4.4 )%
Latin America & Canada 26,705
27,513 (2.9 )% 94,706 97,287 (2.7 )%
Total PMI
214,892 223,199 (3.7 )% 855,954
880,169 (2.8 )%
2014 Full-Year
PMI's cigarette shipment volume of 856.0 billion units decreased
by 2.8% excluding acquisitions, or 24.3 billion units, due
primarily to: EEMA, principally Kazakhstan, Russia and Ukraine,
partially offset by Algeria and Turkey; Asia, predominantly Japan,
reflecting a lower total market, lower market share and the
unfavorable impact of an adjustment in distributor inventories, as
well as Australia, Indonesia and Pakistan; and Latin America &
Canada, principally Canada and Mexico. The overall decline was
partially offset by the positive impact of market share growth in
the EU, EEMA and Latin America & Canada Regions. PMI's
cigarette shipment volume in the EU was slightly positive.
Total cigarette shipments of Marlboro of 283.0 billion units
decreased by 2.8%, due primarily to declines in: the EU, notably
France, Italy and Poland, partly offset by the Czech Republic and
Spain; EEMA, notably Egypt, Russia and Ukraine, partly offset by
Algeria and Saudi Arabia; Asia, due almost entirely to Japan,
partly offset by the Philippines; and Latin America & Canada,
due predominantly to Mexico. The overall decline was partially
offset by the positive impact of market share growth in the EU and
EEMA Regions. Market share of Marlboro in Asia and Latin America
& Canada was flat.
Total cigarette shipments of Parliament of 47.2 billion units
increased by 5.6%, driven by growth in all Regions and notably in
Turkey. Total cigarette shipments of L&M of 94.2 billion units
decreased by 0.9%, due primarily to EEMA, notably Saudi Arabia and
Turkey, partially offset by slightly increased or essentially flat
shipments in the three other Regions. Total cigarette shipments of
Bond Street of 43.6 billion units decreased by 2.9%, due
predominantly to Kazakhstan, Serbia and Ukraine, partially offset
by Australia and Russia. Total cigarette shipments of Philip Morris
of 31.9 billion units decreased by 8.7%, due almost entirely to
Japan, principally reflecting the morphing to Lark, partly offset
by growth in the three other Regions. Total cigarette shipments of
Chesterfield of 42.1 billion units increased by 22.6%, driven by
growth in all Regions and notably in Italy, Poland and Turkey,
partly offset by Russia and Ukraine. Total cigarette shipments of
Lark of 28.5 billion units decreased by 1.3%, due predominantly to
Turkey, partly offset by Japan (including the impact of the
morphing of Philip Morris).
Total shipment volume of Other Tobacco Products ("OTP"), in
cigarette equivalent units, increased by 3.4%, mainly reflecting
growth in the fine cut category, notably in Belgium, the Czech
Republic, Hungary and Poland, partly offset by France and Germany.
Total shipment volume for cigarettes and OTP, in cigarette
equivalent units, decreased by 2.5%.
PMI's market share increased, or was flat, in a number of key
markets, including Algeria, Argentina, Austria, Canada, France,
Germany, Italy, Korea, the Netherlands, the Philippines, Poland,
Russia, Saudi Arabia, Spain, Switzerland and the United
Kingdom.
2014 Fourth-Quarter
PMI's cigarette shipment volume of 214.9 billion units decreased
by 3.8% excluding acquisitions, or 8.4 billion units, due
principally to: EEMA, mainly Kazakhstan and Ukraine, partly offset
by North Africa; Asia, mainly Australia, Indonesia, Japan,
reflecting a lower total market and the unfavorable impact of an
adjustment in distributor inventories, Pakistan and the
Philippines, partially offset by Korea and Thailand; and Latin
America & Canada, mainly Argentina, Brazil, Canada and Mexico.
PMI's cigarette shipment volume in the EU decreased slightly by
0.2%.
Total cigarette shipments of Marlboro of 71.3 billion units
decreased by 4.6%, due to: the EU, notably Italy and Poland, partly
offset by Germany; EEMA, notably Egypt and Ukraine, partly offset
by Algeria and Saudi Arabia; Asia, predominantly Japan, and Latin
America & Canada, mainly Mexico.
Total cigarette shipments of Parliament of 12.0 billion units
increased by 3.7%, driven by growth in EEMA, notably Russia and
Turkey, partly offset by Japan. Total cigarette shipments of
L&M of 25.1 billion units increased by 6.2%, driven by growth
across all four Regions and notably in Egypt, Thailand, Turkey and
Ukraine. Total cigarette shipments of Bond Street of 11.2 billion
units decreased by 2.0%, predominantly due to Kazakhstan and
Ukraine, partly offset by Australia and Russia. Total cigarette
shipments of Philip Morris of 8.2 billion units decreased by 8.8%,
principally reflecting the morphing to Lark in Japan. Total
cigarette shipments of Chesterfield of 10.0 billion units increased
by 15.6%, driven primarily by Italy, Poland and Turkey, partly
offset by Russia. Total cigarette shipments of Lark of 5.8 billion
units decreased by 16.1%, due predominantly to Japan and
Turkey.
Total shipment volume of OTP, in cigarette equivalent units,
increased by 3.0%, mainly reflecting growth in the fine cut
category, notably in the Czech Republic and Hungary, partly offset
by France, Germany and Portugal. Total shipment volume for
cigarettes and OTP, in cigarette equivalent units, decreased by
3.5%.
PMI's market share increased, or was flat, in a number of key
markets, including Algeria, Argentina, Austria, Egypt, France,
Germany, Italy, Japan, Korea, the Netherlands, the Philippines,
Poland, Russia, Saudi Arabia, Spain, Switzerland and the United
Kingdom.
EUROPEAN UNION REGION
(EU)
2014 Full-Year
Net revenues of $8.8 billion increased by 2.8%. Excluding
favorable currency of $122 million, net revenues increased by 1.4%,
or by 1.3% excluding currency and acquisitions, driven by favorable
pricing of $127 million, notably in Germany and Poland, despite the
adverse impact of the October 2013 VAT increase and price
repositioning of Chesterfield in Italy. The favorable pricing was
partly offset by unfavorable volume/mix of $17 million,
predominantly resulting from a lower total market, notably in
France, Poland and the United Kingdom, partly offset by a higher
total market in Germany and Italy and higher share in all key
markets.
Reported operating companies income of $3.7 billion decreased by
12.1%, including favorable currency of $37 million. Excluding
currency, operating companies income decreased by 12.9%, and by the
same percentage excluding currency and acquisitions, mainly due to
higher asset impairment and exit costs of $490 million primarily
related to the discontinuation of cigarette production in the
Netherlands. Excluding the impact of these asset impairment and
exit costs, operating companies income, excluding currency and
acquisitions, decreased by 1.6%, due to: unfavorable volume/mix of
$46 million, reflecting a lower total market; increased marketing
costs related to the Be Marlboro campaign and the roll-out of the
new Marlboro 2.0 brand Architecture; investments related to the
pilot launch and commercialization of iQOS in Italy; and business
building initiatives in the United Kingdom; partly offset by
favorable pricing.
Adjusted operating companies income decreased by 0.8%, as shown
in the table below and detailed on Schedule 15. Adjusted operating
companies income, excluding favorable currency and the impact of
acquisitions, decreased by 1.6%.
EU Operating
Companies Income ($ Millions)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 852 $ 1,011 (15.7 )% (7.8 )% $ 3,727 $ 4,238
(12.1 )% (12.9 )% Asset impairment & exit costs (18 ) (13 )
(490 ) (13 )
Adjusted OCI $ 870 $
1,024 (15.0 )% (7.2 )% $
4,217 $ 4,251 (0.8 )%
(1.7 )% Adjusted OCI Margin* 41.9 % 47.9 %
(6.0 ) (4.7 ) 47.7 % 49.5 % (1.8 ) (1.5 )
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding favorable
currency and the impact of acquisitions, decreased by 1.5 points to
48.0%, as detailed in Schedule 15.
The total cigarette market in the EU of 467.7 billion units
decreased by 3.1%, due primarily to the impact of tax-driven price
increases and the unfavorable economic and employment environment,
partly offset by: the subdued performance of the e-vapor category;
less out-switching to fine cut products; a reduction in the
consumption of illicit products in several markets; and lower than
historical average pricing, mainly in Italy.
The total OTP market in the EU of 164.6 billion cigarette
equivalent units increased by 1.1%, reflecting a larger total fine
cut market, up by 0.9% to 143.1 billion cigarette equivalent
units.
In 2015, the total cigarette market in the EU is forecast to
decrease by approximately 4%.
EU Region &
Key Market Shares
Fourth-Quarter
Full-Year
2014
2013
Change
2014
2013
Change
p.p.
p.p.
Total EU 39.9 % 38.9 % 1.0 39.8 % 38.8 % 1.0 France 41.3 % 40.4 %
0.9 41.0 % 40.2 % 0.8 Germany 37.6 % 36.9 % 0.7 36.6 % 36.2 % 0.4
Italy 55.1 % 52.4 % 2.7 54.9 % 53.1 % 1.8 Poland 41.9 % 41.5 % 0.4
40.1 % 38.2 % 1.9 Spain 32.6 % 31.5 % 1.1 32.1 % 31.2 % 0.9
PMI's cigarette shipment volume of 185.2 billion units increased
by 0.1%, predominantly reflecting improved market share that
increased by 1.0 point to 39.8% as shown in the table above. While
shipment volume of Marlboro of 89.4 billion units decreased by
2.0%, mainly due to a lower total market, market share increased by
0.3 points to 19.3%, driven notably by the Czech Republic, Germany,
Italy and Spain, partly offset by France and Poland. While shipment
volume of L&M was essentially flat at 32.9 billion units,
market share increased by 0.2 points to 7.1%, driven notably by
Germany, partly offset by Poland. Shipment volume of Chesterfield
of 26.2 billion units increased by 38.4% and market share increased
by 1.1 points to 5.5%, driven notably by Italy and Poland. Shipment
volume of Philip Morris of 10.0 billion units increased by 5.0%,
driven notably by Latvia, Lithuania, the Slovak Republic and Spain,
and market share increased by 0.1 point to 2.1%.
PMI's shipments of OTP of 22.8 billion cigarette equivalent
units increased by 6.2%, driven principally by higher share. PMI's
OTP total market share was 14.0%, up by 0.6 points, reflecting
gains in the fine cut category, notably in the Czech Republic, up
by 7.8 points to 26.5%, Hungary, up by 6.4 points to 18.3%, Italy,
up by 3.9 points to 41.5%, Poland, up by 11.2 points to 34.7%,
partly offset by France, down by 0.7 points to 26.2%, Germany down
by 1.3 points to 12.9%, and Portugal, down by 5.4 points to
26.5%.
2014 Fourth-Quarter
Net revenues of $2.1 billion decreased by 2.9%. Excluding
unfavorable currency of $121 million, net revenues increased by
2.7%, or by 2.4% excluding currency and acquisitions, predominantly
driven by favorable pricing of $56 million, despite the adverse
impact of the price repositioning of Chesterfield in Italy, notably
in Germany and Poland, partly offset by unfavorable volume/mix of
$4 million.
Reported operating companies income of $852.0 million decreased
by 15.7%, including unfavorable currency of $80 million. Excluding
currency, operating companies income decreased by 7.8%, or by 7.7%
excluding currency and acquisitions, principally due to:
unfavorable volume/mix of $21 million, mainly reflecting a lower
total market; higher manufacturing costs, including ongoing costs
related to the decision to discontinue cigarette production in the
Netherlands; increased marketing support, notably in Germany and
Poland; investments related to the pilot launch and
commercialization of iQOS in Italy; and business building
initiatives in the United Kingdom; partially offset by higher
pricing.
Adjusted operating companies income decreased by 15.0%, as shown
in the table above and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency and the impact of
acquisitions, decreased by 7.1%.
Adjusted operating companies income margin, excluding currency
and acquisitions, decreased by 4.5 points to 43.4%, as detailed in
Schedule 11, reflecting the impact of the items mentioned
above.
The total cigarette market in the EU of 114.6 billion units
decreased by 2.4% reflecting, in certain key geographies,
moderating total market declines compared to the same period in
2013, resulting from a deceleration in the growth of the e-vapor
category, and a moderation in the level of illicit trade. The total
OTP market in the EU in the quarter of 41.9 billion cigarette
equivalent units increased by 3.4%, reflecting a higher total fine
cut market, up by 3.1% to 36.1 billion cigarette equivalent
units.
Although PMI's cigarette shipment volume of 44.4 billion units
decreased by 0.2%, market share increased by 1.0 point to 39.9% as
shown in the table above. While shipment volume of Marlboro
decreased by 2.2% to 21.6 billion units, market share increased by
0.4 points to 19.5%. Shipment volume of L&M increased by 0.2%
to 8.1 billion units, and market share increased by 0.1 point to
7.1%. Shipment volume of Chesterfield of 6.0 billion units
increased by 26.4%, and market share increased by 1.1 points to
5.6%, driven mainly by Italy and Poland. Shipment volume of Philip
Morris of 2.5 billion units increased by 7.3%, and market share was
flat at 2.1%.
PMI's shipments of OTP of 5.7 billion cigarette equivalent units
increased by 4.7%, driven principally by a higher total market.
PMI's total OTP market share was essentially flat at 13.6%, with
gains in the fine cut category, notably in Belgium, up by 0.3
points to 17.0%, the Czech Republic, up by 2.8 points to 23.8%,
Hungary, up by 4.1 points to 18.0%, Italy, up by 0.3 points to
41.5% and Poland, up by 5.1 points to 35.5%, partially offset by
France, down by 1.5 points to 26.3%, Germany, down by 0.6 points to
12.6%, Portugal, down by 15.1 points to 19.9% and Spain, down by
0.9 points to 14.4%.
EU Key Market
Commentaries
In France, the total cigarette market of 45.0 billion
units decreased by 5.3% in 2014, mainly reflecting the impact of
price increases in January 2014, the increased incidence of e-vapor
products and a weak economy. PMI's shipments of 18.6 billion units
decreased by 2.9%. PMI's market share increased by 0.8 points to
41.0%, mainly driven by the growth of Marlboro, L&M and premium
Philip Morris, up by 0.4 points, 0.1 point and 0.3 points to 25.1%,
2.6% and 9.4%, respectively. Market share of Chesterfield was flat
at 3.4%. The total industry fine cut category of 13.6 billion
cigarette equivalent units decreased by 2.2%. PMI's market share of
the category decreased by 0.7 points to 26.2%.
In the fourth quarter of 2014, the total cigarette market of
11.0 billion units decreased by 4.0%, mainly reflecting the
unfavorable impact of price increases in January 2014 and the weak
economy, partly offset by a lower incidence of e-vapor products.
While PMI's shipments of 4.4 billion units decreased by 0.5%,
market share increased by 0.9 points to 41.3%, mainly driven by
Marlboro and premium Philip Morris, up 0.5 points and 0.2 points to
25.2% and 9.5%, respectively. Market share of L&M increased by
0.2 points to 2.7% and share of Chesterfield was flat at 3.4%. The
total industry fine cut category of 3.5 billion cigarette
equivalent units increased by 0.5%. PMI's market share of the
category decreased by 1.5 points to 26.3%.
In Germany, the total cigarette market of 80.4 billion
units increased by 0.9% in 2014, mainly reflecting the net
favorable impact of estimated trade purchases and a lower incidence
of illicit trade. Excluding the impact of these estimated inventory
movements, the total cigarette market was essentially flat. PMI's
shipments of 29.4 billion units increased by 2.0% and market share
increased by 0.4 points to 36.6%, driven by L&M, up by 0.9
points to 11.8%. Market share of Marlboro decreased by 0.3 points
to 21.7%, while share of Chesterfield was flat at 1.7%. The total
industry fine cut category of 41.2 billion cigarette equivalent
units decreased by 1.0%. PMI's market share of the category
decreased by 1.3 points to 12.9%.
In the fourth quarter of 2014, the total cigarette market of
19.7 billion units increased by 1.8%, partially reflecting the net
favorable impact of estimated trade inventory movements. Excluding
the impact of these inventory movements, the total cigarette market
increased by approximately 0.9%. PMI's shipments of 7.4 billion
units increased by 3.7%, and market share increased by 0.7 points
to 37.6%, driven by Marlboro, up by 0.2 points to 22.2%, and
L&M, up by 0.6 points to 12.2%. Market share of Chesterfield
was flat at 1.7%. The total industry fine cut category of 10.3
billion cigarette equivalent units decreased by 0.5%. PMI's market
share of the category decreased by 0.6 points to 12.6%.
In Italy, the total cigarette market of 74.4 billion
units increased by 0.5% in 2014, partly reflecting a lower
incidence of e-vapor products. PMI's shipments of 40.4 billion
units increased by 3.9%. PMI's market share increased by 1.8 points
to 54.9%, driven by Chesterfield, up by 5.7 points to 9.2%, partly
offset by Marlboro, down by 0.7 points to 25.2%, and Diana in the
low-price segment, down by 2.8 points to 8.5%, the latter primarily
impacted by the growth of the super-low price segment. Share of
Philip Morris was flat at 2.4%. The total industry fine cut
category of 6.1 billion cigarette equivalent units increased by
1.6%. PMI's market share of the category increased by 3.9 points to
41.5%.
In the fourth quarter of 2014, the total cigarette market of
18.4 billion units increased by 0.2%, mainly reflecting a lower
incidence of e-vapor products and continued growth of the super-low
price segment. PMI's shipments of 9.2 billion units increased by
0.1%. PMI's market share increased by 2.7 points to 55.1%, due
primarily to: Chesterfield, up by 6.8 points to 10.2%, benefiting
from its price repositioning in February 2014, partially offset by
Marlboro, down by 0.8 points to 25.1%, and Diana in the low-price
segment, down by 2.9 points to 7.8%, impacted by the growth of the
super-low price segment. Market share of Philip Morris decreased by
0.2 points to 2.4%. The total industry fine cut category of 1.6
billion cigarette equivalent units increased by 1.1%, and PMI's
market share of the category increased by 0.3 points to 41.5%,
driven by Chesterfield and Marlboro.
In Poland, the total cigarette market of 42.1 billion
units decreased by 9.8%, reflecting the prevalence of e-cigarettes,
illicit trade and non-duty paid OTP products. Although PMI's
shipments of 16.6 billion units decreased by 2.6%, PMI's market
share increased by 1.9 points to 40.1%, driven by L&M and
Chesterfield, up by 0.4 and 2.0 points to 18.2% and 7.6%,
respectively. Market share of Marlboro was down by 0.3 points to
11.2%. The total industry fine cut category of 3.6 billion
cigarette equivalent units increased by 7.7% and PMI's market share
of the category increased by 11.2 points to 34.7%.
In the fourth quarter of 2014, the total cigarette market of 9.2
billion units decreased by 11.0%, reflecting the prevalence of
e-cigarettes, illicit trade and non-duty paid OTP products. While
PMI's shipments of 3.9 billion units decreased by 4.9%, PMI's
market share increased by 0.4 points to 41.9%, driven by L&M,
up by 0.5 points to 19.9%, and Chesterfield, up by 1.5 points to
7.7%, partially offset by Marlboro, down by 0.1 point to 12.2%. The
total industry fine cut category of 711 million cigarette
equivalent units increased by 15.7%, and PMI's market share of the
category increased by 5.1 points to 35.5%.
In Spain, the total cigarette market of 47.0 billion
units decreased by 1.5% in 2014, mainly due to a deceleration in
adult smoker down-trading to fine cut, e-vapor and illicit
products. PMI's shipments of 14.9 billion units increased by 1.9%.
PMI's market share increased by 0.9 points to 32.1%, driven by
higher share of Marlboro, up by 1.1 points to 15.9% and Philip
Morris, up by 0.3 points to 0.9%. Market share of Chesterfield was
down by 0.1 point to 9.2% and share of L&M was down by 0.2
points to 6.1%. The total industry fine cut category of 9.7 billion
cigarette equivalent units decreased by 9.8%, partly reflecting
lower consumption resulting from further tax harmonization with
cigarettes following the July 2013 and July 2014 price increases.
PMI's market share of the fine cut category increased by 1.0 point
to 14.8% in 2014.
In the fourth quarter of 2014, the total cigarette market of
11.2 billion units increased by 0.8%, reflecting an improving
economic environment, lower out-switching to the OTP category and a
lower incidence of illicit trade. PMI's shipments of 3.6 billion
units increased by 6.2% and market share increased by 1.1 points to
32.6%, driven by higher share of Marlboro, up by 0.9 points to
16.0% and Philip Morris, up by 0.4 points to 0.9%. Market share of
Chesterfield was down by 0.1 point to 9.4% and share of L&M was
down by 0.2 points to 6.1%. The total industry fine cut category of
2.4 billion cigarette equivalent units decreased by 0.8%, partly
reflecting the narrowing of price gaps with the cigarette category
since July 2013. PMI's market share of the fine cut category
decreased by 0.9 points to 14.4%.
EASTERN EUROPE, MIDDLE
EAST & AFRICA REGION (EEMA)
2014 Full-Year
Net revenues of $8.9 billion increased by 1.8%. Excluding
unfavorable currency of $761 million, net revenues increased by
10.5%, or by 10.4% excluding currency and acquisitions, driven by
favorable pricing of $1.1 billion, principally in Kazakhstan,
Russia, Saudi Arabia and Ukraine, as well as the favorable impact
of the change to PMI's new business structure, and pricing, in
Egypt, partly offset by unfavorable volume/mix of $224 million,
mainly due to Kazakhstan, Russia and Ukraine.
Reported operating companies income of $4.1 billion increased by
9.1%. Excluding unfavorable currency of $611 million, operating
companies income increased by 25.2%, or by 25.4% excluding currency
and acquisitions, driven primarily by higher pricing, and a
favorable cost comparison in the fourth quarter of 2014 driven by
an asset impairment and exit charge of $250 million recorded in the
fourth quarter of 2013 associated with the conclusion of PMI's
relationship with its former business partner in Egypt, partly
offset by unfavorable volume/mix of $202 million.
Adjusted operating companies income increased by 2.0%, as shown
in the table below and detailed on Schedule 15. Adjusted operating
companies income, excluding unfavorable currency and the impact of
acquisitions, increased by 17.3%.
EEMA Operating
Companies Income ($ Millions)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 903 $ 811 11.3 % 41.3 % $ 4,121 $ 3,779 9.1 %
25.2 % Asset impairment & exit costs (2 ) (264 ) (2 ) (264 )
Adjusted OCI $ 905 $ 1,075
(15.8 )% 6.8 % $ 4,123
$ 4,043 2.0 % 17.1 %
Adjusted OCI Margin* 41.2 % 47.6 % (6.4 ) (1.3 ) 46.2 % 46.1
% 0.1 2.8
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency and the impact of acquisitions, increased by
2.9 points to 49.0%, as detailed on Schedule 15.
PMI's cigarette shipment volume of 287.9 billion units decreased
by 2.9%, mainly due to Kazakhstan, Russia, Serbia and Ukraine,
partly offset by Algeria, Saudi Arabia and Turkey.
PMI's cigarette shipment volume of premium brands increased by
1.2%, driven by Parliament, up by 6.9% to 35.3 billion units,
partly offset by Marlboro, down by 0.7% to 85.2 billion units.
2014 Fourth-Quarter
Net revenues of $2.2 billion decreased by 2.7%. Excluding
unfavorable currency of $284 million, net revenues increased by
9.9%, or by 9.8% excluding currency and acquisitions, reflecting
favorable pricing of $277 million, driven principally by Russia, as
well as the favorable impact of the change to PMI's new business
structure, and pricing, in Egypt, partly offset by unfavorable
volume/mix of $55 million, mainly due to Kazakhstan and
Ukraine.
Reported operating companies income of $903 million increased by
11.3%. Excluding unfavorable currency of $243 million, operating
companies income increased by 41.3%, or by 42.3% excluding currency
and acquisitions, driven primarily by higher pricing, and the
favorable cost comparison with the fourth quarter of 2013 driven by
Egypt, partially offset by unfavorable volume/mix of $66
million.
Adjusted operating companies income decreased by 15.8%, as shown
in the table above and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency and the impact of
acquisitions, increased by 7.5%.
Adjusted operating companies income margin, excluding
unfavorable currency and the impact of acquisitions, decreased by
1.0 point to 46.6%, as detailed on Schedule 11, reflecting the
impact of the aforementioned factors.
PMI's cigarette shipment volume of 74.5 billion units decreased
by 2.5%, mainly due to Kazakhstan, Serbia and Ukraine, partially
offset by North Africa, notably Algeria, and Saudi Arabia.
PMI's cigarette shipment volume of premium brands decreased by
1.1%, due principally to Marlboro, down by 3.7% to 22.1 billion
units, partly offset by Parliament, up by 6.7% to 9.4 billion
units.
EEMA Key Market
Commentaries
In North Africa, the estimated total cigarette market
increased by 2.2% to 141.8 billion units in 2014, driven by
Algeria, Egypt and Tunisia, partially offset by Libya and Morocco.
PMI’s shipment volume of 37.8 billion units increased by 2.5%,
driven largely by Marlboro in Algeria and L&M in Egypt. PMI’s
market share decreased by 0.2 points to 26.3%. Market share of
Marlboro increased by 0.2 point to 15.5%, while share of L&M
decreased by 0.1 point to 9.0%.
In the fourth quarter of 2014, the estimated total cigarette
market decreased by 0.2% to 37.6 billion units, due to Egypt,
Morocco and Tunisia, partly offset by Algeria and Libya. PMI’s
shipment volume in the quarter of 10.7 billion units increased by
8.1%, driven largely by Marlboro in Algeria and L&M in Egypt.
PMI’s market share increased by 3.0 points to 28.6%, mainly
reflecting gains in Algeria and Egypt. Market share of Marlboro
increased by 1.3 points to 16.8%, mainly reflecting gains in
Algeria and Libya, partly offset by a decline in Egypt, while share
of L&M increased by 1.9 points to 9.9%, driven by Egypt.
In Russia, the total cigarette market decreased by 9.2%
to an estimated 310.6 billion units in 2014, mainly due to the
unfavorable impact of tax-driven price increases and a weak
economy. In 2015, the total market is forecast to decrease by an
estimated 8% to 10%. PMI's shipment volume of 84.9 billion units in
2014 decreased by 3.5%. Shipment volume of PMI's premium portfolio
decreased by 2.5%, mainly due to Marlboro, down by 13.6%, partially
offset by Parliament, up by 1.6%. In the mid-price segment,
shipment volume decreased by 9.1%, mainly due to Chesterfield, down
by 18.6%. In the low-price segment, shipment volume decreased by
1.4%, mainly due to Optima and Apollo Soyuz, down by 16.3% and
8.5%, respectively, partly offset by Bond Street, up by 2.5%. PMI's
market share of 27.1%, as measured by Nielsen, was up by 1.0 point.
Market share of Parliament increased by 0.3 points to 3.7%, L&M
increased by 0.3 points to 3.1% and Bond Street increased by 1.0
point to 7.5%, while Marlboro decreased by 0.2 points to 1.5% and
Chesterfield decreased by 0.2 points to 2.8%.
In the fourth quarter of 2014, the estimated total cigarette
market declined by 8.3% to 80.8 billion units, mainly due to the
unfavorable impact of the tax-driven price increases and a weak
economy. PMI's shipment volume in the quarter of 21.5 billion units
decreased by 0.3%. PMI's market share of 27.6%, as measured by
Nielsen, was up by 1.3 points. Market share of Parliament, L&M
and Bond Street increased by 0.4, 0.1 and 1.3 points to 3.9%, 3.0%
and 8.0%, respectively, partially offset by Marlboro and
Chesterfield, down by 0.2 and 0.3 points to 1.4% and 2.6%,
respectively.
In Turkey, the total cigarette market increased by 2.4%
to an estimated 93.9 billion units in 2014, primarily reflecting an
increase in the adult population. PMI's shipment volume of 46.3
billion units increased by 2.3%. PMI's market share, as measured by
Nielsen, decreased by 1.5 points to 44.0%, mainly due to Marlboro,
down by 0.3 points to 8.6%, mid-price Muratti, down by 1.4 points
to 5.5%, low-price L&M, down by 0.9 points to 6.4%, and
low-price Lark, down by 2.4 points to 9.0%, partly offset by
premium Parliament, up by 1.2 points to 11.2%, and low-price
Chesterfield, up by 2.3 points to 3.1%.
In the fourth quarter of 2014, the estimated total cigarette
market increased by 0.6% to 25.4 billion units, including an
unfavorable comparison with estimated trade inventory movements in
2013. Excluding the net impact of these inventory movements, the
total cigarette market was estimated to have increased by
approximately 2.8%, primarily reflecting an increase in the adult
population. PMI's shipment volume in the quarter of 12.6 billion
units decreased by 1.8%. PMI's market share, as measured by
Nielsen, decreased by 2.1 points to 43.9%, mainly due to Marlboro,
mid-price Muratti, and low-price Lark, down by 0.1, 1.6 and 3.1
points to 8.7%, 5.1% and 7.7%, respectively, partially offset by
premium Parliament, up by 1.2 points to 11.8%, low-price L&M,
up by 0.1 point to 7.1%, and low-price Chesterfield up by 1.5
points to 3.3%.
In Ukraine, the total cigarette market decreased by 2.5%
to an estimated 73.3 billion units in 2014, mainly reflecting the
impact of price increases in 2014 and business disruption due to
the political instability in the east of the country, partially
offset by a lower prevalence of illicit trade. PMI's 2014 shipment
volume of 23.3 billion units decreased by 8.8%. PMI's market share,
as measured by Nielsen, decreased by 1.0 point to 32.5%, mainly due
to Marlboro down by 0.7 points to 4.8%, Parliament down by 0.3
points to 3.0%, Chesterfield, down by 0.9 points to 5.0%, and
Optima, down by 0.8 points to 1.0%, partly offset by growth from
low-price President, up by 2.3 points to 5.1%.
In the fourth quarter of 2014, the estimated total cigarette
market decreased by 4.1% to 17.3 billion units, mainly reflecting
the impact of price increases in 2014 and business disruption due
to the political instability in the east of the country, partially
offset by a lower prevalence of illicit trade. PMI's shipment
volume in the quarter of 5.5 billion units decreased by 11.3%.
PMI's market share, as measured by Nielsen, was down by 1.7 points
to 31.9%, with Marlboro, Parliament, Bond Street and Chesterfield,
down by 0.6, 0.3, 1.1 and 0.7 points to 4.6%, 2.9%, 8.0% and 4.7%,
respectively. The decrease in PMI's market share was partially
offset by growth from L&M, up by 1.1 points to 3.2%, and
low-price President, up by 1.9 points to 5.8%.
ASIA
REGION
2014 Full-Year
Net revenues of $8.7 billion decreased by 16.9%, including
unfavorable currency of $1.0 billion. Excluding currency, net
revenues decreased by 7.2%, due to unfavorable volume/mix of $906
million, primarily in Australia and Japan, partly offset by
favorable pricing of $155 million, notably in Indonesia, despite
the adverse impact of the Philippines.
Reported operating companies income of $3.2 billion decreased by
31.0%, including unfavorable currency of $656 million. Excluding
currency, operating companies income decreased by 16.9%, due
primarily to: unfavorable volume/mix of $746 million; higher
manufacturing costs, principally in Indonesia driven mainly by
higher clove prices and the transition from hand-rolled to
machine-made kretek cigarette production; costs related to the
factory closure in Australia; investments related to the pilot
launch and commercialization of iQOS in Japan; and higher marketing
investment in support of new brand launches in Indonesia and Japan;
partly offset by favorable pricing.
Adjusted operating companies income decreased by 30.7% as shown
in the table below and detailed on Schedule 15. Adjusted operating
companies income, excluding unfavorable currency, decreased by
16.6%.
Asia Operating
Companies Income ($ Millions)
Fourth-Quarter Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 573 $ 1,055 (45.7 )% (35.1 )% $ 3,187 $ 4,622
(31.0 )% (16.9 )% Asset impairment & exit costs (11 ) (19 ) (35
) (27 )
Adjusted OCI $ 584 $
1,074 (45.6 )% (35.2 )% $
3,222 $ 4,649 (30.7 )%
(16.6 )% Adjusted OCI Margin* 29.2 % 43.4 %
(14.2 ) (11.2 ) 36.9 % 44.3 % (7.4 ) (4.5 )
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency, decreased by 4.5 points to 39.8%, as detailed
on Schedule 15, primarily reflecting the impact of unfavorable
volume/mix, mainly in Australia and Japan, and higher costs, partly
offset by higher pricing.
PMI's cigarette shipment volume of 288.1 billion units decreased
by 4.4%, due primarily to: the unfavorable impact of an adjustment
in distributor inventories in Japan; lower total market and share
in Australia, mainly reflecting the impact of excise tax-driven
price increases and competitive pricing in the deep discount
segment, Japan and Pakistan, and lower share in Indonesia.
Shipment volume of Marlboro of 71.4 billion units decreased by
5.3%, due almost entirely to Japan, partly offset by the
Philippines. Shipment volume of Parliament of 10.7 billion units
increased by 1.8%, driven by Korea. Shipment volume of Lark of 17.7
billion units increased by 7.4%, driven mainly by Japan (including
the morphed Philip Morris).
2014 Fourth-Quarter
Net revenues of $2.0 billion decreased by 19.1%, including
unfavorable currency of $161 million. Excluding currency, net
revenues decreased by 12.6%, due primarily to: unfavorable
volume/mix of $342 million, due mainly to: Australia, reflecting a
lower total market following the impact of tax-driven price
increases in March and September of 2014, and lower market share,
primarily due to the unfavorable impact of significant competitive
price discounting at the low end of the market and continued
down-trading; and Japan, principally reflecting a lower total
market and the unfavorable impact of an adjustment in distributor
inventories; partially offset by favorable pricing of $30 million,
notably in Indonesia, despite the adverse impact of the
Philippines.
Reported operating companies income of $573 million decreased by
45.7%, including unfavorable currency of $112 million. Excluding
currency, operating companies income decreased by 35.1%,
principally due to unfavorable volume/mix of $295 million, due
predominantly to Australia and Japan, and higher costs, mainly
higher manufacturing and distribution costs in Indonesia; marketing
investment in support of new brand launches in Indonesia and Japan;
and investments related to the pilot launch and commercialization
of iQOS in Japan; partially offset by favorable pricing.
Adjusted operating companies income decreased by 45.6% as shown
in the table above and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency, decreased by
35.2%.
Adjusted operating companies income margin, excluding
unfavorable currency, decreased by 11.2 points to 32.2%, as
detailed on Schedule 11, reflecting the impact of the
aforementioned factors.
PMI's cigarette shipment volume of 69.3 billion units decreased
by 7.3%, due primarily to: a lower total market and share in
Australia, mainly reflecting the impact of excise tax-driven price
increases and competitive pricing in the deep discount segment; a
lower total market in Indonesia; a lower total market and the
unfavorable impact of an adjustment in distributor inventories in
Japan; and a lower total market and share in Pakistan.
Shipment volume of Marlboro of 16.9 billion units decreased by
9.3%, due predominantly to Japan. Shipment volume of Parliament of
2.3 billion units decreased by 6.8%, due mainly to Japan. Shipment
volume of Lark of 3.2 billion units decreased by 6.9%, due
principally to Japan.
Asia Key Market
Commentaries
In Indonesia, the total cigarette market increased by
1.9% to 314.0 billion units in 2014. In 2015, the total market is
forecast to increase by up to 2%. PMI's shipment volume of 109.7
billion units in 2014 decreased by 1.5%. PMI's market share
decreased by 1.3 points to 34.9%, predominantly due to the share
decline of: Sampoerna Hijau, down by 0.9 points to 3.4%, mainly
reflecting the decline of the total hand-rolled kretek segment; and
the hand-rolled, full-flavor variants of Dji Sam Soe in the premium
segment, which decreased by 1.5 points to 4.2%, mainly due to a
retail price change ahead of competition. The decline in PMI's
market share was partly offset by machine-made mid-price U Mild, up
by 1.0 point to 5.4%, and machine-made Dji Sam Soe Magnum and Dji
Sam Soe Magnum Blue, up by a combined 1.0 share point to 2.1%.
Market share of Sampoerna A in the premium machine-made
lighter-tasting kretek segment was flat at 14.4%. While market
share of Marlboro decreased by 0.1 point to 5.1%, its share of the
“white” cigarettes segment, representing 6.4% of the total
cigarette market, increased by 2.0 points to 79.7%. The
machine-made kretek segment, representing 73.5% of the total
cigarette market, increased by 3.8 points and PMI's share of the
segment increased by 0.4 points to 29.9%.
In the fourth quarter of 2014, the estimated total cigarette
market decreased by 3.0% to 79.0 billion units, primarily
reflecting the elimination of fuel subsidies and higher commodity
prices. PMI's shipment volume in the quarter of 27.9 billion units
decreased by 3.8%. PMI's market share decreased by 0.3 points to
35.3%, predominantly due to the share decline of Sampoerna Hijau,
down by 1.0 point to 3.2%, mainly reflecting the decline of the
total hand-rolled kretek segment. Market share of the brand family
Dji Sam Soe increased by 0.5 points to 6.8%, mainly reflecting the
growth of machine-made Dji Sam Soe Magnum Blue, which was launched
in April 2014 and which reached a market share of 0.5% in the
quarter, as well as the continued growth of Dji Sam Soe Magnum.
Market share of Sampoerna A, in the premium machine-made
lighter-tasting kretek segment, increased by 0.4 points to 14.8%,
and mid-price U Mild increased by 0.6 points to 5.3%. Although
Marlboro's market share decreased by 0.1 point to 5.0%, its share
of the “white” cigarettes segment, which represented 6.2% of the
total cigarette market, increased by 1.4 points to 80.3%. The
machine-made kretek segment, representing 74.1% of the total
cigarette market, increased by 3.0 points and PMI's share of the
segment increased by 1.5 points to 30.6%.
In Japan, the total cigarette market decreased by 3.4% to
186.2 billion units in 2014, partly reflecting the unfavorable
impact of the consumption tax-driven retail price increases of
April 1, 2014. In 2015, the total market is forecast to decrease by
an estimated 2.5% to 3.0%. PMI's shipment volume of 45.6 billion
units in 2014 decreased by 14.0%, principally due to the
unfavorable impact of an adjustment in distributor inventories and
a lower total market and share. Excluding the impact of these
inventory movements, PMI's shipment volume decreased by 5.8%. PMI's
market share decreased by 0.8 points to 25.9%. Share of Marlboro
and Virginia S. decreased by 0.5 points and 0.1 point to 11.6% and
1.9%, respectively. Share of Lark (including the morphed Philip
Morris) declined by 0.1 point to 10.0%.
In the fourth quarter of 2014, the total cigarette market
decreased by 3.7% to 47.3 billion units, partly reflecting the
unfavorable impact of the consumption tax-driven retail price
increases of April 1, 2014. PMI's shipment volume in the quarter of
8.1 billion units decreased by 23.0%, principally due to a lower
total market and the unfavorable impact of an adjustment in
distributor inventories. Excluding the impact of these inventory
movements, PMI's shipment volume decreased by 4.1%. PMI's market
share increased by 0.1 point to 26.0%, the first year-on-year
quarterly share gain since the second quarter of 2012, driven by
Lark (including the morphed Philip Morris), up by 0.4 points to
10.2%. Market share of Marlboro and Virginia S. declined by 0.2
points and 0.1 point to 11.6% and 1.9%, respectively. PMI's market
share in the quarter was marginally up compared to the third
quarter of 2014 indicating ongoing stabilization.
In Korea, the total cigarette market increased by 1.2% to
89.4 billion units in 2014, reflecting favorable estimated trade
inventory movements. Excluding the impact of these inventory
movements, the total cigarette market decreased by approximately
2%. In 2015, the underlying total market is forecast to decrease by
approximately 20%-25%. PMI's shipment volume of 17.3 billion units
in 2014 increased by 1.1% and market share was flat at 19.4%, with
share of Parliament up by 0.1 point to 7.0%, partly offset by
Marlboro, down by 0.1 point to 7.6%.
In the fourth quarter of 2014, the total cigarette market
increased by 3.6% to 23.1 billion units, reflecting favorable
estimated trade inventory movements ahead of the announced excise
tax increase effective January 1, 2015. Excluding the impact of
these inventory movements, the total cigarette market was down by
0.9%. PMI's shipment volume in the quarter of 4.5 billion units
increased by 3.3% and market share increased by 0.1 point to 19.5%,
with Parliament and Marlboro flat at 7.0% and 7.7%, respectively,
and Virginia S. up by 0.2 points to 4.2%.
In the Philippines, the estimated total tax-paid industry
cigarette volume decreased by 4.6% to an estimated 82.3 billion
units in 2014, reflecting the prevalence of domestic non-duty paid
products. While PMI's shipment volume of 68.4 billion units
decreased by 0.2%, PMI's market share of the estimated total
tax-paid cigarette industry increased by 3.7 points to 83.0%.
Marlboro's market share increased by 1.7 points to 18.4% and share
of Fortune increased by 1.8 points to 33.4%.
In the fourth quarter of 2014, estimated total tax-paid industry
cigarette volumes decreased by 12.9% to 21.8 billion units,
reflecting a higher incidence of non-tax-paid volume. While PMI's
shipment volume in the quarter of 17.5 billion units decreased by
3.3%, PMI's market share of the estimated total tax-paid cigarette
industry of 80.3% was up by 8.0 points. Marlboro's market share
increased by 2.4 points to 19.3% and share of Fortune increased by
4.8 points to 31.5%.
LATIN AMERICA &
CANADA REGION
2014 Full-Year
Net revenues of $3.3 billion decreased by 2.3%, including
unfavorable currency of $431 million. Excluding currency, net
revenues increased by 10.6%, or by the same percentage excluding
currency and acquisitions, driven by favorable pricing of $481
million, principally in Argentina, Canada and Mexico, partially
offset by unfavorable volume/mix of $127 million, principally due
to a lower total market in Canada and Mexico.
Reported operating companies income of $1.0 billion decreased by
9.2%, including unfavorable currency of $243 million. Excluding
currency, operating companies income increased by 12.3%, or by the
same percentage excluding currency and acquisitions, primarily
driven by favorable pricing, partially offset by unfavorable
volume/mix of $133 million.
Adjusted operating companies income decreased by 8.9% as shown
in the table below and detailed on Schedule 15. Adjusted operating
companies income, excluding unfavorable currency and the impact of
acquisitions, increased by 12.6%.
Latin America
& Canada Operating Companies Income ($ Millions)
Fourth-Quarter
Full-Year
Excl. Excl.
2014
2013
Change
Curr.
2014
2013
Change
Curr.
Reported OCI $ 296 $ 358 (17.3 )% (0.8 )% $ 1,030 $ 1,134
(9.2 )% 12.3 % Asset impairment & exit costs (1 ) (5 ) (8 ) (5
)
Adjusted OCI $ 297 $ 363
(18.2 )% (1.9 )% $ 1,038
$ 1,139 (8.9 )% 12.5 %
Adjusted OCI Margin* 32.2 % 39.6 % (7.4 ) (5.3 ) 31.7 % 34.0
% (2.3 ) 0.5
*Margins are calculated as adjusted OCI,
divided by net revenues, excluding excise taxes.
Adjusted operating companies income margin, excluding
unfavorable currency and acquisitions, increased by 0.6 points to
34.6%, as detailed on Schedule 15.
PMI's cigarette shipment volume of 94.7 billion units decreased
by 2.7%, principally due to a lower total market, predominantly in
Canada and Mexico. While shipment volume of Marlboro of 37.0
billion units decreased by 4.3%, due predominantly to Mexico, its
market share was up in Argentina, Brazil and Colombia by 0.3, 0.5
and 1.0 points to 24.1%, 9.2% and 7.9%, respectively. Shipment
volume of Philip Morris of 19.1 billion units increased by 2.1%,
driven mainly by Argentina.
2014 Fourth-Quarter
Net revenues of $922 million increased by 0.5%, including
unfavorable currency of $115 million. Excluding currency, net
revenues increased by 13.1%, or by the same percentage excluding
currency and acquisitions, driven by favorable pricing of $149
million, principally in Argentina, Canada and Mexico, partially
offset by unfavorable volume/mix of $29 million, principally due to
a lower total market in Brazil, Canada and Mexico.
Reported operating companies income of $296 million decreased by
17.3%, including unfavorable currency of $59 million. Excluding
currency and acquisitions, operating companies income decreased by
0.6%, reflecting unfavorable volume/mix of $32 million, higher
marketing costs, notably in Mexico related to the roll-out of the
Marlboro 2.0 Architecture, and investments in Canada related to the
implementation of a new distribution model, partly offset by
favorable pricing.
Adjusted operating companies income decreased by 18.2%, as shown
in the table above and detailed on Schedule 11. Adjusted operating
companies income, excluding unfavorable currency and the impact of
acquisitions, decreased by 1.7%.
Adjusted operating companies income margin, excluding
unfavorable currency and the impact of acquisitions, decreased by
5.2 points to 34.4%, as detailed on Schedule 11, reflecting the
aforementioned factors.
PMI's cigarette shipment volume of 26.7 billion units decreased
by 2.9%, due largely to Argentina, Brazil, Canada and Mexico.
Although shipment volume of Marlboro of 10.8 billion units
decreased by 3.3%, due predominantly to Mexico, its market share
was up, notably in Argentina, Brazil and Colombia by 0.7, 0.5 and
1.1 points to 24.5%, 10.0% and 8.3%, respectively.
Latin America & Canada Key Market
Commentaries
In Argentina, the total cigarette market decreased by
2.2% to 41.7 billion units in 2014. While PMI's cigarette shipment
volume of 32.3 billion units decreased by 0.2%, market share
increased by 1.5 points to 77.1%, driven by Marlboro, up by 0.3
points to 24.1%, and mid-price Philip Morris, up by 1.9 points to
43.4%, reflecting the positive impact of its capsule variants,
partly offset by low-price Next, down by 0.5 points to 2.0%.
In the fourth quarter of 2014, the total cigarette market
decreased by 3.8% to 11.0 billion units. While PMI's cigarette
shipment volume in the quarter of 8.6 billion units decreased by
2.5%, market share increased by 0.9 points to 77.5%, driven by
Marlboro, up by 0.7 points to 24.5%, and mid-price Philip Morris,
up by 0.9 points to 43.7%, reflecting the positive impact of its
capsule variants, partially offset by low-price Next, down by 0.4
points to 1.9%.
In Canada, the total cigarette market decreased by 5.5%
to 27.3 billion units in 2014, mainly due to the impact of both
federal and provincial tax-driven price increases during the first
half of the year. While PMI's cigarette shipment volume of 10.3
billion units decreased by 4.6%, market share increased by 0.4
points to 37.6%, with premium Belmont up by 0.4 points to 3.0% and
premium brand Benson & Hedges flat at 2.4%. Market share of
low-price Next was up by 0.7 points to 10.6%, partly offset by
mid-price Number 7 and low-price Accord, down by 0.2 and 0.5 points
to 4.0% and 2.4%, respectively. Market share of mid-price Canadian
Classics was up by 0.3 points to 10.4%.
In the fourth quarter of 2014, the total cigarette market
decreased by 5.9% to 6.9 billion units, mainly due to the impact of
aforementioned tax-driven price increases. PMI's cigarette shipment
volume of 2.6 billion units decreased by 6.3%. PMI's market share
decreased by 0.1 point to 36.9%, with premium brands Benson &
Hedges flat at 2.4% and Belmont up by 0.3 points to 3.0%. Market
share of mid-price Canadian Classics was up by 0.6 points to 10.4%
and mid-price Number 7 was flat at 3.9%. Market share of low-price
Next decreased by 0.2 points to 10.1%, and low-price Accord was
down by 0.5 points to 2.2%.
In Mexico, the total cigarette market decreased by 3.2%
to 33.5 billion units in 2014, primarily reflecting unfavorable
estimated trade inventory movements compared to 2013. Excluding the
impact of these inventory movements, the total cigarette market is
estimated to have declined by approximately 0.5%. PMI's cigarette
shipment volume of 23.9 billion units decreased by 6.1%. PMI's
market share decreased by 2.2 points to 71.3%. While market share
of Marlboro and Benson & Hedges was down by 2.6 and 0.3 share
points to 49.7% and 5.2%, respectively, reflecting consumer
down-trading, PMI's share of the premium price segment was up by
0.8 points to 91.5%. Market share of Delicados, the second
best-selling brand in the market, decreased by 0.1 point to
11.1%.
In the fourth quarter of 2014, the total cigarette market
decreased by 2.4% to 9.6 billion units, primarily reflecting
unfavorable estimated trade inventory movements compared to 2013.
Excluding the impact of these inventory movements, the total
cigarette market is estimated to have declined by approximately
0.2%. PMI's cigarette shipment volume in the quarter of 7.1 billion
units decreased by 3.5%. While PMI's market share decreased by 0.8
points to 74.4%, it represented the highest quarterly share
performance of 2014. While share of premium Benson & Hedges was
up by 0.1 point to 5.4% in the fourth quarter, market share of
Marlboro was down by 1.8 points to 51.9%, reflecting consumer
down-trading. PMI's share of the premium segment, representing
62.5% of the total cigarette market, increased by 0.1 point to
91.7%. Market share of Delicados increased by 0.1 point 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 2014, the company held an estimated 15.6% share of the total
international cigarette market outside of the U.S., or 28.6%
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 September 30, 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 December 31, ($ in millions,
except per share data) (Unaudited)
2014
2013 % Change Net
revenues $ 19,941 $
20,390 (2.2 )% Cost of sales 2,632 2,602 1.2 %
Excise taxes on products (1) 12,744 12,601 1.1
% Gross profit 4,565 5,187 (12.0 )% Marketing, administration and
research costs 1,975 1,676 Asset impairment and exit costs 32 301
Amortization of intangibles 26 22
Operating
income (2) 2,532 3,188 (20.6 )%
Interest expense, net 263 252 Earnings before
income taxes 2,269 2,936 (22.7 )% Provision for income taxes 651
893 (27.1 )% Equity (income)/loss in unconsolidated subsidiaries,
net (31 ) 7 Net earnings 1,649 2,036 (19.0 )% Net
earnings attributable to noncontrolling interests 37
49
Net earnings attributable to PMI $
1,612 $ 1,987
(18.9 )% Per share data: (3) Basic
earnings per share $ 1.03
$ 1.24 (16.9 )%
Diluted earnings per share $ 1.03
$ 1.24 (16.9
)%
(1) The segment detail of excise taxes on
products sold for the quarters ended December 31, 2014 and 2013 is
shown onSchedule 2.
(2) 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, plus
equity(income)/loss in unconsolidated subsidiaries, net. The
reconciliation from operating income to operating companies income
isas follows:
2014 2013 %
Change Operating Income $ 2,532 $
3,188 (20.6 )%
Excluding:
- Amortization of Intangibles 26 22 - General corporate expenses
(included in marketing, administration and research costs above) 35
32 Plus: Equity (income)/loss in unconsolidated subsidiaries, net
(31 ) 7
Operating Companies Income $
2,624 $ 3,235
(18.9 )%
(3) Net earnings and weighted-average
shares used in the basic and diluted earnings per share
computations for thequarters ended December 31, 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 December 31, ($
in millions) (Unaudited)
Net Revenues excluding
Excise Taxes
EuropeanUnion
EEMA Asia
LatinAmerica
&Canada
Total 2014 Net Revenues (1)
$
6,833
$
5,581
$
4,740
$
2,787
$
19,941 Excise Taxes on Products (4,757 ) (3,385 )
(2,737 ) (1,865 ) (12,744 )
Net Revenues excluding
Excise Taxes 2,076 2,196 2,003 922
7,197 2013 Net Revenues $ 7,048 $ 5,349 $
5,211 $ 2,782 $ 20,390 Excise Taxes on Products (4,909 )
(3,092 ) (2,735 ) (1,865 ) (12,601 )
Net
Revenues excluding Excise Taxes 2,139 2,257
2,476 917 7,789 Variance
Currency (121 ) (284 ) (161 ) (115 ) (681 ) Acquisitions 6 1 — —
7
Operations 52 222 (312 ) 120
82
Variance Total (63 )
(61 ) (473 ) 5 (592
) Variance Total (%) (2.9 )% (2.7 )% (19.1 )% 0.5 % (7.6 )%
Variance excluding Currency 58 223 (312 ) 120 89 Variance
excluding Currency (%) 2.7 % 9.9 % (12.6 )% 13.1 % 1.1 %
Variance excluding Currency & Acquisitions 52 222 (312 ) 120 82
Variance excluding Currency & Acquisitions (%) 2.4 % 9.8 %
(12.6 )% 13.1 % 1.1 % (1) 2014 Currency
decreased net revenues as follows: European Union $ (413 ) EEMA
(738 ) Asia (265 ) Latin America & Canada (422 ) $ (1,838 )
Schedule 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Selected
Financial Data by Business Segment
For the Quarters Ended
December 31, ($ in millions) (Unaudited)
Operating Companies Income
EuropeanUnion
EEMA Asia
LatinAmerica
&Canada
Total 2014 $ 852 $ 903 $ 573 $
296 $ 2,624 2013 1,011 811 1,055 358 3,235 % Change
(15.7 )% 11.3 % (45.7 )% (17.3 )% (18.9 )%
Reconciliation:
For the quarter ended December 31, 2013 $
1,011 $ 811 $ 1,055 $
358 $ 3,235 2013 Asset impairment and
exit costs 13 264 19 5 301 2014 Asset impairment and exit costs (18
) (2 ) (11 ) (1 ) (32 ) Acquired businesses (1 ) (8 ) — (1 )
(10 ) Currency (80 ) (243 ) (112 ) (59 ) (494 ) Operations (73 )
81 (378 ) (6 ) (376 )
For the
quarter ended December 31, 2014 $ 852
$ 903 $
573 $ 296
$ 2,624
Schedule 4 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Diluted Earnings Per Share
For the Quarters Ended December
31, ($ in millions, except per share data) (Unaudited)
Diluted E.P.S. 2014 Diluted Earnings
Per Share $ 1.03
(1)
2013 Diluted Earnings Per Share $ 1.24 (1) Change $ (0.21 ) %
Change (16.9 )%
Reconciliation:
2013 Diluted Earnings Per Share $ 1.24 (1)
Special
Items:
2013 Asset impairment and exit costs 0.12 2013 Tax items 0.01 2014
Asset impairment and exit costs — 2014 Tax items — Currency
(0.28 ) Interest (0.01 ) Change in tax rate 0.01 Impact of lower
shares outstanding and share-based payments 0.03 Operations (0.09 )
2014 Diluted Earnings Per Share $ 1.03
(1) (1) Basic and diluted EPS were calculated
using the following (in millions):
Q42014
Q42013 Net earnings attributable to PMI $
1,612 $ 1,987 Less distributed and undistributed earnings
attributable to share-based payment awards 8 10 Net
earnings for basic and diluted EPS $ 1,604 $
1,977 Weighted-average shares
for basic and diluted EPS 1,552 1,598
Schedule 5 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Condensed Statements of Earnings
For the
Years Ended December 31, ($ in millions, except per share data)
(Unaudited)
2014 2013
% Change Net revenues $
80,106 $ 80,029 0.1 %
Cost of sales 10,436 10,410 0.2 % Excise taxes on products (2)
50,339 48,812 3.1 % Gross profit 19,331 20,807
(7.1 )% Marketing, administration and research costs 7,001 6,890
Asset impairment and exit costs 535 309 Amortization of intangibles
93 93
Operating income (3)
11,702 13,515 (13.4 )% Interest
expense, net 1,052 973 Earnings before income
taxes 10,650 12,542 (15.1 )% Provision for income taxes 3,097 3,670
(15.6 )% Equity (income)/loss in unconsolidated subsidiaries, net
(105 ) 22 Net earnings 7,658 8,850 (13.5 )% Net
earnings attributable to noncontrolling interests 165
274
Net earnings attributable to PMI $
7,493 $ 8,576
(12.6 )% Per share data: (3) Basic
earnings per share $ 4.76
$ 5.26 (9.5 )% Diluted
earnings per share $ 4.76
$ 5.26 (9.5 )%
(1) The segment detail of excise taxes on
products sold for the year ended 2014 and 2013 is shown on Schedule
6.
(2) 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, plus
equity(income)/loss in unconsolidated subsidiaries, net. The
reconciliation from operating income to operating companiesincome
is as follows:
2014 2013 %
Change Operating Income $ 11,702 $
13,515 (13.4 )%
Excluding:
- Amortization of Intangibles 93 93 - General corporate expenses
(included in marketing, administration and research costs above)
165 187 Plus: Equity (income)/loss in unconsolidated subsidiaries,
net (105 ) 22
Operating Companies Income
$ 12,065 $
13,773 (12.4 )%
(3) Net earnings and weighted-average
shares used in the basic and diluted earnings per share
computations for the yearended 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 Years Ended December
31, ($ in millions) (Unaudited)
Net Revenues
excluding Excise Taxes
EuropeanUnion
EEMA Asia
LatinAmerica
&Canada
Total 2014 Net Revenues (1) $
29,058 $ 21,928 $ 19,255 $ 9,865 $
80,106 Excise Taxes on Products (20,219 ) (13,006 )
(10,527 ) (6,587 ) (50,339 )
Net Revenues
excluding Excise Taxes 8,839 8,922 8,728
3,278 29,767 2013 Net Revenues $ 28,303
$ 20,695 $ 20,987 $ 10,044 $ 80,029 Excise Taxes on Products
(19,707 ) (11,929 ) (10,486 ) (6,690 )
(48,812 )
Net Revenues excluding Excise Taxes 8,596
8,766 10,501 3,354 31,217
Variance Currency 122 (761 ) (1,022 ) (431 ) (2,092 )
Acquisitions 11 1 — 1 13 Operations 110 916
(751 ) 354 629
Variance
Total 243 156 (1,773 ) (76
) (1,450 ) Variance Total (%) 2.8 % 1.8 %
(16.9 )% (2.3 )% (4.6 )% Variance excluding Currency 121 917
(751 ) 355 642 Variance excluding Currency (%) 1.4 % 10.5 % (7.2 )%
10.6 % 2.1 % Variance excluding Currency & Acquisitions
110 916 (751 ) 354 629 Variance excluding Currency &
Acquisitions (%) 1.3 % 10.4 % (7.2 )% 10.6 % 2.0 %
(1) 2014 Currency increased (decreased) net revenues as
follows: European Union $ 343 EEMA (2,222 ) Asia (1,899 ) Latin
America & Canada (1,570 ) $ (5,348 )
Schedule 7 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Selected Financial Data by
Business Segment
For the Years Ended December 31, ($ in
millions) (Unaudited)
Operating Companies Income
EuropeanUnion
EEMA Asia
LatinAmerica
&Canada
Total 2014 $ 3,727 $ 4,121 $
3,187 $ 1,030 $ 12,065 2013 4,238 3,779 4,622 1,134
13,773 % Change (12.1 )% 9.1 % (31.0 )% (9.2 )% (12.4 )%
Reconciliation:
For the year ended December 31, 2013 $ 4,238
$ 3,779 $ 4,622 $ 1,134
$ 13,773 2013 Asset impairment and exit costs
13 264 27 5 309 2014 Asset impairment and exit costs (490 ) (2 )
(35 ) (8 ) (535 ) Acquired businesses (1 ) (8 ) — (1 ) (10 )
Currency 37 (611 ) (656 ) (243 ) (1,473 ) Operations (70 )
699 (771 ) 143 1
For
the year ended December 31, 2014 $ 3,727
$ 4,121 $
3,187 $ 1,030
$ 12,065
Schedule 8 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Diluted Earnings Per Share
For the Years Ended
December 31, ($ in millions, except per share data) (Unaudited)
Diluted
E.P.S.
2014 Diluted Earnings Per Share $ 4.76 (1) 2013
Diluted Earnings Per Share $ 5.26
(1)
Change $ (0.50 ) % Change (9.5 )%
Reconciliation:
2013 Diluted Earnings Per Share $ 5.26 (1)
Special
Items:
2013 Asset impairment and exit costs 0.12 2013 Tax items 0.02 2014
Asset impairment and exit costs (0.26 ) 2014 Tax items —
Currency (0.80 ) Interest (0.04 ) Change in tax rate 0.02 Impact of
lower shares outstanding and share-based payments 0.18 Operations
0.26
2014 Diluted Earnings Per Share $
4.76 (1) (1) Basic and diluted EPS were
calculated using the following (in millions):
YTDDecember2014
YTDDecember2013
Net earnings attributable to PMI $ 7,493 $ 8,576 Less
distributed and undistributed earnings attributable
to share-based payment awards
34 45 Net earnings for basic and diluted EPS $
7,459 $ 8,531
Weighted-average shares for basic and diluted EPS 1,566
1,622 Schedule 9 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries
Condensed Balance Sheets ($ in
millions, except ratios) (Unaudited)
December
31, December 31, 2014 2013
Assets
Cash and cash equivalents $ 1,682 $ 2,154 All other current assets
13,802 14,698 Property, plant and equipment, net 6,071 6,755
Goodwill 8,388 8,893 Other intangible assets, net 2,985 3,193
Investments in unconsolidated subsidiaries 1,083 1,536 Other assets
1,176 939
Total assets
$ 35,187 $ 38,168
Liabilities and
Stockholders' (Deficit) Equity
Short-term borrowings $ 1,208 $ 2,400 Current portion of long-term
debt 1,318 1,255 All other current liabilities 12,586 13,411
Long-term debt 26,929 24,023 Deferred income taxes 1,549 1,477
Other long-term liabilities 2,800 1,876 Total
liabilities 46,390 44,442 Total PMI stockholders' deficit
(12,629 ) (7,766 ) Noncontrolling interests 1,426 1,492
Total stockholders' deficit (11,203 ) (6,274 )
Total
liabilities and stockholders' (deficit) equity $
35,187 $ 38,168 Total
debt $ 29,455 $ 27,678 Total debt to Adjusted EBITDA 2.24
(1)
1.88 (1) Net debt to Adjusted EBITDA 2.12
(1)
1.74 (1)
(1) For the calculation of Total Debt to Adjusted EBITDA and Net
Debt to Adjusted 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
December 31, ($ in millions) (Unaudited)
2014 2013
% Change in Reported NetRevenues
excluding Excise Taxes
ReportedNetRevenues
LessExciseTaxes
Reported Net Revenues excluding Excise
Taxes
LessCurrency Reported Net Revenues excluding
Excise Taxes & Currency
LessAcquisi-tions
Reported Net Revenues excluding Excise Taxes, Currency &
Acquisitions Reported Net Revenues
LessExciseTaxes
Reported Net Revenues excluding Excise Taxes
Reported
Reported excluding Currency
Reported excluding Currency &
Acquisitions
$ 6,833 $ 4,757 $ 2,076 $ (121 ) $ 2,197 $ 6 $ 2,191
EuropeanUnion
$ 7,048 $ 4,909 $ 2,139 (2.9 )% 2.7 % 2.4 % 5,581 3,385 2,196 (284
) 2,480 1 2,479 EEMA 5,349 3,092 2,257 (2.7 )% 9.9 % 9.8 % 4,740
2,737 2,003 (161 ) 2,164 — 2,164 Asia 5,211 2,735 2,476 (19.1
)%
(12.6 )% (12.6 )% 2,787 1,865 922 (115 ) 1,037 — 1,037
Latin America& Canada
2,782 1,865 917 0.5 % 13.1 % 13.1 %
$ 19,941 $ 12,744 $ 7,197
$ (681 ) $ 7,878 $
7 $ 7,871 PMI Total $
20,390 $ 12,601 $ 7,789
(7.6 )% 1.1 % 1.1 %
2014 2013
% Change in Reported
OperatingCompanies Income
Reported Operating Companies Income
LessCurrency Reported Operating Companies Income
excluding Currency
LessAcquisi-tions
Reported Operating Companies Income excluding Currency &
Acquisitions Reported Operating Companies Income
Reported
Reported excluding Currency Reported
excluding Currency & Acquisitions $ 852 $ (80 ) $
932 $ (1 ) $ 933
EuropeanUnion
$ 1,011 (15.7 )% (7.8 )% (7.7 )% 903 (243 ) 1,146 (8 ) 1,154 EEMA
811 11.3 % 41.3 % 42.3 % 573 (112 ) 685 — 685 Asia 1,055 (45.7 )%
(35.1 )% (35.1 )% 296 (59 ) 355 (1 ) 356
Latin America& Canada
358 (17.3 )% (0.8 )% (0.6 )%
$ 2,624 $
(494 ) $ 3,118 $ (10
) $ 3,128 PMI Total $
3,235 (18.9 )% (3.6 )%
(3.3 )%
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 December 31, ($ in millions) (Unaudited)
2014 2013
% Change in Adjusted
OperatingCompanies Income
Reported Operating Companies Income LessAsset
Impairment & Exit Costs Adjusted Operating Companies
Income LessCurrency Adjusted Operating
Companies Income excluding Currency
LessAcquisi-tions
Adjusted Operating Companies Income excluding Currency &
Acquisitions Reported Operating Companies Income
LessAsset Impairment & Exit Costs Adjusted
Operating Companies Income
Adjusted
Adjusted excluding Currency Adjusted
excluding Currency & Acquisitions $ 852 $ (18 ) $
870 $ (80 ) $ 950 $ (1 ) $ 951
EuropeanUnion
$ 1,011 $ (13 ) $ 1,024 (15.0 )% (7.2 )% (7.1 )% 903 (2 ) 905 (243
) 1,148 (8 ) 1,156 EEMA 811 (264 ) 1,075 (15.8 )% 6.8 % 7.5 % 573
(11 ) 584 (112 ) 696 — 696 Asia 1,055 (19 ) 1,074 (45.6 )% (35.2 )%
(35.2 )% 296 (1 ) 297 (59 ) 356 (1 ) 357
Latin America& Canada
358 (5 ) 363 (18.2 )% (1.9 )% (1.7 )%
$ 2,624 $
(32 ) $ 2,656 $
(494 ) $ 3,150 $ (10
) $ 3,160 PMI Total $
3,235 $ (301 ) $ 3,536
(24.9 )% (10.9 )% (10.6
)% 2014 2013 %
Points Change Adjusted Operating Companies Income excluding
Currency Net Revenues excluding Excise Taxes &
Currency(1) Adjusted Operating Companies Income Margin
excluding Currency Adjusted Operating Companies Income
excluding Currency & Acquisitions Net Revenues excluding
Excise Taxes, Currency & Acquisitions(1) Adjusted
Operating Companies Income Margin excluding Currency &
Acquisitions Adjusted Operating Companies Income Net
Revenues excluding Excise Taxes(1) Adjusted Operating
Companies Income Margin Adjusted Operating Companies
Income Margin excluding Currency Adjusted Operating
Companies Income Margin excluding Currency & Acquisitions
$ 950 $ 2,197 43.2 % $ 951 $ 2,191 43.4 %
EuropeanUnion
$ 1,024 $ 2,139 47.9 % (4.7 ) (4.5 ) 1,148 2,480 46.3 % 1,156 2,479
46.6 % EEMA 1,075 2,257 47.6 % (1.3 ) (1.0 ) 696 2,164 32.2 % 696
2,164 32.2 % Asia 1,074 2,476 43.4 % (11.2 ) (11.2 ) 356 1,037 34.3
% 357 1,037 34.4 %
Latin America& Canada
363 917 39.6 % (5.3 ) (5.2 )
$ 3,150 $
7,878 40.0 % $ 3,160
$ 7,871 40.1 % PMI Total
$ 3,536 $ 7,789 45.4
% (5.4 ) (5.3 )
(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
December 31, (Unaudited)
2014 2013
% Change Reported Diluted EPS $
1.03 $ 1.24 (16.9 )%
Adjustments: Asset impairment and exit costs — 0.12 Tax
items — 0.01
Adjusted Diluted EPS
$ 1.03 $ 1.37 (24.8 )%
Less: Currency impact (0.28 )
Adjusted Diluted EPS, excluding Currency $
1.31 $ 1.37 (4.4
)%
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
December 31, (Unaudited)
2014 2013 % Change Reported Diluted
EPS $ 1.03 $ 1.24
(16.9 )% Less: Currency impact (0.28 )
Reported Diluted EPS, excluding Currency
$ 1.31 $ 1.24
5.6 %
Schedule 14 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures Adjustments for the Impact of
Currency and Acquisitions
For the Years Ended December 31,
($ in millions) (Unaudited)
2014 2013
% Change in Reported NetRevenues
excluding Excise Taxes
Reported Net Revenues
LessExciseTaxes
Reported Net Revenues excluding Excise
Taxes
LessCurrency
Reported Net Revenues excluding Excise Taxes & Currency
LessAcquisi-tions
Reported Net Revenues excluding Excise Taxes, Currency &
Acquisitions
Reported Net Revenues
LessExciseTaxes
Reported Net Revenues excluding Excise Taxes
Reported
Reported excluding Currency
Reported excluding Currency &
Acquisitions
$ 29,058 $ 20,219 $ 8,839 $ 122 $ 8,717 $ 11 $ 8,706
EuropeanUnion
$ 28,303 $ 19,707 $ 8,596 2.8 % 1.4 % 1.3 % 21,928 13,006 8,922
(761 ) 9,683 1 9,682 EEMA 20,695 11,929 8,766 1.8 % 10.5 % 10.4 %
19,255 10,527 8,728 (1,022 ) 9,750 — 9,750 Asia 20,987 10,486
10,501 (16.9 )% (7.2 )% (7.2 )% 9,865 6,587 3,278 (431 ) 3,709 1
3,708
Latin America& Canada
10,044 6,690 3,354 (2.3 )% 10.6 % 10.6 %
$ 80,106 $ 50,339 $
29,767 $ (2,092 ) $
31,859 $ 13 $ 31,846
PMI Total $ 80,029 $ 48,812
$ 31,217 (4.6 )% 2.1 %
2.0 % 2014 2013
% Change in Reported
OperatingCompanies Income
Reported Operating Companies Income
LessCurrency
Reported Operating Companies Income excluding Currency
LessAcquisi-tions
Reported Operating Companies Income excluding Currency &
Acquisitions Reported Operating Companies Income
Reported
Reported excluding Currency
Reported excluding Currency & Acquisitions
$ 3,727 $ 37 $ 3,690 $ (1 ) $ 3,691
EuropeanUnion
$ 4,238 (12.1 )% (12.9 )% (12.9 )% 4,121 (611 ) 4,732 (8 ) 4,740
EEMA 3,779 9.1 % 25.2 % 25.4 % 3,187 (656 ) 3,843 — 3,843 Asia
4,622 (31.0 )% (16.9 )% (16.9 )% 1,030 (243 ) 1,273 (1 ) 1,274
Latin America& Canada
1,134 (9.2 )% 12.3 % 12.3 %
$ 12,065 $
(1,473 ) $ 13,538 $ (10
) $ 13,548 PMI Total $
13,773 (12.4 )% (1.7 )%
(1.6 )% 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 Years Ended December 31, ($ in
millions) (Unaudited)
2014 2013 % Change in
Adjusted Operating Companies Income
Reported Operating Companies
Income
LessAsset Impairment & Exit
Costs
Adjusted Operating Companies Income
LessCurrency
Adjusted Operating Companies Income excluding Currency
LessAcquisi-tions
Adjusted Operating Companies Income excluding Currency &
Acquisitions
Reported Operating Companies
Income
LessAsset Impairment & Exit
Costs
Adjusted Operating Companies
Income
Adjusted
Adjusted excluding Currency
Adjusted excluding Currency &
Acquisitions
$ 3,727 $ (490 ) $ 4,217 $ 37 $ 4,180 $ (1 ) $ 4,181
EuropeanUnion
$ 4,238 $ (13 ) $ 4,251 (0.8 )% (1.7 )% (1.6 )% 4,121 (2 ) 4,123
(611 ) 4,734 (8 ) 4,742 EEMA 3,779 (264 ) 4,043 2.0 % 17.1 % 17.3 %
3,187 (35 ) 3,222 (656 ) 3,878 — 3,878 Asia 4,622 (27 ) 4,649 (30.7
)% (16.6 )% (16.6 )% 1,030 (8 ) 1,038 (243 ) 1,281 (1 ) 1,282
Latin America& Canada
1,134 (5 ) 1,139 (8.9 )% 12.5 % 12.6 %
$ 12,065 $
(535 ) $ 12,600 $
(1,473 ) $ 14,073 $ (10
) $ 14,083 PMI Total $
13,773 $ (309 ) $ 14,082
(10.5 )% (0.1 )% —
% 2014 2013 %
Points Change Adjusted Operating Companies Income excluding
Currency
Net Revenues excluding Excise Taxes
& Currency(1)
Adjusted Operating Companies Income
Margin excluding Currency
Adjusted Operating Companies Income
excluding Currency & Acquisitions
Net Revenues excluding Excise Taxes,
Currency & Acquisitions(1)
Adjusted Operating Companies Income
Margin excluding Currency & Acquisitions
Adjusted Operating Companies
Income
Net Revenues excluding Excise
Taxes(1)
Adjusted Operating Companies Income
Margin
Adjusted Operating Companies Income
Margin excluding Currency
Adjusted Operating Companies Income Margin excluding
Currency & Acquisitions $ 4,180 $ 8,717 48.0 % $
4,181 $ 8,706 48.0 %
EuropeanUnion
$ 4,251 $ 8,596 49.5 % (1.5 ) (1.5 ) 4,734 9,683 48.9 % 4,742 9,682
49.0 % EEMA 4,043 8,766 46.1 % 2.8 2.9 3,878 9,750 39.8 % 3,878
9,750 39.8 % Asia 4,649 10,501 44.3 % (4.5 ) (4.5 ) 1,281 3,709
34.5 % 1,282 3,708 34.6 %
Latin America& Canada
1,139 3,354 34.0 % 0.5 0.6
$ 14,073 $
31,859 44.2 % $ 14,083
$ 31,846 44.2 % PMI Total
$ 14,082 $ 31,217 45.1
% (0.9 ) (0.9 )
(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 Years Ended
December 31, (Unaudited)
2014 2013
%
Change
Reported Diluted EPS $ 4.76
$ 5.26 (9.5 )%
Adjustments: Asset impairment and exit costs 0.26 0.12 Tax items —
0.02
Adjusted Diluted EPS $
5.02 $ 5.40 (7.0 )% Less:
Currency impact (0.80 )
Adjusted Diluted
EPS, excluding Currency $ 5.82
$ 5.40 7.8 %
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 Years Ended
December 31, (Unaudited)
2014 2013 % Change Reported Diluted
EPS $ 4.76 $ 5.26 (9.5
)% Less: Currency impact (0.80 )
Reported Diluted EPS, excluding Currency $
5.56 $ 5.26 5.7 %
Schedule 18 PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of
Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA
Ratios ($ in millions, except ratios) (Unaudited)
For the
Year Ended For the Year Ended December 31,
December 31, 2014 2013
Earnings before income taxes $ 10,650 $ 12,542 Interest
expense, net 1,052 973 Depreciation and amortization 889 882
Extraordinary, unusual or non-recurring
expenses, net (1)
535 309
Adjusted EBITDA $ 13,126 $
14,706 December 31, December 31,
2014 2013 Short-term borrowings $ 1,208
$ 2,400 Current portion of long-term debt 1,318 1,255 Long-term
debt 26,929 24,023
Total Debt $ 29,455
$ 27,678 Less: Cash and cash equivalents 1,682
2,154
Net Debt $ 27,773 $ 25,524
Ratios
Total Debt to Adjusted EBITDA 2.24 1.88
Net Debt to Adjusted EBITDA 2.12 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 Years Ended
December 31, ($ in millions) (Unaudited)
For the Quarters Ended For
the Years Ended December 31, December 31,
2014 2013 % Change 2014 2013
% Change Net cash provided by operating
activities(a) $ 1,354 $
2,320 (41.6 )% $ 7,739
$ 10,135 (23.6 )% Less:
Capital expenditures 349 379 1,153 1,200
Free cash flow $ 1,005 $
1,941 (48.2 )% $ 6,586 $
8,935 (26.3 )% Less: Currency impact
(267 ) (1,639 )
Free cash
flow, excluding currency $ 1,272
$ 1,941 (34.5 )% $
8,225 $ 8,935
(7.9 )%
For the Quarters
Ended For the Years Ended December 31,
December 31, 2014 2013 %
Change 2014 2013 % Change
Net cash provided by operating activities(a) $
1,354 $ 2,320 (41.6 )% $
7,739 $ 10,135 (23.6 )%
Less: Currency impact (307 ) (1,719 )
Net cash provided by operating activities,excluding
currency $ 1,661 $
2,320 (28.4 )% $
9,458 $ 10,135
(6.7 )% (a) Operating cash flow.
Philip Morris International Inc.Investor Relations:New York: +1
(917) 663 2233Lausanne: +41 (0)58 242 4666Media:Lausanne: +41 (0)58
242 4500
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