Increases 2019
Full-Year Reported Diluted EPS Forecast to at Least $4.94 (from at
Least $4.87) vs. $5.08 in 2018; Reflecting Currency-Neutral
Like-for-Like Adjusted Diluted EPS Growth of at Least
9%
Regulatory News:
Philip Morris International Inc. (NYSE: PM) today announced its
2019 second-quarter results and increases its 2019 full-year
reported diluted earnings per share forecast. Comparisons presented
in this press release on a "like-for-like" basis reflect pro forma
2018 results, which have been adjusted for the deconsolidation of
PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc.
(RBH), effective March 22, 2019 (the date of deconsolidation). In
addition, reflecting the deconsolidation, PMI's total market share
has been restated for previous periods.
2019 SECOND-QUARTER &
YEAR-TO-DATE HIGHLIGHTS
2019 Second-Quarter
- Reported diluted EPS of $1.49, up by 5.7%; up by 10.6%,
excluding currency
- Adjusted diluted EPS of $1.46, up by 3.5%; up by 15.0% on a
like-for-like basis, excluding currency
- Cigarette and heated tobacco unit shipment volume down by 1.4%
(down by 0.7% on a like-for-like basis), reflecting cigarette
shipment volume down by 3.6% and heated tobacco unit shipment
volume up by 37.0%
- Net revenues down by 0.3%; up by 9.0% on a like-for-like basis,
excluding currency
- Operating income up by 3.0%; up by 8.4%, excluding
currency
- Adjusted operating income up by 15.7% on a like-for-like basis,
excluding currency
- Adjusted operating income margin, excluding currency, increased
by 2.4 points to 41.4% on a like-for-like basis
- PMI declared a regular quarterly dividend of $1.14,
representing an annualized rate of $4.56 per common share
- The U.S. Food and Drug Administration announced that the
marketing of IQOS, PMI's electrically heated tobacco system, is
appropriate for the protection of public health and authorized it
for sale in the United States
2019 Six Months Year-to-Date
- Reported diluted EPS of $2.36, down by 2.1%; up by 3.3%,
excluding currency
- Adjusted diluted EPS of $2.55, up by 5.8%; up by 15.0% on a
like-for-like basis, excluding currency
- Cigarette and heated tobacco unit shipment volume down by 0.2%
(up by 0.1% on a like-for-like basis), reflecting cigarette
shipment volume down by 1.9% and heated tobacco unit shipment
volume up by 29.2%
- Net revenues down by 1.2%; up by 6.2% on a like-for-like basis,
excluding currency
- Operating income down by 5.1%; up by 0.5%, excluding
currency
- Adjusted operating income up by 12.7% on a like-for-like basis,
excluding currency
- Adjusted operating income margin, excluding currency, increased
by 2.2 points to 39.4% on a like-for-like basis
"Building on our encouraging start to the year, we delivered
another strong quarter that continues to demonstrate the soundness
of our strategies and the quality of our execution," said André
Calantzopoulos, Chief Executive Officer.
"Of particular note is our combined cigarette and heated tobacco
unit shipment volume, which -- for the first six months of the year
-- was up by 0.1% on a like-for-like basis. This positive
performance was led by robust in-market heated tobacco unit
year-to-date sales growth of 34.0%, making HEETS/HeatSticks,
combined, a top-ten international tobacco brand, despite only being
present in approximately one quarter of our markets. In the markets
where they are sold, our heated tobacco brands held a sizable
combined share of 5.0% year-to-date, driving a total international
share of 2.1%, up by 0.6 points."
"Our strong year-to-date results are the reason behind today's
announcement to increase our full-year guidance and raise our
currency-neutral, like-for-like 2019 full-year adjusted diluted EPS
growth rate by one percentage point to at least 9% in a further
demonstration of our overall confidence in PMI's short and
long-term growth prospects. This projection includes additional
investment behind our RRP portfolio to support geographic expansion
and portfolio development that should help us enter 2020 in an even
stronger position."
2019 FULL-YEAR
FORECAST
Full-Year
2019 EPS Forecast
2019 Forecast
2018
Adjusted Growth
Reported Diluted EPS
≥ $4.94
(a)
$5.08
2018 Tax items
—
0.02
2019 Tax items
(0.04
)
—
2019 Asset impairment and exit costs
0.03
—
2019 Canadian tobacco litigation-related
expense
0.09
—
2019 Loss on deconsolidation of RBH
0.12
—
Adjusted Diluted EPS
$5.14
$5.10
Net earnings attributable to RBH
(0.26
)
(b)
Adjusted Diluted EPS
$5.14
$4.84
(c)
Currency
(0.14
)
Adjusted Diluted EPS, excl.
currency
$5.28
$4.84
(c)
≥ 9 %
(a) Reflects the exclusion of previously
anticipated net EPS of approximately $0.28 attributable to RBH from
March 22, 2019 through December 31, 2019. The impact relating to
the eight-day stub period was not material.
(b) Net reported diluted EPS attributable
to RBH from March 22, 2018 through December 31, 2018.
(c) Pro forma.
PMI revises its full-year 2019 reported diluted EPS forecast to
be at least $4.94 at prevailing exchange rates, compared to the
previously communicated forecast of at least $4.87, versus $5.08 in
2018.
This revised full-year guidance reflects:
- The net impact of the loss on deconsolidation of PMI's Canadian
subsidiary Rothmans, Benson & Hedges Inc. (RBH) under U.S. GAAP
of approximately $0.12 per share, recorded in the first quarter of
2019, which is a non-cash item, as well as the Canadian tobacco
litigation-related expense of approximately $0.09 per share;
- The exclusion, announced on March 22, 2019, of RBH’s previously
anticipated net earnings from PMI’s consolidated financial
statements, from March 22, 2019 (the date of deconsolidation) to
December 31, 2019, of approximately $0.28 per share;
- Asset impairment and exit costs of approximately $0.03 per
share resulting from plant closures as part of global manufacturing
infrastructure optimization, reflecting: $0.01 per share related to
Pakistan recorded in the first quarter of 2019; and $0.02 per share
related to Colombia ($0.01 per share recorded in the second quarter
of 2019 and $0.01 per share anticipated in the third quarter of
2019);
- A favorable tax item of $0.04 per share related to a reduction
in estimated U.S. federal income tax on dividend repatriation for
the years 2015-2018;
- An unfavorable currency impact, at prevailing exchange rates,
of approximately $0.14;
- A full-year effective tax rate of approximately 23%, excluding
discrete tax items and Loss on Deconsolidation of RBH; and
- A projected increase of at least 9%, excluding currency, versus
pro forma adjusted diluted earnings per share of $4.84 in 2018, as
detailed in the attached Schedule 3 and as shown in the 2019 EPS
Forecast table above.
2019 Full-Year Forecast Overview & Assumptions
This forecast assumes:
- A total cigarette and heated tobacco unit shipment volume
decline for PMI of approximately 1.0%, on a like-for-like basis,
compared to the previously disclosed range of approximately 1.5% to
2.0%;
- An estimated total international industry volume decline,
excluding China and the U.S., at the lower end of the previously
disclosed range of approximately 2.5% to 3.0%; and
- Currency-neutral net revenue growth of at least 6% on a
like-for-like basis, compared to the previously disclosed
assumption of at least 5%, which includes an adverse impact of
approximately 0.7 points related to the move to highly inflationary
accounting in Argentina resulting in the treatment of the U.S.
dollar as the functional currency of the company’s Argentinian
affiliates.
This forecast further assumes:
- Net incremental investment behind RRPs of approximately $400
million for the full year 2019, compared to the previously
disclosed estimate of approximately $300 million. Approximately
half of the total net incremental investment of $400 million is
expected in the third quarter;
- An increase in full-year currency-neutral, like-for-like
adjusted operating income margin of at least 100 basis points
compared to 2018;
- Operating cash flow of approximately $9.5 billion, subject to
year-end working capital requirements;
- Capital expenditures of approximately $1.1 billion; and
- No share repurchases.
This forecast excludes the impact of any future acquisitions,
unanticipated asset impairment and exit cost charges, future
changes in currency exchange rates, further developments related to
the Tax Cuts and Jobs Act, further developments pertaining to the
judgment in the two Québec Class Action lawsuits and the Companies’
Creditors Arrangement Act (CCAA) protection granted to RBH and any
unusual events. This forecast also excludes the contemplated
proposal, previously communicated by PMI's local affiliate, to end
cigarette production in Berlin, Germany, by January 2020. Factors
described in the Forward-Looking and Cautionary Statements section
of this release represent continuing risks to these
projections.
FDA Authorization for Sale of IQOS in the United
States
On April 30, 2019, the U.S. Food and Drug Administration (FDA)
announced that the marketing of IQOS, PMI's electrically heated
tobacco system, is appropriate for the protection of public health
and authorized it for sale in the United States. The FDA’s decision
follows its comprehensive assessment of PMI’s premarket tobacco
product applications (PMTAs) submitted to the Agency in 2017.
PMI will bring IQOS to the U.S. through an exclusive license
with Altria Group, Inc., whose subsidiary, Philip Morris USA, will
market the product and comply with the provisions set forth in the
FDA's marketing order, and has the expertise and infrastructure to
ensure a successful launch, beginning with the initial lead market
of Atlanta, Georgia.
For additional information about the FDA's marketing order, see
the FDA News Release of April 30, 2019, set out at the end of this
release.
Conference Call
A conference call, hosted by Martin King, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on July 18,
2019. Access is at www.pmi.com/2019Q2earnings. 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.
CONSOLIDATED SHIPMENT VOLUME & MARKET
SHARE
PMI Shipment Volume by Region
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
European Union
46,367
47,984
(3.4
)%
85,855
87,655
(2.1
)%
Eastern Europe
27,080
28,454
(4.8
)%
47,400
50,493
(6.1
)%
Middle East & Africa
31,659
34,177
(7.4
)%
64,963
63,425
2.4
%
South & Southeast Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
East Asia & Australia
13,845
15,114
(8.4
)%
25,958
29,205
(11.1
)%
Latin America & Canada
18,472
20,204
(8.6
)%
36,052
39,217
(8.1
)%
Total PMI
183,799
190,721
(3.6
)%
348,096
355,001
(1.9
)%
Heated Tobacco Units
European Union
3,043
1,195
+100%
5,336
2,123
+100%
Eastern Europe
2,807
951
+100%
4,355
1,515
+100%
Middle East & Africa
719
971
(26.0
)%
1,473
1,680
(12.3
)%
South & Southeast Asia
—
—
—
%
—
—
—
%
East Asia & Australia
8,428
7,838
7.5
%
15,277
15,180
0.6
%
Latin America & Canada
59
32
84.4
%
113
55
+100%
Total PMI
15,056
10,987
37.0
%
26,554
20,553
29.2
%
Cigarettes and Heated Tobacco
Units
European Union
49,410
49,179
0.5
%
91,191
89,778
1.6
%
Eastern Europe
29,887
29,405
1.6
%
51,755
52,008
(0.5
)%
Middle East & Africa
32,378
35,148
(7.9
)%
66,436
65,105
2.0
%
South & Southeast Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
East Asia & Australia
22,273
22,952
(3.0
)%
41,235
44,385
(7.1
)%
Latin America & Canada
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Total PMI
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Second-Quarter
PMI's total shipment volume decreased by 1.4%, or by 0.7% on a
like-for-like basis, principally due to:
- Middle East & Africa, reflecting lower cigarette shipment
volume, notably Saudi Arabia and Turkey, partly offset by
Egypt;
- East Asia & Australia, reflecting lower cigarette shipment
volume in Japan and lower cigarette and heated tobacco unit
shipment volume in Korea, partly offset by higher heated tobacco
unit shipment volume in Japan; and
- Latin America & Canada, reflecting lower cigarette shipment
volume, principally in Argentina, Canada (reflecting the impact of
the deconsolidation of RBH), and Venezuela, partly offset by
Mexico. On a like-for-like basis, PMI's total shipment volume in
the Region decreased by 1.4%;
partly offset by
- the EU, reflecting higher heated tobacco unit shipment volume
across the Region, partly offset by lower cigarette shipment
volume, notably France, Germany and Italy, partially offset by
Poland;
- Eastern Europe, reflecting higher heated tobacco unit shipment
volume across the Region, notably Russia and Ukraine, partly offset
by lower cigarette shipment volume, mainly Russia and Ukraine;
and
- South & Southeast Asia, reflecting higher cigarette
shipment volume, principally in Pakistan and Thailand.
Impact of Inventory Movements
On a like-for-like basis, excluding the net unfavorable impact
of estimated distributor inventory movements of approximately 0.2
billion units, PMI’s total in-market sales declined by 0.6%, due to
a 2.6% decline of cigarette in-market sales, partially offset by a
33.3% increase in heated tobacco unit in-market sales.
Six Months Year-to-Date
PMI's total shipment volume decreased by 0.2%, or increased by
0.1% on a like-for-like basis, due to:
- Eastern Europe, reflecting lower cigarette shipment volume,
principally in Russia and Ukraine, partly offset by higher heated
tobacco unit shipment volume across the Region, notably Kazakhstan,
Russia and Ukraine;
- East Asia & Australia, reflecting lower cigarette shipment
volume in Japan, lower cigarette and heated tobacco unit shipment
volume in Korea, partly offset by higher heated tobacco unit
shipment volume in Japan; and
- Latin America & Canada, reflecting lower cigarette shipment
volume, principally in Argentina, Canada (primarily reflecting the
impact of the deconsolidation of RBH), and Venezuela, partly offset
by Mexico. On a like-for-like basis, PMI's total shipment volume in
the Region decreased by 4.4%;
partly offset by
- the EU, reflecting higher heated tobacco unit shipment volume
across the Region, and higher cigarette shipment volume in Poland
and Spain, partly offset by lower cigarette shipment volume in
France and Italy;
- Middle East & Africa, primarily reflecting higher cigarette
shipment volume, notably Egypt, Saudi Arabia and Turkey, partly
offset by lower cigarette shipment volume in PMI Duty Free and
Tunisia; and
- South & Southeast Asia, reflecting higher cigarette
shipment volume, principally in Pakistan, the Philippines and
Thailand, partly offset by Indonesia.
Impact of Inventory Movements
On a like-for-like basis, excluding the net unfavorable impact
of estimated distributor inventory movements of approximately 1.3
billion units, PMI’s total in-market sales growth was 0.5%, driven
by a 34.0% increase in heated tobacco unit in-market sales, partly
offset by a 1.4% decline of cigarette in-market sales.
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
Marlboro
68,060
68,893
(1.2
)%
128,024
126,866
0.9
%
L&M
23,522
23,196
1.4
%
45,337
42,422
6.9
%
Chesterfield
14,202
14,926
(4.8
)%
28,501
28,801
(1.0
)%
Philip Morris
12,950
12,523
3.4
%
23,673
23,182
2.1
%
Parliament
9,847
10,993
(10.4
)%
18,677
19,453
(4.0
)%
Sampoerna A
9,355
10,174
(8.0
)%
17,256
18,798
(8.2
)%
Dji Sam Soe
7,839
6,877
14.0
%
14,490
13,573
6.8
%
Bond Street
7,741
8,390
(7.7
)%
13,412
15,365
(12.7
)%
Lark
5,349
5,969
(10.4
)%
10,619
11,546
(8.0
)%
Fortune
3,441
4,155
(17.2
)%
6,487
7,739
(16.2
)%
Others
21,493
24,625
(12.7
)%
41,620
47,256
(11.9
)%
Total Cigarettes
183,799
190,721
(3.6
)%
348,096
355,001
(1.9
)%
Heated Tobacco Units
15,056
10,987
37.0
%
26,554
20,553
29.2
%
Total PMI
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Note: Sampoerna A includes Sampoerna;
Philip Morris includes Philip Morris/Dubliss; and Lark includes
Lark Harmony.
Second-Quarter
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to Italy and Japan, partly reflecting the
impact of out-switching to heated tobacco units, as well as France
and Saudi Arabia, partly offset by Indonesia, Mexico, the
Philippines and Turkey;
- Chesterfield, mainly due to Argentina, Russia, Saudi Arabia,
Turkey and Venezuela, partly offset by Brazil, Mexico and
Morocco;
- Parliament, mainly due to Russia and Turkey;
- Sampoerna A in Indonesia, mainly reflecting the impact of
retail price increases resulting in widened price gaps with
competitors' products and the impact of estimated trade inventory
movements following the absence of an excise tax increase in
January 2019;
- Bond Street, mainly due to Russia and Ukraine;
- Lark, mainly due to Turkey;
- Fortune in the Philippines, mainly reflecting up-trading to
Marlboro resulting from a narrowed price gap; and
- "Others," notably due to: the impact of the deconsolidation of
RBH in Canada; mid-price Sampoerna U in Indonesia, partly
reflecting the impact of above-inflation retail price increases;
and low-price brands, notably in Russia, partly offset by low-price
brands in Pakistan.
The increase in PMI's heated tobacco unit shipment volume was
mainly driven by the EU, notably Italy, Eastern Europe, notably
Russia and Ukraine, as well as Japan, partly offset by Korea and
PMI Duty Free.
PMI's cigarette shipment volume of the following brands
increased:
- L&M, mainly driven by Egypt and Thailand, partly offset by
Russia, Saudi Arabia and Turkey;
- Philip Morris, mainly driven by Indonesia and Russia, partly
offset by Argentina; and
- Dji Sam Soe in Indonesia, driven by the strong performance of
the DSS Magnum Mild 16 variant and the introduction of 20s and 50s
variants.
International Share of Market
PMI's total international market share (excluding China and the
United States), defined as PMI's cigarette and heated tobacco unit
sales volume as a percentage of total industry cigarette and heated
tobacco unit sales volume, increased by 0.1 point to 28.3%,
reflecting:
- Total international cigarette market share of 26.2%, down by
0.4 points; and
- Total international heated tobacco unit market share of 2.1%,
up by 0.5 points.
PMI's total international cigarette market share, defined as
PMI's cigarette sales volume as a percentage of total industry
cigarette sales volume, was 26.9%, down by 0.3 points.
Six Months Year-to-Date
PMI's cigarette shipment volume of the following brands
decreased:
- Chesterfield, mainly due to Argentina, Italy, Russia and
Venezuela, partly offset by Brazil, Mexico, Morocco and
Poland;
- Parliament, mainly due to Korea and Russia, partly offset by
Turkey;
- Sampoerna A in Indonesia, reflecting the same factors as in the
quarter;
- Bond Street, mainly due to Russia and Ukraine;
- Lark, mainly due to Japan and Turkey;
- Fortune in the Philippines, mainly reflecting up-trading to
Marlboro resulting from a narrowed price gap; and
- "Others," notably due to: the impact of the deconsolidation of
RBH in Canada; mid-price Sampoerna U in Indonesia, partly
reflecting the impact of above-inflation retail price increases;
and low-price brands, notably in Mexico and Russia, partly offset
by mid and low-price brands in Pakistan.
The increase in PMI's heated tobacco unit shipment volume was
mainly driven by: the EU, notably Italy, Eastern Europe, notably
Russia and Ukraine, and Japan; partly offset by Korea and PMI Duty
Free.
PMI's cigarette shipment volume of the following brands
increased:
- Marlboro, mainly driven by Indonesia, Mexico, the Philippines,
Saudi Arabia and Turkey, partially offset by Italy and Japan,
partly reflecting the impact of out-switching to heated tobacco
units, as well as France and PMI Duty Free;
- L&M, mainly driven by Egypt, Saudi Arabia and Thailand,
partly offset by Russia and Turkey;
- Philip Morris, mainly driven by Indonesia and Russia, partly
offset by Argentina; and
- Dji Sam Soe in Indonesia, driven by the same factors as for the
quarter.
International Share of Market
PMI's total international market share (excluding China and the
United States), defined as PMI's cigarette and heated tobacco unit
sales volume as a percentage of total industry cigarette and heated
tobacco unit sales volume, increased by 0.5 points to 28.2%,
reflecting:
- Total international cigarette market share of 26.1%, down by
0.1 point; and
- Total international heated tobacco unit market share of 2.1%,
up by 0.6 points.
PMI's total international cigarette market share, defined as
PMI's cigarette sales volume as a percentage of total industry
cigarette sales volume, was 26.8%, up by 0.1 point.
CONSOLIDATED FINANCIAL SUMMARY
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 7,699
$ 7,726
(0.3
)%
5.4
%
(27
)
(447
)
459
209
(248
)
Cost of Sales
(2,665)
(2,744)
2.9
%
(2.0
)%
79
134
—
(84
)
29
Marketing, Administration and Research
Costs
(1,831)
(1,868)
2.0
%
(5.9
)%
37
148
—
—
(111
)
Amortization of Intangibles
(16)
(21)
23.8
%
23.8
%
5
—
—
—
5
Operating Income
$ 3,187
$ 3,093
3.0
%
8.4
%
94
(165
)
459
125
(325
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Adjusted Operating Income
$ 3,210
$ 3,093
3.8
%
9.1
%
117
(165
)
459
125
(302
)
Adjusted Operating Income
Margin
41.7
%
40.0
%
1.7pp
1.4pp
(1) Cost/Other variance includes the
impact of the RBH deconsolidation.
(2) Included in Marketing, Administration
and Research Costs above.
Net revenues, excluding unfavorable currency, increased by 5.4%,
mainly reflecting: a favorable pricing variance, driven notably by
Germany, Indonesia, Japan, the Philippines and Turkey, partly
offset by Argentina; as well as a favorable volume/mix, mainly
driven by favorable volume/mix of heated tobacco units, notably in
the EU and Eastern Europe, partly offset by unfavorable volume/mix
of cigarettes, mainly in the EU and East Asia & Australia. The
currency-neutral growth in net revenues of 5.4% came despite the
unfavorable impact of $248 million, shown in "Cost/Other,"
predominantly resulting from the deconsolidation of RBH. On a
like-for-like basis, net revenues, excluding unfavorable currency,
increased by 9.0%, as detailed in the attached Schedule 9.
Operating income, excluding unfavorable currency, increased by
8.4%. Excluding asset impairment and exit charges related to a
plant closure in Colombia as part of global manufacturing
infrastructure optimization, adjusted operating income, excluding
unfavorable currency, increased by 9.1%, primarily reflecting: a
favorable pricing variance; favorable volume/mix, notably in the
EU; partly offset by higher manufacturing costs, higher marketing,
administration and research costs and the net unfavorable impact
resulting from the deconsolidation of RBH shown in "Cost/Other." On
a like-for-like basis, adjusted operating income, excluding
unfavorable currency, increased by 15.7%, as detailed in the
attached Schedule 9.
Adjusted operating income margin, excluding currency, increased
by 1.4 points to 41.4%, reflecting the factors mentioned above, as
detailed in the attached Schedule 8, or by 2.4 points to 41.4% on a
like-for-like basis, as detailed in the attached Schedule 9.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 14,450
$ 14,622
(1.2
)%
4.4
%
(172
)
(816
)
687
194
(237
)
Cost of Sales
(5,130
)
(5,359
)
4.3
%
(0.3
)%
229
244
—
(74
)
59
Marketing, Administration and Research
Costs (2)
(4,048
)
(3,701
)
(9.4
)%
(16.5
)%
(347
)
262
—
—
(609
)
Amortization of Intangibles
(35
)
(43
)
18.6
%
16.3
%
8
1
—
—
7
Operating Income
$ 5,237
$ 5,519
(5.1
)%
0.5
%
(282
)
(309
)
687
120
(780
)
Asset Impairment & Exit Costs (3)
(43
)
—
—
%
—
%
(43
)
—
—
—
(43
)
Canadian Tobacco Litigation-Related
Expense (3)
(194
)
—
—
%
—
%
(194
)
—
—
—
(194
)
Loss on Deconsolidation of RBH (3)
(239
)
—
—
%
—
%
(239
)
—
—
—
(239
)
Adjusted Operating Income
$ 5,713
$ 5,519
3.5
%
9.1
%
194
(309
)
687
120
(304
)
Adjusted Operating Income
Margin
39.5
%
37.7
%
1.8pp
1.7pp
(1) Cost/Other variance includes the
impact of the RBH deconsolidation.
(2) Unfavorable Cost/Other variance
includes the 2019 Canadian tobacco litigation-related expense, the
loss on deconsolidation of RBH, asset impairment and exit costs,
and the impact of the RBH deconsolidation.
(3) Included in Marketing, Administration
and Research Costs above.
Net revenues, excluding unfavorable currency, increased by 4.4%,
mainly reflecting: a favorable pricing variance, notably in Canada,
Germany, Indonesia, Japan, the Philippines and Turkey, partly
offset by Argentina and Saudi Arabia; and favorable volume/mix,
mainly driven by favorable volume/mix of heated tobacco units in
the EU and Eastern Europe, partly offset by unfavorable volume/mix
of cigarettes, mainly in the EU, Eastern Europe and East Asia &
Australia, as well as unfavorable volume/mix of heated tobacco
units in East Asia & Australia. The currency-neutral growth in
net revenues of 4.4% came despite the unfavorable impact of $237
million, shown in "Cost/Other," predominantly resulting from the
deconsolidation of RBH. On a like-for-like basis, net revenues,
excluding unfavorable currency, increased by 6.2%, as detailed in
the attached Schedule 9.
Operating income, excluding unfavorable currency, increased by
0.5%. Excluding the loss on deconsolidation of RBH, the Canadian
tobacco litigation-related expense, and asset impairment and exit
charges related to plant closures in Colombia and Pakistan as part
of global manufacturing infrastructure optimization, adjusted
operating income, excluding unfavorable currency, increased by
9.1%, primarily reflecting: a favorable pricing variance; favorable
volume/mix, mainly in the EU, partly offset by East Asia &
Australia; and lower manufacturing costs; partly offset by higher
marketing, administration and research costs, the net unfavorable
impact resulting from the deconsolidation of RBH, shown in
"Cost/Other," as well as increased investment behind reduced-risk
products mainly in the EU and Eastern Europe. On a like-for-like
basis, adjusted operating income, excluding unfavorable currency,
increased by 12.7%, as detailed in the attached Schedule 9.
Adjusted operating income margin, excluding currency, increased
by 1.7 points to 39.4%, reflecting the factors mentioned above, as
detailed in the attached Schedule 8, or by 2.2 points to 39.4% on a
like-for-like basis, as detailed in the attached Schedule 9.
EUROPEAN UNION REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,577
$ 2,503
3.0
%
11.6
%
74
(216
)
84
206
—
Operating Income
$ 1,195
$ 1,177
1.5
%
11.8
%
18
(121
)
84
168
(113
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 1,195
$ 1,177
1.5
%
11.8
%
18
(121
)
84
168
(113
)
Adjusted Operating Income
Margin
46.4
%
47.0
%
(0.6)pp
0.1pp
Net revenues, excluding unfavorable currency, increased by
11.6%, reflecting a favorable pricing variance, driven principally
by France and Germany, and favorable volume/mix, driven by
favorable heated tobacco unit volume, notably in the Czech
Republic, Germany, Italy and Poland, partly offset by unfavorable
cigarette volume, notably in France and Italy, and unfavorable
cigarette volume/mix in Germany.
Operating income, excluding unfavorable currency, increased by
11.8%, mainly reflecting: a favorable pricing variance; favorable
volume/mix, notably in the Czech Republic, Italy and Poland, driven
by heated tobacco unit volume, partly offset by lower cigarette
volume, notably in France and Italy, and unfavorable volume/mix in
Germany; partially offset by higher manufacturing costs and higher
marketing, administration and research costs primarily related to
reduced-risk products.
Adjusted operating income margin, excluding currency, increased
by 0.1 point to 47.1%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 4,736
$ 4,491
5.5
%
13.4
%
245
(359
)
152
452
—
Operating Income
$ 2,091
$ 1,917
9.1
%
19.2
%
174
(195
)
152
365
(148
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 2,091
$ 1,917
9.1
%
19.2
%
174
(195
)
152
365
(148
)
Adjusted Operating Income
Margin
44.2
%
42.7
%
1.5pp
2.2pp
Net revenues, excluding unfavorable currency, increased by
13.4%, reflecting a favorable pricing variance, driven principally
by Germany, and favorable volume/mix, primarily reflecting
favorable heated tobacco unit volume/mix, notably in the Czech
Republic, Germany, Italy and Poland, partly offset by lower
cigarette volume, notably in France and Italy, and lower cigarette
volume/mix in Germany.
Operating income, excluding unfavorable currency, increased by
19.2%, mainly reflecting: a favorable pricing variance; favorable
volume/mix, notably in the Czech Republic, Italy and Poland, driven
by heated tobacco unit volume, partially offset by lower cigarette
volume/mix, notably in France, Germany and Italy; partially offset
by higher manufacturing costs and higher marketing, administration
and research costs primarily related to reduced-risk products.
Adjusted operating income margin, excluding currency, increased
by 2.2 points to 44.9%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
European Union Key Data
Second-Quarter
Six Months
Year-to-Date
Change
Change
2019
2018
% / pp
2019
2018
% / pp
Total Market (billion units)
124.3
126.2
(1.5
)%
231.5
234.0
(1.1
)%
PMI Shipment Volume (million
units)
Cigarettes
46,367
47,984
(3.4
)%
85,855
87,655
(2.1
)%
Heated Tobacco Units
3,043
1,195
+100.0%
5,336
2,123
+100.0%
Total EU
49,410
49,179
0.5
%
91,191
89,778
1.6
%
PMI Market Share
Marlboro
18.1
%
18.5
%
(0.4
)
18.1
%
18.4
%
(0.3
)
L&M
6.9
%
7.0
%
(0.1
)
6.8
%
6.9
%
(0.1
)
Chesterfield
5.8
%
5.9
%
(0.1
)
5.9
%
5.9
%
—
Philip Morris
2.7
%
2.9
%
(0.2
)
2.8
%
3.0
%
(0.2
)
HEETS
2.4
%
1.0
%
1.4
2.3
%
0.9
%
1.4
Others
3.0
%
3.1
%
(0.1
)
3.0
%
3.2
%
(0.2
)
Total EU
38.9
%
38.4
%
0.5
38.9
%
38.3
%
0.6
Second-Quarter
The estimated total market in the EU decreased by 1.5% to 124.3
billion units, mainly due to:
- France, down by 6.6%, mainly due to the impact of significant
excise-tax driven price increases, as well as an increase in the
prevalence of illicit trade;
- Germany, down by 3.4%, primarily reflecting the impact of price
increases in the first quarter of 2019; and
- Italy, down by 3.1%, primarily reflecting the impact of price
increases in the first quarter of 2019;
partly offset by
- Poland, up by 8.0%, primarily reflecting a lower prevalence of
illicit trade.
PMI's total shipment volume increased by 0.5% to 49.4 billion
units, notably driven by:
- higher heated tobacco unit shipment volume across the Region,
notably Italy, driven by higher market share; and
- higher cigarette shipment volume, notably in Poland, driven by
the higher total market;
partly offset by:
- lower cigarette shipment volume, mainly in France and Germany
due to the lower total market, and Italy, due to the lower total
market and lower cigarette market share.
Six Months Year-to-Date
The estimated total market in the EU decreased by 1.1% to 231.5
billion units, notably due to:
- France, down by 7.3%, primarily reflecting the impact of price
increases in 2018 and the first quarter of 2019;
- Germany, down by 3.7%, primarily reflecting the impact of price
increases in 2018 and the first quarter of 2019; and
- Italy, down by 3.0%, primarily reflecting the impact of price
increases in 2018 and the first quarter of 2019;
partly offset by
- Poland, up by 8.0%, reflecting the same factors as in the
quarter; and
- Spain, up by 0.9%, partly reflecting a lower prevalence of
illicit trade.
PMI's total shipment volume increased by 1.6% to 91.2 billion
units, notably driven by:
- higher heated tobacco unit shipment volume across the Region,
notably Italy, driven by higher market share; and
- higher cigarette shipment volume, notably in Poland, mainly
driven by the higher total market;
partly offset by
- lower cigarette shipment volume, mainly in France due to the
lower total market, and Italy, due to the lower total market and
lower cigarette market share.
EASTERN EUROPE REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 822
$ 760
8.2
%
16.8
%
62
(66
)
36
92
—
Operating Income
$ 256
$ 261
(1.9
)%
4.2
%
(5
)
(16
)
36
27
(52
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 256
$ 261
(1.9
)%
4.2
%
(5
)
(16
)
36
27
(52
)
Adjusted Operating Income
Margin
31.1
%
34.3
%
(3.2)pp
(3.7)pp
Net revenues, excluding unfavorable currency, increased by
16.8%, reflecting a favorable pricing variance, driven notably by
Russia and Ukraine, and favorable volume/mix, predominantly driven
by heated tobacco unit volume in Russia, partly offset by lower
cigarette volume/mix in Russia.
Operating income, excluding unfavorable currency, increased by
4.2%, reflecting: a favorable pricing variance; favorable
volume/mix, predominantly driven by heated tobacco unit volume in
Russia, partly offset by lower cigarette volume/mix in Russia;
partly offset by higher marketing, administration and research
costs, notably reflecting increased investments behind reduced-risk
products, primarily in Russia in support of geographic
expansion.
Adjusted operating income margin, excluding currency, decreased
by 3.7 points to 30.6%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,401
$ 1,327
5.6
%
15.4
%
74
(130
)
53
151
—
Operating Income
$ 385
$ 412
(6.6
)%
1.9
%
(27
)
(35
)
53
41
(86
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 385
$ 412
(6.6
)%
1.9
%
(27
)
(35
)
53
41
(86
)
Adjusted Operating Income
Margin
27.5
%
31.0
%
(3.5)pp
(3.6)pp
Net revenues, excluding unfavorable currency, increased by
15.4%, reflecting a favorable pricing variance, driven notably by
Ukraine, and favorable volume/mix, predominantly driven by heated
tobacco unit volume in Russia, partly offset by lower cigarette
volume/mix in Russia.
Operating income, excluding unfavorable currency, increased by
1.9%, reflecting: a favorable pricing variance; favorable
volume/mix, predominantly driven by heated tobacco unit volume in
Russia, partly offset by lower cigarette volume/mix in Russia;
partly offset by higher manufacturing costs and higher marketing,
administration and research costs, notably reflecting increased
investments behind reduced-risk products, primarily in Russia in
support of geographic expansion.
Adjusted operating income margin, excluding currency, decreased
by 3.6 points to 27.4%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
27,080
28,454
(4.8
)%
47,400
50,493
(6.1
)%
Heated Tobacco Units
2,807
951
+100.0%
4,355
1,515
+100.0%
Total Eastern Europe
29,887
29,405
1.6
%
51,755
52,008
(0.5
)%
Second-Quarter
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 3.8%, primarily reflecting the impact of price
increases, as well as an increase in the prevalence of illicit
trade; and
- Ukraine, down by 14.5%, primarily reflecting the impact of
excise tax-driven price increases, as well as an increase in the
prevalence of illicit trade.
PMI's total shipment volume increased by 1.6% to 29.9 billion
units, driven by:
- Kazakhstan, up by 11.7%, reflecting a higher total market and a
higher market share of heated tobacco units; and
- Russia, up by 1.1%, reflecting a higher market share of heated
tobacco units, partially offset by the lower total market;
partly offset by
- Ukraine, down by 4.3%, reflecting a lower total market, partly
offset by higher market share of cigarettes and heated tobacco
units.
Six Months Year-to-Date
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 4.9%, reflecting the same factors as in the
quarter, as well as the unfavorable impact in the first quarter of
2019 of estimated trade inventory movements in certain key
accounts; and
- Ukraine, down by 12.8%, reflecting the same factors as in the
quarter.
PMI's total shipment volume decreased by 0.5% to 51.8 billion
units, primarily in:
- Russia, down by 1.5%. Excluding the net unfavorable impact of
estimated distributor inventory movements of 0.5 billion units,
primarily of heated tobacco units, PMI's in-market sales growth was
0.3%, reflecting a higher market share of heated tobacco units,
partially offset by the lower total market;
partly offset by
- Kazakhstan, up by 11.9%, reflecting a higher total market and a
higher market share of heated tobacco units.
MIDDLE EAST & AFRICA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,004
$ 1,022
(1.8
)%
7.0
%
(18
)
(90
)
115
(48
)
5
Operating Income
$ 441
$ 403
9.4
%
20.8
%
38
(46
)
115
(47
)
16
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 441
$ 403
9.4
%
20.8
%
38
(46
)
115
(47
)
16
Adjusted Operating Income
Margin
43.9
%
39.4
%
4.5pp
5.1pp
Net revenues, excluding unfavorable currency, increased by 7.0%,
primarily reflecting a favorable pricing variance, driven
predominantly by Turkey, partly offset by unfavorable volume/mix,
notably due to unfavorable heated tobacco unit volume in PMI Duty
Free, and unfavorable cigarette volume in the GCC, primarily Saudi
Arabia, and Turkey, partly offset by Egypt.
Operating income, excluding unfavorable currency, increased by
20.8%, mainly reflecting a favorable pricing variance and lower
manufacturing costs, partly offset by unfavorable volume/mix,
notably due to unfavorable cigarette and heated tobacco unit volume
in PMI Duty Free, and unfavorable cigarette volume in the GCC,
primarily Saudi Arabia, and Turkey.
Adjusted operating income margin, excluding currency, increased
by 5.1 points to 44.5%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,931
$ 1,983
(2.6
)%
5.3
%
(52
)
(158
)
65
25
16
Operating Income
$ 785
$ 777
1.0
%
10.3
%
8
(72
)
65
(12
)
27
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 785
$ 777
1.0
%
10.3
%
8
(72
)
65
(12
)
27
Adjusted Operating Income
Margin
40.7
%
39.2
%
1.5pp
1.8pp
Net revenues, excluding unfavorable currency, increased by 5.3%,
mainly reflecting: a favorable pricing variance, driven by Egypt,
PMI Duty Free and Turkey, partly offset by Saudi Arabia; favorable
volume/mix, driven by favorable cigarette volume/mix, notably in
Saudi Arabia and Turkey, partly offset by unfavorable cigarette and
heated tobacco unit volume in PMI Duty Free; and a favorable
cost/other variance mainly driven by the timing of other
revenues.
Operating income, excluding unfavorable currency, increased by
10.3%, mainly reflecting: a favorable pricing variance, lower
manufacturing costs and a favorable cost/other variance, as noted
above; partly offset by unfavorable volume/mix, notably due to
unfavorable cigarette and heated tobacco unit volume in PMI Duty
Free, partly offset by favorable cigarette volume/mix in Saudi
Arabia and favorable cigarette volume in Turkey.
Adjusted operating income margin, excluding currency, increased
by 1.8 points to 41.0%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
31,659
34,177
(7.4
)%
64,963
63,425
2.4
%
Heated Tobacco Units
719
971
(26.0
)%
1,473
1,680
(12.3
)%
Total Middle East & Africa
32,378
35,148
(7.9
)%
66,436
65,105
2.0
%
Second-Quarter
The estimated total market in the Middle East & Africa
increased, notably driven by:
- Saudi Arabia, up by 6.7%, primarily reflecting a favorable
comparison with the second quarter of 2018, which was down by 23.8%
mainly due to the impact of retail price increases in 2017 and the
first quarter of 2018 following the introduction of the new excise
tax in June 2017 and VAT in January 2018, respectively; and
- Turkey, up by 9.2%, mainly reflecting a lower prevalence of
illicit trade;
partly offset by
- Egypt, down by 4.7%, mainly due to the impact of price
increases in 2018.
PMI's total shipment volume decreased by 7.9% to 32.4 billion
units, notably in:
- PMI Duty Free, down by 8.5%. Excluding the net unfavorable
impact of estimated distributor inventory movements of 0.2 billion
units, principally cigarettes, PMI's in-market sales decline was
5.9%;
- Saudi Arabia, down by 50.2%. Net unfavorable estimated
distributor inventory movements totaled 0.9 billion cigarettes,
mainly attributable to the pay-back of adjustments in the first
quarter of 2019 resulting from the delayed importation deadline
before the implementation of plain packaging scheduled for January
1, 2020. Excluding the impact of these inventory movements, PMI's
in-market sales grew by 3.5%, reflecting a favorable comparison
with the second quarter of 2018, which was down by 40.1%, mainly
due to the impact of the factors described for the total market
above; and
- Turkey, down by 7.6%, reflecting lower market share, mainly
driven by the timing of retail price increases in April 2019
compared to competition, partly offset by a higher total
market;
partly offset by
- Egypt, up by 11.5%, primarily reflecting higher market share,
driven by L&M, partly offset by a lower total market.
Six Months Year-to-Date
The estimated total market in the Middle East & Africa
increased, notably driven by:
- Algeria, up by 4.9%, or down by 4.1% excluding the net
favorable impact of estimated trade inventory movements associated
with expectations regarding excise tax announcements in 2019
compared to 2018;
- Saudi Arabia, up by 7.5%, primarily reflecting a favorable
comparison with the first six months of 2018, which was down by
33.2% mainly due to the impact of retail price increases in 2017
and the first quarter of 2018 following the introduction of the new
excise tax in June 2017 and VAT in January 2018, respectively;
and
- Turkey, up by 11.5%, mainly reflecting the same factor as in
the quarter;
partly offset by
- Egypt, down by 2.2%, mainly reflecting the same factor as in
the quarter.
PMI's total shipment volume increased by 2.0% to 66.4 billion
units, notably in:
- Egypt, up by 10.5%, primarily reflecting higher market share,
driven by L&M, partly offset by a lower total market;
- Saudi Arabia, up by 69.0%. Net favorable estimated distributor
inventory movements totaled 1.7 billion cigarettes, mainly
attributable to the timing of shipments compared to 2018. Excluding
the impact of these inventory movements, PMI's in-market sales grew
by 6.1%, reflecting a favorable comparison with the first six
months of 2018, which were down by 48.3%, mainly due to the impact
of the factors described for the quarter above; and
- Turkey, up by 5.6%, driven by a higher total market, partly
offset by a lower market share reflecting the same factor as in the
quarter;
partly offset by
- PMI Duty Free, down by 10.4%. Excluding the net unfavorable
impact of estimated distributor inventory movements of 0.6 billion
units, PMI's in-market sales decline was 4.3%.
SOUTH & SOUTHEAST ASIA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,248
$ 1,156
8.0
%
10.7
%
92
(32
)
114
10
—
Operating Income
$ 492
$ 440
11.8
%
15.0
%
52
(14
)
114
9
(57
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 492
$ 440
11.8
%
15.0
%
52
(14
)
114
9
(57
)
Adjusted Operating Income
Margin
39.4
%
38.1
%
1.3pp
1.4pp
Net revenues, excluding unfavorable currency, increased by
10.7%, predominantly reflecting a favorable pricing variance driven
by Indonesia and the Philippines.
Operating income, excluding unfavorable currency, increased by
15.0%, predominantly reflecting a favorable pricing variance,
partly offset by higher manufacturing costs, mainly due to
Indonesia, and higher marketing, administration and research costs,
notably due to the Philippines, partly offset by Indonesia.
Adjusted operating income margin, excluding currency, increased
by 1.4 points to 39.5%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,361
$ 2,237
5.5
%
9.7
%
124
(93
)
190
27
—
Operating Income
$ 932
$ 869
7.2
%
12.3
%
63
(44
)
190
23
(106
)
Asset Impairment & Exit Costs (1)
(20
)
—
—
%
—
%
(20
)
—
—
—
(20
)
Adjusted Operating Income
$ 952
$ 869
9.6
%
14.6
%
83
(44
)
190
23
(86
)
Adjusted Operating Income
Margin
40.3
%
38.8
%
1.5pp
1.8pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, increased by 9.7%,
reflecting: a favorable pricing variance, driven principally by
Indonesia and the Philippines, as well as a favorable volume/mix,
largely driven by favorable cigarette volume and mix in the
Philippines, partly offset by lower cigarette volume and mix in
Indonesia.
Operating income, excluding unfavorable currency, increased by
12.3%. Excluding asset impairment and exit costs related to a plant
closure in Pakistan in the first quarter of 2019 as part of global
manufacturing infrastructure optimization, adjusted operating
income, excluding unfavorable currency, increased by 14.6%, mainly
reflecting: a favorable pricing variance; favorable volume/mix,
mainly driven by favorable cigarette volume and mix in the
Philippines, partly offset by lower cigarette volume and mix in
Indonesia; partly offset by higher manufacturing costs, mainly due
to Indonesia and the Philippines, and higher marketing,
administration and research costs, partly due to the
Philippines.
Adjusted operating income margin, excluding currency, increased
by 1.8 points to 40.6%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
46,376
44,788
3.5
%
87,868
85,006
3.4
%
Heated Tobacco Units
—
—
—
%
—
—
—
%
Total South & Southeast
Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
Second-Quarter
The estimated total market in South & Southeast Asia
increased, notably driven by:
- Indonesia, up by 4.8%, mainly driven by the absence of an
excise tax increase in January 2019;
- Pakistan, up by 21.7%, mainly driven by the timing of estimated
trade inventory movements related to anticipated excise tax-driven
price increases in 2019 compared to the prior year. Excluding the
impact of these inventory movements, the total market is estimated
to have declined by 7.3%; and
- Thailand, up by 10.0%, primarily reflecting on-going recovery
from the September 2017 excise tax reform;
partly offset by
- the Philippines, down by 1.5%, mainly due to the impact of
price increases in the below premium segment in the fourth quarter
of 2018; and
- Vietnam, down by 2.9% reflecting the impact of the excise tax
increase in January 2019.
PMI's total shipment volume increased by 3.5% to 46.4 billion
units, notably driven by:
- Pakistan, up by 33.6%, mainly reflecting a higher total market
and higher market share resulting from the timing of estimated
trade inventory movements described above; and
- Thailand, up by 19.8%, mainly reflecting a higher market share
driven by the continued strong performance of L&M 7.1 and the
favorable impact of distribution expansion in 2018, as well as a
higher total market.
Six Months Year-to-Date
The estimated total market in South & Southeast Asia
increased, notably driven by:
- Indonesia, up by 2.1%, reflecting the same factor as in the
quarter;
- Pakistan, up by 10.5%, reflecting the same factor as in the
quarter. Excluding the impact of trade inventory movements, the
total market is estimated to have declined by 4.0%;
- the Philippines, up by 3.2%, mainly reflecting the impact of
net favorable estimated trade inventory movements in the first
quarter of 2019 associated with expectations regarding excise
tax-driven price increases, partly offset by the impact of price
increases in the below premium segment in the fourth quarter of
2018; and
- Thailand, up by 17.8%, reflecting the same factor as in the
quarter;
partly offset by
- Vietnam, down by 5.3% reflecting the same factor as in the
quarter.
PMI's total shipment volume increased by 3.4% to 87.9 billion
units, notably driven by:
- Pakistan, up by 22.3%, mainly reflecting a higher market share
resulting from the timing of estimated trade inventory movements
described above, as well as a higher total market;
- the Philippines, up by 3.7%, mainly reflecting the higher total
market; and
- Thailand, up by 26.6%, reflecting the same factors as in the
quarter;
partly offset by
- Indonesia, down by 1.8%, mainly reflecting a lower market share
primarily due to the widened retail price gap of A Mild to
competitive brands following its price increase in October 2018,
partly offset by the higher total market.
EAST ASIA & AUSTRALIA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,521
$ 1,478
2.9
%
4.6
%
43
(25
)
121
(53
)
—
Operating Income
$ 642
$ 498
28.9
%
23.7
%
144
26
121
(32
)
29
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 642
$ 498
28.9
%
23.7
%
144
26
121
(32
)
29
Adjusted Operating Income
Margin
42.2
%
33.7
%
8.5pp
6.1pp
During the quarter, net revenues, excluding currency, increased
by 4.6%, reflecting a favorable pricing variance, driven
predominantly by Japan, partly offset by unfavorable volume/mix,
mainly due to unfavorable cigarette volume in Australia and Japan
and unfavorable cigarette and heated tobacco unit volume in
Korea.
Operating income, excluding favorable currency, increased by
23.7%, mainly reflecting a favorable pricing variance and lower
manufacturing costs, mainly in Korea, as well as lower marketing,
administration and research costs, partly offset by unfavorable
volume/mix, mainly due to unfavorable cigarette volume in Australia
and Japan and unfavorable cigarette and heated tobacco unit volume
in Korea, partially offset by heated tobacco unit volume in
Japan.
Adjusted operating income margin, excluding currency, increased
by 6.1 points to 39.8%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,842
$ 3,069
(7.4
)%
(6.6
)%
(227
)
(25
)
207
(409
)
—
Operating Income
$ 1,069
$ 1,013
5.5
%
3.5
%
56
21
207
(254
)
82
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 1,069
$ 1,013
5.5
%
3.5
%
56
21
207
(254
)
82
Adjusted Operating Income
Margin
37.6
%
33.0
%
4.6pp
3.6pp
Net revenues, excluding unfavorable currency, decreased by 6.6%,
reflecting a challenging comparison with the first six months of
2018 in which net revenues, excluding currency, grew by 16.8%,
partly fueled by higher IQOS device shipments. The decline of 6.6%
primarily reflected unfavorable volume/mix, due to lower cigarette
shipment volume in Australia, lower cigarette and IQOS device
shipment volume in Japan, and lower cigarette, heated tobacco unit
and IQOS device shipment volume in Korea, partly offset by a
favorable pricing variance driven predominantly by Japan.
Operating income, excluding favorable currency, increased by
3.5%, mainly reflecting: a favorable pricing variance, lower
manufacturing costs related to Japan and Korea, lower marketing,
administration and research costs, notably in Australia and Korea,
partly offset by Japan; partly offset by unfavorable volume/mix as
described above.
Adjusted operating income margin, excluding currency, increased
by 3.6 points to 36.6%, reflecting the factors mentioned above, as
detailed on Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
13,845
15,114
(8.4
)%
25,958
29,205
(11.1
)%
Heated Tobacco Units
8,428
7,838
7.5
%
15,277
15,180
0.6
%
Total East Asia & Australia
22,273
22,952
(3.0
)%
41,235
44,385
(7.1
)%
Second-Quarter
The estimated total market in East Asia & Australia,
excluding China, decreased, notably due to:
- Australia, down by 10.8%, mainly reflecting the impact of
excise tax-driven retail price increases;
- Japan, down by 4.3%, mainly reflecting the impact of the
October 1, 2018 excise tax-driven retail price increases; and
- Taiwan, down by 16.3%, primarily reflecting the impact of
excise tax-driven retail price increases.
PMI's total shipment volume decreased by 3.0% to 22.3 billion
units, notably in:
- Japan, down by 0.4%. Excluding the net favorable impact of
estimated distributor inventory movements of approximately 0.7
billion units, comprised of approximately 0.5 billion heated
tobacco units and approximately 0.2 billion cigarettes, PMI's
in-market sales decline was 5.5%, reflecting the lower total market
and lower cigarette market share; and
- Korea, down by 9.8%, principally due to lower cigarette market
share.
Six Months Year-to-Date
The estimated total market in East Asia & Australia,
excluding China, decreased, notably due to:
- Japan, down by 4.4%, mainly reflecting the same factor as in
the quarter; and
- Taiwan, down by 3.8%, primarily reflecting the impact of excise
tax-driven retail price increases in 2017.
PMI's total shipment volume decreased by 7.1% to 41.2 billion
units, notably in:
- Japan, down by 7.1%. Excluding the net unfavorable impact of
estimated distributor inventory movements of approximately 0.5
billion units, comprised of approximately 0.1 billion heated
tobacco units and approximately 0.4 billion cigarettes, PMI's
in-market sales decline was 5.5%, reflecting the lower total market
and lower cigarette market share; and
- Korea, down by 9.7%, principally due to lower cigarette market
share.
LATIN AMERICA & CANADA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 527
$ 807
(34.7
)%
(32.5
)%
(280
)
(18
)
(11
)
2
(253
)
Operating Income
$ 161
$ 314
(48.7
)%
(50.6
)%
(153
)
6
(11
)
—
(148
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Adjusted Operating Income
$ 184
$ 314
(41.4
)%
(43.3
)%
(130
)
6
(11
)
—
(125
)
Adjusted Operating Income
Margin
34.9
%
38.9
%
(4.0)pp
(6.2)pp
(1) Unfavorable Cost/Other variance
includes the impact of the RBH deconsolidation.
(2) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by
32.5%, almost entirely due to the unfavorable impact of $253
million, shown in "Cost/Other," resulting from the deconsolidation
of RBH. On a like-for-like basis, net revenues, excluding
unfavorable currency, decreased by 2.0%, as detailed in the
attached Schedule 10, mainly due to an unfavorable pricing variance
primarily resulting from the adoption of highly inflationary
accounting in Argentina.
Operating income, excluding favorable currency, decreased by
50.6%, predominantly due to the unfavorable impact, shown in
"Cost/Other," resulting from the deconsolidation of RBH. Excluding
asset impairment and exit costs related to a plant closure in
Colombia as part of global manufacturing infrastructure
optimization, adjusted operating income, excluding favorable
currency, decreased by 43.3%. On a like-for-like basis, excluding
favorable currency, adjusted operating income increased by 29.0%,
as detailed in the attached Schedule 10, mainly reflecting lower
manufacturing costs, and lower marketing, administration and
research costs, partly resulting from the adoption of highly
inflationary accounting in Argentina.
Adjusted operating income margin, excluding currency, decreased
by 6.2 points to 32.7%, reflecting the factors mentioned above, as
detailed on Schedule 8, or increased by 7.9 points to 32.7% on a
like-for-like basis, as detailed in the attached Schedule 10.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 1,179
$ 1,515
(22.2
)%
(18.8
)%
(336
)
(51
)
20
(52
)
(253
)
Operating Income (Loss)
$ (25)
$ 531
-(100)%
-(100)%
(556
)
16
20
(43
)
(549
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Canadian Tobacco Litigation-Related
Expense (2)
(194
)
—
—
%
—
%
(194
)
—
—
—
(194
)
Loss on Deconsolidation of RBH (2)
(239
)
—
—
%
—
%
(239
)
—
—
—
(239
)
Adjusted Operating Income
$ 431
$ 531
(18.8
)%
(21.8
)%
(100
)
16
20
(43
)
(93
)
Adjusted Operating Income
Margin
36.6
%
35.0
%
1.6pp
(1.3)pp
(1) Unfavorable Cost/Other variance
includes the impact of the RBH deconsolidation.
(2) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by
18.8%, predominantly due to: the unfavorable impact of $253
million, shown in "Cost/Other," resulting from the deconsolidation
of RBH. On a like-for-like basis, net revenues, excluding
unfavorable currency, decreased by 2.7%, as detailed in the
attached Schedule 10, reflecting: unfavorable volume, mainly due to
Argentina and Canada, partly offset by Mexico (largely due to the
timing of retail price increases compared to 2018); partly offset
by a favorable pricing variance, notably in Canada and Mexico,
partially offset by Argentina mainly due to the adoption of highly
inflationary accounting.
Operating income, excluding favorable currency, decreased by
over 100%, predominantly due to the unfavorable impact, shown in
"Cost/Other," resulting from the deconsolidation of RBH. Excluding
asset impairment and exit costs related to a plant closure in
Colombia as part of global manufacturing infrastructure
optimization, the Canadian tobacco litigation-related expense and
the loss on deconsolidation of RBH, adjusted operating income,
excluding favorable currency, decreased by 21.8%. On a
like-for-like basis, excluding favorable currency, adjusted
operating income increased by 16.9%, as detailed in the attached
Schedule 10. This increase reflected: a favorable pricing variance;
lower manufacturing costs and lower marketing, administration and
research costs, partly resulting from the adoption of highly
inflationary accounting in Argentina; partly offset by an
unfavorable volume/mix, mainly due to lower cigarette volume in
Argentina and Canada, partly offset by higher cigarette volume in
Mexico (largely due to the timing of retail price increases
compared to 2018).
Adjusted operating income margin, excluding currency, decreased
by 1.3 points to 33.7%, reflecting the factors mentioned above, as
detailed on Schedule 8, or increased by 5.6 points to 33.7% on a
like-for-like basis, as detailed in the attached Schedule 10.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
18,472
20,204
(8.6
)%
36,052
39,217
(8.1
)%
Heated Tobacco Units
59
32
84.4
%
113
55
+100.0%
Total Latin America &
Canada
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Second-Quarter
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 9.9%, primarily due to the impact of
cumulative price increases and the impact of the economic downturn
as of the second half of 2018. Excluding estimated net trade
inventory movements related to the timing of these price increases,
the total market decreased by 5.5%;
- Canada, down by 10.7%, primarily due to the impact of
cumulative price increases; and
- Venezuela, down by 60.7%, mainly reflecting the deterioration
of the socioeconomic environment and the impact of inflation-driven
price increases;
partly offset by:
- Mexico, up by 8.3%, or by 1.5% excluding estimated net trade
inventory movements related to the timing of price increases.
PMI's total shipment volume decreased by 8.4% to 18.5 billion
units, or by 1.4% on a like-for-like basis, in part due to:
- Argentina, down by 10.0%, primarily reflecting the lower total
market; and
- Venezuela, down by 85.5%, reflecting the lower total market and
lower market share;
partly offset by
- Mexico, up by 13.4%, driven by the higher total market and
higher market share, largely reflecting the timing of retail price
increases compared to 2018.
Six Months Year-to-Date
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 8.6%, reflecting the same factors as in the
quarter. Excluding estimated net trade inventory movements, the
total market decreased by 7.4%;
- Canada, down by 9.5%, reflecting the same factor as in the
quarter; and
- Venezuela, down by 58.5%, reflecting the same factors as in the
quarter;
partly offset by:
- Mexico, up by 3.3%, or down by 0.4% excluding estimated net
trade inventory movements related to the timing of price
increases.
PMI's total shipment volume decreased by 7.9% to 36.2 billion
units, or by 4.4% on a like-for-like basis mainly due to:
- Argentina, down by 10.5%, primarily reflecting the lower total
market, as well as lower market share; and
- Venezuela, down by 80.9%, primarily reflecting the lower total
market, as well as lower market share;
partly offset by
- Mexico, up by 6.3%, reflecting the same factors as in the
quarter.
FDA NEWS RELEASE (APRIL 30, 2019)
(https://www.fda.gov/news-events/press-announcements/fda-permits-sale-iqos-tobacco-heating-system-through-premarket-tobacco-product-application-pathway)
FDA permits sale of IQOS Tobacco Heating
System through premarket tobacco product application
pathway
Agency places stringent marketing
restrictions on heated tobacco products aimed at preventing youth
access and exposure to the new products
For Immediate Release: April 30, 2019
The U.S. Food and Drug Administration today announced it has
authorized the marketing of new tobacco products manufactured by
Philip Morris Products S.A. for the IQOS “Tobacco Heating System” –
an electronic device that heats tobacco-filled sticks wrapped in
paper to generate a nicotine-containing aerosol. The FDA has placed
stringent marketing restrictions on the products in an effort to
prevent youth access and exposure.
Following a rigorous science-based review through the premarket
tobacco product application (PMTA) pathway, the agency determined
that authorizing these products for the U.S. market is appropriate
for the protection of the public health because, among several key
considerations, the products produce fewer or lower levels of some
toxins than combustible cigarettes. The products authorized for
sale include the IQOS device, Marlboro Heatsticks, Marlboro Smooth
Menthol Heatsticks and Marlboro Fresh Menthol Heatsticks. While
today’s action permits the tobacco products to be sold in the U.S.,
it does not mean these products are safe or “FDA approved.” All
tobacco products are potentially harmful and addictive and those
who do not use tobacco products should continue not to.
Additionally, today’s action is not a decision on the separate
modified risk tobacco product (MRTP) applications that the company
also submitted for these products to market them with claims of
reduced exposure or reduced risk.
“Ensuring new tobacco products undergo a robust premarket
evaluation by the FDA is a critical part of our mission to protect
the public, particularly youth, and to reduce tobacco-related
disease and death. While the authorization of new tobacco products
doesn’t mean they are safe, the review process makes certain that
the marketing of the products is appropriate for the protection of
the public health, taking into account the risks and benefits to
the population as a whole. This includes how the products may
impact youth use of nicotine and tobacco, and the potential for the
products to completely move adult smokers away from use of
combustible cigarettes,” said Mitch Zeller, J.D., director of the
FDA’s Center for Tobacco Products. “Importantly, the FDA is putting
in place postmarket requirements aimed at, among other things,
monitoring market dynamics such as potential youth uptake. We’ll be
keeping a close watch on the marketplace, including how the company
is marketing these products, and will take action as necessary to
ensure the continued sale of these products in the U.S. remains
appropriate and make certain that the company complies with the
agency’s marketing restrictions to prevent youth access and
exposure. As other manufacturers seek to market new tobacco
products, the FDA remains committed to upholding the vital public
health standards under the law and using all the tools at our
disposal to ensure the efficient and appropriate oversight of
tobacco products.”
Under the PMTA pathway, manufacturers must demonstrate to the
agency, among other things, that marketing of the new tobacco
product would be appropriate for the protection of the public
health. That standard requires the FDA to consider the risks and
benefits to the population as a whole, including users and
non-users of tobacco products. Importantly this includes youth. The
agency’s evaluation includes reviewing a tobacco product’s
components, ingredients, additives and health risks, as well as how
the product is manufactured, packaged and labeled. The review for
the IQOS products took into account the increased or decreased
likelihood that existing tobacco product users will stop using
tobacco products, and the increased or decreased likelihood that
those who do not use tobacco products will start using them.
In particular, through the FDA’s scientific evaluation of the
company’s applications, peer-reviewed published literature and
other sources, the agency found that the aerosol produced by the
IQOS Tobacco Heating System contains fewer toxic chemicals than
cigarette smoke, and many of the toxins identified are present at
lower levels than in cigarette smoke. For example, the carbon
monoxide exposure from IQOS aerosol is comparable to environmental
exposure, and levels of acrolein and formaldehyde are 89% to 95%
and 66% to 91% lower than from combustible cigarettes,
respectively.
Additionally, IQOS delivers nicotine in levels close to
combustible cigarettes suggesting a likelihood that IQOS users may
be able to completely transition away from combustible cigarettes
and use IQOS exclusively. Available data, while limited, also
indicate that few non-tobacco users would be likely to choose to
start using IQOS, including youth.
While these non-combusted cigarettes may be referred to as
“heat-not-burn” or “heated” tobacco products, they meet the
definition of a cigarette in the Federal Food, Drug and Cosmetic
Act. Therefore, these products must adhere to existing restrictions
for cigarettes under FDA regulations, as well as other federal laws
that, among other things, prohibit television and radio
advertising. In addition, to further limit youth access to the
products and exposure to their advertising and promotion, the FDA
is placing stringent restrictions on how the products are marketed
– particularly via websites and through social media platforms – by
including requirements that advertising be targeted to adults. The
company must also give notification to the FDA of, among other
things, its labeling, advertising, marketing plans, including
information about specific adult target audiences, and how it plans
to restrict youth access and limit youth exposure to the products’
labeling, advertising, marketing and promotion. The agency has
issued a document providing its rationale for these postmarket
requirements, which highlight important considerations for
reviewing the company’s applications as well any potential future
PMTAs for other products.
The FDA also is requiring all package labels and advertisements
for these products to include a warning about the addictiveness of
nicotine, in addition to other warnings required for cigarettes, to
prevent consumer misperceptions about the relative addiction risk
of using IQOS compared to combusted cigarettes.
With the authorization of these products, the FDA will evaluate
new available data regarding the products through postmarketing
records and reports required in the marketing order. The company is
required to report regularly to the FDA with information regarding
the products on the market, including, but not limited to, ongoing
and completed consumer research studies, advertising, marketing
plans, sales data, information on current and new users,
manufacturing changes and adverse experiences. The FDA may withdraw
a marketing order if it, among other reasons, determines that the
continued marketing of a product is no longer appropriate for the
protection of the public health, such as if there is an uptake of
the product by youth.
The FDA is continuing its substantive scientific review of the
company’s MRTP applications. The company would need to receive an
MRTP order from the FDA before they could market a tobacco product
with any implicit or explicit claims that, among other things, a
product reduces exposure to certain chemicals or that use of the
product is less harmful than another tobacco product or would
reduce the risk of disease. If a company markets a tobacco product
as an MRTP without authorization, the company would be in violation
of the law and may face FDA advisory or enforcement actions.
Philip Morris International: Delivering a Smoke-Free
Future
Philip Morris International (PMI) is leading a transformation in
the tobacco industry to create a smoke-free future and ultimately
replace cigarettes with smoke-free products to the benefit of
adults who would otherwise continue to smoke, society, the company
and its shareholders. PMI is a leading international tobacco
company engaged in the manufacture and sale of cigarettes,
smoke-free products and associated electronic devices and
accessories, and other nicotine-containing products in markets
outside the U.S. PMI is building a future on a new category of
smoke-free products that, while not risk-free, are a much better
choice than continuing to smoke. Through multidisciplinary
capabilities in product development, state-of-the-art facilities
and scientific substantiation, PMI aims to ensure that its
smoke-free products meet adult consumer preferences and rigorous
regulatory requirements. PMI's smoke-free IQOS product portfolio
includes heat-not-burn and nicotine-containing vapor products. As
of June 30, 2019, PMI estimates that approximately 8.0 million
adult smokers around the world have already stopped smoking and
switched to PMI’s heat-not-burn product, available for sale in 48
markets in key cities or nationwide under the IQOS brand. For more
information, please visit www.pmi.com and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
other forward-looking statements. Achievement of future 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: excise tax increases and
discriminatory tax structures; increasing marketing and regulatory
restrictions that could reduce our competitiveness, eliminate our
ability to communicate with adult consumers, or ban certain of our
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,
natural disasters and conflicts; 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, and limitations
on the ability to repatriate funds; 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 and effectiveness of its data
privacy policies. PMI's future profitability may also be adversely
affected should it be unsuccessful in its attempts to produce and
commercialize reduced-risk products or if regulation or taxation do
not differentiate between such products and cigarettes; 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. Future results are also subject to
the lower predictability of our reduced-risk product category's
performance.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-Q for the
quarter ended March 31, 2019. 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.
Key Terms, Definitions and Explanatory Notes
General
- "PMI" refers to Philip Morris International Inc. and its
subsidiaries. Trademarks and service marks that are the registered
property of, or licensed by, the subsidiaries of PMI, are
italicized.
- Comparisons are made to the same prior-year period unless
otherwise stated.
- Unless otherwise stated, references to total industry, total
market, PMI shipment volume and PMI market share performance
reflect cigarettes and heated tobacco units.
- [REVISED] References to total international market,
defined as worldwide cigarette and heated tobacco unit volume
excluding the United States, total industry, total market and
market shares are PMI estimates for tax-paid products 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. In addition, to
reflect the deconsolidation of PMI's Canadian subsidiary, Rothmans,
Benson & Hedges, Inc. (RBH), effective March 22, 2019, PMI's
total market share has been restated for previous periods.
- "OTP" is defined as "other tobacco products," primarily
roll-your-own and make-your-own cigarettes, pipe tobacco, cigars
and cigarillos, and does not include reduced-risk products.
- "Combustible products" is the term PMI uses to refer to
cigarettes and OTP, combined.
- In-market sales, or "IMS," is defined as sales to the retail
channel, depending on the market and distribution model.
- "Total shipment volume" is defined as the combined total of
cigarette shipment volume and heated tobacco unit shipment
volume.
- "North Africa" is defined as Algeria, Egypt, Libya, Morocco and
Tunisia.
- "The GCC" (Gulf Cooperation Council) is defined as Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates
(UAE).
- Following the deconsolidation of PMI's Canadian subsidiary,
Rothmans, Benson & Hedges, Inc. (RBH), PMI will continue to
report the volume of brands sold by RBH for which other PMI
subsidiaries are the trademark owner. These include HEETS, Next,
Philip Morris and Rooftop, which accounted for approximately 40% of
RBH's total shipment volume in 2018.
- [REVISED] From time to time, PMI’s shipment volumes are
subject to the impact of distributor inventory movements, and
estimated total industry/market volumes are subject to the impact
of inventory movements in various trade channels that include
estimated trade inventory movements of PMI’s competitors arising
from market-specific factors that significantly distort reported
volume disclosures. Such factors may include changes to the
manufacturing supply chain, shipment methods, consumer demand,
timing of excise tax increases or other influences that may affect
the timing of sales to customers. In such instances, in addition to
reviewing PMI shipment volumes and certain estimated total
industry/market volumes on a reported basis, management reviews
these measures on an adjusted basis that excludes the impact of
distributor and/or estimated trade inventory movements. Management
also believes that disclosing PMI shipment volumes and estimated
total industry/market volumes in such circumstances on a basis that
excludes the impact of distributor and/or estimated trade inventory
movements, such as on an IMS basis, improves the comparability of
performance and trends for these measures over different reporting
periods.
Financial
- Net revenues related to combustible products refer to the
operating revenues generated from the sale of these products,
including shipping and handling charges billed to customers, net of
sales and promotion incentives, and excise taxes. PMI recognizes
revenue when control is transferred to the customer, typically
either upon shipment or delivery of goods.
- Net revenues related to RRPs represent the sale of heated
tobacco units, IQOS devices and related accessories, and other
nicotine-containing products, primarily e-vapor products, including
shipping and handling charges billed to customers, net of sales and
promotion incentives, and excise taxes. PMI recognizes revenue when
control is transferred to the customer, typically either upon
shipment or delivery of goods.
- "Cost of sales" consists principally of: tobacco leaf,
non-tobacco raw materials, labor and manufacturing costs; shipping
and handling costs; and the cost of IQOS devices produced by
third-party electronics manufacturing service providers. Estimated
costs associated with IQOS warranty programs are generally provided
for in cost of sales in the period the related revenues are
recognized.
- "Marketing, administration and research costs" include the
costs of marketing and selling our products, other costs generally
not related to the manufacture of our products (including general
corporate expenses), and costs incurred to develop new products.
The most significant components of our marketing, administration
and research costs are marketing and sales expenses and general and
administrative expenses.
- [REVISED] "Cost/Other" in the Consolidated Financial
Summary table of total PMI and the six reporting segments of this
release reflects the currency-neutral variances of: cost of sales
(excluding the volume/mix cost component); marketing,
administration and research costs (including asset impairment and
exit costs, the Canadian tobacco litigation-related expense and the
charge related to the deconsolidation of RBH in Canada); and
amortization of intangibles. “Cost/Other” also includes the
currency-neutral net revenue variance, unrelated to volume/mix and
price components, attributable to fees for certain distribution
rights billed to customers in certain markets in the ME&A
Region, as well as the impact of the deconsolidation in RBH.
- "Adjusted Operating Income Margin" is calculated as adjusted
operating income, divided by net revenues.
- "Adjusted EBITDA" is defined as earnings before interest,
taxes, depreciation, amortization and equity (income)/loss in
unconsolidated subsidiaries, excluding asset impairment and exit
costs, and unusual items.
- "Net debt" is defined as total debt, less cash and cash
equivalents.
- Management reviews net revenues, OI, OI margins, operating cash
flow 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, tax items and other
special items. For example, PMI’s adjusted diluted EPS and other
impacted results reflect the loss on deconsolidation of RBH and the
Canadian tobacco litigation-related expense, recorded in the first
quarter of 2019. PMI believes that the adjusted measures, including
pro forma measures, will provide useful insight into underlying
business trends and results, and will provide a more meaningful
performance comparison for the period during which RBH remains
under CCAA protection. For PMI's 2018 pro forma adjusted diluted
EPS by quarter and year-to-date, see Schedule 3 in PMI's
second-quarter 2019 earnings release.
- Management reviews these measures because they exclude changes
in currency exchange rates and other factors that may distort
underlying business trends, thereby improving the comparability of
PMI’s business performance between reporting periods. Furthermore,
PMI uses several of these measures in its management compensation
program to promote internal fairness and a disciplined assessment
of performance against company targets. PMI discloses these
measures to enable investors to view the business through the eyes
of management.
- Non-GAAP measures used in this release should neither be
considered in isolation nor as a substitute for the financial
measures prepared in accordance with U.S. GAAP. For a
reconciliation of non-GAAP measures to the most directly comparable
U.S. GAAP measures, see the relevant schedules provided with this
press release.
- U.S. GAAP Treatment of Argentina as a Highly Inflationary
Economy. Following the categorization of Argentina by the
International Practices Task Force of the Center for Audit Quality
as a country with a three-year cumulative inflation rate greater
than 100%, the country is considered highly inflationary in
accordance with U.S. GAAP. Consequently, PMI began to account for
the operations of its Argentinian affiliates as highly
inflationary, and to treat the U.S. dollar as the functional
currency of the affiliates, effective July 1, 2018. The move to
highly inflationary accounting in Argentina reduced PMI's
currency-neutral net revenue growth by approximately 0.6 points in
2018.
Reduced-Risk Products
- "Reduced-risk products," or "RRPs," is the term PMI uses to
refer to products that present, are likely to present, or have the
potential to present less risk of harm to smokers who switch to
these products versus continued smoking. PMI has a range of RRPs in
various stages of development, scientific assessment and
commercialization. Because PMI's RRPs do not burn tobacco, they
produce an aerosol that contains far lower quantities of harmful
and potentially harmful constituents than found in cigarette
smoke.
- "Heated tobacco units," or "HTUs," is the term PMI uses to
refer to heated tobacco consumables, which include the company's
HEETS, HEETS Marlboro and HEETS FROM MARLBORO, defined collectively
as HEETS, as well as Marlboro HeatSticks and Parliament
HeatSticks.
- Unless otherwise stated, all references to IQOS are to PMI's
heat-not-burn products.
- The IQOS heat-not-burn device is a precisely controlled heating
device into which a specially designed and proprietary tobacco unit
is inserted and heated to generate an aerosol.
Appendix 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Quarters Ended June
30,
Market
Total Market, bio
units
PMI Shipments, bio
units
PMI Market Share, %
(1)
Total
Cigarette
HTU
Total
HTU
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
pp Change
2019
2018
pp Change
Total PMI
696.0
702.5
(0.9
)
198.9
201.7
(1.4
)
183.8
190.7
(3.6
)
15.1
11.0
37.0
28.3
28.2
0.1
2.1
1.6
0.5
European Union
France
9.8
10.5
(6.6
)
4.5
5.0
(10.6
)
4.5
5.0
(10.8
)
—
—
—
44.7
45.2
(0.5
)
0.2
0.1
0.1
Germany
18.9
19.6
(3.4
)
7.3
7.4
(2.0
)
7.1
7.3
(3.8
)
0.2
0.1
+100
38.5
38.0
0.5
1.1
0.4
0.7
Italy
17.1
17.7
(3.1
)
9.3
9.3
0.1
8.5
9.0
(5.5
)
0.8
0.3
+100
51.8
51.3
0.5
4.6
1.9
2.7
Poland
12.3
11.4
8.0
5.0
4.7
6.7
4.8
4.6
2.9
0.3
0.1
+100
40.8
41.3
(0.5
)
2.0
0.6
1.4
Spain
11.6
11.6
(0.6
)
3.9
3.9
(0.9
)
3.8
3.8
(1.7
)
0.1
0.1
60.8
31.2
31.8
(0.6
)
0.7
0.4
0.3
Eastern Europe
Russia
59.8
62.1
(3.8
)
17.7
17.5
1.1
15.9
16.9
(6.1
)
1.8
0.6
+100
29.6
28.1
1.5
2.9
0.8
2.1
Middle East & Africa
Saudi Arabia
5.4
5.0
6.7
0.8
1.7
(50.2
)
0.8
1.7
(50.2
)
—
—
—
38.9
40.1
(1.2
)
—
—
—
Turkey
31.3
28.6
9.2
12.5
13.5
(7.6
)
12.5
13.5
(7.6
)
—
—
—
39.9
47.2
(7.3
)
—
—
—
South & Southeast Asia
Indonesia
78.8
75.2
4.8
24.9
25.0
(0.1
)
24.9
25.0
(0.1
)
—
—
—
31.7
33.2
(1.5
)
—
—
—
Philippines
18.6
18.9
(1.5
)
13.1
13.2
(0.4
)
13.1
13.2
(0.4
)
—
—
—
70.4
69.6
0.8
—
—
—
East Asia & Australia
Australia
2.9
3.3
(10.8
)
0.9
1.0
(7.6
)
0.9
1.0
(7.6
)
—
—
—
31.0
29.9
1.1
—
—
—
Japan
40.6
42.4
(4.3
)
15.1
15.1
(0.4
)
8.0
8.7
(8.5
)
7.1
6.4
10.6
33.9
34.4
(0.5
)
16.6
15.5
1.1
Korea
17.7
17.9
(1.2
)
4.1
4.5
(9.8
)
2.8
3.1
(9.9
)
1.3
1.4
(9.5
)
23.1
25.3
(2.2
)
7.3
8.0
(0.7
)
Latin America & Canada
Argentina
7.8
8.6
(9.9
)
5.6
6.2
(10.0
)
5.6
6.2
(10.0
)
—
—
—
72.1
72.2
(0.1
)
—
—
—
Mexico
10.0
9.2
8.3
7.0
6.1
13.4
7.0
6.1
13.4
—
—
—
69.5
66.4
3.1
—
—
—
(1) Market share estimates are calculated
using IMS data
Note: % change for Total Market and PMI
shipments is computed based on millions of units; PMI Market Share
estimates for previous periods are restated to reflect RBH
deconsolidation and exclude RBH-owned brands.
Appendix 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Six Months Ended June
30,
Market
Total Market, bio
units
PMI Shipments, bio
units
PMI Market Share, %
(1)
Total
Cigarette
HTU
Total
HTU
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
pp Change
2019
2018
pp Change
Total PMI
1,322.2
1,336.9
(1.1
)
374.7
375.6
(0.2
)
348.1
355.0
(1.9
)
26.6
20.6
29.2
28.2
27.7
0.5
2.1
1.5
0.6
European Union
France
18.9
20.4
(7.3
)
8.6
9.4
(8.4
)
8.6
9.4
(8.7
)
—
—
—
44.9
45.0
(0.1
)
0.2
0.1
0.1
Germany
34.3
35.6
(3.7
)
13.4
13.3
0.8
13.0
13.1
(0.9
)
0.4
0.1
+100
38.9
37.2
1.7
1.1
0.4
0.7
Italy
32.8
33.8
(3.0
)
17.0
17.3
(1.3
)
15.6
16.7
(6.3
)
1.4
0.6
+100
51.4
51.7
(0.3
)
4.2
1.7
2.5
Poland
22.9
21.2
8.0
9.2
8.6
7.5
8.8
8.5
3.8
0.4
0.1
+100
40.4
40.6
(0.2
)
1.9
0.5
1.4
Spain
21.8
21.6
0.9
7.5
7.1
4.6
7.3
7.1
3.4
0.1
0.1
+100
31.4
32.0
(0.6
)
0.6
0.3
0.3
Eastern Europe
Russia
106.4
111.9
(4.9
)
29.9
30.3
(1.5
)
27.2
29.4
(7.6
)
2.7
0.9
+100
29.0
27.5
1.5
3.0
0.6
2.4
Middle East & Africa
Saudi Arabia
10.6
9.9
7.5
4.7
2.8
69.0
4.7
2.8
69.0
—
—
—
40.3
40.8
(0.5
)
—
—
—
Turkey
60.8
54.5
11.5
26.4
25.0
5.6
26.4
25.0
5.6
—
—
—
43.4
45.9
(2.5
)
—
—
—
South & Southeast Asia
Indonesia
147.5
144.5
2.1
47.1
48.0
(1.8
)
47.1
48.0
(1.8
)
—
—
—
31.9
33.2
(1.3
)
—
—
—
Philippines
35.4
34.3
3.2
24.9
24.0
3.7
24.9
24.0
3.7
—
—
—
70.3
69.9
0.4
—
—
—
East Asia & Australia
Australia
6.0
6.2
(2.6
)
1.7
1.8
(8.4
)
1.7
1.8
(8.4
)
—
—
—
27.6
29.3
(1.7
)
—
—
—
Japan
78.4
82.0
(4.4
)
27.2
29.3
(7.1
)
14.4
16.7
(13.3
)
12.7
12.6
1.2
34.1
34.6
(0.5
)
16.8
15.7
1.1
Korea
33.3
33.7
(1.1
)
7.7
8.6
(9.7
)
5.3
6.0
(11.6
)
2.4
2.6
(5.4
)
23.2
25.4
(2.2
)
7.3
7.6
(0.3
)
Latin America & Canada
Argentina
16.2
17.8
(8.6
)
11.7
13.1
(10.5
)
11.7
13.1
(10.5
)
—
—
—
72.0
73.5
(1.5
)
—
—
—
Mexico
17.4
16.9
3.3
11.7
11.0
6.3
11.7
11.0
6.3
—
—
—
67.0
65.1
1.9
—
—
—
(1) Market share estimates are calculated
using IMS data
Note: % change for Total Market and PMI
shipments is computed based on millions of units; PMI Market Share
estimates for previous periods are restated to reflect RBH
deconsolidation and exclude RBH-owned brands.
Appendix 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Shipment Volume Adjusted for
the Impact of RBH Deconsolidation
(in million units) /
(Unaudited)
Total PMI
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
% Change
2019
2018
% Change
Total Shipment Volume
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Shipment Volume for RBH-owned brands
(1)
(1,460
)
(1,460
)
(2)
Total Shipment Volume
198,855
200,248
(3)
(0.7
)%
374,650
374,094
(3)
0.1
%
Latin America & Canada
Total Shipment Volume
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Shipment Volume for RBH-owned brands
(1,446
)
(1,446
)
(2)
Total Shipment Volume
18,531
18,790
(3)
(1.4
)%
36,165
37,826
(3)
(4.4
)%
(1) Includes Duty Free sales in Canada
(2) Represents volume for RBH-owned brands
from March 22, 2018 through end of period date
(3) Pro forma
Note: Shipment Volume includes Cigarettes
and Heated Tobacco Units; following the deconsolidation of RBH, we
report the volume of brands sold by RBH for which other PMI
subsidiaries are the trademark owners
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
(EPS)
($ in millions, except per share
data) / (Unaudited)
Quarters Ended
Diluted EPS
Six Months Ended
June 30,
June 30,
$
1.49
2019 Diluted Earnings Per
Share (1)
$
2.36
$
1.41
2018 Diluted Earnings Per
Share (1)
$
2.41
$
0.08
Change
$
(0.05
)
5.7
%
% Change
(2.1
)%
Reconciliation:
$
1.41
2018 Diluted Earnings Per
Share (1)
$
2.41
—
2018 Asset impairment and exit
costs
—
—
2018 Tax items
—
(0.01
)
2019 Asset impairment and exit
costs
(0.02
)
—
2019 Canadian tobacco
litigation-related expense
(0.09
)
—
2019 Loss on deconsolidation of
RBH
(0.12
)
0.04
2019 Tax items
0.04
(0.07
)
Currency
(0.13
)
0.01
Interest
0.04
(0.01
)
Change in tax rate
0.03
0.12
Operations (2)
0.20
$
1.49
2019 Diluted Earnings Per
Share (1)
$
2.36
(1) Basic and diluted EPS were calculated
using the following (in millions):
Quarters Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
$ 2,319
$ 2,198
Net Earnings attributable to
PMI
$ 3,673
$ 3,754
5
5
Less distributed and
undistributed earnings attributable to share-based payment
awards
8
8
$ 2,314
$ 2,193
Net Earnings for basic and
diluted EPS
$ 3,665
$ 3,746
1,556
1,555
Weighted-average shares for basic
EPS
1,556
1,554
—
—
Plus Contingently Issuable
Performance Stock Units
—
—
1,556
1,555
Weighted-average shares for
diluted EPS
1,556
1,554
(2) Includes the impact of shares
outstanding and share-based payments
Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Reported
Diluted EPS to Reported Diluted EPS, excluding Currency,
and Reconciliation of Reported
Diluted EPS to Adjusted Diluted EPS, excluding Currency
(Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
% Change
2019
2018
% Change
$ 1.49
$ 1.41
5.7
%
Reported Diluted EPS
$ 2.36
$ 2.41
(2.1
)%
(0.07
)
Currency
(0.13
)
$ 1.56
$ 1.41
10.6
%
Reported Diluted EPS,
excluding Currency
$ 2.49
$ 2.41
3.3
%
Quarters Ended June
30,
Six Months Ended June
30,
Year Ended
2019
2018
% Change
2019
2018
% Change
2018
$ 1.49
$ 1.41
5.7
%
Reported Diluted EPS
$ 2.36
$ 2.41
(2.1
)%
$ 5.08
0.01
—
Asset impairment and exit
costs
0.02
—
—
—
—
Canadian tobacco
litigation-related expense
0.09
—
—
—
—
Loss on deconsolidation of
RBH
0.12
—
—
(0.04
)
—
Tax items
(0.04
)
—
0.02
$ 1.46
$ 1.41
3.5
%
Adjusted Diluted EPS
$ 2.55
$ 2.41
5.8
%
$ 5.10
(0.07
)
Currency
(0.13
)
$ 1.53
$ 1.41
8.5
%
Adjusted Diluted EPS,
excluding Currency
$ 2.68
$ 2.41
11.2
%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Reported
Diluted EPS to Pro Forma Adjusted Diluted EPS
(Unaudited)
Quarter Ended
Quarter Ended
Six Months Ended
Quarter Ended
Nine Months Ended
Quarter Ended
Year Ended
Quarter Ended
March 31,
June 30,
June 30,
September 30,
September 30,
December 31,
December 31,
March 31,
2018
2018
2018
2018
2018
2018
2018
2019
Reported Diluted EPS
$ 1.00
$ 1.41
$ 2.41
$ 1.44
$ 3.85
$ 1.23
$ 5.08
$ 0.87
Asset impairment and exit costs
—
—
—
—
—
—
—
0.01
Canadian tobacco litigation-related
expense
—
—
—
—
—
—
—
0.09
Loss on deconsolidation of RBH
—
—
—
—
—
—
—
0.12
Tax items
—
—
—
—
—
0.02
0.02
—
Adjusted Diluted EPS
$ 1.00
$ 1.41
$ 2.41
$ 1.44
$ 3.85
$ 1.25
$ 5.10
$ 1.09
(3)
Net earnings attributable to RBH
—
(1)
(0.08
)
(0.08
)
(1)
(0.09
)
(0.18
)
(1)
(0.08
)
(0.26
)
(1)
—
(2)
Pro Forma Adjusted Diluted EPS
$ 1.00
$ 1.33
$ 2.33
$ 1.35
$ 3.67
$ 1.17
$ 4.84
(1) Represents the impact of net earnings
attributable to RBH from March 22, 2018 through end of period
date
(2) Represents the impact of net earnings
attributable to RBH from March 22, 2019 through end of period
date
(3) Includes approximately $0.06 per share
of net earnings attributable to RBH from January 1, 2019 through
March 21, 2019
Note: EPS is computed independently for
each of the periods presented. Accordingly, the sum of the
quarterly EPS amounts may not agree to the total for the year.
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Net Revenues by Product
Category and Adjustments of Net Revenues for the Impact of Currency
and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding
Currency
Acquisitions
Net Revenues excluding
Currency & Acquisitions
Quarters Ended June
30,
Net Revenues
Total
Excluding Currency
Excluding Currency &
Acquisitions
2019
Combustible Products
2018
% Change
$ 2,149
$ (180
)
$ 2,329
$ —
$ 2,329
European Union
$ 2,321
(7.4
)%
0.3
%
0.3
%
640
(51
)
691
—
691
Eastern Europe
695
(7.9
)%
(0.6
)%
(0.6
)%
918
(87
)
1,005
—
1,005
Middle East & Africa
910
0.8
%
10.4
%
10.4
%
1,248
(32
)
1,280
—
1,280
South & Southeast Asia
1,156
8.0
%
10.7
%
10.7
%
756
(18
)
774
—
774
East Asia & Australia
822
(8.0
)%
(5.8
)%
(5.8
)%
522
(18
)
540
—
540
Latin America & Canada
802
(34.9
)%
(32.7
)%
(32.7
)%
$ 6,233
$ (385
)
$ 6,618
$ —
$ 6,618
Total Combustible
$ 6,706
(7.1
)%
(1.3
)%
(1.3
)%
2019
Reduced-Risk Products
2018
% Change
$ 428
$ (36
)
$ 464
$ —
$ 464
European Union
$ 182
+100
%
+100
%
+100
%
182
(15
)
197
—
197
Eastern Europe
65
+100
%
+100
%
+100
%
86
(3
)
89
—
89
Middle East & Africa
112
(22.8
)%
(20.3
)%
(20.3
)%
—
—
—
—
—
South & Southeast Asia
—
—
%
—
%
—
%
765
(7
)
772
—
772
East Asia & Australia
656
16.6
%
17.7
%
17.7
%
5
—
5
—
5
Latin America & Canada
5
(2.4
)%
6.1
%
6.1
%
$ 1,466
$ (62
)
$ 1,528
$ —
$ 1,528
Total RRPs
$ 1,020
43.7
%
49.8
%
49.8
%
2019
PMI
2018
% Change
$ 2,577
$ (216
)
$ 2,793
$ —
$ 2,793
European Union
$ 2,503
3.0
%
11.6
%
11.6
%
822
(66
)
888
—
888
Eastern Europe
760
8.2
%
16.8
%
16.8
%
1,004
(90
)
1,094
—
1,094
Middle East & Africa
1,022
(1.8
)%
7.0
%
7.0
%
1,248
(32
)
1,280
—
1,280
South & Southeast Asia
1,156
8.0
%
10.7
%
10.7
%
1,521
(25
)
1,546
—
1,546
East Asia & Australia
1,478
2.9
%
4.6
%
4.6
%
527
(18
)
545
—
545
Latin America & Canada
807
(34.7
)%
(32.5
)%
(32.5
)%
$ 7,699
$ (447)
$ 8,146
$ —
$ 8,146
Total PMI
$ 7,726
(0.3
)%
5.4
%
5.4
%
Note: Sum of product categories or Regions
might not foot to Total PMI due to roundings. “-“ indicates amounts
between -$0.5 million and +$0.5 million.
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Net Revenues by Product
Category and Adjustments of Net Revenues for the Impact of Currency
and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding
Currency
Acquisitions
Net Revenues excluding
Currency & Acquisitions
Six Months Ended June
30,
Net Revenues
Total
Excluding Currency
Excluding Currency &
Acquisitions
2019
Combustible Products
2018
% Change
$ 3,961
$ (300
)
$ 4,261
$ —
$ 4,261
European Union
$ 4,157
(4.7
)%
2.5
%
2.5
%
1,110
(102
)
1,213
—
1,213
Eastern Europe
1,222
(9.1
)%
(0.8
)%
(0.8
)%
1,746
(155
)
1,901
—
1,901
Middle East & Africa
1,794
(2.7
)%
6.0
%
6.0
%
2,361
(93
)
2,454
—
2,454
South & Southeast Asia
2,237
5.5
%
9.7
%
9.7
%
1,394
(25
)
1,419
—
1,419
East Asia & Australia
1,559
(10.6
)%
(9.0
)%
(9.0
)%
1,168
(50
)
1,218
—
1,218
Latin America & Canada
1,506
(22.4
)%
(19.1
)%
(19.1
)%
$ 11,741
$ (725
)
$ 12,466
$ —
$ 12,466
Total Combustible
$ 12,475
(5.9
)%
(0.1
)%
(0.1
)%
2019
Reduced-Risk Products
2018
% Change
$ 775
$ (59
)
$ 834
$ —
$ 834
European Union
$ 334
+100
%
+100
%
+100
%
291
(28
)
318
—
318
Eastern Europe
105
+100
%
+100
%
+100
%
185
(3
)
188
—
188
Middle East & Africa
189
(2.3
)%
(0.6
)%
(0.6
)%
—
—
—
—
—
South & Southeast Asia
—
—
%
—
%
—
%
1,448
—
1,448
—
1,448
East Asia & Australia
1,510
(4.1
)%
(4.1
)%
(4.1
)%
11
(1
)
12
—
12
Latin America & Canada
9
18.9
%
28.1
%
28.1
%
$ 2,709
$ (91
)
$ 2,800
$ —
$ 2,800
Total RRPs
$ 2,147
26.2
%
30.4
%
30.4
%
2019
PMI
2018
% Change
$ 4,736
$ (359
)
$ 5,095
$ —
$ 5,095
European Union
$ 4,491
5.5
%
13.4
%
13.4
%
1,401
(130
)
1,531
—
1,531
Eastern Europe
1,327
5.6
%
15.4
%
15.4
%
1,931
(158
)
2,089
—
2,089
Middle East & Africa
1,983
(2.6
)%
5.3
%
5.3
%
2,361
(93
)
2,454
—
2,454
South & Southeast Asia
2,237
5.5
%
9.7
%
9.7
%
2,842
(25
)
2,867
—
2,867
East Asia & Australia
3,069
(7.4
)%
(6.6
)%
(6.6
)%
1,179
(51
)
1,230
—
1,230
Latin America & Canada
1,515
(22.2
)%
(18.8
)%
(18.8
)%
$ 14,450
$ (816
)
$ 15,266
$ —
$ 15,266
Total PMI
$ 14,622
(1.2
)%
4.4
%
4.4
%
Note: Sum of product categories or Regions
might not foot to Total PMI due to roundings. “-“ indicates amounts
between -$0.5 million and +$0.5 million.
Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments of Operating
Income for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Operating Income
Currency
Operating Income excluding
Currency
Acquisitions
Operating Income
excluding Currency & Acquisitions
Operating Income
Total
Excluding Currency
Excluding Currency &
Acquisitions
2019
Quarters Ended June
30,
2018
% Change
$ 1,195
$ (121
)
$ 1,316
$ —
$ 1,316
European Union
$ 1,177
1.5
%
11.8
%
11.8
%
256
(16
)
272
—
272
Eastern Europe
261
(1.9
)%
4.2
%
4.2
%
441
(46
)
487
—
487
Middle East & Africa
403
9.4
%
20.8
%
20.8
%
492
(14
)
506
—
506
South & Southeast Asia
440
11.8
%
15.0
%
15.0
%
642
26
616
—
616
East Asia & Australia
498
28.9
%
23.7
%
23.7
%
161
(1)
6
155
—
155
Latin America & Canada
314
(48.7
)%
(50.6
)%
(50.6
)%
$ 3,187
$ (165
)
$ 3,352
$ —
$ 3,352
Total PMI
$ 3,093
3.0
%
8.4
%
8.4
%
2019
Six Months Ended June
30,
2018
% Change
$ 2,091
$ (195
)
$ 2,286
$ —
$ 2,286
European Union
$ 1,917
9.1
%
19.2
%
19.2
%
385
(35
)
420
—
420
Eastern Europe
412
(6.6
)%
1.9
%
1.9
%
785
(72
)
857
—
857
Middle East & Africa
777
1.0
%
10.3
%
10.3
%
932
(2)
(44
)
976
—
976
South & Southeast Asia
869
7.2
%
12.3
%
12.3
%
1,069
21
1,048
—
1,048
East Asia & Australia
1,013
5.5
%
3.5
%
3.5
%
(25
)
(3)
16
(41
)
—
(41
)
Latin America & Canada
531
-(100)%
-(100)%
-(100)%
$ 5,237
$ (309
)
$ 5,546
$ —
$ 5,546
Total PMI
$ 5,519
(5.1
)%
0.5
%
0.5
%
(1) Includes asset impairment and exit
costs ($23 million)
(2) Includes asset impairment and exit
costs ($20 million)
(3) Includes asset impairment and exit
costs ($23 million), Canadian tobacco litigation-related expense
($194 million) and the loss on deconsolidation of RBH ($239
million)
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Income to Adjusted Operating Income, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Operating Income
Asset Impairment & Exit
Costs and Others
Adjusted Operating
Income
Currency
Adjusted Operating Income
excluding Currency
Acqui- sitions
Adjusted Operating Income
excluding Currency & Acqui- sitions
Operating Income
Asset Impairment & Exit
Costs
Adjusted Operating
Income
Total
Excluding Currency
Excluding Currency &
Acqui- sitions
2019
Quarters Ended June
30,
2018
% Change
$ 1,195
$ —
$ 1,195
$ (121
)
$ 1,316
$ —
$ 1,316
European Union
$ 1,177
$ —
$ 1,177
1.5
%
11.8
%
11.8
%
256
—
256
(16
)
272
—
272
Eastern Europe
261
—
261
(1.9
)%
4.2
%
4.2
%
441
—
441
(46
)
487
—
487
Middle East & Africa
403
—
403
9.4
%
20.8
%
20.8
%
492
—
492
(14
)
506
—
506
South & Southeast Asia
440
—
440
11.8
%
15.0
%
15.0
%
642
—
642
26
616
—
616
East Asia & Australia
498
—
498
28.9
%
23.7
%
23.7
%
161
(23
)
(1)
184
6
178
—
178
Latin America & Canada
314
—
314
(41.4
)%
(43.3
)%
(43.3
)%
$ 3,187
$ (23
)
$ 3,210
$ (165
)
$ 3,375
$ —
$ 3,375
Total PMI
$ 3,093
$ —
$ 3,093
3.8
%
9.1
%
9.1
%
2019
Six Months Ended June
30,
2018
% Change
$ 2,091
$ —
$ 2,091
$ (195
)
$ 2,286
$ —
$ 2,286
European Union
$ 1,917
$ —
$ 1,917
9.1
%
19.2
%
19.2
%
385
—
385
(35
)
420
—
420
Eastern Europe
412
—
412
(6.6
)%
1.9
%
1.9
%
785
—
785
(72
)
857
—
857
Middle East & Africa
777
—
777
1.0
%
10.3
%
10.3
%
932
(20
)
(1)
952
(44
)
996
—
996
South & Southeast Asia
869
—
869
9.6
%
14.6
%
14.6
%
1,069
—
1,069
21
1,048
—
1,048
East Asia & Australia
1,013
—
1,013
5.5
%
3.5
%
3.5
%
(25
)
(456
)
(2)
431
16
415
—
415
Latin America & Canada
531
—
531
(18.8
)%
(21.8
)%
(21.8
)%
$ 5,237
$ (476
)
$ 5,713
$ (309
)
$ 6,022
$ —
$ 6,022
Total PMI
$ 5,519
$ —
$ 5,519
3.5
%
9.1
%
9.1
%
(1) Represents asset impairment and exit
costs
(2) Includes asset impairment and exit
costs ($23 million), Canadian tobacco litigation-related expense
($194 million) and the loss on deconsolidation of RBH ($239
million)
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Adjusted
Operating Income Margin, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
excluding Currency (1)
Net Revenues excluding
Currency (2)
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
excluding Currency & Acqui- sitions (1)
Net Revenues excluding
Currency & Acqui- sitions (2)
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
2019
Quarters Ended June
30,
2018
% Points Change
$ 1,195
$ 2,577
46.4
%
$ 1,316
$ 2,793
47.1
%
$ 1,316
$ 2,793
47.1
%
European Union
$ 1,177
$ 2,503
47.0
%
(0.6
)
0.1
0.1
256
822
31.1
%
272
888
30.6
%
272
888
30.6
%
Eastern Europe
261
760
34.3
%
(3.2
)
(3.7
)
(3.7
)
441
1,004
43.9
%
487
1,094
44.5
%
487
1,094
44.5
%
Middle East & Africa
403
1,022
39.4
%
4.5
5.1
5.1
492
1,248
39.4
%
506
1,280
39.5
%
506
1,280
39.5
%
South & Southeast Asia
440
1,156
38.1
%
1.3
1.4
1.4
642
1,521
42.2
%
616
1,546
39.8
%
616
1,546
39.8
%
East Asia & Australia
498
1,478
33.7
%
8.5
6.1
6.1
184
527
34.9
%
178
545
32.7
%
178
545
32.7
%
Latin America & Canada
314
807
38.9
%
(4.0
)
(6.2
)
(6.2
)
$ 3,210
$ 7,699
41.7
%
$ 3,375
$ 8,146
41.4
%
$ 3,375
$ 8,146
41.4
%
Total PMI
$ 3,093
$ 7,726
40.0
%
1.7
1.4
1.4
2019
Six Months Ended June
30,
2018
% Points Change
$ 2,091
$ 4,736
44.2
%
$ 2,286
$ 5,095
44.9
%
$ 2,286
$ 5,095
44.9
%
European Union
$ 1,917
$ 4,491
42.7
%
1.5
2.2
2.2
385
1,401
27.5
%
420
1,531
27.4
%
420
1,531
27.4
%
Eastern Europe
412
1,327
31.0
%
(3.5
)
(3.6
)
(3.6
)
785
1,931
40.7
%
857
2,089
41.0
%
857
2,089
41.0
%
Middle East & Africa
777
1,983
39.2
%
1.5
1.8
1.8
952
2,361
40.3
%
996
2,454
40.6
%
996
2,454
40.6
%
South & Southeast Asia
869
2,237
38.8
%
1.5
1.8
1.8
1,069
2,842
37.6
%
1,048
2,867
36.6
%
1,048
2,867
36.6
%
East Asia & Australia
1,013
3,069
33.0
%
4.6
3.6
3.6
431
1,179
36.6
%
415
1,230
33.7
%
415
1,230
33.7
%
Latin America & Canada
531
1,515
35.0
%
1.6
(1.3
)
(1.3
)
$ 5,713
$ 14,450
39.5
%
$ 6,022
$ 15,266
39.4
%
$ 6,022
$ 15,266
39.4
%
Total PMI
$ 5,519
$ 14,622
37.7
%
1.8
1.7
1.7
(1) For the calculation of Adjusted
Operating Income and Adjusted Operating Income excluding currency
and acquisitions refer to Schedule 7
(2) For the calculation of Net Revenues
excluding currency and acquisitions refer to Schedules 4 and 5
Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments for the Impact of
RBH, excluding Currency
($ in millions, except per share
data) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
% Change
2019
2018
% Change
Net Revenues
$ 7,699
$ 7,726
(0.3
)%
$ 14,450
$ 14,622
(1.2
)%
Net Revenues attributable to RBH
(253
)
(253
)
(1)
Net Revenues
$ 7,699
$ 7,473
(2)
3.0
%
$ 14,450
$ 14,369
(2)
0.6
%
Currency
(447
)
(816
)
Net Revenues, ex. currency
$ 8,146
$ 7,473
(2)
9.0
%
$ 15,266
$ 14,369
(2)
6.2
%
Operating Income
$ 3,187
$ 3,093
3.0
%
$ 5,237
$ 5,519
(5.1
)%
Asset impairment and exit costs
(23
)
—
(43
)
—
Canadian tobacco litigation-related
expense
—
—
(194
)
—
Loss on deconsolidation of RBH
—
—
(239
)
—
Adjusted Operating Income
$ 3,210
$ 3,093
3.8
%
$ 5,713
$ 5,519
3.5
%
Operating Income attributable to RBH
(177
)
(177
)
(1)
Adjusted Operating Income
$ 3,210
$ 2,916
(2)
10.1
%
$ 5,713
$ 5,342
(2)
6.9
%
Currency
(165
)
(309
)
Adjusted Operating Income, ex.
currency
$ 3,375
$ 2,916
(2)
15.7
%
$ 6,022
$ 5,342
(2)
12.7
%
Adjusted OI Margin
41.7
%
40.0
%
1.7
39.5
%
37.7
%
1.8
Adjusted OI Margin attributable to RBH
(1.0
)
(0.5
)
(1)
Adjusted OI Margin
41.7
%
39.0
%
(2)
2.7
39.5
%
37.2
%
(2)
2.3
Currency
0.3
0.1
Adjusted OI Margin, ex.
currency
41.4
%
39.0
%
(2)
2.4
39.4
%
37.2
%
(2)
2.2
Adjusted Diluted EPS(3)
$ 1.46
$ 1.41
3.5
%
$ 2.55
$ 2.41
5.8
%
Net earnings attributable to RBH
(0.08
)
(0.08
)
(1)
Adjusted Diluted EPS
$ 1.46
$ 1.33
(2)
9.8
%
$ 2.55
$ 2.33
(2)
9.4
%
Currency
(0.07
)
(0.13
)
Adjusted Diluted EPS, ex.
currency
$ 1.53
$ 1.33
(2)
15.0
%
$ 2.68
$ 2.33
(2)
15.0
%
(1) Represents the impact attributable to
RBH from March 22, 2018 through end of period date
(2) Pro forma
(3) For the calculation, see Schedule
2
Note: Financials attributable to RBH
include Duty Free sales in Canada
Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments for the Impact of
RBH, excluding Currency
($ in millions) / (Unaudited)
Latin America & Canada
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
% Change
2019
2018
% Change
Net Revenues
$ 527
$ 807
(34.7
)%
$ 1,179
$ 1,515
(22.2
)%
Net Revenues attributable to RBH
(251
)
(251
)
(1)
Net Revenues
$ 527
$ 556
(2)
(5.2
)%
$ 1,179
$ 1,264
(2)
(6.7
)%
Currency
(18
)
(51
)
Net Revenues, ex. currency
$ 545
$ 556
(2)
(2.0
)%
$ 1,230
$ 1,264
(2)
(2.7
)%
Operating Income
$ 161
$ 314
(48.7
)%
$ (25)
$ 531
-(100)%
Asset impairment and exit costs
(23
)
—
(23
)
—
Canadian tobacco litigation-related
expense
—
—
(194
)
—
Loss on deconsolidation of RBH
—
—
(239
)
—
Adjusted Operating Income
$ 184
$ 314
(41.4
)%
$ 431
$ 531
(18.8
)%
Operating Income attributable to RBH
(176
)
(176
)
(1)
Adjusted Operating Income
$ 184
$ 138
(2)
33.3
%
$ 431
$ 355
(2)
21.4
%
Currency
6
16
Adjusted Operating Income, ex.
currency
$ 178
$ 138
(2)
29.0
%
$ 415
$ 355
(2)
16.9
%
Adjusted OI Margin
34.9
%
38.9
%
(4.0
)
36.6
%
35.0
%
1.6
Adjusted OI Margin attributable to RBH
(14.1
)
(6.9
)
(1)
Adjusted OI Margin
34.9
%
24.8
%
(2)
10.1
36.6
%
28.1
%
(2)
8.5
Currency
2.2
2.9
Adjusted OI Margin, ex.
currency
32.7
%
24.8
%
(2)
7.9
33.7
%
28.1
%
(2)
5.6
(1) Represents the impact attributable to
RBH from March 22, 2018 through end of period date
(2) Pro forma
Schedule 11
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of
Earnings
($ in millions, except per share
data) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
Change Fav./(Unfav.)
2019
2018
Change Fav./(Unfav.)
$ 19,987
$ 21,100
(5.3
)%
Revenues including Excise
Taxes
$ 37,692
$ 39,526
(4.6
)%
12,288
13,374
8.1
%
Excise Taxes on products
23,242
24,904
6.7
%
7,699
7,726
(0.3
)%
Net Revenues
14,450
14,622
(1.2
)%
2,665
2,744
2.9
%
Cost of sales
5,130
5,359
4.3
%
5,034
4,982
1.0
%
Gross profit
9,320
9,263
0.6
%
1,831
1,868
2.0
%
Marketing, administration and
research costs (1)
4,048
3,701
(9.4
)%
16
21
Amortization of intangibles
35
43
3,187
3,093
3.0
%
Operating Income
5,237
5,519
(5.1
)%
150
168
10.7
%
Interest expense, net
302
395
23.5
%
20
6
-(100)%
Pension and other employee
benefit costs
41
12
-(100)%
3,017
2,919
3.4
%
Earnings before income taxes
4,894
5,112
(4.3
)%
611
644
5.1
%
Provision for income taxes
1,035
1,203
14.0
%
(30
)
(20
)
Equity investments and securities
(income)/loss, net
(41
)
(33
)
2,436
2,295
6.1
%
Net Earnings
3,900
3,942
(1.1
)%
117
97
Net Earnings attributable to
noncontrolling interests
227
188
$ 2,319
$ 2,198
5.5
%
Net Earnings attributable to
PMI
$ 3,673
$ 3,754
(2.2
)%
Per share data (2):
$ 1.49
$ 1.41
5.7
%
Basic Earnings Per
Share
$ 2.36
$ 2.41
(2.1
)%
$ 1.49
$ 1.41
5.7
%
Diluted Earnings Per
Share
$ 2.36
$ 2.41
(2.1
)%
(1) Six months ended June 30, 2019
includes asset impairment and exit costs ($43 million), Canadian
tobacco litigation-related expense ($194 million) and the loss on
deconsolidation of RBH ($239 million). Quarter ended June 30, 2019
includes asset impairment and exit costs ($23 million).
(2) Net Earnings and weighted-average
shares used in the basic and diluted Earnings Per Share
computations for the quarters and for the six months ended June 30,
2019 and 2018 are shown on Schedule 1, Footnote 1.
Schedule 12
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance
Sheets
($ in millions, except ratios) /
(Unaudited)
June 30,
December 31,
2019
2018
Assets
Cash and cash equivalents
$
4,008
$
6,593
All other current assets
13,155
12,849
Property, plant and equipment, net
6,917
7,201
Goodwill
5,828
7,189
Other intangible assets, net
2,130
2,278
Investments in unconsolidated subsidiaries
and equity securities
4,665
1,269
Other assets
3,220
2,422
Total assets
$
39,923
$
39,801
Liabilities and Stockholders' (Deficit)
Equity
Short-term borrowings
$
269
$
730
Current portion of long-term debt
4,762
4,054
All other current liabilities
13,015
12,407
Long-term debt
24,858
26,975
Deferred income taxes
786
898
Other long-term liabilities
5,642
5,476
Total liabilities
49,332
50,540
Total PMI stockholders' deficit
(11,199
)
(12,459
)
Noncontrolling interests
1,790
1,720
Total stockholders' (deficit)
equity
(9,409
)
(10,739
)
Total liabilities and stockholders'
(deficit) equity
$
39,923
$
39,801
Schedule 13
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)
Year Ended June 30,
2019
Year Ended December 31,
2018
July ~ December
January ~ June
12 months
2018
2019
rolling
Net Earnings
$
4,344
$
3,900
$
8,244
$
8,286
Equity (income)/loss in unconsolidated
subsidiaries, net
(37
)
(41
)
(78
)
(65
)
Provision for income taxes
1,242
1,035
2,277
2,445
Interest expense, net
270
302
572
665
Depreciation and amortization
501
472
973
989
Asset impairment and exit costs and Others
(1)
—
476
476
—
Adjusted EBITDA
$
6,320
$
6,144
$
12,464
$
12,320
June 30,
December 31,
2019
2018
Short-term borrowings
$
269
$
730
Current portion of long-term debt
4,762
4,054
Long-term debt
24,858
26,975
Total Debt
$
29,889
$
31,759
Cash and cash equivalents
4,008
6,593
Net Debt
$
25,881
$
25,166
Ratios:
Total Debt to Adjusted EBITDA
2.40
2.58
Net Debt to Adjusted EBITDA
2.08
2.04
(1) Others include Canadian tobacco
litigation-related expense ($194 million) and the loss on
deconsolidation of RBH ($239 million)
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Cash Flow to Operating Cash Flow, excluding Currency
($ in millions) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2019
2018
% Change
2019
2018
% Change
$ 3,442
$ 3,993
(13.8
)%
Net cash provided by operating
activities (1)
$ 4,683
$ 5,373
(12.8
)%
(614
)
Currency
(777
)
$ 4,056
$ 3,993
1.6
%
Net cash provided by operating
activities, excluding currency
$ 5,460
$ 5,373
1.6
%
(1) Operating cash flow
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190718005305/en/
Investor Relations: New York: +1 (917) 663 2233 Lausanne: +41
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Media: Lausanne: +41 (0)58 242 4500 Email:
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