Philip Morris International Inc. (PMI) Reports 2012 Third-Quarter Results; Narrows 2012 Reported Dil

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Philip Morris International Inc. (PMI) Reports 2012 Third-Quarter Results;
Narrows 2012 Reported Diluted EPS Guidance to a Range of $5.12 to $5.18

NEW YORK--(BUSINESS WIRE)-- Regulatory News:


Third-Quarter 2012

  • Reported diluted earnings per share of $1.32, down by 2.2% versus $1.35 in 2011
    • Excluding currency, reported diluted earnings per share of $1.39 up by 3.0%
  • Adjusted diluted earnings per share of $1.38, up by 0.7% versus $1.37 in 2011, as detailed in the attached Schedule 12
    • Excluding currency, adjusted diluted earnings per share of $1.45, up by 5.8%
  • Cigarette shipment volume down by 1.3%
  • Reported net revenues, excluding excise taxes, down by 5.3% to $7.9 billion
    • Excluding currency and acquisitions, reported net revenues, excluding excise taxes, up by 3.4%
  • Reported operating companies income down by 1.5% to $3.7 billion
    • Excluding currency and acquisitions, reported operating companies income up by 4.8%
  • Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, down by 1.7% to $3.7 billion
    • Excluding currency and acquisitions, adjusted operating companies income up by 4.5%
  • Operating income down by 1.5% to $3.6 billion
  • Increased its regular quarterly dividend by 10.4% to an annualized rate of $3.40 per common share
  • Repurchased 16.7 million shares of its common stock for $1.5 billion
  • Commenced a new three-year share repurchase program of $18 billion

Year-To-Date September 2012

  • Reported diluted earnings per share of $3.92, up by 4.3% versus $3.76 in 2011
    • Excluding currency, reported diluted earnings per share of $4.11, up by 9.3%
  • Adjusted diluted earnings per share of $3.99, up by 5.8% versus $3.77 in 2011, as detailed in the attached Schedule 16
    • Excluding currency, adjusted diluted earnings per share of $4.18, up by 10.9%
  • Cigarette shipment volume up by 0.7%, excluding acquisitions
  • Reported net revenues, excluding excise taxes, up by 0.3% to $23.5 billion
    • Excluding currency and acquisitions, reported net revenues, excluding excise taxes, up by 5.4%
  • Reported operating companies income up by 2.4% to $10.9 billion
    • Excluding currency and acquisitions, reported operating companies income up by 7.1%
  • Adjusted operating companies income, which reflects the items detailed in the attached Schedule 15, up by 2.3% to $10.9 billion
    • Excluding currency and acquisitions, adjusted operating companies income up by 6.9%
  • Operating income up by 2.3% to $10.6 billion

Full-Year 2012

  • PMI narrows, at prevailing exchange rates, its 2012 full-year reported diluted earnings per share forecast to a range of $5.12 to $5.18 versus $4.85 in 2011
    • Excluding incremental adjustments since the previously announced forecast of July 19, 2012, of $0.05 per share for a net tax expense of $79 million related to the completion of the U.S. Federal Income Tax audit for the years 2004 through 2006, and $0.01 per share for asset impairment and exit costs, the range is forecast to be $5.18 to $5.24
  • Excluding a forecasted total unfavorable currency impact of approximately $0.23 for the full-year 2012, which compares favorably by $0.04 per share to the unfavorable full-year currency forecast of $0.27 per share previously announced on July 19, 2012, the reported diluted earnings forecast range of $5.12 to $5.18 per share represents a projected increase of approximately 10.5% to 11.5% versus $4.85 in 2011
  • Excluding the unfavorable impact of currency, the aforementioned net tax expense of $0.05 per share and year-to-date asset impairment and exit costs of $0.02 per share, the full-year reported diluted earnings forecast range of $5.12 to $5.18 per share represents a growth rate of approximately 11% to 12% versus adjusted diluted earnings per share of $4.88 in 2011, as detailed in the attached Schedule 20

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2012 third-quarter results.

"Despite the difficult comparisons in the third-quarter, we remain confident that the fundamentals of our business are solid as a whole, which is testament to our progress, especially in our Asia and EEMA Regions," said Louis C. Camilleri, Chairman of the Board and Chief Executive Officer.

"We expect to achieve our annual organic volume growth target of 1% in 2012 and our adjusted diluted EPS growth to be in line with our mid-to-long term constant currency annual growth target.

"We were pleased to announce an increase to our regular quarterly dividend of 10.4% during the quarter. Since the spin-off, we have increased the dividend by 84.8% to an annualized rate of $3.40 per common share."

Conference Call

A conference call, hosted by Jacek Olczak, Chief Financial Officer, with members of the investment community and news media, will be webcast at 9:00 a.m., Eastern Time, on October 18, 2012. Access is available at www.pmi.com.

Dividends and Share Repurchase Program

PMI increased its regular quarterly dividend during the quarter to $0.85, up by 10.4% from $0.77, which represents an annualized rate of $3.40 per common share. Since its spin-off in March 2008, PMI has increased its regular quarterly dividend by 84.8% from the initial annualized rate of $1.84 per common share.

In July 2012, PMI completed ahead of schedule its three-year share repurchase program of $12 billion that began in May 2010, and, in August 2012, initiated a new three-year share repurchase program of $18 billion. During the quarter, PMI spent $1.5 billion to repurchase 16.7 million shares. On a September year-to-date basis, PMI spent $4.5 billion to repurchase 52.5 million shares, as shown in the table below.

 

2012 PMI Share Repurchases

     

Value

   

Shares

($ Mio.)

000

$12 billion, three-year program

January - March1,50018,057
April - June1,53517,774
July6126,861

$18 billion, three-year program

August - September

893

9,825

Total4,54052,517
 

Since May 2008, when PMI began its first share repurchase program of $13 billion, which was completed in April 2010, the company has spent an aggregate of $25.9 billion to repurchase 466.6 million shares at an average price of $55.49 per share, or 22.1% of the shares outstanding at the time of the spin-off in March 2008. PMI has a share repurchase target for the full-year 2012 of $6 billion.

2012 Full-Year Forecast

PMI narrows, at prevailing exchange rates, its 2012 full-year reported diluted earnings per share forecast to a range of $5.12 to $5.18 versus $4.85 in 2011. Excluding incremental adjustments since the previously announced forecast of July 19, 2012, of $0.05 per share for a net tax expense of $79 million related to the completion of the U.S. Federal Income Tax audit for the years 2004 through 2006, and $0.01 per share for asset impairment and exit costs, the range is forecast to be $5.18 to $5.24.

Excluding a forecasted total unfavorable currency impact of approximately $0.23 for the full-year 2012, which compares favorably by $0.04 per share to the unfavorable full-year currency forecast of $0.27 per share previously announced on July 19, 2012, the reported diluted earnings forecast range of $5.12 to $5.18 per share represents a projected increase of approximately 10.5% to 11.5% versus $4.85 in 2011.

Excluding the unfavorable impact of currency, the aforementioned net tax expense of $0.05 per share and year-to-date asset impairment and exit costs of $0.02 per share, the full-year reported diluted earnings forecast range of $5.12 to $5.18 per share represents a growth rate of approximately 11% to 12% versus adjusted diluted earnings per share of $4.88 in 2011, as detailed in the attached Schedule 20.

This guidance excludes the impact of any potential future acquisitions, unanticipated asset impairment and exit cost charges, and any unusual events.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.

2012 THIRD-QUARTER CONSOLIDATED RESULTS

In this press release, "PMI" refers to Philip Morris International Inc. and its subsidiaries.References to total international cigarette market, defined as worldwide cigarette volume excluding the United States, total cigarette market, total market and market shares are PMI estimates based on the latest available data from a number of internal and external sources and may, in defined instances, exclude the People's Republic of China and/or PMI's duty-free business.The term "net revenues" refers to operating revenues from the sale of our products, excluding excise taxes and net of sales and promotion incentives.Operating companies income, or "OCI", is defined as operating income before general corporate expenses and the amortization of intangibles.PMI's management evaluates business segment performance and allocates resources based on OCI.Management also reviews OCI, OCI margins and earnings per share, or "EPS", on an adjusted basis (which may exclude the impact of currency and other items such as acquisitions, asset impairment and exit costs, discrete tax items and unusual items), earnings before interest, taxes, depreciation, and amortization, or "EBITDA", free cash flow, defined as net cash provided by operating activities less capital expenditures, and net debt.PMI believes it is appropriate to disclose these measures as they improve comparability and help investors analyze business performance and trends.Non-GAAP measures used in this release should be considered neither in isolation nor as a substitute for the financial measures prepared in accordance with U.S. GAAP.Comparisons are to the same prior-year period unless otherwise stated.For a reconciliation of non-GAAP measures to corresponding GAAP measures, see the relevant schedules provided with this release.

 

NET REVENUES

 

PMI Net Revenues ($ Millions)

   

Third-Quarter

  

Nine Months Year-To-Date

      Excl.      Excl.

2012

2011

Change

Curr.

2012

2011

Change

Curr.

European Union$2,125$2,506(15.2)%(1.9)%$6,463$7,004(7.7)%0.6%
Eastern Europe, Middle East & Africa2,2072,210(0.1)%9.4%6,1935,9094.8%11.8%
Asia2,7612,799(1.4)%2.4%8,3938,0584.2%4.9%
Latin America & Canada

827

847

(2.4)%7.3%

2,439

2,455

(0.7)%6.4%
Total PMI$7,920$8,362(5.3)%3.5%$23,488$23,4260.3%5.5%
 

Net revenues of $7.9 billion were down by 5.3% in the quarter, including unfavorable currency of $731 million. Excluding currency and acquisitions, net revenues increased by 3.4%, driven by favorable pricing of $505 million, partly offset by unfavorable volume/mix of $223 million.

 

OPERATING COMPANIES INCOME

 

PMI Operating Companies Income ($ Millions)

   

Third-Quarter

  

Nine Months Year-To-Date

      Excl.      Excl.

2012

2011

Change

Curr.

2012

2011

Change

Curr.

European Union$1,085$1,262(14.0)%(2.1)%$3,232$3,548(8.9)%(0.3)%
Eastern Europe, Middle East & Africa1,04792513.2%19.6%2,8052,48213.0%20.4%
Asia1,2971,309(0.9)%(0.2)%4,0683,8007.1%5.8%
Latin America & Canada

267

255

4.7%11.4%

753

774

(2.7)%4.9%
Total PMI$3,696$3,751(1.5)%4.8%$10,858$10,6042.4%7.1%
 

Reported operating companies income was down by 1.5% to $3.7 billion in the quarter, including unfavorable currency of $236 million. Excluding currency, operating companies income was up by 4.8%, driven by higher pricing, partly offset by unfavorable volume/mix of $200 million, higher manufacturing costs and increased marketing, sales and distribution investments, notably in Brazil, Colombia, Germany, Indonesia, the Philippines and Russia. Adjusted operating companies income declined by 1.7% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 4.5%.

 

PMI Operating Companies Income ($ Millions)

               

Third-Quarter

Nine Months Year-To-Date

2012

2011

Change

2012

2011

Change

Reported OCI$3,696$3,751(1.5)%$10,858$10,6042.4%
Asset impairment & exit costs

(34

)

(43

)

(50

)

(60

)

Adjusted OCI$3,730$3,794(1.7)%$10,908$10,6642.3%
Adjusted OCI Margin*47.1%45.4%1.7 p.p.46.4%45.5%0.9 p.p.

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Adjusted operating companies income margin, excluding the impact of currency and acquisitions, was up by 0.5 percentage points to 45.9% during the quarter, as detailed on Schedule 11.

SHIPMENT VOLUME & MARKET SHARE

 

PMI Cigarette Shipment Volume by Segment (Million Units)

               

Third-Quarter

Nine Months Year-To-Date

2012

2011

Change

2012

2011

Change

European Union51,62956,198(8.1)%151,222161,913(6.6)%
Eastern Europe, Middle East & Africa81,38879,0533.0%226,472218,0323.9%
Asia79,50779,0530.6%244,009235,1873.8%
Latin America & Canada24,00725,243(4.9)%72,21473,512(1.8)%
Total PMI236,531239,547(1.3)%693,917688,6440.8%
 

PMI's cigarette shipment volume was down in the quarter by 1.3%. PMI's September year-to-date cigarette shipment volume was up by 0.7%, excluding acquisitions. Excluding acquisitions and the Japan hurdle of 6.3 billion units related to additional volume shipped in the second quarter of 2011 following the disruption of PMI's principal competitor's supply chain, PMI's September year-to-date cigarette shipment volume was up by a strong 1.7%.

In the EU, PMI's total cigarette shipment volume decreased by 8.1% in the quarter, predominantly due to a lower total market, particularly in southern Europe. PMI's September year-to-date cigarette shipment volume was down by 6.6%.

In EEMA, PMI's total cigarette shipment volume grew by 3.0% in the quarter, driven mainly by improved market conditions in Egypt and favorable distributor inventory movements and higher share in Russia. PMI's September year-to-date cigarette shipment volume was up by 3.9%.

In Asia, PMI's total cigarette shipment volume increased by 0.6% in the quarter, driven mainly by Indonesia, Thailand and Vietnam, largely offset by Japan, due to: an unfavorable comparison with the prior year period in which depleted PMI distributor inventories and trade inventories of competitive product were rebuilt; and Korea. PMI's September year-to-date cigarette shipment volume was up by 3.8%. Excluding the Japan hurdle of 6.3 billion units, PMI's September year-to-date cigarette shipment volume in Asia was up by 6.6%.

In Latin America & Canada, PMI's total cigarette shipment volume decreased by 4.9% in the quarter, mainly due to a lower total market in Argentina, Brazil, Colombia and Mexico. PMI's September year-to-date cigarette shipment volume decreased by 1.8%.

Total cigarette shipment volume of Marlboro of 77.1 billion units was down by 2.3% in the quarter, reflecting a decline in the EU of 5.8%, notably in France, Italy and Spain, partly offset by Germany and Poland, a marginal decline in EEMA of 0.5% and a decline in Latin America & Canada of 2.6%. Cigarette shipment volume of Marlboro grew slightly in Asia by 0.6%, driven by gains in Indonesia and the Philippines, partly offset by declines in Japan and Korea. Total September year-to-date cigarette shipment volume of Marlboro was up by 0.3%, or by 1.1% excluding the Japan hurdle.

Total cigarette shipment volume of L&M of 24.6 billion units was up by 3.4% in the quarter, reflecting growth of 12.6% in EEMA, notably in Egypt and Russia, 9.0% in Asia, mainly Thailand, and 1.7% in Latin America & Canada. Cigarette shipment volume of L&M declined by 8.4% in the EU, no

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