February 4, 2009

Philip Morris International Inc. (PMI) Reports 2008 Results

NEW YORK--(BUSINESS WIRE)--

Regulatory News:

2008 Full-Year

  • Full-year diluted earnings per share of $3.32, up 16.1% from $2.86 in 2007, including the items detailed on Schedule 8
  • Adjusted 2008 full-year diluted earnings per share of $3.32, up 18.6% from the 2007 pro-forma adjusted earnings per share of $2.80. Excluding currency, adjusted 2008 full-year diluted earnings per share were up 13.2%

2008 Fourth-Quarter

  • Fourth-quarter diluted earnings per share of $0.71, down 4.1% from $0.74 for the same period in 2007, including the items detailed on Schedule 7
  • Adjusted fourth-quarter diluted earnings per share of $0.71, down 1.4% for the same period in 2007 from the pro-forma adjusted earnings per share of $0.72. Excluding currency, adjusted fourth-quarter diluted earnings per share were up 12.5%
  • Spent a total of $5.4 billion to repurchase 106.8 million shares of its common stock in 2008; increased the dividend by 17.4% in 2008 to an annualized rate of $2.16 per share
  • During 2008, acquired Rothmans Inc. of Canada and the fine cut trademark Interval
  • Forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%
  • As announced on February 3, 2009, PMI entered into an exclusive 50:50 joint venture agreement with Swedish Match AB to commercialize smoke-free tobacco products worldwide, excluding Scandinavia and the USA
  • Announces an agreement to acquire the rights to the Petteroes trademark, the leading fine cut brand in Norway

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2008 full-year and fourth-quarter results and provided its forecast for 2009 full-year diluted earnings per share.

“Our operating performance in 2008 was exceptionally strong and our results exceeded our constant currency growth targets for both the full year and the fourth quarter. Our first year as an independent company was also marked by significant progress on numerous strategic fronts and specifically behind our efforts to improve our speed to market and enhance the vibrancy and equity of our strong brand portfolio," said Louis Camilleri, Chairman and Chief Executive Officer.

"The global economic crisis obviously results in uncertainty, particularly on the currency front, and at current exchange rates we face a steep hurdle. Nevertheless, we enter 2009 with solid momentum and confident in our ability to meet our constant currency income growth targets. Our commitment to judiciously invest in the growth of our business and deliver superior returns to our shareholders over the long term remains as steadfast as ever."

Conference Call

A conference call, hosted by Louis Camilleri, Chairman and Chief Executive Officer, and Hermann Waldemer, Chief Financial Officer, with members of the investment community and news media will be webcast at 1:00 p.m. Eastern Time on February 4, 2009. Access is available at www.pmintl.com.

Dividends and Share Repurchase Program

During the fourth quarter, PMI announced a regular quarterly dividend of $0.54. PMI increased its dividend by 17.4% in August 2008 to an annualized rate of $2.16 per share.

In the fourth-quarter, PMI spent $888 million to repurchase 20.6 million shares of its common stock. Since May 2008, when PMI began its previously-announced $13 billion, two-year share repurchase program, the company has spent a total of $5.4 billion to repurchase 106.8 million shares.

Acquisitions

In 2008, PMI acquired all of the outstanding common shares of Rothmans Inc. of Canada for CAD $30.00 per share in cash, representing an aggregate transaction value of approximately CAD $2.0 billion. The Canadian business’ results were incorporated into the renamed Latin America & Canada segment as of September 19, 2008. These results were not material to PMI’s operating results for the fourth quarter 2008 or for the full-year 2008.

During the year, PMI also acquired the fine cut trademark Interval for 254 million euros.

Certain PMI Subsidiaries Revise their Closing Date

Prior to 2008, certain of PMI’s subsidiaries reported their results up to ten days before the end of December, rather than on December 31. During 2008, these subsidiaries moved to a December 31 closing date. Accordingly, the first and fourth quarter results of previous periods have been revised to reflect this change. The unfavorable impact of this change on 2008 diluted earnings per share in the first quarter is essentially offset by a favorable impact in the fourth quarter. The effect of this change for the year ended December 31, 2008 was not material to PMI’s consolidated financial position, results of operations or cash flows. See Schedules 9-12 for more information.

PMI Enters into Agreement with Swedish Match AB

As separately announced on February 3, 2009, PMI has entered into an agreement with Swedish Match AB (SWMA) to establish an exclusive 50:50 joint venture to commercialize Swedish style snus and other smoke-free tobacco products worldwide, outside of Scandinavia and the USA. PMI and SWMA will license exclusively to the joint venture an agreed list of trademarks and intellectual property.

PMI has further licensed to SWMA certain PMI trademarks in Sweden and Norway, including 1847 by Philip Morris, PMI's first product in the Swedish snus category launched in June 2008.

Acquisition of Petteroes

PMI has reached an agreement to acquire the rights to the Petteroes fine cut tobacco trademark worldwide and other cigarette trademarks sold primarily in Norway and Sweden.

In 2008, Petteroes had a 58% share of the Norwegian roll-your-own segment and a 7% share of the cigarette category. The brand recorded net revenues, excluding excise taxes, of approximately NOK 370 million (USD 54 million), and operating companies income of approximately NOK 260 million (USD 38 million), in the fiscal year ending June 30, 2008.

The transaction is subject to approval by the European Commission and certain individual country regulatory agencies and is expected to be completed during the first quarter of 2009. The transaction is projected be modestly accretive to net earnings in 2009.

2009 Full-Year Forecast

PMI forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%. This guidance excludes the impact of any potential future acquisition.

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

2008 FULL-YEAR AND FOURTH-QUARTER CONSOLIDATED RESULTS

Management reviews operating companies income, which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and to allocate resources. Management believes it is appropriate to disclose this measure to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed Statements of Earnings contained in this release. References to international tobacco market shares are PMI estimates based on a number of sources.

NET REVENUES*

PMI Net Revenues* ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

European Union $9,688 $8,835 9.7% $2,127 $2,262 (6.0)%
Eastern Europe, Middle East & Africa 7,504 6,346 18.2% 1,800 1,664 8.2%
Asia 6,185 5,648 9.5% 1,468 1,405 4.5%
Latin America & Canada

2,328

1,981

17.5%

727

576

26.2%
Total PMI $25,705 $22,810 12.7% $6,122 $5,907 3.6%
Total PMI (excl. currency) 6.6% 8.5%

* Net revenues, excluding excise taxes.

Reported net revenues, excluding excise taxes, of $25.7 billion for the full-year 2008 were up 12.7%, driven by growth in all business segments. Net revenues increased by 6.6% for the full-year, excluding favorable currency of $1.4 billion. Excluding currency and acquisitions, net revenues increased by 5.6%.

In the fourth quarter, reported net revenues, excluding excise taxes, of $6.1 billion, were up 3.6%. Net revenues increased by 8.5% for the quarter, excluding unfavorable currency of $288 million. Excluding currency and acquisitions, net revenues increased by 5.6%.

OPERATING COMPANIES INCOME

PMI Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

European Union $4,738 $4,195 12.9% $959 $1,059 (9.4)%
Eastern Europe, Middle East & Africa 3,119 2,431 28.3% 680 628 8.3%
Asia 2,057 1,803 14.1% 426 424 0.5%
Latin America & Canada

520

514

1.2%

238

190

25.3%
Total PMI $10,434 $8,943 16.7% $2,303 $2,301 0.1%
Total PMI (excl. currency) 11.3% 10.4%

Reported operating companies income increased 16.7% to $10.4 billion for the full-year 2008, due primarily to higher pricing of $1.2 billion, across all business segments, improved volume/mix and favorable currency of $481 million. Adjusted for the items shown in the table below, operating companies income grew 16.5%. Excluding currency, operating companies income was up 11.3%. Excluding currency and acquisitions, operating companies income increased by 9.9%.

Fourth-quarter 2008 reported operating companies income was essentially flat at $2.3 billion, reflecting higher pricing across all business segments and the favorable impact of the Canadian acquisition, offset by unfavorable currency of $237 million and by increased expenditures in marketing, trade and selling activities, principally in Asia of approximately $100 million. Adjusted for the items shown in the table below, operating companies income declined 1.7%. Excluding currency, operating companies income was up 10.4%. Excluding currency and acquisitions, operating companies income increased by 7.4%.

PMI Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

Reported Operating Companies Income $10,434 $8,943 16.7% $2,303 $2,301 0.1%
Asset impairment and exit costs 84 195 0 42
Equity loss from RBH* legal settlement 124 0 0 0
Adjusted Operating Companies Income $10,642 $9,138 16.5% $2,303 $2,343 (1.7)%
Adjusted OCI Margin** 41.4% 40.1% 1.3 pp 37.6% 39.7% (2.1) pp

* Rothmans, Benson & Hedges Inc.

**Margins are calculated as adjusted operating companies income, divided by net revenues, excluding excise taxes.

SHIPMENT VOLUME & MARKET SHARE

PMI Cigarette Shipment Volume by Segment (Million Units)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

European Union 243,451 257,541 (5.5)% 57,520 62,938 (8.6)%
Eastern Europe, Middle East & Africa 303,205 290,310 4.4% 75,626 72,152 4.8%
Asia 223,724 211,480 5.8% 55,373 52,533 5.4%
Latin America & Canada

99,377

89,307

11.3%

28,688

25,322

13.3%
Total PMI 869,757 848,638 2.5% 217,207 212,945 2.0%

2008 Full-Year Results

PMI cigarette shipment volume of 869.8 billion units was up 2.5% for the full-year 2008. On an organic basis, excluding acquisitions, PMI’s cigarette shipment volume was up 1.0%, benefiting from strong performances in EEMA, Asia and Latin America & Canada, partially offset by the EU. The performance in the EU was adversely affected by a decline in the total market, the build-up of trade inventories in the Czech Republic in the fourth quarter of 2007 in anticipation of the January 2008 excise tax increase, and the impact of tax-driven pricing in Poland. Absent the distortions in the Czech Republic and Poland, PMI cigarette shipment volume in the EU declined by 2.9%.

Marlboro cigarette shipment volume of 310.7 billion units was up 0.2%, with a combined growth in EEMA, Asia and Latin America & Canada of 4.3%, partially offset by the EU, down 6.0%, primarily reflecting cigarette consumption declines.

Total cigarette shipments of L&M of 92.4 billion units were down 4.6%, mainly due to a decline in EEMA, partially offset by growth in the EU. Led by double-digit growth in EEMA and an increase in the EU, total cigarette shipments of Chesterfield grew 13.7%. Total cigarette shipments of Parliament recorded strong growth, up 20.0%, led by gains in EEMA and Asia. Virginia Slims grew 8.2%, driven by gains across all business segments.

Shipment volume of other tobacco products (in cigarette equivalent units) grew 30.9%, driven by strong growth in France, Germany and Poland. Excluding acquisitions, shipment volume of other tobacco products was up 18.1%.

Total shipment volume for cigarettes and other tobacco products was up 2.8%, or up 1.2% excluding acquisitions.

PMI’s full-year market share performance improved versus 2007 in a number of markets, including Algeria, Argentina, Australia, Belgium, Brazil, Bulgaria, Canada, the Czech Republic, the Dominican Republic, Egypt, Germany, Greece, Hungary, Indonesia, Korea, Mexico, the Netherlands, Romania, Russia, Turkey, Ukraine and the United Kingdom.

2008 Fourth-Quarter Results

PMI cigarette shipment volume of 217.2 billion units was up 2.0%, driven by EEMA, Asia and Latin America & Canada, partially offset by a decline in the EU due to the factors mentioned above for the full-year. Absent the distortions in the Czech Republic and Poland, PMI cigarette shipment volume in the EU declined 3.6%. On an organic basis, excluding acquisitions, PMI’s cigarette shipment volume was up 0.6%, benefiting from particularly strong performances in Indonesia, Mexico, the Philippines, Russia and Turkey, partially offset by EU markets, mainly the Czech Republic and Poland.

Total cigarette shipments of Marlboro of 78.5 billion units were up 2.0%, with combined growth in EEMA, Asia and Latin America & Canada of 6.4%, partially offset by a 5.2% decline in the EU.

Total cigarette shipments of L&M of 22.0 billion units were down 4.0%, mainly due to a decline in EEMA. Total cigarette shipments of Chesterfield grew 4.8% versus the prior-year quarter, driven by continued growth in the EU and EEMA. Total cigarette shipments of Parliament continued to record strong growth, up 16.4%, led by gains in EEMA and Asia. Virginia Slims grew 2.4%, driven by gains in the EU and EEMA.

Shipment volume of other tobacco products (in cigarette equivalent units) grew 30.0%, driven by strong growth in Belgium, France and Poland. Excluding acquisitions, shipment volume of other tobacco products was up 4.4%.

Total shipment volume for cigarettes and other tobacco products was up 2.4%, or up 0.6% excluding acquisitions.

PMI’s market share performance improved versus the same period in 2007 in a number of markets, including Algeria, Argentina, Australia, Belgium, Brazil, Bulgaria, Canada, Colombia, the Czech Republic, the Dominican Republic, Egypt, Germany, Hungary, Korea, Mexico, the Netherlands, Portugal, Romania, Russia, Turkey, Ukraine and the United Kingdom.

EUROPEAN UNION (EU)

2008 Full-Year Results

In the EU, net revenues, excluding excise taxes, increased by 9.7% to reach $9.7 billion, due to favorable currency of $899 million. Excluding the impact of currency and acquisitions, net revenues decreased 0.8%, mainly due to: an unfavorable volume/mix of $454 million, especially in the Czech Republic driven by the impact of unfavorable trade inventory movements in anticipation of the January 2008 excise tax increase; the total market decline, primarily in Poland due to tax-driven price increases; and lower share in some markets, principally France and Poland. These factors were partially offset by higher pricing in most markets of $382 million, net of a total tax absorption cost of $75 million in the Czech Republic and Poland where PMI absorbed taxes as a result of shorter inventory durations of old tax products compared to its competitors.

Operating companies income grew by 12.9% to $4.7 billion, mainly due to favorable currency of $432 million and higher pricing. Excluding currency, operating companies income increased in all main markets with the exception of the Czech Republic, France and Poland for the reasons mentioned above. Operating companies income grew 10.9% in 2008 when adjusted for the impact of the items shown in the table below. Excluding the impact of currency and acquisitions, adjusted operating companies income increased by 0.5%.

The total cigarette market in the EU declined by 4.8%. Adjusted for the Czech Republic inventory distortion and excluding the tax-driven pricing impact in Poland, the total cigarette market in the EU was down 1.8%.

PMI’s cigarette shipment volume in the EU declined by 5.5%, reflecting a lower total market. Absent the distortions in the Czech Republic and the total market decline in Poland, PMI cigarette shipment volume in the EU declined 2.9%. PMI’s share was down 0.2 share points at 39.2%. Marlboro’s share in the EU was down 0.1 share point for the year, with declines in France, Germany, Italy and Spain partially offset by gains in Greece and Hungary.

2008 Fourth-Quarter Results

Net revenues, excluding excise taxes, declined by 6.0% to $2.1 billion, due to unfavorable currency of $83 million. Excluding the impact of currency and acquisitions, net revenues decreased 2.9%, principally due to an unfavorable volume/mix of $184 million, due to total market declines and the inventory distortion in the Czech Republic mentioned above, partially offset by higher pricing across almost all markets of $119 million.

Operating companies income declined by 9.4% to $959 million, mainly due to unfavorable volume/mix, and unfavorable currency of $91 million, partially offset by higher pricing. Operating companies income declined 12.4% for the fourth quarter when adjusted for the impact of the items shown in the table below. Excluding the impact of currency and acquisitions, adjusted operating companies income decreased by 5.0%.

The total cigarette market in the EU declined by 8.7%, impacted by the unfavorable factors mentioned above for the full year. Adjusted for these factors, the total cigarette market in the EU was down 3.1%.

PMI’s cigarette shipment volume in the EU declined by 8.6%, reflecting a lower total market. PMI’s share was essentially flat at 39.3%. However, Marlboro’s share in the EU was up 0.3 share points versus the third quarter 2008.

EU Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

Reported Operating Companies Income $4,738 $4,195 12.9% $959 $1,059 (9.4)%
Asset impairment and exit costs 66 137 0 36
Adjusted Operating Companies Income $4,804 $4,332 10.9% $959 $1,095 (12.4)%
Adjusted OCI Margin* 49.6% 49.0% 0.6 pp 45.1% 48.4% (3.3) pp

*Margins are calculated as adjusted operating companies income, divided by net revenues, excluding excise taxes.

EU Key Market Commentaries

In France, the total cigarette market was down 2.5% in 2008, reflecting the impact of the August 2007, 0.30 euros per pack price increase as well as the expansion of public smoking restrictions in January 2008. In the fourth quarter, the total cigarette market was down only 0.3%, reflecting the annualization of the price increase impact. PMI’s shipments were down 6.1% in 2008 and, while market share in the fourth quarter was flat against the third quarter 2008, total share for the year decreased 1.7 share points to 40.8%. Marlboro share in 2008 was down 2.9 share points to 27.3%, reflecting the impact of crossing the 5.00 euros per pack threshold, and down 0.2 share points in the fourth quarter versus the third quarter of 2008.

In Germany, the total cigarette market was down 2.7% in 2008, primarily reflecting the impact of public smoking restrictions that came into force during the year. While PMI’s cigarette shipments were down 1.7%, market share was up 0.4 share points to 36.9%, reflecting the continued strong momentum of L&M, the fastest growing major cigarette brand in Germany, up 1.9 share points versus 2007. PMI’s market share in the fourth quarter of 2008 was up 0.8 share points versus the prior-year quarter.

In Italy, the total market was down 0.9% in 2008, reflecting the impact of 2008 price increases. PMI’s shipments declined 2.9%, reflecting distributor inventory adjustments, and market share declined 0.2 share points to 54.4%. Marlboro’s share was down 0.3 share points.

In Poland, the total cigarette market was down 9.7% in 2008, reflecting the impact of the 2007 and 2008 price increases driven by EU tax harmonization. PMI’s shipments declined 12.8% and market share declined 1.3 share points to 37.6%, reflecting the loss incurred by PMI’s low priced brands. Following the closure of price gaps with competitive brands that had widened as a result of the tax-driven price increases during the third quarter of 2008, PMI’s market share is showing early signs of recovery, as evidenced by total share and Marlboro share in December 2008, up 0.7 and 0.2 share points respectively, versus the same period in 2007.

In Spain, the total market was up 1.2% in 2008. PMI’s shipments increased 0.4% and PMI’s market share was essentially flat at 31.9%, benefiting from the October 2008 launch of Marlboro Pocket Pack which captured a 0.7% share in the fourth quarter.

EASTERN EUROPE, MIDDLE EAST & AFRICA (EEMA)

2008 Full-Year Results

In EEMA, net revenues, excluding excise taxes, increased by 18.2% to reach $7.5 billion, including favorable currency of $296 million. Excluding currency, net revenues grew 13.6% due to higher pricing and favorable volume/mix, principally in Russia, Turkey and Ukraine.

Operating companies income surged 28.3%, including favorable currency of $21 million, or 27.7% when adjusted for the impact of the items shown in the table below. Excluding the impact of currency, adjusted operating companies income was up a strong 26.9%, driven by continued gains across the region and especially in Eastern Europe and Turkey. The income gain reflects a combination of strong volume growth, particularly in Russia and Ukraine, favorable product mix due to up-trading in Eastern Europe and Turkey and improved pricing across the region.

PMI’s cigarette shipment volume increased 4.4%, driven by gains in Algeria, Egypt, Russia, Turkey and Ukraine, as well as favorable trade inventory movements in Bulgaria.

2008 Fourth-Quarter Results

Net revenues, excluding excise taxes, increased by 8.2% to reach $1.8 billion, including unfavorable currency of $109 million. Excluding currency, net revenues grew 14.7% due to the same factors mentioned above for the full year.

Operating companies income grew 8.3%, including unfavorable currency of $104 million. Excluding the impact of currency, adjusted operating companies income was up a strong 24.8% driven by strong growth in Russia, Turkey and Ukraine.

In the fourth quarter, PMI’s cigarette shipment volume increased 4.8%, driven by Algeria, Egypt, Russia, Turkey and Ukraine, as well as favorable trade inventory movements in Bulgaria.

EEMA Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

Reported Operating Companies Income $3,119 $2,431 28.3% $680 $628 8.3%
Asset impairment and exit costs 1 12 0 0
Adjusted Operating Companies Income $3,120 $2,443 27.7% $680 $628 8.3%
Adjusted OCI Margin* 41.6% 38.5% 3.1 pp 37.8% 37.7% 0.1 pp

*Margins are calculated as adjusted operating companies income, divided by net revenues, excluding excise taxes.

EEMA Key Market Commentaries

In Russia, PMI’s shipment volume was up 7.9% in 2008, benefiting from up-trading to our higher-priced brands. PMI’s market share was up 0.2 share points, with the premium brands Marlboro and Parliament, and the medium-priced brand Chesterfield, all registering share gains. PMI’s premium brand portfolio increased market share by 0.5 share points for the full year 2008. In the fourth quarter, PMI’s shipment volume was up 4.7% and market share was up 0.5 share points versus the prior year and up 0.2 share points versus the third quarter 2008.

In Turkey, PMI’s shipment volume was up 4.9% in 2008, fueled by improved product mix, with double-digit growth of the premium brand portfolio, comprised of Parliament, Marlboro and Virginia Slims, launched in the first quarter of 2008, partially offset by the decline of lower-margin brands. Total market share in 2008 of 40.5% was up 0.2 share points. PMI’s share has recovered strongly in 2008 and gained 1.5 share points to reach 41.4% in the fourth quarter.

In Ukraine, PMI’s shipment volume was up 6.6% in 2008 and market share rose 1.3 share points versus 2007 to 35.2%, reflecting share gains by our higher-margin brands Marlboro, Parliament and Chesterfield. In the fourth quarter, PMI’s shipment volume was up 3.5%.

ASIA

2008 Full-Year Results

In Asia, net revenues, excluding excise taxes, increased by 9.5% to reach $6.2 billion, including favorable currency of $140 million. Excluding currency and acquisitions, net revenues grew 6.2%.

Operating companies income grew 14.1% to $2.1 billion, due primarily to strong performances in Australia, Indonesia and Korea. Operating companies income grew 13.1% in 2008 when adjusted for the impact of the items shown in the table below. Excluding the impact of currency and acquisitions, adjusted operating companies income grew 11.1%, primarily due to higher pricing, mainly in Australia, Indonesia and Thailand, and favorable volume/mix, mainly in Indonesia and Korea.

PMI’s cigarette shipment volume increased 5.8%, due to gains in Indonesia, Korea, acquisition volume in Pakistan, and the Philippines, partially offset by Japan.

2008 Fourth-Quarter Results

In the fourth quarter, net revenues, excluding excise taxes, increased by 4.5% to reach $1.5 billion, including unfavorable currency of $63 million. Excluding currency, net revenues grew 9.0%.

In the fourth quarter, operating companies income was up 0.5%, due primarily to higher pricing and favorable volume mix, partially offset by increased expenditures in marketing, trade and selling activities, principally in Japan and Indonesia. Operating companies income was down 0.9% when adjusted for the impact of the items shown in the table below. Excluding the impact of currency, adjusted operating companies income grew 4.4%. The decrease in adjusted operating companies income margin reflects additional expenditures in marketing, trade and selling activities.

In the fourth quarter, PMI’s cigarette shipment volume increased 5.4%, reflecting gains in Indonesia, Korea and the Philippines, partially offset by Japan.

Asia Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

Reported Operating Companies Income $2,057 $1,803 14.1% $426 $424 0.5%
Asset impairment and exit costs 14 28 0 6
Adjusted Operating Companies Income $2,071 $1,831 13.1% $426 $430 (0.9)%
Adjusted OCI Margin* 33.5% 32.4% 1.1 pp 29.0% 30.6% (1.6) pp

*Margins are calculated as adjusted operating companies income, divided by net revenues, excluding excise taxes.

Asia Key Market Commentaries

In Indonesia, PMI’s shipment volume rose 9.7% in 2008, reflecting overall industry growth and portfolio share gains, notably by Marlboro, up 0.4 share points to 4.8%, and A Mild, up 0.4 share points to 10.0%. The A Mild brand family continued to perform strongly, helped by the successful launch of A Volution, the first super slims kretek in the Indonesian market. PMI’s shipment volume rose 5.6% in the fourth quarter versus the prior-year period and market share remained stable at 29.6%.

In Japan, the total cigarette market declined 4.4% in 2008. However, adjusting for the impact of the completed implementation of vending machine age verification and resultant trade inventory movements, the total market is estimated to have declined 3.8%. PMI’s shipments were down 5.0%, primarily reflecting the lower total market. Although PMI’s market share in 2008 declined 0.4 share points to 23.9%, share in the fourth quarter of 2008 was stable compared to the previous quarter and versus prior year. Marlboro’s share for 2008 was up 0.1 share point at 10.1% and up 0.6 share points to 10.4% in the fourth quarter of 2008 versus the prior year, driven by the August launch of Marlboro Black Menthol, an innovative product in the growing menthol segment, which captured 1.0% share of market in the fourth quarter, and the November launch of Marlboro Filter Plus One, which achieved a 0.3% share of market in the fourth quarter. Share of Lark in 2008 was 6.6%, down 0.2 share points versus 2007.

In Korea, the total market was up 3.6% in 2008 and PMI’s shipment volume increased 24.9%, driven by market share increases. Following a record market share of 12.3% in the fourth quarter, up 2.0 share points compared to the prior year, PMI’s share in 2008 reached 11.8%, up 2.0 share points, due mainly to the continued strong performance of Parliament, up 1.4 share points, Marlboro, up 0.6 share points, and Virginia Slims, up 0.2 share points.

LATIN AMERICA & CANADA

2008 Full-Year Results

In Latin America & Canada, net revenues, excluding excise taxes, increased by 17.5% to reach $2.3 billion, including favorable currency of $47 million, due largely to higher pricing in Argentina, Brazil, Colombia and Mexico and higher volume in Argentina and Mexico. Excluding currency and acquisitions, net revenues, excluding excise taxes, grew 7.2%, due mainly to higher pricing and positive volume/mix.

Operating companies income grew 1.2% to $520 million, due primarily to the favorable impact of acquisitions in Canada and Mexico. Operating companies income grew 21.6% when adjusted for the impact of the items shown in the table below. Excluding the impact of currency and acquisitions, adjusted operating companies income increased 3.6%.

Cigarette shipment volume increased by 11.3%, primarily reflecting gains in Argentina and Mexico and the inclusion of acquisition volume in Canada and Mexico. Excluding acquisitions, shipments increased 2.7%.

2008 Fourth-Quarter Results

Net revenues, excluding excise taxes, increased by 26.2% to reach $727 million, due largely to the Canadian acquisition, partially offset by unfavorable currency of $33 million. Excluding these items, net revenues grew 4.7%, due mainly to higher pricing in Argentina, Brazil and Mexico.

Operating companies income increased 25.3%, due primarily to the favorable impact of the Canadian acquisition. Excluding the impact of currency and acquisitions, adjusted operating companies income grew 4.7%.

Cigarette shipment volume increased by 13.3%, reflecting the same factors as for the total year. Excluding acquisitions, shipments increased 1.4%.

Latin America & Canada Operating Companies Income ($ Millions)

 

Full Year

 

Fourth Quarter

2008

 

2007

 

Change

2008

 

2007

 

Change

Reported Operating Companies Income $520 $514 1.2% $238 $190 25.3%
Asset impairment and exit costs 3 18 0 0
Equity loss from RBH* legal settlement 124 0 0 0
Adjusted Operating Companies Income $647 $532 21.6% $238 $190 25.3%
Adjusted OCI Margin** 27.8% 26.9% 0.9 pp 32.7% 33.0% (0.3) pp

* Rothmans, Benson & Hedges Inc.

**Margins are calculated as adjusted operating companies income, divided by net revenues, excluding excise taxes.

Latin America & Canada Key Market Commentaries

In Argentina, the total cigarette market grew 5.7% in 2008. PMI’s cigarette shipment volume increased 8.8% and share increased 2.0 share points to 71.0%, driven by Marlboro, up 1.3 share points and the Philip Morris brand, up 1.9 share points. In the fourth quarter, PMI cigarette shipment volume increased 7.4% and market share increased 1.8 share points to 71.6%

In Canada, the total cigarette market declined 2.3% in 2008. PMI recorded cigarette shipment volume of 2.8 billion units following the acquisition. Pro forma share for the full year 2008 increased 1.2 share points to 33.8% and for the fourth quarter increased 1.0 share point to 34.4%.

In Mexico, the total cigarette market was down 1.3% in 2008, reflecting the impact of price increases in October 2007 and related trade inventory movements, and tax-driven price increases in January and December 2008. However, PMI’s cigarette shipment volume rose by 22.6% and share increased 3.4 share points to 67.7%, led by Benson & Hedges, up 0.6 share points and Delicados, up 1.3 share points. The share of Marlboro, the market leader, was 48.7%, up 0.9 share points.

Philip Morris International Inc. Profile

Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 brands, including Marlboro, the number one cigarette brand worldwide. PMI has more than 75,000 employees and its products are sold in approximately 160 countries. In 2007, the company held an estimated 15.6% share of the total international cigarette market outside of the U.S. For more information, see www.pmintl.com.

Trademarks and service marks mentioned in this release are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc.

A complete copy of PMI’s audited 2008 financial statements will be available through PMI’s website after they are filed with the Securities and Exchange Commission on or about February 9, 2009. Those without internet access who would like to receive a copy of the 2008 audited financial statements for PMI, may call our Shareholder Publications Center toll-free on +1-866-713-8075 to request a copy.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

Philip Morris International Inc. and its tobacco subsidiaries (PMI) are subject to intense price competition; changes in consumer preferences and demand for their products; fluctuations in levels of customer inventories; increases in raw material costs; the effects of foreign economies and local economic and market conditions; unfavorable currency movements and changes to income tax laws. Their results are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios in order to compete effectively; and to improve productivity.

PMI is also subject to legislation and governmental regulation, including actual and potential excise tax increases; discriminatory excise tax structures; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases on consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; privately imposed smoking restrictions; and governmental investigations.

PMI is subject to litigation, including risks associated with adverse jury and judicial determinations, and courts reaching conclusions at variance with the company’s understanding of applicable law. It is possible that PMI’s consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10 and its Quarterly Report on Form 10-Q for the period ended September 30, 2008. PMI cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make.

      Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings (1)
For the Quarters Ended December 31,
(in millions, except per share data)
(Unaudited)
 
  2008     2007     % Change
Net revenues $ 15,218 $ 14,893 2.2 %
Cost of sales 2,204 2,244 (1.8 ) %
Excise taxes on products (2)   9,096     8,986   1.2 %
Gross profit 3,918 3,663 7.0 %
Marketing, administration and research costs 1,615 1,320
Asset impairment and exit costs   -     42  
Operating companies income 2,303 2,301 0.1 %
Amortization of intangibles 15 10
Gain on sale of leasing business - (52 )
General corporate expenses 62 9
Asset impairment and exit costs   -     13  
Operating income 2,226 2,321 (4.1 ) %
Interest expense, net   106     13  
Earnings before income taxes and minority interest 2,120 2,308 (8.1 ) %
Provision for income taxes   605     654   (7.5 ) %
Earnings before minority interest 1,515 1,654 (8.4 ) %
Minority interest in earnings, net of income taxes   70     87  
Net earnings $ 1,445   $ 1,567   (7.8 ) %
 
Per share data:
Basic earnings per share $ 0.72   $ 0.74   (2.7 ) %
Diluted earnings per share $ 0.71   $ 0.74   (4.1 ) %
Weighted average number of
shares outstanding
- Basic (3) 2,020 2,109 (4.2 ) %
- Diluted (3) 2,031 2,109 (3.7 ) %
 
 
(1) Results have been revised to reflect the movement of certain
subsidiaries to a December 31 closing date. See Schedule 11
for more information.
(2) The segment detail of excise taxes on products sold for the
quarters ended December 31, 2008 and 2007 is shown on
Schedule 2.
(3) For the quarter ended December 31, 2007, basic and diluted
earnings per share are calculated based on the number of our
shares distributed by Altria on the Distribution Date.
          Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
 
 
Net Revenues (1)
Latin
European America &
Union   EEMA   Asia   Canada   Total
2008 $ 6,838 $ 3,569 $ 2,888 $ 1,923 $ 15,218
2007 7,190 3,273 2,894 1,536 14,893
% Change (4.9 )% 9.0 % (0.2 )% 25.2 % 2.2 %
 

Reconciliation:

For the quarter ended December 31, 2007 $ 7,190 $ 3,273 $ 2,894 $ 1,536 $ 14,893
 
Acquired businesses 18 - - 355 373
Currency (243 ) (279 ) (265 ) (84 ) (871 )
Operations   (127 )     575       259       116       823  
For the quarter ended December 31, 2008 $ 6,838     $ 3,569     $ 2,888     $ 1,923     $ 15,218  
 
(*) The detail of excise taxes on products
sold is as follows:
2008 $ 4,711 $ 1,769 $ 1,420 $ 1,196 $ 9,096
2007 $ 4,928 $ 1,609 $ 1,489 $ 960 $ 8,986
 
2008 Currency (decreased) excise
taxes as follows: $ (160 ) $ (170 ) $ (202 ) $ (51 ) $ (583 )
 
 

(1) Results have been revised to reflect the movement of

certain subsidiaries to a December 31 closing date.

See Schedule 11 for more information.

          Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
 
 
Operating Companies Income (1)
Latin
European America &
Union   EEMA   Asia   Canada   Total
2008 $ 959 $ 680 $ 426 $ 238 $ 2,303
2007 1,059 628 424 190 2,301
% Change (9.4 )% 8.3 % 0.5 % 25.3 % 0.1 %
 
Reconciliation:
For the quarter ended December 31, 2007 $ 1,059 $ 628 $ 424 $ 190 $ 2,301
 
Asset impairment and exit costs - 2007 36 - 6 - 42
Asset impairment and exit costs - 2008 - - - - -
 
Acquired businesses 10 - - 58 68
Currency (91 ) (104 ) (23 ) (19 ) (237 )
Operations   (55 )     156       19       9       129  
For the quarter ended December 31, 2008 $ 959     $ 680     $ 426     $ 238     $ 2,303  
 
(1) Results have been revised to reflect the movement
of certain subsidiaries to a December 31 closing
date. See Schedule 11 for more information.
      Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings (1)
For the Years Ended December 31,
(in millions, except per share data)
(Unaudited)
 
2008   2007     % Change
Net revenues $ 63,640 $ 55,243 15.2 %
Cost of sales 9,328 8,711 7.1 %
Excise taxes on products (2)   37,935   32,433   17.0 %
Gross profit 16,377 14,099 16.2 %
Marketing, administration and research costs 5,859 4,961
Asset impairment and exit costs   84     195  
Operating companies income 10,434 8,943 16.7 %
Amortization of intangibles 44 28
Gain on sale of leasing business - (52 )
General corporate expenses 142 60
Asset impairment and exit costs   -     13  
Operating income 10,248 8,894 15.2 %
Interest expense, net   311     10  
Earnings before income taxes and minority interest 9,937 8,884 11.9 %
Provision for income taxes   2,787     2,570   8.4 %
Earnings before minority interest 7,150 6,314 13.2 %
Minority interest in earnings, net of income taxes   260     276  
Net earnings $ 6,890   $ 6,038   14.1 %
 
Per share data: (3)
Basic earnings per share $ 3.33   $ 2.86   16.4 %
 
Diluted earnings per share $ 3.32   $ 2.86   16.1 %
Weighted average number of
shares outstanding
- Basic (4) 2,068 2,109 (1.9 ) %
- Diluted (4) 2,078 2,109 (1.5 ) %
 
(1) Results have been revised to reflect the movement of
certain subsidiaries to a December 31 closing date.
See Schedule 11 for more information.
(2) The segment detail of excise taxes on products sold
for the year ended December 31, 2008 and 2007 is
shown on Schedule 5.
(3) Basic and diluted earnings per share are computed for
each of the periods presented. Accordingly, the sum
of the quarterly earnings per share amounts may not
agree to the year-to-date amounts.
(4) For the year ended December 31, 2007, basic and diluted
earnings per share are calculated based on the number of
our shares distributed by Altria on the Distribution Date.
          Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Years Ended December 31,
(in millions)
(Unaudited)
 
 
Net Revenues (1)
Latin
European America &
Union   EEMA   Asia   Canada   Total
2008 $ 30,265 $ 14,817 $ 12,222 $ 6,336 $ 63,640
2007 26,829 12,166 11,097 5,151 55,243
% Change 12.8 % 21.8 % 10.1 % 23.0 % 15.2 %
 

Reconciliation:

For the year ended December 31, 2007 $ 26,829 $ 12,166 $ 11,097 $ 5,151 $ 55,243
 
Acquired businesses 36 - 88 355 479
Currency 3,032 679 96 129 3,936
Operations   368       1,972       941       701       3,982  
For the year ended December 31, 2008 $ 30,265     $ 14,817     $ 12,222     $ 6,336     $ 63,640  
 
(*) The detail of excise taxes on products
sold is as follows:
2008 $ 20,577 $ 7,313 $ 6,037 $ 4,008 $ 37,935
2007 $ 17,994 $ 5,820 $ 5,449 $ 3,170 $ 32,433
 
2008 Currency increased (decreased) excise
taxes as follows: $ 2,133 $ 383 $ (44 ) $ 82 $ 2,554
 
 
(1) Results have been revised to reflect the movement of certain
subsidiaries to a December 31 closing date. See Schedule 11
for more information.
          Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Years Ended December 31,
(in millions)
(Unaudited)
 
 
Operating Companies Income (1)
Latin
European America &
Union   EEMA   Asia   Canada   Total
2008 $ 4,738 $ 3,119 $ 2,057 $ 520 $ 10,434
2007 4,195 2,431 1,803 514 8,943
% Change 12.9 % 28.3 % 14.1 % 1.2 % 16.7 %
 

Reconciliation:

For the year ended December 31, 2007 $ 4,195 $ 2,431 $ 1,803 $ 514 $ 8,943
 
Asset impairment and exit costs - 2007 137 12 28 18 195
Asset impairment and exit costs - 2008 (66 ) (1 ) (14 ) (3 ) (84 )
Equity loss from RBH legal settlement - 2008 - - - (124 ) (124 )
 
Acquired businesses 20 - 5 100 125
Currency 432 21 32 (4 ) 481
Operations   20       656       203       19       898  
For the year ended December 31, 2008 $ 4,738     $ 3,119     $ 2,057     $ 520     $ 10,434  
 
 
(1) Results have been revised to reflect the movement of certain
subsidiaries to a December 31 closing date. See Schedule 11
for more information.
    Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted  
Net Earnings E.P.S.
 
2008 Net Earnings $ 1,445 $ 0.71
2007 Net Earnings (1) $ 1,567 $ 0.74
% Change (7.8 ) % (4.1 ) %
 

Reconciliation:

2007 Net Earnings (1) $ 1,567 $ 0.74
 

Special Items:

2007 Asset impairment and exit costs 41 0.02
2007 Tax items (41 ) (0.02 )
2007 Gain on sale of business   (14 )   (0.01 )
Subtotal 2007 items   (14 )   (0.01 )
 
2008 Asset impairment and exit costs - -
2008 Tax items   6     -  
Subtotal 2008 items   6     -  
 
Currency (224 ) (0.10 )
Interest (61 ) (0.03 )
Change in tax rate 7 -
Lower shares outstanding - 0.03
Operations   164     0.08  
2008 Net Earnings $ 1,445   $ 0.71  
 
 
(1) Results for the quarter ended December 31, 2007 have been
revised to reflect the movement of certain subsidiaries
to a December 31 closing date. See Schedule 11 for more
information.
    Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Years Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted  
Net Earnings E.P.S. (*)
 
2008 Net Earnings $ 6,890 $ 3.32
2007 Net Earnings (1) $ 6,038 $ 2.86
% Change 14.1 % 16.1 %
 

Reconciliation:

2007 Net Earnings (1) $ 6,038 $ 2.86
 

Special Items:

2007 Asset impairment and exit costs 152 0.07
2007 Tax items (68 ) (0.03 )
2007 Gain on sale of business   (14 )   (0.01 )
Subtotal 2007 items   70     0.03  
 
2008 Asset impairment and exit costs (54 ) (0.02 )
2008 Equity loss from RBH legal settlement (124 ) (0.06 )
2008 Tax items   175     0.08  
Subtotal 2008 items   (3 )   -  
 
Currency 306 0.15
Interest (204 ) (0.09 )
Lower shares outstanding - 0.05
Change in tax rate (11 ) (0.01 )
Operations   694     0.33  
2008 Net Earnings $ 6,890   $ 3.32  
 
 
(*) Basic and diluted earnings per share are computed for each of
the periods presented. Accordingly, the sum of the quarterly
earnings per share amounts may not agree to the year-to-date
amounts.
 
(1) Results for the year ended December 31, 2007 have been revised
to reflect the movement of certain subsidiaries to a
December 31 closing date. See Schedule 11 for more information.
          Schedule 9

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries
Revised Volume, Net Revenues, Excise Taxes on Products and Operating Companies Income (1)
For the Quarters and Year Ended December 31, 2007
(in millions)
(Unaudited)
 
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31, June 30, September 30, December 31, December 31,
2007 2007 2007 2007 2007
 
Cigarette Volume:
European Union 61,377 67,776 65,450 62,938 257,541
EEMA 64,756 75,904 77,498 72,152 290,310
Asia 50,182 55,804 52,961 52,533 211,480
Latin America & Canada   21,171   21,517   21,297   25,322   89,307
  197,486   221,001   217,206   212,945   848,638
Net Revenues:
European Union $ 5,940 $ 6,867 $ 6,832 $ 7,190 $ 26,829
EEMA 2,478 3,103 3,312 3,273 12,166
Asia 2,602 2,787 2,814 2,894 11,097
Latin America & Canada   1,150   1,191   1,274   1,536   5,151
$ 12,170 $ 13,948 $ 14,232 $ 14,893 $ 55,243
Excise Taxes on Products:
European Union $ 3,944 $ 4,568 $ 4,554 $ 4,928 $ 17,994
EEMA 1,133 1,472 1,606 1,609 5,820
Asia 1,242 1,346 1,372 1,489 5,449
Latin America & Canada   699   727   784   960   3,170
$ 7,018 $ 8,113 $ 8,316 $ 8,986 $ 32,433
 
Operating Companies Income:
European Union $ 910 $ 1,075 $ 1,151 $ 1,059 $ 4,195
EEMA 459 634 710 628 2,431
Asia 436 429 514 424 1,803
Latin America & Canada   79   102   143   190   514
$ 1,884 $ 2,240 $ 2,518 $ 2,301 $ 8,943
 
 
(1) Prior to 2008, certain of our subsidiaries reported
their results up to ten days before the end of December
rather than on December 31. During 2008, these subsidiaries
moved to a December 31 closing date. As a result, the first
and fourth quarter results of previous periods have been
revised to reflect this change. The effect of this change
for the year ended December 31, 2007 was not material to
our consolidated financial position, results of operations
or cash flows.
          Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Revised Volume, Net Revenues, Excise Taxes on Products and Operating Companies Income (1)
For the Quarters and Year Ended December 31, 2008
(in millions)
(Unaudited)
 
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31, June 30, September 30, December 31, December 31,
2008 2008 2008 2008 2008
 
Cigarette Volume:
European Union 57,051 64,817 64,063 57,520 243,451
EEMA 67,874 78,300 81,405 75,626 303,205
Asia 55,562 56,843 55,946 55,373 223,724
Latin America & Canada   22,980   23,209   24,500   28,688   99,377
  203,467   223,169   225,914   217,207   869,757
Net Revenues:
European Union $ 6,697 $ 8,279 $ 8,451 $ 6,838 $ 30,265
EEMA 3,283 3,802 4,163 3,569 14,817
Asia 2,976 3,170 3,188 2,888 12,222
Latin America & Canada   1,398   1,452   1,563   1,923   6,336
$ 14,354 $ 16,703 $ 17,365 $ 15,218 $ 63,640
Excise Taxes on Products:
European Union $ 4,451 $ 5,635 $ 5,780 $ 4,711 $ 20,577
EEMA 1,621 1,869 2,054 1,769 7,313
Asia 1,473 1,566 1,578 1,420 6,037
Latin America & Canada   888   924   1,000   1,196   4,008
$ 8,433 $ 9,994 $ 10,412 $ 9,096 $ 37,935
 
Operating Companies Income:
European Union $ 1,167 $ 1,287 $ 1,325 $ 959 $ 4,738
EEMA 680 813 946 680 3,119
Asia 550 523 558 426 2,057
Latin America & Canada   149   23   110   238   520
$ 2,546 $ 2,646 $ 2,939 $ 2,303 $ 10,434
 
 
(1) Prior to 2008, certain of our subsidiaries reported
their results up to ten days before the end of December
rather than on December 31. During 2008, these subsidiaries
moved to a December 31 closing date. As a result, the first
and fourth quarter results of previous periods have been
revised to reflect this change. The effect of this change
for the year ended December 31, 2008 was not material to our
consolidated financial position, results of operations
or cash flows.
          Schedule 11
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Revised Condensed Statements of Earnings (1)
For the Quarters and Year Ended December 31, 2007
(in millions, except per share data)
(Unaudited)
 
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31, June 30, September 30, December 31, December 31,
2007 2007 2007 2007 2007
Net revenues $ 12,170 $ 13,948 $ 14,232 $ 14,893 $ 55,243
Cost of sales 1,994 2,244 2,229 2,244 8,711
Excise taxes on products   7,018   8,113   8,316     8,986     32,433  
Gross profit 3,158 3,591 3,687 3,663 14,099
Marketing, administration and research costs 1,212 1,275 1,154 1,320 4,961
Asset impairment and exit costs   62   76   15     42     195  
Operating companies income 1,884 2,240 2,518 2,301 8,943
Amortization of intangibles 6 6 6 10 28
Gain on sale of leasing business - - - (52 ) (52 )
General corporate expenses 17 17 17 9 60
Asset impairment and exit costs   -   -   -     13     13  
Operating income 1,861 2,217 2,495 2,321 8,894
Interest expense, net   10   3   (16 )   13     10  
Earnings before income taxes and minority interest 1,851 2,214 2,511 2,308 8,884
Provision for income taxes   538   668   710     654     2,570  
Earnings before minority interest 1,313 1,546 1,801 1,654 6,314
Minority interest in earnings, net of income taxes   50   63   76     87     276  
Net earnings $ 1,263 $ 1,483 $ 1,725   $ 1,567   $ 6,038  
 
Per share data:
Basic earnings per share (2) $ 0.60 $ 0.70 $ 0.82   $ 0.74   $ 2.86  
Diluted earnings per share (2) $ 0.60 $ 0.70 $ 0.82   $ 0.74   $ 2.86  
 
Weighted average number of
shares outstanding
- Basic (3) 2,109 2,109 2,109 2,109 2,109
- Diluted (3) 2,109 2,109 2,109 2,109 2,109
 
(1) Prior to 2008, certain of our subsidiaries reported their results up to ten
days before the end of December rather than on December 31. During 2008, these
subsidiaries moved to a December 31 closing date. As a result, the first and
fourth quarter results of previous periods have been revised to reflect this
change. The effect of this change for the year ended December 31, 2007 was not
material to our consolidated financial position, results of operations or cash flows.
(2) Basic and diluted earnings per share are computed for each of the periods
presented. Accordingly, the sum of the quarterly earnings per share amounts
may not agree to the year-to-date amounts.
(3) Basic and diluted earnings per share are calculated based on the number of
our shares distributed by Altria on the Distribution Date.
        Schedule 12
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Revised Condensed Statements of Earnings (1)
For the Quarters and Year Ended December 31, 2008
(in millions, except per share data)
(Unaudited)
 
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31, June 30, September 30, December 31, December 31,
2008 2008 2008 2008 2008
Net revenues $ 14,354 $ 16,703 $ 17,365 $ 15,218 $ 63,640
Cost of sales 2,181 2,462 2,481 2,204 9,328
Excise taxes on products   8,433   9,994   10,412   9,096   37,935
Gross profit 3,740 4,247 4,472 3,918 16,377
Marketing, administration and research costs 1,171 1,553 1,520 1,615 5,859
Asset impairment and exit costs   23   48   13   -   84
Operating companies income 2,546 2,646 2,939 2,303 10,434
Amortization of intangibles 9 7 13 15 44
Gain on sale of leasing business - - - - -
General corporate expenses 13 31 36 62 142
Asset impairment and exit costs   -   -   -   -   -
Operating income 2,524 2,608 2,890 2,226 10,248
Interest expense, net   75   61   69   106   311
Earnings before income taxes and minority interest 2,449 2,547 2,821 2,120 9,937
Provision for income taxes   725   790   667   605   2,787
Earnings before minority interest 1,724 1,757 2,154 1,515 7,150
Minority interest in earnings, net of income taxes   51   65   74   70   260
Net earnings $ 1,673 $ 1,692 $ 2,080 $ 1,445 $ 6,890
 
Per share data:
Basic earnings per share (2) $ 0.79 $ 0.81 $ 1.01 $ 0.72 $ 3.33
Diluted earnings per share (2) $ 0.79 $ 0.80 $ 1.01 $ 0.71 $ 3.32
 
Weighted average number of
shares outstanding
- Basic 2,108 2,095 2,051 2,020 2,068
- Diluted 2,108 2,108 2,064 2,031 2,078
 
(1) Prior to 2008, certain of our subsidiaries reported their results up to ten
days before the end of December rather than on December 31. During 2008, these
subsidiaries moved to a December 31 closing date. As a result, the first and
fourth quarter results of previous periods have been revised to reflect this
change. The effect of this change for the year ended December 31, 2008 was not
material to our consolidated financial position, results of operations or cash flows.
(2) Basic and diluted earnings per share are computed for each of the periods
presented. Accordingly, the sum of the quarterly earnings per share amounts may
not agree to the year-to-date amounts.
    Schedule 13
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Reported to Pro Forma Adjusted Condensed Consolidated Statement of Earnings
For the Quarter Ended December 31, 2007
(in millions, except per share data)
(Unaudited)
 
Pro Forma
Reported (g) Adjustments Adjusted
Net revenues $ 14,893 $ - $ 14,893
Cost of sales 2,244 - 2,244
Excise taxes on products   8,986     -     8,986
Gross profit 3,663 - 3,663
Marketing, administration and research costs 1,320 6 (c) 1,326
Asset impairment and exit costs   42     (42 ) (a)   -
Operating companies income 2,301 36 2,337
Amortization of intangibles 10 - 10
Gain on sale of leasing business (52 ) 52 (b) -
General corporate expenses 9 17 (c) 26
Asset impairment and exit costs   13     (13 ) (a)   -
Operating income 2,321 (20 ) 2,301
Interest expense, net   13     40   (d)   53
Earnings before income taxes and minority interest 2,308 (60 ) 2,248
Provision for income taxes   654     (3 ) (a,b,c,d,e)   651
Earnings before minority interest 1,654 (57 ) 1,597
Minority interest in earnings, net of income taxes   87     -     87
Net earnings $ 1,567     (57 ) $ 1,510
 
Per share data:
Basic earnings per share $ 0.74   $ 0.72
Diluted earnings per share $ 0.74   $ 0.72
 
Weighted average number of
shares outstanding
- Basic (f) 2,109 2,109
- Diluted (f) 2,109 2,109
(a) This adjustment reflects the reversal of $55 million of pre-tax asset impairment and exit
costs ($41 million after-tax) relating to the streamlining of various administrative functions.
(b) During 2007, we sold our leasing business, which was managed by Philip Morris Capital
Corporation, or PMCC, Altria's financial services subsidiary, for a pre-tax gain of $52 million
($14 million after-tax). This adjustment reflects the reversal of this transaction.
(c) A subsidiary of Altria had provided us with certain services at cost plus a management fee.
This adjustment reflects incremental costs of $23 million, partially offset by the related tax
benefit of $6 million. These incremental costs reflect the expansion of services that were
previously provided by Altria to reflect our status as a stand-alone public company.
(d) As part of the Spin-off, we paid to Altria $4.0 billion in special dividends, of which $3.1
billion were paid in 2007 and the remaining $900 million were paid in the first quarter of 2008.
The pro forma adjusted statement of earnings has been adjusted to reflect the incremental
interest expense we would have incurred if borrowings to finance the special dividends had been
made on January 1, 2007. The incremental interest adjustment of $40 million, partially offset by
the related tax benefit of $14 million, was computed by applying a rate of 5.24% (the average
rate of our December 2007 borrowings that were incurred to pay Altria the dividend) to the total
special dividends that were paid to Altria, less $11 million of interest related to these
borrowings that is already included in our historical interest expense. An increase or (decrease)
of one-eighth of 1% (12.5 basis points) in the interest rate associated with these variable rate
borrowings would have increased or (decreased) our pro forma adjusted interest expense by $1.1
million.
(e) The reported tax provision in 2007 included the reversal of tax accruals of $41 million no
longer required. This adjustment reflects the reversal of this transaction.
(f) Basic and diluted earnings per share are calculated based on the number of our shares
distributed by Altria on the Distribution Date.
(g) Results for the quarter ended December 31, 2007 have been revised to reflect the movement of
certain subsidiaries to a December 31 closing date. See Schedule 11 for more information.
  Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Reported to Pro Forma Adjusted Condensed Consolidated Statement of Earnings
For the Year Ended December 31, 2007
(in millions, except per share data)
(Unaudited)
 
Pro Forma
Reported (g) Adjustments Adjusted
Net revenues $ 55,243 $ - $ 55,243
Cost of sales 8,711 - 8,711
Excise taxes on products   32,433     -     32,433
Gross profit 14,099 - 14,099
Marketing, administration and research costs 4,961 26 (c) 4,987
Asset impairment and exit costs   195     (195 ) (a)   -
Operating companies income 8,943 169 9,112
Amortization of intangibles 28 - 28
Gain on sale of leasing business (52 ) 52 (b) -
General corporate expenses 60 66 (c) 126
Asset impairment and exit costs   13     (13 ) (a)   -
Operating income 8,894 64 8,958
Interest expense, net   10     199   (d)   209
Earnings before income taxes and minority interest 8,884 (135 ) 8,749
Provision for income taxes   2,570     -   (a,b,c,d,e)   2,570
Earnings before minority interest 6,314 (135 ) 6,179
Minority interest in earnings, net of income taxes   276     -     276
Net earnings $ 6,038     (135 ) $ 5,903
 
Per share data:
Basic earnings per share $ 2.86   $ 2.80
Diluted earnings per share $ 2.86   $ 2.80
 
Weighted average number of
shares outstanding
- Basic (f) 2,109 2,109
- Diluted (f) 2,109 2,109
(a) These adjustments reflect the reversal of $208 million of pre-tax asset impairment and exit
costs ($152 million after-tax) relating to the streamlining of various administrative functions.
(b) During 2007, we sold our leasing business, which was managed by Philip Morris Capital
Corporation, or PMCC, Altria's financial services subsidiary, for a pre-tax gain of $52 million
($14 million after-tax). This adjustment reflects the reversal of this transaction.
(c) A subsidiary of Altria had provided us with certain services at cost plus a management fee.
This adjustment reflects incremental costs of $92 million, partially offset by the related tax
benefit of $27 million. These incremental costs reflect the expansion of services that were
previously provided by Altria to reflect our status as a stand-alone public company.
(d) As part of the Spin-off, we paid to Altria $4.0 billion in special dividends, of which $3.1
billion were paid in 2007 and the remaining $900 million were paid in the first quarter of 2008.
The pro forma adjusted statement of earnings has been adjusted to reflect the incremental interest
expense we would have incurred if borrowings to finance the special dividends had been made on
January 1, 2007. The incremental interest adjustment of $199 million, partially offset by the
related tax benefit of $59 million, was computed by applying a rate of 5.24% (the average rate
of our December 2007 borrowings that were incurred to pay Altria the dividend) to the total
special dividends that were paid to Altria, less $11 million of interest related to these
borrowings that is already included in our historical interest expense. An increase or (decrease)
of one-eighth of 1% (12.5 basis points) in the interest rate associated with these variable rate
borrowings would have increased or (decreased) our pro forma adjusted interest expense by $5
million.
(e) The 2007 reported effective tax rate included a tax benefit of $27 million related to the
reduction of deferred tax liabilities resulting from future tax rates enacted in Germany. The
reported tax provision in 2007 also included the reversal of tax accruals of $41 million no longer
required. This adjustment reflects the reversal of these transactions.
(f) Basic and diluted earnings per share are calculated based on the number of our shares
distributed by Altria on the Distribution Date.
(g) Results for the year ended December 31, 2007 have been revised to reflect the movement of
certain subsidiaries to a December 31 closing date. See Schedule 11 for more information.
  Schedule 15
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
(Unaudited)
 
December 31, December 31,
2008 2007 (*)

Assets

Cash and cash equivalents $ 1,531 $ 1,501
All other current assets 13,408 13,285
Property, plant and equipment, net 6,348 6,435
Goodwill 8,015 7,925
Other intangible assets, net 3,084 1,906
Other assets   586   725
Total assets $ 32,972 $ 31,777

 

Liabilities and Stockholders' Equity

Short-term borrowings $ 375 $ 400
Current portion of long-term debt 209 91
All other current liabilities 9,560 7,600
Long-term debt 11,377 5,578
Deferred income taxes 1,401 1,240
Other long-term liabilities   2,550   1,273
Total liabilities 25,472 16,182
Total stockholders' equity   7,500   15,595
Total liabilities and stockholders' equity $ 32,972 $ 31,777
 
Total debt $ 11,961 $ 6,069
Total debt/equity ratio 1.59 0.39
 
 
(*) Prior to 2008, certain of our subsidiaries reported their results
up to ten days before the end of December, rather than on December 31.
During 2008, these subsidiaries moved to a December 31, 2008 closing
date. As a result, certain prior years' amounts have been revised to
reflect this change. The effect of this change was not material to our
consolidated financial position in any of the periods presented above.

Source: Philip Morris International Inc.

Philip Morris International Inc.
Investor Relations
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Lausanne: +41 (058) 242 4666

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