Philip Morris International Inc. (PMI) Reports 2011 Third-Quarter Results;
Narrows 2011 EPS Guidance to a Range of $4.75 to $4.80

October 20, 2011 06:59 AM Eastern Daylight Time

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

Reported diluted earnings per share of $1.35, up by 36.4%, or by 32.3% excluding currency, versus $0.99 in 2010
Adjusted diluted earnings per share of $1.37, as detailed in the attached Schedule 12, up by 37.0%, or by 33.0% excluding currency, versus $1.00 in 2010
Cigarette shipment volume growth of 4.4%, excluding acquisitions
Reported net revenues, excluding excise taxes, up by 26.4% to $8.4 billion, or by 15.9% excluding currency
Reported operating companies income up by 29.2% to $3.8 billion, or by 23.1% excluding currency
Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, up by 29.8% to $3.8 billion, or by 23.7% excluding currency and acquisitions
Operating income up by 29.7% to $3.7 billion
Free cash flow, defined as net cash provided by operating activities less capital expenditures:
- Up for the quarter by 25.6% to $2.8 billion, or by 16.1% to $2.6 billion excluding currency, as detailed in the attached Schedule 19
- Up for the first nine months of the year by 22.1% to $9.0 billion, or by 15.6% to $8.5 billion excluding currency, as detailed in the attached Schedule 19
Increased its regular quarterly dividend during the quarter by 20.3% to an annualized rate of $3.08 per common share
Repurchased 21.2 million shares of its common stock for $1.4 billion during the quarter
PMI narrows its forecast for 2011 full-year reported diluted earnings per share to a range of $4.75 to $4.80, up by approximately 21% to 22.5% versus $3.92 in 2010
- Excluding a forecasted total favorable currency impact of approximately $0.20 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 16% to 17.5% versus $3.92 in 2010, or by approximately 17.5% to 19% versus adjusted diluted earnings per share of $3.87 in 2010 as detailed in the attached Schedule 20

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2011 third-quarter results.

“While we benefited from a relatively undemanding comparison, our results this quarter were simply superb on each and every key performance measure. Our business in Japan was a key driver of our stellar results, but elsewhere we enjoyed very solid growth and improving trends in virtually all geographies,” said Louis C. Camilleri, Chairman and Chief Executive Officer.

“It is heartening to witness that the efforts deployed by all our employees are being rewarded by such significant progress and continued strong momentum.”

Conference Call

A conference call, hosted by Hermann Waldemer, Chief Financial Officer, with members of the investment community and news media, will be webcast at 9:00 a.m., Eastern Time, on October 20, 2011. Access is available at www.pmi.com.

Dividends and Share Repurchase Program

PMI increased its regular quarterly dividend during the quarter to $0.77, up 20.3% from $0.64, which represents an annualized rate of $3.08 per common share. Since its spin-off in March 2008, PMI has increased its regular quarterly dividend by 67.4% from the initial annualized dividend rate of $1.84 per common share.

During the third quarter, PMI spent $1.4 billion to repurchase 21.2 million shares of its common stock, as shown in the table below.

Current $12 Billion, Three-Year Program
	Value	Shares
	($ Mio.)	000
May-December 2010	2,953	55,933
January-March 2011	1,356	22,154
April-June 2011	1,548	22,660
July-September 2011	1,448	21,210
Total Under Program	7,305	121,957

PMI’s 2011 full-year forecast includes planned share repurchases of approximately $5.0 billion against its previously communicated three-year share repurchase program of $12 billion, initiated in May 2010.

Since May 2008, when PMI began its first share repurchase program, the company has spent an aggregate of $20.3 billion to repurchase 399.6 million shares at an average price of $50.81, or 18.9% of the shares outstanding at the time of the spin-off in March 2008.

2011 Full-Year Forecast

PMI narrows its forecast for 2011 full-year reported diluted earnings per share from its previous guidance range of $4.70 to $4.80 to a range of $4.75 to $4.80, up by approximately 21% to 22.5% versus $3.92 in 2010. Excluding a forecasted total favorable currency impact of approximately $0.20 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 16% to 17.5% versus $3.92 in 2010, or by approximately 17.5% to 19% versus adjusted diluted earnings per share of $3.87 in 2010 as detailed in the attached Schedule 20.

This guidance excludes the impact of any potential future acquisitions, 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.

2011 THIRD-QUARTER CONSOLIDATED RESULTS

Management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and to allocate resources. In the following discussion, the term “net revenues” refers to net revenues, excluding excise taxes, unless otherwise stated. Management also reviews OCI, operating margins and EPS on an adjusted basis (which may exclude the impact of currency and other items such as acquisitions or asset impairment and exit costs), EBITDA, free cash flow and net debt. Management believes it is appropriate to disclose these measures to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed Statements of Earnings provided with this release. Reconciliations of non-GAAP measures to corresponding GAAP measures are also provided with this release. References to total international cigarette market, total cigarette market, total market and market shares are PMI estimates based on latest available data from a number of sources. Comparisons are to the same prior-year period unless otherwise stated.

NET REVENUES

PMI Net Revenues ($ Millions)
	Third-Quarter				Nine Months Year-To-Date
				Excl.				Excl.
	2011	2010	Change	Curr.	2011	2010	Change	Curr.
European Union	$2,506	$2,139	17.2%	2.2%	$7,004	$6,618	5.8%	(0.2)%
Eastern Europe, Middle East & Africa	2,210	1,896	16.6%	11.9%	5,909	5,531	6.8%	4.8%
Asia	2,799	1,833	52.7%	39.2%	8,058	5,829	38.2%	28.0%
Latin America & Canada	847	746	13.5%	8.3%	2,455	2,193	11.9%	7.7%
Total PMI	$8,362	$6,614	26.4%	15.9%	$23,426	$20,171	16.1%	10.1%

Net revenues of $8.4 billion were up by 26.4%, including favorable currency of $697 million. Excluding currency, net revenues increased by 15.9%, primarily driven by favorable pricing of $564 million across all Regions, primarily in Asia, and favorable volume/mix of $472 million that benefited from a favorable comparison with 2010, particularly in Japan and Ukraine. The favorable volume/mix was driven by Asia, mainly Indonesia, Japan and Korea, and EEMA, and was partly offset by the EU, mainly Portugal and Spain. Volume/mix in Latin America & Canada was flat due to an erosion in Mexico. Excluding currency and acquisitions, PMI’s net revenues increased by 15.7%.

OPERATING COMPANIES INCOME

PMI Operating Companies Income ($ Millions)
	Third-Quarter				Nine Months Year-To-Date
				Excl.				Excl.
	2011	2010	Change	Curr.	2011	2010	Change	Curr.
European Union	$1,262	$1,113	13.4%	4.0%	$3,548	$3,280	8.2%	1.0%
Eastern Europe, Middle East & Africa	925	856	8.1%	11.8%	2,482	2,412	2.9%	4.3%
Asia	1,309	690	89.7%	74.6%	3,800	2,259	68.2%	52.7%
Latin America & Canada	255	244	4.5%	4.5%	774	699	10.7%	9.3%
Total PMI	$3,751	$2,903	29.2%	23.1%	$10,604	$8,650	22.6%	16.1%

Reported operating companies income was up by 29.2% to $3.8 billion, including favorable currency of $177 million. Excluding currency and acquisitions, operating companies income was up by 23.5%, primarily driven by higher pricing and favorable volume/mix, partly offset by unfavorable costs, partially related to airfreight of product to Japan in response to in-market shortages of competitors’ products.

Adjusted operating companies income grew by 29.8% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 23.7%.

PMI Operating Companies Income ($ Millions)

Third-Quarter

Nine Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI

$3,751

$2,903

29.2%

$10,604

$8,650

22.6%

Asset impairment & exit costs

(43)

(20)

(60)

(20)

Adjusted OCI

$3,794

$2,923

29.8%

$10,664

$8,670

23.0%

Adjusted OCI Margin*

45.4%

44.2%

1.2 p.p.

45.5%

43.0%

2.5 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, was up by 3.0 percentage points to 47.2%, as detailed on Schedule 11. Excluding currency and acquisitions, adjusted operating companies income margin was up by 3.1 percentage points to 47.3%.

SHIPMENT VOLUME & MARKET SHARE

PMI Cigarette Shipment Volume by Segment (Million Units)
	Third-Quarter			Nine Months Year-To-Date

	2011	2010	Change	2011	2010	Change
European Union	56,198	58,264	(3.5)%	161,913	169,617	(4.5)%
Eastern Europe, Middle East & Africa	79,053	75,228	5.1%	218,032	217,265	0.4%
Asia	79,053	70,188	12.6%	235,187	211,588	11.2%
Latin America & Canada	25,243	25,532	(1.1)%	73,512	76,436	(3.8)%
Total PMI	239,547	229,212	4.5%	688,644	674,906	2.0%

Excluding acquisitions, PMI’s cigarette shipment volume was up by 4.4% for the quarter, or by 0.5% on a nine-month year-to-date basis, driven by growth from each of PMI’s top ten brands.

In the EU, cigarette shipment volume decreased by 3.5%, predominantly due to lower total markets, mainly in Spain, and lower market share, mostly in Poland. In EEMA, cigarette shipment volume grew by 5.1%, primarily driven by growing total markets in the Middle East, market share gains in North Africa and Turkey, and a favorable comparison in Ukraine due to trade inventory movements in 2010. In Asia, PMI’s cigarette shipment volume increased by 12.6%, fueled by double-digit growth in Indonesia, Japan, benefiting from the timing of shipments in 2010, and Korea. In Latin America & Canada, cigarette shipment volume decreased by 1.1%, mainly due to Mexico, reflecting a lower total market, partly offset by growth in Argentina, Brazil, Canada and Colombia.

Total cigarette shipments of Marlboro of 78.9 billion units were up by 3.9%, driven primarily by growth in EEMA of 10.2%, in particular in the Middle East and North Africa, and in Asia of 11.8%, notably in Indonesia, Japan and Korea. The growth was partly offset by a decline: in the EU of 3.4%, mainly reflecting lower total markets and share, primarily in Poland and Spain, partly offset by growth in France; and in Latin America & Canada of 3.0%, mainly due to a lower total market in Mexico, partly offset by growth in Argentina and Brazil.

Total cigarette shipments of L&M of 23.8 billion units were up by 3.9%, driven by growth in all four Regions. Total cigarette shipments of Bond Street of 12.4 billion units increased by 6.8%, led mainly by growth in Russia and Ukraine. Total cigarette shipments of Philip Morris of 9.8 billion units increased by 1.8%, mainly reflecting growth in Argentina, France and Japan. Total cigarette shipments of Chesterfield of 10.0 billion units were up by 7.0%, driven by growth in the EU, mainly in Portugal. Total cigarette shipments of Parliament of 10.6 billion units were up by 16.2%, fueled by growth in all four Regions. Total cigarette shipments of Lark of 9.7 billion units increased by 44.1%, driven primarily by growth in Japan.

Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, excluding acquisitions, grew by 10.0%, notably in Belgium, France and Germany. Total shipment volume for cigarettes and OTP combined was up by 4.6%, excluding acquisitions.

PMI’s market share performance was stable, or registered growth, in a number of key markets, including Algeria, Argentina, Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Indonesia, Japan, Korea, Mexico, the Netherlands, Russia, Singapore, Turkey and the United Kingdom.

EUROPEAN UNION REGION (EU)

2011 Third-Quarter Results

In the EU, net revenues increased by 17.2% to $2.5 billion, including favorable currency of $321 million. Excluding currency, net revenues grew by 2.2%, primarily reflecting higher pricing of $95 million, driven by France, Germany and Italy. The favorable pricing variance more than offset the unfavorable volume/mix of $49 million, primarily attributable to the adverse economic environment in the south of Europe, notably Greece, Portugal and Spain, and to a lower total market and share in Poland.

Operating companies income increased by 13.4% to $1.3 billion, due predominantly to favorable pricing, and favorable currency of $105 million, partly offset by unfavorable volume/mix. Excluding the favorable impact of currency, operating companies income was up by 4.0%.

Adjusted operating companies income increased by 12.4%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 3.1%.

EU Operating Companies Income ($ Millions)

Third-Quarter

Nine Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI

$1,262

$1,113

13.4%

$3,548

$3,280

8.2%

Asset impairment & exit costs

(11 )

(20 )

(23 )

(20 )

Adjusted OCI

$1,273

$1,133

12.4%

$3,571

$3,300

8.2%

Adjusted OCI Margin*

50.8 %

53.0 %

(2.2) p.p.

51.0 %

49.9 %

1.1 p.p.

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

Excluding the impact of currency, adjusted operating companies income margin was up by 0.5 percentage points to 53.5%, as detailed on Schedule 11.

The total cigarette market in the EU declined by 3.7%, due primarily to the impact of a lower total market: in Greece, reflecting the continuing adverse economic environment; in Spain, following the unfavorable impact of tax-driven price increases in June and December of 2010, the implementation of stricter indoor public smoking bans in January 2011, and continuing adverse economic conditions; and in Poland, reflecting excise-tax driven price increases in October 2010 and May 2011 combined with the implementation of a smoking ban in November 2010. Excluding Spain, the total cigarette market in the EU declined by 2.8%.

PMI’s cigarette shipment volume in the EU declined by 3.5%, due mainly to the aforementioned reasons, partly offset by favorable distributor inventory movements, primarily in Spain. Shipment volume of Marlboro decreased by 3.4%, mainly due to lower total markets, particularly in Spain, and to lower share, primarily in Germany, Italy and Poland, partially offset by higher share in France and Hungary. Shipment volume of L&M was up by 1.5%, driven predominantly by higher share in Germany.

PMI’s market share in the EU was down by 0.7 share points to 38.3% as gains, notably in France, Germany and the Netherlands, were more than offset by declines, mainly in the Czech Republic, Italy, Poland, Portugal and Spain. Marlboro’s share in the EU was down by 0.4 points to 18.0%, reflecting a higher share mainly in the Czech Republic, France, Greece, Hungary and the Netherlands, which was more than offset by lower share in Germany, Italy, Poland, Portugal and Spain. Compared to the second quarter of 2011, Marlboro’s share was down slightly by 0.1 point. L&M’s market share in the EU was up slightly by 0.1 point to 6.5%, primarily driven by gains in Germany, the Netherlands and Poland. Complementing L&M, market share of Chesterfield in the EU was up by 0.3 points to 3.2%.

EU Key Market Commentaries

In the Czech Republic, the total cigarette market was down by 2.3%, reflecting the unfavorable impact of excise tax-driven price increases in the first quarter of 2011. PMI’s shipments were down by 9.1%. Market share was down by 3.3 points to 44.5%, principally reflecting continued share declines for lower-margin local brands, Start, Petra and Sparta, down by 3.2 points. This decline was partly offset by a higher share for Marlboro, up by 0.2 points to 7.2%, assisted by the April 2011 launch of Marlboro Core Flavor and Marlboro Gold Touch, and a higher share for Red & White, up by 0.7 points to 13.4%.

In France, the total cigarette market was down by 2.0%. PMI’s shipments were up by 4.0%, and market share was up by 0.4 points to 40.4%, mainly reflecting a higher share for Marlboro and the premium Philip Morris brand, up by 0.2 and 0.5 points to 25.9% and 8.2%, respectively, as well as a higher share for Chesterfield, up by 0.2 points to 3.0%.

In Germany, the total cigarette market was up by 0.3%. PMI’s shipments were up by 1.2% and market share grew by 0.3 points to 35.2%, driven by L&M, up by 1.1 points to 10.3%. Share of Marlboro was down by 0.8 points to 20.3%.

In Italy, the total cigarette market was down by 1.4%, reflecting the unfavorable impact of excise tax-driven price increases in the third quarter of 2010, price increases in July 2011, and a VAT-driven price increase of €0.20 per pack in September 2011. PMI’s shipments were down by 1.0% and market share declined by 1.1 points to 53.0%. While Marlboro’s market share of 22.7% was down by 0.5 points compared to the third quarter of 2010, it was flat compared to the second quarter of 2011.

In Poland, the total cigarette market was down by 5.0%, reflecting the unfavorable impact of excise tax-driven price increases in the fourth quarter of 2010 and second quarter of 2011, as well as the introduction of an indoor public smoking ban in November of 2010. PMI’s shipments were down by 11.3%. PMI’s market share was down by 2.5 points to 35.1%, due mainly to lower share of Marlboro, down by 1.3 points to 9.7%, and low-price Red & White, down by 1.5 points to 5.1%, partially offset by L&M, up by 0.9 points to 16.9%, supported by the launch of L&M Forward in April 2011. Compared to the second quarter of 2011, PMI’s market share was up by 0.2 points.

In Spain, the total cigarette market was down by 10.5%, largely due to the continuing adverse economic environment and the introduction of a total indoor public smoking ban in January 2011. PMI’s shipments were down by 6.9%. PMI’s market share was down by 1.4 points to 31.2%, reflecting lower trade purchases of PMI products in September as a result of the timing of competitive price increases later the same month. By comparison, PMI’s market share in July and August was up by 1.1 points versus the same period in 2010. Share of Marlboro in the quarter of 15.1% was up by 0.5 points compared to the second quarter of 2011.

EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)

2011 Third-Quarter Results

In EEMA, net revenues increased by 16.6% to $2.2 billion, including favorable currency of $89 million. Excluding the impact of currency and acquisitions, net revenues increased by 11.2%, primarily due to favorable pricing of $65 million, primarily in the Middle East and Russia, and favorable volume/mix of $147 million.

Operating companies income increased by 8.1% to $925 million, despite unfavorable currency of $32 million that was largely due to the appreciation of the Euro, particularly in regard to manufacturing costs. Excluding the impact of currency and acquisitions, operating companies income increased by 13.3%, due primarily to higher pricing and favorable volume/mix, partly offset by higher costs, principally related to business building initiatives in Russia. Adjusted operating companies income increased by 9.9%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 13.8%.

EEMA Operating Companies Income ($ Millions)

Third-Quarter

Nine Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI

$925

$856

8.1%

$2,482

$2,412

2.9%

Asset impairment & exit costs

(16)

(18)

Adjusted OCI

$941

$856

9.9%

$2,500

$2,412

3.6%

Adjusted OCI Margin*

42.6%

45.1%

(2.5) p.p.

42.3%

43.6%

(1.3) p.p.

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

Excluding the impact of currency and acquisitions, adjusted operating companies income margin was up by 1.1 percentage points to 46.2%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in EEMA increased by 5.1%, predominantly due to: the Middle East, primarily Saudi Arabia, mainly reflecting favorable distributor inventory movements; North Africa, mainly Algeria driven by a higher total market and share growth; Turkey, reflecting share growth; and Ukraine, reflecting favorable trade inventory movements. This increase was partly offset by a decline in Russia due to unfavorable distributor inventory movements and a lower total market.

PMI’s cigarette shipment volume of premium brands grew by 10.5% in EEMA, driven by Marlboro and Parliament, up by 10.2% and 15.9%, respectively.

EEMA Key Market Commentaries

In Russia, PMI’s shipment volume decreased by 3.5%. While shipment volume of PMI’s premium portfolio was down by 7.1%, primarily due to a decline in Marlboro of 19.6%, shipment volume of Parliament was up by 0.4%. In the mid-price segment, shipment volume was down by 5.5%, due mainly to Chesterfield, down by 4.1%, and L&M, down by 3.2%. In the low-price segment, shipment volume of Bond Street was up by 3.0%. PMI’s quarter-to-date August market share of 25.8%, as measured by A.C. Nielsen, was up slightly by 0.1 point. Market share for Parliament, in the premium segment, was up slightly by 0.1 point; Marlboro, in the premium segment, was down by 0.2 points; L&M in the mid-price segment was down by 0.4 share points; Chesterfield in the mid-price segment was up by 0.2 share points; and Bond Street in the low-price segment was up by 0.4 share points.

In Turkey, the total cigarette market was up by 5.6%, reflecting a recovery following the steep January 2010 excise tax increase. PMI’s shipment volume increased by 21.6%. PMI’s market share, as measured by A.C. Nielsen, grew by 3.9 points to a record 45.7%, driven by Parliament, Muratti and L&M, up by 1.3, 0.6 and 4.4 share points, respectively, partly offset by declines in Lark and Bond Street, down by 1.6 and 0.7 points, respectively. Market share of Marlboro was flat at 9.5% and up by 0.4 points compared to the second quarter of 2011.

In Ukraine, the total cigarette market grew by an estimated 8.6%, reflecting a favorable comparison with the third quarter of 2010 impacted by trade inventory movements following the excise tax increase of July 2010 and the favorable impact of competitive trade inventory movements in the third quarter of 2011. PMI’s shipment volume increased by 10.2%. While PMI’s market share, as measured by A.C. Nielsen, was down by 2.4 points to 32.4%, largely due to declines in PMI’s medium and low-price segments, share for premium Parliament was up by 0.4 points to 2.8%. Share of Marlboro was flat at 5.6%.

ASIA REGION

2011 Third-Quarter Results

In Asia, net revenues increased strongly by 52.7% to $2.8 billion, including favorable currency of $248 million. Excluding the impact of currency, net revenues increased by 39.2%, reflecting the favorable impact of pricing of $342 million, primarily in Australia, Indonesia, Japan and the Philippines, and favorable volume/mix of $374 million, mainly in Japan, reflecting a weak prior year quarter resulting from the payback of distributor inventories built up in the second quarter of 2010 in anticipation of increased trade and consumer purchases, as well as in Indonesia and Korea. Excluding the impact of currency and acquisitions, net revenues increased by 39.1%.

Operating companies income surged by 89.7% to reach $1.3 billion. Excluding the favorable impact of currency of $104 million, operating companies income increased by 74.6%, driven by strong growth in Australia, Indonesia, Japan, Korea and the Philippines. Excluding the impact of currency and acquisitions, operating companies income increased by 74.3%. Adjusted operating companies income increased by 90.4% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 75.1%.

Asia Operating Companies Income ($ Millions)

Third-Quarter

Nine Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI

$1,309

$690

89.7%

$3,800

$2,259

68.2%

Asset impairment & exit costs

(5)

(7)

Adjusted OCI

$1,314

$690

90.4%

$3,807

$2,259

68.5%

Adjusted OCI Margin*

46.9%

37.6%

9.3 p.p.

47.2%

38.8%

8.4 p.p.

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

Excluding the impact of currency and acquisitions, adjusted operating companies income margin was up by 9.8 percentage points to 47.4%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in Asia increased by 12.6%, predominantly due to growth in Indonesia, Japan and Korea. The growth was partly offset by declines in Pakistan of 18.9%, due to the continued growth of illicit products, and in the Philippines of 3.0%, reflecting the unfavorable impact of excise tax-driven price increases in January 2011 and extreme weather conditions.

Shipment volume of Marlboro was up by 11.8%, driven mainly by growth in Indonesia, Japan, Korea and Vietnam.

Asia Key Market Commentaries

In Indonesia, the total cigarette market was up by 14.5%, driven mainly by growth in the low-price segment and moderate price increases compared to 2010. PMI’s shipment volume increased by 22.5%, with all key brand families recording growth. Market share was up by 2.0 points to a record 31.2%, driven by growth from premium Sampoerna A and low-price U Mild, Vegas Mild and Trend Mild. Although Marlboro’s market share was down by 0.2 points to 4.2%, shipments grew by 8.9% and share of the “white” cigarettes segment increased by 3.6 points to 65.4%.

In Japan, the total cigarette market decreased by 29.5%, reflecting: an unfavorable comparison with the third quarter of 2010 which witnessed strong trade and consumer demand ahead of the October 1, 2010 tax-driven price increases; the subsequent unfavorable impact of these price increases; and the underlying market decline. PMI’s shipment volume was up by 47.1%, driven mainly by a favorable comparison to the third quarter of 2010 which witnessed the payback of distributor inventories built up in the second quarter of 2010 in anticipation of the aforementioned tax-driven price increases, as well as by increased trade purchases compensating for in-market shortages of competitors’ products in July 2011. Market share of 27.9% was up by 3.9 points, reflecting growth of Marlboro, Lark, the Philip Morris brand and Virginia S. by 1.0, 2.3, 0.2 and 0.3 points, to 12.0%, 8.7%, 2.5% and 2.1%, respectively.

In Korea, the total cigarette market declined by 0.5%. PMI’s shipment volume increased by 22.4%, driven by market share increases. PMI’s market share reached a record 21.1%, up by 4.1 points, driven by Marlboro and Parliament, up by 2.5 and 1.4 points to 9.4% and 7.1%, respectively.

In the Philippines, the total market declined by 1.8%, reflecting the impact of PMFTC Inc.’s excise-tax driven price increase of its key brand variants in January 2011 and extreme weather conditions. PMI’s shipment volume was down by 3.0%. PMI’s market share was down by 1.2 points to 93.4%. Share of Marlboro was down by 0.7 points to 21.1%.

LATIN AMERICA & CANADA REGION

2011 Third-Quarter Results

In Latin America & Canada, net revenues increased by 13.5% to $847 million, including favorable currency of $39 million. Excluding the impact of currency, net revenues increased by 8.3%, reflecting favorable pricing of $62 million, primarily in Argentina, Brazil, Canada and Mexico. Volume/mix was flat.

Operating companies income increased by 4.5% to $255 million, primarily reflecting favorable pricing. Adjusted operating companies income grew by 9.0% as shown in the table below and detailed on Schedule 11, and by the same percentage excluding currency.

Latin America & Canada Operating Companies Income ($ Millions)

Third-Quarter

Nine Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI

$255

$244

4.5%

$774

$699

10.7%

Asset impairment & exit costs

(11)

(12)

Adjusted OCI

$266

$244

9.0%

$786

$699

12.4%

Adjusted OCI Margin*

31.4%

32.7%

(1.3) p.p.

32.0%

31.9%

0.1 p.p.

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

Excluding the impact of currency, adjusted operating companies income margin increased by 0.2 percentage points to 32.9%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in Latin America & Canada decreased by 1.1%, due mainly to Mexico, partly offset by increases in Argentina, Brazil, Canada and Colombia. Shipment volume of Marlboro decreased by 3.0% due to Mexico.

Latin America & Canada Key Market Commentaries

In Argentina, the total cigarette market grew by 3.2%, reflecting growth in the economy. PMI’s cigarette shipment volume increased by 4.0%. PMI’s market share was up by 0.5 points to 74.3%, reflecting growth of Marlboro, up by 0.7 points to 24.2%, and of the mid-price Philip Morris brand, up by 0.2 share points to 37.8%. Share of low-price Next was down by 0.2 points to 3.5%.

In Canada, the total tax-paid cigarette market was up by 1.3%, due mainly to a favorable comparison with the third quarter of 2010, which included the payback of trade inventory movements in June 2010 in anticipation of the harmonized sales tax implementation in the provinces of Ontario and British Columbia. PMI’s cigarette shipment volume increased by 5.2%. PMI’s market share grew by 1.3 points to 34.3%, with premium brand Belmont up by 0.2 points to 1.9% and low-price brand Next up by 2.7 points to 7.0%, partly offset by mid-price Number 7 and Canadian Classics, and low-price Accord, down by 0.3, 0.3 and 0.7 share points, to 4.1%, 8.8% and 3.5%, respectively.

In Mexico, the total cigarette market was down by 18.0%, primarily due to the significant January 1, 2011, excise tax increase which resulted in a 26.7% increase in the retail price of Marlboro and a surge in the availability of illicit products. Although PMI’s cigarette shipment volume decreased by 15.1%, market share grew by 2.6 points to 73.2%, led by Marlboro, up by 3.1 share points to a quarterly record of 52.8%, and Benson & Hedges, up by 0.5 points to 6.1%. Market share of low-price Delicados, the second best-selling brand in the market, declined by 0.7 points to 11.1%.

Philip Morris International Inc. Profile

Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 international brands, including Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in approximately 180 countries. In 2010, the company held an estimated 16.0% share of the total international cigarette market outside of the U.S., or 27.6% excluding the People’s Republic of China and the U.S. For more information, see www.pmi.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements 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 global economic developments and individual country 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; to be able to protect and enhance margins through price increases; 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 PMI’s understanding of applicable law.

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 June 30, 2011. 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, except in the normal course of its public disclosure obligations.



Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended September 30,
($ in millions, except per share data)
(Unaudited)

	2011		2010		% Change
Net revenues	$	20,706	$	16,936		22.3	%
Cost of sales		2,847		2,290		24.3	%
Excise taxes on products ⁽¹⁾		12,344		10,322		19.6	%
Gross profit		5,515		4,324		27.5	%
Marketing, administration and research costs		1,721		1,401
Asset impairment and exit costs		43		20
Operating companies income		3,751		2,903		29.2	%
Amortization of intangibles		25		22
General corporate expenses		49		45
Operating income		3,677		2,836		29.7	%
Interest expense, net		192		214
Earnings before income taxes		3,485		2,622		32.9	%
Provision for income taxes		1,024		730		40.3	%
Net earnings		2,461		1,892		30.1	%
Net earnings attributable to noncontrolling interests		84		70
Net earnings attributable to PMI	$	2,377	$	1,822		30.5	%

Per share data:⁽²⁾
Basic earnings per share	$	1.35	$	0.99		36.4	%
Diluted earnings per share	$	1.35	$	0.99		36.4	%


	(1) The segment detail of excise taxes on products sold for the quarters ended September 30, 2011 and 2010 is shown on Schedule 2.

	(2) Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the quarters ended September 30, 2011 and 2010 are shown on Schedule 4, Footnote 1.



Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
($ in millions)
(Unaudited)

		Net Revenues excluding Excise Taxes

		European Union			EEMA			Asia			Latin America & Canada			Total

2011	Net Revenues ⁽¹⁾	$	8,155		$	4,921		$	5,143		$	2,487		$	20,706
	Excise Taxes on Products		(5,649	)		(2,711	)		(2,344	)		(1,640	)		(12,344	)
	Net Revenues excluding Excise Taxes		2,506			2,210			2,799			847			8,362

2010	Net Revenues	$	7,045		$	4,184		$	3,629		$	2,078		$	16,936
	Excise Taxes on Products		(4,906	)		(2,288	)		(1,796	)		(1,332	)		(10,322	)
	Net Revenues excluding Excise Taxes		2,139			1,896			1,833			746			6,614

Variance	Currency		321			89			248			39			697
	Acquisitions		-			13			2			-			15
	Operations		46			212			716			62			1,036
	Variance Total		367			314			966			101			1,748
	Variance Total (%)		17.2	%		16.6	%		52.7	%		13.5	%		26.4	%

	Variance excluding Currency		46			225			718			62			1,051
	Variance excluding Currency (%)		2.2	%		11.9	%		39.2	%		8.3	%		15.9	%

	Variance excluding Currency & Acquisitions		46			212			716			62			1,036
	Variance excluding Currency & Acquisitions (%)		2.2	%		11.2	%		39.1	%		8.3	%		15.7	%

⁽¹⁾ 2011 Currency increased net revenues as follows:
	European Union	$	1,061
	EEMA		108
	Asia		467
	Latin America & Canada		109
		$	1,745



Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
($ in millions)
(Unaudited)

	Operating Companies Income

	European Union			EEMA			Asia			Latin America & Canada			Total
2011	$	1,262		$	925		$	1,309		$	255		$	3,751
2010		1,113			856			690			244			2,903
% Change		13.4	%		8.1	%		89.7	%		4.5	%		29.2	%

Reconciliation:
For the quarter ended September 30, 2010	$	1,113		$	856		$	690		$	244		$	2,903

2010 Asset impairment and exit costs		20			-			-			-			20
2011 Asset impairment and exit costs		(11	)		(16	)		(5	)		(11	)		(43	)

Acquired businesses		-			(1	)		2			-			1
Currency		105			(32	)		104			-			177
Operations		35			118			518			22			693
For the quarter ended September 30, 2011	$	1,262		$	925		$	1,309		$	255		$	3,751



Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Quarters Ended September 30,
($ in millions, except per share data)
(Unaudited)

			Diluted
			E.P.S.

2011 Diluted Earnings Per Share			$	1.35		⁽¹⁾
2010 Diluted Earnings Per Share			$	0.99		⁽¹⁾
Change			$	0.36
% Change				36.4		%

Reconciliation:
2010 Diluted Earnings Per Share			$	0.99		⁽¹⁾


Special Items:
2011 Asset impairment and exit costs				(0.02	)
2011 Tax items				-
2010 Asset impairment and exit costs				0.01
2010 Tax items				-

Currency				0.04
Interest				0.01
Change in tax rate				(0.03	)
Impact of lower shares outstanding and share-based payments				0.06
Operations				0.29
2011 Diluted Earnings Per Share			$	1.35		⁽¹⁾

⁽¹⁾ Basic and diluted EPS were calculated using the following (in millions):

	Q3 2011		Q3 2010

Net earnings attributable to PMI	$	2,377	$	1,822
Less distributed and undistributed earnings attributable
to share-based payment awards		14		8
Net earnings for basic and diluted EPS	$	2,363	$	1,814

Weighted-average shares for basic EPS		1,749		1,828
Plus incremental shares from assumed conversions:
Stock Options		-		2
Weighted-average shares for diluted EPS		1,749		1,830



Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Nine Months Ended September 30,
($ in millions, except per share data)
(Unaudited)

	2011		2010		% Change
Net revenues	$	57,470	$	49,906		15.2	%
Cost of sales		7,986		7,212		10.7	%
Excise taxes on products ⁽¹⁾		34,044		29,735		14.5	%
Gross profit		15,440		12,959		19.1	%
Marketing, administration and research costs		4,776		4,289
Asset impairment and exit costs		60		20
Operating companies income		10,604		8,650		22.6	%
Amortization of intangibles		73		65
General corporate expenses		135		128
Operating income		10,396		8,457		22.9	%
Interest expense, net		613		660
Earnings before income taxes		9,783		7,797		25.5	%
Provision for income taxes		2,850		2,109		35.1	%
Net earnings		6,933		5,688		21.9	%
Net earnings attributable to noncontrolling interests		228		181
Net earnings attributable to PMI	$	6,705	$	5,507		21.8	%

Per share data:⁽²⁾
Basic earnings per share	$	3.76	$	2.96		27.0	%
Diluted earnings per share	$	3.76	$	2.96		27.0	%


	(1) The segment detail of excise taxes on products sold for the nine months ended September 30, 2011 and 2010 is shown on Schedule 6.

	(2) Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the nine months ended September 30, 2011 and 2010 are shown on Schedule 8, Footnote 1.



Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
($ in millions)
(Unaudited)

		Net Revenues excluding Excise Taxes

		European Union			EEMA			Asia			Latin America & Canada			Total

2011	Net Revenues ⁽¹⁾	$	22,650		$	13,195		$	14,577		$	7,048		$	57,470
	Excise Taxes on Products		(15,646	)		(7,286	)		(6,519	)		(4,593	)		(34,044	)
	Net Revenues excluding Excise Taxes		7,004			5,909			8,058			2,455			23,426

2010	Net Revenues	$	21,053		$	11,665		$	11,094		$	6,094		$	49,906
	Excise Taxes on Products		(14,435	)		(6,134	)		(5,265	)		(3,901	)		(29,735	)
	Net Revenues excluding Excise Taxes		6,618			5,531			5,829			2,193			20,171

Variance	Currency		402			115			598			93			1,208
	Acquisitions		-			13			110			-			123
	Operations		(16	)		250			1,521			169			1,924
	Variance Total		386			378			2,229			262			3,255
	Variance Total (%)		5.8	%		6.8	%		38.2	%		11.9	%		16.1	%

	Variance excluding Currency		(16	)		263			1,631			169			2,047
	Variance excluding Currency (%)		(0.2	)%		4.8	%		28.0	%		7.7	%		10.1	%

	Variance excluding Currency & Acquisitions		(16	)		250			1,521			169			1,924
	Variance excluding Currency & Acquisitions (%)		(0.2	)%		4.5	%		26.1	%		7.7	%		9.5	%

⁽¹⁾ 2011 Currency increased net revenues as follows:
	European Union	$	1,342
	EEMA		116
	Asia		1,070
	Latin America & Canada		239
		$	2,767



Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
($ in millions)
(Unaudited)

	Operating Companies Income

	European Union			EEMA			Asia			Latin America & Canada			Total
2011	$	3,548		$	2,482		$	3,800		$	774		$	10,604
2010		3,280			2,412			2,259			699			8,650
% Change		8.2	%		2.9	%		68.2	%		10.7	%		22.6	%

Reconciliation:
For the nine months ended September 30, 2010	$	3,280		$	2,412		$	2,259		$	699		$	8,650

2010 Asset impairment and exit costs		20			-			-			-			20
2011 Asset impairment and exit costs		(23	)		(18	)		(7	)		(12	)		(60	)

Acquired businesses		(1	)		(1	)		26			-			24
Currency		236			(33	)		351			10			564
Operations		36			122			1,171			77			1,406
For the nine months ended September 30, 2011	$	3,548		$	2,482		$	3,800		$	774		$	10,604



Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Nine Months Ended September 30,
($ in millions, except per share data)
(Unaudited)

			Diluted
			E.P.S.

2011 Diluted Earnings Per Share			$	3.76		⁽¹⁾
2010 Diluted Earnings Per Share			$	2.96		⁽¹⁾
Change			$	0.80
% Change				27.0		%

Reconciliation:
2010 Diluted Earnings Per Share			$	2.96		⁽¹⁾


Special Items:
2011 Asset impairment and exit costs				(0.03	)
2011 Tax items				0.02
2010 Asset impairment and exit costs				0.01
2010 Tax items				(0.07	)


Currency				0.19
Interest				0.02
Change in tax rate				(0.04	)
Impact of lower shares outstanding and share-based payments				0.17
Operations				0.53
2011 Diluted Earnings per Share			$	3.76		⁽¹⁾

⁽¹⁾ Basic and diluted EPS were calculated using the following (in millions):

	YTD September 2011		YTD September 2010

Net earnings attributable to PMI	$	6,705	$	5,507
Less distributed and undistributed earnings attributable
to share-based payment awards		38		25
Net earnings for basic and diluted EPS	$	6,667	$	5,482

Weighted-average shares for basic EPS		1,771		1,849
Plus incremental shares from assumed conversions:
Stock Options		-		3
Weighted-average shares for diluted EPS		1,771		1,852



Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)

	September 30,			December 31,
	2011			2010
Assets
Cash and cash equivalents	$	3,391		$	1,703
All other current assets		11,699			12,053
Property, plant and equipment, net		6,411			6,499
Goodwill		10,087			10,161
Other intangible assets, net		3,774			3,873
Other assets		858			761
Total assets	$	36,220		$	35,050

Liabilities and Stockholders' Equity
Short-term borrowings	$	2,563		$	1,747
Current portion of long-term debt		2,326			1,385
All other current liabilities		11,161			9,672
Long-term debt		12,870			13,370
Deferred income taxes		1,983			2,027
Other long-term liabilities		1,663			1,728
Total liabilities		32,566			29,929

Redeemable noncontrolling interest		1,216			1,188

Total PMI stockholders' equity		2,130			3,506
Noncontrolling interests		308			427
Total stockholders' equity		2,438			3,933
Total liabilities and stockholders' equity	$	36,220		$	35,050

Total debt	$	17,759		$	16,502
Total debt to EBITDA		1.26	⁽¹⁾		1.36	⁽¹⁾
Net debt to EBITDA		1.02	⁽¹⁾		1.22	⁽¹⁾

⁽¹⁾ For the calculation of Total Debt to EBITDA and Net Debt to EBITDA ratios, refer to Schedule 18.



Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Quarters Ended September 30,
($ in millions)
(Unaudited)

2011																	2010						% Change in Reported Net Revenues excluding Excise Taxes

Reported Net Revenues		Less Excise Taxes		Reported Net Revenues excluding Excise Taxes		Less Currency			Reported Net Revenues excluding Excise Taxes & Currency		Less Acquisi- tions			Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions			Reported Net Revenues		Less Excise Taxes		Reported Net Revenues excluding Excise Taxes		Reported		Reported excluding Currency		Reported excluding Currency & Acquisitions

$	8,155	$	5,649	$	2,506	$	321		$	2,185	$	-		$	2,185	European Union	$	7,045	$	4,906	$	2,139	17.2	%	2.2	%	2.2	%
	4,921		2,711		2,210		89			2,121		13			2,108	EEMA		4,184		2,288		1,896	16.6	%	11.9	%	11.2	%
	5,143		2,344		2,799		248			2,551		2			2,549	Asia		3,629		1,796		1,833	52.7	%	39.2	%	39.1	%
	2,487		1,640		847		39			808		-			808	Latin America & Canada		2,078		1,332		746	13.5	%	8.3	%	8.3	%

$	20,706	$	12,344	$	8,362	$	697		$	7,665	$	15		$	7,650	PMI Total	$	16,936	$	10,322	$	6,614	26.4	%	15.9	%	15.7	%


2011																	2010						% Change in Reported Operating Companies Income

Reported Operating Companies Income						Less Currency			Reported Operating Companies Income excluding Currency		Less Acquisi- tions			Reported Operating Companies Income excluding Currency & Acquisitions							Reported Operating Companies Income		Reported		Reported excluding Currency		Reported excluding Currency & Acquisitions

$	1,262					$	105		$	1,157	$	-		$	1,157	European Union					$	1,113	13.4	%	4.0	%	4.0	%
	925						(32	)		957		(13	)		970	EEMA						856	8.1	%	11.8	%	13.3	%
	1,309						104			1,205		2			1,203	Asia						690	89.7	%	74.6	%	74.3	%
	255						-			255		-			255	Latin America & Canada						244	4.5	%	4.5	%	4.5	%

$	3,751					$	177		$	3,574	$	(11	)	$	3,585	PMI Total					$	2,903	29.2	%	23.1	%	23.5	%



Schedule 11
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Quarters Ended September 30,
($ in millions)
(Unaudited)

2011																				2010								% Change in Adjusted Operating Companies Income

Reported Operating Companies Income		Less Asset Impairment & Exit Costs			Adjusted Operating Companies Income			Less Currency			Adjusted Operating Companies Income excluding Currency		Less Acquisi- tions			Adjusted Operating Companies Income excluding Currency & Acquisitions				Reported Operating Companies Income		Less Asset Impairment & Exit Costs			Adjusted Operating Companies Income			Adjusted		Adjusted excluding Currency		Adjusted excluding Currency & Acquisitions

$	1,262	$	(11	)	$	1,273		$	105		$	1,168	$	-		$	1,168		European Union	$	1,113	$	(20	)	$	1,133		12.4	%	3.1	%	3.1	%
	925		(16	)		941			(32	)		973		(1	)		974		EEMA		856		-			856		9.9	%	13.7	%	13.8	%
	1,309		(5	)		1,314			104			1,210		2			1,208		Asia		690		-			690		90.4	%	75.4	%	75.1	%
	255		(11	)		266			-			266		-			266		Latin America & Canada		244		-			244		9.0	%	9.0	%	9.0	%

$	3,751	$	(43	)	$	3,794		$	177		$	3,617	$	1		$	3,616		PMI Total	$	2,903	$	(20	)	$	2,923		29.8	%	23.7	%	23.7	%


2011																				2010								% Points Change

Adjusted Operating Companies Income excluding Currency		Net Revenues excluding Excise Taxes & Currency⁽¹⁾			Adjusted Operating Companies Income Margin excluding Currency						Adjusted Operating Companies Income excluding Currency & Acquisitions		Net Revenues excluding Excise Taxes, Currency & Acquisitions⁽¹⁾			Adjusted Operating Companies Income Margin excluding Currency & Acquisitions				Adjusted Operating Companies Income		Net Revenues excluding Excise Taxes⁽¹⁾			Adjusted Operating Companies Income Margin					Adjusted Operating Companies Income Margin excluding Currency		Adjusted Operating Companies Income Margin excluding Currency & Acquisitions

$	1,168	$	2,185			53.5	%				$	1,168	$	2,185			53.5	%	European Union	$	1,133	$	2,139			53.0	%			0.5		0.5
	973		2,121			45.9	%					974		2,108			46.2	%	EEMA		856		1,896			45.1	%			0.8		1.1
	1,210		2,551			47.4	%					1,208		2,549			47.4	%	Asia		690		1,833			37.6	%			9.8		9.8
	266		808			32.9	%					266		808			32.9	%	Latin America & Canada		244		746			32.7	%			0.2		0.2

$	3,617	$	7,665			47.2	%				$	3,616	$	7,650			47.3	%	PMI Total	$	2,923	$	6,614			44.2	%			3.0		3.1

⁽¹⁾ For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 10.

Schedule 12

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency

For the Quarters Ended September 30,

(Unaudited)

2011

2010

% Change

Reported Diluted EPS

1.35

0.99

36.4

Adjustments:

Asset impairment and exit costs

0.02

0.01

Tax items

Adjusted Diluted EPS

1.37

1.00

37.0

Less:

Currency impact

0.04

Adjusted Diluted EPS, excluding Currency

1.33

1.00

33.0

Schedule 13

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency

For the Quarters Ended September 30,

(Unaudited)

2011

2010

% Change

Reported Diluted EPS

1.35

0.99

36.4

Less:

Currency impact

0.04

Reported Diluted EPS, excluding Currency

1.31

0.99

32.3



Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Nine Months Ended September 30,
($ in millions)
(Unaudited)

2011																		2010						% Change in Reported Net Revenues excluding Excise Taxes

Reported Net Revenues		Less Excise Taxes		Reported Net Revenues excluding Excise Taxes		Less Currency			Reported Net Revenues excluding Excise Taxes & Currency		Less Acquisi- tions				Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions			Reported Net Revenues		Less Excise Taxes		Reported Net Revenues excluding Excise Taxes		Reported		Reported excluding Currency		Reported excluding Currency & Acquisitions

$	22,650	$	15,646	$	7,004	$	402		$	6,602	$	-			$	6,602	European Union	$	21,053	$	14,435	$	6,618	5.8	%	(0.2	)%	(0.2	)%
	13,195		7,286		5,909		115			5,794		13				5,781	EEMA		11,665		6,134		5,531	6.8	%	4.8	%	4.5	%
	14,577		6,519		8,058		598			7,460		110		⁽¹⁾		7,350	Asia		11,094		5,265		5,829	38.2	%	28.0	%	26.1	%
	7,048		4,593		2,455		93			2,362		-				2,362	Latin America & Canada		6,094		3,901		2,193	11.9	%	7.7	%	7.7	%

$	57,470	$	34,044	$	23,426	$	1,208		$	22,218	$	123			$	22,095	PMI Total	$	49,906	$	29,735	$	20,171	16.1	%	10.1	%	9.5	%


2011																		2010						% Change in Reported Operating Companies Income

Reported Operating Companies Income						Less Currency			Reported Operating Companies Income excluding Currency		Less Acquisi- tions				Reported Operating Companies Income excluding Currency & Acquisitions							Reported Operating Companies Income		Reported		Reported excluding Currency		Reported excluding Currency & Acquisitions

$	3,548					$	236		$	3,312	$	(1	)		$	3,313	European Union					$	3,280	8.2	%	1.0	%	1.0	%
	2,482						(33	)		2,515		(13	)			2,528	EEMA						2,412	2.9	%	4.3	%	4.8	%
	3,800						351			3,449		26		⁽²⁾		3,423	Asia						2,259	68.2	%	52.7	%	51.5	%
	774						10			764		-				764	Latin America & Canada						699	10.7	%	9.3	%	9.3	%

$	10,604					$	564		$	10,040	$	12			$	10,028	PMI Total					$	8,650	22.6	%	16.1	%	15.9	%

⁽¹⁾ Includes the business combination in the Philippines ($ 105).
⁽²⁾ Includes the business combination in the Philippines ($ 23).


Schedule 15
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Nine Months Ended September 30,
($ in millions)
(Unaudited)

2011																					2010								% Change in Adjusted Operating Companies Income
Reported Operating Companies Income		Less Asset Impairment & Exit Costs			Adjusted Operating Companies Income			Less Currency			Adjusted Operating Companies Income excluding Currency		Less Acquisi- tions				Adjusted Operating Companies Income excluding Currency & Acquisitions				Reported Operating Companies Income		Less Asset Impairment & Exit Costs			Adjusted Operating Companies Income			Adjusted		Adjusted excluding Currency		Adjusted excluding Currency & Acquisitions

$	3,548	$	(23	)	$	3,571		$	236		$	3,335	$	(1	)		$	3,336		European Union	$	3,280	$	(20	)	$	3,300		8.2	%	1.1	%	1.1	%
	2,482		(18	)		2,500			(33	)		2,533		(1	)			2,534		EEMA		2,412		-			2,412		3.6	%	5.0	%	5.1	%
	3,800		(7	)		3,807			351			3,456		26		⁽¹⁾		3,430		Asia		2,259		-			2,259		68.5	%	53.0	%	51.8	%
	774		(12	)		786			10			776		-				776		Latin America & Canada		699		-			699		12.4	%	11.0	%	11.0	%

$	10,604	$	(60	)	$	10,664		$	564		$	10,100	$	24			$	10,076		PMI Total	$	8,650	$	(20	)	$	8,670		23.0	%	16.5	%	16.2	%



2011																					2010								% Points Change
Adjusted Operating Companies Income excluding Currency		Net Revenues excluding Excise Taxes & Currency⁽²⁾			Adjusted Operating Companies Income Margin excluding Currency						Adjusted Operating Companies Income excluding Currency & Acquisitions		Net Revenues excluding Excise Taxes, Currency & Acquisitions⁽²⁾				Adjusted Operating Companies Income Margin excluding Currency & Acquisitions				Adjusted Operating Companies Income		Net Revenues excluding Excise Taxes⁽²⁾			Adjusted Operating Companies Income Margin					Adjusted Operating Companies Income Margin excluding Currency		Adjusted Operating Companies Income Margin excluding Currency & Acquisitions

$	3,335	$	6,602			50.5	%				$	3,336	$	6,602				50.5	%	European Union	$	3,300	$	6,618			49.9	%			0.6		0.6
	2,533		5,794			43.7	%					2,534		5,781				43.8	%	EEMA		2,412		5,531			43.6	%			0.1		0.2
	3,456		7,460			46.3	%					3,430		7,350				46.7	%	Asia		2,259		5,829			38.8	%			7.5		7.9
	776		2,362			32.9	%					776		2,362				32.9	%	Latin America & Canada		699		2,193			31.9	%			1.0		1.0

$	10,100	$	22,218			45.5	%				$	10,076	$	22,095				45.6	%	PMI Total	$	8,670	$	20,171			43.0	%			2.5		2.6

⁽¹⁾ Includes the business combination in the Philippines ($ 23).
⁽²⁾ For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to Schedule 14.

Schedule 16

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency

For the Nine Months Ended September 30,

(Unaudited)

2011

2010

% Change

Reported Diluted EPS

3.76

2.96

27.0

Adjustments:

Asset impairment and exit costs

0.03

0.01

Tax items

(0.02

)

(0.07

)

Adjusted Diluted EPS

3.77

2.90

30.0

Less:

Currency impact

0.19

Adjusted Diluted EPS, excluding Currency

3.58

2.90

23.4

Schedule 17

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency

For the Nine Months Ended September 30,

(Unaudited)

2011

2010

% Change

Reported Diluted EPS

3.76

2.96

27.0

Less:

Currency impact

0.19

Reported Diluted EPS, excluding Currency

3.57

2.96

20.6



							Schedule 18
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios
($ in millions, except ratios)
(Unaudited)

	For the Year Ended						For the Year Ended
	September 30,						December 31,
	2011						2010
	October ~ December		January ~ September		12 months
	2010		2011		rolling

Earnings before income taxes	$	2,527	$	9,783	$	12,310	$	10,324
Interest expense, net		216		613		829		876
Depreciation and amortization		255		743		998		932
EBITDA	$	2,998	$	11,139	$	14,137	$	12,132

					September 30,		December 31,
					2011		2010

Short-term borrowings					$	2,563	$	1,747
Current portion of long-term debt						2,326		1,385
Long-term debt						12,870		13,370
Total Debt					$	17,759	$	16,502
Less: Cash and cash equivalents						3,391		1,703
Net Debt					$	14,368	$	14,799

Ratios
Total Debt to EBITDA						1.26		1.36
Net Debt to EBITDA						1.02		1.22

Schedule 19

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Operating Cash Flow to Free Cash Flow and Free Cash Flow, excluding Currency

Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency

For the Quarters and Nine Months Ended September 30,

($ in millions)

(Unaudited)

For the Quarters Ended

For the Nine Months Ended

September 30,

2011

2010

% Change

2011

2010

% Change

Net cash provided by operating activities^(a)

3,053

2,417

26.3

9,568

7,856

21.8

Less:

Capital expenditures

223

164

568

483

Free cash flow

2,830

2,253

25.6

9,000

7,373

22.1

Less:

Currency impact

214

478

Free cash flow, excluding currency

2,616

2,253

16.1

8,522

7,373

15.6

2011

2010

% Change

2011

2010

% Change

Net cash provided by operating activities^(a)

3,053

2,417

26.3

9,568

7,856

21.8

Less:

Currency impact

236

515

Net cash provided by operating activities,
excluding currency

2,817

2,417

16.5

9,053

7,856

15.2

(a) Operating cash flow.

Schedule 20

PHILIP MORRIS INTERNATIONAL INC.

and Subsidiaries

Reconciliation of Non-GAAP Measures

Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS

For the Year Ended December 31,

(Unaudited)

2010

Reported Diluted EPS

3.92

Adjustments:

Tax items

(0.07

)

Asset impairment and exit costs

0.02

Adjusted Diluted EPS

3.87

Contacts

Philip Morris International Inc.
Investor Relations:
New York: +1 917-663 2233
Lausanne: +41 (0)58 242 4666
or
Media:
Lausanne: +41 (0)58 242 4500

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