July 21, 2011

Philip Morris International Inc. (PMI) Reports 2011 Second-Quarter Results;Increases 2011 EPS Guidance by $0.15 to a Range of $4.70 to $4.80

NEW YORK, Jul 21, 2011 (BUSINESS WIRE) --

Regulatory News:

  • Reported diluted earnings per share of $1.35, up by 26.2%, or by 14.0% excluding currency, versus $1.07 in 2010
  • Adjusted diluted earnings per share of $1.34, as detailed in the attached Schedule 12, up by 34.0%, or by 21.0% excluding currency, versus $1.00 in 2010
  • Reported net revenues, excluding excise taxes, up by 17.2% to $8.3 billion, or by 10.2% excluding currency
  • Reported operating companies income up by 27.1% to $3.8 billion, or by 16.5% excluding currency
  • Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, up by 27.2% to $3.8 billion, or by 16.5% excluding currency
  • Operating income up by 27.7% to $3.7 billion
  • Free cash flow for the first half of the year, defined as net cash provided by operating activities less capital expenditures, up by 20.5% to $6.2 billion, or by 15.4% excluding currency, as detailed in the attached Schedule 19
  • Repurchased 22.7 million shares of its common stock for $1.5 billion during the quarter
  • PMI increases its forecast for 2011 full-year reported diluted earnings per share by $0.15 to a range of $4.70 to $4.80, up by approximately 20% to 22.5% versus $3.92 in 2010
    • Approximately $0.10 of the increased guidance are attributable to an improved business outlook, driven largely by Japan, and approximately $0.05 reflect favorable currency at prevailing rates
    • Excluding a total favorable currency impact of approximately $0.25 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 13.5% to 16.0%, or by approximately 15.0% to 17.5% versus adjusted diluted earnings per share of $3.87 in 2010

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

"Our strong second-quarter results are testament to our continued growth momentum, particularly in Asia, strong pricing in numerous key markets and our excellent executional capability, as exemplified by our performance in Japan," said Louis C. Camilleri, Chairman and Chief Executive Officer.

"Our progress is such that we are again raising our EPS guidance for 2011, reflecting our confidence in the future."

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 July 21, 2011. Access is available at www.pmi.com.

Dividends and Share Repurchase Program

During the second quarter, PMI spent $1.5 billion to repurchase 22.7 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

Total Under Program 5,857 100,747

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 $18.9 billion to repurchase 378.4 million shares, or 17.9% of the shares outstanding at the time of the spin-off in March 2008.

2011 Full-Year Forecast

PMI increases its forecast for 2011 full-year reported diluted earnings per share by $0.15 to a range of $4.70 to $4.80, up by approximately 20% to 22.5% versus $3.92 in 2010. Approximately $0.10 of the increased guidance are attributable to an improved business outlook, driven largely by Japan, and approximately $0.05 reflect favorable currency at prevailing rates. Excluding a total favorable currency impact of approximately $0.25 for the full-year 2011, reported diluted earnings per share are projected to increase by approximately 13.5% to 16.0%, or by approximately 15.0% to 17.5% versus adjusted diluted earnings per share of $3.87 in 2010.

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 SECOND-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)

Second-Quarter

Six Months Year-To-Date

Excl. Excl.

2011

2010

Change

Curr.

2011

2010

Change

Curr.

European Union $2,497 $2,295 8.8% 0.7% $4,498 $4,479 0.4% (1.4)%
Eastern Europe, Middle East & Africa 2,012 1,889 6.5% 3.6% 3,699 3,635 1.8% 1.0%
Asia 2,936 2,123 38.3% 27.8% 5,259 3,996 31.6% 22.8%
Latin America & Canada

828

754

9.8% 5.8%

1,608

1,447

11.1% 7.4%
Total PMI $8,273 $7,061 17.2% 10.2% $15,064 $13,557 11.1% 7.3%

Net revenues of $8.3 billion were up by 17.2%, including favorable currency of $494 million. Excluding currency, net revenues increased by 10.2%, primarily driven by favorable pricing of $617 million, primarily in Asia, and favorable volume/mix of $98 million. The favorable volume/mix was driven by Asia, mainly Indonesia, Japan and Korea, and was partly offset by: in the EU, mainly Greece, Portugal and Spain; and, in Latin America & Canada, primarily Brazil, Canada and Mexico. Volume/mix in EEMA was essentially flat. Excluding currency and acquisitions, net revenues increased by 10.1%.

OPERATING COMPANIES INCOME

PMI Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

Excl. Excl.

2011

2010

Change

Curr.

2011

2010

Change

Curr.

European Union $1,280 $1,105 15.8% 2.1% $2,286 $2,167 5.5% (0.6)%
Eastern Europe, Middle East & Africa 835 786 6.2% 4.8% 1,557 1,556 0.1% 0.1%
Asia 1,398 845 65.4% 48.3% 2,491 1,569 58.8% 43.0%
Latin America & Canada

268

238

12.6% 8.8%

519

455

14.1% 11.9%
Total PMI $3,781 $2,974 27.1% 16.5% $6,853 $5,747 19.2% 12.5%

Operating income increased by 27.7% to $3.7 billion. Reported operating companies income was up by 27.1% to $3.8 billion, including favorable currency of $317 million. Excluding currency and acquisitions, operating companies income was up by 16.5%, primarily driven by higher pricing and favorable volume/mix, partly offset by unfavorable costs, mostly related to airfreight of product to Japan in response to in-market shortages of competitors' products.

Adjusted operating companies income grew by 27.2% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 16.5%.

PMI Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI $3,781 $2,974 27.1% $6,853 $5,747 19.2%
Asset impairment & exit costs

(1)

0

(17)

0

Adjusted OCI $3,782 $2,974 27.2% $6,870 $5,747 19.5%
Adjusted OCI Margin* 45.7% 42.1% 3.6 p.p. 45.6% 42.4% 3.2 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 2.4 percentage points to 44.5%, as detailed on Schedule 11. Excluding currency and acquisitions, adjusted operating companies income margin was up by 2.5 percentage points to 44.6%.

SHIPMENT VOLUME & MARKET SHARE

PMI Cigarette Shipment Volume by Segment (Million Units)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

European Union 57,193 59,024 (3.1)% 105,715 111,353 (5.1)%
Eastern Europe, Middle East & Africa 75,336 77,892 (3.3)% 138,979 142,037 (2.2)%
Asia 84,042 78,185 7.5% 156,134 141,400 10.4%
Latin America & Canada

24,606

25,858

(4.8)%

48,269

50,904

(5.2)%
Total PMI 241,177 240,959 0.1% 449,097 445,694 0.8%

PMI's cigarette shipment volume of 241.2 billion units was up slightly by 0.1%. In the EU, cigarette shipment volume decreased by 3.1%, predominantly due to lower total markets, mainly in Spain, lower market share, mainly in Poland, and unfavorable distributor inventory movements, partly offset by total market growth in Germany. In EEMA, cigarette shipment volume declined by 3.3%, primarily due to: a lower total market in Russia and a lower total market and share in Ukraine; the suspension of our business activities following the imposition of sanctions in Libya; and an unfavorable comparison with the second quarter of 2010 in Ukraine, impacted by trade inventory movements; partly offset by growth in Algeria and Turkey. In Asia, PMI's cigarette shipment volume increased by 7.5%, primarily driven by double-digit growth in Indonesia, Japan and Korea. In Latin America & Canada, cigarette shipment volume decreased by 4.8%, due mainly to: Mexico, reflecting a lower total market resulting from the significant January 1, 2011, excise tax increase; and Brazil, reflecting the depletion of trade inventories established ahead of the April 2011 price increase; partly offset by growth in Argentina.

On an organic basis, which excludes acquisitions, PMI's cigarette shipment volume was up slightly by 0.1%.

Total cigarette shipments of Marlboro of 78.1 billion units were up by 0.2%, driven primarily by growth in EEMA of 0.9%, in particular in Algeria, and in Asia of 5.9%, notably in Indonesia, Japan, Korea and Vietnam. The growth was partly offset by decreases: in the EU of 3.3%, reflecting mainly lower total markets and share, primarily in Portugal and Spain; and in Latin America & Canada of 2.8%, due mainly to the unfavorable impact of the aforementioned excise tax increase in Mexico.

Total cigarette shipments of L&M of 23.9 billion units were up by 3.1%, driven by growth in the EU of 5.4%, notably in Germany and Greece, and in EEMA of 3.6%, led by Turkey.

Total cigarette shipments of Chesterfield of 9.8 billion units were down by 4.9%, with declines, primarily in Spain and Ukraine, partly offset by growth, mainly in Portugal. Total cigarette shipments of Parliament of 10.3 billion units were up by 4.9%, driven by growth in the EU, EEMA and Latin America & Canada.

Total cigarette shipments of Lark of 10.1 billion units increased by 10.2%, due primarily to growth in Japan, partly offset by a decline in Turkey. Total cigarette shipments of Bond Street of 12.0 billion units decreased by 2.3%, due mainly to declines in Turkey and Ukraine, partly offset by growth in Russia and Kazakhstan.

Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, excluding acquisitions, grew by 7.9%, notably in Belgium, France and Germany. Total shipment volume for cigarettes and OTP combined was up by 0.2%, excluding acquisitions.

PMI's market share performance was stable, or registered growth, in a number of key markets, including Algeria, Austria, Belgium, Canada, Egypt, France, Germany, Hong Kong, Indonesia, Japan, Korea, Mexico, the Netherlands, the Philippines, Singapore, Thailand and Turkey.

EUROPEAN UNION REGION (EU)

2011 Second-Quarter Results

In the EU, net revenues increased by 8.8% to $2.5 billion, including favorable currency of $187 million. Excluding currency, net revenues grew by 0.7%, primarily reflecting higher pricing of $49 million, driven mainly by France, Italy and Poland, partly offset by Spain. The favorable pricing variance more than offset the unfavorable volume/mix of $34 million. The unfavorable volume/mix was primarily attributable to a lower total market and share in Greece, Portugal, Spain and the UK, partly offset by a higher total market in Germany.

Operating companies income increased by 15.8% to $1.3 billion, due predominantly to favorable pricing, and favorable currency of $152 million, partly offset by unfavorable volume/mix of $28 million. Excluding the impact of currency, operating companies income was up by 2.1%.

Adjusted operating companies income increased by 15.9%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 2.3%.

EU Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI $1,280 $1,105 15.8% $2,286 $2,167 5.5%
Asset impairment & exit costs

(1)

0

(12)

0

Adjusted OCI $1,281 $1,105 15.9% $2,298 $2,167 6.0%
Adjusted OCI Margin* 51.3% 48.1% 3.2 p.p. 51.1% 48.4% 2.7 p.p.
*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Excluding the favorable impact of currency, adjusted operating companies income margin was up by 0.8 percentage points to 48.9%, as detailed on Schedule 11.

The total cigarette market in the EU declined by 1.7%, due mainly to Spain, reflecting the unfavorable impact of continued adverse economic conditions. Excluding Spain, the total cigarette market in the EU grew slightly by 0.2%.

PMI's cigarette shipment volume in the EU declined by 3.1%, due primarily to the impact of the lower total market in Spain, lower share, mainly in Poland, and unfavorable distributor inventory movements, mainly in Austria, France and Spain, partly offset by total market growth in Germany. Shipment volume of Marlboro decreased by 3.3%, due mainly to lower total markets, unfavorable distributor inventory movements, and lower share, primarily in Portugal and Spain, the former reflecting the impact of price increases in July and November 2010 and January 2011. Shipment volume of L&M was up by 5.4%, driven mainly by higher share in Germany.

PMI's market share in the EU was down slightly by 0.2 share points to 38.6% as gains, primarily in Belgium, France, Germany, the Netherlands and the Nordics, were more than offset by share declines, mainly in the Czech Republic, Italy, Poland and Portugal. While Marlboro's share in the EU was flat at 18.1%, reflecting a higher share in Belgium, the Czech Republic, Greece, Hungary and the Netherlands, offset by lower share in Germany, Italy, Portugal and the UK, it grew by 0.3 points compared to the first quarter 2011. L&M's market share in the EU grew by 0.3 points to 6.6%, its best performance since the spin-off in March 2008, primarily driven by gains in Germany, Poland and Spain.

EU Key Market Commentaries

In the Czech Republic, the total cigarette market was up by 3.3%. PMI's shipments were down by 2.5%. Market share was down by 2.7 points to 45.5%, reflecting continued share declines for lower-margin local brands, partly offset by a higher share for Marlboro, up by 0.6 points to 7.5%, and for Red & White, up by 0.6 points to 13.1%.

In France, the total cigarette market was up by 1.8%. Whilst PMI's shipments were down slightly by 0.5%, unfavorably impacted by distributor inventory movements, market share was up slightly by 0.1 point to 40.9%, reflecting a higher share for the premium Philip Morris brand, up by 0.5 points to 8.3%, partly offset by a lower share for Marlboro, down by 0.3 points to 26.0%. Compared to the first quarter 2011, PMI's market share was up by 0.5 points, driven by Marlboro, up by 0.5 points.

In Germany, the total cigarette market was up by 4.6%. PMI's shipments were up by 5.3% and market share was up by 0.2 points to 36.1%, driven by L&M, up by 1.0 points to 10.4%. Compared to the first quarter of 2011, PMI's market share was up by 0.4 points. Although share of Marlboro in the second quarter was down by 0.5 points to 21.1%, it was essentially flat compared to the first quarter of 2011.

In Italy, the total cigarette market was up by 0.2%. PMI's shipments were down by 0.9%. Although PMI's market share declined by 0.7 points to 53.4%, share was essentially flat compared to the first quarter of 2011. Marlboro'smarketshare in the second quarter of 2011 of 22.7% was down by 0.3 points compared to the second quarter 2010, but up by 0.2 points compared to the first quarter 2011.

In Poland, the total cigarette market was down by 1.5%, reflecting the unfavorable impact of tax-driven price increases in the fourth quarter of 2010 and second quarter of 2011, and the introduction of an indoor public smoking ban in the fourth quarter of 2010. PMI's shipments were down by 9.7%. Whilst PMI's market share was down by 3.2 points to 34.9%, due mainly to lower share of low-price Red & White, down by 3.3 points to 5.1%, share of Marlboro was up slightly by 0.1 point to 10.3%, and share of L&M grew by 0.8 points to 15.9%.

In Spain, the total cigarette market was down by 14.6%, largely due to the continuing adverse economic environment, the impact of the June 2010 VAT-driven price increase and the December 2010 excise tax-driven price increase, and the introduction of a total indoor public smoking ban in January 2011. PMI's shipments were down by 17.6%. PMI's market share was down by 0.2 points to 31.0%, due mainly to a lower share of Chesterfield, down by 0.5 points to 8.4%. Share of Marlboro was essentially flat at 14.6%. PMI's market share was up by 0.6 points versus the first quarter 2011, driven by Marlboro, up by 0.5 points, reflecting the positive consumer reaction to the price movements of May and June 2011.

EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)

2011 Second-Quarter Results

In EEMA, net revenues increased by 6.5% to $2.0 billion, including favorable currency of $55 million. Excluding the impact of currency, net revenues increased by 3.6%, primarily due to favorable pricing of $69 million, primarily in Russia and Ukraine.

Operating companies income increased by 6.2% to $835 million, including favorable currency of $11 million. Excluding the impact of currency, operating companies income increased by 4.8%, 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 6.2%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 4.8%.

EEMA Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI $835 $786 6.2% $1,557 $1,556 0.1%
Asset impairment & exit costs

0

0

(2)

0

Adjusted OCI $835 $786 6.2% $1,559 $1,556 0.2%
Adjusted OCI Margin* 41.5% 41.6% (0.1) p.p. 42.1% 42.8% (0.7) p.p.
*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Excluding the favorable impact of currency, adjusted operating companies income margin was up by 0.5 percentage points to 42.1%, as detailed on Schedule 11.

PMI's cigarette shipment volume in EEMA decreased by 3.3%, principally due to: Libya, reflecting the imposition of sanctions; Russia, primarily reflecting a lower total market; and Ukraine, due to an unfavorable comparison with the second quarter of 2010, impacted by trade inventory movements ahead of the July 2010 excise tax-driven price increase, a lower total market and lower share. These declines were partly offset by growth in Algeria and Turkey.

PMI's cigarette shipment volume of premium brands grew by 2.7% in EEMA, driven by Marlboro and Parliament, up by 0.9% and 10.0%, respectively, reflecting the second consecutive quarter of growth following eight quarters of decline.

EEMA Key Market Commentaries

In Russia, the total cigarette market declined by an estimated annualized rate of 2-3%. PMI's shipment volume decreased by 4.1%. Whilst shipment volume of PMI's premium portfolio was down by 1.7%, primarily due to a decline in Marlboro of 7.3%, shipment volume of above premium Parliament was up by 1.9%. In the mid-price segment, shipment volume was down by 3.3%, with growth in Chesterfield, up by 0.6%, more than offset by a decline in L&M, down by 8.3%. In the low price segment, shipment volume of Bond Street was up by 2.1%. PMI's quarter-to-date May market share of 25.4%, as measured by A.C. Nielsen, was essentially flat. Market share for Parliament, in the above 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 slightly by 0.1 share point; and Bond Street in the low-price segment was up by 0.4 share points.

In Turkey, the total cigarette market declined by an estimated 0.8%, having stabilized following the steep January 2010 excise tax increase. PMI's shipment volume increased by 12.1%. PMI's quarter-to-date May market share, as measured by A.C. Nielsen, grew by 3.8 points to 44.6%, driven by Parliament, Muratti and L&M, up by 1.1, 0.5 and 4.3 share points, respectively, partly offset by declines in Lark and Bond Street, down by 1.3 and 0.8 points, respectively. Market share of Marlboro was flat at 9.1%.

In Ukraine, the total cigarette market declined by an estimated 15.0%, due mainly to: an unfavorable comparison with the second quarter of 2010 which was impacted by trade inventory movements ahead of the July 2010 excise tax-driven price increase; the unfavorable impact of excise tax-driven price increases in July 2010 and January 2011; and the underlying market decline. PMI's shipment volume decreased by 24.8%, reflecting the aforementioned factors, as well as lower share driven by low-price competition. Whilst PMI's market share, as measured by A.C. Nielsen, was down by 3.5 points to 32.1%, shares for premium Marlboro and Parliament were up by 0.3 and 0.2 points, respectively.

ASIA REGION

2011 Second-Quarter Results

In Asia, net revenues increased strongly by 38.3% to $2.9 billion, including favorable currency of $222 million. Excluding the impact of currency, net revenues increased by 27.8%, reflecting the favorable impact of pricing of $413 million, primarily in Australia, Indonesia, Japan and the Philippines, and favorable volume/mix of $175 million, mainly in Japan, reflecting increased shipments in response to in-market shortages of competitors' products, Indonesia and Korea. Excluding the impact of currency and acquisitions, net revenues increased by 27.7%.

Operating companies income surged by 65.4% to reach $1.4 billion, despite significant costs related to airfreight of product to Japan. Excluding the favorable impact of currency of $145 million, operating companies income increased by 48.3%, driven by strong growth in Australia, Indonesia, Japan and the Philippines. Excluding the impact of currency and acquisitions, operating companies income increased by 48.2%. Adjusted operating companies income increased by 65.4% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 48.3%, or by 48.2% excluding both currency and acquisitions.

Asia Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI $1,398 $845 65.4% $2,491 $1,569 58.8%
Asset impairment & exit costs

0

0

(2)

0

Adjusted OCI $1,398 $845 65.4% $2,493 $1,569 58.9%
Adjusted OCI Margin* 47.6% 39.8% 7.8 p.p. 47.4% 39.3% 8.1 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 6.4 percentage points to 46.2%, as detailed on Schedule 11.

PMI's cigarette shipment volume in Asia increased by 7.5%, predominantly due to growth in Indonesia, Japan and Korea. The growth was partly offset by a decline in Pakistan of 6.6% due to the continued growth of illicit products.

Shipment volume of Marlboro was up by 5.9%, driven mainly by growth in Indonesia, Japan, Korea and Vietnam.

Asia Key Market Commentaries

In Indonesia, the total cigarette market was up by 13.9%, driven mainly by growth in the low-price segment and moderate price increases compared to 2010. PMI's shipment volume increased by 20.7%, with all key brand families recording growth. Market share was up by 1.6 points to a record 30.2%, driven by growth from premium Sampoerna A, mid-price Sampoerna Kretek and low-price U Mild and Vegas Mild. Although Marlboro's market share declined by 0.3 points to 4.2%, shipments grew by 6.7% and share of the "white" cigarettes segment increased by 3.3 points to 64.2%.

In Japan, the total cigarette market decreased by 19.1%, reflecting the unfavorable impact of the significant October 1, 2010, tax-driven price increases and the underlying market decline. PMI's shipment volume was up by 11.0%, driven by increased trade purchases compensating for in-market shortages of competitors' products. Market share of 42.0% was up by 17.7 points, reflecting growth of Marlboro, Lark and the Philip Morris brand by 5.6, 7.7 and 1.6 points, to 16.4%, 14.4% and 4.0%, respectively.

In Korea, the total cigarette market declined by 1.9%. PMI's shipment volume increased by 17.6%, driven by market share increases. PMI's market share reached a record 19.9%, up by 3.3 points, driven by Marlboro and Parliament, up by 1.8 and 1.2 points, respectively.

In the Philippines, the total market declined by 2.9%, partly reflecting the impact of PMFTC Inc.'s excise-tax driven price increase of its key brand variants in January 2011. PMI's shipments were down by 1.5%. PMI's market share was up by 1.3 points to 94.1%. Share of Marlboro increased by 0.4 points to 21.1%.

LATIN AMERICA & CANADA REGION

2011 Second-Quarter Results

In Latin America & Canada, net revenues increased by 9.8% to $828 million, including favorable currency of $30 million. Excluding the impact of currency, net revenues increased by 5.8%, reflecting favorable pricing of $86 million, primarily in Argentina, Brazil, Canada and Mexico, that more than offset unfavorable volume/mix of $42 million.

Operating companies income increased by 12.6% to $268 million. Excluding the impact of currency, operating companies income increased by 8.8%, primarily reflecting favorable pricing. Adjusted operating companies income grew by 12.6% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency, grew by 8.8%.

Latin America & Canada Operating Companies Income ($ Millions)

Second-Quarter

Six Months Year-To-Date

2011

2010

Change

2011

2010

Change

Reported OCI $268 $238 12.6% $519 $455 14.1%
Asset impairment & exit costs

0

0

(1)

0

Adjusted OCI $268 $238 12.6% $520 $455 14.3%
Adjusted OCI Margin* 32.4% 31.6% 0.8 p.p. 32.3% 31.4% 0.9 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 0.9 percentage points to 32.5%, as detailed on Schedule 11.

PMI's cigarette shipment volume in Latin America & Canada decreasedby 4.8%, due mainly to Mexico and Brazil, partly offset by an increase in Argentina. Shipment volume of Marlboro decreased by 2.8%.

Latin America & Canada Key Market Commentaries

In Argentina, the total cigarette market grew by 8.7%. PMI's cigarette shipment volume increased by 8.4%. Although PMI's market share was down by 0.4 points to 74.4%, share of Marlboro was up by 0.6 points to 24.0%, offset by the mid-price Philip Morris brand, down by 0.4 share points to 37.9%, and low-price Next, down by 0.2 points to 3.7%.

In Canada, the total tax-paid cigarette market was down by 4.5%, due mainly to trade inventory movements in June 2010 in anticipation of harmonized sales tax implementation in the provinces of Ontario and British Columbia and a lower total market. Although PMI's cigarette shipment volume decreased by 1.9%, market share grew by 1.0 point to 34.0%, with low-price brands Next and Quebec Classique, up by 2.7 and 0.3 share points, respectively, partly offset by mid-price Number 7 and Canadian Classics, and low-price Accord, down by 0.5, 0.5 and 0.8 share points, respectively. Market share of premium Belmont was up slightly by 0.1 point to 1.8%.

In Mexico, the total cigarette market was down by 13.2%, primarily due to the significant January 1, 2011, excise tax increase which drove a 26.7% increase in the retail price of Marlboro. Although PMI's cigarette shipment volume decreased by 10.3%, market share grew by 2.3 points to 72.2%, led by Marlboro, up by 3.8 share points to a quarterly record 52.0%, 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 1.1 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 March 31, 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 June 30,
($ in millions, except per share data)
(Unaudited)
2011 2010 % Change
Net revenues $ 20,234 $ 17,383 16.4 %
Cost of sales 2,844 2,550 11.5 %
Excise taxes on products (1) 11,961 10,322 15.9 %
Gross profit 5,429 4,511 20.4 %
Marketing, administration and research costs 1,647 1,537
Asset impairment and exit costs 1 -
Operating companies income 3,781 2,974 27.1 %
Amortization of intangibles 24 23
General corporate expenses 45 45
Operating income 3,712 2,906 27.7 %
Interest expense, net 208 223
Earnings before income taxes 3,504 2,683 30.6 %
Provision for income taxes 1,019 641 59.0 %
Net earnings 2,485 2,042 21.7 %
Net earnings attributable to noncontrolling interests 76 60
Net earnings attributable to PMI $ 2,409 $ 1,982 21.5 %
Per share data:(2)
Basic earnings per share $ 1.35 $ 1.07 26.2 %
Diluted earnings per share $ 1.35 $ 1.07 26.2 %
(1) The segment detail of excise taxes on products sold for the quarters ended June 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 June 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 June 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes

Latin

European

America &

Union

EEMA Asia

Canada

Total
2011 Net Revenues (1) $ 8,080 $ 4,603 $ 5,146 $ 2,405 $ 20,234
Excise Taxes on Products (5,583 ) (2,591 ) (2,210 ) (1,577 ) (11,961 )
Net Revenues excluding Excise Taxes 2,497 2,012 2,936 828 8,273
2010 Net Revenues $ 7,260 $ 4,125 $ 3,903 $ 2,095 $ 17,383
Excise Taxes on Products (4,965 ) (2,236 ) (1,780 ) (1,341 ) (10,322 )
Net Revenues excluding Excise Taxes 2,295 1,889 2,123 754 7,061
Variance Currency 187 55 222 30 494
Acquisitions - - 3 - 3
Operations 15 68 588 44 715
Variance Total 202 123 813 74 1,212
Variance Total (%) 8.8 % 6.5 % 38.3 % 9.8 % 17.2 %
Variance excluding Currency 15 68 591 44 718
Variance excluding Currency (%) 0.7 % 3.6 % 27.8 % 5.8 % 10.2 %
Variance excluding Currency & Acquisitions 15 68 588 44 715
Variance excluding Currency & Acquisitions (%) 0.7 % 3.6 % 27.7 % 5.8 % 10.1 %
(1) 2011 Currency increased net revenues as follows:
European Union $ 609
EEMA 94
Asia 368
Latin America & Canada 76
$ 1,147
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
Operating Companies Income

Latin

European

America &

Union

EEMA Asia

Canada

Total
2011 $ 1,280 $ 835 $ 1,398 $ 268 $ 3,781
2010 1,105 786 845 238 2,974
% Change 15.8 % 6.2 % 65.4 % 12.6 % 27.1 %

Reconciliation:

For the quarter ended June 30, 2010 $ 1,105 $ 786 $ 845 $ 238 $ 2,974
2010 Asset impairment and exit costs - - - - -
2011 Asset impairment and exit costs (1 ) - - - (1 )
Acquired businesses (1 ) - 1 - -
Currency 152 11 145 9 317
Operations 25 38 407 21 491
For the quarter ended June 30, 2011 $ 1,280 $ 835 $ 1,398 $ 268 $ 3,781
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings Attributable to PMI and Diluted Earnings Per Share
For the Quarters Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Earnings
Attributable to

Diluted

PMI E.P.S.
2011 Net Earnings Attributable to PMI $ 2,409 $ 1.35

(1)

2010 Net Earnings Attributable to PMI $ 1,982 $ 1.07

(1)

% Change 21.5 % 26.2 %

Reconciliation:

2010 Net Earnings Attributable to PMI $ 1,982 $ 1.07

(1)

Special Items:

2011 Asset impairment and exit costs (1 ) -
2011 Tax items 15 0.01
2010 Asset impairment and exit costs - -
2010 Tax items (121 ) (0.07 )
Currency 235 0.13
Interest 15 0.01
Change in tax rate (35 ) (0.02 )
Impact of lower shares outstanding and share-based payments 5 0.05
Operations 314 0.17
2011 Net Earnings Attributable to PMI $ 2,409 $ 1.35

(1)

(1) Basic and diluted EPS were calculated using the following (in millions):
Q2

2011

Q2

2010

Net earnings attributable to PMI $ 2,409 $ 1,982
Less distributed and undistributed earnings attributable
to share-based payment awards 14 9
Net earnings for basic and diluted EPS $ 2,395 $ 1,973
Weighted-average shares for basic EPS 1,772 1,846
Plus incremental shares from assumed conversions:
Stock Options - 3
Weighted-average shares for diluted EPS 1,772 1,849
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Six Months Ended June 30,
($ in millions, except per share data)
(Unaudited)
2011 2010 % Change
Net revenues $ 36,764 $ 32,970 11.5 %
Cost of sales 5,139 4,922 4.4 %
Excise taxes on products (1) 21,700 19,413 11.8 %
Gross profit 9,925 8,635 14.9 %
Marketing, administration and research costs 3,055 2,888
Asset impairment and exit costs 17 -
Operating companies income 6,853 5,747 19.2 %
Amortization of intangibles 48 43
General corporate expenses 86 83
Operating income 6,719 5,621 19.5 %
Interest expense, net 421 446
Earnings before income taxes 6,298 5,175 21.7 %
Provision for income taxes 1,826 1,379 32.4 %
Net earnings 4,472 3,796 17.8 %
Net earnings attributable to noncontrolling interests 144 111
Net earnings attributable to PMI $ 4,328 $ 3,685 17.4 %
Per share data:(2)
Basic earnings per share $ 2.42 $ 1.97 22.8 %
Diluted earnings per share $ 2.42 $ 1.97 22.8 %
(1) The segment detail of excise taxes on products sold for the six months ended June 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 six months ended June 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 Six Months Ended June 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes

Latin

European

America &

Union

EEMA Asia

Canada

Total
2011 Net Revenues (1) $ 14,495 $ 8,274 $ 9,434 $ 4,561 $ 36,764
Excise Taxes on Products (9,997 ) (4,575 ) (4,175 ) (2,953 ) (21,700 )
Net Revenues excluding Excise Taxes 4,498 3,699 5,259 1,608 15,064
2010 Net Revenues $ 14,008 $ 7,481 $ 7,465 $ 4,016 $ 32,970
Excise Taxes on Products (9,529 ) (3,846 ) (3,469 ) (2,569 ) (19,413 )
Net Revenues excluding Excise Taxes 4,479 3,635 3,996 1,447 13,557
Variance Currency 81 26 350 54 511
Acquisitions - - 108 - 108
Operations (62 ) 38 805 107 888
Variance Total 19 64 1,263 161 1,507
Variance Total (%) 0.4 % 1.8 % 31.6 % 11.1 % 11.1 %
Variance excluding Currency (62 ) 38 913 107 996
Variance excluding Currency (%) (1.4 )% 1.0 % 22.8 % 7.4 % 7.3 %
Variance excluding Currency & Acquisitions (62 ) 38 805 107 888
Variance excluding Currency & Acquisitions (%) (1.4 )% 1.0 % 20.1 % 7.4 % 6.6 %
(1) 2011 Currency increased net revenues as follows:
European Union $ 281
EEMA 8
Asia 603
Latin America & Canada 130
$ 1,022
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Six Months Ended June 30,
($ in millions)
(Unaudited)

Operating Companies Income

Latin

European

America &

Union

EEMA Asia

Canada

Total
2011 $ 2,286 $ 1,557 $ 2,491 $ 519 $ 6,853
2010 2,167 1,556 1,569 455 5,747
% Change 5.5 % 0.1 % 58.8 % 14.1 % 19.2 %

Reconciliation:

For the six months ended June 30, 2010 $ 2,167 $ 1,556 $ 1,569 $ 455 $ 5,747
2010 Asset impairment and exit costs - - - - -
2011 Asset impairment and exit costs (12 ) (2 ) (2 ) (1 ) (17 )
Acquired businesses (1 ) - 24 - 23
Currency 131 (1 ) 247 10 387
Operations 1 4 653 55 713
For the six months ended June 30, 2011 $ 2,286 $ 1,557 $ 2,491 $ 519 $ 6,853
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Net Earnings Attributable to PMI and Diluted Earnings Per Share
For the Six Months Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Earnings
Attributable to

Diluted

PMI E.P.S.
2011 Net Earnings Attributable to PMI $ 4,328 $ 2.42

(1)

2010 Net Earnings Attributable to PMI $ 3,685 $ 1.97

(1)

% Change 17.4 % 22.8 %

Reconciliation:

2010 Net Earnings Attributable to PMI $ 3,685 $ 1.97

(1)

Special Items:

2011 Asset impairment and exit costs (11 ) (0.01 )
2011 Tax items 26 0.02
2010 Asset impairment and exit costs - -
2010 Tax items (121 ) (0.07 )
Currency 291 0.16
Interest 19 0.01
Change in tax rate (26 ) (0.01 )
Impact of lower shares outstanding and share-based payments 7 0.10
Operations 458 0.25
2011 Net Earnings Attributable to PMI $ 4,328 $ 2.42

(1)

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

2011

YTD June

2010

Net earnings attributable to PMI $ 4,328 $ 3,685
Less distributed and undistributed earnings attributable
to share-based payment awards 24 17
Net earnings for basic and diluted EPS $ 4,304 $ 3,668
Weighted-average shares for basic EPS 1,782 1,860
Plus incremental shares from assumed conversions:
Stock Options - 3
Weighted-average shares for diluted EPS 1,782 1,863
Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)

June 30,

December 31,
2011 2010

Assets

Cash and cash equivalents $ 2,178 $ 1,703
All other current assets 12,155 12,053
Property, plant and equipment, net 6,793 6,499
Goodwill 10,652 10,161
Other intangible assets, net 4,020 3,873
Other assets 996 761
Total assets $ 36,794 $ 35,050

Liabilities and Stockholders' Equity

Short-term borrowings $ 570 $ 1,747
Current portion of long-term debt 3,314 1,385
All other current liabilities 10,879 9,672
Long-term debt 13,037 13,370
Deferred income taxes 2,067 2,027
Other long-term liabilities 1,747 1,728
Total liabilities 31,614 29,929
Redeemable noncontrolling interest 1,204 1,188
Total PMI stockholders' equity 3,669 3,506
Noncontrolling interests 307 427
Total stockholders' equity 3,976 3,933
Total liabilities and stockholders' equity $ 36,794 $ 35,050
Total debt $ 16,921 $ 16,502
Total debt to EBITDA 1.28

(1)

1.36

(1)

Net debt to EBITDA 1.11

(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 June 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

$ 8,080 $ 5,583 $ 2,497 $ 187 $ 2,310 $ - $ 2,310 European Union $ 7,260 $ 4,965 $ 2,295 8.8 % 0.7 % 0.7 %
4,603 2,591 2,012 55 1,957 - 1,957 EEMA 4,125 2,236 1,889 6.5 % 3.6 % 3.6 %
5,146 2,210 2,936 222 2,714 3 2,711 Asia 3,903 1,780 2,123 38.3 % 27.8 % 27.7 %
2,405 1,577 828 30 798 - 798

Latin America

& Canada

2,095 1,341 754 9.8 % 5.8 % 5.8 %
$ 20,234 $ 11,961 $ 8,273 $ 494 $ 7,779 $ 3 $ 7,776 PMI Total $ 17,383 $ 10,322 $ 7,061 17.2 % 10.2 % 10.1 %
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

$ 1,280 $ 152 $ 1,128 $ (1 ) $ 1,129 European Union $ 1,105 15.8 % 2.1 % 2.2 %
835 11 824 - 824 EEMA 786 6.2 % 4.8 % 4.8 %
1,398 145 1,253 1 1,252 Asia 845 65.4 % 48.3 % 48.2 %
268 9 259 - 259

Latin America

& Canada

238 12.6 % 8.8 % 8.8 %
$ 3,781 $ 317 $ 3,464 $ - $ 3,464 PMI Total $ 2,974 27.1 % 16.5 % 16.5 %
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 June 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

$ 1,280 $ (1 ) $ 1,281 $ 152 $ 1,129 $ (1 ) $ 1,130 European Union $ 1,105 $ - $ 1,105 15.9 % 2.2 % 2.3 %
835 - 835 11 824 - 824 EEMA 786 - 786 6.2 % 4.8 % 4.8 %
1,398 - 1,398 145 1,253 1 1,252 Asia 845 - 845 65.4 % 48.3 % 48.2 %
268 - 268 9 259 - 259

Latin America

& Canada

238 - 238 12.6 % 8.8 % 8.8 %
$ 3,781 $ (1 ) $ 3,782 $ 317 $ 3,465 $ - $ 3,465 PMI Total $ 2,974 $ - $ 2,974 27.2 % 16.5 % 16.5 %
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

$ 1,129 $ 2,310 48.9 % $ 1,130 $ 2,310 48.9 % European Union $ 1,105 $ 2,295 48.1 % 0.8 0.8
824 1,957 42.1 % 824 1,957 42.1 % EEMA 786 1,889 41.6 % 0.5 0.5
1,253 2,714 46.2 % 1,252 2,711 46.2 % Asia 845 2,123 39.8 % 6.4 6.4
259 798 32.5 % 259 798 32.5 %

Latin America

& Canada

238 754 31.6 % 0.9 0.9
$ 3,465 $ 7,779 44.5 % $ 3,465 $ 7,776 44.6 % PMI Total $ 2,974 $ 7,061 42.1 % 2.4 2.5
(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 June 30,
(Unaudited)

2011

2010

% Change

Reported Diluted EPS $ 1.35 $ 1.07 26.2 %
Adjustments:
Asset impairment and exit costs - -
Tax items (0.01 ) (0.07 )
Adjusted Diluted EPS $ 1.34 $ 1.00 34.0 %
Less:
Currency impact 0.13
Adjusted Diluted EPS, excluding Currency $ 1.21 $ 1.00 21.0 %

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 June 30,
(Unaudited)

2011

2010

% Change
Reported Diluted EPS $ 1.35 $ 1.07 26.2 %
Less:
Currency impact 0.13
Reported Diluted EPS, excluding Currency $ 1.22 $ 1.07 14.0 %
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Six Months Ended June 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

$ 14,495 $ 9,997 $ 4,498 $ 81 $ 4,417 $ - $ 4,417 European Union $ 14,008 $ 9,529 $ 4,479 0.4 % (1.4 )% (1.4 )%
8,274 4,575 3,699 26 3,673 - 3,673 EEMA 7,481 3,846 3,635 1.8 % 1.0 % 1.0 %
9,434 4,175 5,259 350 4,909 108

(1)

4,801 Asia 7,465 3,469 3,996 31.6 % 22.8 % 20.1 %
4,561 2,953 1,608 54 1,554 - 1,554

Latin America

& Canada

4,016 2,569 1,447 11.1 % 7.4 % 7.4 %
$ 36,764 $ 21,700 $ 15,064 $ 511 $ 14,553 $ 108 $ 14,445 PMI Total $ 32,970 $ 19,413 $ 13,557 11.1 % 7.3 % 6.6 %
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

$ 2,286 $ 131 $ 2,155 $ (1 ) $ 2,156 European Union $ 2,167 5.5 % (0.6 )% (0.5 )%
1,557 (1 ) 1,558 - 1,558 EEMA 1,556 0.1 % 0.1 % 0.1 %
2,491 247 2,244 24

(2)

2,220 Asia 1,569 58.8 % 43.0 % 41.5 %
519 10 509 - 509

Latin America

& Canada

455 14.1 % 11.9 % 11.9 %
$ 6,853 $ 387 $ 6,466 $ 23 $ 6,443 PMI Total $ 5,747 19.2 % 12.5 % 12.1 %
(1) Includes the business combination in the Philippines ($105).
(2) Includes the business combination in the Philippines ($23).
Schedule 15
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Six Months Ended June 30,
($ 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

$ 2,286 $ (12 ) $ 2,298 $ 131 $ 2,167 $ (1 ) $ 2,168 European Union $ 2,167 $ - $ 2,167 6.0 % - % - %
1,557 (2 ) 1,559 (1 ) 1,560 - 1,560 EEMA 1,556 - 1,556 0.2 % 0.3 % 0.3 %
2,491 (2 ) 2,493 247 2,246 24

(1)

2,222 Asia 1,569 - 1,569 58.9 % 43.1 % 41.6 %
519 (1 ) 520 10 510 - 510

Latin America

& Canada

455 - 455 14.3 % 12.1 % 12.1 %
$ 6,853 $ (17 ) $ 6,870 $ 387 $ 6,483 $ 23 $ 6,460 PMI Total $ 5,747 $ - $ 5,747 19.5 % 12.8 % 12.4 %
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

$ 2,167 $ 4,417 49.1 % $ 2,168 $ 4,417 49.1 % European Union $ 2,167 $ 4,479 48.4 % 0.7 0.7
1,560 3,673 42.5 % 1,560 3,673 42.5 % EEMA 1,556 3,635 42.8 % (0.3 ) (0.3 )
2,246 4,909 45.8 % 2,222 4,801 46.3 % Asia 1,569 3,996 39.3 % 6.5 7.0
510 1,554 32.8 % 510 1,554 32.8 %

Latin America

& Canada

455 1,447 31.4 % 1.4 1.4
$ 6,483 $ 14,553 44.5 % $ 6,460 $ 14,445 44.7 % PMI Total $ 5,747 $ 13,557 42.4 % 2.1 2.3
(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 Six Months Ended June 30,
(Unaudited)

2011

2010

% Change

Reported Diluted EPS $ 2.42 $ 1.97 22.8 %
Adjustments:
Asset impairment and exit costs 0.01 -
Tax items (0.02 ) (0.07 )
Adjusted Diluted EPS $ 2.41 $ 1.90 26.8 %
Less:
Currency impact 0.16
Adjusted Diluted EPS, excluding Currency $ 2.25 $ 1.90 18.4 %

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 Six Months Ended June 30,
(Unaudited)

2011

2010

% Change

Reported Diluted EPS $ 2.42 $ 1.97 22.8 %
Less:
Currency impact 0.16
Reported Diluted EPS, excluding Currency $ 2.26 $ 1.97 14.7 %
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
June 30, December 31,
2011 2010
July ~ December January ~ June

12 months

2010 2011 rolling
Earnings before income taxes $ 5,149 $ 6,298 $ 11,447 $ 10,324
Interest expense, net 430 421 851 876
Depreciation and amortization 485 488 973 932
EBITDA $ 6,064 $ 7,207 $ 13,271 $ 12,132
June 30, December 31,
2011 2010
Short-term borrowings $ 570 $ 1,747
Current portion of long-term debt 3,314 1,385
Long-term debt 13,037 13,370
Total Debt $ 16,921 $ 16,502
Less: Cash and cash equivalents 2,178 1,703
Net Debt $ 14,743 $ 14,799

Ratios

Total Debt to EBITDA 1.28 1.36
Net Debt to EBITDA 1.11 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 Six Months Ended June 30,
($ in millions)
(Unaudited)
For the Quarters Ended For the Six Months Ended
June 30, June 30,
2011 2010 % Change 2011 2010 % Change
Net cash provided by operating activities(a) $ 4,120 $ 3,465 18.9 % $ 6,515 $ 5,439 19.8 %
Less:
Capital expenditures 186 169 345 319
Free cash flow $ 3,934 $ 3,296 19.4 % $ 6,170 $ 5,120 20.5 %
Less:
Currency impact 236 264
Free cash flow, excluding currency $ 3,698 $ 3,296 12.2 % $ 5,906 $ 5,120 15.4 %
For the Quarters Ended For the Six Months Ended
June 30, June 30,
2011 2010 % Change 2011 2010 % Change
Net cash provided by operating activities(a) $ 4,120 $ 3,465 18.9 % $ 6,515 $ 5,439 19.8 %
Less:
Currency impact 250 279
Net cash provided by operating activities,

excluding currency

$ 3,870 $ 3,465 11.7 % $ 6,236 $ 5,439 14.7 %
(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

SOURCE: Philip Morris International Inc.

Philip Morris International Inc.
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