Philip Morris International Inc
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Consumer Staples : Tobacco | Large Cap Value
Company profile

Philip Morris International Inc. is a holding company. The Company is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. Its segments include European Union (EU); Eastern Europe, Middle East & Africa (EEMA); Asia, and Latin America & Canada. The Company's portfolio of international and local brands is led by Marlboro. Its mid-price brands are L&M, Lark, Merit, Muratti and Philip Morris. Its other international brands include Bond Street, Chesterfield, Next and Red & White. The Company also owns various local cigarette brands, such as Dji Sam Soe, Sampoerna and U Mild in Indonesia; Champion, Fortune and Jackpot in the Philippines; Apollo-Soyuz and Optima in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics and Number 7 in Canada; f6 in Germany; Delicados in Mexico; Assos in Greece, and Petra in the Czech Republic and Slovakia.

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Philip Morris International Inc. Reports 2020 Second-Quarter Reported Diluted EPS of $1.25 Versus $1.49 in 2019, Reflecting Currency-Neutral Adjusted Diluted EPS Decline of 7.5%

6:59 am ET July 21, 2020 (BusinessWire) Print

Regulatory News:

Philip Morris International Inc. (NYSE:PM) today announces its 2020 second-quarter results. Comparisons presented in this press release on a "like-for-like" basis reflect pro forma 2019 results, which have been adjusted for the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective March 22, 2019 (the date of deconsolidation). In addition, PMI's total market share has been restated for previous periods to reflect the deconsolidation.

2020 SECOND-QUARTER & YEAR-TO-DATE HIGHLIGHTS

2020 Second-Quarter

Reported diluted EPS of $1.25, down by 16.1%; down by 12.1%, excluding currency Adjusted diluted EPS of $1.29, down by 11.6%; down by 7.5%, excluding currency Cigarette and heated tobacco unit shipment volume down by 14.5% (reflecting cigarette shipment volume down by 17.6%, and heated tobacco unit shipment volume up by 24.3% to 18.7 billion units) Market share for heated tobacco units in IQOS markets, excluding the U.S., up by 1.8 points to 6.3% Net revenues down by 13.6%; down by 9.5%, excluding currency Operating income down by 14.3%; down by 11.0%, excluding currency Adjusted operating income down by 9.5%, excluding currency Adjusted operating income margin flat at 41.7%, excluding currency Total IQOS users at quarter-end estimated at approximately 15.4 million, of which approximately 11.2 million have stopped smoking and switched to IQOS During the quarter, PMI declared a regular quarterly dividend of $1.17 per common share, representing an annualized rate of $4.68 On July 7, 2020, the U.S. Food and Drug Administration (FDA) authorized the marketing of the IQOS tobacco heating system as a modified risk tobacco product

2020 Six Months Year-to-Date

Reported diluted EPS of $2.42, up by 2.5%; up by 10.6%, excluding currency Adjusted diluted EPS of $2.50, down by 2.0%; up by 8.0% on a like-for-like basis, excluding currency Cigarette and heated tobacco unit shipment volume down by 8.2% (reflecting cigarette shipment volume down by 11.4%, and heated tobacco unit shipment volume up by 33.4% to 35.4 billion units); down by 8.0% on a like-for-like basis Market share for heated tobacco units in IQOS markets, excluding the U.S., up by 1.8 points to 6.3% Net revenues down by 4.5%; down by 0.5% on a like-for-like basis, excluding currency Operating income up by 5.4%; up by 11.1%, excluding currency Adjusted operating income up by 5.4% on a like-for-like basis, excluding currency Adjusted operating income margin up by 2.3 points to 41.5% on a like-for-like basis, excluding currency

"Despite a very challenging quarter due to the pandemic, we delivered results above our previously communicated expectations for both net revenues and reported diluted EPS," said Andre Calantzopoulos, Chief Executive Officer.

"This primarily reflected favorable sequential performance in June, with a strong industry volume recovery -- notably in the higher margin EU Region -- and substantial IQOS user acquisition growth, as well as the benefit of certain non-underlying factors, some of which we expect to reverse in the third quarter."

"We are particularly pleased by the excellent performance of IQOS, for which we continued to grow share across a broad range of markets. This is testament to the strength and agility of our commercial model, which increasingly leverages our digital assets."

"While further volatility and restrictions are clearly possible, and the pandemic's economic impact is difficult to quantify, we have improving visibility on the trajectory of our business for the remainder of the year. We are therefore providing a full-year 2020 forecast, which reflects like-for-like currency-neutral adjusted diluted EPS growth in the low-to-mid single digits."

"Importantly, we are very pleased with the U.S. FDA's recent authorization of IQOS as a modified risk tobacco product. This is a historic milestone for both public health and PMI, and reflects the FDA's recognition that IQOS is a fundamentally different product than cigarettes and must be regulated differently."

COVID-19: Business Continuity Update

Since the onset of COVID-19, PMI has undertaken a number of business continuity measures to mitigate potential disruption to its operations and route-to-market in order to preserve the availability of products to its customers and adult consumers.

Currently, PMI has sufficient access to the inputs for its products and is not facing any significant business continuity issues with respect to key suppliers.

The large majority of PMI's manufacturing facilities globally are currently operational, including all heated tobacco unit factories. Certain cigarette production facilities are temporarily impacted by government-mandated shutdowns or production limitations. Such facilities account for less than 5% of PMI's total cigarette production capacity worldwide.

Based on current sales trends, there are adequate inventories of PMI finished goods across all key markets for cigarettes and across all IQOS markets for heated tobacco units and tobacco heating devices. While government-related restrictions have led to complexities in the company's route-to-market in select geographies, PMI does not currently anticipate out-of-stock situations in any major operating income markets and generally expects consumers to have adequate access to its products.

PMI has ample liquidity through cash on hand, the ongoing cash generation of its business, and its access to the commercial paper and debt markets. As of June 30, 2020, the company had approximately $4.2 billion of cash and cash equivalents. The company has a well laddered bond portfolio, and on May 1, 2020, issued a three-tranche bond offering totaling $2.25 billion, equally split among three, five and 10-year maturities. PMI has a $0.3 billion (equivalent) bond maturing in September 2020.

Organizational Design Optimization

As part of its transformation to a smoke-free future, PMI seeks to optimize its organizational design, which includes the elimination, relocation and outsourcing of certain activities. During the second quarter, PMI recorded pre-tax asset impairment and exit costs of $71 million related to restructuring activities in Switzerland and the outsourcing of certain activities performed in the U.S. These pre-tax charges were allocated across all segments.

2020 FULL-YEAR FORECAST

On April 21, 2020, PMI withdrew its 2020 full-year reported diluted EPS forecast of at least $5.50, originally provided on February 6, 2020. At the time, the company was unable to forecast its full-year financial results with reasonable accuracy given the uncertainty surrounding the COVID-19 pandemic and the related impact on the company's business globally.

PMI believes that it is now in a better position to provide a 2020 full-year forecast, primarily reflecting the benefit of an additional quarter of actual results, as well as improved visibility on the progression of pandemic-related government restrictions (including lockdowns) in many of its key international markets, and the impact of such restrictions on adult smoker and reduced-risk product user behavior, as well as the company's global operations.

Notwithstanding this improved visibility, uncertainty remains as to the risk and magnitude of COVID-19 resurgence, as well as the economic consequences of the pandemic.

                                                                                                                                                        Full-Year
                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2020 EPS Forecast                                                              2020 Forecast                                                        2019                                Adjusted
                                                                                                                                                                                                                                                                     Growth
                                                      ------------------------------------------------------------   -------------------- -------------------- ------------------------------  -------------------- -------------------- ----------------------------------------------------------
                                                                   
                                                      -------------------- -------------------- -------------------- --------------------
Reported Diluted EPS                                                 $4.84                    -                $4.99          $4.61            
                                                      -------------------- -------------------- -------------------- --------------------
Tax items                                                            (0.04 )                             
Asset impairment and exit costs                                           0.04           0.23            
Canadian tobacco litigation-related expense                           0.09            
Loss on deconsolidation of RBH                                        0.12            
Russia excise and VAT audit charge                                    0.20            
Fair value adjustment for equity security investments                     0.04          (0.02 )                             
                                                      -------------------- -------------------- --------------------                                           ---------- --------------------
Adjusted Diluted EPS                                                 $4.92                    -                $5.07          $5.19            
Net earnings attributable to RBH                                     (0.06 )                    (a)                         
                                                      -------------------- -------------------- --------------------                                           ---------- --------------------
Adjusted Diluted EPS                                                 $4.92                    -                $5.07          $5.13   (b)                         
Currency                                                                  0.31                           
                                                      -------------------- -------------------- -------------------- --------------------                      ------------------------------                                            -------------------  -------------------- -------------------
Adjusted Diluted EPS, excluding currency                             $5.23                    -                $5.38          $5.13   (b)                             2 %                   -                   5 %
                                                      -------------------- -------------------- -------------------- --------------------                                                                                                ---------- --------- -------------------- ---------- ---------
                                                                   
(a) Net reported diluted EPS attributable to RBH from January 1, 2019 through March 21, 2019.

Reported diluted earnings per share forecast to be in a range of $4.84 to $4.99, at prevailing exchange rates versus reported diluted earnings per share of $4.61 in 2019.

Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.31 per share, asset impairment and exit costs of $0.04 per share, and a fair value adjustment for equity security investments of $0.04 per share, this forecast represents a projected increase of approximately 2% to 5% versus pro forma adjusted diluted earnings per share of $5.13 in 2019, as detailed in the above table.

2020 Full-Year Forecast Assumptions

This forecast assumes:

No recurrence of national lockdowns in PMI's key international markets during the second half of 2020; Lack of near-term recovery in PMI's duty-free business given the uncertain outlook for global travel, with current dynamics persisting at least through the third quarter; Full enforcement of minimum retail selling price requirements in Indonesia as of September 2020, at the earliest; An estimated total international industry volume decline, excluding China and the U.S., of approximately 7% to 9%; A total cigarette and heated tobacco unit shipment volume decline for PMI of approximately 8% to 10% on a like-for-like basis, notably due to Indonesia and PMI Duty Free; A full-year heated tobacco unit shipment volume that keeps PMI on-track to reach its 2021 target of 90 to 100 billion units; A currency-neutral net revenue decline in the low single digits, on a like-for-like basis. Excluding Indonesia and PMI Duty Free, this assumes currency-neutral net revenue growth in the low single digits on the same basis; An increase in currency-neutral, like-for-like adjusted operating income margin of more than 150 basis points; Reported diluted EPS in the third quarter broadly in line with the company's second-quarter 2020 EPS results, supported by a sequential improvement in reported net revenues in the quarter, offset by the unfavorable impact of the reversal of certain items from the first half and the timing of certain costs; Operating cash flow of at least $9.0 billion, subject to year-end working capital requirements and currency movements; Capital expenditures of approximately $0.7 billion; An effective tax rate of 22% to 23%, compared to approximately 23% assumed previously, notably reflecting changes in the company's earnings mix and a lower corporate tax rate in Indonesia; and No share repurchases.

This forecast excludes the impact of any future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates, further developments related to the U.S. Tax Cuts and Jobs Act, further developments pertaining to the judgment in the two Quebec Class Action lawsuits and the Companies' Creditors Arrangement Act (CCAA) protection granted to RBH, any unusual events, and any COVID-19-related developments different from the assumptions set forth in the company's forecast.

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

FDA Authorizes Marketing of IQOS as a Modified Risk Tobacco Product

On July 7, 2020, the U.S. Food and Drug Administration (FDA) authorized the marketing of a version of IQOS, PMI's heat-not-burn product, as a modified risk tobacco product (MRTP). In doing so, the agency found that an IQOS exposure modification order is appropriate to promote the public health. IQOS is the first and only electronic nicotine product to be granted marketing orders through the FDA's MRTP process.

The FDA authorized the marketing of IQOS with the following information:

The IQOS system heats tobacco but does not burn it This significantly reduces the production of harmful and potentially harmful chemicals Scientific studies have shown that switching completely from conventional cigarettes to the IQOS system reduces your body's exposure to harmful or potentially harmful chemicals

The agency concluded that the available scientific evidence demonstrates that IQOS is expected to benefit the health of the population as a whole, taking into account both users of tobacco products and persons who do not currently use tobacco products.

The FDA's decision further builds on the emerging independent international scientific consensus that IQOS is a better choice than continuing to smoke, and follows the FDA's April 2019 decision authorizing the commercialization of a version of IQOS in the U.S.

The FDA's decision provides an important example of how governments and public health organizations can regulate smoke-free alternatives to differentiate them from cigarettes in order to protect and promote the public health.

This decision follows a review of the extensive scientific evidence package PMI submitted to the FDA in December 2016 to support its MRTP applications.

Conference Call

A conference call, hosted by Emmanuel Babeau, Chief Financial Officer, will be webcast at 9:00 a.m., Eastern Time, on July 21, 2020. Access is at www.pmi.com/2020Q2earnings. The audio webcast may also be accessed on iOS or Android devices by downloading PMI's free Investor Relations Mobile Application at www.pmi.com/irapp.

CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE

PMI Shipment Volume by Region                                 Second-Quarter                                               Six Months Year-to-Date
                                                         ------------------------------------------------------------                        ------------------------------------------------------------
(million units)                                       2020                 2019               Change                   2020                 2019               Change
                                                         -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Cigarettes                                         
European Union                                      40,317               46,367              (13.0)%                 80,963               85,855               (5.7)%
Eastern Europe                                      23,657               27,080              (12.6)%                 45,076               47,400               (4.9)%
Middle East & Africa                                27,188               31,659              (14.1)%                 57,184               64,963              (12.0)%
South & Southeast Asia                              33,346               46,376              (28.1)%                 70,941               87,868              (19.3)%
East Asia & Australia                               12,071               13,845              (12.8)%                 24,370               25,958               (6.1)%
Latin America & Canada                              14,780               18,472              (20.0)%                 29,843               36,052              (17.2)%
                                                         -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total PMI                                          151,359              183,799              (17.6)%                308,377              348,096              (11.4)%
                                
Heated Tobacco Units                               
European Union                                       4,227                3,043                38.9%                  8,888                5,336                66.6%
Eastern Europe                                       5,126                2,807                82.6%                  9,492                4,355                +100%
Middle East & Africa                                   185                  719              (74.3)%                    655                1,473              (55.5)%
South & Southeast Asia                      --       --      --%         --       --      --%
East Asia & Australia                                9,076                8,428                 7.7%                 16,198               15,277                 6.0%
Latin America & Canada (1)                              94                   59                59.3%                    202                  113                78.8%
                                                         -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total PMI                                           18,708               15,056                24.3%                 35,435               26,554                33.4%
                                
Cigarettes and Heated Tobacco Units                
European Union                                      44,544               49,410               (9.8)%                 89,851               91,191               (1.5)%
Eastern Europe                                      28,783               29,887               (3.7)%                 54,568               51,755                 5.4%
Middle East & Africa                                27,373               32,378              (15.5)%                 57,839               66,436              (12.9)%
South & Southeast Asia                              33,346               46,376              (28.1)%                 70,941               87,868              (19.3)%
East Asia & Australia                               21,147               22,273               (5.1)%                 40,568               41,235               (1.6)%
Latin America & Canada                              14,874               18,531              (19.7)%                 30,045               36,165              (16.9)%
                                                         -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total PMI                                          170,067              198,855              (14.5)%                343,812              374,650               (8.2)%

Second-Quarter

PMI's total shipment volume decreased by 14.5%, principally due to:

the EU, reflecting lower cigarette shipment volume, notably in Italy, Poland and Spain, partly offset by higher heated tobacco unit shipment volume across most markets, notably Germany, Italy and Poland; Eastern Europe, reflecting lower cigarette shipment volume, particularly in Russia and Ukraine, partly offset by higher heated tobacco unit shipment volume across the Region, notably in Russia; Middle East & Africa, reflecting lower cigarette shipment volume, particularly in North Africa, PMI Duty Free and Turkey, partly offset by Saudi Arabia, as well as lower heated tobacco shipment volume in PMI Duty Free; South & Southeast Asia, reflecting lower cigarette shipment volume, primarily in Indonesia, Pakistan and the Philippines; East Asia & Australia, reflecting lower cigarette shipment volume, mainly in Japan, partly offset by higher heated tobacco unit shipment volume in Japan; and Latin America & Canada, reflecting lower cigarette shipment volume, primarily in Argentina and Mexico.

Impact of Inventory Movements

Excluding the net unfavorable impact of estimated distributor inventory movements of approximately 2.3 billion units, PMI's total in-market sales declined by 13.4%, due to a 16.4% decline in cigarettes, partly offset by a 24.0% increase in heated tobacco units.

The net unfavorable impact of estimated distributor inventory movements of approximately 2.3 billion units reflected a net unfavorable impact of 2.5 billion cigarettes, mainly due to Italy, Japan, PMI Duty Free, Russia and Spain, partly offset by Saudi Arabia.

Six Months Year-to-Date

PMI's total shipment volume decreased by 8.2%, or by 8.0% on a like-for-like basis, due to:

the EU, reflecting lower cigarette shipment volume, notably in Italy, Poland and Spain, partly offset by higher heated tobacco unit shipment volume across the Region, particularly in Italy; Middle East & Africa, reflecting lower cigarette shipment volume, notably in PMI Duty Free, Saudi Arabia and Turkey, partly offset by North Africa, as well as lower heated tobacco unit shipment volume in PMI Duty Free; South & Southeast Asia, reflecting lower cigarette shipment volume, primarily in Indonesia, Pakistan and the Philippines; East Asia & Australia, reflecting lower cigarette shipment volume, mainly in Japan, partly offset by higher heated tobacco unit shipment volume in Japan; and Latin America & Canada, reflecting lower cigarette shipment volume, primarily in Argentina, Canada (due to the impact of the deconsolidation of RBH), and Mexico. On a like-for-like basis, PMI's total shipment volume in the Region decreased by 14.6%;

partly offset by

Eastern Europe, reflecting higher heated tobacco unit shipment volume across the Region, notably in Russia and Ukraine, partly offset by lower cigarette shipment volume, notably in Russia and Ukraine.

Impact of Inventory Movements

On a like-for-like basis, excluding the net favorable impact of estimated distributor inventory movements of approximately 3.0 billion units, PMI's total in-market sales declined by 8.8%, due to an 11.8% decline in cigarettes, partly offset by a 29.5% increase in heated tobacco units.

The net favorable impact of estimated distributor inventory movements of approximately 3.0 billion units reflected:

a net favorable impact of 2.2 billion cigarettes, mainly driven by Japan, Kuwait and North Africa, partly offset by Saudi Arabia and Spain; and a net favorable impact of 0.8 billion heated tobacco units, mainly driven by Japan and Russia.

PMI Shipment Volume by Brand

PMI Shipment Volume by Brand                           Second-Quarter                                               Six Months Year-to-Date
                                                  ------------------------------------------------------------                        ------------------------------------------------------------
(million units)                                2020                 2019               Change                   2020                 2019               Change
                                                  -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Cigarettes                                  
Marlboro                                     54,812               68,060              (19.5)%                114,057              128,024              (10.9)%
L&M                                          22,385               23,522               (4.8)%                 45,025               45,337               (0.7)%
Chesterfield                                 12,604               14,202              (11.3)%                 25,507               28,501              (10.5)%
Philip Morris                                11,106               12,950              (14.2)%                 22,569               23,673               (4.7)%
Parliament                                    8,462                9,847              (14.1)%                 16,035               18,677              (14.1)%
Sampoerna A                                   7,254                9,355              (22.5)%                 15,802               17,256               (8.4)%
Bond Street                                   6,428                7,741              (17.0)%                 12,041               13,412              (10.2)%
Dji Sam Soe                                   5,797                7,839              (26.0)%                 11,972               14,490              (17.4)%
Lark                                          4,189                5,349              (21.7)%                  8,213               10,619              (22.7)%
Fortune                                       2,263                3,441              (34.2)%                  4,745                6,487              (26.8)%
Others                                       16,059               21,493              (25.3)%                 32,411               41,620              (22.1)%
                                                  -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total Cigarettes                            151,359              183,799              (17.6)%                308,377              348,096              (11.4)%
Heated Tobacco Units (1)                     18,708               15,056                24.3%                 35,435               26,554                33.4%
                                                  -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total PMI                                   170,067              198,855              (14.5)%                343,812              374,650               (8.2)%
(1) Includes shipments to Altria Group, Inc., commencing in the third quarter of 2019, for sale in the United States under license.

Second-Quarter

PMI's cigarette shipment volume of the following brands decreased:

Marlboro, mainly due to Indonesia, Italy, Japan, Mexico, the Philippines and PMI Duty Free, partially offset by the GCC; L&M, mainly due to Egypt, PMI Duty Free, Poland and Thailand, partly offset by Saudi Arabia and Turkey; Chesterfield, mainly due to Mexico, Poland, Russia and Turkey, partly offset by Brazil and Saudi Arabia; Philip Morris, primarily driven by Argentina, Indonesia and Italy; Parliament, mainly due to PMI Duty Free, Russia and Turkey; Sampoerna A in Indonesia, mainly due to premium A Mild; Bond Street, mainly due to Russia and Ukraine; Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum Mild; Lark, mainly due to Japan and Turkey; Fortune in the Philippines; and "Others," notably due to: mid-price Sampoerna U in Indonesia and low-price Morven in Pakistan.

The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU, Eastern Europe and Japan, partly offset by PMI Duty Free.

International Share of Market

PMI's total international market share (excluding China and the U.S.), defined as PMI's cigarette and heated tobacco unit sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, decreased by 0.1 point to 28.0%, reflecting:

Total international market share for cigarettes of 25.0%, down by 1.0 point; and Total international market share for heated tobacco units of 3.0%, up by 0.9 points.

PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.7 points to 26.0%, mainly reflecting: out-switching to heated tobacco units, as well as lower cigarette market share and/or an unfavorable geographic mix impact, notably in Indonesia, Mexico, Pakistan, the Philippines and PMI Duty Free, partly offset by Germany, Russia and Turkey.

Six Months Year-to-Date

PMI's cigarette shipment volume of the following brands decreased:

Marlboro, mainly due to Indonesia, Italy, Mexico, the Philippines, PMI Duty Free, Saudi Arabia, Spain and Turkey, partially offset by Germany, Kuwait, North Africa and Russia; L&M, notably due to PMI Duty Free, Poland and Thailand, partly offset by Jordan, Mexico and Turkey; Chesterfield, notably due to Russia and Turkey, partly offset by Brazil and Saudi Arabia; Philip Morris, notably due to Argentina and Italy, partly offset by Japan, the Philippines and Russia; Parliament, mainly due to PMI Duty Free, Russia and Turkey; Sampoerna A in Indonesia, mainly due to premium A Mild; Bond Street, mainly due to Russia and Ukraine; Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum Mild; Lark, mainly due to Japan and Turkey; Fortune in the Philippines; and "Others," notably due to: the impact of the deconsolidation of RBH in Canada; mid-price Sampoerna U in Indonesia and Muratti in Turkey; and low-price Baronet in Mexico and Morven in Pakistan.

The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU (notably Italy), Eastern Europe (notably Russia and Ukraine) and Japan, partly offset by PMI Duty Free.

International Share of Market

PMI's total international market share (excluding China and the U.S.), decreased by 0.4 points to 27.7%, reflecting:

Total international market share for cigarettes of 24.8%, down by 1.2 points; and Total international market share for heated tobacco units of 2.9%, up by 0.8 points.

PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.9 points to 25.8%, mainly reflecting: out-switching to heated tobacco units, as well as lower cigarette market share and/or an unfavorable geographic mix impact, notably in Indonesia, Mexico, Pakistan, the Philippines, PMI Duty Free and Turkey, partly offset by Germany and Russia.

CONSOLIDATED FINANCIAL SUMMARY

Second-Quarter

Financial Summary -                                                                                                             Change                                                                                                                           Variance
Quarters Ended June 30,                                                                                                                                                                                  Fav./(Unfav.)                                                                                                                                        Fav./(Unfav.)
                                                                      ----------------------------------------  ------------------------------                       --------------------------------------------------------------------------------                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    2020                                 2019                                   Total                                     Excl.                                  Total                             Cur-                                Price                               Vol/                              Cost/
                                                                                                                                                                                                             Curr.                                                                                       rency                                                                    Mix                              Other
                                                 ----------------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                                         
------------------------------------------------
Net Revenues                                                    $ 6,651      $ 7,699                    (13.6 )%                                   (9.5 )%                         (1,048 )                              (317 )                               172             (904 )                             1  
Cost of Sales                                                    (2,179 )                        (2,665 )                                      18.2 %                                    14.1 %                             486              111   --              239          136  
Marketing, Administration and Research Costs (1)                 (1,722 )                        (1,831 )                                       6.0 %                                     0.4 %                             109              101   --   --            8  
Amortization of Intangibles                                         (19 )                           (16 )                                     (18.8 )%                                  (25.0 )%                             (3 )                                 1   --   --           (4 )
------------------------------------------------                      -------------------- -------------------- ---------- --------------------                      -------------------- -------------------- -------------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Operating Income                                                $ 2,731      $ 3,187                    (14.3 )%                                  (11.0 )%                           (456 )                              (104 )                               172             (665 )                           141  
Asset Impairment & Exit Costs (2)                                   (71 )                           (23 )                                     -(100 )%                                  -(100 )%                            (48 )                    --   --   --          (48 )
------------------------------------------------                      -------------------- -------------------- ---------- --------------------                      -------------------- -------------------- -------------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Adjusted Operating Income                                       $ 2,802      $ 3,210                    (12.7 )%                                   (9.5 )%                           (408 )                              (104 )                               172             (665 )                           189  
                                                                                                                                                 
Adjusted Operating Income Margin                                   42.1 %                          41.7 %                                       0.4 pp                         -- pp                                                                                      
(1) Favorable Cost/Other variance includes the 2019 and 2020 asset impairment and exit costs.
(2) Included in Marketing, Administration and Research Costs above.

Net revenues, excluding unfavorable currency, decreased by 9.5%, mainly reflecting: unfavorable volume/mix, primarily due to lower cigarette volume (mainly in Indonesia, Italy, Japan, Mexico, the Philippines, PMI Duty Free and Russia, partly offset by Saudi Arabia), partially offset by higher heated tobacco unit volume (notably in the EU, Japan and Russia, partly offset by PMI Duty Free); partially offset by a favorable pricing variance (notably driven by Germany, Mexico, the Philippines, Russia and Saudi Arabia, partially offset by Indonesia and Turkey).

Operating income, excluding unfavorable currency, decreased by 11.0%, primarily reflecting: unfavorable volume/mix, reflecting the same factors as for net revenues noted above, partially offset by a favorable pricing variance, lower manufacturing costs (driven by productivity gains related to combustible and reduced-risk products), and lower marketing, administration and research costs (despite pandemic-related expenses in 2020 and the unfavorable net impact of asset impairment and exit costs).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income decreased by 9.5%. Adjusted operating income margin, excluding currency, was flat at 41.7%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                                             Change                                                                                                                           Variance
Six Months Ended June 30,                                                                                                                                                                                Fav./(Unfav.)                                                                                                                                        Fav./(Unfav.)
                                                                      ----------------------------------------  ------------------------------                       --------------------------------------------------------------------------------                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    2020                                 2019                                   Total                                     Excl.                                  Total                             Cur-                                Price                               Vol/                              Cost/
                                                                                                                                                                                                             Curr.                                                                                       rency                                                                    Mix                            Other(1)
                                                 ----------------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                                         
------------------------------------------------
Net Revenues                                                   $ 13,804     $ 14,450                     (4.5 )%                                   (1.8 )%                           (646 )                              (391 )                               495             (523 )                          (227 )
Cost of Sales                                                    (4,581 )                        (5,130 )                                      10.7 %                                     7.6 %                             549              160   --              268          121  
Marketing, Administration and Research Costs (2)                 (3,666 )                        (4,048 )                                       9.4 %                                    11.2 %                             382              (70 )                    --   --          452  
Amortization of Intangibles                                         (37 )                           (35 )                                      (5.7 )%                                   (8.6 )%                             (2 )                                 1   --   --           (3 )
------------------------------------------------                      -------------------- -------------------- ---------- --------------------                      -------------------- -------------------- -------------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Operating Income                                                $ 5,520      $ 5,237                      5.4 %                                    11.1 %                             283             (300 )                               495             (255 )                           343  
Asset Impairment & Exit Costs (3)                                   (71 )                           (43 )                                     (65.1 )%                                  (65.1 )%                            (28 )                    --   --   --          (28 )
Canadian Tobacco Litigation-Related Expense (3)          --         (194 )                                      +100 %                                    +100 %                             194   --   --   --          194  
Loss on Deconsolidation of RBH (3)                       --         (239 )                                      +100 %                                    +100 %                             239   --   --   --          239  
                                                                      -------------------- -------------------- ---------- --------------------                      -------------------- -------------------- -------------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Adjusted Operating Income                                       $ 5,591      $ 5,713                     (2.1 )%                                    3.1 %                            (122 )                              (300 )                               495             (255 )                           (62 )
                                                                                                                                                 
Adjusted Operating Income Margin                                   40.5 %                          39.5 %                                       1.0 pp                                    2.0 pp                                                                                      
(1) Cost/Other variance includes the impact of the RBH deconsolidation.
(2) Favorable Cost/Other variance includes the 2019 Canadian tobacco litigation-related expense, the 2019 loss on deconsolidation of RBH, the 2019 and 2020 asset impairment and exit costs, and the impact of the RBH deconsolidation.
(3) Included in Marketing, Administration and Research Costs above.

Net revenues, excluding unfavorable currency, decreased by 1.8%, reflecting: unfavorable volume/mix, primarily due to lower cigarette volume (mainly in Australia, Indonesia, Italy, Japan, Mexico, the Philippines, PMI Duty Free, Poland, Spain and Turkey, partly offset by Germany) and lower IQOS device volume (primarily in Japan), partially offset by higher heated tobacco unit volume (notably in the EU, Japan, Russia and Ukraine, partly offset by PMI Duty Free); and the unfavorable impact of $227 million, shown in "Cost/Other," mainly resulting from the deconsolidation of RBH; partly offset by a favorable pricing variance (notably driven by Australia, the GCC, Germany, Mexico, and the Philippines, partially offset by Indonesia). On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 0.5%, as detailed in Schedule 9.

Operating income, excluding unfavorable currency, increased by 11.1%, notably reflecting a favorable comparison, shown in "Cost/Other," of charges recorded in the first half of 2020 of $71 million, related to asset impairment and exit costs associated with organizational design optimization, to charges recorded in the first half of 2019 of $476 million, related to the loss on deconsolidation of RBH, the Canadian tobacco litigation-related expense, and asset impairment and exit costs associated with plant closures in Colombia and Pakistan.

Excluding these charges and unfavorable currency, adjusted operating income increased by 3.1%, primarily reflecting: a favorable pricing variance; lower manufacturing costs (driven by productivity gains related to combustible and reduced-risk products); and lower marketing, administration and research costs (despite pandemic-related expenses in 2020); partially offset by unfavorable volume/mix, mainly due to lower cigarette volume (mainly in Australia, Indonesia, Italy, Japan, Mexico, the Philippines, PMI Duty Free, Poland and Spain, partly offset by Germany), partly offset by higher heated tobacco unit volume (notably in the EU, Japan, Russia and Ukraine, partly offset by PMI Duty Free); and the net unfavorable impact resulting from the deconsolidation of RBH, included in "Cost/Other." On a like-for-like basis, adjusted operating income, excluding unfavorable currency, increased by 5.4%, as detailed in Schedule 9.

Adjusted operating income margin, excluding currency, increased by 2.0 points to 41.5%, as detailed in Schedule 8, or by 2.3 points to 41.5% on a like-for-like basis, as detailed in Schedule 9.

EUROPEAN UNION REGION

Second-Quarter

Financial Summary -                                                                                   Change                                                                                                               Variance
Quarters Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 2,475          $ 2,577               (4.0 )%            (0.1 )%                           (102 )                              (100 )                                44              (46 )                    --  
Operating Income                                 $ 1,178          $ 1,195               (1.4 )%             4.0 %                             (17 )                               (65 )                                44               (2 )                                 6  
Asset Impairment & Exit Costs (1)                    (27 )                    --     -- %   -- %                             (27 )                    --   --   --              (27 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                        $ 1,205          $ 1,195                0.8 %              6.3 %                              10              (65 )                                44               (2 )                                33  
Adjusted Operating Income Margin                    48.7 %                              46.4 %                                 2.3 pp             2.9 pp                                                                                      

Net revenues, excluding unfavorable currency, decreased by 0.1%, reflecting: unfavorable volume/mix, mainly due to lower cigarette volume (notably in Italy, Poland and Spain, partly offset by Germany), partially offset by higher heated tobacco unit volume (notably in Germany, Italy and Poland); largely offset by a favorable pricing variance (driven by higher combustible pricing, notably in Germany, partly offset by lower heated tobacco unit pricing).

Operating income, excluding unfavorable currency, increased by 4.0%, mainly reflecting: a favorable pricing variance; and lower manufacturing costs (notably in Italy); partly offset by higher marketing, administration and research costs (largely related to increased investments behind reduced-risk products, as well as 2020 asset impairment and exit costs).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 6.3%. Adjusted operating income margin, excluding currency, increased by 2.9 points to 49.3%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                   Change                                                                                                               Variance
Six Months Ended June 30,                                                                                                                                                      Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 5,010          $ 4,736                5.8 %              9.4 %                             274             (170 )                                60              384   --  
Operating Income                                 $ 2,336          $ 2,091               11.7 %             17.9 %                             245             (130 )                                60              376              (61 )
Asset Impairment & Exit Costs (1)                    (27 )                    --     -- %   -- %                             (27 )                    --   --   --              (27 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                        $ 2,363          $ 2,091               13.0 %             19.2 %                             272             (130 )                                60              376              (34 )
Adjusted Operating Income Margin                    47.2 %                              44.2 %                                 3.0 pp             3.9 pp                                                                                      

Net revenues, excluding unfavorable currency, increased by 9.4%, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume across the Region (notably in Germany, Italy and Poland), partly offset by lower cigarette volume (notably in Italy, Poland and Spain, partly offset by Germany); and a favorable pricing variance (driven by higher combustible pricing across the Region, notably in Germany, partly offset by lower heated tobacco unit and IQOS device pricing).

Operating income, excluding unfavorable currency, increased by 17.9%, mainly reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; a favorable pricing variance; and lower manufacturing costs (notably in Germany and Italy); partly offset by higher marketing, administration and research costs (largely related to increased investments behind reduced-risk products, notably in Poland, as well as 2020 asset impairment and exit costs).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 19.2%. Adjusted operating income margin, excluding currency, increased by 3.9 points to 48.1%, as detailed in Schedule 8.

Total Market, PMI Shipment & Market Share Commentaries

European Union Key Data                                                                    Second-Quarter                                                                                                      Six Months Year-to-Date
                                                         ----------------------------------------------------------------------------------------------------------------                             ------------------------------------------------------------------------------------------------------------
                                                        Change                                    Change
                                   2020                   2019                                % / pp                   2020                   2019                            % / pp
                                                         -------------------  -------------------- -------------------  -------------------- ----------------------------------                       -------------------  -------------------- -------------------  -------------------- ------------------------------
Total Market (billion units)                         115.5                  124.5             (7.3 )%                                    224.6                  231.8         (3.1 )%
                                                       
PMI Shipment Volume (million units)                                       
Cigarettes                                          40,317                 46,367            (13.0 )%                                   80,963                 85,855         (5.7 )%
Heated Tobacco Units                                 4,227                  3,043             38.9 %                                     8,888                  5,336         66.6 %
                                                         -------------------  -------------------- -------------------  -------------------- -------------- --------------------                      -------------------  -------------------- -------------------  -------------------- ---------- --------------------
Total EU                                            44,544                 49,410             (9.8 )%                                   89,851                 91,191         (1.5 )%
                                                       
PMI Market Share                                                          
Marlboro                                    17.8 %                 18.0 %                     (0.2 )                            17.7 %                 18.1 %                 (0.4 )
L&M                                          6.5 %                  6.9 %                     (0.4 )                             6.5 %                  6.8 %                 (0.3 )
Chesterfield                                 5.6 %                  5.8 %                     (0.2 )                             5.6 %                  5.9 %                 (0.3 )
Philip Morris                                2.6 %                  2.7 %                     (0.1 )                             2.6 %                  2.8 %                 (0.2 )
HEETS                                        3.9 %                  2.4 %                      1.5            3.9 %                  2.3 %                  1.6  
Others                                       3.0 %                  3.0 %           --            3.1 %                  3.0 %                  0.1  
                                                         ---------- --------- -------------------- ---------- --------- -------------------- -------------- --------------------                      ---------- --------- -------------------- ---------- --------- -------------------- ---------- --------------------

Second-Quarter

The estimated total market in the EU decreased by 7.3% to 115.5 billion units, mainly driven by:

Czech Republic, down by 16.7%, mainly reflecting lower border sales due to lockdown measures; Denmark, down by 78.5%, mainly reflecting the net unfavorable impact of estimated trade inventory movements related to a significant excise tax increase on April 1, 2020. Excluding these movements, the total estimated market increased by 0.3%; Poland, down by 13.6%, notably reflecting lower border sales due to lockdown measures, as well as the impact of price increases in the first quarter of 2020; Romania, down by 16.6%, mainly reflecting the impact of lockdown measures; and Spain, down by 17.2%, mainly reflecting lower in-bound tourism and border sales due to lockdown measures;

partly offset by

Germany, up by 5.9%, or by 4.2% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the favorable impact of reduced out-bound tourism and lower cross-border (non-domestic) purchases due to lockdown measures, partly offset by the impact of price increases in April and May 2020.

PMI's total shipment volume decreased by 9.8% to 44.5 billion units, reflecting:

lower cigarette shipment volume, mainly due to the lower total market, lower market share (notably in Italy and Poland, partly reflecting out-switching to heated tobacco units) and the net unfavorable impact of estimated distributor inventory movements (partially due to distributor inventory decreases, following increases in the first quarter related to COVID-19, notably in Italy and Spain);

partly offset by

higher heated tobacco unit shipment volume, driven by higher market share (notably in Germany, Italy and Poland).

Excluding the net unfavorable impact of estimated distributor inventory movements, PMI's total in-market sales in the Region decreased by 6.0%.

Six Months Year-to-Date

The estimated total market in the EU decreased by 3.1% to 224.6 billion units, notably due to:

Czech Republic, down by 11.5%, primarily reflecting the same factor as in the quarter; Poland, down by 6.4%, mainly reflecting the same factors as in the quarter; Romania, down by 8.7%, primarily reflecting the same factor as in the quarter; and Spain, down by 8.2%, mainly reflecting the same factors as in the quarter;

partly offset by

Germany, up by 4.9%, or by 2.3% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the same factors as in the quarter.

PMI's total shipment volume decreased by 1.5% to 89.9 billion units, reflecting:

lower cigarette shipment volume, mainly due to the lower total market, as well as lower cigarette market share (notably in Italy and Poland, partly reflecting out-switching to heated tobacco units);

partly offset by

higher heated tobacco unit shipment volume across the Region (notably in Germany, Italy and Poland), driven by higher market share.

EASTERN EUROPE REGION

Second-Quarter

Financial Summary -                                                                                   Change                                                                                                               Variance
Quarters Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                       $ 783            $ 822               (4.7 )%             5.6 %                             (39 )                               (85 )                                27               19   --  
Operating Income                                   $ 266            $ 256                3.9 %              8.2 %                              10              (11 )                                27               10              (16 )
Asset Impairment & Exit Costs (1)                     (7 )                    --     -- %   -- %                              (7 )                    --   --   --               (7 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                          $ 273            $ 256                6.6 %             10.9 %                              17              (11 )                                27               10               (9 )
Adjusted Operating Income Margin                    34.9 %                              31.1 %                                 3.8 pp             1.6 pp                                                                                      

Net revenues, excluding unfavorable currency, increased by 5.6%, reflecting: a favorable pricing variance, driven by higher combustible pricing (predominantly in Russia), partly offset by lower IQOS device pricing (mainly in Russia); and favorable volume/mix, driven by higher heated tobacco unit volume across the Region (primarily in Russia and Ukraine), partly offset by lower cigarette volume (mainly in Russia and Ukraine) and unfavorable cigarette mix in Russia.

Operating income, excluding unfavorable currency, increased by 8.2%, mainly reflecting: a favorable pricing variance; favorable volume/mix, reflecting the same drivers as for net revenues noted above; and lower manufacturing costs; partially offset by higher marketing, administration and research costs (largely related to increased investments behind reduced-risk products, notably in Russia).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 10.9%. Adjusted operating income margin, excluding currency, increased by 1.6 points to 32.7%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                   Change                                                                                                               Variance
Six Months Ended June 30,                                                                                                                                                      Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 1,571          $ 1,401               12.1 %             17.8 %                             170              (79 )                                41              208   --  
Operating Income                                   $ 365            $ 385               (5.2 )%            21.6 %                             (20 )                              (103 )                                41              139              (97 )
Asset Impairment & Exit Costs (1)                     (7 )                    --     -- %   -- %                              (7 )                    --   --   --               (7 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                          $ 372            $ 385               (3.4 )%            23.4 %                             (13 )                              (103 )                                41              139              (90 )
Adjusted Operating Income Margin                    23.7 %                              27.5 %                                (3.8 )pp            1.3 pp                                                                                      

Net revenues, excluding unfavorable currency, increased by 17.8%, reflecting: favorable volume/mix, predominantly driven by higher heated tobacco unit volume in Russia and Ukraine, partly offset by unfavorable cigarette volume/mix in Russia and lower cigarette volume in Ukraine; and a favorable pricing variance, driven by higher combustible pricing (primarily in Russia), partly offset by lower IQOS device pricing (mainly in Russia).

Operating income, excluding unfavorable currency, increased by 21.6%, mainly reflecting: favorable volume/mix, reflecting the same drivers as for net revenues noted above; and a favorable pricing variance; partly offset by higher manufacturing costs due to Russia; and higher marketing, administration and research costs (primarily related to increased investments behind reduced-risk products, notably in Russia and Ukraine).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 23.4%. Adjusted operating income margin, excluding currency, increased by 1.3 points to 28.8%, as detailed in Schedule 8.

Total Market, PMI Shipment & Market Share Commentaries

PMI Shipment Volume                             Second-Quarter                                               Six Months Year-to-Date
                                          -----------------------------------------------------------                          ----------------------------------------------------------
(million units)          2020     2019    Change     2020     2019   Change
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- ------
Cigarettes             23,657   27,080   (12.6)%   45,076   47,400   (4.9)%
Heated Tobacco Units    5,126    2,807     82.6%    9,492    4,355    +100%
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- ------

Second-Quarter

The estimated total market in Eastern Europe decreased, notably due to:

Russia, down by 4.1%, or by 6.6% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the impact of price increases, partly offset by the impact of a decrease in the prevalence of illicit trade due to lockdown measures; and Ukraine, down by 15.0%, mainly reflecting the impact of excise tax-driven price increases and reduced adult smoker average daily consumption due to lockdown measures.

PMI's total shipment volume decreased by 3.7% to 28.8 billion units, mainly due to:

Ukraine, down by 14.7%, or by 11.1% excluding the net unfavorable impact of estimated distributor inventory movements, mainly reflecting the lower total market, partly offset by a higher market share, driven by heated tobacco units.

Six Months Year-to-Date

The estimated total market in Eastern Europe decreased, notably due to:

Russia, down by 2.1%, or by 6.4% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the same factors as in the quarter; and Ukraine, down by 10.9%, mainly reflecting the same factors as in the quarter.

PMI's total shipment volume increased by 5.4% to 54.6 billion units, mainly due to:

Russia, up by 10.3%, primarily reflecting a higher market share, driven by heated tobacco units, partly offset by the lower total market;

partly offset by

Ukraine, down by 5.7%, mainly due to the same factors as in the quarter.

MIDDLE EAST & AFRICA REGION

Second-Quarter

Financial Summary -                                                                                   Change                                                                                                        Variance
Quarters Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                     Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                        Cur-                           Price                               Vol/                              Cost/
                                                                                                                                                                                Curr.                                                                       rency                                                               Mix                              Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                          
---------------------------------
Net Revenues                                       $ 704          $ 1,004              (29.9 )%           (28.3 )%                           (300 )                     (16 )                                45             (335 )                             6  
Operating Income                                   $ 237            $ 441              (46.3 )%           (47.4 )%                           (204 )                       5               45             (264 )                            10  
Asset Impairment & Exit Costs (1)                     (9 )                    --     -- %   -- %                              (9 )          --   --   --           (9 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- ---------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Adjusted Operating Income                          $ 246            $ 441              (44.2 )%           (45.4 )%                           (195 )                       5               45             (264 )                            19  
Adjusted Operating Income Margin                    34.9 %                              43.9 %                                (9.0 )pp          (10.4 )pp                                                                           

Net revenues, excluding unfavorable currency, decreased by 28.3%, primarily reflecting: unfavorable volume/mix, mainly due to lower cigarette volume (predominantly in North Africa, PMI Duty Free and South Africa, partly offset by Saudi Arabia) and lower heated tobacco unit volume in PMI Duty Free; partially offset by a favorable pricing variance, driven mainly by combustible pricing in Saudi Arabia, partly offset by Turkey.

Operating income, excluding favorable currency, decreased by 47.4%, mainly reflecting: unfavorable volume/mix, due to the same factors as for net revenues noted above; partly offset by a favorable pricing variance.

Excluding asset impairment, exit costs and favorable currency, adjusted operating income decreased by 45.4%. Adjusted operating income margin, excluding currency, decreased by 10.4 points to 33.5%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                   Change                                                                                                  Variance
Six Months Ended June 30,                                                                                                                                                      Fav./(Unfav.)                                                                                                               Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ---------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                        Cur-                           Price                               Vol/                              Cost/
                                                                                                                                                                                Curr.                                                                       rency                                                               Mix                              Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 1,580          $ 1,931              (18.2 )%           (17.2 )%                           (351 )                     (18 )                               117             (411 )                           (39 )
Operating Income                                   $ 558            $ 785              (28.9 )%           (27.1 )%                           (227 )                     (14 )                               117             (294 )                           (36 )
Asset Impairment & Exit Costs (1)                     (9 )                    --     -- %   -- %                              (9 )          --   --   --           (9 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- ---------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- ---------
Adjusted Operating Income                          $ 567            $ 785              (27.8 )%           (26.0 )%                           (218 )                     (14 )                               117             (294 )                           (27 )
Adjusted Operating Income Margin                    35.9 %                              40.7 %                                (4.8 )pp           (4.3 )pp                                                                           

Net revenues, excluding unfavorable currency, decreased by 17.2%, reflecting: unfavorable volume/mix, mainly due lower cigarette volume (mainly in PMI Duty Free and Turkey, partly offset by Kuwait) and lower heated tobacco unit volume in PMI Duty Free; and lower fees for certain distribution rights billed to customers in certain markets, shown in "Cost/Other"; partially offset by a favorable pricing variance, driven by combustible pricing (mainly in the GCC, particularly Saudi Arabia).

Operating income, excluding unfavorable currency, decreased by 27.1%, mainly reflecting: unfavorable volume/mix, predominantly due to lower cigarette and heated tobacco unit volume in PMI Duty Free; and unfavorable "Cost/Other," mainly due to lower fees for certain distribution rights, as noted above for net revenues; partially offset by a favorable pricing variance.

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income decreased by 26.0%. Adjusted operating income margin, excluding currency, decreased by 4.3 points to 36.4%, as detailed in Schedule 8.

Total Market, PMI Shipment & Market Share Commentaries

PMI Shipment Volume                             Second-Quarter                                                Six Months Year-to-Date
                                          -----------------------------------------------------------                          -----------------------------------------------------------
(million units)          2020     2019    Change     2020     2019    Change
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- -------
Cigarettes             27,188   31,659   (14.1)%   57,184   64,963   (12.0)%
Heated Tobacco Units      185      719   (74.3)%      655    1,473   (55.5)%
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- -------

Second-Quarter

The estimated total market in the Middle East & Africa decreased, mainly due to:

Egypt, down by 19.6%, notably reflecting pandemic-related supply-chain shortages involving competitors' products and reductions in adult smoker average daily consumption during lockdown; International Duty Free, down by 82.9%, reflecting the impact of government travel restrictions and reduced passenger traffic due to the pandemic; South Africa, down by 100%, reflecting the impact of the pandemic-related ban on all tobacco sales effective March 27, 2020; and Turkey, down by 6.8%, or by 16.9% excluding the net favorable impact of estimated trade inventory movements, mainly reflecting the impact of lockdown measures on adult smoker average daily consumption, as well as a higher prevalence of illicit trade related to cut tobacco following significant industry-wide price increases in 2019.

PMI's total shipment volume decreased by 15.5% to 27.4 billion units, notably due to:

Egypt, down by 15.6%, or by 12.1% excluding the net unfavorable impact of estimated distributor inventory movements, mainly reflecting the lower total market, partly offset by a higher market share, primarily driven by the impact of supply chain shortages for competitors' products; PMI Duty Free, down by 94.4%, or by 82.1% excluding the net unfavorable impact of estimated distributor inventory movements (driven by cigarettes), mainly reflecting the lower total market; and Turkey, down by 6.6%, mainly reflecting the lower total market;

partly offset by

Saudi Arabia, up by +100%. Excluding the net favorable impact of estimated distributor inventory movements of 1.7 billion cigarettes, largely attributable to the timing of shipments in 2019, PMI's in-market sales increased by 11.2%, mainly driven by the reduced prevalence of non-domestic products and the shift from duty-free to domestic sales due to the impact of pandemic-related government travel restrictions and reduced passenger traffic.

Six Months Year-to-Date

The estimated total market in the Middle East & Africa decreased, mainly due to:

Egypt, down by 6.9%, notably reflecting the same factors as in the quarter; International Duty Free, down by 57.8%, reflecting the same factors as in the quarter; South Africa, down by 50.8%, primarily reflecting the same factor as in the quarter; and Turkey, down by 9.3%, mainly reflecting the same factors as in the quarter.

PMI's total shipment volume decreased by 12.9% to 57.8 billion units, notably due to:

PMI Duty Free, down by 55.9%, mainly reflecting the lower total market; and Turkey, down by 17.4%, mainly reflecting the lower total market and lower market share, due primarily to adult smoker down-trading following the 2019 price increases.

SOUTH & SOUTHEAST ASIA REGION

Second-Quarter

Financial Summary -                                                                                   Change                                                                                                          Variance
Quarters Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                       Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                        Cur-                           Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                       rency                                                               Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                       $ 889          $ 1,248              (28.8 )%           (25.1 )%                           (359 )                     (46 )                               (15 )                              (298 )                    --  
Operating Income                                   $ 289            $ 492              (41.3 )%           (38.0 )%                           (203 )                     (16 )                               (15 )                              (218 )                                46  
Asset Impairment & Exit Costs (1)                    (11 )                    --     -- %   -- %                             (11 )          --   --   --              (11 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- ---------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                          $ 300            $ 492              (39.0 )%           (35.8 )%                           (192 )                     (16 )                               (15 )                              (218 )                                57  
Adjusted Operating Income Margin                    33.7 %                              39.4 %                                (5.7 )pp           (5.6 )pp                                                                           

Net revenues, excluding unfavorable currency, decreased by 25.1%, reflecting: unfavorable volume/mix, mainly due to lower cigarette volume in Indonesia and the Philippines, partly offset by favorable mix in Indonesia; and an unfavorable pricing variance, principally in Indonesia, partly offset by the Philippines.

Operating income, excluding unfavorable currency, decreased by 38.0%, primarily reflecting: unfavorable volume/mix, due to the same factors as for net revenues noted above; and an unfavorable pricing variance; partly offset by lower marketing, administration and research costs; and lower manufacturing costs (mainly in Indonesia).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income decreased by 35.8%. Adjusted operating income margin, excluding currency, decreased by 5.6 points to 33.8%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                     Change                                                                                                     Variance
Six Months Ended June 30,                                                                                                                                        Fav./(Unfav.)                                                                                                                  Fav./(Unfav.)
                                                       ----------------------------------------  ------------------------------                       -------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                 2019                           Total            Excl.                  Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                             Curr.                                                                       rency                                                                    Mix                                Other
                                  ----------------------------------------  ------------------------------                       ------------------------  -------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 2,140      $ 2,361     (9.4 )%  (8.2 )%                           (221 )                               (27 )                               144             (338 )                    --  
Operating Income                                   $ 888        $ 932     (4.7 )%  (5.0 )%                            (44 )                                 3              144             (236 )                                45  
Asset Impairment & Exit Costs (1)                    (11 )                           (20 )                      45.0 %   45.0 %                               9   --   --   --                9  
---------------------------------                      -------------------- -------------------- ---------- --------------------                      ---- --- ---- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                          $ 899        $ 952     (5.6 )%  (5.9 )%                            (53 )                                 3              144             (236 )                                36  
Adjusted Operating Income Margin                    42.0 %                          40.3 %                       1.7 pp   1.0 pp                                                                                      

Net revenues, excluding unfavorable currency, decreased by 8.2%, reflecting: unfavorable volume/mix, primarily due to lower cigarette volume in Indonesia, Pakistan and the Philippines, partly offset by favorable mix in Indonesia; partially offset by a favorable pricing variance, principally driven by the Philippines, partly offset by Indonesia.

Operating income, excluding favorable currency, decreased by 5.0%, mainly reflecting: unfavorable volume/mix, due to the same factors as for net revenues noted above; partially offset by a favorable pricing variance; lower marketing, administration and research costs; and lower manufacturing costs (notably in Indonesia).

Excluding asset impairment, exit costs and favorable currency, adjusted operating income decreased by 5.9%. Adjusted operating income margin, excluding currency, increased by 1.0 point to 41.3%, as detailed in Schedule 8.

Total Market, PMI Shipment & Market Share Commentaries

PMI Shipment Volume                                         Second-Quarter                                                                        Six Months Year-to-Date
                                          -----------------------------------------------------------------------------------                          -----------------------------------------------------------------------------------
(million units)                  2020             2019            Change             2020             2019            Change
                                          -------------- -------------------- -------------- -------------------- ---------------                      -------------- -------------------- -------------- -------------------- ---------------
Cigarettes                     33,346           46,376           (28.1)%           70,941           87,868           (19.3)%
Heated Tobacco Units   --   --   --%   --   --   --%
                                          -------------- -------------------- -------------- -------------------- ---------------                      -------------- -------------------- -------------- -------------------- ---------------

Second-Quarter

The estimated total market in South & Southeast Asia decreased, notably due to:

Bangladesh, down by 29.9%, or by 5.3% excluding the net unfavorable impact of estimated trade inventory movements, primarily reflecting the impact of lockdown restrictions on tobacco product availability; India, down by 37.6%, primarily reflecting the impact of lockdown restrictions on the movement of certain products, including tobacco; Indonesia, down by 17.5%, or by 22.1% excluding the net favorable impact of estimated trade inventory movements, mainly reflecting the impact of pandemic-related measures on adult smoker average daily consumption, as well as the impact of excise tax-driven price increases; Pakistan, down by 25.8%, mainly reflecting the impact of excise tax-driven price increases in June 2019 and value brand price increases in February 2020, coupled with the impact of trade supply disruption on tobacco product availability, due to lockdown measures; and the Philippines, down by 24.6%, mainly reflecting the impact of the strict enforcement of nationwide quarantine, as well as industry-wide price increases in the third quarter of 2019.

PMI's total shipment volume decreased by 28.1% to 33.3 billion units, notably due to:

Indonesia, down by 27.7%, reflecting the lower total market, as well as a lower market share, mainly due to: the impact of elevated price gaps in the tier one segment (partly due to the delay in minimum price enforcement), adult smoker down-trading to the tax-advantaged 'below tier one' segment, and the disproportionate impact of stricter public mobility restrictions in urban areas, where PMI's share is higher; Pakistan, down by 39.2%, due to the lower total market and a lower market share; and the Philippines, down by 25.7%, mainly reflecting the lower total market.

Six Months Year-to-Date

The estimated total market in South & Southeast Asia decreased, notably due to:

Bangladesh, down by 5.6%, primarily reflecting the same factor as in the quarter; India, down by 23.5%, mainly reflecting the same factor as in the quarter; Indonesia, down by 9.5%, or by 14.8% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the same factors as in the quarter; Pakistan, down by 25.6%, mainly due to the same factors as in the quarter; and the Philippines, down by 17.1%, mainly reflecting the same factors as in the quarter.

PMI's total shipment volume decreased by 19.3% to 70.9 billion units, notably due to:

Indonesia, down by 18.2%, reflecting the lower total market, as well as a lower market share, mainly due to the same factors as in the quarter; Pakistan, down by 37.4%, mainly due to the same factors as in the quarter; and the Philippines, down by 17.7%, mainly reflecting the same factor as in the quarter.

EAST ASIA & AUSTRALIA REGION

Second-Quarter

Financial Summary -                                                                                   Change                                                                                                               Variance
Quarters Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 1,432          $ 1,521               (5.9 )%            (5.1 )%                            (89 )                               (12 )                                30             (107 )                    --  
Operating Income                                   $ 669            $ 642                4.2 %              5.9 %                              27              (11 )                                30              (85 )                                93  
Asset Impairment & Exit Costs (1)                    (13 )                    --     -- %   -- %                             (13 )                    --   --   --              (13 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                          $ 682            $ 642                6.2 %              7.9 %                              40              (11 )                                30              (85 )                               106  
Adjusted Operating Income Margin                    47.6 %                              42.2 %                                 5.4 pp             5.8 pp                                                                                      

Net revenues, excluding unfavorable currency, decreased by 5.1%, reflecting: unfavorable volume/mix, mainly due to lower cigarette volume (primarily in Australia and Japan) and unfavorable heated tobacco unit mix in Japan, partly offset by higher heated tobacco unit volume in Japan; partially offset by a favorable pricing variance, mainly driven by higher heated tobacco unit pricing in Japan and higher combustible pricing in Australia, partly offset by lower IQOS device pricing in Japan.

Operating income, excluding unfavorable currency, increased by 5.9%, mainly reflecting: lower manufacturing costs (notably related to Japan and Korea); lower marketing, administration and research costs (primarily in Japan); and a favorable pricing variance; partly offset by unfavorable volume/mix, due to the same factors as for net revenues noted above.

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 7.9%. Adjusted operating income margin, excluding currency, increased by 5.8 points to 48.0%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                   Change                                                                                                               Variance
Six Months Ended June 30,                                                                                                                                                      Fav./(Unfav.)                                                                                                                            Fav./(Unfav.)
                                                       ----------------------------------------  ----------------------------------                       ---------------------------------------------------                         ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                   2019                                  Total                      Excl.                       Total                             Cur-                                Price                               Vol/                                Cost/
                                                                                                                                                                                Curr.                                                                            rency                                                                    Mix                                Other
                                  ----------------------------------------  ----------------------------------                       ----------------------------------  -----------------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ----------------------------------
(in millions)                          
---------------------------------
Net Revenues                                     $ 2,687          $ 2,842               (5.5 )%            (4.7 )%                           (155 )                               (21 )                                43             (177 )                    --  
Operating Income                                 $ 1,155          $ 1,069                8.0 %              9.4 %                              86              (15 )                                43              (96 )                               154  
Asset Impairment & Exit Costs (1)                    (13 )                    --     -- %   -- %                             (13 )                    --   --   --              (13 )
---------------------------------                      -------------------- -------------------- -------------- --------------------                      -------------- --- -------------- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- --------------------
Adjusted Operating Income                        $ 1,168          $ 1,069                9.3 %             10.7 %                              99              (15 )                                43              (96 )                               167  
Adjusted Operating Income Margin                    43.5 %                              37.6 %                                 5.9 pp             6.1 pp                                                                                      

Net revenues, excluding unfavorable currency, decreased by 4.7%, reflecting: unfavorable volume/mix, mainly due to lower cigarette volume in Japan, unfavorable volume/mix in Australia, lower IQOS device volume in Japan and unfavorable heated tobacco unit mix in Japan, partly offset by higher heated tobacco unit volume in Japan; partially offset by a favorable pricing variance, mainly driven by higher combustible pricing in Australia and higher heated tobacco pricing in Japan, partly offset by lower IQOS device pricing in Japan.

Operating income, excluding unfavorable currency, increased by 9.4%, mainly reflecting: lower marketing, administration and research costs (notably in Japan); lower manufacturing costs (mainly related to Japan and Korea); and a favorable pricing variance; partly offset by unfavorable volume/mix, primarily due to lower cigarette volume in Japan, unfavorable volume/mix in Australia and unfavorable heated tobacco unit mix in Japan, partly offset by higher heated tobacco unit volume in Japan.

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income increased by 10.7%. Adjusted operating income margin, excluding currency, increased by 6.1 points to 43.7%, as detailed in Schedule 8.

Total Market, PMI Shipment & Market Share Commentaries

PMI Shipment Volume                             Second-Quarter                                               Six Months Year-to-Date
                                          -----------------------------------------------------------                          ----------------------------------------------------------
(million units)          2020     2019    Change     2020     2019   Change
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- ------
Cigarettes             12,071   13,845   (12.8)%   24,370   25,958   (6.1)%
Heated Tobacco Units    9,076    8,428      7.7%   16,198   15,277     6.0%
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- ------

Second-Quarter

The estimated total market in East Asia & Australia, excluding China, decreased, notably due to:

Japan, down by 12.7%, mainly reflecting the impact of reduced adult smoker social consumption occasions due to pandemic-related measures, as well as adult smoker out-switching from cigarettes to the cigarillo category;

partly offset by

Korea, up by 3.9%, notably driven by the shift of adult smokers from duty-free to domestic purchases due to the pandemic-related decline in international travel.

PMI's total shipment volume decreased by 5.1% to 21.1 billion units, notably in:

Japan, down by 6.4%, mainly due to the lower total market, partly offset by a higher market share driven by heated tobacco units.

Six Months Year-to-Date

The estimated total market in East Asia & Australia, excluding China, decreased, notably due to:

Japan, down by 9.4%, mainly reflecting the same factors as in the quarter;

partly offset by

Korea, up by 3.8%, notably due the same factor as in the quarter.

PMI's total shipment volume decreased by 1.6% to 40.6 billion units, notably in:

Japan, down by 1.0%, or by 3.6% excluding the net favorable impact of estimated distributor inventory movements, mainly due to the same factors as in the quarter; and Korea, down by 4.6%, mainly due to a lower market share, primarily reflecting the unfavorable impact of the growth of the cigarette new taste dimension segment, in which PMI has a relatively low share, partly offset by the higher total market.

LATIN AMERICA & CANADA REGION

Second-Quarter

Financial Summary -                                                                       Change                                                                                                    Variance
Quarters Ended June 30,                                                                                                                                            Fav./(Unfav.)                                                                                                                 Fav./(Unfav.)
                                                       ----------------------------------------  ------------------------------                       ----------------------------------                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2020                                 2019                           Total              Excl.                   Total                             Cur-                                Price                               Vol/                              Cost/
                                                                                                                                                               Curr.                                                                        rency                                                                    Mix                              Other
                                  ----------------------------------------  ------------------------------                       -------------------------  ---------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                          
---------------------------------
Net Revenues                                       $ 368        $ 527     (30.2 )%   (19.2 )%                           (159 )                               (58 )                                41             (137 )                            (5 )
Operating Income                                    $ 92        $ 161     (42.9 )%   (39.1 )%                            (69 )                                (6 )                                41             (106 )                             2  
Asset Impairment & Exit Costs (1)                     (4 )                           (23 )                       82.6 %     82.6 %                              19   --   --   --           19  
---------------------------------                      -------------------- -------------------- ---------- --------------------                      ----- ---- ----- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Adjusted Operating Income                           $ 96        $ 184     (47.8 )%   (44.6 )%                            (88 )                                (6 )                                41             (106 )                           (17 )
Adjusted Operating Income Margin                    26.1 %                          34.9 %                       (8.8 )pp  (11.0 )pp                                                                                     
(1) Included in marketing, administration and research costs at the consolidated operating income level.

Net revenues, excluding unfavorable currency, decreased by 19.2%, mainly reflecting: unfavorable volume/mix, primarily due to lower cigarette volume in Argentina, Colombia and Mexico; partly offset by a favorable pricing variance, predominantly driven by higher combustible pricing in Mexico.

Operating income, excluding unfavorable currency, decreased by 39.1%, primarily reflecting: unfavorable volume/mix (mainly due to lower cigarette volume in Mexico); partly offset by a favorable pricing variance; and lower marketing, administration and research costs (driven by the favorable net impact of 2019 and 2020 asset impairment and exit costs).

Excluding asset impairment, exit costs and unfavorable currency, adjusted operating income decreased by 44.6%. Adjusted operating income margin, excluding currency, decreased by 11.0 points to 23.9%, as detailed in Schedule 8.

Six Months Year-to-Date

Financial Summary -                                                                                     Change                                                                                                    Variance
Six Months Ended June 30,                                                                                                                                                        Fav./(Unfav.)                                                                                                                 Fav./(Unfav.)
                                                                     ----------------------------------------  ------------------------------                       ----------------------------------                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   2020                                 2019                           Total              Excl.                   Total                             Cur-                                Price                               Vol/                              Cost/
                                                                                                                                                                             Curr.                                                                        rency                                                                    Mix                            Other(1)
                                                ----------------------------------------  ------------------------------                       -------------------------  ---------                       ------------------------------  ----------------------------------  ----------------------------------  ----------------------------------  ------------------------------
(in millions)                                        
-----------------------------------------------
Net Revenues                                                     $ 816      $ 1,179     (30.8 )%   (24.3 )%                           (363 )                               (76 )                                90             (189 )                          (188 )
Operating Income (Loss)                                          $ 218        $ (25 )                       +100 %     +100 %                             243              (41 )                                90             (144 )                           338  
Asset Impairment & Exit Costs (2)                                   (4 )                           (23 )                       82.6 %     82.6 %                              19   --   --   --           19  
Canadian Tobacco Litigation-Related Expense (2)         --         (194 )                       +100 %     +100 %                             194   --   --   --          194  
Loss on Deconsolidation of RBH (2)                      --         (239 )                       +100 %     +100 %                             239   --   --   --          239  
-----------------------------------------------                      -------------------- -------------------- ---------- --------------------                      ----- ---- ----- --------------------                      ---------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ---------- --------------------
Adjusted Operating Income                                        $ 222        $ 431     (48.5 )%   (39.0 )%                           (209 )                               (41 )                                90             (144 )                          (114 )
Adjusted Operating Income Margin                                  27.2 %                          36.6 %                       (9.4 )pp   (7.1 )pp                                                                                     
(1) Cost/Other variance includes the impact of the RBH deconsolidation.
(2) Included in marketing, administration and research costs at the consolidated operating income level.

Net revenues, excluding unfavorable currency, decreased by 24.3%, reflecting: unfavorable volume/mix, due to lower cigarette volume, notably in Argentina and Mexico; and the unfavorable impact of the deconsolidation of RBH shown in "Cost/Other"; partly offset by a favorable pricing variance, mainly driven by higher combustible pricing in Mexico. On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 10.7%, as detailed in Schedule 10.

Operating income, excluding unfavorable currency, increased by +100%, notably reflecting a favorable comparison, shown in "Cost/Other," of charges recorded in the first half of 2020 of $4 million, related to asset impairment and exit costs associated with organizational design optimization, to charges recorded in the first half of 2019 of $456 million, related to the loss on deconsolidation of RBH, the Canadian tobacco litigation-related expense, and asset impairment and exit costs associated with a plant closure in Colombia.

Excluding these charges and unfavorable currency, adjusted operating income decreased by 39.0%, reflecting: unfavorable volume/mix, due to the same factor as for net revenues noted above; and the unfavorable impact of the deconsolidation of RBH, included in "Cost/Other"; partly offset by a favorable pricing variance. On a like-for-like basis, excluding unfavorable currency, adjusted operating income decreased by 14.7%, as detailed in Schedule 10.

Adjusted operating income margin, excluding currency, decreased by 7.1 points to 29.5%, as detailed in Schedule 8, or by 1.4 points to 29.2% on a like-for-like basis, as detailed in Schedule 10.

Total Market, PMI Shipment & Market Share Commentaries

PMI Shipment Volume                             Second-Quarter                                                Six Months Year-to-Date
                                          -----------------------------------------------------------                          -----------------------------------------------------------
(million units)          2020     2019    Change     2020     2019    Change
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- -------
Cigarettes             14,780   18,472   (20.0)%   29,843   36,052   (17.2)%
Heated Tobacco Units       94       59     59.3%      202      113     78.8%
                                          ------ -------------------- ------ -------------------- -------                      ------ -------------------- ------ -------------------- -------

Second-Quarter

The estimated total market in Latin America & Canada decreased, notably due to:

Argentina, down by 7.4%, mainly reflecting retail out-of-stock (particularly of PMI brands) due to temporary factory shutdowns related to the pandemic, as well as the impact of price increases, partly offset by the net favorable impact of estimated trade inventory movements; Colombia, down by 25.6%, primarily reflecting reduced product availability and adult smoker average daily consumption due to lockdown measures; and Mexico, down by 24.4%, or by 16.8% excluding the net unfavorable impact of estimated trade inventory movements (primarily related to July 2019 price increases), mainly due to the impact of excise tax-driven price increases in January 2020, as well as the impact of pandemic-related measures on adult smoker average daily consumption;

partly offset by

Brazil, up by 8.7%, mainly reflecting a lower estimated prevalence of illicit trade due to: reduced price gaps with legal products and the impact of border restrictions imposed as a result of the pandemic.

PMI's total shipment volume decreased by 19.7% to 14.9 billion units, notably due to:

Argentina, down by 15.2%, primarily reflecting the lower total market and a lower market share, mainly due to the impact of retail out-of-stock of PMI brands, as well as adult smoker down-trading to ultra-low-price brands produced by local manufacturers; and Mexico, down by 32.5%, mainly due to the lower total market (partly reflecting the net unfavorable impact of estimated trade inventory movements noted above) and lower market share, primarily reflecting adult smoker down-trading and the impact of the pandemic on adult smoker consumption patterns.

Six Months Year-to-Date

The estimated total market in Latin America & Canada decreased, notably due to:

Argentina, down by 6.3%, mainly reflecting the same factors as in the quarter; Colombia, down by 15.3%, primarily due to the same factors as in the quarter; and Mexico, down by 18.4%, or by 13.6% excluding the net unfavorable impact of estimated trade inventory movements, mainly due to the same factors as in the quarter;

partly offset by

Brazil, up by 9.5%, mainly reflecting the same factors as in the quarter.

PMI's total shipment volume decreased by 16.9% to 30.0 billion units, or by 14.6% on a like-for-like basis, notably due to:

Argentina, down by 14.2%, primarily reflecting the same factors as in the quarter; Canada, down by 34.3%, due to the unfavorable impact of the deconsolidation of RBH; and Mexico, down by 25.0%, mainly due the same factors as in the quarter.

Philip Morris International: Delivering a Smoke-Free Future

Philip Morris International (PMI) is leading a transformation in the tobacco industry to create a smoke-free future and ultimately replace cigarettes with smoke-free products to the benefit of adults who would otherwise continue to smoke, society, the company and its shareholders. PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes, as well as smoke-free products and associated electronic devices and accessories, and other nicotine-containing products in markets outside the United States. In addition, PMI ships a version of its IQOS Platform 1 device and its consumables authorized by the U.S. Food and Drug Administration to Altria Group, Inc. for sale in the U.S. under license. PMI is building a future on a new category of smoke-free products that, while not risk-free, are a much better choice than continuing to smoke. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, PMI aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements. PMI's smoke-free IQOS product portfolio includes heat-not-burn and nicotine-containing vapor products. As of June 30, 2020, PMI estimates that approximately 11.2 million adult smokers around the world have already stopped smoking and switched to PMI's heat-not-burn product, available for sale in 57 markets in key cities or nationwide under the IQOS brand. For more information, please visit www.pmi.com and www.pmiscience.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.

PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent. Future results are also subject to the lower predictability of our reduced-risk product category's performance.

The COVID-19 pandemic has created significant societal and economic disruption, and resulted in closures of stores, factories and offices, and restrictions on manufacturing, distribution and travel, all of which will adversely impact our business, results of operations, cash flows and financial position during the continuation of the pandemic. Our business continuity plans and other safeguards in place may not be effective to mitigate the impact of the pandemic. Currently, significant risks include our diminished ability to convert adult smokers to our RRPs, significant volume declines in our duty-free business and certain other key markets, disruptions or delays in our manufacturing and supply chain, increased currency volatility, and delays in certain cost saving, transformation and restructuring initiatives. Our business could also be adversely impacted if key personnel or a significant number of employees or business partners become unavailable due to the COVID-19 outbreak. The significant adverse impact of COVID-19 on the economic or political conditions in markets in which we operate could result in changes to the preferences of our adult consumers and lower demand for our products, particularly for our mid-price or premium-price brands. Continuation of the pandemic could disrupt our access to the credit markets or increase our borrowing costs. Governments may temporarily be unable to focus on the development of science-based regulatory frameworks for the development and commercialization of RRPs or on the enforcement or implementation of regulations that are significant to our business. In addition, messaging about the potential negative impacts of the use of our products on COVID-19 risks may lead to increasingly restrictive regulatory measures on the sale and use of our products, negatively impact demand for our products, the willingness of adult consumers to switch to our RRPs and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of RRPs.

The impact of these risks also depends on factors beyond our knowledge or control, including the duration and severity of the outbreak, its recurrence in our key markets, actions taken to contain its spread and to mitigate its public health effects, and the ultimate economic consequences thereof.

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, 2020. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.

Key Terms, Definitions and Explanatory Notes

General

"PMI" refers to Philip Morris International Inc. and its subsidiaries. Trademarks and service marks that are the registered property of, or licensed by, the subsidiaries of PMI, are italicized. Comparisons are made to the same prior-year period unless otherwise stated. Unless otherwise stated, references to total industry, total market, PMI shipment volume and PMI market share performance reflect cigarettes and heated tobacco units. References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the U.S., total industry, total market and market shares are PMI estimates for tax-paid products based on the latest available data from a number of internal and external sources and may, in defined instances, exclude the People's Republic of China and/or PMI's duty free business. In addition, to reflect the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective March 22, 2019, PMI's total market share has been restated for previous periods. Estimates for second-quarter 2020 and six months year-to-date 2020 total industry volume and market share in certain geographies reflect limitations on the availability and accuracy of industry data during pandemic-related restrictions. "OTP" is defined as "other tobacco products," primarily roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and does not include reduced-risk products. "Combustible products" is the term PMI uses to refer to cigarettes and OTP, combined. In-market sales, or "IMS," is defined as sales to the retail channel, depending on the market and distribution model. "Total shipment volume" is defined as the combined total of cigarette shipment volume and heated tobacco unit shipment volume. "North Africa" is defined as Algeria, Egypt, Libya, Morocco and Tunisia. "The GCC" (Gulf Cooperation Council) is defined as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). Following the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), PMI will continue to report the volume of brands sold by RBH for which other PMI subsidiaries are the trademark owner. These include HEETS, Next, Philip Morris and Rooftop. From time to time, PMI's shipment volumes are subject to the impact of distributor inventory movements, and estimated total industry/market volumes are subject to the impact of inventory movements in various trade channels that include estimated trade inventory movements of PMI's competitors arising from market-specific factors that significantly distort reported volume disclosures. Such factors may include changes to the manufacturing supply chain, shipment methods, consumer demand, timing of excise tax increases or other influences that may affect the timing of sales to customers. In such instances, in addition to reviewing PMI shipment volumes and certain estimated total industry/market volumes on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements. Management also believes that disclosing PMI shipment volumes and estimated total industry/market volumes in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements, such as on an IMS basis, improves the comparability of performance and trends for these measures over different reporting periods.

Financial

Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods. Net revenues related to RRPs represent the sale of heated tobacco units, IQOS devices and related accessories, and other nicotine-containing products, primarily e-vapor products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods. "Cost of sales" consists principally of: tobacco leaf, non-tobacco raw materials, labor and manufacturing costs; shipping and handling costs; and the cost of IQOS devices produced by third-party electronics manufacturing service providers. Estimated costs associated with IQOS warranty programs are generally provided for in cost of sales in the period the related revenues are recognized. "Marketing, administration and research costs" include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (including general corporate expenses), and costs incurred to develop new products. The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses. "Cost/Other" in the Consolidated Financial Summary table of total PMI and the six operating segments of this release reflects the currency-neutral variances of: cost of sales (excluding the volume/mix cost component); marketing, administration and research costs (including asset impairment and exit costs, the Canadian tobacco litigation-related expense and the charge related to the deconsolidation of RBH in Canada); and amortization of intangibles. "Cost/Other" also includes the currency-neutral net revenue variance, unrelated to volume/mix and price components, attributable to fees for certain distribution rights billed to customers in certain markets in the ME&A Region, as well as the impact of the deconsolidation in RBH. "Adjusted Operating Income Margin" is calculated as adjusted operating income, divided by net revenues. "Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation, amortization and equity (income)/loss in unconsolidated subsidiaries, excluding asset impairment and exit costs, and unusual items. "Net debt" is defined as total debt, less cash and cash equivalents. Management reviews net revenues, OI, OI margins, operating cash flow and earnings per share, or "EPS," on an adjusted basis, which may exclude the impact of currency and other items such as acquisitions, asset impairment and exit costs, tax items and other special items. For example, PMI's adjusted diluted EPS and other impacted results reflect the loss on deconsolidation of RBH and the Canadian tobacco litigation-related expense, recorded in the first quarter of 2019, asset impairment and exit costs associated with plant closures in Pakistan and Colombia, recorded in the first and second quarters of 2019, respectively, and asset impairment and exit costs associated with organizational design optimization, recorded in the second quarter of 2020. PMI believes that the adjusted measures, including pro forma measures, will provide useful insight into underlying business trends and results, and will provide a more meaningful performance comparison for the period during which RBH remains under CCAA protection. For PMI's 2018 pro forma adjusted diluted EPS by quarter and year-to-date, see Schedule 3 in PMI's second-quarter 2019 earnings release. Management reviews these measures because they exclude changes in currency exchange rates and other factors that may distort underlying business trends, thereby improving the comparability of PMI's business performance between reporting periods. Furthermore, PMI uses several of these measures in its management compensation program to promote internal fairness and a disciplined assessment of performance against company targets. PMI discloses these measures to enable investors to view the business through the eyes of management. Non-GAAP measures used in this release should neither be considered in isolation nor as a substitute for the financial measures prepared in accordance with U.S. GAAP. For a reconciliation of non-GAAP measures to the most directly comparable U.S. GAAP measures, see the relevant schedules provided with this press release. U.S. GAAP Treatment of Argentina as a Highly Inflationary Economy. Following the categorization of Argentina by the International Practices Task Force of the Center for Audit Quality as a country with a three-year cumulative inflation rate greater than 100%, the country is considered highly inflationary in accordance with U.S. GAAP. Consequently, PMI began to account for the operations of its Argentinian affiliates as highly inflationary, and to treat the U.S. dollar as the functional currency of the affiliates, effective July 1, 2018. "Fair value adjustment for equity security investments" reflects the adjustment resulting from share price movements in passive investments for publicly traded entities that are not controlled or influenced by PMI. Under U.S. GAAP, such adjustments are required, since January 1, 2018, to be reflected directly in the income statement.

Reduced-Risk Products

Reduced Risk Products ("RRPs") is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continuing smoking. PMI has a range of RRPs in various stages of development, scientific assessment and commercialization. PMI's RRPs are smoke-free products that produce an aerosol that contains far lower quantities of harmful and potentially harmful constituents than found in cigarette smoke. "Heated tobacco units," or "HTUs," is the term PMI uses to refer to heated tobacco consumables, which include the company's HEETS, HEETS Creations, HEETS Marlboro and HEETS FROM MARLBORO, defined collectively as HEETS, as well as Marlboro HeatSticks and Parliament HeatSticks. Market share for HTUs is defined as the total sales volume for HTUs as a percentage of the total estimated sales volume for cigarettes and HTUs. Unless otherwise stated, all references to IQOS are to PMI's heat-not-burn products. The IQOS heat-not-burn device is a precisely controlled heating device into which a specially designed and proprietary tobacco unit is inserted and heated to generate an aerosol. "Total IQOS users" is defined as the estimated number of Legal Age (minimum 18 years) IQOS users that used PMI HTUs for at least 5% of their daily tobacco consumption over the past seven days. The estimated number of people who have "stopped smoking and switched to IQOS" is defined as: for markets where IQOS is the only heat-not-burn product, daily individual consumption of PMI HTUs represents the totality of their daily tobacco consumption in the past seven days; for markets where IQOS is one among other heat-not-burn products, daily individual consumption of HTUs represents the totality of their daily tobacco consumption in the past seven days, of which at least 70% are PMI HTUs.

IQOS in the United States

On April 30, 2019, the U.S. Food and Drug Administration (FDA) announced that the marketing of a version of IQOS, PMI's heat-not-burn product, together with its heated tobacco units (the term PMI uses to refer to heated tobacco consumables), is appropriate for the protection of public health and authorized it for sale in the U.S. The FDA's decision follows its comprehensive assessment of PMI's premarket tobacco product applications (PMTAs) submitted to the Agency in 2017. In the third quarter of 2019, PMI brought a version of its IQOS Platform 1 device and three variants of its heated tobacco units to the U.S. through its license with Altria Group, Inc., whose subsidiary, Philip Morris USA Inc., is responsible for marketing the product and complying with the provisions set forth in the FDA's marketing order. On March 30, 2020, PMI submitted a supplemental PMTA for the IQOS 3 tobacco heating device with the FDA. On July 7, 2020, the FDA authorized the marketing of a version of IQOS, together with its heated tobacco units, as a modified risk tobacco product (MRTP). In doing so, the agency found that an IQOS exposure modification order is appropriate to promote the public health. The decision follows a review of the extensive scientific evidence package PMI submitted to the FDA in December 2016 to support its MRTP applications. Shipment volume of heated tobacco units to the U.S. is included in the heated tobacco unit shipment volume of the Latin America & Canada segment. Revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc. for sale under license in the U.S. are included in Net Revenues of the Latin America & Canada segment.

                                                                                                                                                                                                                                                                                                                                                           Appendix 1
                                                                                                                                                                                                                                     PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                                                                                     Key Market Data
                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                     Quarters Ended June 30,
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Market                                                                   Total Market,                                                                                                                                                                                                                            PMI Shipments, bio units                                                                                                                                                                                                                                                                                        PMI Market Share, % (1)
                                                                                                                bio units
                                                                                                                                                                                              ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Total                                                                                                     Cigarette                                                                                                      HTU                                                                                                            Total                                                                                                            HTU
                                          ----------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------                           ------------------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------
                                                                             2019                              %                                    2020                                 2019                              %                                    2020                                 2019                              %                                    2020                                   2019                                  %                                      2020                                 2019                             pp                                    2020                                   2019                                 pp
                                                                                                            Change                                                                                                                         Change                                                                                                                         Change                                                                                                                               Change                                                                                                                           Change                                                                                                                               Change
                                                               ------------------------------  ------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------  ----------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------  ----------------------------------
                                                                                                                                                                                                                                                                                                                                   
----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Total                                            609.2        700.3                  (13.0 )                           170.1        198.9                  (14.5 )                           151.4        183.8                  (17.6 )                                18.7             15.1                   24.3           28.0         28.1                   (0.1 )                                 3.0              2.1              0.9  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
European Union                                                                                                                                                                                                                                                                                                                                                                              
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
France                                             9.8          9.8                    0.7            4.5          4.5                    0.3            4.4          4.5                   (0.4 )                      --   --         --           44.9         44.7                    0.2                0.5              0.2              0.3  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Germany                                           20.0         18.9                    5.9            7.8          7.3                    6.9            7.4          7.1                    4.4                0.4              0.2                   89.4           38.9         38.5                    0.4                2.0              1.1              0.9  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Italy                                             16.3         17.2                   (4.8 )                             7.9          9.3                  (15.5 )                             6.8          8.5                  (20.1 )                                 1.1              0.8                   32.3           52.1         51.7                    0.4                7.7              4.6              3.1  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Poland                                            10.6         12.3                  (13.6 )                             4.2          5.0                  (16.8 )                             3.7          4.8                  (22.2 )                                 0.5              0.3                   85.9           39.3         40.8                   (1.5 )                                 4.4              2.0              2.4  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Spain                                              9.6         11.6                  (17.2 )                             2.7          3.9                  (29.5 )                             2.7          3.8                  (29.7 )                                 0.1              0.1                  (23.9 )                            31.3         31.2                    0.1                1.0              0.7              0.3  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Eastern Europe                                                                                                                                                                                                                                                                                                                                                                              
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Russia                         57.2         59.6                   (4.1 )                            17.9         17.7                    0.8           14.3         15.9                  (10.1 )                                 3.6              1.8                   95.5           32.4         29.6                    2.8                5.9              2.9              3.0  
-------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Middle East & Africa                                                                                                                                                                                                                                                                                                                                                                        
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Saudi Arabia                                       6.0          5.4                   12.0            2.7          0.8                   +100            2.7          0.8                   +100     --   --         --           38.6         38.9                   (0.3 )                                 0.2   --              0.2  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Turkey                         29.9         32.1                   (6.8 )                            11.7         12.5                   (6.6 )                            11.7         12.5                   (6.6 )                      --   --         --           38.9         38.9         --     --   --   --  
-------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
South & Southeast Asia                                                                                                                                                                                                                                                                                                                                                                      
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Indonesia                                         64.0         77.6                  (17.5 )                            18.0         24.9                  (27.7 )                            18.0         24.9                  (27.7 )                      --   --         --           28.2         32.2                   (4.0 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Philippines                                       14.0         18.6                  (24.6 )                             9.7         13.1                  (25.7 )                             9.7         13.1                  (25.7 )                      --   --         --           69.5         70.6                   (1.1 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
East Asia & Australia                                                                                                                                                                                                                                                                                                                                                                       
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Australia                                          2.6          2.9                  (11.2 )                             0.8          0.9                  (12.0 )                             0.8          0.9                  (12.0 )                      --   --         --           30.8         31.0                   (0.2 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Japan                                             35.4         40.6                  (12.7 )                            14.1         15.1                   (6.4 )                             6.3          8.0                  (20.9 )                                 7.8              7.1                   10.0           36.5         34.0                    2.5               20.0             16.6              3.4  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Korea                                             18.4         17.7                    3.9            3.8          4.1                   (6.2 )                             2.6          2.8                   (6.1 )                                 1.2              1.3                   (6.4 )                            21.1         23.1                   (2.0 )                                 6.6              7.3             (0.7 )
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Latin America & Canada                                                                                                                                                                                                                                                                                                                                                                      
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Argentina                                          7.3          7.8                   (7.4 )                             4.8          5.6                  (15.2 )                             4.8          5.6                  (15.2 )                      --   --         --           65.4         71.8                   (6.4 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Mexico                                             7.6         10.0                  (24.4 )                             4.7          7.0                  (32.5 )                             4.7          7.0                  (32.7 )                      --   --         --           62.1         69.5                   (7.4 )                                 0.2   --              0.2  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
(1) Market share estimates are calculated using IMS data
                                                                                                                                                                                                                                                                                                                                                           Appendix 2
                                                                                                                                                                                                                                     PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                                                                                     Key Market Data
                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                     Six Months Ended June 30,
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Market                                                                   Total Market,                                                                                                                                                                                                                            PMI Shipments, bio units                                                                                                                                                                                                                                                                                        PMI Market Share, % (1)
                                                                                                                bio units
                                                                                                                                                                                              ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Total                                                                                                     Cigarette                                                                                                      HTU                                                                                                            Total                                                                                                            HTU
                                          ----------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------                           ------------------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------
                                                                             2019                              %                                    2020                                 2019                              %                                    2020                                 2019                              %                                    2020                                   2019                                  %                                      2020                                 2019                             pp                                    2020                                   2019                                 pp
                                                                                                            Change                                                                                                                         Change                                                                                                                         Change                                                                                                                               Change                                                                                                                           Change                                                                                                                               Change
                                                               ------------------------------  ------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------  ----------------------------------                       ----------------------------------------  ------------------------------  ------------------------------                       ----------------------------------------  ----------------------------------  ----------------------------------
                                                                                                                                                                                                                                                                                                                
-------------------- --------------------                      ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Total                                          1,224.1      1,325.0                   (7.6 )                           343.8        374.7                   (8.2 )                           308.4        348.1                  (11.4 )                                35.4             26.6                   33.4           27.7         28.1                   (0.4 )                                 2.9              2.1              0.8  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
European Union                                                                                                                                                                                                                                                                                                                                                                              
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
France                                            18.2         18.9                   (3.9 )                             8.5          8.6                   (1.3 )                             8.4          8.6                   (2.1 )                                 0.1   --         --           44.7         44.9                   (0.2 )                                 0.4              0.2              0.2  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Germany                                           36.0         34.3                    4.9           14.5         13.4                    8.7           13.7         13.0                    5.7                0.8              0.4                   +100           40.4         38.9                    1.5                2.2              1.1              1.1  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Italy                                             32.0         32.8                   (2.2 )                            17.1         17.0                    0.2           14.6         15.6                   (6.9 )                                 2.5              1.4                   78.6           52.0         51.4                    0.6                7.5              4.2              3.3  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Poland                                            21.4         22.9                   (6.4 )                             8.5          9.2                   (8.0 )                             7.6          8.8                  (14.0 )                                 0.9              0.4                   +100           39.7         40.4                   (0.7 )                                 4.3              1.9              2.4  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Spain                                             20.0         21.8                   (8.2 )                             6.4          7.5                  (14.4 )                             6.2          7.3                  (15.5 )                                 0.2              0.1                   39.8           31.1         31.4                   (0.3 )                                 1.0              0.6              0.4  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Eastern Europe                                                                                                                                                                                                                                                                                                                                                                              
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Russia                        104.1        106.3                   (2.1 )                            32.9         29.9                   10.3           26.7         27.2                   (1.8 )                                 6.2              2.7                   +100           32.4         29.1                    3.3                6.2              3.0              3.2  
-------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Middle East & Africa                                                                                                                                                                                                                                                                                                                                                                        
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Saudi Arabia                                      10.3         10.6                   (2.9 )                             3.8          4.7                  (19.0 )                             3.8          4.7                  (19.6 )                      --   --         --           39.4         40.3                   (0.9 )                                 0.1   --              0.1  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Turkey                         55.9         61.6                   (9.3 )                            21.8         26.4                  (17.4 )                            21.8         26.4                  (17.4 )                      --   --         --           38.9         42.9                   (4.0 )                      --   --   --  
-------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
South & Southeast Asia                                                                                                                                                                                                                                                                                                                                                                      
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Indonesia                                        131.4        145.2                   (9.5 )                            38.5         47.1                  (18.2 )                            38.5         47.1                  (18.2 )                      --   --         --           29.3         32.4                   (3.1 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Philippines                                       29.3         35.3                  (17.1 )                            20.5         24.9                  (17.7 )                            20.5         24.9                  (17.7 )                      --   --         --           69.9         70.4                   (0.5 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
East Asia & Australia                                                                                                                                                                                                                                                                                                                                                                       
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Australia                                          5.1          6.0                  (15.3 )                             1.5          1.7                   (9.8 )                             1.5          1.7                   (9.8 )                      --   --         --           29.4         27.6                    1.8     --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Japan                                             70.9         78.2                   (9.4 )                            26.9         27.2                   (1.0 )                            13.1         14.4                   (9.1 )                                13.8             12.7                    8.1           36.4         34.2                    2.2               19.6             16.8              2.8  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Korea                                             34.6         33.3                    3.8            7.4          7.7                   (4.6 )                             5.1          5.3                   (3.8 )                                 2.3              2.4                   (6.3 )                            21.4         23.2                   (1.8 )                                 6.6              7.3             (0.7 )
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
Latin America & Canada                                                                                                                                                                                                                                                                                                                                                                      
------------------------------------------------------------------------------------------     ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------------                       ------------------------------  ------------------------------  ----------------------------------------                       ----------------------------------  ----------------------------------  ----------------------------------
Argentina                                         15.3         16.3                   (6.3 )                            10.0         11.7                  (14.2 )                            10.0         11.7                  (14.2 )                      --   --         --           65.7         72.1                   (6.4 )                      --   --   --  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
Mexico                                            14.2         17.4                  (18.4 )                             8.8         11.7                  (25.0 )                             8.7         11.7                  (25.2 )                      --   --         --           61.6         67.0                   (5.4 )                                 0.2   --              0.2  
----------------------------------------                       ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------------- --------------------                      ---------- -------------------- ---------- -------------------- -------------------- --------------------                      -------------- -------------------- -------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                                                
(1) Market share estimates are calculated using IMS data
                                                      Appendix 3
                                                                                                                          PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                 Reconciliation of Non-GAAP Measures
                                                                                                                   Shipment Volume Adjusted for the Impact of RBH Deconsolidation
                                                                                                                                  (in million units) / (Unaudited)
                                             
                                             
Total PMI                                                                           Quarters Ended June 30,                                                                                   Six Months Ended June 30,
                                                              ---------------------------------------------------------------------------------------------------                           ---------------------------------------------------------------------------------------------------
                                2020                   2019                 % Change                 2020                   2019                 % Change
                                                              -------------------- -------------------- -------------------- -------------------- -------------------                       -------------------- -------------------- -------------------- -------------------- -------------------
Total Shipment Volume                                   170,067                198,855        (14.5 )%                       343,812                374,650         (8.2 )%
Shipment Volume for RBH-owned brands (1)             --                        (1,008)          (2)          
                                                              -------------------- -------------------- -------------------- -------------------- -------------------                       -------------------- -------------------- -------------------- -------------------- -------------------
Total Shipment Volume                                   170,067                198,855        (14.5 )%                       343,812                373,642          (3)               (8.0 )%
                                                                                                                                                  ---------- ---------                                                                                                          ---------- ---------
                                             
Total Cigarette Shipment Volume                         151,359                183,799        (17.6 )%                       308,377                348,096        (11.4 )%
Shipment Volume for RBH-owned brands (1)             --                        (1,008)          (2)          
                                                              -------------------- -------------------- -------------------- -------------------- -------------------                       -------------------- -------------------- -------------------- -------------------- -------------------
Total Cigarette Shipment Volume                         151,359                183,799        (17.6 )%                       308,377                347,088          (3)              (11.2 )%
                                                                                                                                                  ---------- ---------                                                                                                          ---------- ---------
                                             
                                                                                                                                                  -------------------                                                                                                           -------------------
Total HTU Shipment Volume                                18,708                 15,056         24.3 %                         35,435                 26,554         33.4 %
                                                                                                                                                  ---------- ---------                                                                                                          ---------- ---------
                                             
Latin America & Canada                                          
                                             
Total Shipment Volume                                    14,874                 18,531        (19.7 )%                        30,045                 36,165        (16.9 )%
Shipment Volume for RBH-owned brands                 --                          (995)          (2)          
                                                              -------------------- -------------------- -------------------- -------------------- -------------------                       -------------------- -------------------- -------------------- -------------------- -------------------
Total Shipment Volume                                    14,874                 18,531        (19.7 )%                        30,045                 35,170          (3)              (14.6 )%
                                                              ==================== ==================== ==================== ==================== ---------- ---------                      ==================== ==================== ==================== ==================== ---------- ---------
                                             
(1) Includes Duty Free sales in Canada
(2) Represents volume for RBH-owned brands from January 1, 2019 through March 21, 2019
(3) Pro forma
                                                                                                                                                                           Schedule 1
                                                                                                                                                                                                        PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                                                                Diluted Earnings Per Share (EPS)
                                                                                                                                                                                                      ($ in millions, except per share data) / (Unaudited)
                                                                                      
                                                                      Quarters Ended                                                                                             Diluted EPS                                                                                                 Six Months Ended
                                                                         June 30,                                                                                                                                                                                                                   June 30,
                     -------------------- -----------------------------------------------------------------------------------------------------------------------------------------          --------------------                                                            --------------------------------------------------------------------------------------------------------------------------------------------------------------
        $                                    1.25                     2020 Diluted Earnings Per Share (1)                  $                                               2.42      
        $                                    1.49                     2019 Diluted Earnings Per Share (1)                  $                                               2.36      
        $                                   (0.24 )                                                    Change                                 $                                               0.06      
                                            (16.1 )%                                                  % Change                                                                                 2.5 %                       
                                                                                                                                                                  
                                                                                Reconciliation:                                                                                      
                                                                                                                                                                                                                  ----------------------------------------------------------
        $                                    1.49                     2019 Diluted Earnings Per Share (1)                  $                                               2.36      
                                             0.01                    2019 Asset impairment and exit costs                                                                  0.02      
                                   --              2019 Canadian tobacco litigation-related expense                                                            0.09      
                                   --                     2019 Loss on deconsolidation of RBH                                                                  0.12      
                                            (0.04 )                                                2019 Tax items                                                                            (0.04 )                       
                                            (0.04 )                                     2020 Asset impairment and exit costs                                                                 (0.04 )                       
                                   --         2020 Fair value adjustment for equity security investments                                                      (0.04 )                       
                                   --                               2020 Tax items                                                                   --      
                                            (0.06 )                                                   Currency                                                                               (0.19 )                       
                                            (0.01 )                                                   Interest                                                                      --      
                                             0.03                             Change in tax rate                                                                           0.02      
                                            (0.13 )                                                Operations (2)                                                                             0.12      
                                                               -------------------- --------------------------------------    --------------------                                                                                                                                                                     -------------------- ------------------------------------------------     --------------------
        $                                    1.25                     2020 Diluted Earnings Per Share (1)                  $                                               2.42      
                                                               ==================== ====== ================================   ====================                                                                                                                                                                     ==================== ====== ==========================================    ====================
                                                                                      
(1) Basic and diluted EPS were calculated using the following (in millions):
                                                                                      
                                                                      Quarters Ended                                                                                                                                                                                      Six Months Ended
                                                                         June 30,                                                                                                                                                                                             June 30,
                                          -----------------------------------------------------------------------------------------------------------------------------------------                                                                                                               ---------------------------------------------------------------------------------------------------------------------------------------------------
                                                              2020                                                             2019                                                                                                       2020                                                                        2019
                                          ----------------------------------------------------------                          -----------------------------------------------------------                                                                                                         ----------------------------------------------------------                          ---------------------------------------------------------------------
                                                           $ 1,947                                                          $ 2,319                Net Earnings attributable to PMI                                                                       $ 3,773                                                                     $ 3,673
                                                                 5                                                                5          Less: Distributed and undistributed earnings                                                                      10                                                                           8
                                                                                                                                                                                                                          attributable to share-based payment awards
                                          ----------------------------------------------------------                          -----------------------------------------------------------                                                                                                         ----------------------------------------------------------                          ---------------------------------------------------------------------
                                                           $ 1,942                                                          $ 2,314             Net Earnings for basic and diluted EPS                                                                    $ 3,763                                                                     $ 3,665
                                          ==========================================================                          ===========================================================                                                                                                         ==========================================================                          =====================================================================
                                                                                      
                                                             1,558                                                            1,556              Weighted-average shares for basic EPS                                                                      1,557                                                                       1,556
                                                    --                                                   --       Plus Contingently Issuable Performance Stock Units                                                       --                                                              --
                                          ----------------------------------------------------------                          -----------------------------------------------------------                                                                                                         ----------------------------------------------------------                          ---------------------------------------------------------------------
                                                             1,558                                                            1,556             Weighted-average shares for diluted EPS                                                                     1,557                                                                       1,556
                                          ==========================================================                          ===========================================================                                                                                                         ==========================================================                          =====================================================================
                                                                                      
                                                           Schedule 2
                                                                                       PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                              Reconciliation of Non-GAAP Measures
                                                                      Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency,
                                                                    and Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency
                                                                                                          (Unaudited)
                                                  
                    Quarters Ended June 30,                                                                          Six Months Ended June 30,                      
-----------------------------------------------------------                                                          -----------------------------------------------------------
        2020                 2019               % Change                                                  2020                 2019               % Change          
-------------------- -------------------- -------------------                                                        -------------------- -------------------- -------------------
              $ 1.25               $ 1.49      (16.1 )%                         Reported Diluted EPS                               $ 2.42               $ 2.36        2.5 %            
              (0.06)                         Less: Currency                                  (0.19)        
-------------------- -------------------- -------------------                                                        -------------------- -------------------- -------------------
              $ 1.31               $ 1.49      (12.1 )%               Reported Diluted EPS, excluding Currency                     $ 2.61               $ 2.36       10.6 %            
==================== ==================== ========== =========                                                       ==================== ==================== ========== =========
                                                  
                                                  
                    Quarters Ended June 30,                                                                          Six Months Ended June 30,                          Year Ended
-----------------------------------------------------------                                                          -----------------------------------------------------------
        2020                 2019               % Change                                                  2020                 2019               % Change                 2019
-------------------- -------------------- -------------------                                                        -------------------- -------------------- -------------------                       --------------------
              $ 1.25               $ 1.49      (16.1 )%                         Reported Diluted EPS                               $ 2.42               $ 2.36        2.5 %                         $ 4.61
                0.04                 0.01               Asset impairment and exit costs                           0.04                 0.02                     0.23
      --       --         Canadian tobacco litigation-related expense           --                 0.09                     0.09
      --       --               Loss on deconsolidation of RBH                  --                 0.12                     0.12
      --       --             Russia excise and VAT audit charge                --       --                     0.20
      --       --    Fair value adjustment for equity security investments                0.04       --                   (0.02)
      --               (0.04)                          Tax items                            --               (0.04)                   (0.04)
-------------------- -------------------- -------------------                                                        -------------------- -------------------- -------------------                       --------------------
              $ 1.29               $ 1.46      (11.6 )%                         Adjusted Diluted EPS                               $ 2.50               $ 2.55       (2.0 )%                        $ 5.19
              (0.06)                         Less: Currency                                  (0.19)        
-------------------- -------------------- -------------------                                                        -------------------- -------------------- -------------------
                                                                                            Schedule 3
                                                                                                                                                                PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                       Reconciliation of Non-GAAP Measures
                                                                                                                                                    Reconciliation of Reported Diluted EPS to Pro Forma Adjusted Diluted EPS
                                                                                                                                                                                   (Unaudited)
                                                                
                                                       Quarter                        Quarter                         Six Months                       Quarter                         Nine Months                      Quarter                            Year
                                                                                              Ended                          Ended                                                Ended                          Ended                                                Ended                          Ended                                                Ended
                                                      March 31,                      June 30,                          June 30,                     September 30,                     September 30,                  December 31,                      December 31,
                                                        2019                           2019                              2019                           2019                              2019                           2019                              2019
                                                                           ----------------------------------------  -------------------- -------------------- ----------------------------------------  -------------------- -------------------- ----------------------------------------  -------------------- -------------------- ----------------------------------------
Reported Diluted EPS                                                  $ 0.87                 $ 1.49                 $ 2.36                 $ 1.22                 $ 3.57                 $ 1.04                 $ 4.61  
Asset impairment and exit costs                                         0.01                   0.01                   0.02                   0.01                   0.03                   0.20                   0.23  
Canadian tobacco litigation-related expense                             0.09         --                   0.09         --                   0.09         --                   0.09  
Loss on deconsolidation of RBH                                          0.12         --                   0.12         --                   0.12         --                   0.12  
Russia excise and VAT audit charge                            --         --         --                   0.20                   0.20         --                   0.20  
Fair value adjustment for equity security investments         --         --         --         --         --                 (0.02)                 (0.02)  
Tax items                                                     --                 (0.04)                 (0.04)         --                 (0.04)         --                 (0.04)  
                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Diluted EPS                                                  $ 1.09                 $ 1.46                 $ 2.55                 $ 1.43                 $ 3.97                 $ 1.22                 $ 5.19  
Net earnings attributable to RBH                                      (0.06) (1)                        --                 (0.06) (1)                        --                 (0.06) (1)                        --                 (0.06) (1)
                                                                           -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Pro Forma Adjusted Diluted EPS                                        $ 1.03                 $ 1.46                 $ 2.49                 $ 1.43                 $ 3.91                 $ 1.22                 $ 5.13  
                                                                           ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
                                                                
(1) Represents the impact of net earnings attributable to RBH from January 1, 2019 through March 21, 2019
                                                          Schedule 4
                                                                                                                   PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                          Reconciliation of Non-GAAP Measures
                                                                                     Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
                                                                                                                             ($ in millions) / (Unaudited)
                              
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
         Net               Currency                Net             Acquisitions              Net                 Quarters Ended                 Net                   Total              Excluding            Excluding
      Revenues                                  Revenues                                  Revenues                                     June 30,                                    Revenues                                                       Currency            Currency &
                                                excluding                                 excluding                                                                                                                                                                  Acquisitions
                                                Currency                                 Currency &
                                                                                        Acquisitions
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                        Combustible Products             2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
             $ 1,945               $ (75)              $ 2,020     $ --              $ 2,020         European Union                     $ 2,149                 (9.5)%               (6.0)%               (6.0)%
                 522                 (52)                  575       --                  575         Eastern Europe                         640                (18.3)%              (10.1)%              (10.1)%
                 696                 (16)                  712       --                  712      Middle East & Africa                      918                (24.2)%              (22.4)%              (22.4)%
                 889                 (46)                  935       --                  935     South & Southeast Asia                   1,248                (28.8)%              (25.1)%              (25.1)%
                 630                 (15)                  645       --                  645      East Asia & Australia                     756                (16.7)%              (14.7)%              (14.7)%
                 363                 (57)                  420       --                  420     Latin America & Canada                     522                (30.5)%              (19.6)%              (19.6)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
             $ 5,045              $ (262)              $ 5,307     $ --              $ 5,307        Total Combustible                   $ 6,233                (19.1)%              (14.9)%              (14.9)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                        Reduced-Risk Products            2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
               $ 530               $ (25)                $ 555     $ --                $ 555         European Union                       $ 428                  23.9%                29.7%                29.7%
                 261                 (33)                  293       --                  293         Eastern Europe                         182                  42.9%                60.8%                60.8%
                   8       --                    8       --                    8      Middle East & Africa                       86                (90.6)%              (90.7)%              (90.7)%
      --       --       --       --       --     South & Southeast Asia          --        --%      --%      --%
                 802                    3                  799       --                  799      East Asia & Australia                     765                   4.9%                 4.5%                 4.5%
                   5                  (1)                    6       --                    6    Latin America & Canada(1)                     5                   7.9%                24.4%                24.4%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
             $ 1,606               $ (55)              $ 1,661     $ --              $ 1,661           Total RRPs                       $ 1,466                   9.5%                13.3%                13.3%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                                 PMI                     2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
             $ 2,475              $ (100)              $ 2,575     $ --              $ 2,575         European Union                     $ 2,577                 (4.0)%               (0.1)%               (0.1)%
                 783                 (85)                  868       --                  868         Eastern Europe                         822                 (4.7)%                 5.6%                 5.6%
                 704                 (16)                  720       --                  720      Middle East & Africa                    1,004                (29.9)%              (28.3)%              (28.3)%
                 889                 (46)                  935       --                  935     South & Southeast Asia                   1,248                (28.8)%              (25.1)%              (25.1)%
               1,432                 (12)                1,444       --                1,444      East Asia & Australia                   1,521                 (5.9)%               (5.1)%               (5.1)%
                 368                 (58)                  426       --                  426     Latin America & Canada                     527                (30.2)%              (19.2)%              (19.2)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
             $ 6,651              $ (317)              $ 6,968     $ --              $ 6,968            Total PMI                       $ 7,699                (13.6)%               (9.5)%               (9.5)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                              
(1) Net Revenues include revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc., commencing in the third quarter of 2019, for sale under license in the United States.
                                                          Schedule 5
                                                                                                                   PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                          Reconciliation of Non-GAAP Measures
                                                                                     Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
                                                                                                                             ($ in millions) / (Unaudited)
                              
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
         Net               Currency                Net             Acquisitions              Net                Six Months Ended                Net                   Total              Excluding            Excluding
      Revenues                                  Revenues                                  Revenues                                     June 30,                                    Revenues                                                       Currency            Currency &
                                                excluding                                 excluding                                                                                                                                                                  Acquisitions
                                                Currency                                 Currency &
                                                                                        Acquisitions
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                        Combustible Products             2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
             $ 3,855              $ (128)              $ 3,983     $ --              $ 3,983         European Union                     $ 3,961                 (2.7)%                 0.6%                 0.6%
               1,045                 (56)                1,101       --                1,101         Eastern Europe                       1,110                 (5.9)%               (0.8)%               (0.8)%
               1,528                 (18)                1,547       --                1,547      Middle East & Africa                    1,746                (12.5)%              (11.4)%              (11.4)%
               2,140                 (27)                2,167       --                2,167     South & Southeast Asia                   2,361                 (9.4)%               (8.2)%               (8.2)%
               1,272                 (22)                1,294       --                1,294      East Asia & Australia                   1,394                 (8.8)%               (7.2)%               (7.2)%
                 803                 (75)                  878       --                  878     Latin America & Canada                   1,168                (31.3)%              (24.9)%              (24.9)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
            $ 10,643              $ (327)             $ 10,970     $ --             $ 10,970        Total Combustible                  $ 11,741                 (9.4)%               (6.6)%               (6.6)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                        Reduced-Risk Products            2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
             $ 1,155               $ (42)              $ 1,197     $ --              $ 1,197         European Union                       $ 775                  49.0%                54.4%                54.4%
                 526                 (23)                  549       --                  549         Eastern Europe                         291                  81.0%                88.9%                88.9%
                  52       --                   51       --                   51      Middle East & Africa                      185                (72.0)%              (72.2)%              (72.2)%
      --       --       --       --       --     South & Southeast Asia          --        --%      --%      --%
               1,415                    1                1,414       --                1,414      East Asia & Australia                   1,448                 (2.3)%               (2.3)%               (2.3)%
                  13                  (1)                   14       --                   14    Latin America & Canada(1)                    11                  24.4%                33.5%                33.5%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
             $ 3,161               $ (64)              $ 3,225     $ --              $ 3,225           Total RRPs                       $ 2,709                  16.7%                19.1%                19.1%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                                                  2020                                                                 PMI                     2019                                      % Change
----------------------------------------------------------------------------------------------------                          -------------------------                      --------------------                      ------------------------------------------------------------
             $ 5,010              $ (170)              $ 5,180     $ --              $ 5,180         European Union                     $ 4,736                   5.8%                 9.4%                 9.4%
               1,571                 (79)                1,650       --                1,650         Eastern Europe                       1,401                  12.1%                17.8%                17.8%
               1,580                 (18)                1,598       --                1,598      Middle East & Africa                    1,931                (18.2)%              (17.2)%              (17.2)%
               2,140                 (27)                2,167       --                2,167     South & Southeast Asia                   2,361                 (9.4)%               (8.2)%               (8.2)%
               2,687                 (21)                2,708       --                2,708      East Asia & Australia                   2,842                 (5.5)%               (4.7)%               (4.7)%
                 816                 (76)                  892       --                  892     Latin America & Canada                   1,179                (30.8)%              (24.3)%              (24.3)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
            $ 13,804              $ (391)             $ 14,195     $ --             $ 14,195            Total PMI                      $ 14,450                 (4.5)%               (1.8)%               (1.8)%
-------------------- -------------------- -------------------- -------------------- --------------------                      -------------------------                      --------------------                      -------------------- -------------------- --------------------
                              
(1) Net Revenues include revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc., commencing in the third quarter of 2019, for sale under license in the United States.
                                                           Schedule 6
                                                                                                                                      PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                             Reconciliation of Non-GAAP Measures
                                                                                                                         Adjustments of Operating Income for the Impact of Currency and Acquisitions
                                                                                                                                                ($ in millions) / (Unaudited)
                               
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- --------------------                      -------------------- -------------------- --------------------
                 Operating                      Currency             Operating          Acquisitions           Operating                               Operating                          Total              Excluding            Excluding
                  Income                                              Income                                    Income                                                                                           Income                                                                  Currency            Currency &
                                                                     excluding                                 excluding                                                                                                                                                                                    Acquisitions
                                                                     Currency                                 Currency &
                                                                                                             Acquisitions
----------------------------------------  -------------------- -------------------- -------------------- --------------------                      ----------------------                      ----------------------------------------                       -------------------- -------------------- --------------------
                                                             2020                                                                   Quarters Ended                          2019                                                % Change
                                                                                                                                                          June 30,
------------------------------------------------------------------------------------------------------------------------                           ----------------------                      ----------------------------------------                       ------------------------------------------------------------
             $ 1,178          (1)                       $ (65)              $ 1,243     $ --              $ 1,243       European Union                    $ 1,195                   (1.4)%                 4.0%                 4.0%
                 266          (1)                         (11)                  277       --                  277       Eastern Europe                        256                     3.9%                 8.2%                 8.2%
                 237          (1)                            5                  232       --                  232    Middle East & Africa                     441                  (46.3)%              (47.4)%              (47.4)%
                 289          (1)                         (16)                  305       --                  305   South & Southeast Asia                    492                  (41.3)%              (38.0)%              (38.0)%
                 669          (1)                         (11)                  680       --                  680    East Asia & Australia                    642                     4.2%                 5.9%                 5.9%
                  92          (1)                          (6)                   98       --                   98   Latin America & Canada                    161          (2)                        (42.9)%              (39.1)%              (39.1)%
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 2,731                $ (104)              $ 2,835     $ --              $ 2,835          Total PMI                      $ 3,187                  (14.3)%              (11.0)%              (11.0)%
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- --------------------                      -------------------- -------------------- --------------------
                                                             2020                                                                  Six Months Ended                         2019                                                % Change
                                                                                                                                                          June 30,
------------------------------------------------------------------------------------------------------------------------                           ----------------------                      ----------------------------------------                       ------------------------------------------------------------
             $ 2,336          (1)                      $ (130)              $ 2,466     $ --              $ 2,466       European Union                    $ 2,091                    11.7%                17.9%                17.9%
                 365          (1)                        (103)                  468       --                  468       Eastern Europe                        385                   (5.2)%                21.6%                21.6%
                 558          (1)                         (14)                  572       --                  572    Middle East & Africa                     785                  (28.9)%              (27.1)%              (27.1)%
                 888          (1)                            3                  885       --                  885   South & Southeast Asia                    932          (3)                         (4.7)%               (5.0)%               (5.0)%
               1,155          (1)                         (15)                1,170       --                1,170    East Asia & Australia                  1,069                     8.0%                 9.4%                 9.4%
                 218          (1)                         (41)                  259       --                  259   Latin America & Canada                   (25)          (4)                          +100%                +100%                +100%
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 5,520                $ (300)              $ 5,820     $ --              $ 5,820          Total PMI                      $ 5,237                     5.4%                11.1%                11.1%
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- --------------------                      -------------------- -------------------- --------------------
                               
(1) Includes asset impairment and exit costs ($71 million): EU ($27 million), EE ($7 million), ME&A ($9 million), S&SA ($11 million), EA&A ($13 million) and LA&C ($4 million).
(2) Includes asset impairment and exit costs ($23 million)
(3) Includes asset impairment and exit costs ($20 million)
                                                                   Schedule 7
                                                                                                                                                                                PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                                       Reconciliation of Non-GAAP Measures
                                                                                                                                                      Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions
                                                                                                                                                                                          ($ in millions) / (Unaudited)
                                       
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                                                                  -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
      Operating                         Asset                        Adjusted             Currency             Adjusted              Acqui-              Adjusted                     Operating                         Asset                        Adjusted                 Total              Excluding            Excluding
       Income                        Impairment                      Operating                                 Operating             sitions             Operating                                                                              Income                        Impairment                      Operating                                                      Currency             Currency
                                    & Exit Costs                      Income                                    Income                                    Income                                                                                                             & Exit Costs                      Income                                                                             & Acqui-
                                     and Others                                                                excluding                            excluding Currency                                                                                                        and Others                                                                                                           sitions
                                                                                                               Currency                                  & Acqui-
                                                                                                                                                          sitions
-------------------- ----------------------------------------  -------------------- -------------------- -------------------- -------------------- --------------------                                                                  -------------------- ----------------------------------------  --------------------                      -------------------- -------------------- --------------------
                                                                                  2020                                                                                                           Quarters Ended                                                                  2019                                                                     % Change
                                                                                                                                                                                                    June 30,
----------------------------------------------------------------------------------------------------------------------------------------------------------------        --------------------------------------------------------------   --------------------------------------------------------------------------------                         ------------------------------------------------------------
             $ 1,178               $ (27)          (1)                      $ 1,205               $ (65)              $ 1,270     $ --              $ 1,270       European Union                    $ 1,195     $ --                $ 1,195                   0.8%                 6.3%                 6.3%
                 266                  (7)          (1)                          273                 (11)                  284       --                  284       Eastern Europe                        256       --                    256                   6.6%                10.9%                10.9%
                 237                  (9)          (1)                          246                    5                  241       --                  241    Middle East & Africa                     441       --                    441                (44.2)%              (45.4)%              (45.4)%
                 289                 (11)          (1)                          300                 (16)                  316       --                  316   South & Southeast Asia                    492       --                    492                (39.0)%              (35.8)%              (35.8)%
                 669                 (13)          (1)                          682                 (11)                  693       --                  693    East Asia & Australia                    642       --                    642                   6.2%                 7.9%                 7.9%
                  92                  (4)          (1)                           96                  (6)                  102       --                  102   Latin America & Canada                    161                 (23)          (1)                          184                (47.8)%              (44.6)%              (44.6)%
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 2,731               $ (71)                $ 2,802              $ (104)              $ 2,906     $ --              $ 2,906          Total PMI                      $ 3,187               $ (23)                $ 3,210                (12.7)%               (9.5)%               (9.5)%
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                  2020                                                                                                          Six Months Ended                                                                 2019                                                                     % Change
                                                                                                                                                                                                    June 30,
----------------------------------------------------------------------------------------------------------------------------------------------------------------        --------------------------------------------------------------   --------------------------------------------------------------------------------                         ------------------------------------------------------------
             $ 2,336               $ (27)          (1)                      $ 2,363              $ (130)              $ 2,493     $ --              $ 2,493       European Union                    $ 2,091     $ --                $ 2,091                  13.0%                19.2%                19.2%
                 365                  (7)          (1)                          372                (103)                  475       --                  475       Eastern Europe                        385       --                    385                 (3.4)%                23.4%                23.4%
                 558                  (9)          (1)                          567                 (14)                  581       --                  581    Middle East & Africa                     785       --                    785                (27.8)%              (26.0)%              (26.0)%
                 888                 (11)          (1)                          899                    3                  896       --                  896   South & Southeast Asia                    932                 (20)          (1)                          952                 (5.6)%               (5.9)%               (5.9)%
               1,155                 (13)          (1)                        1,168                 (15)                1,183       --                1,183    East Asia & Australia                  1,069       --                  1,069                   9.3%                10.7%                10.7%
                 218                  (4)          (1)                          222                 (41)                  263       --                  263   Latin America & Canada                   (25)                (456)          (2)                          431                (48.5)%              (39.0)%              (39.0)%
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 5,520               $ (71)                $ 5,591              $ (300)              $ 5,891     $ --              $ 5,891          Total PMI                      $ 5,237              $ (476)                $ 5,713                 (2.1)%                 3.1%                 3.1%
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
 
(1) Represents asset impairment and exit costs
                                                                       Schedule 8
                                                                                                                                                                                                     PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                                                                                            Reconciliation of Non-GAAP Measures
                                                                                                                                                                                  Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions
                                                                                                                                                                                                               ($ in millions) / (Unaudited)
                                           
-------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                                                                  -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
      Adjusted                Net               Adjusted               Adjusted                Net               Adjusted               Adjusted                Net               Adjusted                     Adjusted                Net               Adjusted               Adjusted             Adjusted             Adjusted
      Operating            Revenues             Operating                                 Operating            Revenues             Operating                                 Operating            Revenues             Operating                                                                             Operating            Revenues             Operating                                 Operating            Operating            Operating
       Income                                    Income                                    Income              excluding             Income                                    Income              excluding             Income                                                                                Income                                    Income                                    Income               Income               Income
         (1)                                     Margin                                   excluding            Currency              Margin                                   excluding            Currency              Margin                                                                                  (1)                                     Margin                                    Margin               Margin               Margin
                                                                                          Currency                (2)               excluding                                 Currency             & Acqui-             excluding                                                                                                                                                                                      excluding            excluding
                                                                                             (1)                                    Currency                                  & Acqui-            sitions (2)           Currency                                                                                                                                                                                       Currency             Currency
                                                                                                                                                                             sitions (1)                                & Acqui-                                                                                                                                                                                                            & Acqui-
                                                                                                                                                                                                                         sitions                                                                                                                                                                                                             sitions
-------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                                                                  -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                                                 2020                                                                                                                                           Quarters Ended                                                       2019                                                        % Points Change
                                                                                                                                                                                                                                                                 June 30,
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------           --------------------------------------------------------------   ------------------------------------------------------------                        ------------------------------------------------------------
             $ 1,205              $ 2,475                48.7%                $ 1,270              $ 2,575                49.3%                $ 1,270              $ 2,575                49.3%       European Union                    $ 1,195              $ 2,577                46.4%                    2.3                  2.9                  2.9
                 273                  783                34.9%                    284                  868                32.7%                    284                  868                32.7%       Eastern Europe                        256                  822                31.1%                    3.8                  1.6                  1.6
                 246                  704                34.9%                    241                  720                33.5%                    241                  720                33.5%    Middle East & Africa                     441                1,004                43.9%                  (9.0)               (10.4)               (10.4)
                 300                  889                33.7%                    316                  935                33.8%                    316                  935                33.8%   South & Southeast Asia                    492                1,248                39.4%                  (5.7)                (5.6)                (5.6)
                 682                1,432                47.6%                    693                1,444                48.0%                    693                1,444                48.0%    East Asia & Australia                    642                1,521                42.2%                    5.4                  5.8                  5.8
                  96                  368                26.1%                    102                  426                23.9%                    102                  426                23.9%   Latin America & Canada                    184                  527                34.9%                  (8.8)               (11.0)               (11.0)
-------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 2,802              $ 6,651                42.1%                $ 2,906              $ 6,968                41.7%                $ 2,906              $ 6,968                41.7%          Total PMI                      $ 3,210              $ 7,699                41.7%                    0.4       --       --
-------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                                                 2020                                                                                                                                          Six Months Ended                                                      2019                                                        % Points Change
                                                                                                                                                                                                                                                                 June 30,
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------           --------------------------------------------------------------   ------------------------------------------------------------                        ------------------------------------------------------------
             $ 2,363              $ 5,010                47.2%                $ 2,493              $ 5,180                48.1%                $ 2,493              $ 5,180                48.1%       European Union                    $ 2,091              $ 4,736                44.2%                    3.0                  3.9                  3.9
                 372                1,571                23.7%                    475                1,650                28.8%                    475                1,650                28.8%       Eastern Europe                        385                1,401                27.5%                  (3.8)                  1.3                  1.3
                 567                1,580                35.9%                    581                1,598                36.4%                    581                1,598                36.4%    Middle East & Africa                     785                1,931                40.7%                  (4.8)                (4.3)                (4.3)
                 899                2,140                42.0%                    896                2,167                41.3%                    896                2,167                41.3%   South & Southeast Asia                    952                2,361                40.3%                    1.7                  1.0                  1.0
               1,168                2,687                43.5%                  1,183                2,708                43.7%                  1,183                2,708                43.7%    East Asia & Australia                  1,069                2,842                37.6%                    5.9                  6.1                  6.1
                 222                  816                27.2%                    263                  892                29.5%                    263                  892                29.5%   Latin America & Canada                    431                1,179                36.6%                  (9.4)                (7.1)                (7.1)
-------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
             $ 5,591             $ 13,804                40.5%                $ 5,891             $ 14,195                41.5%                $ 5,891             $ 14,195                41.5%          Total PMI                      $ 5,713             $ 14,450                39.5%                    1.0                  2.0                  2.0
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      ----------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                           
(1) For the calculation of Adjusted Operating Income and Adjusted Operating Income excluding currency and acquisitions refer to Schedule 7
                                                           Schedule 9  
                                                                                                                                                         PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries                                                                                                                                                          
                                                                                                                                                                Reconciliation of Non-GAAP Measures                                                                                                                                                                 
                                                                                                                                                       Adjustments for the Impact of RBH, excluding Currency                                                                                                                                                        
                                                                                                                                                       ($ in millions, except per share data) / (Unaudited)                                                                                                                                                         
                                                    
                                                                           Quarters Ended June 30,                                                                                                                             Six Months Ended June 30,
                                                             ------------------------------------------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2020                   2019                            % Change                           2020                   2019                                % Change
                                                             -------------------- -------------------- -------------------- -------------------- ----------------------------------------                       -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------------------------------------
Net Revenues                                           $ 6,651                $ 7,699                  (13.6 )%                                 $ 13,804               $ 14,450                       (4.5 )%
Net Revenues attributable to RBH                    --                            (181)                    (1)      
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net Revenues                                           $ 6,651                $ 7,699                  (13.6 )%                                 $ 13,804               $ 14,269                    (2)                   (3.3 )%
Less: Currency                                           (317)                            (392)              
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net Revenues, ex. currency                             $ 6,968                $ 7,699                   (9.5 )%                                 $ 14,196               $ 14,269                    (2)                   (0.5 )%
                                                                                                                                                 -------------------- --------------------                                                                                                                                                    -------------------- --------------------
                                                    
Adjusted Operating Income (3)                          $ 2,802                $ 3,210                  (12.7 )%                                  $ 5,591                $ 5,713                       (2.1 )%
Operating Income attributable to RBH                --                            (126)                    (1)      
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Operating Income                              $ 2,802                $ 3,210                  (12.7 )%                                  $ 5,591                $ 5,587                    (2)                    0.1 %
Less: Currency                                           (104)                            (299)              
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Operating Income, ex. currency                $ 2,906                $ 3,210                   (9.5 )%                                  $ 5,890                $ 5,587                    (2)                    5.4 %
                                                                                                                                                 -------------------- --------------------                                                                                                                                                    -------------------- --------------------
                                                    
Adjusted OI Margin                                       42.1%                  41.7%                    0.4                    40.5%                  39.5%                        1.0  
Adjusted OI Margin attributable to RBH              --                            (0.3)                    (1)      
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted OI Margin                                       42.1%                  41.7%                    0.4                    40.5%                  39.2%                    (2)                    1.3  
Less: Currency                                  --                   --              
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted OI Margin, ex. currency                         41.7%                  41.7%         --                    41.5%                  39.2%                    (2)                    2.3  
                                                                                                                                                 -------------------- --------------------                                                                                                                                                    -------------------- --------------------
                                                    
Adjusted Diluted EPS (4)                                $ 1.29                 $ 1.46                  (11.6 )%                                   $ 2.50                 $ 2.55                       (2.0 )%
Net earnings attributable to RBH                    --                           (0.06)                    (1)      
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Diluted EPS                                    $ 1.29                 $ 1.46                  (11.6 )%                                   $ 2.50                 $ 2.49                    (2)                    0.4 %
Less: Currency                                          (0.06)                           (0.19)              
                                                             -------------------- -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Diluted EPS, ex. currency                      $ 1.35                 $ 1.46                   (7.5 )%                                   $ 2.69                 $ 2.49                    (2)                    8.0 %
                                                                                                                                                 -------------------- --------------------                                                                                                                                                    -------------------- --------------------
                                                    
(1) Represents the impact attributable to RBH from January 1, 2019 through March 21, 2019
(2) Pro forma
(3) For the calculation of Adjusted Operating Income, see Schedule 7
(4) For the calculation, see Schedule 2
                                                              Schedule 10
                                                                                                                                        PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                               Reconciliation of Non-GAAP Measures
                                                                                                                                      Adjustments for the Impact of RBH, excluding Currency
                                                                                                                                                  ($ in millions) / (Unaudited)
                                                      
Latin America & Canada                                                                     Quarters Ended June 30,                                                                                              Six Months Ended June 30,
                                                                     ----------------------------------------------------------------------------------------------------                          ------------------------------------------------------------------------------------------------------------------------
                                       2020                   2019                 % Change                 2020                              2019                           % Change
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- ----------------------------------------  -------------------- --------------------
Net Revenues                                                     $ 368                  $ 527                (30.2)%                  $ 816                $ 1,179                  (30.8)%
Net Revenues attributable to RBH                            --                          (179)                  (1)    
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net Revenues                                                     $ 368                  $ 527                (30.2)%                  $ 816                $ 1,000                  (2)                (18.4)%
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
Less: Currency                                                    (58)                           (77)          
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net Revenues, ex. currency                                       $ 426                  $ 527                (19.2)%                  $ 893                $ 1,000                  (2)                (10.7)%
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
                                                      
Operating Income                                                  $ 92                  $ 161                (42.9)%                  $ 218                 $ (25)                    +100%
Less:                                                                    
                                                                   (4)                   (23)                        (4)                   (23)      
    Asset impairment and exit costs
                                                        --         --             --                  (194)      
    Canadian tobacco litigation-related expense
                                                        --         --             --                  (239)      
    Loss on deconsolidation of RBH
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Operating Income                                         $ 96                  $ 184                (47.8)%                  $ 222                  $ 431                  (48.5)%
Operating Income attributable to RBH                        --                          (125)                  (1)    
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Operating Income                                         $ 96                  $ 184                (47.8)%                  $ 222                  $ 306                  (2)                (27.5)%
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
Less: Currency                                                     (6)                           (39)          
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Operating Income, ex. currency                          $ 102                  $ 184                (44.6)%                  $ 261                  $ 306                  (2)                (14.7)%
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
                                                      
Adjusted OI Margin                                               26.1%                  34.9%                  (8.8)                  27.2%                  36.6%                    (9.4)
Adjusted OI Margin attributable to RBH                      --                          (6.0)                  (1)    
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted OI Margin                                               26.1%                  34.9%                  (8.8)                  27.2%                  30.6%                  (2)                  (3.4)
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
Less: Currency                                                     2.2                          (2.0)          
                                                                     -------------------- -------------------- -------------------- -------------------- --------------------                      -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted OI Margin, ex. currency                                 23.9%                  34.9%                 (11.0)                  29.2%                  30.6%                  (2)                  (1.4)
                                                                     ==================== ==================== ==================== ==================== ====================                      ==================== ==================== ==================== ==================== ==================== ====================
                                                      
(1) Represents the impact attributable to RBH from January 1, 2019 through March 21, 2019
                                                                                                                                                                                                                                                                                        Schedule 11  
                                                                                                                                                                                   PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries                                                                                                                                                                                   
                                                                                                                                                                                           Condensed Statements of Earnings                                                                                                                                                                                            
                                                                                                                                                                                 ($ in millions, except per share data) / (Unaudited)                                                                                                                                                                                  
                                                                                                                                                                                                                                            
                                                       Quarters Ended June 30,                                                                                                                                                                                                 Six Months Ended June 30,                                                      
---------------------------------------------------------------------------------------------------------------------------------                                                                                                                                                 ---------------------------------------------------------------------------------------------------------------------------------
                    2020                                        2019                                       Change                                                                                                                            2020                                        2019                                       Change                    
                                                                                                        Fav./(Unfav.)                                                                                                                                                                                                                                                                     Fav./(Unfav.)
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                   $ 17,819                                    $ 19,987                                     (10.8)%                                      Revenues including Excise Taxes                                                                       $ 36,072                                    $ 37,692                                      (4.3)%  
                                     11,168                                      12,288                                        9.1%                                         Excise Taxes on products                                                                             22,268                                      23,242                                        4.2%  
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                      6,651                                       7,699                                     (13.6)%                                               Net Revenues                                                                                   13,804                                      14,450                                      (4.5)%  
                                      2,179                                       2,665                                       18.2%                                               Cost of sales                                                                                   4,581                                       5,130                                       10.7%  
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                      4,472                                       5,034                                     (11.2)%                                               Gross profit                                                                                    9,223                                       9,320                                      (1.0)%  
                                      1,722                                       1,831                                        6.0%                             Marketing, administration and research costs (1)                                                                  3,666                                       4,048                                        9.4%  
                                         19                                          16                                                                 Amortization of intangibles                                                                               37                                          35                           
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                      2,731                                       3,187                                     (14.3)%                                             Operating Income                                                                                  5,520                                       5,237                                        5.4%  
                                        162                                         150                                      (8.0)%                                           Interest expense, net                                                                                 291                                         302                                        3.6%  
                                         22                                          20                                     (10.0)%                                 Pension and other employee benefit costs                                                                         45                                          41                                      (9.8)%  
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                      2,547                                       3,017                                     (15.6)%                                       Earnings before income taxes                                                                            5,184                                       4,894                                        5.9%  
                                        528                                         611                                       13.6%                                        Provision for income taxes                                                                             1,124                                       1,035                                      (8.6)%  
                                       (30)                                        (30)                                                    Equity investments and securities (income)/loss, net                                                                   24                                        (41)                           
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                      2,049                                       2,436                                     (15.9)%                                               Net Earnings                                                                                    4,036                                       3,900                                        3.5%  
                                        102                                         117                                                    Net Earnings attributable to noncontrolling interests                                                                 263                                         227                           
------------------------------------------- ------------------------------------------- -------------------------------------------                                                                                                                                               ------------------------------------------- ------------------------------------------- -------------------------------------------
                                    $ 1,947                                     $ 2,319                                     (16.0)%                                     Net Earnings attributable to PMI                                                                        $ 3,773                                     $ 3,673                                        2.7%  
=========================================== =========================================== ===========================================                                                                                                                                               =========================================== =========================================== ===========================================
                                                                                                                                                                                                                                            
                                                                                                                      Per share data (2):                                                                                                                      
                                     $ 1.25                                      $ 1.49                                     (16.1)%                                         Basic Earnings Per Share                                                                             $ 2.42                                      $ 2.36                                        2.5%  
                                     $ 1.25                                      $ 1.49                                     (16.1)%                                        Diluted Earnings Per Share                                                                            $ 2.42                                      $ 2.36                                        2.5%  
                                                                                                                                                                                                                                            
(1) Six months ended and quarter ended June 30, 2020 includes asset impairment and exit costs ($71 million). Six months ended June 30, 2019 includes asset impairment and exit costs ($43 million), Canadian tobacco litigation-related expense ($194 million) and the loss on deconsolidation of RBH ($239 million). Quarter ended June 30, 2019 includes asset impairment and exit costs ($23 million).              
                                                                                             Schedule 12
                                                                  PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                              Condensed Balance Sheets
                                                                    ($ in millions, except ratios) / (Unaudited)
                                                                       
                                                                 June 30,                           December 31,
                                                                   2020                                 2019
                                                                                          --------------------------------                        --------------------------------
Assets                                                                                    
                                                                       $       4,200     $       6,861  
    Cash and cash equivalents
                                                                              13,576            13,653  
    All other current assets
                                                                               6,184             6,631  
    Property, plant and equipment, net
                                                                               5,653             5,858  
    Goodwill
                                                                               1,948             2,113  
    Other intangible assets, net
                                                                               4,516             4,635  
    Investments in unconsolidated subsidiaries and equity securities
                                                                               3,085             3,124  
    Other assets
                                                                                          ------------  --------------------                      ------------  --------------------
Total assets                                                           $      39,162     $      42,875  
                                                                                          ====== ====== ====================                      ====== ====== ====================
                                                                       
Liabilities and Stockholders' (Deficit) Equity                                            
                                                                       $         281     $         338  
    Short-term borrowings
                                                                               2,304             4,051  
    Current portion of long-term debt
                                                                              13,207            14,444  
    All other current liabilities
                                                                              27,043            26,656  
    Long-term debt
                                                                                 775               908  
    Deferred income taxes
                                                                               5,672             6,077  
    Other long-term liabilities
                                                                                          ------------  --------------------                      ------------  --------------------
Total liabilities                                                             49,282            52,474  
                                                                       
                                                                             (11,997 )                            (11,577 )
    Total PMI stockholders' deficit
                                                                               1,877             1,978  
    Noncontrolling interests
                                                                                          ------------  --------------------                      ------------  --------------------
Total stockholders' (deficit) equity                                         (10,120 )                             (9,599 )
                                                                                          ------------  --------------------                      ------------  --------------------
                                                                                                        Schedule 13
                                                                                                              PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                     Reconciliation of Non-GAAP Measures
                                                                                             Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios
                                                                                                                ($ in millions, except ratios) / (Unaudited)
                                                                                  
                                                                                               Year Ended June 30, 2020                                                                     Year Ended
                                                                                                                                                                                                                                                    December 31,
                                                                                                                                                                                                                                                        2019
                                                                              ----------------------------------------------------------------------------------------------------------------------------
                                                  July   December                January   June                   12 months              
                                                       2019                           2020                         rolling               
                                                                              --------------------------------   -------------------- --------------------  -------------------- --------------------------------
Net Earnings                                               $       3,828     $               4,036   $       7,864     $       7,728  
                                                                    (108 )                                         24             (84 )                               (149 )
    Equity investments and securities (income)/loss, net
                                                                   1,258                     1,124           2,382             2,293  
    Provision for income taxes
                                                                     268                       291             559               570  
    Interest expense, net
                                                                     492                       470             962               964  
    Depreciation and amortization
                                                                     753                        71             824             1,229  
    Asset impairment and exit costs and Others (1)
                                                                              ------------  -------------------- -------------------- --------------------  -------------------- ------------  --------------------                      ------------  --------------------
Adjusted EBITDA                                            $       6,491     $               6,016   $      12,507     $      12,635  
                                                                                  
                                                                            June 30,                           December 31,
                                                                              2020                                 2019
                                                                                                                                                                                 --------------------------------                        --------------------------------
                                                                                  $         281     $         338  
    Short-term borrowings
                                                                                          2,304             4,051  
    Current portion of long-term debt
                                                                                         27,043            26,656  
    Long-term debt
                                                                                                                                                                                 ------------  --------------------                      ------------  --------------------
Total Debt                                                                        $      29,628     $      31,045  
                                                                                          4,200             6,861  
    Cash and cash equivalents
                                                                                                                                                                                 ------------  --------------------                      ------------  --------------------
Net Debt                                                                          $      25,428     $      24,184  
                                                                                  
Ratios:                                                                                              
                                                                                           2.37              2.46  
    Total Debt to Adjusted EBITDA
(1) For the period July to December 2019, Others include the Russia excise and VAT charge ($374 million). For the year ended December 31, 2019, Others include the Canadian tobacco litigation-related expense ($194 million), the loss on deconsolidation of RBH ($239 million) and the Russia excise and VAT audit charge ($374 million).
                                                          Schedule 14
                                                                                                                             PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
                                                                                                                                    Reconciliation of Non-GAAP Measures
                                                                                                             Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency
                                                                                                                                       ($ in millions) / (Unaudited)
                                                  
                                         Quarters Ended June 30,                                                                                                                Six Months Ended June 30,
----------------------------------------------------------------------------------------------------                                                                                             ----------------------------------------------------------------------------------------------------
        2020                   2019                 % Change                                              2020                   2019                 % Change
-------------------- -------------------- -------------------- -------------------- --------------------                                                                                         -------------------- -------------------- -------------------- -------------------- --------------------
             $ 1,925                $ 3,442                (44.1)%    Net cash provided by operating activities (1)               $ 3,036                $ 4,683                (35.2)%
               (198)                           Less: Currency                                 (248)        
-------------------- -------------------- -------------------- -------------------- --------------------                                                                                         -------------------- -------------------- -------------------- -------------------- --------------------
             $ 2,123                $ 3,442                (38.3)%     Net cash provided by operating activities,                 $ 3,284                $ 4,683                (29.9)%
                                                                                                                                            excluding currency
==================== ==================== ==================== ==================== ====================                                                                                         ==================== ==================== ==================== ==================== ====================
                                                  

View source version on businesswire.com: https://www.businesswire.com/news/home/20200721005455/en/

SOURCE: Philip Morris International

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