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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Philip Morris International Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	9,635)	10,188)	8,950)	8,323)	8,723)
Cost of capital²	9.15%	9.53%	9.00%	9.14%	9.02%
Invested capital³	47,466)	29,268)	31,958)	31,284)	30,915)

Economic profit⁴	5,290)	7,399)	6,073)	5,462)	5,933)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 9,635 – 9.15% × 47,466 = 5,290

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Philip Morris International Inc. economic profit increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.

Philip Morris International Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net earnings attributable to PMI	9,048)	9,109)	8,056)	7,185)	7,911)
Deferred income tax expense (benefit)¹	(234)	(18)	(143)	(141)	(100)
Increase (decrease) in allowances²	(28)	47)	3)	(5)	—)
Increase (decrease) in accrued product warranty³	(9)	(24)	(3)	73)	(4)
Increase (decrease) in exit cost liabilities⁴	(102)	(38)	(11)	191)	—)
Increase (decrease) in equity equivalents⁵	(373)	(33)	(154)	118)	(104)
Interest expense	768)	737)	728)	796)	855)
Interest expense, operating lease liability⁶	21)	19)	30)	34)	20)
Adjusted interest expense	789)	756)	758)	830)	875)
Tax benefit of interest expense⁷	(166)	(159)	(159)	(174)	(184)
Adjusted interest expense, after taxes⁸	623)	597)	599)	655)	691)
Interest income	(180)	(109)	(110)	(226)	(190)
Investment income, before taxes	(180)	(109)	(110)	(226)	(190)
Tax expense (benefit) of investment income⁹	38)	23)	23)	47)	40)
Investment income, after taxes¹⁰	(142)	(86)	(87)	(179)	(150)
Net income (loss) attributable to noncontrolling interest	479)	601)	536)	543)	375)
Net operating profit after taxes (NOPAT)	9,635)	10,188)	8,950)	8,323)	8,723)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in accrued product warranty.

⁴ Addition of increase (decrease) in exit cost liabilities.

⁵ Addition of increase (decrease) in equity equivalents to net earnings attributable to PMI.

⁶ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 614 × 3.40% = 21

⁷ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 789 × 21.00% = 166

⁸ Addition of after taxes interest expense to net earnings attributable to PMI.

⁹ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 180 × 21.00% = 38

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Philip Morris International Inc. NOPAT increased from 2020 to 2021 but then slightly decreased from 2021 to 2022.

Philip Morris International Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for income taxes	2,244)	2,671)	2,377)	2,293)	2,445)
Less: Deferred income tax expense (benefit)	(234)	(18)	(143)	(141)	(100)
Add: Tax savings from interest expense	166)	159)	159)	174)	184)
Less: Tax imposed on investment income	38)	23)	23)	47)	40)
Cash operating taxes	2,606)	2,825)	2,656)	2,561)	2,689)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Philip Morris International Inc. cash operating taxes increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.

Philip Morris International Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term borrowings	5,637)	225)	244)	338)	730)
Current portion of long-term debt	2,611)	2,798)	3,124)	4,051)	4,054)
Long-term debt, excluding current portion	34,875)	24,783)	28,168)	26,656)	26,975)
Operating lease liability¹	614)	536)	707)	763)	657)
Total reported debt & leases	43,737)	28,342)	32,243)	31,808)	32,416)
Total PMI stockholders’ deficit	(8,957)	(10,106)	(12,567)	(11,577)	(12,459)
Net deferred tax (assets) liabilities²	1,353)	(169)	(726)	(245)	(79)
Allowances³	42)	70)	23)	20)	25)
Accrued product warranty⁴	104)	113)	137)	140)	67)
Exit cost liabilities⁵	40)	142)	180)	191)	—)
Equity equivalents⁶	1,539)	156)	(386)	106)	13)
Accumulated other comprehensive (income) loss, net of tax⁷	9,559)	9,577)	11,181)	9,363)	10,111)
Noncontrolling interests	2,646)	1,898)	1,936)	1,978)	1,720)
Adjusted total PMI stockholders’ deficit	4,787)	1,525)	164)	(130)	(615)
Construction in progress⁸	(1,058)	(599)	(449)	(394)	(886)
Invested capital	47,466)	29,268)	31,958)	31,284)	30,915)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of accrued product warranty.

⁵ Addition of exit cost liabilities.

⁶ Addition of equity equivalents to total PMI stockholders’ deficit.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Philip Morris International Inc. invested capital decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Philip Morris International Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	158,682)	158,682)	÷	200,048)	=	0.79	0.79	×	10.84%	=	8.60%
Debt, including finance lease obligations³	40,752)	40,752)	÷	200,048)	=	0.20	0.20	×	3.39% × (1 – 21.00%)	=	0.55%
Operating lease liability⁴	614)	614)	÷	200,048)	=	0.00	0.00	×	3.40% × (1 – 21.00%)	=	0.01%
Total:	200,048)					1.00					9.15%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	167,319)	167,319)	÷	197,913)	=	0.85	0.85	×	10.84%	=	9.17%
Debt, including finance lease obligations³	30,058)	30,058)	÷	197,913)	=	0.15	0.15	×	2.96% × (1 – 21.00%)	=	0.36%
Operating lease liability⁴	536)	536)	÷	197,913)	=	0.00	0.00	×	3.60% × (1 – 21.00%)	=	0.01%
Total:	197,913)					1.00					9.53%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	133,365)	133,365)	÷	169,757)	=	0.79	0.79	×	10.84%	=	8.52%
Debt, including finance lease obligations³	35,685)	35,685)	÷	169,757)	=	0.21	0.21	×	2.83% × (1 – 21.00%)	=	0.47%
Operating lease liability⁴	707)	707)	÷	169,757)	=	0.00	0.00	×	4.30% × (1 – 21.00%)	=	0.01%
Total:	169,757)					1.00					9.00%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	136,064)	136,064)	÷	170,209)	=	0.80	0.80	×	10.84%	=	8.67%
Debt, including finance lease obligations³	33,382)	33,382)	÷	170,209)	=	0.20	0.20	×	2.98% × (1 – 21.00%)	=	0.46%
Operating lease liability⁴	763)	763)	÷	170,209)	=	0.00	0.00	×	4.40% × (1 – 21.00%)	=	0.02%
Total:	170,209)					1.00					9.14%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	119,283)	119,283)	÷	151,865)	=	0.79	0.79	×	10.84%	=	8.52%
Debt, including finance lease obligations³	31,925)	31,925)	÷	151,865)	=	0.21	0.21	×	3.00% × (1 – 21.00%)	=	0.50%
Operating lease liability⁴	657)	657)	÷	151,865)	=	0.00	0.00	×	3.00% × (1 – 21.00%)	=	0.01%
Total:	151,865)					1.00					9.02%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Philip Morris International Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	5,290)	7,399)	6,073)	5,462)	5,933)
Invested capital²	47,466)	29,268)	31,958)	31,284)	30,915)
Performance Ratio
Economic spread ratio³	11.14%	25.28%	19.00%	17.46%	19.19%
Benchmarks
Economic Spread Ratio, Competitors⁴
Altria Group Inc.	11.00%	-2.09%	4.25%	-9.67%	—
Coca-Cola Co.	3.66%	5.19%	2.98%	3.27%	—
Mondelēz International Inc.	-3.74%	-0.73%	-1.89%	-2.34%	—
PepsiCo Inc.	4.90%	5.43%	4.06%	5.84%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,290 ÷ 47,466 = 11.14%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Philip Morris International Inc. economic spread ratio improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.

Philip Morris International Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	5,290)	7,399)	6,073)	5,462)	5,933)
Revenues including excise taxes	80,669)	82,223)	76,047)	77,921)	79,823)
Performance Ratio
Economic profit margin²	6.56%	9.00%	7.99%	7.01%	7.43%
Benchmarks
Economic Profit Margin, Competitors³
Altria Group Inc.	12.63%	-2.70%	6.74%	-16.41%	—
Coca-Cola Co.	6.80%	10.79%	6.84%	6.48%	—
Mondelēz International Inc.	-7.58%	-1.57%	-4.37%	-5.34%	—
PepsiCo Inc.	3.94%	4.77%	4.05%	5.16%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues including excise taxes
= 100 × 5,290 ÷ 80,669 = 6.56%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Philip Morris International Inc. economic profit margin improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.

Philip Morris International Inc. (NYSE:PM)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin