Nicholas M. Rolli - Philip Morris International, Inc. André Calantzopoulos - Philip Morris International, Inc. Jacek Olczak - Philip Morris International, Inc.

Judy E. Hong - Goldman Sachs & Co. Matthew C. Grainger - Morgan Stanley & Co. LLC Bonnie L. Herzog - Wells Fargo Securities LLC Christopher Growe - Stifel, Nicolaus & Co., Inc. Vivien Azer - Cowen & Co. LLC Michael Lavery - CLSA Americas LLC Jonathan Leinster - Joh. Berenberg, Gossler & Co. KG (United Kingdom)

Good day, and welcome to the Philip Morris International 2016 Fourth Quarter and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Philip Morris International management and the question-and-answer session. Media representatives on the call will also be invited to ask questions at the conclusion of questions from the investment community. I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. Please go ahead, sir. Nicholas M. Rolli - Philip Morris International, Inc.: Welcome, and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2016 fourth quarter and full year results and you may access the release on our new company website at www.pmi.com, or the PMI Investor Relations app. During our call today, we'll be talking about results for the fourth quarter and full year 2016, and comparing them to the same period in 2015, unless otherwise stated. A glossary of terms, adjustments, and other calculations, as well as reconciliations to the most directly comparable U.S. GAAP measures are at the end of today's webcast slides which are posted on our website. Reduced-Risk Products or RRPs is the term we use 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 continued smoking. Today's remarks contain forward-looking statements and projections of future results, and I direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. Please also note that in the first quarter of 2017, we will begin to report our shipment volume on a combined basis including both cigarettes and HeatSticks. We will also report our combined estimated market share in certain markets, as we currently do for Japan, to the extent that reliable data is available. It's now my pleasure to introduce André Calantzopoulos, our Chief Executive Officer. Jacek Olczak, our Chief Financial Officer, will join André for the question-and-answer period. André? André Calantzopoulos - Philip Morris International, Inc.: Thank you, Nick, and welcome ladies and gentlemen. 2016 was a pivotal year for PMI, reflecting exciting progress in our transformation from combustible tobacco products to a Reduced-Risk Products focused company. While our combustible tobacco portfolio continue to drive our income growth, we began to see clear signs of the enormous potential of our RRP portfolio. As expected, we closed 2016 with exceptionally strong quarterly results, driven by the annualization of price increases and the growth of RRPs coupled with a favorable cost comparison. Net revenues increased by 10.5% excluding currency while adjusted OCI and adjusted diluted EPS increased by over 47% and 51%, respectively, on the same basis. Full-year net revenues increased by 4.4% excluding currency driven by a favorable pricing variance equivalent to 6% of prior-year net revenues, and the strong performance of RRPs, notably HeatSticks and IQOS devices. As in any year, we faced some unique challenges in 2016 such as the very large excise tax increase in Argentina, the surge of illicit trade in Pakistan and the cigarette industry volume declines in the Philippines and Thailand. In aggregate, these items had an adverse effect on our volume and net revenues but a very limited impact on our adjusted OCI due to the low corresponding margins. Please note that approximately 22% of our $733 million in 2016 (4:21) RRP net revenues were from IQOS devices, which yielded a negative margin due to introductory discounts offer in the initial commercialization phase to accelerate adult smoker switching. Clearly, the economics of the devices will improve over time as we reach broader adult smoker acceptance. Adjusted operating company's income increased by a robust 10.3% excluding currency, driven by higher net revenues on the same basis and a favorable cost comparison versus 2015 notwithstanding continued investment behind RRPs. Our results were strong across all four regions, with currency-neutral adjusted OCI growth ranging from 8.7% in the European Union to 12.6% in EEMA. Adjusted OCI margin increased by 0.6 points to 41.8%, or by 2.4 points to 43.6% excluding currency, again, with gains across all four regions. Adjusted diluted EPS increased by 11.8% excluding currency in 2016. Importantly, adjusted diluted EPS grew by 1.4% including currency, representing the first such increase since 2013. Full-year free cash flow was stable at $6.9 billion despite unfavorable currency of $340 million and our previously announced increase in capital expenditures to support the manufacturing capacity expansion of HeatSticks. Excluding currency, free cash flow increased by 4.9%. As I mentioned previously, our strong financial results were achieved despite a cigarette shipment volume decline in 2016. Some 40% of the decline was due to Pakistan and the Philippines, where the volume erosion was concentrated in low-unit margin brands that had a limited impact on our bottom line. A portion of our cigarette volume decline was also due to in-switching to HeatSticks from our own cigarette brand, a trend that we expect to continue going forward. HeatSticks volume reached 7.4 billion units, which reflected our maximum manufacturing capacity for 2016. HeatSticks volume would have been much higher absent this capacity restriction, which obliged us to limit IQOS device sales in Japan since June. Our cigarette market share excluding China and the U.S. declined by 0.6 points in 2016, with low-price Fortune and super-low price Jackpot, both in the Philippines, accounting for 0.5 points of the total decline. Cigarette share for the balance of our portfolio was essentially stable. Marlboro continued its widespread growth with cigarette share increases in the EU, Asia, and Latin America, and Canada regions. Importantly, the brand's cigarette share growth in Asia was achieved in spite of the impact of Marlboro HeatSticks growth in Japan. Marlboro's decline in EEMA was due essentially to Algeria, reflecting significant adult smoker rejection of the 2.0 Architecture for Marlboro Round Taste. As noted during our September Investor Day, we instituted a number of initiatives to address this weakness and, as of the fourth quarter, the brand had already recovered close to 6 points of market share compared to its nadir in the second quarter. I will now discuss our performance in a few of our key geographies, beginning with the European Union region. Currency-neutral adjusted OCI increased for the second straight year, with higher pricing driving growth of over 8%. Full year cigarette industry volume declined by 1.6%, with the decrease concentrated in the fourth quarter. This primarily reflects a difficult comparison with 2015, which benefited from the estimated positive impact of immigration and a recovery from illicit trade. Our regional cigarette share was flat in 2016, with growth notably in France, Poland, and Spain, offset mainly by a decline in Italy as a result of our price increase in the second quarter of 2016 and the growth of the super-low price segment. Marlboro's share increased by 0.2 points, growing in most key markets, with the exception of Italy. Moving to Russia, cigarette industry volume again exceeded our expectations in 2016, with the decline moderating to 4.6% despite a third straight year of weighted average industry retail price increases of above 20%. Our cigarette market share declined by 1.2 points, due mainly to the slower penetration of competitors' price increases at retail. In addition, following the ban of the production of big packs, effective July 2016, many competitors launched limited pack editions at a discount equivalent to the per-stick price of big packs. We have deployed initiatives to improve our share performance and, indeed, stabilized our sequential quarterly share in the second half of the year. Strong pricing drove another year of double-digit OCI growth excluding currency, more than offsetting the adverse cigarette volume impact. For reference, amendments to the tax code effective January 2017 were enacted last November, raising the ad valorem rate to 14.5% and increasing both the specific and minimum excise tax. The weighted average total excise tax pass-on for the industry is around RUB 13 per pack, which equates to an average retail price increase of around 10% and is above the approximately RUB 10 per pack average pass-on for 2016. Importantly, the tax code also now includes the introduction of a weight-based specific excise tax on heated tobacco products. Turning now to Japan, the growth of RRPs in 2016 had a notable impact on cigarette industry volume, which declined by 4.6% for the full year and by 7.4% in the fourth quarter. HeatSticks' national market share continued its strong sequential growth, reaching 4.9% in the fourth quarter. During the final week of December, HeatSticks' national market share reached an estimated 5.5%, and its off-take share increased to 7%. Our full-year cigarette market share declined by 0.4 points to 24.9%, due mainly to the impact of HeatSticks. The rate of in-switching to HeatSticks from our own cigarette portfolio declined as the year progressed to an estimated 32% in late 2016. Our combined market share, including cigarettes and HeatSticks increased by 1.7 points to 27.1% in 2016, and by 3.1 points to 28.3% in the fourth quarter. Indonesia continued to be an important profit driver for PMI in 2016 with double-digit OCI growth, mainly reflecting strong pricing. Cigarette industry volume declined by 1.4%, due mainly to the soft economic environment and higher retail prices driven by weighted average excise tax increase in 2016 of around 15% industry-wide. The excise tax increase for 2017 is around 10% on the same basis, though the government also increased the VAT rate on cigarettes to 9.1% from 8.7% last year. As a result, the weighted average total pass-on for the industry in 2017 is approximately 6% at the retail level compared to 8% in 2016. The 0.9 points decline in our cigarette market share was due mainly to the soft performance of our lighter-tasting machine-made kretek brand, reflecting the impact of competitors' discounted product offerings. Our share decline was partly offset by the strong performance of our full-flavor machine kretek brand, U Bold. In addition, our Marlboro Filter Black kretek offering, which we launched in 25 cities last September, is performing well and already reached the national market share of 0.5% in the fourth quarter. Our actions to address our last year's share weakness will continue bearing fruit this year and we project that Indonesia will again be a key contributor to our OCI growth in 2017. Profit in the Philippines continued to improve in 2016 through higher pricing and favorable mix. While our total cigarette share declined by 2.1 points due mainly to Fortune and Jackpot, Marlboro performed exceptionally, increasing its volume by 25%. Cigarette industry volume declined by 12%, due principally to the impact of excise tax-driven retail price increases at the bottom of the market in late 2015. Industry volume decreased by 13.2% in the fourth quarter, reflecting the impact of further excise tax-driven price increases at the end of October last year. Effective January 1 of this year, the excise tax structure in the Philippines was reduced to one tier, with a specific rate of PHP 30 per pack. This completed the tax tier harmonization process, which saw weighted average excise tax increases of 33% on a compound annual basis since 2013. Based on current legislation, the specific rate is scheduled to increase by 4% annually, beginning in 2018. While we expect continued volume softness this year due mainly to the final step in the excise tax tier convergence, we remain positive about the long-term growth potential in this important market. In the Latin America and Canada region, strong currency-neutral adjusted OCI growth of 12.4% in 2016 was driven by higher pricing, notably in Argentina and Canada. Our original cigarette market share increased by 0.7 points, driven by Marlboro and supported by share gains in Brazil, Canada, and Mexico. Regional cigarette industry volume declined by 5.9% in 2016, due mainly to tax-driven retail price increases in Argentina and Brazil. We expect the industry volume declines in both markets to moderate in 2017. To close on 2016, I will highlight the favorable performance of IQOS across the many launch markets beyond Japan. While this performance requires some additional context given the smaller scale of the launches and the role of HeatSticks capacity constraints in the second half of last year, it nonetheless serves as a positive indicator of the potential for IQOS broadly. One measure that we closely monitor is the rate of IQOS purchasers who fully or predominantly convert to the product. Conversion rates have grown over time and at the end of 2016 stood at approximately 70% or higher. As a reminder, Japan only reached this level in May last year, over 18 months after launch. This confirms that IQOS resonates strongly with adult smokers who try it, irrespective of the market. We also clearly monitor HeatSticks off-take volumes. During the fourth quarter of 2016, estimated off-take volume in all markets with launches prior to mid-year grew at a compound weekly rate of over 6%, comparable to Japan during the initial launch phase. Such performance augurs well for our planned national expansions which, in Japan, had an accelerating effect. Turning now to 2017. We enter the year with positive momentum and favorable trends across many of our key geographies, although currency volatility remains an issue. As announced this morning, our reported diluted EPS guidance for 2017 at prevailing exchange rates is a range of $4.70 to $4.85 versus $4.48 in 2016, and includes an unfavorable currency impact of approximately $0.18. This guidance represents a growth rate excluding currency of approximately 9% to 12% compared to our adjusted diluted EPS of $4.48 in 2016. We expect our currency-neutral financial growth to be slightly skewed toward the second half of 2017, reflecting the timing of HeatSticks capacity and phasing of RRP investments, as well as unfavorable cigarette industry volume comparisons with the first half of 2016, notably in Argentina, the EU Region, and Turkey. The $0.18 of unfavorable currency impact at prevailing exchange rates included in our 2017 guidance is driven primarily by the Turkish lira, Euro, Japanese yen, and Mexican peso, partly offset by the Russian ruble. We've currently hedged approximately 40% of our 2017 forecast sales to Japan which, at prevailing exchange rates, translates to an effective rate of ¥ 114 to the U.S. dollar versus ¥ 111 in 2016. As I noted during last September's Investors Day, the advent of RRPs introduces some additional variables into the attractive and predictable growth equation of our industry. These variables are somewhat less range-bound and linear (18:48) given the emerging nature of the category, but also offer exponential upside. For this reason, we have widened our EPS guidance rates this year to $0.15. Our EPS guidance reflects net revenue growth in excess of our current currency-neutral annual growth target range of 4% to 6%. We expect this growth to be driven by two main factors: higher RRP volume, reflecting both HeatSticks and IQOS devices; and a favorable pricing variance. The anticipated pricing variance is equivalent to approximately 6% of our 2016 net revenues. As of today, we have implemented or announced over 60% of the pricing that is included in our guidance. Our guidance also reflects significant incremental investment behind the deployment of our RRP portfolio, partly offset by the judicious reallocation of resources from our combustible tobacco portfolio to RRPs in the relevant markets. For this year, we are targeting operating cash flow of approximately $8.5 billion, reflecting higher net earnings. We plan to use this cash flow primarily for capital expenditures to support the growth of our business and for dividends, at the board's discretion, to our shareholders. We anticipate capital expenditures of approximately $1.5 billion this year versus $1.2 billion in 2016. The projected increase is driven by higher investments to support RRP capacity expansion, notably for HeatSticks. Last September, we increased our annual dividend for the ninth consecutive year since the spin in 2008, representing a total increase of approximately 126% at the compound annual growth rate of approximately 11%. While we expect our combustible tobacco business to remain the primary driver of our financial results in the near term, our Reduced-Risk Products portfolio provides us with the single-largest opportunity to significantly accelerate the growth of our company and generously reward our shareholders. In 2017, the majority of our RRP commercialization focus will remain on IQOS. To-date, we have launched IQOS in key cities in 20 markets, as seen on this slide, and aim to expand nationally in many of these markets this year as HeatSticks capacity becomes available. We are also targeting launches in key cities in an additional 10 to 15 markets by year-end, subject to capacity. We began 2017 with approximately 15 billion units of installed annual HeatSticks capacity and expect over 32 billion units in total capacity to be available for commercialization this year. We continue to anticipate an installed annual capacity of approximately 50 billion units by year-end. We look forward to unleashing the true potential of IQOS once the pressure on HeatSticks capacity eases as the year unfolds. Moving to our other RRP platforms, we expect to conduct city tests for our Platform 2 heated tobacco product and our Platform 3 nicotine-containing product this year. We began the city test of our Platform 4 MESH vaporization technology in Birmingham, UK, late last year. And though still very early, we're pleased by the initial results and our related learnings thus far. In conclusion, 2016 was a pivotal year for PMI, reflecting exciting progress in our transformation from combustible tobacco products to Reduced-Risk Products focused company. We recorded strong full year currency-neutral financial results, driven by our combustible tobacco business and including an important net revenue growth contribution from RRPs for the first time. IQOS is performing exceptionally, with its most visible success in Japan, and high conversion rates and off-take volume growth broadly. As of year-end 2016, we estimate that approximately 1.4 million adult consumers have quit smoking cigarettes and converted to IQOS. Finally, the outlook for our business remains strong. Our 2017 EPS guidance reflects a growth rate of approximately 9% to 12% excluding currency, compared to adjusted diluted EPS of $4.48 in 2016. Thank you. Jacek and I will now be happy to answer your questions.

Our first question comes from the line of Judy Hong of Goldman Sachs. Judy E. Hong - Goldman Sachs & Co.: Thank you. Hi, everyone. André Calantzopoulos - Philip Morris International, Inc.: Hi, Judy. Judy E. Hong - Goldman Sachs & Co.: So, first, just in terms of 2017 guidance, it's now calling for 9% to 12% earnings growth. It's a little bit better than the 8% to 10% algorithm that you had given at the September meeting. So, can you just talk about what's changed in terms of thinking about 2017? And, obviously, you've talked about the IQOS contribution from a revenue standpoint. But are you expecting profit contribution to kick-in in 2017 from an IQOS standpoint? André Calantzopoulos - Philip Morris International, Inc.: Okay. The reason, first of all, we increased the range, as I explained, is because there is obviously a bit more volatility as regarding the IQOS HeatSticks sales, but also our capacity. And that explains, more or less, the vast majority of the variability, I would say, okay. Clearly, IQOS is going to play a big role in our revenue growth next year and here, I would like to give some clarification for all the people on the call and broadly to understand. There is always in the revenues coming from – a part of the revenues coming from IQOS is due to the device sales. And as I said, this initial commercialization phase, the bottom line contribution of device sales is negative. And if we take 2016 as a proxy, if you look at total IQOS revenues, 22% of those revenues were linked to device sales. And just to give you another rule of thumb, for your own projections, if we look forward, and I would think that will work for the first year or two, obviously, of IQOS sales, if we have rapid expansion, you should count for every incremental billion sales of HeatSticks, roughly 300,000 to 350,000 sales of devices of IQOS, which have a negative margin. So, we cannot apply our current operating profit margins to the devices. That's all I want all of you to understand, okay. Having said that, clearly, IQOS will be an increasingly important contributor to our revenue growth. And also, we have to take into consideration there will be much more substantial cannibalization. As I said, 32% of the people switching into IQOS in Japan come from our own brand, and if we take European Union countries, we'll be north of 40%. That's why we said, as we approach this as one company and one business, we'll be reporting combined volumes, because it will be very difficult over time to split the two and calculate cannibalization rate. So overall, I think we have a very strong guidance for the year. That's really clear. And I'm very happy with – I don't know if I answered your question entirely or not. Judy E. Hong - Goldman Sachs & Co.: Yeah. I think that's certainly helpful. Just, if I can follow up on Japan, André, just in terms of what you've seen post the Glo launch in Sendai, and how you think that that's impacting the broader – the heated tobacco category, as well as your market share performance in that market? André Calantzopoulos - Philip Morris International, Inc.: Well, first of all, it's a very good thing that other companies launched heat-not-burn and, in general, Reduced-Risk Products. Because I said many times, once you convince people to move out of cigarettes, then clearly, in my view, the better products in the new category will eventually succeed and prevail. It's very early days and, obviously, as in any test market, you also have some sales going – not staying in the city, but going somewhere else. But the results are fairly good. Now, this has not impacted at all the IQOS share, that continued to grow during the period, which to your point, outlines that there is a lot of demand for this new category in Japan. And that's very encouraging for all of us. Judy E. Hong - Goldman Sachs & Co.: Got it. Okay. And then just finally, Jacek, does the inventory impact in the quarter – it sounds like you had a pretty positive impact in both Japan and Russia, maybe a 2-point of an impact. So, maybe just at the total company level, if you can quantify the inventory impact and how that will impact the 2017 combustible volume, if this reverses in the coming quarters? Thanks. Jacek Olczak - Philip Morris International, Inc.: Yes. I mean, Russia ended up with a higher inventory, but it was a pretty normal reaction to the price rollouts into the market. So, usually you hike a little bit the inventory, and I think some of this is going to unwind during the year. And the second thing on Japan is the more – look, we have a little bit, to be frank, and to link back to what André said, I mean IQOS volumes versus the combustible volumes in Japan is a little bit harder for us to predict. So, we might have some temporary disallocations of inventories to the sales there. I think we're going to correct that. But on the other hand, we ended up, frankly speaking, with almost no inventories for the IQOS combustibles – sorry, for the IQOS RRPs. So, I think you will see these corrections going forward into 2017. Judy E. Hong - Goldman Sachs & Co.: Okay. Got it. Thank you. Jacek Olczak - Philip Morris International, Inc.: Thank you.

Your next question comes from the line of Matthew Grainger of Morgan Stanley. André Calantzopoulos - Philip Morris International, Inc.: Hello. Matthew C. Grainger - Morgan Stanley & Co. LLC: Hi. I guess, first question on IQOS, you've referenced it being present in 30 to 35 markets during 2017 or by the end of 2017. Is it possible to give a sense for how many markets you're targeting to potentially receive full investment in field sales resources, essentially the level of resources that you'd need to fully activate the IQOS platform and break through that 2% to 3% market share threshold as opposed to markets that you'll be in more than just an initial capacity? André Calantzopoulos - Philip Morris International, Inc.: Okay. The first thing is we need to differentiate whether in these markets we do city productions or national launches, okay, because that absorbs capacity (31:17) resources. Now, as an overall picture for this year, clearly, there is substantial incremental investment in commercial expenses behind IQOS. Despite the fact that in the relevant markets, we have also reallocated resources from our existing business to IQOS because everybody will be doing IQOS for a national launch. So, overall, I think this is all in the guidance, bearing in mind that, you know, if we see more traction and we have the capacity, we may put even more resources behind during the year in terms of field forces and other commercial activities. And if we have capacity constraints, we may postpone some launches, and we all need to live with this variability because it's very difficult for me to predict precisely how this is going to unfold. But overall, the trend is extremely positive, and that's what is reflected in the guidance. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. Understood. Thanks, André. And, Jacek, I was hoping you could speak maybe at a general level to the potential impact of U.S. tax reform on the company. And I know there's a range of possibilities. The statutory rate may go down, that applies to your repatriation. You could have a territorial system where repatriation is tax free. Interest deductibility could be changed. So, I'm just curious how you'd contextualize the potential implications for PM? Jacek Olczak - Philip Morris International, Inc.: You have mentioned all variables which are being discussed between the President Trump and the Republicans. We will have to see how this is going to reconcile. I think we'll be preemptive at this stage to give any more sound estimate. I mean, clearly – I mean a tax reform should allow – what we hear from the U.S. – I mean, it should allow for the different repatriation pattern to U.S. But we'll have to see what's going to happen. If you go to the note, I guess, 11 in our filings, I mean, you'll see we always break down how much tax we pay on a foreign basis – I mean how much the profit taxes we pay before repatriations to U.S. And the rate – the blended rate would be somewhere in the range 22%, 22.5%, that's the foreign taxes which we pay on our earnings, which we generate outside U.S. And then, obviously, to our effective tax rate, which you have today, you have to add the different various cost of the repatriations of this earnings to U.S. and, obviously, the top-up to the 35% statutory in the U.S. But whatever happens – I mean, we will not be able, with the current tax regimes staying as they are today, to go to the tax rate lower than this 22%, 22.5%. Okay. This is as the rule of thumb I would use. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. That's helpful. Thanks, again. Jacek Olczak - Philip Morris International, Inc.: Thank you.

Your next question comes from the line of Bonnie Herzog of Wells Fargo. Bonnie L. Herzog - Wells Fargo Securities LLC: Hi, André and Jacek. André Calantzopoulos - Philip Morris International, Inc.: Hi, Bonnie. Jacek Olczak - Philip Morris International, Inc.: Hi. Bonnie L. Herzog - Wells Fargo Securities LLC: I guess my first question is on pricing, which was very strong during the quarter. So, I'm curious what you learned from consumer behavior by taking this much pricing, and then what your elasticity was, and then with pricing consistent across your different brands. In other words, I guess I'm trying to understand if you were able to maintain the same level of price gaps within your portfolio. André Calantzopoulos - Philip Morris International, Inc.: Well, there were a couple of price increases that came a bit earlier. In the Philippines we increased, if I recall correctly, in October. We came in the quarter. And in Turkey, the government adjusted the minimum excise-specific tax, effective January 1, we took the pricing a bit ahead of that. So, all these prices appear in the quarter clearly. There is nothing exceptional, it's in the normal course of things, okay. I think the pricing was more or less the same across segments in absolute terms in the majority of the market. So, there's no any particular opening of (35:50) that I can think about, and we have not seen elasticities changing. However, the only thing we need to observe now is Turkey, because in Turkey, if you take the beginning of 2016 to the end, we took TRY 3 per pack price increase, which is around 30% plus average and Turkey grew also because of the reduction of the contraband volume last year especially in the half of the year. So, we can expect a little bit of weaknesses, I would assume, given that magnitude of price increases. And I think we will recover as the year unfolds, that's at second half, but we will see softness in the first part of the year. But that's all I can say about this whole thing. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. And then I wanted to go back to something on your guidance that you mentioned, I just wanted to be clear. So, your guidance assumes that IQOS in total will still be breakeven. I think that's what you mentioned at your Investor Day, so I just wanted to clarify that. And then wanted to understand your plans for spending by IQOS or behind IQOS this year. And then maybe help us quantify how big of an increase you're anticipating, if you could do that. André Calantzopoulos - Philip Morris International, Inc.: Okay. Yes, IQOS will breakeven towards the end of next year. If you remember – I'm sorry, this... Bonnie L. Herzog - Wells Fargo Securities LLC: Wait. Okay... André Calantzopoulos - Philip Morris International, Inc.: We're still in (37:31) in 2016. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. André Calantzopoulos - Philip Morris International, Inc.: I'm sorry about that. Bonnie L. Herzog - Wells Fargo Securities LLC: No, no. André Calantzopoulos - Philip Morris International, Inc.: This year, okay, and we still have significant capacity constraints in the third quarter, if you remember. Bonnie L. Herzog - Wells Fargo Securities LLC: Yeah. André Calantzopoulos - Philip Morris International, Inc.: And then we have a very aggressive capacity build-up plan. And clearly, the whole volume is going to be skewed towards the second half of the year. This is also the reason that the first quarter is going to be probably the weakest in the year because we don't have the capacity but many European markets, for example, and others, are making all the investments ahead of the deployment in the first quarter and second quarter. So, that's how I see it unfolding during the year. And these are substantial incremental investments I can't quantify, but they're very substantial. The increment is much higher than this year. Okay. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. All right. That's helpful. And then just my final question, I'd be curious to hear from you guys the feedback you've been receiving from public health experts and then governments around the world given the success you've had with IQOS and the science you've been publishing. Anything you can share with us regarding conversations and progress you're making would really be helpful. Thanks. André Calantzopoulos - Philip Morris International, Inc.: Look, I can comment generally, and I also have direct contacts with a number of people. I think there is a positive momentum building, okay, and I must say faster than I personally anticipated. Now, as you know very well, there are still people that have not embraced the principle of harm reduction of the product and that will continue requiring a significant amount of work going forward. But I believe the trend is very positive and I'm very happy with the progress we're making. Okay. I'm not saying there will be no hurdles. I'm not saying there is not going to be difficulties. But I think the way we are received and the science is received is positive, very positive. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. Thank you.

Your next question comes from the line of Chris Growe with Stifel. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. Thank you. I just had a couple of questions for you, if I could. The first, and I hope this is not a repeat of earlier questions, but you talked about shifting resources from combustibles to RRPs, and I know you're probably trying to find the right balance across many of those markets. I'm thinking like a market like Japan, can you talk about how resources have shifted if that's a percentage or some measurement of that to explain how that shifts from one to the other? And then just to be clear, I'm sorry if I missed it, have you said how much your costs are up in 2017 and would that be inclusive of RRP investments? André Calantzopoulos - Philip Morris International, Inc.: Okay. On your first question, okay, first of all, the allocation – the reallocation is done on the relevant market. We are not reducing resources in a market where we don't plan to launch RRPs and put them behind the RRPs. And the explanation is the allocation is based on the fact that, as I said in Investors Day, we try to get as fast as possible to the 2% or 3% market share that we believe is the tipping point to go from linear (40:48) expansion to exponential growth of IQOS because then, the consumers or the adopters of IQOS become the ambassadors of the product and the brand. So, it's market-specific and the amount of reallocation you do is also based on the competitive environment, the consumer dynamics and so on and so forth. So, there is no rule of thumb. And I don't remember exactly how much money we reallocated in Japan, but there has been a significant shift of things that are very measurable like your direct marketing budget. But also that's where it becomes a little bit more difficult, it's how really the time of a field force that exists is allocated between the two categories. Okay. In many markets, as I said, you need incremental ground forces during the initial period well and above the field forces we have. Because we've seen very clearly that the more people you put on the ground, the faster the reaction, as we see in Italy now, as we see in Switzerland now, more resources. In Italy, we've doubled the market share in just 10 weeks because now we have the resources on the ground. So, that's the rule of thumb. Now, as of the overall costs, clearly in 2017, we will be above our 1% to 3% more or less target because of all these deployments. Okay. So, the cost – but they're all in the guidance, by the way. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Jacek Olczak - Philip Morris International, Inc.: Chris, we have said – it's Jacek here, we have said that we look to grow the revenues above the 6% or the upper-end of the current (42:45) and clearly still we're lifting EPS. So, you could see that we are not diluting the margins. I think we should look for the year when we will have a small but still the margin expansion operating profit margin expansion, not to the tune which we had in 2016. André mentioned that there is a device sales in this revenue and, for a time being, they yield a negative margin. So, that's obviously dilutive. But the HeatSticks, and still the performance of the combustibles were both (43:18) 6% pricing. I mean, that should allow us for some margin expansion, say 10, 20 basis points, and we will see how the year unfolds. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. And then just one other follow-up question, if I could, which is that, if you were able to get approval as a Modified Risk Tobacco Product in the U.S. in 2017, I'm just curious what that would mean to you in other international markets, in Japan? I'm obviously getting to – could you make a, or would you make, a claim and would that, for some reason, cause you to accelerate your investments in IQOS? André Calantzopoulos - Philip Morris International, Inc.: Okay, Chris. First of all, it is highly unlikely we will get approval for MRTP in 2017. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Yes. André Calantzopoulos - Philip Morris International, Inc.: Okay. As you know, the FDA gave a guidance that they would – may take X-days, but I mean that may take more time. What we believe is more within the 2017 realm, is the product authorization for the U.S. market without claims, okay. And we will submit that application, the PMTA application, in the first quarter this year, okay. Now, irrespective of the approval in the U.S. – the FDA approval obviously helps the credibility internationally, but it doesn't apply to Japan, okay. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Yeah. André Calantzopoulos - Philip Morris International, Inc.: In Japan and other markets, our claim structure, as we said, follows the local legislation, but also the conclusion of our own science. So, what we communicate to the consumers is driven by local laws and our own science. And the FDA cannot be applied to these places. But, obviously, it will add credibility to their entire scientific dossier, and that's why it is important to us. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for your time. André Calantzopoulos - Philip Morris International, Inc.: You're welcome.

Your next question comes from the line of Vivien Azer of Cowen & Co. André Calantzopoulos - Philip Morris International, Inc.: Hi, Vivien. Vivien Azer - Cowen & Co. LLC: Hi. Good morning. So, I was hoping to get a little bit more color on your go-to-market execution on IQOS for some of the newer markets that you've entered, perhaps Canada. If you could comment on the excise tax structure, retail footprint, and relative pricing versus combustibles? Thanks. André Calantzopoulos - Philip Morris International, Inc.: Okay. First of all, the first variable is clearly what marketing freedoms you have. Okay. What we learned, as I said for many markets, is in the initial phase, unless – until you get this critical mass, you need the right amount of people on the ground that talk to the consumers, explain the product, and help the consumers in the conversion. And as a general principle, as of this year, we will start introducing digital tools to – we are a little bit too manual and labor-intensive and we'll introduce, where the law allows, digital tools to help the conversion. And that is something we'll do everywhere, but the speed by which IQOS switching occurs depends also on the freedoms we have in the market. In Canada, you have very limited ability to communicate with consumers under the current regime. So Canada is going to take some time, okay. Clearly, the tax we received is more favorable than the tax levy on cigarettes in Canada. And pricing, I don't exactly remember, because depends on the State of Canada in which we go. But I think, in any case, we will be at the premium end of the market, okay. I think we're, yeah, we're premium like Belmont price. But in Canada, it varies from state – province to province, so I can't make a general comment. Okay. Did I answer your question? Vivien Azer - Cowen & Co. LLC: You did. Thank you. And if I could just follow up, so of the 20 markets, is there any market where you have not gotten a favorable tax treatment? André Calantzopoulos - Philip Morris International, Inc.: No. Vivien Azer - Cowen & Co. LLC: Very good. André Calantzopoulos - Philip Morris International, Inc.: Jacek is the underlying factor (47:46). Vivien Azer - Cowen & Co. LLC: And just one on the combustibles, if I could. In the EU, you guys called out the kind of anniversarying of a benefit from immigration as well as illicit. How do we think about kind of full-year industry volumes for the EU? And I think you called out some softness on the comps in the first half. But order of magnitude, how much is one-half versus two halves going to differ, do you think? Thanks. André Calantzopoulos - Philip Morris International, Inc.: For the moment, we assume that EU will go to its secular 2% to 3% decline rate this year. Okay, last year, we assumed the same, we had a positive surprise. But logically, it should go there, because we don't have the one-offs of immigration and so on. And, yes, the employment is getting better in Europe. The outlook in GDP growth is moderately better. But when you look at the whole thing, I have to assume, at this stage, 2% to 3% decline, okay, that's what we're working with. Now, just for you (48:55) on this quarter comparison, don't forget that in European Union countries, we have the implementation of the Tobacco Product Directive. And there are cutoff days for certain products, for 10s, for 20s, for 19s (49:07), so it has been a little bit of a rocky thing with trade loadings and unloadings, which should ease now as we move into this year, okay. So, yes, there will be some unfavorable comparisons at the beginning of the year, but that's how I see EU. We'll see as the year unfolds. Vivien Azer - Cowen & Co. LLC: Very helpful. Thank you very much.

Your next question comes from the line of Michael Lavery of CLSA. Michael Lavery - CLSA Americas LLC: Thank you. I just wanted to touch on the Philippines. We know, about a week or two ago, your local competitor took some pricing, and you took pricing in the fourth quarter on Marlboro. Mix has been a big driver there, obviously, lifting Marlboro's share up. What do price gaps look like now, and can you sustain that trading-up momentum over the course of this year? André Calantzopoulos - Philip Morris International, Inc.: Look, our major competitor increased prices but they are implementing also some discounting schemes, so we still need to see the prices flowing through to the market, okay?. Plus, as you know, there are still a lot of non-tax-paid volumes and fake stamps on the market. But I'm very encouraged that the government seems to start moving in this direction but still we need to see it happening. Now, we increased the price of Marlboro and the per-stick price is theoretically PHP 3.50. In some places, it went up to PHP 4. We have to assume there will be some impact on Marlboro initially but, so far, it looks better than what we anticipate. So, I think the up-trading may stop for a while at the beginning, but it will continue over time because still, the price gaps are very attractive. Okay. The big problem in the Philippines that we had in 2016, in terms of low-end of the market volumes, will continue. Because with the implementation of our price increase, per-stick prices still went up at the bottom end and these are pretty substantial increases for low-income consumers. The good news is we don't see smoking incidence decrease, but we see a decrease in sticks per day, which means that once we get up stability now that we got the excise tax kind of convergence of the tiers done, I hope that over time, probably towards the end of this year, we'll start seeing some stability, and then daily consumption will start coming up to the previous level. But we have to assume conservatively, at least for the Philippines, the trend is not going to change in terms of volume for the year. Michael Lavery - CLSA Americas LLC: Okay. That's helpful. And then on IQOS, you've touched on some of the capacity constraints. Sorry if I missed this. Can you just revisit – I believe you've been saying you thought that those capacity constraints would ease at the end of this quarter. Is that still the case? André Calantzopoulos - Philip Morris International, Inc.: Yes. But we start the year with 15 billion installed capacity which, if everything goes right, that gives you, mathematically, the equivalent of 1.2 billion per month, okay. And we'll ramp up the capacity to 50 billion at the year-end, but the average for the year is something around 32 billion given all these machines that are being installed assuming the plan goes into perfection. So, that's basically a variable. So, we'll have some constraints still in the first quarter, obviously. And we'll start getting more capacity as we move on, and we'll have the max capacity, obviously, in the fourth quarter of the year. And that will dictate, obviously, the pace of sales as well. Michael Lavery - CLSA Americas LLC: We talked to consumers in Korea and Hong Kong who are getting product from Japan, obviously, because you haven't launched there yet. But do you expect to move into those markets sooner than later? Do you have any sense of what timing that might look like? André Calantzopoulos - Philip Morris International, Inc.: Yes, we have a plan, obviously. Jacek Olczak - Philip Morris International, Inc.: There are more markets where consumers are getting the product from other places, so... André Calantzopoulos - Philip Morris International, Inc.: Okay. So, yes, I think Korea has very good potential given the characteristics of consumers and the market and, eventually, we'll be in this markets. But you appreciate I can't say exactly when. Michael Lavery - CLSA Americas LLC: No. That makes sense. And then just one last one on Indonesia. We've seen the leaf crop there this year be hurt by bad weather. It looks like it's set to rebound very strongly next year. I know you have some ability to smooth – you at least have big inventories in leaf stocks. How much can you smooth any potential impact from the expensive leaf that might be coming through now? Is that any headwind there or do you have different ways to offset that? André Calantzopoulos - Philip Morris International, Inc.: It's more of the cloves (54:12) than leaf – the leaf as well. I think we are able to amortize these shocks now because we have sufficient inventory. It's a bit tighter on the leaf, a bit better on the cloves (54:24), which... Michael Lavery - CLSA Americas LLC: Okay. Thank you very much. André Calantzopoulos - Philip Morris International, Inc.: Okay.

Your next question comes from the line of Jon Leinster of Berenberg. Jonathan Leinster - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Hi. Good morning, gentlemen. A couple of few questions, if I can, just a little quick accounting one. When you put in the $733 million of sales, is that counting all of the IQOS, HeatSticks devices at full price with the discounts going through as cost of sales? Or is that actually the sort of net realizations? Jacek Olczak - Philip Morris International, Inc.: It's the net realization. Discounts go into consumers and the trade will be deducted from obviously from the revenues. You have on a net basis net after allowances. Jonathan Leinster - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Okay. And just out of interest on the sort of (55:10) fourth quarter sales, how much of that was actually do you think sold on a discount. Jacek Olczak - Philip Morris International, Inc.: It depends by the market. There are different schemes. Devices, they were all sold at the promotional price, on a discount. And the HeatSticks, you will have to go market by market, and the different stages, they might run different schemes. Usually, market at the beginning will have some small discount on the HeatSticks and then depends on the market situation, I mean, at the full price of cigarette price (55:43)... André Calantzopoulos - Philip Morris International, Inc.: It's mostly full price. In many markets you can't even discount the HeatSticks. It's illegal by legislation. So, it's mostly discounts. Jacek Olczak - Philip Morris International, Inc.: The (55:54) from the devices. André Calantzopoulos - Philip Morris International, Inc.: It's the devices and that's why I caution everybody not to take this to the bottom line straight at the same margin as the rest because it's negative. But it pays off very quickly. It's pretty obvious. I mean, it... Michael Lavery - CLSA Americas LLC: And then just today the French sort of put out their price list today and obviously there has been some big tax increases going through. And yourself and one of your big competitors didn't change prices at all. What's the thinking behind that? André Calantzopoulos - Philip Morris International, Inc.: Look, I cannot comment on pricing. You appreciate that. The only thing I can tell you is in France, given the structure of the excise tax that is all ad valorem essentially, it's not a big deal because the trade-off between volume and pricing is very often neutral. And that's the only comment I can make at least temporarily. Michael Lavery - CLSA Americas LLC: I thought it was a turnover tax on the actual companies... André Calantzopoulos - Philip Morris International, Inc.: ...which works like an ad valorem component. Michael Lavery - CLSA Americas LLC: Okay. André Calantzopoulos - Philip Morris International, Inc.: The turnover of the distributors net of excise taxes, that boils down to a pass-on of around €0.18. Michael Lavery - CLSA Americas LLC: €0.18? Okay. Awesome. Okay. Thank you very much. André Calantzopoulos - Philip Morris International, Inc.: You're welcome.

Your final question comes from the line of Adam Spielman of Citi. André Calantzopoulos - Philip Morris International, Inc.: Hi, Adam.

Adam, your line is open. Please state your question. Jacek Olczak - Philip Morris International, Inc.: Well, we lost Adam.

There is no response from that line. At this time, I will turn the call to management for any additional or closing remarks. Nicholas M. Rolli - Philip Morris International, Inc.: Well, thank you very much. That concludes the call. If you have any follow-up questions, you can contact the Investor Relations team. We're currently in Switzerland. And the next presentation will be at the CAGNY Conference on February 22 in Florida. Thank you again. Have a great day.

Thank you for participating in the Philip Morris International 2016 fourth quarter and full-year earnings conference call. You may now disconnect.