Asset Impairment and Exit Costs

6 Months Ended

Jun. 30, 2022

Restructuring and Related Activities [Abstract]

Asset Impairment and Exit Costs

Asset Impairment and Exit Costs:

For the six months and three months ended June 30, 2022, PMI did not record any charges for asset impairment and exit costs. For the six months and three months ended June 30, 2021, PMI recorded total pre-tax asset impairment and exit costs of $127 million and $79 million, respectively. These pre-tax charges for the six months and three months ended June 30, 2021 were included in marketing, administration and research costs in the condensed consolidated statements of earnings.

South Korea

In 2021 PM Korea implemented a new business operating model, which required the restructuring of its current distribution agreements. As a result, PMI recorded exit costs of $26 million as of June 30, 2021, related to contract terminations and restructuring with certain distributors. The full cost of the program, which was recorded as exit costs during the year ended December 31, 2021, was $57 million.

Organizational Design Optimization

As part of PMI’s transformation to a smoke-free future, PMI sought to optimize its organizational design, which included the elimination, relocation and outsourcing of certain operations center and centralized activities. In January 2020, PMI commenced a multi-phase restructuring project in Switzerland. PMI initiated the employee consultation procedures, as required under Swiss law, for the impacted employees. The consultation procedures for the first two phases were completed in 2020 with the final phases initiated and completed in 2021. Additionally, since the commencement of this multi-phase restructuring project in 2020, PMI launched a voluntary separation program in Switzerland for certain eligible employees and announced the outsourcing of certain activities in Argentina, Indonesia, Poland and the United States. This multi-phase restructuring project was completed in the fourth quarter of 2021.

For the six months and three months ended June 30, 2021, PMI recorded pre-tax charges of $101 million and $79 million, respectively, related to the organizational design optimization. Since inception of this multi-phase restructuring project in January 2020 through December 31, 2021, approximately 1,020 positions in total were impacted, resulting in cumulative pre-tax charges of $308 million related to the organizational design optimization program. Of this cumulative pre-tax amount, $300 million related to separation program charges and $8 million related to asset impairment charges.

Asset Impairment and Exit Costs by Segment

PMI recorded the following pre-tax asset impairment and exit costs by segment:

(in millions)	For the Six Months Ended June 30,		For the Three Months Ended June 30,
	2021		2021
Separation programs: (1)
European Union	$	44	$	35
Eastern Europe	9		7
Middle East & Africa	10		8
South & Southeast Asia	13		10
East Asia & Australia	20		15
Americas	5		4
Total separation programs	101		79
Contract termination charges:
East Asia & Australia	26		—
Total contract termination charges	26		—
Asset impairment and exit costs	$	127	$	79

(1) Organizational design optimization pre-tax charges in 2021 were allocated across all geographical segments.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30, 2022 was as follows:

(in millions)
Liability balance, January 1, 2022	$	142
Charges, net	—
Cash spent	(47)
Currency/other	(5)
Liability balance, June 30, 2022	$	90

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2023, with approximately $49 million expected to be paid in the remainder of 2022.