Asset Impairment, Exit, Implementation and Integration Costs

Pre-tax asset impairment, exit, implementation and integration costs for the years ended December 31, 2012, 2011 and 2010 consisted of the following:



	For the Year Ended December 31, 2012
(in millions)	Asset Impairment and Exit Costs		Implementation (Gain) Costs			Total
Smokeable products	$	38	$	(10	)	$	28
Smokeless products	22		6			28
General corporate	1		(1		)	—
Total	$	61	$	(5	)	$	56



	For the Year Ended December 31, 2011
(in millions)	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
Smokeable products	$	182	$	1	$	—	$	183
Smokeless products	32		—		3		35
General corporate	8		—		—		8
Total	$	222	$	1	$	3	$	226

	For the Year Ended December 31, 2010
(in millions)	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
Smokeable products	$	24	$	75	$	2	$	101
Smokeless products	6		—		16		22
Wine	—		—		2		2
General corporate	6		—		—		6
Total	$	36	$	75	$	20	$	131

The change in the severance liability and details of asset impairment and exit costs for Altria Group, Inc. for the years ended December 31, 2012 and 2011 was as follows:



(in millions)	Severance			Other			Total
Severance liability balance, December 31, 2010	$	26		$	—		$	26
Charges, net	154			68			222
Cash spent	(24		)	(20		)	(44		)
Other	—			(48		)	(48		)
Severance liability balance, December 31, 2011	156			—			156
Charges, net	(7		)	68			61
Cash spent	(112		)	(22		)	(134		)
Other	—			(46		)	(46		)
Severance liability balance, December 31, 2012	$	37		$	—		$	37

Other charges in the table above primarily include other employee termination benefits, including pension and postretirement, and asset impairments. Charges, net in the table above include the reversal in 2012 of severance costs ($8 million) associated with the 2011 Cost Reduction Program and the reversal in 2011 of lease exit costs ($4 million) associated with the UST integration.

The pre-tax asset impairment, exit, implementation and integration costs for 2012 and 2011 shown above are primarily related to the 2011 Cost Reduction Program discussed below.

▪2011 Cost Reduction Program: In October 2011, Altria Group, Inc. announced the 2011 Cost Reduction Program for its tobacco and service company subsidiaries, reflecting Altria Group, Inc.'s objective to reduce cigarette-related infrastructure ahead of PM USA’s cigarettes volume declines. For this program, Altria Group, Inc. incurred total net pre-tax charges of $271 million as of December 31, 2012. The net pre-tax charges included employee separation costs of $209 million and other net charges of $62 million. These other net charges included lease termination and asset impairments, partially offset by a curtailment gain related to amendments made to an Altria Group, Inc. postretirement benefit plan. Substantially all of these charges will result in cash expenditures. Total pre-tax charges, net, incurred related to this program have been substantially completed.

For the year ended December 31, 2012, total pre-tax asset impairment and exit costs of $52 million were recorded for this program in the smokeable products segment ($29 million), smokeless products segment ($22 million), and general corporate ($1 million). In addition, pre-tax implementation (gain) costs of $(5) million shown in the table above were recorded on Altria Group, Inc.'s consolidated statement of earnings for the year ended December 31, 2012, as follows: a net gain of $14 million, which included a $26 million curtailment gain related to amendments made to an Altria Group, Inc. postretirement benefit plan, was included in marketing, administration and research costs; and other costs of $9 million were included in cost of sales.

For the year ended December 31, 2011, total pre-tax asset impairment and exit costs of $223 million were recorded for this program in the smokeable products segment ($179 million), smokeless products segment ($36 million), and general corporate ($8 million). In addition, pre-tax implementation costs of $1 million, which were recorded in marketing, administration and research costs on Altria Group, Inc.'s consolidated statement of earnings, were recorded in the smokeable products segment.

Cash payments related to this program of $135 million and $9 million were made during the years ended December 31, 2012 and 2011, respectively, for total cash payments of $144 million since inception.

In connection with the 2011 Cost Reduction Program, Altria Group, Inc. reorganized two of its tobacco operating companies and revised its reportable segments (see Note 1. Background and Basis of Presentation and Note 15. Segment Reporting).

▪Other Programs: The pre-tax asset impairment, exit, implementation and integration costs incurred during 2010 shown in the table above related primarily to the previously completed manufacturing optimization program associated with PM USA's closure of its Cabarrus, North Carolina manufacturing facility in 2009, and Altria Group, Inc.'s integration and restructuring program in 2008 associated with the integration of UST.

Pre-tax implementation costs of $75 million were associated with the manufacturing optimization program and were primarily related to accelerated depreciation and were included in cost of sales on the consolidated statement of earnings for the year ended December 31, 2010. Pre-tax integration costs of $20 million related primarily to the integration and restructuring program were included in marketing, administration and research costs on the consolidated statement of earnings for the year ended December 31, 2010.