Asset Impairment, Exit and Implementation Costs

Pre-tax asset impairment, exit and implementation costs for the year ended December 31, 2016 consisted of the following:



(in millions)	Asset Impairment and Exit Costs⁽¹⁾		Implementation Costs		Total
Smokeable products	$	125	$	9	$	134
Smokeless products	42		15		57
All other	7		—		7
General corporate	5		—		5
Total	$	179	$	24	$	203

⁽¹⁾ Includes termination, settlement and curtailment costs of $27 million. See Note 17. Benefit Plans.

The movement in the restructuring liabilities (excluding termination, settlement and curtailment costs), substantially all of which are severance liabilities, was as follows:



(in millions)	For the Year Ended December 31, 2016
Charges	$	152
Cash spent	(73		)
Balances at December 31, 2016	$	79

The pre-tax asset impairment, exit and implementation costs for 2016 shown above are related to the facilities consolidation and productivity initiative discussed below.

▪Facilities Consolidation: In October 2016, Altria Group, Inc. announced the consolidation of certain of its operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies. Middleton will transfer its Limerick, Pennsylvania operations to the Manufacturing Center site in Richmond, Virginia (“Richmond Manufacturing Center”). USSTC will transfer its Franklin Park, Illinois operations to its Nashville, Tennessee facility and the Richmond Manufacturing Center. Separation benefits will be paid to non-relocating employees. The consolidation is expected to be completed by the first quarter of 2018.

As a result of the consolidation, Altria Group, Inc. expects to record total pre-tax charges of approximately $150 million, or $0.05 per share. Of this amount, during 2016, Altria Group, Inc. incurred pre-tax charges of $71 million, or approximately $0.03 per share, and expects to record approximately $70 million in 2017 and the remainder in 2018. The total estimated charges relate primarily to accelerated depreciation ($55 million), employee separation costs ($45 million) and other exit and implementation costs ($50 million). Approximately $90 million of the total pre-tax charges are expected to result in cash expenditures.

For the year ended December 31, 2016, total pre-tax asset impairment and exit costs for the consolidation of $54 million were recorded in the smokeable products segment ($25 million) and smokeless products segment ($29 million). In addition, for the year ended December 31, 2016, pre-tax implementation costs of $17 million were recorded in the smokeable products segment ($3 million) and smokeless products segment ($14 million). The pre-tax implementation costs were included in cost of sales in Altria Group, Inc.’s consolidated statement of earnings.

Cash payments related to the consolidation of $4 million were made during the year ended December 31, 2016.

▪Productivity Initiative: In January 2016, Altria Group, Inc. announced a productivity initiative designed to maintain its operating companies’ leadership and cost competitiveness. The initiative reduces spending on certain selling, general and administrative infrastructure and implements a leaner organizational structure. As a result of the initiative, during 2016, Altria Group, Inc. incurred total pre-tax restructuring charges of $132 million, or $0.04 per share, substantially all of which result in cash expenditures. The charges consist of employee separation costs of $117 million and other associated costs of $15 million. Total pre-tax charges related to the initiative have been substantially completed.

For the year ended December 31, 2016, total pre-tax asset impairment and exit costs for the initiative of $125 million were recorded in the smokeable products segment ($100 million), smokeless products segment ($13 million), all other ($7 million) and general corporate ($5 million). In addition, for the year ended December 31, 2016, pre-tax implementation costs of $7 million were recorded in the smokeable products segment ($6 million) and smokeless products segment ($1 million). The pre-tax implementation costs were included in marketing, administration and research costs in Altria Group, Inc.’s consolidated statement of earnings.

Cash payments related to the initiative of $69 million were made during the year ended December 31, 2016.

▪Other Programs: During 2014, PM USA sold its Cabarrus, North Carolina manufacturing facility for approximately $66 million in connection with the previously completed manufacturing optimization program associated with PM USA’s closure of the manufacturing facility in 2009. As a result, during 2014, PM USA recorded a pre-tax gain of $10 million.