Asset Impairment, Exit and Implementation Costs

Pre-tax asset impairment, exit and implementation costs consisted of the following:



(in millions)	Asset Impairment and Exit Costs						Implementation Costs						Total
For the year ended December 31,	2018		2017		2016		2018⁽¹⁾		2017⁽¹⁾		2016⁽²⁾		2018		2017		2016
Smokeable products	$	82	$	5	$	125	$	1	$	17	$	9	$	83	$	22	$	134
Smokeless products	20		28		42		3		28		15		23		56		57
Wine ⁽³⁾	54		—		—		—		—		—		54		—		—
All other	227		—		7		63		—		—		290		—		7
General corporate	3		—		5		—		—		—		3		—		5
Total	386		33		179		67		45		24		453		78		203
Less amounts included in net periodic benefit (income) cost, excluding service cost	3		1		30		—		—		—		3		1		30
Total	$	383	$	32	$	149	$	67	$	45	$	24	$	450	$	77	$	173

⁽¹⁾ Included in cost of sales in Altria’s consolidated statements of earnings.

⁽²⁾ Included in cost of sales ($17 million) and marketing, administration and research costs ($7 million) in Altria’s consolidated statement of earnings.

⁽³⁾ Reflects impairment of the Columbia Crest trademark. See Note 4. Goodwill and Other Intangible Assets, net.

Substantially all of the 2018 pre-tax asset impairment, exit and implementation costs are related to Altria’s decision to refocus its innovative product efforts, the cost reduction program discussed below and the impairment of the Columbia Crest trademark.

The pre-tax asset impairment, exit and implementation costs for 2017 are related to the facilities consolidation. The pre-tax asset impairment, exit and implementation costs for 2016 are related to both the facilities consolidation and the productivity initiative.

The movement in the restructuring liabilities, substantially all of which are severance liabilities, for the years ended December 31, 2018 and 2017 was as follows:



(in millions)
Balances at December 31, 2016	$	79
Charges	25
Cash spent	(71		)
Balances at December 31, 2017	33
Charges	154
Cash spent	(32		)
Balances at December 31, 2018	$	155

▪Refocus of Innovative Product Efforts: During the fourth quarter of 2018, Altria announced its decision to refocus its innovative product efforts, which includes the discontinuation of production and distribution of all MarkTen and Green Smoke e-vapor products. This decision was based upon the current and expected financial performance of these products, coupled with regulatory restrictions that burden Altria’s ability to quickly improve these products. As a result, during 2018, Altria incurred pre-tax charges of $272 million, consisting of asset impairment and exit costs of $209 million and other charges of $63 million. The asset impairment and exit costs primarily relate to the impairment of goodwill and other intangible assets. See Note 4. Goodwill and Other Intangible Assets, net. The other charges relate to inventory write-offs and accelerated depreciation.

The majority of the charges related to these efforts will not result in cash payments.

▪Cost Reduction Program: In December 2018, Altria announced a cost reduction program that it expects will deliver approximately $575 million in annualized cost savings by the end of 2019. This program includes, among other things, reducing third-party spending across the business and workforce reductions.

As a result of the cost reduction program, Altria expects to record total pre-tax restructuring charges of approximately $210 million. Of these amounts, during 2018, Altria incurred pre-tax charges of $121 million and expects to record the remainder in 2019. The total estimated charges, substantially all of which will result in cash expenditures, relate primarily to employee separation costs of approximately $160 million and other costs of approximately $50 million. There were no cash payments related to this program in 2018.

For the year ended December 31, 2018, total pre-tax asset impairment and exit costs for the cost reduction program of $121 million were recorded in the smokeable products segment ($86 million), smokeless products segment ($14 million), all other ($18 million) and general corporate ($3 million).

▪Facilities Consolidation: In October 2016, Altria announced the consolidation of certain of its operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies. In the first quarter of 2018, Middleton completed the transfer of its Limerick, Pennsylvania operations to the Manufacturing Center site in Richmond, Virginia (“Richmond Manufacturing Center”), and USSTC completed the transfer of its Franklin Park, Illinois operations to its Nashville, Tennessee facility and the Richmond Manufacturing Center. The pre-tax charges related to the consolidation have been completed.

As a result of the consolidation, Altria recorded total pre-tax charges of $155 million. During 2018, 2017 and 2016, Altria recorded pre-tax charges of $6 million, $78 million and $71 million, respectively. The total charges related primarily to accelerated depreciation and asset impairment ($55 million), employee separation costs ($40 million) and other exit and implementation costs ($60 million).

Cash payments related to the consolidation of $34 million were made during the year ended December 31, 2018, for total cash payments of $97 million since inception. At December 31, 2018, cash payments related to the consolidation were substantially completed.

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

Cash payments related to the initiative of $32 million were made during the year ended December 31, 2017, for total cash payments of $106 million since inception. At December 31, 2017, cash payments related to the initiative were substantially completed.