Asset Impairment, Exit, Implementation and Integration Costs

6 Months Ended

Jun. 30, 2011

Asset Impairment, Exit, Implementation and Integration Costs

Asset Impairment, Exit, Implementation and Integration Costs

Note 2. Asset Impairment, Exit, Implementation and Integration Costs:

For the six and three months ended June 30, 2011, total pre-tax asset impairment and exit costs were $3 million and $1 million, respectively, all of which were reported in the cigarettes segment. In addition, total pre-tax integration costs of $2 million were reported in the smokeless products segment for both the six and three months ended June 30, 2011. There were no implementation costs incurred during the six months ended June 30, 2011.

Pre-tax asset impairment, exit, implementation and integration costs for the six and three months ended June 30, 2010 consisted of the following:

	For the Six Months Ended June 30, 2010
	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
	(in millions)
Cigarettes	$	25	$	49	$	—	$	74
Smokeless products		2				11		13
Cigars						1		1
Wine						1		1
General corporate		1						1
Total	$	28	$	49	$	13	$	90
	For the Three Months Ended June 30, 2010
	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
	(in millions)
Cigarettes	$	20	$	25	$	—	$	45
Smokeless products						4		4
General corporate		1						1
Total	$	21	$	25	$	4	$	50

The movement in the severance liability and details of asset impairment and exit costs for Altria Group, Inc. for the six months ended June 30, 2011 was as follows:

	Severance			Other			Total
	(in millions)
Severance liability balance, December 31, 2010	$	26		$	—		$	26
Charges					3			3
Cash spent		(21	)		(7	)		(28	)
Other					4			4
Severance liability balance, June 30, 2011	$	5		$	—		$	5

Manufacturing Optimization Program:

PM USA ceased production at its Cabarrus, North Carolina manufacturing facility and completed the consolidation of its cigarette manufacturing capacity into its Richmond, Virginia facility on July 29, 2009. PM USA took this action to address ongoing cigarette volume declines including the impact of the federal excise tax increase enacted in early 2009. In April 2011, PM USA completed the de-commissioning of the Cabarrus facility.

PM USA continues to market for sale the Cabarrus facility and land. The future sale of the Cabarrus facility and land is not expected to have a material impact on the financial results of Altria Group, Inc.

As a result of this program, which commenced in 2007, PM USA expects to incur total pre-tax charges of approximately $800 million, which consist of employee separation costs of $325 million, accelerated depreciation of $275 million and other charges of $200 million, primarily related to the relocation of employees and equipment, net of estimated gains on sales of land and buildings. Total pre-tax charges incurred for the program through June 30, 2011 of $827 million, which are reflected in the cigarettes segment, do not reflect estimated gains from the future sales of land and buildings.

PM USA recorded pre-tax charges for this program as follows:

	For the Six Months  Ended June 30,				For the Three Months  Ended June 30,
	2011		2010		2011		2010
	(in millions)
Asset impairment and exit costs	$	3	$	25	$	1	$	20
Implementation costs				49				25
Total	$	3	$	74	$	1	$	45

Pre-tax implementation costs related to this program were primarily related to accelerated depreciation and were included in cost of sales in the condensed consolidated statements of earnings for the six and three months ended June 30, 2010.