Asset Impairment, Exit, Implementation And Integration Costs

9 Months Ended

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

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

	For the Nine Months Ended September 30, 2010
	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
	(in millions)
Cigarettes	$	28	$	70	$	—	$	98
Smokeless products		2				13		15
Cigars						1		1
Wine						2		2
General corporate		1						1
Total	$	31	$	70	$	16	$	117
	For the Three Months Ended September 30, 2010
	Asset Impairment and Exit Costs		Implementation Costs		Integration Costs		Total
	(in millions)
Cigarettes	$	3	$	21	$	—	$	24
Smokeless products						2		2
Wine						1		1
Total	$	3	$	21	$	3	$	27

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

	Severance			Other			Total
	(in millions)
Severance liability balance, December 31, 2010	$	26		$	—		$	26
Charges					3			3
Cash spent		(23	)		(9	)		(32	)
Other					6			6
Severance liability balance, September 30, 2011	$	3		$	—		$	3

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 September 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 Nine Months  Ended September 30,				For the Three Months  Ended September 30,
	2011		2010		2011		2010
	(in millions)
Asset impairment and exit costs	$	3	$	28	$	—	$	3
Implementation costs				70				21
Total	$	3	$	98	$	—	$	24

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 nine and three months ended September 30, 2010.

New Cost Reduction Program

On October 26, 2011, Altria Group, Inc.'s Board of Directors approved a new 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 cigarette volume declines. The program is expected to deliver $400 million in annualized cost savings by the end of 2013. Altria Group, Inc. estimates total pre-tax restructuring charges in connection with this new program of approximately $375 million, with approximately $340 million or $0.11 per share to be recorded in the fourth quarter of 2011, and the balance in 2012. The estimated charges, substantially all of which will result in cash expenditures, relate primarily to employee separation costs of approximately $300 million, and other associated costs of approximately $75 million including lease termination and asset impairment. These estimated charges do not reflect the non-cash impact which may result from pension settlement and curtailment accounting.