Asset Impairment and Exit Costs

6 Months Ended

Jun. 30, 2014

Restructuring and Related Activities [Abstract]

Asset Impairment and Exit Costs

Asset Impairment and Exit Costs:

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

(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2014		2013		2014		2013
Separation programs:
European Union	$	359	$	—	$	359	$	—
Asia	24		—		1		—
Total separation programs	383		—		360		—
Contract termination charges:
Asia	—		8		—		5
Total contract termination charges	—		8		—		5
Asset impairment charges:
European Union	129		—		129		—
Total asset impairment charges	129		—		129		—
Asset impairment and exit costs	$	512	$	8	$	489	$	5

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30,2014 was as follows:

(in millions)
Liability balance, January 1, 2014	$	308
Charges	383
Cash spent	(230		)
Currency/other	(22		)
Liability balance, June 30, 2014	$	439

Cash payments related to exit costs at PMI were $230 million and $30 million for the six months and three months ended June 30,2014, respectively, and $12 million and $7 million for the six months and three months ended June 30,2013, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $439 million, and will be substantially paid by the second quarter of 2015.

The pre-tax asset impairment and exit costs shown above are primarily a result of the following:

The Netherlands

On April 4, 2014, PMI announced the initiation by its affiliate, Philip Morris Holland B.V. (“PMH”), of consultations with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands. PMH has reached an agreement with the trade unions and their members on a social plan, and plans to cease cigarette production by September 1, 2014. For the six months and three months ended June 30, 2014, total pre-tax asset impairment and exit costs of $488 million were recorded for this program in the European Union segment.

Other Exit Costs

Other Separation Program Charges

PMI recorded other pre-tax separation program charges of $24 million and $1 million for the six months and three months ended June 30,2014, respectively, related to severance costs for a factory closure in Australia.

Contract Termination Charges

During the six months and three months ended June 30,2013, PMI recorded exit costs of $8 million and $5 million, respectively, related to the termination of distribution agreements.