Asset Impairment and Exit Costs

9 Months Ended

Sep. 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 Nine Months Ended September 30,				For the Three Months Ended September 30,
	2014		2013		2014			2013
Separation programs:
European Union	$	343	$	—	$	(16	)	$	—
Asia	24		—		—			—
Latin America & Canada	3		—		3			—
Total separation programs	370		—		(13		)	—
Contract termination charges:
Asia	—		8		—			—
Total contract termination charges	—		8		—			—
Asset impairment charges:
European Union	129		—		—			—
Latin America & Canada	4		—		4			—
Total asset impairment charges	133		—		4			—
Asset impairment and exit costs	$	503	$	8	$	(9	)	$	—

Movement in Exit Cost Liabilities

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

(in millions)
Liability balance, January 1, 2014	$	308
Charges, net	370
Cash spent	(263		)
Currency/other	(48		)
Liability balance, September 30, 2014	$	367

Cash payments related to exit costs at PMI were $263 million and $33 million for the nine months and three months ended September 30,2014, respectively, and $17 million and $5 million for the nine months and three months ended September 30,2013, respectively. Future cash payments for exit costs incurred to date are expected to be approximately $367 million, and will be substantially paid by the third 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 reached an agreement with the trade unions and their members on a social plan, and ceased cigarette production on September 1, 2014. For the nine months ended September 30, 2014, total pre-tax asset impairment and exit costs of $472 million were recorded and for the three months ended September 30, 2014 a reversal of $16 million was recorded for this program due to a change in estimate in the European Union segment.

Other

Separation Program Charges

PMI recorded other pre-tax separation program charges of $27 million and $3 million for the nine months and three months ended September 30, 2014 related to severance costs for factory closures in Australia and Canada.

Contract Termination Charges

During the nine months ended September 30,2013, PMI recorded exit costs of $8 million related to the termination of distribution agreements.

Asset Impairment Charges

PMI recorded other pre-tax asset impairment charges of $4 million for the nine months and three months ended September 30,2014 related to a factory closure in Canada.