Asset Impairment and Exit Costs

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Asset Impairment and Exit Costs:

Global Manufacturing Infrastructure Optimization

In light of declining PMI cigarette volumes resulting from lower total industry volumes and the shift to smoke-free alternatives, PMI continues to optimize its global manufacturing infrastructure.

For the six months and three months ended June 30, 2019, PMI recorded pre-tax asset impairment and exit costs of $43 million and $23 million, respectively. These costs were related to cigarette plants closures in Pakistan in the three months ended March 31, 2019 and in Colombia in the three months ended June 30, 2019. For the cigarette plant closure in Colombia, we expect to incur additional pre-tax exit costs of approximately $30 million during the remainder of 2019.

In the second quarter of 2019, an affiliate of PMI, Philip Morris Manufacturing GmbH ("PMMG"), initiated consultations with employee representatives on a proposal to end cigarette production in its factory located in Berlin, Germany by January 1, 2020, and to seek to agree on fair solutions for any impacted employees. Until the consultation process is concluded, the closure is not considered probable and the total potential costs associated with this contemplated proposal cannot be determined and, as a result, no related costs were recorded in the second quarter of 2019.

Asset Impairment and Exit Costs by Segment

PMI recorded the following pre-tax asset impairment and exit costs by segment:



(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2019		2018		2019		2018
Separation programs:
South & Southeast Asia	$	3	$	—	$	—	$	—
Latin America & Canada	15		—		15		—
Total separation programs	18		—		15		—
Asset impairment charges:
South & Southeast Asia	17		—		—		—
Latin America & Canada	8		—		8		—
Total asset impairment charges	25		—		8		—
Asset impairment and exit costs	$	43	$	—	$	23	$	—

The total pre-tax asset impairment and exit costs above were included in marketing, administration and research costs on the condensed consolidated statements of earnings.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the six months ended June 30, 2019 was as follows:



(in millions)
Liability balance, January 1, 2019	$	—
Charges, net	18
Cash spent	(8		)
Currency/other	—
Liability balance, June 30, 2019	$	10

Cash payments related to exit costs at PMI were $8 million and $5 million for the six months and three months ended June 30, 2019, respectively. Future cash payments for exit costs incurred to date are anticipated to be substantially paid in the following twelve months.