Asset Impairment, Exit, Implementation and Integration Costs:

Pre-tax asset impairment, exit and implementation costs for the six and three months ended June 30, 2012 consisted of the following:




	For The Six Months Ended June 30, 2012								For The Three Months Ended June 30, 2012
	Asset Impairment and Exit Costs		Implementation (Gain) Costs			Total			Asset Impairment and Exit Costs		Implementation Costs		Total
	(in millions)
Smokeable products	$	23	$	(12	)	$	11		$	16	$	9	$	25
Smokeless products	14		5			19			—		—		—
General corporate	—		(1		)	(1		)	—		—		—
Total	$	37	$	(8	)	$	29		$	16	$	9	$	25

The asset impairment, exit and implementation costs shown in the table above are related to the 2011 Cost Reduction Program, which is discussed further below.

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 smokeable products 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.

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, 2012 was as follows:



	Severance			Other			Total
	(in millions)
Severance liability balance, December 31, 2011	$	156		$	—		$	156
Charges	—			37			37
Cash spent	(59		)	(12		)	(71		)
Other	—			(25		)	(25		)
Severance liability balance, June 30, 2012	$	97		$	—		$	97

2011 Cost Reduction Program: In October 2011, Altria Group, Inc. announced 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. As a result of this program, Altria Group, Inc. expects to incur total net pre-tax charges of approximately $300 million (concluding in 2012). The estimated net charges include employee separation costs of approximately $220 million and other net charges of approximately $80 million. These other net charges include lease termination and asset impairments, partially offset by a curtailment gain related to amendments made to an Altria Group, Inc. postretirement benefit plan. Substantially all of these charges will result in cash expenditures.

Implementation (gain) costs of ($8) million shown in the table above were recorded on Altria Group, Inc.'s condensed consolidated statement of earnings for the six months ended June 30, 2012, as follows: a net gain of $16 million, which included a $26 million curtailment gain related to amendments made to an Altria Group, Inc. postretirement benefit plan, was included in marketing, administration and research costs; and other costs of $8 million were included in cost of sales. For the three months ended June 30, 2012, implementation costs of $9 million shown in the table above were recorded in marketing, administration and research costs on Altria Group, Inc.'s condensed consolidated statement of earnings.

Total pre-tax charges, net, incurred since the inception of this program through June 30, 2012 were $253 million. Cash payments related to this program of $73 million and $41 million were made during the six and three months ended June 30, 2012, respectively, for total cash payments of $82 million since inception.

In connection with the 2011 Cost Reduction Program, Altria Group, Inc. has reorganized two of its tobacco operating companies and revised its reportable segments (see Note 1. Background and Basis of Presentation and Note 7. Segment Reporting).