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|ALTRIA GROUP, INC. filed this Form 8-K on 02/01/2018|
Altria Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
of Patz & Hall Wine Company, Inc. In addition, there were no accumulated impairment losses related to goodwill and other intangible assets, net at December 31, 2017 and 2016.
Note 4. Asset Impairment, Exit and Implementation Costs
Pre-tax asset impairment, exit and implementation costs consisted of the following:
(1) The pre-tax implementation costs were included in cost of sales in Altria Group, Inc.’s consolidated statement of earnings.
(1) Includes termination, settlement and curtailment costs of $27 million. See Note 16. Benefit Plans.
The pre-tax asset impairment, exit and implementation costs for 2017 are related to the facilities consolidation discussed below, and the pre-tax asset impairment, exit and implementation costs for 2016 are related to both the facilities consolidation and the productivity initiative discussed below.
The movement in the restructuring liabilities (excluding termination, settlement and curtailment costs), substantially all of which are severance liabilities, for the years ended December 31, 2017 and 2016 was as follows:
▪Facilities Consolidation: In October 2016, Altria Group, Inc. announced the consolidation of certain of its operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies. Middleton is in the process of transferring its Limerick, Pennsylvania operations to the Manufacturing Center site in Richmond, Virginia (“Richmond Manufacturing Center”). USSTC is in the process of transferring its Franklin Park, Illinois operations to its Nashville, Tennessee facility and the Richmond Manufacturing Center. Separation benefits are being paid to non-relocating employees. The consolidation is expected to be substantially completed by the end of the first quarter of 2018.
As a result of the consolidation, Altria Group, Inc. expects to record total pre-tax charges of approximately $150 million, or $0.05 per share. Of this amount, during 2017, Altria Group, Inc. incurred pre-tax charges of $78 million and recorded $71 million in 2016. The total estimated charges relate primarily to accelerated depreciation and asset impairment ($50 million), employee separation costs ($45 million) and other exit and implementation costs ($55 million). Approximately $95 million of the total pre-tax charges are expected to result in cash expenditures.
For the year ended December 31, 2016, total pre-tax asset impairment and exit costs for the consolidation of $54 million were recorded in the smokeable products segment ($25 million) and smokeless products segment ($29 million). In addition, for the year ended December 31, 2016, pre-tax implementation costs of $17 million were recorded in the smokeable products segment ($3 million) and smokeless products segment ($14 million). The pre-tax implementation costs were included in cost of sales in Altria Group, Inc.’s consolidated statement of earnings.
Cash payments related to the consolidation of $58 million were made during the year ended December 31, 2017, for total cash payments of $63 million since inception.
▪Productivity Initiative: In January 2016, Altria Group, Inc. announced a productivity initiative designed to maintain its operating companies’ leadership and cost competitiveness through reduced spending on certain selling, general and administrative infrastructure and a leaner organizational structure. As a result of the initiative, during 2016, Altria Group, Inc. incurred total pre-