Asset Impairment, Exit and Implementation Costs

12 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

Asset Impairment, Exit, and Implementation Costs

Asset Impairment, Exit and Implementation Costs

Pre-tax asset impairment, exit and implementation costs (income) consisted of the following:


(in millions)	Asset Impairment and Exit Costs						Implementation Costs						Total
For the year ended December 31,	2020		2019		2018		2020 (1)		2019 (2)		2018 (1)		2020		2019		2018
Smokeable products	$	2	$	59	$	79	$	—	$	33	$	1	$	2	$	92	$	80
Oral tobacco products	(5)		9		20		—		5		3		(5)		14		23
Wine (3)	—		76		54		411		—		—		411		76		54
All other	—		14		227		—		(10)		63		—		4		290
General corporate	(1)		1		3		—		—		—		(1)		1		3

Total	(4)		159		383		411		28		67		407		187		450
Plus amounts included in net periodic benefit (income) cost, excluding service cost(4)	—		29		3		—		—		—		—		29		3
Total	$	(4)	$	188	$	386	$	411	$	28	$	67	$	407	$	216	$	453

(1) Included in cost of sales in Altria’s consolidated statements of earnings (losses).

(2) Included in cost of sales ($2 million) and marketing, administration and research costs ($26 million) in Altria’s consolidated statement of earnings (losses).

(3) Includes impairment of goodwill for the wine reporting unit in 2019 and impairment of the Columbia Crest trademark in 2018. See Note 4. Goodwill and Other Intangible Assets, net.

(4) Represents settlement and curtailment costs. See Note 16. Benefit Plans.

Implementation costs for 2020 were related to Ste. Michelle’s strategic reset, as discussed below.

The 2019 pre-tax asset impairment, exit and implementation costs were related to the cost reduction program and the refocus of innovative product efforts discussed below, and the goodwill impairment for the wine reporting unit.

Substantially all of the 2018 pre-tax asset impairment, exit and implementation costs were related to the refocus of innovative product efforts and the cost reduction program discussed below, and the impairment of the Columbia Crest trademark.

The movement in the restructuring liabilities, substantially all of which were severance liabilities, for the years ended December 31, 2020 and 2019 was as follows:


(in millions)
Balances at December 31, 2018	$	155
Charges	59
Cash spent	(147)
Balances at December 31, 2019	67
Cost reversals, net	(4)
Cash spent	(47)
Balances at December 31, 2020	$	16

▪Wine Business Strategic Reset: Evolving adult consumer preferences have posed strategic challenges for Ste. Michelle, which has seen slowing growth in the wine category and increased inventory levels in recent periods. Against a backdrop of product volume demand uncertainty and long-term, non-cancelable grape purchase commitments, which have been further negatively impacted by the COVID-19 pandemic (including economic uncertainty and government actions that restrict direct-to-consumer sales and on-premise sales), Ste. Michelle experienced additional increases in inventory levels that, in 2020, significantly exceeded long-term forecasted demand.

During the year ended December 31, 2020, Ste. Michelle recorded pre-tax charges of $411 million, which were included in cost of sales in Altria’s consolidated statement of earnings (losses). The charges consisted primarily of the following: (i) write-off of inventory ($292 million recorded in the first quarter of 2020) as Ste. Michelle no longer believed that the benefit of the blending and production plans for its inventory outweighs inventory carrying cost given the reduced product volume demand; (ii) estimated losses on future non-cancelable grape purchase commitments that Ste. Michelle believed no longer have a future economic benefit ($100 million recorded in the first quarter of 2020); and (iii) inventory disposal costs and other charges ($19 million). The non-cancelable grape purchase commitments will continue to require cash payments as grape commitments are fulfilled over the next four years.

Given such uncertainty in economic conditions and product volume demand, as well as long-term supply-side contractual challenges, Altria and Ste. Michelle undertook a review of the wine business. As a result, Altria and Ste. Michelle implemented a strategic reset in order to maximize Ste. Michelle’s profitability and achieve improved long-term cash-flow generation. This strategic reset includes: (i) an updated approach to forecasting demand; (ii) supply chain optimization; (iii) SKU rationalization to reduce the number of products and eliminate underperforming brands; and (iv) streamlining operations by reducing future capital expenditures, working capital requirements and ongoing operating costs.

▪Refocus of Innovative Product Efforts: During the fourth quarter of 2018, Altria refocused its companies’ innovative product efforts, which included the discontinuation of production and distribution of all e-vapor products. During the year ended December 31, 2019, Altria incurred pre-tax charges of $9 million, consisting of asset impairment, exit and implementation costs. During 2018, Altria incurred pre-tax charges of $272 million, consisting of asset impairment and exit costs of $209 million primarily related to the impairment of goodwill and other intangible assets and other charges of $63 million related to inventory write-offs and accelerated depreciation. The pre-tax charges related to the refocus of innovative product efforts have been completed. The majority of the charges related to these efforts did not result in cash payments.

▪Cost Reduction Program: In December 2018, Altria announced a cost reduction program that included workforce reductions and third-party spending reductions across the businesses. As a result of the cost reduction program, Altria recorded total pre-tax restructuring charges of $250 million, which included employee benefit-related curtailment and settlement costs. Of this amount, Altria recorded net pre-tax cost reversals of $4 million in 2020 and pre-tax charges of $133 million in 2019 and $121 million in 2018. The total charges, the majority of which resulted in cash expenditures, related primarily to employee separation costs of $198 million and other costs of $52 million. The pre-tax charges related to this cost reduction program have been completed. Cash payments related to this cost reduction program of $44 million and $136 million were made during the years ended December 31, 2020 and 2019, respectively, for total cash payments of $180 million since inception.