Exit and disposal activities

On October 24, 2017, the Company’s Board of Directors approved a plan to implement a program (the “Store Optimization Program”) as part of an initiative to optimize store locations within the Company’s Retail Pharmacy USA segment upon completion of the acquisition of certain stores and related assets from Rite Aid. The Store Optimization Program includes plans to close approximately 600 stores and related assets across the U.S. The actions under the Store Optimization Program commenced in March 2018 and are expected to take place over an 18 month period.

The Company currently estimates that it will recognize cumulative pre-tax charges to its GAAP financial results of approximately $450 million, including costs associated with lease obligations and other real estate costs, employee severance and other exit costs. The Company expects to incur pre-tax charges of approximately $270 million for lease obligations and other real estate costs and approximately $180 million for employee severance and other exit costs. The Company estimates that substantially all of these cumulative pre-tax charges will result in future cash expenditures.

The Company did not incur any charges related to the Store Optimization Program for the three and six months ended February 28, 2018.

On April 8, 2015, the Walgreens Boots Alliance Board of Directors approved a plan to implement a restructuring program (the “Cost Transformation Program”) as part of an initiative to reduce costs and increase operating efficiencies. The Cost Transformation Program implemented and built on the cost-reduction initiative previously announced by the Company on August 6, 2014 and included plans to close stores across the U.S.; reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions. The actions under the Cost Transformation Program focused primarily on the Retail Pharmacy USA segment, but included activities from all segments. The Company completed the Cost Transformation Program in the fourth quarter of fiscal 2017.

The changes in accrued expenses and other liabilities related to the Cost Transformation Program for the six months ended February 28, 2018 include the following (in millions):



	Real estate costs			Severance and other business transition and exit costs			Total
Balance at August 31, 2017	$	521		$	79		$	600
Payments	(79		)	(63		)	(142		)
Other - non cash	9			—			9
Balance at February 28, 2018	$	451		$	16		$	467

Restructuring costs by segment included in the three and six months ended February 28, 2017 are as follows (in millions):



Three Months Ended February 28, 2017	Retail Pharmacy USA		Retail Pharmacy International		Pharmaceutical Wholesale		Walgreens Boots Alliance, Inc.
Asset impairments	$	65	$	1	$	1	$	67
Real estate costs	240		—		—		240
Severance and other business transition and exit costs	11		18		4		33
Total restructuring costs	$	316	$	19	$	5	$	340



Six Months Ended February 28, 2017	Retail Pharmacy USA		Retail Pharmacy International		Pharmaceutical Wholesale		Walgreens Boots Alliance, Inc.
Asset impairments	$	111	$	3	$	1	$	115
Real estate costs	249		—		—		249
Severance and other business transition and exit costs	28		22		7		57
Total restructuring costs	$	388	$	25	$	8	$	421