Exit and disposal activities

Store Optimization Program

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 through the planned closure of approximately 600 stores and related assets within the Company’s Retail Pharmacy USA segment upon completion of the acquisition of certain stores and related assets from Rite Aid. 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 $350 million, including costs associated with lease obligations and other real estate costs, employee severance and other exit costs, compared to the Company's previously stated expectation of $450 million. The Company expects to incur pre-tax charges of approximately $160 million for lease obligations and other real estate costs and approximately $190 million for employee severance and other exit costs. The Company estimates that substantially all of these cumulative pre-tax charges will result in cash expenditures.

Since approval of the Store Optimization Program, the Company has recognized cumulative pre-tax charges to its financial results in accordance with generally accepted accounting principles in the United States of America ("GAAP") totaling $120 million, which were recorded within selling, general and administrative expenses. These charges included $12 million related to lease obligations and other real estate costs and $108 million in employee severance and other exit costs.

Costs related to the Store Optimization Program for the three months ended November 30, 2018 were as follows:



Three months ended November 30, 2018
Lease obligations and other real estate costs	$	(7	)
Employee severance and other exit costs	27
Total costs	$	20

The changes in liabilities related to the Store Optimization Program for the three months ended November 30, 2018 include the following (in millions):



	Lease obligations and other real estate costs			Employee severance and other exit costs			Total
Balance at August 31, 2018	$	308		$	21		$	329
Costs	(7		)	27			20
Payments	(47		)	(34		)	(81		)
Other - non cash¹	86			1			87
Balance at November 30, 2018	$	340		$	15		$	355


¹	Primarily represents unfavorable lease liabilities from acquired Rite Aid stores.

Cost Transformation Program

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 liabilities related to the Cost Transformation Program include the following (in millions):



	Real estate costs			Severance and other business transition and exit costs			Total
Balance at August 31, 2018	$	414		$	7		$	421
Payments	(21		)	(1		)	(22		)
Other - non cash	5			—			5
Currency translation adjustments	—			1			1
Balance at November 30, 2018	$	398		$	7		$	405