On December 20, 2018, the Company announced a transformational cost management program that was expected to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 (the “Transformational Cost Management Program”). The Company continues to expect to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 from continuing operations, after excluding amounts related to the Disposal Group.

The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies. To date, the Company has taken actions across all aspects of the Transformational Cost Management Program. The actions under the Transformational Cost Management Program focus on the two reportable segments and the Company’s Corporate and global functions. Divisional optimization within each of the Company’s segments includes activities such as optimization of stores, including current plans to exit approximately 200 Boots stores in the UK and approximately 250 stores in the U.S.

The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its GAAP financial results in continuing operations of approximately $2.1 billion to $2.3 billion, subject to approval of which $1.8 billion to $2.0 billion are expected to be recorded as exit and disposal activities. In addition to these impacts, as a result of the actions related to store closures taken under the Transformational Cost Management Program, the Company recorded $508 million of non-cash transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard that became effective on September 1, 2019.

Since the inception of the Transformational Cost Management Program to May 31, 2021, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $1.2 billion, which were primarily recorded within selling, general and administrative expenses. These charges included $293 million related to lease obligations and other real estate costs, $245 million in asset impairments, $517 million in employee severance and business transition costs and $153 million of information technology transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three and nine months ended May 31, 2021 and May 31, 2020 were as follows (in millions):


Three months ended May 31, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	15	$	6	$	—	$	21
Asset impairments	5		9		—		14
Employee severance and business transition costs	(19)		2		14		(2)
Information technology transformation and other exit costs	1		10				11
Total pre-tax exit and disposal charges	$	2	$	27	$	14	$	44


Nine months ended May 31, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	56	$	6	$	—	$	62
Asset impairments	9		10		—		19
Employee severance and business transition costs	92		36		44		172
Information technology transformation and other exit costs	14		11		1		26
Total pre-tax exit and disposal costs	$	172	$	63	$	44	$	279


Three months ended May 31, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	170	$	3	$	—	$	173
Asset impairments	19		10		—		29
Employee severance and business transition costs	47		(2)		11		56
Information technology transformation and other exit costs	17		16		—		33
Total pre-tax exit and disposal charges	$	253	$	27	$	11	$	290


Nine months ended May 31, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	179	$	5	$	—	$	184
Asset impairments	31		13		—		44
Employee severance and business transition costs	111		33		18		162
Information technology transformation and other exit costs	27		26		12		65
Total pre-tax exit and disposal costs	$	348	$	76	$	31	$	455

The changes in liabilities and assets related to the exit and disposal activities under Transformational Cost Management Program include the following (in millions):


	Lease obligations and other real estate costs		Asset Impairments		Employee severance and business transition costs		Information technology transformation and other exit costs		Total
Balance at August 31, 2020	$	19	$	—	$	166	$	14	$	199
Costs	62		19		172		26		279
Payments	(47)		—		(183)		(18)		(249)
Other	(9)		(19)		(4)		(12)		(43)
Currency	1		(1)		4		(2)		3
Balance at May 31, 2021	$	26	$	—	$	155	$	9	$	190

On October 24, 2017, the Company’s Board of Directors approved a plan to implement a program (the “Store Optimization Program”) to optimize store locations through the planned closure of approximately 600 stores and related assets within the Company’s United States segment upon completion of the acquisition of certain stores and related assets from Rite Aid. The Company closed 769 stores and related assets. The actions under the Store Optimization Program commenced in March 2018 and were completed in the fourth quarter of fiscal 2020.

Costs related to the Store Optimization Program for the three and nine months ended May 31, 2020 were $3 million and $24 million for lease obligation and other real estate costs and $7 million and $25 million for employee severance and other exit costs, respectively. The liabilities related to the Store Optimization Program as of May 31, 2021 and May 31, 2020 were not material.