BUSINESS REALIGNMENT ACTIVITIES

We are currently pursuing several business realignment activities designed to increase our efficiency and focus our business behind our key growth strategies. Costs recorded in 2016, 2015 and 2014 related to these activities are as follows:



For the years ended December 31,	2016		2015		2014
Operational Optimization Program:
Severance	$	17,872	$	—	$	—
Accelerated depreciation	48,590		—		—
Other program costs	21,831		—		—
2015 Productivity Initiative:
Severance	—		81,290		—
Pension settlement charges	13,669		10,178		—
Other program costs	5,609		14,285		—
Other international restructuring programs:
Severance	—		6,651		2,947
Accelerated depreciation and amortization	—		5,904		—
Mauna Loa Divestiture (see Note 2)	—		2,667		22,256
Project Next Century	—		—		9,087
Total	$	107,571	$	120,975	$	34,290

The costs and related benefits of the Operational Optimization Program relate approximately 25% to the North America segment and 75% to the International and Other segment. The costs and related benefits to be derived from the 2015 Productivity Initiative relate primarily to the North American segment, while the costs and related benefits of the other international programs relate primary to the International and Other segment. However, segment operating results do not include these business realignment expenses because we evaluate segment performance excluding such costs.

2016 Operational Optimization Program

In the second quarter of 2016, we commenced a program (the “Operational Optimization Program”) to optimize our production and supply chain network, which includes select facility consolidations. The program encompasses the continued transition of our China chocolate and SGM operations into a united Golden Hershey platform, including the integration of the China sales force, as well as workforce planning efforts and the consolidation of production within certain facilities in China and North America.

We have incurred pre-tax costs of $88,293 to date, including non-cash asset-related incremental depreciation costs, severance and employee benefit costs, costs to consolidate and relocate production, and third-party costs incurred to execute these activities. We currently expect to incur additional cash costs of approximately $37 million over the next two years to complete this program.

2015 Productivity Initiative

In mid-2015, we initiated a productivity initiative (the “2015 Productivity Initiative”) intended to move decision making closer to the customer and the consumer, to enable a more enterprise-wide approach to innovation, to more swiftly advance our knowledge agenda, and to provide for a more efficient cost structure, while ensuring that we effectively allocate resources to future growth areas. Overall, the 2015 Productivity Initiative was undertaken to simplify the organizational structure to enhance the Company's ability to rapidly anticipate and respond to the changing demands of the global consumer.

The 2015 Productivity Initiative was executed throughout the third and fourth quarters of 2015, resulting in a net reduction of approximately 300 positions, with the majority of the departures taking place by the end of 2015. For the year ended December 31, 2016, we incurred charges totaling $19,278, representing pension settlement charges, adjustments to estimated severance benefits and incremental third-party costs related to the design and implementation of the new organizational structure. The 2015 Productivity Initiative was completed during the third quarter 2016. We incurred total costs of $125,031 relating to this program, including pension settlement charges of $13,669 recorded in 2016 and $10,178 recorded in 2015 relating to lump sum withdrawals by employees retiring or leaving the Company as a result of this program.

Other international restructuring programs

Costs incurred for the year ended December 31, 2015 related principally to accelerated depreciation and amortization and employee severance costs for a couple of programs commenced in 2014 to rationalize certain non-U.S. manufacturing and distribution activities and to establish our own sales and distribution teams in Brazil in connection with our exit from the Bauducco joint venture.

Project Next Century

The 2014 costs shown relate primarily to the demolition of the Company’s former manufacturing facility, representing the final phase of the Project Next Century program. As of December 31, 2014, we have concluded the Project Next Century.

Total costs associated with business realignment activities are classified in our Consolidated Statements of Income as follows:



For the years ended December 31,	2016		2015		2014
Cost of sales	$	58,106	$	8,801	$	1,622
Selling, marketing and administrative expense	16,939		17,368		2,947
Business realignment costs	32,526		94,806		29,721
Total costs associated with business realignment activities	$	107,571	$	120,975	$	34,290

The following table presents the liability activity for employee-related costs qualifying as exit and disposal costs for the year ended December 31, 2016:



	Total
Liability balance at December 31, 2015	$	16,310
2016 business realignment charges (1)	18,857
Cash payments	(31,522		)
Other, net	80
Liability balance at December 31, 2016 (reported within accrued liabilities)	$	3,725


(1)	The costs reflected in the liability roll-forward above do not include items charged directly to expense, such as accelerated depreciation and amortization and the loss on the Mauna Loa divestiture and certain of the third-party charges associated with various programs, as those items are not reflected in the business realignment liability in our Consolidated Balance Sheets.