NOTE 5 – Restructuring and Impairment Charges

In 2018, the Company recorded $64 million of pre-tax restructuring charges. During the second quarter of 2018, the Company introduced its Cost Smart program, designed to improve profitability, further streamline its global business and deliver increased value to shareholders through anticipated savings in cost of sales, including freight, and SG&A. For the year ended December 31, 2018, the Company recorded $49 million of restructuring expenses as part of the Cost Smart cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant, consisting of $34 million of accelerated depreciation, $8 million of mechanical stores, $3 million of employee-related severance and $4 million of other costs. The Company expects to incur up to $3 million of additional restructuring costs during 2019.

As part of its Cost Smart SG&A program, during the third quarter of 2018, the Company announced a Finance Transformation initiative in Latin America to strengthen organizational capabilities and drive efficiencies to support the growth strategy of the Company. The Company recorded $4 million of employee-related severance and other costs for the year ended December 31, 2018, in relation to this initiative. The Company expects to incur between $1 million and $2 million in 2019 related to this initiative. In addition, restructuring expenses of $7 million ($6 million employee-related severance and $1 million of consulting costs) were recorded as part of the Cost Smart SG&A program for the year ended December 31, 2018 in the South America, APAC and North America segments.

Additionally, for the year ended December 31, 2018, the Company recorded $3 million of other restructuring costs associated with the North America Finance Transformation initiative as well as $1 million of other restructuring costs related to the leaf extraction process in Brazil. The Company does not expect to incur any additional costs related to the North America Finance Transformation or the leaf extraction process in Brazil.

In 2017, the Company recorded $38 million of pre-tax restructuring charges. The charges consist of $17 million of employee-related severance and other costs in connection to an organizational restructuring effort in Argentina, $13 million of pre-tax restructuring charges in relation to its leaf extraction process in Brazil, $6 million of employee-related severance and other costs associated with the Company’s optimization initiative in North America and $2 million of other pre-tax restructuring charges, including other employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities.

A summary of the Company’s severance accrual at December 31, 2018, is as follows (in millions):


Balance in severance accrual as of December 31, 2017	$	11
Cost Smart cost of sales and SG&A		8
Foreign exchange translation		(3)
Latin American Finance Transformation		2
Other		1
Payments made to terminated employees		(9)
Balance in severance accrual as of December 31, 2018	$	10

Of the $10 million severance accrual at December 31, 2018, $9 million is expected to be paid within the next 12 months.

The Company assesses goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if impairment indicators arise. No goodwill or indefinite-lived intangible asset impairment was recognized in 2018, 2017 or 2016 related to the Company’s annual impairment testing.