Walgreens 2010 Annual Report Download - page 25

The expected timing of payments of the obligations above is estimated based on
current information. Timing of payments and actual amounts paid may be different,
depending on the time of receipt of goods or services, or changes to agreed-upon
amounts for some obligations.
Off-Balance Sheet Arrangements
We do not have any unconsolidated special purpose entities and, except as
described herein, we do not have significant exposure to any off-balance sheet
arrangements. The term “off-balance sheet arrangement” generally means any
transaction, agreement or other contractual arrangement to which an entity uncon-
solidated with us is a party, under which we have: (i) any obligation arising under a
guarantee contract, derivative instrument or variable interest; or (ii) a retained or
contingent interest in assets transferred to such entity or similar arrangement that
serves as credit, liquidity or market risk support for such assets.
Letters of credit are issued to support purchase obligations and commitments
(as reflected on the Contractual Obligations and Commitments table) as follows
(In millions):
Insurance $ 233
Inventory obligations 185
Real estate development 19
Total $ 437
We have no off-balance sheet arrangements other than those disclosed on the
Contractual Obligations and Commitments table and a credit agreement guaranty on
behalf of SureScripts-RxHub, LLC. This agreement is described more fully in Note 10
in the Notes to Consolidated Financial Statements.
Both on-balance sheet and off-balance sheet financing alternatives are considered
when pursuing our capital structure and capital allocation objectives.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Codification (ASC) Topic 810, Consolidation (formerly SFAS No. 167,
Amendments to FASB Interpretation No. 46(R)), which amends the consolidation
guidance applicable to variable interest entities. The amendments will significantly
affect the overall consolidation analysis under ASC Topic 810. The application of the
new provisions under this topic, which will be effective for the first quarter of fiscal
2011, is not expected to have a material impact on the Company’s Consolidated
Balance Sheet or Consolidated Statement of Earnings.
Cautionary Note Regarding Forward-Looking Statements
This report and other documents that we file with the Securities and Exchange
Commission contain forward-looking statements that are based on current expectations,
estimates, forecasts and projections about our future performance, our business,
our beliefs and our management’s assumptions. Statements that are not historical
facts are forward-looking statements, including forward-looking information
concerning pharmacy sales trends, prescription margins, number and location of
new store openings, outcomes of litigation, the level of capital expenditures, industry
trends, demographic trends, growth strategies, financial results, cost reduction
initiatives, acquisition synergies, regulatory approvals, and competitive strengths.
Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,”
“intend,” “plan,” “continue,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,”
and variations of such words and similar expressions are often used to identify such
forward-looking statements, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These forward-looking state-
ments are not guarantees of future performance and involve risks, assumptions and
uncertainties, including, but not limited to, those described in Item 1A “Risk Factors”
in our Form 10-K and in other reports that we file or furnish with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary materially
from those indicated or anticipated by such forward-looking statements. Accordingly,
you are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date they are made. Except to the extent required by
law, we undertake no obligation to update publicly any forward-looking statements
after the date they are made, whether as a result of new information, future events,
changes in assumptions or otherwise.
Contractual Obligations and Commitments
The following table lists our contractual obligations and commitments at August 31, 2010 (In millions):
Payments Due by Period
Total Less Than 1 Year 1—3 Years 3—5 Years Over 5 Years
Operating leases (1) $ 36,369 $ 2,263 $ 4,562 $ 4,384 $ 25,160
Purchase obligations (2):
Open inventory purchase orders 1,802 1,802 — — —
Real estate development 370 184 168 18 —
Other corporate obligations 682 368 189 96 29
Long-term debt* (3) 2,352 7 1,304 9 1,032
Interest payment on long-term debt 636 113 232 105 186
Insurance* 558 233 169 77 79
Retiree health* 441 12 26 32 371
Closed location obligations* 151 32 36 23 60
Capital lease obligations* (1) 92 5 8 8 71
Other long-term liabilities reflected on the balance sheet* (4) 860 91 176 149 444
Total $ 44,313 $ 5,110 $ 6,870 $ 4,901 $ 27,432
* Recorded on balance sheet.
(1) Amounts for operating leases and capital leases do not include certain operating expenses under these leases such as common area maintenance, insurance and real estate taxes.
These expenses for the fiscal year ended August 31, 2010, were $375 million.
(2) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including open purchase orders.
(3) Total long-term debt on the Consolidated Balance Sheet includes a $51 million fair market value adjustment and $8 million of unamortized discount.
(4) Includes $76 million ($31 million due in 1–3 years, $33 million due in 3–5 years and $12 million due over 5 years) of unrecognized tax benefits recorded under ASC Topic 740.
2010 Walgreens Annual Report Page 23