Walgreens 2013 Annual Report Download - page 29

with respect to the British pound Sterling, and to a lesser extent the Euro and certain
other foreign currencies, is expected to increase. We are exposed to the translation
of foreign currency earnings to the U.S. dollar as a result of our 45% interest in
Alliance Boots, which we account for using the equity method of accounting on a
three-month lag. Foreign currency forward contracts and other derivative instruments
may be used from time to time in some instances to hedge in full or in part certain
risks relating to foreign currency denominated assets and liabilities, intercompany
transactions, and in connection with acquisitions, joint ventures or investments
outside the United States. As of August 31, 2013, and August 31, 2012, we did
not have any outstanding foreign exchange derivative instruments.
Changes in AmerisourceBergen common stock price and equity volatility may have
a significant impact on the value of the warrants to acquire AmerisourceBergen
common stock described in Note 10 to our consolidated financial statements.
As of August 31, 2013, a one dollar change in AmerisourceBergen’s common
stock would, holding other factors constant, increase or decrease the fair
value of the Company’s warrants by $15 million and a one percent change in
AmerisourceBergen’s equity volatility would, holding other factors constant,
increase or decrease the fair value of the Company’s warrants by $7 million.
Additionally, the Company holds an investment in AmerisourceBergen common stock.
As of August 31, 2013, a one dollar charge in AmerisourceBergen common stock
would increase or decrease the fair value of the Company’s investment by $4 million.
Cautionary Note Regarding Forward-Looking Statements
This report and other documents that we file or furnish 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. In addition, we,
or others on our behalf, may make forward-looking statements in press releases
or written statements, on the Company’s website or in our communications and
discussions with investors and analysts in the normal course of business through
meetings, webcasts, phone calls, conference calls and other communications.
Some of such forward-looking statements may be based on certain data and forecasts
relating to our business and industry that we have obtained from internal surveys,
market research, publicly available information and industry publications. Industry
publications, surveys and market research generally state that the information
they provide has been obtained from sources believed to be reliable, but that
the accuracy and completeness of such information is not guaranteed.
Statements that are not historical facts are forward-looking statements, including,
without limitation, statements regarding our future financial and operating
performance, as well as forward-looking information concerning our investment
in Alliance Boots GmbH and the other arrangements and transactions contemplated
by the Purchase and Option Agreement with Alliance Boots and their possible
effects, our commercial agreement with AmerisourceBergen, the arrangements
and transactions contemplated by our framework agreement with AmerisourceBergen
and Alliance Boots and their possible effects, levels of business with Express Scripts
customers, estimates of the impact of developments on our earnings, earnings
per share and other financial metrics, network participation, cough/cold and
flu season, prescription volume, pharmacy sales trends, prescription margins,
number and location of new store openings, vendor, payer and customer relationships
and terms, possible new contracts or contract extensions, competition, economic
and business conditions, outcomes of litigation and regulatory matters, the level
of capital expenditures, industry trends, demographic trends, growth strategies,
financial results, cost reduction initiatives, acquisition and joint venture synergies,
competitive strengths and changes in legislation or regulations. Words such as
“expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,”
“project,” “intend,” “plan,” “goal,” “target,” “continue,” “sustain,” “synergy,” “on
track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,”
variations of such words and similar expressions are intended 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 statements are not guarantees of future performance and
are subject to risks, uncertainties and assumptions that could cause actual results
to vary materially from those indicated, including, but not limited to, those relating
to the Purchase and Option Agreement and other agreements relating to our strategic
partnership with Alliance Boots, the arrangements and transactions contemplated
thereby and their possible effects, our commercial agreement with AmerisourceBergen,
the arrangements and transactions contemplated by our framework agreement with
AmerisourceBergen and Alliance Boots and their possible effects, the occurrence of
any event, change or other circumstance that could give rise to the termination,
cross-termination or modification of any of the transaction documents, the parties’
ability to realize anticipated synergies and achieve anticipated financial results, the
amount of costs, fees, expenses and charges incurred in connection with strategic
transactions, the risks associated with transitions in supply arrangements, the risks
associated with international business operations, the risks associated with governance
and control matters in minority investments, whether the option to acquire the
remainder of the Alliance Boots equity interest will be exercised and the financial
ramifications thereof, the risks associated with potential equity investments in
AmerisourceBergen including whether the warrants to invest in AmerisourceBergen
will be exercised and the financial ramifications thereof, changes in vendor, payer
and customer relationships and terms, changes in network participation, levels of
business with Express Scripts customers, the implementation, operation and growth
of our customer loyalty program, changes in economic and business conditions
generally or in the markets in which we or Alliance Boots participate, competition,
risks associated with new business areas and activities, risks associated with
acquisitions, joint ventures, strategic investments and divestitures, the ability to
realize anticipated results from capital expenditures and cost reduction initiatives,
outcomes of legal and regulatory matters, and changes in legislation or regulations
or interpretations thereof, and those described in Item 1A (Risk Factors) in our
Form 10-K for the fiscal year ended August 31, 2013, 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 assump-
tions 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 do not
undertake, and expressly disclaim, any duty or obligation to update publicly any
forward-looking statement after the date the statement is made, whether as a
result of new information, future events, changes in assumptions or otherwise.
2013 Walgreens Annual Report 27
Gregory D. Wasson
President and Chief Executive Officer
Management’s Report on Internal Control
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Under the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control – Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on our evaluation, management concluded that our internal control over
financial reporting was effective as of August 31, 2013. Deloitte & Touche LLP,
the Company’s independent registered public accounting firm, has audited our
internal control over financial reporting, as stated in its report which is included herein.
Wade D. Miquelon
Executive Vice President and
Chief Financial Officer and
President, International