Walgreens 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Walgreens annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

WALGREENS BOOTS ALLIANCE, INC.
2014 Annual Report

Table of contents

  • Page 1
    WALGREENS BOOTS ALLIANCE, INC. 2014 Annual Report

  • Page 2
    ... wholesaling and community pharmacy care, dating back more than 100 years. The company, with a presence in more than 25* countries, employs over 370,000* people and is the largest retail pharmacy, health and daily living destination in the USA and Europe, and (including equity method investments) is...

  • Page 3
    ... stores, and delivering to clients from 340 distribution centers (as at 30 November 2014 including equity method investments). Add to this our outstanding service and product brand portfolio and it is clear that our new enterprise is positioned at the forefront of our industry. This equips us well...

  • Page 4
    ... new combined company. Our identity and core values Above all, Walgreens Boots Alliance is defined by our potential for the future. With a presence across the world, we are now a global company, with three divisions and reportable business segments-Retail Pharmacy USA, Retail Pharmacy International...

  • Page 5
    ... new synergies of service far beyond our commitment and contribution today. As we forge a new, expanded global program, we intend to report our work and results annually. To Walgreens Boots Alliance, corporate social responsibility is much more than our duty. It is our passion, and a powerful way...

  • Page 6
    Board of Directors As of 10 April 2015 James A. Skinner Executive Chairman†Walgreens Boots Alliance, Inc. Elected 2005 Stefano Pessina Executive Vice Chairman and Acting Chief Executive Officer Walgreens Boots Alliance, Inc. Elected 2012 Janice M. Babiak Former Partner Ernst & Young LLP Elected ...

  • Page 7
    ... (Address of principal executive offices) 60015 (Zip Code) Registrant's telephone number, including area code: (847) 315-2500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock ($.078125 Par Value) New York Stock...

  • Page 8
    ... 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership...

  • Page 9
    ...Take Care Employer) business and now hold an equity investment in the business. See the "Business Development" section below for further details. On August 2, 2012, we acquired a 45% equity interest in Alliance Boots GmbH (Alliance Boots), a leading international pharmacy-led health and beauty group...

  • Page 10
    ...instantly redeem rewards at our stores or through Walgreens.com. We had 82 million Balance ® Rewards active members as of August 31, 2014. We seek to grow pharmacy, front-end and online market share through new store growth, comparable store sales increases, pharmacy prescription file purchases and...

  • Page 11
    ... of changes in equity and Group statements of cash flows for each of the years in the three-year period ended March 31, 2014, and our Form 8-K filed on September 16, 2014 that discloses certain unaudited pro forma consolidated financial information related to the pending Transactions. We plan to...

  • Page 12
    ... health and daily living" store, creating community-centric healthcare integration with expanded pharmacy, health and wellness solutions. We seek to continue to deliver an outstanding customer experience through enhanced employee engagement and to expand our product and service offerings across new...

  • Page 13
    ... network of pharmacies allows easy access for customers to fill their prescriptions at any of our drugstores. In addition, our stores sell branded and owned brand general merchandise. Take Care Health Systems, a wholly-owned subsidiary, manages the Healthcare Clinics at select Walgreens throughout...

  • Page 14
    ... various managed care organizations within both the private and public sectors. No customer accounted for ten percent or more of the Company's consolidated net sales in fiscal 2014. Government contracts The Company fills prescriptions for many state Medicaid public assistance plans. Revenues from...

  • Page 15
    ...% as of the date of this report. Research and development The Company does not engage in any material research and development activities. Overview of Alliance Boots Walgreens acquired a 45% equity interest in Alliance Boots GmbH on August 2, 2012 along with a call option to acquire the remaining 55...

  • Page 16
    ... Walgreens stores on a phased basis. In Europe, its Boots Laboratories line of products was sold by independent pharmacies in five countries as of March 31, 2014. In addition, Alliance Boots has partnerships with a select number of third party brand owners to sell their products in Boots stores...

  • Page 17
    ..., managed care organizations, pharmacy benefit management companies, government entities, and other third party payers to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation relating to how drugs are priced, may adversely impact our profitability. Plan changes with...

  • Page 18
    ... priced generic alternatives typically results in relatively lower sales revenues, but higher gross profit margins. Accordingly, a decrease in the number of significant new brand name drugs or generics successfully introduced could adversely affect our results of operations. Generic drug inflation...

  • Page 19
    ... in recent years to create larger healthcare enterprises with greater bargaining power, which has resulted in greater pricing pressures. For example, in April 2012, two of the three largest pharmacy benefit managers, Medco Health Solutions, Inc. and Express Scripts, Inc., merged. The resulting...

  • Page 20
    between Walgreens and Alliance Boots; and agreements and arrangements pursuant to which we and Alliance Boots together have the right, but not the obligation, to purchase a minority equity position in AmerisourceBergen and gain associated representation on AmerisourceBergen's board of directors in ...

  • Page 21
    ... customer loyalty. We have invested in our development and procurement resources and marketing efforts relating to these private brand offerings. Although we believe that our private brand products offer value to our customers at each price point and typically provide us with higher gross margins...

  • Page 22
    ... 2015, we plan to pursue strategies designed to create a "Well Experience" and further transform our traditional drugstore to a "retail health and daily living" store while delivering an outstanding customer experience through enhanced employee engagement; transform the role of community pharmacy...

  • Page 23
    ... to purchase products or services, enroll in promotional programs, participate in our customer loyalty program, register on our websites, or otherwise communicate and interact with us. In addition, aspects of our operations depend upon the secure transmission of confidential information over public...

  • Page 24
    ... or federal level for certain healthcare services or adverse changes in legislation or regulations governing prescription drug pricing, healthcare services or mandated benefits, may cause customers to reduce the amount of our products and services they purchase or the price they are willing to pay...

  • Page 25
    ... States Department of Justice relating to controlled substance matters that required the Company to pay $80 million and implement certain remedial actions. We are also governed by federal and state laws of general applicability, including laws regulating matters of working conditions, health and...

  • Page 26
    ... infrastructure, information technology systems or the operational systems of key third party suppliers; and risks relating to increased costs, not achieving, or delays in achieving, expected synergies, changes in management, acquisitions, currency exchange, funding and interest rates, pension...

  • Page 27
    ... impacting our financial condition and results of operations. In addition, both prescription and non-prescription drug sales are affected by the timing and severity of the cough, cold and flu season which can vary considerably from year to year. In addition, the Alliance Boots business is seasonal...

  • Page 28
    ... the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) could require us to make significant changes to our lease management system or other accounting systems, and could result in changes to our financial statements. We are involved in a number of...

  • Page 29
    ... a material adverse impact on our business, financial condition and results of operations and the price of our common stock. Our August 2012 investment in Alliance Boots significantly increased, and the proposed second step transaction would significantly further increase, our exposure to the risks...

  • Page 30
    ... higher interest rates, inflation, and increased government regulation or ownership of traditional private businesses; the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets; and developing and emerging markets may...

  • Page 31
    ... board of directors pursuant to the AmerisourceBergen shareholders agreement to which both the Company and Alliance Boots are parties, the second director nominee would be an Alliance Boots executive, designated by the Company in consultation with and at the direction of Alliance Boots...

  • Page 32
    ...and the price of our common stock. If the second step transaction is completed, we intend, to the extent possible, to further integrate the operations of Alliance Boots. Our goal in integrating these operations is to increase revenues through enhanced growth opportunities and achieve cost savings by...

  • Page 33
    ..., in a public or private offering to finance the second step transaction. In connection with the closing of the first step transaction on August 2, 2012, we issued approximately 83.4 million shares of our common stock to Alliance Boots shareholders and entered into the Company Shareholders Agreement...

  • Page 34
    ... or Chief Executive Officer of Alliance Boots) and for so long as the KKR Investors have the right to designate the KKR Investor Designee, respectively, vote all of their shares of common stock in accordance with our Board of Directors' recommendation on matters submitted to a vote of the Company...

  • Page 35
    ... and indefinite-lived intangible assets. The Company utilizes a three-month lag in reporting its share of equity income in Alliance Boots. As of March 31, 2014, its most recent fiscal year end, Alliance Boots had £9.9 billion (equivalent to approximately $16.5 billion based on exchange rates as of...

  • Page 36
    ...to serve on the Alliance Boots Board of Directors. As of the date of this report, Gregory D. Wasson, President and Chief Executive Officer and a director of Walgreens, Thomas J. Sabatino, Jr., Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary, and Robert...

  • Page 37
    ...as Executive Chairperson or Chief Executive Officer of Alliance Boots) and for so long as the KKR Investors have the right to designate the KKR Investor Designee, respectively, vote all of their shares of common stock in accordance with the Walgreens Boots Alliance Board of Directors' recommendation...

  • Page 38
    ... Exchange Commission. Walgreens Boots Alliance has only recently been incorporated and has no operating history and no revenues. The unaudited pro forma financial information contained in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2014...

  • Page 39
    ... fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934. Item 2. Properties The Company's locations, including drugstores, infusion and respiratory service facilities, specialty pharmacies and mail service facilities at August 31, 2014 and 2013 are listed...

  • Page 40
    ... and Chief Operating Officer. Mr. Wasson has served as a director of Verizon Communications Inc., a provider of communications, information and entertainment products and services, since March 2013, of Alliance Boots GmbH since August 2012, and of AmerisourceBergen Corporation, a pharmaceutical...

  • Page 41
    ... pursuant to an agreement between Alliance Boots and Walgreens. He served as Chief Executive of the Health & Beauty Division, Alliance Boots, from January 2009 to September 2013, and previously was Managing Director of Boots U.K. and a member of the Alliance Boots Group operating committee following...

  • Page 42
    ...2012 and as Executive Vice President and Chief Strategy and External Affairs Officer of Wellpoint, Inc. from September 2007 to December 2010. He has served as a director of Performant Financial Corporation, a provider of technology-enabled recovery and related analytics services, since February 2014...

  • Page 43
    ... the Board of Directors. The following table provides information about purchases by the Company during the quarter ended August 31, 2014 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act. Subject to applicable law, share purchases may be made in open...

  • Page 44
    ...Financial Data Walgreen Co. and Subsidiaries (Dollars in Millions, except per share and location amounts) Fiscal Year 2014 2013 (1) 2012 (1) 2011 2010 (4) Net sales Cost of sales Gross Profit Selling, general and administrative expenses Gain on sale of business (2) Equity earnings in Alliance Boots...

  • Page 45
    ... drugstores, infusion and respiratory services facilities, specialty pharmacies and mail service facilities. Locations in 2010 through 2013 also included worksite health and wellness centers, which were part of the Take Care Employer business in which we sold a majority interest in fiscal 2014. The...

  • Page 46
    ... Walgreens drugstores. Total locations also do not include locations of unconsolidated partially owned entities such as Alliance Boots. Number of Locations Location Type 2014 2013 2012 Drugstores Worksite Health and Wellness Centers Infusion and Respiratory Services Facilities Specialty Pharmacies...

  • Page 47
    ... objectives. In fiscal 2014, we acquired certain assets of Kerr Drug and its affiliates, which include 76 retail drugstore locations, as well as a specialty pharmacy business and a distribution center, all based in North Carolina. In fiscal 2013, we acquired Stephen L. LaFrance Holdings, Inc. (USA...

  • Page 48
    ... of comprehensive income, Group statements of changes in equity and Group statements of cash flows for each of the years in the three-year period ended March 31, 2014, and our Form 8-K filed on September 16, 2014 that includes certain unaudited pro forma consolidated financial information related to...

  • Page 49
    ... refer to our Current Report on Form 8-K filed on March 20, 2013, for more detailed information regarding these agreements and arrangements. STORE CLOSURES AND COST REDUCTION INITIATIVES On March 24, 2014, our Board of Directors approved a plan to close underperforming stores in efforts to optimize...

  • Page 50
    ...various factors, including the timing and number of store closings; the timing and amount of sublease income and other lease expense; factors relating to real estate including sale proceeds; asset write-downs and other factors affecting inventory value; changes in management's assumptions; and other...

  • Page 51
    ... and 1.9% for 2012. New generic drug introductions have led to an increased proportion of generics on total net sales. Third party sales, where reimbursement is received from managed care organizations, the government, employers or private insurers, were 96.5% of prescription sales in 2014, 95.8% of...

  • Page 52
    ...prescription drug and convenience and fresh foods categories. Pharmacy and front-end margin decreases were partially offset by purchasing synergies realized from the joint venture formed by Walgreens and Alliance Boots and a lower provision for LIFO in fiscal 2014. Gross margin as a percent of sales...

  • Page 53
    ...opened or acquired 268 locations. Acquisitions included Kerr Drug, which contributed 76 drugstore locations as well as a specialty pharmacy and a distribution center. In 2014, the Company had a net reduction of 273 locations primarily due to the sale of the Take Care Employer Solutions, LLC business...

  • Page 54
    ... dividend payout ratio target between 30 and 35 percent of net earnings. On July 13, 2011, our Board of Directors authorized the 2012 stock repurchase program, which allowed for the repurchase of up to $2.0 billion of the Company's common stock prior to its planned expiration on December 15, 2015...

  • Page 55
    ... as well as the financial performance and level of outstanding debt of Alliance Boots. Our credit ratings impact our borrowing costs, access to capital markets and operating lease costs. The rating agency ratings are not recommendations to buy, sell or hold our debt securities or commercial paper...

  • Page 56
    ... equity position in AmerisourceBergen over time pursuant to open market purchases and warrants to acquire AmerisourceBergen common stock. WAB Holdings, LLC, a newly formed entity jointly owned by Walgreens and Alliance Boots, which is consolidated by Walgreens, can acquire up to 19,859,795 shares...

  • Page 57
    ... rates; and forecasts of revenue, operating income, depreciation and amortization and capital expenditures. The allocation requires several analyses to determine fair value of assets and liabilities including, among other things, purchased prescription files, customer relationships and trade names...

  • Page 58
    ... used to determine asset impairments. Liability for closed locations - The liability is based on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. We have not made any material changes to the method of estimating our...

  • Page 59
    ...1 Year 1-3 Years 3-5 Years Over 5 Years Operating leases (1) Purchase obligations (2) : Open inventory purchase orders Real estate development Other corporate obligations Alliance Boots purchase option exercise (3) Long-term debt* Interest payment on long-term debt Insurance* Retiree health* Closed...

  • Page 60
    ...the Alliance Boots Purchase and Option Agreement, as amended, the Company is required to make a cash payment of £3.133 billion (approximately $5.2 billion at August 31, 2014) if the second step transaction is completed. The Company is also required to issue approximately 144.3 million common shares...

  • Page 61
    ... and off-balance sheet financing alternatives are considered when pursuing our capital structure and capital allocation objectives. RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic...

  • Page 62
    .../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...

  • Page 63
    ... Walgreens and Alliance Boots related to the transactions; the ability to retain key personnel; changes in financial markets, interest rates and foreign currency exchange rates; the risks associated with international business operations; the risk of unexpected costs, liabilities or delays; changes...

  • Page 64
    ... Walgreen Co. and Subsidiaries For the years ended August 31, 2014, 2013 and 2012 (In millions, except per share amounts) 2014 2013 2012 Net sales Cost of sales Gross Profit Selling, general and administrative expenses Gain on sale of business Equity earnings in Alliance Boots Operating Income...

  • Page 65
    ...Comprehensive Income Walgreen Co. and Subsidiaries For the years ended August 31, 2014, 2013 and 2012 (In millions) 2014 2013 2012 Comprehensive Income Net Earnings Other comprehensive income (loss), net of tax: Postretirement liability Changes in unrecognized gain on available-for-sale investments...

  • Page 66
    Consolidated Statements of Shareholders' Equity Walgreen Co. and Subsidiaries For the years ended August 31, 2014, 2013 and 2012 (In millions, except shares and per share amounts) Equity attributable to Walgreen Co. Accumulated Common Treasury Employee Other Common Stock Stock Stock Paid-In Stock ...

  • Page 67
    ... issued Common stock, $.078125 par value; authorized 3.2 billion shares; issued and outstanding 1,028,180,150 shares in 2014 and 2013 Paid-in capital Employee stock loan receivable Retained earnings Accumulated other comprehensive income (loss) Treasury stock at cost, 77,793,261 shares in 2014 and...

  • Page 68
    ... Change in fair value of warrants and related amortization Loss on exercise of call option Deferred income taxes Stock compensation expense Equity earnings in Alliance Boots Other Changes in operating assets and liabilities - Accounts receivable, net Inventories Other current assets Trade accounts...

  • Page 69
    .... The companies share common board of director members, recognize purchasing synergies through Walgreens Boots Alliance Development GmbH, a 50/50 joint venture, as well as engage in intercompany sales transactions on select front-end merchandise. Because of the three-month lag and the timing of the...

  • Page 70
    ... of the Company's subsidiaries to make dividend payments, loans or advances to the Company. Other Information In addition, this Amendment No. 1 on Form 10-K/A corrects the number of warrants to purchase shares of AmerisourceBergen common stock issued to the Company and Alliance Boots GmbH in Note...

  • Page 71
    ... million using May 31, 2014 exchange rates). The Company utilizes a three-month lag in reporting its share of equity income in Alliance Boots, including this reporting unit. The Company will continue to monitor this reporting unit in accordance with Accounting Standards Codification 350, Intangibles...

  • Page 72
    ...$894 million in fiscal 2013 and $841 million in fiscal 2012. The Company capitalizes application stage development costs for significant internally developed software projects, such as upgrades to the store point-of-sale system. These costs are amortized over a five-year period. Amortization expense...

  • Page 73
    .... Gift card breakage income, which is included in selling, general and administrative expenses, was not significant in fiscal 2014, 2013 or 2012. Loyalty Program The Company's rewards program, Balance ® Rewards, is accrued as a charge to cost of sales at the time a point is earned. Points are...

  • Page 74
    .... Available-for-Sale Investments The Company, Alliance Boots and AmerisourceBergen Corporation (AmerisourceBergen) entered into a Framework Agreement dated as of March 18, 2013, pursuant to which Walgreens and Alliance Boots together were granted the right to purchase a minority equity position in...

  • Page 75
    ...the average market price of the common shares. Outstanding options to purchase common shares that were anti-dilutive and excluded from earnings per share totaled 3,510,395, 12,316,949 and 32,593,870 in fiscal 2014, 2013 and 2012, respectively. New Accounting Pronouncements In May 2014, the Financial...

  • Page 76
    ... in nature and would not affect the Company's cash position. (2) Store Closures In March 2014, the Board of Directors approved a plan to close underperforming stores in efforts to optimize and focus resources in a manner intended to increase shareholder value. Total pre-tax charges associated with...

  • Page 77
    ... the following (in millions): Year Ended August 31, 2014 2013 Balance - beginning of period Provision for present value of non-cancellable lease payments of closed facilities Assumptions about future sublease income, terminations and changes in interest rates Interest accretion Cash payments, net...

  • Page 78
    ...Alliance Boots GmbH and AB Acquisitions Holdings Limited (the Purchase and Option Agreement), the Company acquired 45% of the issued and outstanding share capital of Alliance Boots in exchange for $4.025 billion in cash and approximately 83.4 million shares of Company common stock. On August 5, 2014...

  • Page 79
    ...'s infusion and respiratory business and its equity method investment received through the sale of the Take Care Employer business. These investments are included within other non-current assets on the Consolidated Balance Sheets. The Company's share of equity income is reported within selling...

  • Page 80
    ... to twelve months results recorded in fiscal 2014. Earnings in Alliance Boots are translated at the average exchange rate of $1.61 and $1.57 to one British pound Sterling for the years ended August 31, 2014 and 2013 respectively. Walgreens Boots Alliance Development GmbH operations are excluded...

  • Page 81
    ... revenue, operating income, depreciation and amortization and capital expenditures. The allocation requires several analyses to determine the fair value of assets and liabilities including, among other things, purchased prescription files, customer relationships and trade names. Although the Company...

  • Page 82
    ... purchase accounting for this acquisition. In September 2012, the Company purchased the regional drugstore chain USA Drug from Stephen L. LaFrance Holdings, Inc. and members of the LaFrance family for $436 million, net of assumed cash and selected other assets (primarily prescription files...

  • Page 83
    ...249 The difference between the statutory federal income tax rate and the effective tax rate is as follows: 2014 2013 2012 Federal statutory rate State income taxes, net of federal benefit Loss on Alliance Boots call option (1) Foreign income taxed at non-US rate Other Effective income tax rate 35...

  • Page 84
    ... for fiscal years 2014, 2013 and 2012. ASC Topic 740, Income Taxes, provides guidance regarding the recognition, measurement, presentation and disclosure in the financial statements of tax positions taken or expected to be taken on a tax return, including the decision whether to file in a particular...

  • Page 85
    ...million and $28 million, respectively. For the year ended August 31, 2014, the amount reported in income tax expense related to interest and penalties was an immaterial benefit. The Company files a consolidated U.S. federal income tax return, as well as income tax returns in various states. It is no...

  • Page 86
    ... and 2013, was $1.1 billion and $1.1 billion, respectively. Fair value for these notes was determined based upon quoted market prices. We have periodically borrowed under our commercial paper program during the current fiscal year, and may continue to borrow in future periods. We had average daily...

  • Page 87
    ...certain financial ratios related to minimum net worth and priority debt, along with limitations on the sale of assets and purchases of investments. At August 31, 2014, the Company was in compliance with all such covenants. The Company pays a facility fee to the financing banks to keep these lines of...

  • Page 88
    ...$16 44 $ 1 - The Company, Alliance Boots and AmerisourceBergen Corporation entered into a Framework Agreement dated as of March 18, 2013, pursuant to which (1) Walgreens and Alliance Boots together were granted the right to purchase a minority equity position in AmerisourceBergen, beginning with...

  • Page 89
    ... treasury rates; the dividend yield for AmerisourceBergen's common stock; AmerisourceBergen's common stock price at the valuation date; AmerisourceBergen's equity volatility; the number of shares of AmerisourceBergen's common stock outstanding; the number of AmerisourceBergen employee stock options...

  • Page 90
    ... call option was valued using a Monte Carlo simulation. Key assumptions used in the valuation include expected term, Walgreens equity value, the value of Alliance Boots and the potential impacts of certain provisions of the Purchase and Option Agreement dated June 18, 2012, by and among the Company...

  • Page 91
    ...31, 2015. In August 2014, the Board of Directors approved the 2014 share repurchase program, which replaces the 2012 repurchase program, that allows for the purchase of up to $3.0 billion of the Company's common stock prior to its expiration on August 31, 2016. Activity related to these programs was...

  • Page 92
    ... plans. Shares totaling $705 million were purchased to support the needs of the employee stock plans during fiscal 2014 as compared to $615 million in fiscal 2013. At August 31, 2014, 48.4 million shares of common stock were reserved for future issuances under the Company's various employee benefit...

  • Page 93
    ...The related tax benefit realized was $130 million in fiscal 2014 compared to $60 million in the prior year. The Walgreen Co. 1982 Employees Stock Purchase Plan permits eligible employees to purchase common stock at 90% of the fair market value at the date of purchase. Employees may make purchases by...

  • Page 94
    ... costs of these benefits are accrued over the service life of the employee. In fiscal 2012, the Company amended its prescription drug program for certain Medicare-eligible retirees to a group-based Company-sponsored Medicare Part D program, or employer group waiver program, effective January 1, 2013...

  • Page 95
    ... The measurement date used to determine postretirement benefits is August 31. $(24) 19 The discount rate assumption used to compute the postretirement benefit obligation at year-end was 4.40% for 2014 and 5.20% for 2013. The discount rate assumption used to determine net periodic benefit cost was...

  • Page 96
    ... 2014 and 2013. Future benefit costs were estimated assuming medical costs would increase at a 7.15% annual rate, gradually decreasing to 5.25% over the next nine years and then remaining at a 5.25% annual growth rate thereafter. A one percentage point change in the assumed medical cost trend rate...

  • Page 97
    ... per share amounts) November Quarter Ended February May August Fiscal Year Fiscal 2014 Net Sales Gross Profit Net Earnings attributable to Walgreen Co. Per Common Share - Basic Diluted Cash Dividends Declared Per Common Share Fiscal 2013 Net Sales Gross Profit Net Earnings Per Common Share - Basic...

  • Page 98
    ... sets forth the sales price ranges of the Company's common stock by quarter during the fiscal years ended August 31, 2014 and August 31, 2013 as reported by the Consolidated Transaction Reporting System. November Quarter Ended February May August Fiscal Year Fiscal 2014 Fiscal 2013 High Low High...

  • Page 99
    ... & 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. /s/ Gregory D. Wasson Gregory D. Wasson President and Chief Executive Officer /s/ Timothy R. McLevish Timothy...

  • Page 100
    REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS To the Board of Directors and Shareholders of Walgreen Co.: We have audited the accompanying consolidated balance sheets of Walgreen Co. and subsidiaries (the "Company") as of August 31, 2014 and 2013, and the related consolidated statements ...

  • Page 101
    ... the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended August 31, 2014 of the Company and our report dated October 20, 2014 (except for the Other Matters section of Note 1 as to which the date is November 3, 2014) expressed...

  • Page 102
    ... comprehensive income, Group statements of changes in equity and Group statements of cash flows for the year ended 31 May 2014 and ten months ended 31 May 2013. These non-statutory consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an...

  • Page 103
    ...to a new general ledger system in the fiscal quarter ending November 30, 2014. This is part of an ongoing initiative to enhance the overall design and operating effectiveness of the Company's financial reporting controls and is not in response to an identified internal control deficiency. Management...

  • Page 104
    ... common stock, on a one-for-one basis. Walgreens shareholders will own the same number of shares of Walgreens Boots Alliance common stock as they own of Walgreens common stock immediately prior to the completion of the Reorg Merger, and, after taking into account the completion of the second step...

  • Page 105
    ... must comply with applicable SEC rules and regulations regarding the inclusion of stockholder proposals in company-sponsored proxy materials. If you want to present a proposal or nominate a candidate for election to the Walgreens Boots Alliance Board of Directors at the WBA Annual Meeting following...

  • Page 106
    ... the Company's Board of Directors, as well as the Company's Corporate Governance Guidelines and Code of Ethics for Financial Executives and Code of Business Conduct, are available on the Company's website at investor.walgreens.com or, upon written request and free of charge, in printed hardcopy form...

  • Page 107
    ... Income and Shareholders' Equity for the years ended August 31, 2014, 2013 and 2012 Consolidated Balance Sheets at August 31, 2014 and 2013 Consolidated Statements of Cash Flows for the years ended August 31, 2014, 2013 and 2012 Notes to Consolidated Financial Statements Management's Report...

  • Page 108
    ... other time. (b) Exhibits Exhibit No. Description SEC Document Reference 2.1* Purchase and Option Agreement by and among Walgreen Co., Alliance Boots GmbH and AB Acquisitions Holdings Limited dated June 18, 2012 and related annexes. Amendment No. 1, dated August 5, 2014, to the Purchase and Option...

  • Page 109
    ... and certain other investors party thereto. Amendment No. 1, dated August 5, 2014, to the Purchase and Option Agreement and Walgreen Co. Shareholders Agreement, by and among Walgreen Co., Alliance Boots GmbH, AB Acquisitions Holdings Limited, Walgreen Scotland Investments LP, KKR Sprint (European...

  • Page 110
    ... (File No. 1-00604). 10.3 Walgreen Co. 2013 Omnibus Incentive Plan. 10.4 Amendment No. 1 to Walgreen Co. 2013 Omnibus Incentive Plan. 10.5 Form of Restricted Stock Unit Award agreement (effective July 2014). 10.6 Form of Performance Share Award agreement (effective July 2014). 10.7 Form of...

  • Page 111
    ... to Walgreen Co.'s Annual Report on Form 10-K for the fiscal year ended August 31, 1992 (File No. 1-00604). 10.15 Form of Restricted Stock Unit Award Agreement (August 15, 2011 grants). 10.16 Form of Restricted Stock Unit Award Agreement (effective November 1, 2012). 10.17 Form of Performance...

  • Page 112
    ... Co. 1997 Executive Deferred Compensation/Capital Accumulation Plan Series 2. Walgreen Co. 2001 Executive Deferred Compensation/Capital Accumulation Plan. Incorporated by reference to Exhibit 10 to Walgreen Co.'s Annual Report on Form 10-K for the fiscal year ended August 31, 1992 (File No. 1-00604...

  • Page 113
    ... No. Description SEC Document Reference 10.36 10.37 Amendment Number Two to the Walgreen Co. Executive Deferred Profit-Sharing Plan. Share Walgreens Stock Purchase/Option Plan (effective October 1, 1992), as amended. Previously filed with the Original Form 10-K on October 20, 2014. Incorporated...

  • Page 114
    ... by reference to Exhibit 10.52 to Walgreen Co.'s Annual Report on Form 10-K for the fiscal year ended August 31, 2013 (File No. 1-00604). 10.55 Offer letter agreement dated July 30, 2014 between Timothy R. McLevish and Walgreen Co. drugstore.com, inc., 1998 Stock Plan, as amended. 10.56 10.57...

  • Page 115
    ... 27, 2013 between Alexander Gourlay and Alliance Boots Management Services Ltd. Assignment Agreement dated November 15, 2012 between Walgreen Co. and Jeffrey Berkowitz (including the Walgreen Co. LongTerm Global Assignment Relocation Policy attached thereto). Retirement Agreement and Release between...

  • Page 116
    ... Co., Alliance Boots GmbH and AmerisourceBergen Corporation. Transaction Rights Agreement, dated as of March 18, 2013, by and among Walgreen Co., Walgreens Pharmacy Strategies, LLC, Alliance Boots GmbH, Alliance Boots Luxembourg S.Ã r.l., and WAB Holdings LLC. Limited Liability Company Agreement of...

  • Page 117
    ... Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Alliance Boots GmbH audited consolidated financial statements comprised of the Group statements of financial position at March 31, 2014 and 2013, and the related Group income statements, Group...

  • Page 118
    ... 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WALGREEN CO. November 3, 2014 By: /s/ Timothy R. McLevish Timothy R. McLevish Executive Vice President and Chief Financial Officer

  • Page 119
    ... releases, proxy statements, the company's Code of Ethics for Financial Executives, Code of Business Conduct and the Annual Report to Stockholders. These and other reports may also be obtained without charge upon request to: Investor Relations Walgreens Boots Alliance, Inc. 108 Wilmot Road - Mail...

  • Page 120