Walgreens 2014 Annual Report Download - page 15

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Competitive conditions
The drugstore industry is highly competitive. As a leader in the retail drug industry and as a retailer of general
merchandise, Walgreens competes with various retailers, including chain and independent drugstores, mail order
prescription providers, grocery stores, convenience stores, mass merchants, online pharmacies and retailers,
warehouse clubs, dollar stores and other discount merchandisers. The Company competes primarily on the basis
of service, convenience, variety and price. The Company’s geographic dispersion helps offset the impact of
temporary, localized economic and competitive conditions in individual markets. The number and location of the
Company’s drugstores appears under Item 2 – “Properties” in this Form 10-K.
Employees
At August 31, 2014, the Company employed approximately 251,000 persons, approximately 76,000 of whom
were part-time employees working less than 30 hours per week. The foregoing does not include employees of
unconsolidated partially owned entities, such as Alliance Boots, of which we owned 45% 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% equity interest during the six-month period beginning February 2, 2015 (the first step
transaction). On August 5, 2014, the Purchase and Option Agreement was amended to permit the exercise of the
call option beginning on that date, and we, through an indirectly wholly-owned subsidiary to which we
previously assigned our rights to the call option, exercised the call option on August 5, 2014, as described
above. Completion of the second step transaction is subject to shareholder and various regulatory approvals and
is expected to occur in the first quarter of calendar 2015. We account for our 45% investment in Alliance Boots
using the equity method of accounting on a three-month lag basis. Accordingly, because of the three-month lag
and the timing of the closing of the first step transaction on August 2, 2012, our financial statements for the fiscal
year ended August 31, 2013 reflect 12 months of the dilutive effect of the incremental shares and interest
expense associated with our Alliance Boots investment, but only 10 months (August 2012 through May 2013) of
Alliance Boots results, reported as Equity earnings in Alliance Boots. Our financial statements for the fiscal year
ended August 31, 2014 reflect Alliance Boots results for the 12 months ending May 31, 2014, reported as Equity
earnings in Alliance Boots.
Alliance Boots is a leading international, pharmacy-led health and beauty retailing and pharmaceutical
wholesaling and distribution business. As of August 31, 2014, Alliance Boots had, together with its associates
and joint ventures, pharmacy-led health and beauty retail businesses in 11 countries and operated more than
4,600 health and beauty retail stores, of which more than 4,450 had a pharmacy, with a growing online presence.
In addition, as of March 31, 2014, its fiscal year end, Alliance Boots had approximately 600 optical practices in
the United Kingdom, approximately 180 of which operated on a franchise basis. Approximately 30% of its
optical practices are located in Boots stores with the balance being standalone practices. In addition, Alliance
Boots is a leader in the United Kingdom hearingcare market through its associate, Boots Hearingcare, which
operated in approximately 430 locations across the United Kingdom, almost all of which are within Boots stores
or standalone Boots Opticians practices. Its pharmaceutical wholesale businesses, together with its associates and
joint ventures, supplied medicines, other healthcare products and related services to more than 180,000
pharmacies, doctors, health centers and hospitals from more than 370 distribution centers in 20 countries. Except
as otherwise indicated, figures regarding Alliance Boots business activities are as of March 31, 2014, with the
addition of Farmacias Ahumada S.A. data at the date of its acquisition by Alliance Boots on August 11, 2014,
and include its associates and joint ventures.
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