Walgreens 2014 Annual Report Download - page 26

Our long-term debt obligations include covenants that may adversely affect our ability to incur certain secured
indebtedness or engage in certain types of sale and leaseback transactions. In addition, our existing credit
agreements require the Company to maintain as of the last day of each fiscal quarter a ratio of consolidated debt
to total capitalization not to exceed a certain level. Our ability to comply with these restrictions and covenants
may be affected by events beyond our control. If we breach any of these restrictions or covenants and do not
obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding indebtedness could be
declared immediately due and payable.
Our credit ratings are important to our business.
The major credit rating agencies have assigned us and our corporate debt investment grade credit ratings. These
ratings are based on a number of factors, which include their assessment of our financial strength and financial
policies. We aim to maintain investment grade ratings as they serve to lower our borrowing costs and facilitate our
access to a variety of lenders and other creditors, including landlords for our leased stores, on terms that we consider
advantageous to our business. However, there can be no assurance that any particular rating assigned to us will
remain in effect for any given period of time or that a rating will not be changed or withdrawn by a rating agency, if
in that rating agency’s judgment, future circumstances relating to the basis of the rating so warrant. Incurrence of
additional debt by Alliance Boots or us could adversely affect our credit ratings. Any downgrade of our credit
ratings could adversely affect our cost of funds, liquidity, competitive position and access to capital markets.
Our quarterly results and Alliance Boots operating results may fluctuate significantly.
Our operating results have historically varied on a quarterly basis and may continue to fluctuate significantly in the
future. Factors that may affect our quarterly operating results include, but are not limited to, seasonality, the timing of
the introduction of new generic and brand name prescription drugs, inflation including with respect to generic drug
procurement costs, the timing and severity of the cough, cold and flu season, changes in payer reimbursement rates and
terms, significant acquisitions, dispositions, joint ventures and other strategic initiatives, asset impairments, the relative
magnitude of our LIFO provision in any particular quarter, variations in the earnings contribution from equity method
investments such as Alliance Boots, fluctuations in the value of our warrants to acquire AmerisourceBergen common
stock, prolonged severe weather in key markets, and the other risk factors discussed under this Item 1A. Accordingly,
we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful and investors
should not rely on the results of any particular quarter as an indication of our future performance.
In addition, Alliance Boots operating results have historically varied on a quarterly basis and may continue to
fluctuate significantly in the future. Alliance Boots faces risks similar to those we face and additional risks
particular to its businesses, operations and markets, including: macro-economic and political risks; regulatory
risks including, with respect to its Health & Beauty Division, the potential adverse effects of changes to licensing
regimes for pharmacies, prescription processing regimes or reimbursement arrangements and, with respect to its
Pharmaceutical Wholesale Division, the potential adverse effects of regulations relating to such things as product
margins, product traceability and the conditions under which products must be stored; changes and trends in
consumer behavior and spending; competitive risks resulting from intense competition from a wide variety of
competitors including, with respect to its Health & Beauty Division, other pharmacies, supermarkets and
department stores and, with respect to its Pharmaceutical Wholesale Division, from direct competitors and
alternative supply sources such as importers and manufacturers who supply directly to pharmacies; health, safety
and environmental risks; product/services risks, including risks associated with defective products, the provision
of inadequate services, the potential infiltration of counterfeit products into the supply chain, errors in re-labeling
of products and contamination or product mishandling issues; risk of major operational business failures such as
a major failure of its distribution centers and logistics 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 contributions including the potential need to increase the funding of its defined benefit pension
plans due to lower than expected pension fund investment returns and/or increased life expectancy of plan
members, and protection of confidential personal and business data.
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