Walgreens 2014 Annual Report Download - page 60

(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) Pursuant to 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 if the second step transaction is completed and would assume the then-outstanding debt of Alliance
Boots upon closing of the transaction, neither of which is reflected in the above table.
(4) Includes $127 million ($73 million in 1-3 years, $48 million in 3-5 years and $6 million over 5 years) of
unrecognized tax benefits recorded under Accounting Standards Codification Topic 740, Income Taxes.
The obligations and commitments included in the table above do not include the obligations and commitments of
unconsolidated partially owned entities, such as Alliance Boots, of which we own 45% of the outstanding share
capital as of the date of this report. 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.
On August 5, 2014, we entered into an amendment to the Purchase and Option Agreement, which among other
things, accelerated the option period to the period beginning August 5, 2014 and ending February 5,
2015. Pursuant to the amendment, we exercised the call option on August 5, 2014 and are obligated to make a
cash payment of £3.133 billion (equivalent to approximately $5.2 billion based on exchange rates as of
August 31, 2014) and issue approximately 144.3 million shares of our common stock, with the amount and form
of such consideration being subject to adjustment in certain circumstances including if the volume weighted-
average price of our common stock is below $31.18 per share during a period shortly before the closing of the
second step transaction. We also would assume the then-outstanding debt of Alliance Boots upon the closing of
the second step transaction.
In addition, pursuant to our arrangements with AmerisourceBergen and Alliance Boots, we and Alliance Boots
have the right, but not the obligation, to purchase a minority equity position in AmerisourceBergen over time,
including open market purchases and warrants to acquire AmerisourceBergen common stock. If we elect to
exercise the two warrants issued by AmerisourceBergen in full, Walgreens would, subject to the terms and
conditions of such warrants, be required to make a cash payment of approximately $584.4 million in connection
with the exercise of the first warrant during a six-month period beginning in March 2016 and $595.8 million in
connection with the exercise of the second warrant during a six-month period beginning in March 2017.
Similarly, if Alliance Boots elects to exercise the two warrants issued by AmerisourceBergen in full, Alliance
Boots would, subject to the terms and conditions of such warrants, be required to pay AmerisourceBergen similar
amounts upon the exercise of their warrants in 2016 and 2017. If the second step transaction is completed,
Walgreens would acquire the warrants held by Alliance Boots and be required to make cash payments of
approximately $1.2 billion in order to exercise each tranche of warrants. Our and Alliance Boots ability to invest
in equity in AmerisourceBergen above certain thresholds is subject to the receipt of regulatory approvals. See
“Liquidity and Capital Resources” above.
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 unconsolidated 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.
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