Walgreens 2014 Annual Report Download - page 9

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PART I
Item 1. Business
Overview
Walgreen Co., together with its subsidiaries, operates the largest drugstore chain in the United States with net
sales of $76.4 billion in the fiscal year ended August 31, 2014. We provide our customers with convenient, omni-
channel access to consumer goods and services, pharmacy, and health and wellness services in communities
across America. We offer our products and services through drugstores, as well as through mail, telephone,
online and our mobile application.
We sell prescription and non-prescription drugs as well as general merchandise, including convenience and fresh
foods, household items, personal care, photofinishing and beauty care. Our pharmacy, health and wellness
services include retail, specialty, infusion and respiratory services, mail service, convenient care clinics and
wellness centers. These services help improve health outcomes for patients and manage costs for payers
including employers, managed care organizations, health systems, pharmacy benefit managers and the public
sector. Our Take Care Health Systems subsidiary is a manager of in-store convenient care clinics (Healthcare
Clinics), with more than 400 locations throughout the United States. In fiscal 2014, we sold a controlling interest
in the Take Care Employer Solutions, LLC (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, which we account for using the equity method of
accounting. Alliance Boots delivers a range of products and services to customers including pharmacy-led health
and beauty retailing and pharmaceutical wholesaling and distribution. As part of the initial 45% investment in
Alliance Boots, we also acquired the right, but not the obligation, to elect to acquire the remaining 55% interest
in Alliance Boots (the second step transaction), at any time during the period beginning February 2, 2015 and
ending on August 2, 2015, in exchange for £3.133 billion in cash, payable in British pounds sterling, and
144,333,468 shares of Walgreens common stock, subject to certain specified potential adjustments (the call
option). On August 5, 2014, the Purchase and Option Agreement dated June 18, 2012 was amended (as amended,
the Purchase and Option Agreement) 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 under “Business Development” below.
In addition, we plan to complete, immediately prior to the completion of the second step transaction, a
reorganization of Walgreens into a holding company structure (the Reorganization and together with the second
step transaction and the related share issuance, the Transactions), under which Walgreens would become a
wholly-owned subsidiary of a new Delaware corporation named “Walgreens Boots Alliance, Inc.” (Walgreens
Boots Alliance) and Walgreen Co. shareholders immediately prior to the Reorganization would become
shareholders of Walgreens Boots Alliance, with shares of Walgreen Co. common stock being converted
automatically into shares of Walgreens Boots Alliance common stock on a one-for-one basis. The Reorganization
is conditioned upon the second step transaction being completed immediately following the completion of the
Reorganization. The second step transaction is not conditioned on the completion of the Reorganization. Closing
of the Transactions is subject to shareholder and various regulatory approvals and is expected to occur in the first
quarter of calendar 2015.
Walgreen Co. was incorporated as an Illinois corporation in 1909 as a successor to a business founded in
1901. Our principal executive offices are located at 108 Wilmot Road, Deerfield, Illinois 60015. The Company is
principally in the retail drugstore business and its operations are within one reportable segment.
Business Development
As of August 31, 2014, Walgreens operated 8,309 locations in 50 states, the District of Columbia, Puerto Rico
and U.S. Virgin Islands. In 2014, the Company opened or acquired 268 locations. Acquisitions included Kerr
1