Walgreens 2015 Annual Report Download - page 118

• The Retail Pharmacy International segment consists primarily of the legacy Alliance Boots pharmacy-
led health and beauty stores, optical practices, and related contract manufacturing operations. Stores are
located in the United Kingdom, Mexico, Chile, Thailand, Norway, the Republic of Ireland, The
Netherlands and Lithuania. Revenues for the segment are principally derived from the sale of
prescription drugs and retail health, beauty, toiletries and other consumer products.
• The Pharmaceutical Wholesale segment consists of the legacy Alliance Boots pharmaceutical
wholesaling and distribution businesses. Wholesale operations are located in France, United Kingdom,
Germany, Turkey, Spain, Russia, The Netherlands, Egypt, Norway, Romania, Czech Republic and
Lithuania. Revenues for the segment are principally derived from wholesaling and distribution of a
comprehensive offering of brand-name pharmaceuticals (including specialty pharmaceutical products)
and generic pharmaceuticals, health and beauty products, home healthcare supplies and equipment, and
related services to pharmacies and other healthcare providers.
The accounting policies of the segments are in accordance with Note 2, Summary of Major Accounting Policies.
The results of operations for each reportable segment include synergy benefits, including WBAD operations and
an allocation of corporate-related overhead costs. The “Eliminations and Unallocated Items” column contains
items not allocable to the reportable segments, as the information is not utilized by the chief operating decision
maker to assess segment performance and allocate resources.
The segment information for fiscal 2015 reflects the operating results of the Company’s new business segments.
The Company began recording revenue and expense transactions using the new segments effective January 1,
2015. Beginning January 1, 2015, synergy benefits including WBAD operations have been allocated to the Retail
Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale segments on a source of
procurement benefit basis. Under this method, the synergy benefits are allocated to the segment whose purchase
gave rise to the benefit. A synergy arising on the purchase of an item for use in the Retail Pharmacy USA
segment is recognized in the Retail Pharmacy USA segment and similarly for the Retail Pharmacy International
and Pharmaceutical Wholesale segments. Procurement service income related to third parties is recognized in the
Pharmaceutical Wholesale segment. Corporate costs have been allocated to segments based on their respective
gross profit.
The Company has determined that it is impracticable to restate segment information for fiscal 2014 and 2013, as
well as to provide disclosures under both the old basis and new basis of reporting for certain items. Specifically,
WBAD operations historically have been recorded in the Retail Pharmacy USA segment and not restated as it is
impracticable to separate the information to the individual reportable segments. Equity earnings from Alliance
Boots prior to the completion of the Second Step Transaction have been recorded within the Retail Pharmacy
USA segment. The equity earnings of the 45% interest in Alliance Boots have not been separated into the Retail
Pharmacy International and Pharmaceutical Wholesale segments for the prior periods as it is impracticable.
Additionally, comparative information has not been restated to reflect the 45% equity interest in Alliance Boots.
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