Walgreens 2015 Annual Report Download - page 71

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from branded to generic status can increase or decrease, which can have a significant impact on the Company’s
Retail Pharmacy USA segment’s sales, gross profit margins and gross profit dollars.
As part of the Second Step Transaction, the Company acquired the remaining 27.5% noncontrolling interest in
Walgreens Boots Alliance Development GmbH (“WBAD”), a 50/50 global sourcing enterprise established by the
Company and Alliance Boots. The Company already owned a 50% direct ownership in WBAD and indirectly
owned an additional ownership interest through its previous 45% investment in Alliance Boots, representing a
direct and indirect economic interest of 72.5%. The Company’s acquisition of the remaining 27.5% effective
ownership in WBAD as part of the Second Step Transaction was accounted for as an equity transaction as it has
historically been consolidated by the Company. On January 1, 2015, WBAD Holdings Limited sold 320 common
shares of WBAD, representing approximately 5% of the equity interests in WBAD, to Alliance Healthcare Italia
Distribuzione S.p.A. (“AHID”), which is not a member of the Company’s consolidated group. Under certain
circumstances, AHID has the right to put, and WBAD Holdings Limited has the right to call, the 320 common
shares of WBAD currently owned by AHID for a purchase price of $100,000.
Immediately prior to the completion of the Second Step Transaction, the Company held a 45% equity interest in
Alliance Boots and recorded its proportionate share of equity income in Alliance Boots in the Company’s
consolidated financial statements on a three-month reporting lag. Following the Second Step Transaction, the
Company eliminated the three-month reporting lag and applied this change retrospectively as a change in
accounting principle in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting
Changes and Error Corrections. See Note 3, Change in Accounting Policy for further information.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments with an original maturity of
three months or less. Credit and debit card receivables from banks, which generally settle within two to seven
business days, of $165 million and $229 million were included in cash and cash equivalents at August 31, 2015
and 2014, respectively.
The Company’s cash management policy provides for controlled disbursement. As a result, the Company had
outstanding checks in excess of funds on deposit at certain banks. These amounts, which were $448 million at
August 31, 2015, and $267 million at August 31, 2014, are included in trade accounts payable in the
accompanying Consolidated Balance Sheets.
In addition, the Company’s cash management policy provides for a bank overdraft facility for certain
disbursement accounts. This overdraft facility represents uncleared and cleared checks in excess of cash balances
in the related bank accounts. These amounts, which were $45 million at August 31, 2015, and zero at August 31,
2014, are included in short-term borrowings in the accompanying Consolidated Balance Sheets.
Restricted Cash
The Company is required to maintain cash deposits with certain banks which consist of deposits restricted under
contractual agency agreements and cash restricted by law and other obligations. As of August 31, 2015, the
amount of such restricted cash was $184 million. There was no restricted cash as of August 31, 2014.
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