Walgreens 2014 Annual Report Download - page 36

At least annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying
value as defined by generally accepted accounting principles in the United States, we will evaluate this goodwill
and other intangible assets for impairment by first assessing qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not that the fair value of
the reporting unit is less than the carrying amount. Estimated fair values could change if, for example, there are
changes in the business climate, unanticipated changes in the competitive environment, adverse legal or
regulatory actions or developments, changes in capital structure, cost of debt, interest rates, capital expenditure
levels, operating cash flows, or market capitalization. Because of the significance of our goodwill and intangible
assets, any future impairment of these assets could require material non-cash charges to our results of operations
and have a material adverse effect on our financial results.
We share certain directors with Alliance Boots and certain of our officers serve on the Alliance Boots
Board of Directors, which may give rise to conflicts of interest.
In connection with our initial 45% investment in Alliance Boots on August 2, 2012, we obtained the right to
appoint four designees to serve on the Alliance Boots Board of Directors. As of the date of this report, Gregory
D. Wasson, President and Chief Executive Officer and a director of Walgreens, Thomas J. Sabatino, Jr.,
Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary, and Robert
Zimmerman, retired Senior Vice President, International and International Chief Administration Officer and
currently a consultant to Walgreens, serve as Walgreens’ representatives on the Alliance Boots Board of
Directors. In addition, Mr. Pessina, Executive Chairman of Alliance Boots, and Mr. Dominic Murphy, an
Alliance Boots director and an executive of KKR and certain of its affiliates, joined our Board of Directors.
Mr. Pessina and his affiliates and KKR and its affiliates jointly control AB Acquisitions, which holds the
remaining 55% of Alliance Boots. These persons may have actual or apparent conflicts of interest with respect to
matters involving or affecting each company. For example, while our contractual arrangements with Alliance
Boots place restrictions on the parties’ conduct in various potential conflict situations and related party
transactions are subject to review and approval by independent directors in accordance with our related party
transaction approval procedures, the potential for a conflict of interest exists when we on one hand, and Alliance
Boots on the other hand, consider acquisitions and other corporate opportunities that may be suitable to Alliance
Boots and us. Conflicts may also arise if there are issues or disputes under the commercial arrangements that
exist between Alliance Boots and us. Similar issues may arise in connection with other investments we make. For
example, we and Alliance Boots have the right, but not the obligation, to invest in AmerisourceBergen common
stock and to designate up to two members of the AmerisourceBergen board of directors in certain circumstances
if we achieve specified ownership thresholds. In May 2014, Walgreens achieved a five percent beneficial
ownership threshold and Gregory D. Wasson was designated as a board member of AmerisourceBergen.
Risks Related to the Reorganization
The following risks relate to the Reorganization. The Reorganization is conditioned upon, and will not be
completed unless, the second step transaction and related share issuance are completed immediately following
the completion of the Reorganization.
The value of the shares of Walgreens Boots Alliance common stock that existing Walgreens shareholders
will receive upon the completion of the Reorganization may be less than the value of their shares of
Walgreens common stock as of the date of the Special Meeting or the closing of the Reorganization.
The exchange ratio of Walgreens common stock for Walgreens Boots Alliance common stock in the
Reorganization is fixed at one-to-one and will not be adjusted in the event of any change in the stock price of
Walgreens or the value of Alliance Boots before the closing of the Reorganization. The relative price of shares of
Walgreens common stock and the value of Alliance Boots may vary significantly between the date of the Special
Meeting and the date of the completion of the Transactions. These variations may be caused by, among other
things, changes in the businesses, operations and results of Walgreens and Alliance Boots, market expectations of
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