Walgreens 2015 Annual Report Download - page 82

Year Ended August 31, 2013
As
Reported Adjustments
After
Change in
Accounting
Principle
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities:
Net earnings $2,450 $ 98 $2,548
Deferred income taxes 148 54 202
Equity earnings in Alliance Boots (344) (152) (496)
(1) Due to the adoption of Accounting Standards Update 2015-03, Interest – Imputation of Interest, all reported
periods include debt issuance costs as a contra-liability. This impacted the August 31, 2014 Consolidated
Balance Sheet by reducing non-current assets and non-current liabilities by $20 million.
The cumulative effect of eliminating the three-month reporting lag was recorded as an after-tax increase to
retained earnings of $98 million as of September 1, 2013, the first day of the Company’s 2014 fiscal year.
4. Restructuring
On April 8, 2015, the Company’s Board of Directors approved a plan to implement a new restructuring program
(the “Cost Transformation Program”) as part of an initiative to reduce costs and increase operating efficiencies.
The Cost Transformation Program included plans to close approximately 200 stores across the U.S.; reorganize
corporate and field operations; drive operating efficiencies; and streamline information technology and other
functions. The actions under the Cost Transformation Program focus primarily on the Retail Pharmacy USA
division, but includes activities from all segments and are expected to be substantially complete by the end of
fiscal 2017. The Company estimates that it will recognize cumulative pre-tax charges to its GAAP financial
results of between $1.6 billion and $1.8 billion, including costs associated with lease obligations and other real
estate payments, asset impairments and employee termination and other business transition and exit costs. The
Company expects to incur pre-tax charges of between $525 million and $600 million for real estate costs,
including lease obligations (net of estimated sublease income), between $650 million and $725 million for asset
impairment charges relating primarily to asset write-offs from store closures, information technology, inventory
and other non-operational real estate asset write-offs, and between $425 million and $475 million for employee
severance and other business transition and exit costs. The Company incurred pre-tax charges of $542 million
($223 million related to asset impairment charges, $202 million in real estate costs and $117 million in severance
and other business transition and exit costs) related to the Cost Transformation Program in fiscal 2015. The
majority of the charges incurred in fiscal 2015 related to activities within the Retail Pharmacy USA division, but
also included activities within Retail Pharmacy International. All charges related to the Cost Transformation
Program have been recorded within selling, general and administrative expenses. As the program is
implemented, the restructuring charges will be recognized as the costs are incurred over time in accordance with
GAAP.
In March 2014, the Company’s Board of Directors approved a plan to close underperforming stores in efforts to
optimize and focus resources within the Retail Pharmacy USA operations in a manner intended to increase
shareholder value. In fiscal 2015, the Company incurred total pre-tax charges related to this plan of $17 million,
primarily related to lease termination costs. In fiscal 2014, the Company incurred pre-tax charges of $209 million
($137 million from lease termination costs, $71 million from asset impairments and $1 million of other charges).
All charges related to this plan have been recorded within selling, general and administrative expenses. The
Company expects to incur no additional costs related to this plan.
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