Walgreens Boots Alliance, Inc.
Walgreens Boots Alliance, Inc. (Form: 10-Q, Received: 01/07/2016 16:44:07)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended November 30, 2015

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to        

Commission File Number
001-36759

WALGREENS BOOTS ALLIANCE, INC.
(Exact name of registrant as specified in its charter)

Delaware
47-1758322
(State of Incorporation)
(I.R.S. Employer Identification No.)
   
 
108 Wilmot Road, Deerfield, Illinois
60015
(Address of principal executive offices)
(Zip Code)

(847) 315-2500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒      No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No ☒

The number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of December 31, 2015 was 1,078,746,871.

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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements (Unaudited)

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(In millions, except per share amounts)

 
November 30,
2015
August 31,
2015
Assets
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash and cash equivalents
$
2,570
 
$
3,000
 
Accounts receivable, net
 
6,821
 
 
6,849
 
Inventories
 
9,884
 
 
8,678
 
Other current assets
 
956
 
 
1,130
 
Total Current Assets
 
20,231
 
 
19,657
 
Non-Current Assets:
 
 
 
 
 
 
Property, plant and equipment, at cost, less accumulated depreciation and amortization
 
14,878
 
 
15,068
 
Goodwill
 
16,195
 
 
16,372
 
Intangible assets
 
12,040
 
 
12,351
 
Other non-current assets
 
5,313
 
 
5,334
 
Total Non-Current Assets
 
48,426
 
 
49,125
 
Total Assets
$
68,657
 
$
68,782
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
Short-term borrowings
$
1,083
 
$
1,068
 
Trade accounts payable
 
10,643
 
 
10,088
 
Accrued expenses and other liabilities
 
4,886
 
 
5,225
 
Income taxes
 
262
 
 
176
 
Total Current Liabilities
 
16,874
 
 
16,557
 
Non-Current Liabilities:
 
 
 
 
 
 
Long-term debt
 
13,194
 
 
13,315
 
Deferred income taxes
 
3,313
 
 
3,538
 
Other non-current liabilities
 
4,122
 
 
4,072
 
Total Non-Current Liabilities
 
20,629
 
 
20,925
 
Commitments and Contingencies (see Note 13)
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
Preferred stock $.01 par value; authorized 32 million shares, none issued
 
 
 
 
Common stock $.01 par value; authorized 3.2 billion shares; issued 1,172,513,618 at November 30, 2015 and August 31, 2015
 
12
 
 
12
 
Paid-in capital
 
9,997
 
 
9,953
 
Employee stock loan receivable
 
(2
)
 
(2
)
Retained earnings
 
25,806
 
 
25,089
 
Accumulated other comprehensive (loss) income
 
(658
)
 
(214
)
Treasury stock, at cost; 86,857,537 shares at November 30, 2015 and 82,603,274 at August 31, 2015
 
(4,446
)
 
(3,977
)
Total Walgreens Boots Alliance, Inc. Shareholders’ Equity
 
30,709
 
 
30,861
 
Noncontrolling interests
 
445
 
 
439
 
Total Equity
 
31,154
 
 
31,300
 
Total Liabilities and Equity
$
68,657
 
$
68,782
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these Statements.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EQUITY
(UNAUDITED)
For the three month period ended November 30, 2015
(In millions, except per share amounts)

 
Equity attributable to Walgreens Boots Alliance, Inc.
 
 
 
Common
Stock Shares
Common
Stock
Amount
Treasury
Stock
Amount
Paid-In
Capital
Employee
Stock
Loan
Receivable
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Equity
August 31, 2015
 
1,089,910,344
 
$
12
 
$
(3,977
)
$
9,953
 
$
(2
)
$
(214
)
$
25,089
 
$
439
 
$
31,300
 
Net earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
1,110
 
 
7
 
 
1,117
 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
(444
)
 
 
 
(1
)
 
(445
)
Dividends declared ($0.36 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
(393
)
 
 
 
(393
)
Treasury stock purchases
 
(6,386,371
)
 
 
 
(529
)
 
 
 
 
 
 
 
 
 
 
 
(529
)
Employee stock purchase and option plans
 
2,132,108
 
 
 
 
60
 
 
13
 
 
 
 
 
 
 
 
 
 
73
 
Stock-based compensation
 
 
 
 
 
 
 
31
 
 
 
 
 
 
 
 
 
 
31
 
November 30, 2015
 
1,085,656,081
 
$
12
 
$
(4,446
)
$
9,997
 
$
(2
)
$
(658
)
$
25,806
 
$
445
 
$
31,154
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these Statements.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(In millions, except per share amounts)

 
Three Months Ended November 30,
 
2015
2014
Net sales
$
29,033
 
$
19,554
 
Cost of sales
 
21,531
 
 
14,258
 
Gross Profit
 
7,502
 
 
5,296
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
6,034
 
 
4,456
 
Equity earnings in Alliance Boots
 
 
 
214
 
Operating Income
 
1,468
 
 
1,054
 
 
 
 
 
 
 
 
Other income (expense)
 
(57
)
 
199
 
Earnings Before Interest and Income Tax Provision
 
1,411
 
 
1,253
 
 
 
 
 
 
 
 
Interest expense, net
 
138
 
 
55
 
Earnings Before Income Tax Provision
 
1,273
 
 
1,198
 
Income tax provision
 
167
 
 
321
 
Post tax earnings from equity method investments
 
11
 
 
 
Net Earnings
 
1,117
 
 
877
 
Net earnings attributable to noncontrolling interests
 
7
 
 
27
 
Net Earnings Attributable to Walgreens Boots Alliance, Inc.
$
1,110
 
$
850
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – basic
$
1.02
 
$
0.90
 
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted
$
1.01
 
$
0.89
 
 
 
 
 
 
 
 
Dividends declared per share
$
0.3600
 
$
0.3375
 
 
 
 
 
 
 
 
Average shares outstanding
 
1,089.0
 
 
945.8
 
Dilutive effect of stock options
 
9.6
 
 
10.2
 
Average diluted shares
 
1,098.6
 
 
956.0
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these Statements.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In millions)

 
Three Months Ended November 30,
 
2015
2014
Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Earnings
$
1,117
 
$
877
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
Pension/postretirement obligations
 
3
 
 
(1
)
Unrealized gain (loss) on cash flow hedges
 
1
 
 
(12
)
Unrecognized gain (loss) on available-for-sale investments
 
1
 
 
99
 
Share of other comprehensive income (loss) of Alliance Boots
 
 
 
21
 
Currency translation adjustments
 
(450
)
 
(189
)
Total Other Comprehensive Income (Loss)
 
(445
)
 
(82
)
Total Comprehensive Income
 
672
 
 
795
 
 
 
 
 
 
 
 
Comprehensive income attributable to noncontrolling interests
 
6
 
 
27
 
Comprehensive Income Attributable to Walgreens Boots Alliance, Inc.
$
666
 
$
768
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these Statements.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)

 
Three Months Ended
November 30,
 
2015
2014
Cash Flows from Operating Activities :
 
 
 
 
 
 
Net earnings
$
1,117
 
$
877
 
Adjustments to reconcile net earnings to net cash provided by operating activities -
 
 
 
 
 
 
Depreciation and amortization
 
382
 
 
319
 
Change in fair value of warrants and related amortization
 
57
 
 
(296
)
Deferred income taxes
 
(158
)
 
58
 
Stock compensation expense
 
31
 
 
31
 
Equity earnings from equity method investments
 
(11
)
 
(214
)
Other
 
115
 
 
94
 
Changes in operating assets and liabilities -
 
 
 
 
 
 
Accounts receivable, net
 
(166
)
 
(353
)
Inventories
 
(1,306
)
 
(436
)
Other current assets
 
(38
)
 
(20
)
Trade accounts payable
 
740
 
 
874
 
Accrued expenses and other liabilities
 
(329
)
 
(80
)
Income taxes
 
231
 
 
204
 
Other non-current assets and liabilities
 
67
 
 
(27
)
Net cash provided by operating activities
 
732
 
 
1,031
 
 
 
 
 
 
 
 
Cash Flows from Investing Activities :
 
 
 
 
 
 
Additions to property, plant and equipment
 
(340
)
 
(335
)
Proceeds from sale leaseback transactions
 
54
 
 
291
 
Proceeds related to sale of business
 
43
 
 
 
Proceeds from sale of other assets
 
40
 
 
3
 
Business and intangible asset acquisitions, net of cash received
 
(72
)
 
(13
)
Purchases of short-term investments held to maturity
 
(25
)
 
(17
)
Proceeds from short-term investments held to maturity
 
25
 
 
16
 
Other
 
4
 
 
 
Net cash used for investing activities
 
(271
)
 
(55
)
 
 
 
 
 
 
 
Cash Flows from Financing Activities :
 
 
 
 
 
 
Proceeds from short-term borrowings, net
 
52
 
 
 
Proceeds from issuance of long-term debt
 
 
 
10,020
 
Payments of long-term debt
 
(41
)
 
 
Stock purchases
 
(529
)
 
(500
)
Proceeds related to employee stock plans
 
71
 
 
112
 
Cash dividends paid
 
(393
)
 
(322
)
Other
 
(13
)
 
(61
)
Net cash (used for) provided by financing activities
 
(853
)
 
9,249
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(38
)
 
(10
)
 
 
 
 
 
 
 
Changes in Cash and Cash Equivalents :
 
 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
 
(430
)
 
10,215
 
Cash and cash equivalents at beginning of period
 
3,000
 
 
2,646
 
Cash and cash equivalents at end of period
$
2,570
 
$
12,861
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these Statements.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

Note 1. Organization

Walgreens Boots Alliance, Inc. (“Walgreens Boots Alliance”) and subsidiaries are a global pharmacy-led health and wellbeing enterprise. Its operations are conducted through three reportable segments (Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale). See Note 19, Segment Reporting for further information.

On December 31, 2014, Walgreens Boots Alliance became the successor of Walgreen Co. (“Walgreens”) pursuant to a merger designed to effect a reorganization of Walgreens into a holding company structure (the “Reorganization”). Pursuant to the Reorganization, Walgreens became a wholly-owned subsidiary of Walgreens Boots Alliance, a Delaware corporation formed for the purposes of the Reorganization, and each issued and outstanding share of Walgreens common stock converted on a one-to-one basis into Walgreens Boots Alliance common stock. References to the “Company” refer to Walgreens Boots Alliance and its subsidiaries from and after the effective time of the Reorganization on December 31, 2014 and, prior to that time, to the predecessor registrant Walgreens and its subsidiaries, except as otherwise indicated or the context otherwise requires.

On December 31, 2014, following the completion of the Reorganization, Walgreens Boots Alliance completed the acquisition of the remaining 55% of Alliance Boots GmbH (“Alliance Boots”) that Walgreens did not previously own (the “Second Step Transaction”) in exchange for £3.133 billion in cash and approximately 144.3 million shares of Walgreens Boots Alliance common stock. Alliance Boots became a consolidated subsidiary and ceased being accounted for under the equity method immediately upon completion of the Second Step Transaction. For financial reporting and accounting purposes, Walgreens Boots Alliance was the acquirer of Alliance Boots. The consolidated financial statements (and other data) reflect the results of operations and financial position of Walgreens and its subsidiaries for periods prior to December 31, 2014 and of Walgreens Boots Alliance and its subsidiaries for periods from and after the effective time of the Reorganization on December 31, 2014.

As part of the Second Step Transaction, the Company acquired the remaining 27.5% noncontrolling interest in Walgreens Boots Alliance Development GmbH (“WBAD”), a 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.

Note 2. Accounting Policies

Basis of Presentation

The consolidated condensed financial statements of Walgreens Boots Alliance included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. The consolidated condensed financial statements include all subsidiaries in which the Company holds a controlling interest. Investments in less than majority-owned subsidiaries in which the Company does not have a controlling interest, but does have significant influence, are accounted for as equity method investments. All intercompany transactions have been eliminated.

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The Consolidated Condensed Balance Sheet as of November 30, 2015, the Consolidated Condensed Statement of Equity for the three-month period ended November 30, 2015, and the Consolidated Condensed Statements of Earnings, the Consolidated Condensed Statements of Comprehensive Income and the Consolidated Condensed Statements of Cash Flows for the three-month periods ended November 30, 2015 and 2014, have been prepared without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited consolidated condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Walgreens Boots Alliance Annual Report on Form 10-K for the fiscal year ended August 31, 2015.

In the opinion of the Company, the consolidated condensed financial statements for the unaudited interim periods presented include all adjustments (consisting only of normal recurring adjustments) necessary to present a fair statement of the results for such interim periods. Because of the acquisition of Alliance Boots, influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payer and customer relationships and terms and other factors on the Company’s operations, net earnings for any interim period may not be comparable to the same interim period in previous years or indicative of net earnings for the full fiscal year. In addition, with respect to the Company’s Retail Pharmacy USA segment, the positive impact on gross profit margins and gross profit dollars typically has been significant in the first several months after a generic version of a drug is first allowed to compete with the branded version, which is generally referred to as a “generic conversion.” In any given year, the number of major brand name drugs that undergo a conversion 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.

The preparation of financial statements in accordance with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company bases its estimates on the information available at the time, its experience and on various other assumptions believed to be reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results may differ. For a discussion of the Company’s significant accounting policies, please see the Walgreens Boots Alliance Annual Report on Form 10-K for the fiscal year ended August 31, 2015.

Note 3. Change in Accounting Policy

Prior to completion of the Second Step Transaction, the Company accounted for its investment and proportionate share of earnings in Alliance Boots utilizing a three-month reporting lag. Concurrent with the completion of the Second Step Transaction, the Company eliminated the three-month reporting lag. The Company determined that the elimination of the three-month reporting lag was preferable because having Alliance Boots and its subsidiaries have the same period-end reporting date improves the Company’s overall financial reporting as business performance is reflected in the Company’s consolidated financial statements on a more timely basis.

In accordance with ASC Topic 810, Consolidation, a change to eliminate a previously existing reporting lag is considered a change in accounting principle in accordance with ASC Topic 250, Accounting Changes and Error Corrections. Changes in accounting principles are to be reported through retrospective application of the new principle to all prior financial statement periods presented. Accordingly, the consolidated condensed financial statements have been recast to reflect the period specific effects of eliminating the three-month reporting lag.

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The elimination of the three-month reporting lag for the equity investment in Alliance Boots resulted in the adjustments as of and for the periods indicated below (in millions, except per share amounts).

 
Three Months Ended November 30, 2014
 
As
Reported
Adjustments
After
Change in
Accounting
Principle
Consolidated Condensed Statements of Earnings
 
 
 
 
 
 
 
 
 
Equity earnings in Alliance Boots
$
151
 
$
63
 
$
214
 
Operating Income
 
991
 
 
63
 
 
1,054
 
Earnings Before Income Tax Provision
 
1,135
 
 
63
 
 
1,198
 
Income tax provision
 
299
 
 
22
 
 
321
 
Net Earnings
 
836
 
 
41
 
 
877
 
Net Earnings Attributable to Walgreens Boots Alliance, Inc.
 
809
 
 
41
 
 
850
 
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – basic
 
0.86
 
 
0.04
 
 
0.90
 
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted
 
0.85
 
 
0.04
 
 
0.89
 
 
 
 
 
 
 
 
 
 
 
Consolidated Condensed Statements of Comprehensive Income
 
 
 
 
 
 
 
 
 
Net Earnings
 
836
 
 
41
 
 
877
 
Share of other comprehensive income (loss) of Alliance Boots
 
(10
)
 
31
 
 
21
 
Cumulative translation adjustments
 
(32
)
 
(157
)
 
(189
)
Total Other Comprehensive Income
 
44
 
 
(126
)
 
(82
)
Total Comprehensive Income
 
880
 
 
(85
)
 
795
 
Comprehensive Income Attributable to Walgreens Boots Alliance, Inc.
$
853
 
$
(85
)
$
768
 
 
Three Months Ended November 30, 2014
 
As
Reported
Adjustments
After
Change in
Accounting
Principle
Consolidated Condensed Statement of Cash Flows
 
 
 
 
 
 
 
 
 
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
 
Net earnings
$
836
 
$
41
 
$
877
 
Deferred income taxes
 
36
 
 
22
 
 
58
 
Equity earnings in Alliance Boots
 
(151
)
 
(63
)
 
(214
)

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, 2014, the first day of the Company’s 2015 fiscal year.

Note 4. Restructuring

On April 8, 2015, the Walgreens Boots Alliance 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 Company’s Retail Pharmacy USA segment, but includes activities from all segments and are expected to be substantially complete by the end of the Company’s 2017 fiscal year. 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

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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 $90 million ($52 million related to real estate costs, $25 million in asset impairment charges and $13 million in severance and other business transition and exit costs) related to the Cost Transformation Program during the three months ended November 30, 2015. No charges were incurred with respect to the Cost Transformation Program in the three months ended November 30, 2014. From inception through November 30, 2015, the Company incurred pre-tax charges of $632 million ($254 million in real estate costs, $248 million related to asset impairment charges and $130 million in severance and other business transition and exit costs) related to the Cost Transformation Program. 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 Walgreens Board of Directors approved a plan to close underperforming stores in efforts to optimize and focus resources within the Company’s Retail Pharmacy USA segment in a manner intended to increase stockholder value. As of August 31, 2015, this plan was completed and no additional charges related to the plan are expected. For the three months ended November 30, 2014, the Company incurred pre-tax charges of $17 million, which were primarily related to lease termination costs. All charges related to this plan have been recorded within selling, general and administrative expenses.

Restructuring costs by segment are as follows (in millions):

 
Retail Pharmacy
Pharmaceutical
Wholesale
Consolidated
 
USA
International
Three M onths E nded November 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
Real estate costs
$
52
 
$
 
$
 
$
52
 
Asset impairments
 
25
 
 
 
 
 
 
25
 
Severance and other business transition and exit costs
 
8
 
 
5
 
 
 
 
13
 
Total restructuring costs
$
85
 
$
5
 
$
 
$
90
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three M onths E nded November 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Real estate costs
$
17
 
$
 
$
 
$
17
 
Asset impairments
 
 
 
 
 
 
 
 
Severance and other business transition and exit costs
 
 
 
 
 
 
 
 
Total restructuring costs
$
17
 
$
 
$
 
$
17
 

Note 5. Leases

Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or the date the Company has the right to control the property. The Company recognizes rent expense on a straight-line basis over the term of the lease. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales.

The Company continuously evaluates its real estate portfolio in conjunction with its capital needs. The Company has entered into several sale-leaseback transactions. For the three-month periods ended November 30, 2015 and 2014, the Company recorded proceeds from sale-leaseback transactions of $54 million and $291 million, respectively.

The Company provides for future costs related to closed locations. The liability is based on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. During the three-month period ended November 30, 2015, the Company recorded charges of $66 million for facilities that were closed or relocated under long-term leases, including stores closed through the Company’s restructuring activities. This compares to $26 million for the three-month period ended November 30, 2014. These charges are reported in selling, general and administrative expenses on the Consolidated Condensed Statements of Earnings.

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The changes in reserve for facility closings and related lease termination charges include the following (in millions):

 
November 30,
2015
August 31,
2015
Balance – beginning of period
$
446
 
$
257
 
Provision for present value of non-cancellable lease payments on closed facilities
 
70
 
 
231
 
Assumptions about future sublease income, terminations and changes in interest rates
 
(9
)
 
(6
)
Interest accretion
 
5
 
 
27
 
Liability assumed through acquisition of Alliance Boots
 
 
 
13
 
Cash payments, net of sublease income
 
(26
)
 
(76
)
Balance – end of period
$
486
 
$
446
 

The Company remains secondarily liable on 71 leases. The maximum potential undiscounted future payments are $347 million at November 30, 2015. Lease option dates vary, with some extending to 2039.

Note 6. Equity Method Investments

Equity method investments as of November 30, 2015 and August 31, 2015 were as follows (in millions, except percentages):

 
November 30, 2015
August 31, 2015
 
Carrying
Value
Ownership
Percentage
Carrying
Value
Ownership
Percentage
Equity method investments
$
1,240
 
12% - 50%
$
1,242
 
12% - 50%

Equity method investments primarily relate to the Company’s investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Corporation Limited, the Company’s pharmaceutical wholesale investments in China and the Company’s investment in Option Care Inc., which it retained through the sale of a majority interest in Walgreens Infusion Services in April 2015. Also included are additional investments in pharmaceutical wholesaling and distribution, retail pharmacy and the Company’s hearing care operator and the equity method investment retained through the sale of a majority interest in Take Care Employer in fiscal 2014. Equity method investments of the Company are recorded within other non-current assets on the Consolidated Condensed Balance Sheets. The Company reported $11 million of post-tax equity earnings in equity method investments for the three-month period ended November 30, 2015 in the Consolidated Condensed Statements of Earnings. For the three-month period ended November 30, 2014, the Company reported equity earnings in Alliance Boots of $214 million as its own line in the Consolidated Condensed Statements of Earnings. Post-tax equity earnings from the historical Walgreens equity method investments other than Alliance Boots for the three-month period ended November 30, 2014 were immaterial.

Summarized Financial Information

Summarized financial information for the Company’s equity method investments is as follows:

Balance Sheet s (in millions)

 
November 30, 2015 (1)
August 31, 2015 (1)
Current assets
$
5,321
 
$
5,015
 
Noncurrent assets
 
1,546
 
 
1,548
 
Current liabilities
 
4,255
 
 
3,936
 
Noncurrent liabilities
 
801
 
 
837
 
Shareholders’ equity (2)
 
1,811
 
 
1,790
 

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Statements of Earnings (in millions)

 
Three Months Ended
November 30,
 
2015 (3)
2014 (3) (4)
Net sales
$
3,203
 
$
9,661
 
Gross Profit
 
328
 
 
2,189
 
Net Income
 
24
 
 
498
 
Share of income from equity method investments (3)
 
11
 
 
216
 
(1) Net assets in foreign equity method investments are translated at their respective November 30, 2015 and August 31, 2015 spot rates.
(2) Shareholders’ equity at November 30, 2015 and August 31, 2015 includes $165 million and $163 million respectively, related to noncontrolling interests.
(3) Earnings in foreign equity method investments are translated at their respective average exchange rates.
(4) Includes equity method investment in Alliance Boots. See Note 1, Organization.

Note 7. Available-for-Sale Investments

Walgreens, Alliance Boots and AmerisourceBergen Corporation (“AmerisourceBergen”) entered into a Framework Agreement dated as of March 18, 2013, pursuant to which Walgreens and Alliance Boots together were granted the right to purchase a minority equity position in AmerisourceBergen, beginning with the right, but not the obligation, to purchase up to 19,859,795 shares of AmerisourceBergen common stock in open market transactions.

In conjunction with its long-term relationship with AmerisourceBergen, as of November 30, 2015, the Company held 11.5 million shares, approximately 5.6% of AmerisourceBergen’s outstanding common stock, at a total fair value of $1.1 billion. The Company did not acquire any AmerisourceBergen common shares in the three-month period ended November 30, 2015. The Company’s cumulative cost basis of AmerisourceBergen shares acquired was $717 million as of November 30, 2015.

Pursuant to ASC Topic 320, Investments – Debt and Equity Securities, the Company accounts for its investment in AmerisourceBergen shares as an available-for-sale investment reported at fair value within other non-current assets in the Consolidated Condensed Balance Sheets. As an available-for-sale investment, changes in the fair value are recorded through other comprehensive income. The value of the investment is recorded at the closing price of AmerisourceBergen common stock as of the balance sheet date.

A summary of the cost and fair value of available-for-sale securities, with gross unrealized gains and losses, is as follows (in millions):

 
November 30, 2015
 
Amortized
cost basis
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
AmerisourceBergen common stock
$
717
 
$
414
 
$
 
$
1,131
 
Other investments
 
35
 
 
 
 
(2
)
 
33
 
Total available-for-sale investments
$
752
 
$
414
 
$
(2
)
$
1,164
 
 
August 31, 2015
 
Amortized
cost basis
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
AmerisourceBergen common stock
$
717
 
$
430
 
$
 
$
1,147
 
Other investments
 
37
 
 
 
 
(1
)
 
36
 
Total available-for-sale investments
$
754
 
$
430
 
$
(1
)
$
1,183
 

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For the three-month period ended November 30, 2015, there were $2 million of available-for-sale securities sold. There were no sales of available-for-sale investments for the three-month period ended November 30, 2014.

The Company has $33 million of other available-for-sale investments classified within other current assets in the Consolidated Condensed Balance Sheets as of November 30, 2015.

Note 8. Acquisitions

Alliance Boots

The Second Step Transaction closed on December 31, 2014, resulting in the acquisition by the Company of 55% of the issued and outstanding share capital of Alliance Boots, increasing its interest to 100%. The Company previously accounted for its 45% interest in Alliance Boots as an equity method investment. As a result of the Second Step Transaction, the Company significantly expanded its operations to include pharmacy-led health and beauty retailing and pharmaceutical wholesaling and distribution businesses in major international markets.

As a result of the closing of the Second Step Transaction, the Company increased its interest in WBAD, a global sourcing enterprise between Walgreens and Alliance Boots, to 100%. Because Walgreens held, prior to the Second Step Transaction, a 50% direct interest and an additional indirect interest in WBAD through its 45% ownership of Alliance Boots, the financial results of WBAD were fully consolidated into the Walgreens financial statements with the remaining 27.5% effective interest being recorded as a noncontrolling interest. The acquisition of the 27.5% noncontrolling interest was accounted for as an equity transaction with no gain or loss recorded in the statement of earnings under ASC Topic 805, Business Combinations. 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.

The total purchase price of the Second Step Transaction of $15.9 billion included £3.133 billion in cash (approximately $4.9 billion at the December 31, 2014 spot rate of $1.56 to £1.00) and 144.3 million of the Company’s common shares at a fair value of $11.0 billion (based on the December 30, 2014 closing market price of $76.05). Of the total purchase price, $13.3 billion was preliminarily allocated to acquire the 55% ownership interest in Alliance Boots and $2.6 billion was preliminarily allocated to acquire the noncontrolling interest in WBAD. The purchase price attributed to the acquisition of the noncontrolling interest in WBAD was determined based on the relative fair value of Alliance Boots and WBAD, respectively.

The preliminary impact of the equity transaction is as follows (in millions):

 
Amount
Consideration attributable to WBAD
$
2,559
 
Less: Carrying value of the Company’s pre-existing noncontrolling interest
 
130
 
Impact to additional paid in capital
$
2,429
 

As of November 30, 2015, the Company had not completed the analysis to assign fair values to all tangible and intangible assets acquired, and therefore the purchase price allocation for Alliance Boots and WBAD has not been completed. The preliminary purchase price allocation will be subject to further refinement and may result in material changes. These changes are likely to primarily relate to the allocation of consideration and the fair value assigned to all tangible and intangible assets acquired and identified. The following table summarizes the consideration paid to acquire the remaining 55% interest in Alliance Boots and the preliminary amounts of identified assets acquired and liabilities assumed at the date of the Second Step Transaction (in millions).

   
 
Consideration paid
 
 
 
Cash
$
4,874
 
Common stock
 
10,977
 
Total consideration transferred
 
15,851
 
Less: consideration attributed to WBAD
 
(2,559
)
 
 
13,292
 
Fair value of the investment in Alliance Boots held before the Second Step Transaction
 
8,149
 
Total consideration
$
21,441
 

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Identifiable assets acquired and liabilities assumed including noncontrolling interests
 
 
 
Cash and cash equivalents
$
413
 
Accounts receivable
 
3,799
 
Inventories
 
3,713
 
Other current assets
 
894
 
Property, plant and equipment
 
3,847
 
Intangible assets
 
11,691
 
Other non-current assets
 
2,218
 
Trade accounts payable, accrued expenses and other liabilities
 
(7,711
)
Borrowings
 
(9,010
)
Deferred income taxes
 
(2,461
)
Other non-current liabilities
 
(389
)
Noncontrolling interests
 
(412
)
Total identifiable net assets and noncontrolling interests
 
6,592
 
Goodwill
$
14,849
 

As a result of the Company acquiring the remaining 55% interest in Alliance Boots, the Company’s previously held 45% interest was re-measured to fair value, resulting in a gain of $563 million as of November 30, 2015. The gain has been previously recognized as Gain on previously held equity interest in the Consolidated Statements of Earnings for the fiscal year ended August 31, 2015. This gain is preliminary and may be subject to change as the Company finalizes purchase accounting.

The fair value of the previously held equity interest of $8.1 billion in Alliance Boots was determined using the income approach methodology. The fair value for trade names and trademarks was determined using the relief from royalty method of the income approach; pharmacy licenses and customer relationships were determined using the excess earnings method of the income approach; and loyalty card holders were determined using the incremental cash flow method, which is a form of the income approach. Personal property fair values were determined primarily using the indirect cost approach, while real property fair values were determined using the income, market and/or cost approach. The fair value measurements of the previously held equity interest and intangible assets are based on significant inputs not observable in the market, and thus represent Level 3 measurements. The fair value estimates for the previously held equity interest and intangible assets are based on (a) projected discounted cash flows, (b) historical and projected financial information, (c) synergies including cost savings, and (d) attrition rates, as relevant, that market participants would consider when estimating fair values.

The preliminary identified definite and indefinite lived intangible assets were as follows:

Definite-Lived Intangible Assets
Weighted-Average Useful Life
(in years)
Amount (in millions)
Customer relationships
 
12
 
$
1,311
 
Loyalty card holders
 
20
 
 
742
 
Trade names and trademarks
 
9
 
 
399
 
Favorable lease interests
 
7
 
 
93
 
Total
 
 
 
$
2,545
 
Indefinite-Lived Intangible Assets
 
Amount (in millions)
Trade names and trademarks
 
 
 
$
6,657
 
Pharmacy licenses
 
 
 
 
2,489
 
Total
 
 
 
$
9,146
 

The preliminary goodwill of $14.8 billion arising from the Second Step Transaction primarily reflects the expected purchasing synergies, operating efficiencies by benchmarking performance and applying best practices across the combined company, consolidation of operations, reductions in selling, general and administrative expenses and combining workforces.

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Following the completion of the Second Step Transaction, the Company realigned its operations into three reportable segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company determined that the preliminary goodwill should be allocated across all segments recognizing that each segment will benefit from the expected synergies.

The preliminary goodwill allocated to the Retail Pharmacy USA segment of $7.3 billion comprises $3.5 billion of synergy benefits allocable to the segment on a source of procurement benefit basis and $3.8 billion determined on a “with-and-without” basis. The source of procurement benefit basis allocates the synergy benefits to the segment whose purchase gave rise to the benefit. The “with-and-without” basis computes the difference between the fair value of the pre-existing business before the combination and its fair value after the combination, and since the pre-existing Walgreens business is now within the Retail Pharmacy USA segment, all of this difference is allocated to this segment. The “with-and-without” computation recognized that if the Second Step Transaction did not happen, then this was likely to negatively impact the existing Walgreens business, which already had a 45% interest in Alliance Boots, as the expected purchasing synergies and other benefits resulting from a full combination would not be fully realized.

Of the remaining preliminary goodwill, $3.9 billion was allocated to the Retail Pharmacy International segment and $3.6 billion was allocated to the Pharmaceutical Wholesale segment. The allocation of the goodwill to the individual reporting units within the respective segments has not been completed. Substantially all of the goodwill recognized is not expected to be deductible for income tax purposes.

The Company incurred legal and other professional services costs related to the Second Step Transaction, which were included in selling, general and administrative expenses, of $87 million in fiscal 2015 ($24 million in the three months ended November 30, 2014). No costs related to the Second Step Transaction were incurred in the three month period ended November 30, 2015.

The preliminary fair value of the assets acquired includes inventory having an estimated fair value of $3.7 billion. This fair value includes a $107 million fair value adjustment to capitalize the estimated profit in acquired finished goods inventory as of the date of the Second Step Transaction, which was expensed to cost of sales over the first inventory turn.

The following table presents supplemental unaudited condensed pro forma consolidated information for the three months ended November 30, 2014 as if the Second Step Transaction had occurred on September 1, 2014, the first day of the Company’s 2015 fiscal year. As described in Note 3, Change in Accounting Policy, the information has been presented without a lag. The unaudited condensed pro forma information reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased amortization expense based on the fair valuation of assets acquired, the impact of acquisition financing, transaction costs and the related income tax effects. The unaudited condensed pro forma information does not include any anticipated synergies that may be achievable subsequent to the date of the Second Step Transaction. The unaudited condensed pro forma information also excludes certain non-recurring items such as transaction related costs. Accordingly, the unaudited condensed pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company’s results would have been had the Second Step Transaction occurred at the beginning of the periods presented or the results which may occur in the future.

 
Three Months
Ended November 30 ,
 
201 4
(in millions, except per share amounts)
 
 
 
Net sales
$
28,971
 
Net earnings
 
1,375
 
   
 
 
 
Net earnings per common share:
 
 
 
Basic
$
1.25
 
Diluted
 
1.24
 

Other Acquisitions

The aggregate purchase price of all businesses, net of cash received was $72 million for the three-month period ended November 30, 2015. These acquisitions added $24 million to goodwill and $53 million to intangible assets, primarily an international beauty brand and the purchase of prescription files. The remaining fair value

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relates to immaterial amounts of tangible assets, less liabilities assumed. Operating results of the businesses acquired have been included in the Consolidated Condensed Statements of Earnings from their respective acquisition dates forward. Pro forma results of the Company, assuming all of the other acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported.

Note 9. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment consist of the following activity (in millions):

 
Retail Pharmacy
USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Total
August 31, 2015
$
8,940
 
$
3,898
 
$
3,534
 
$
16,372
 
Acquisitions
 
 
 
24
 
 
 
 
24
 
Other (1)
 
 
 
(3
)
 
 
 
(3
)
Currency translation adjustments
 
 
 
(100
)
 
(98
)
 
(198
)
November 30, 2015
$
8,940
 
$
3,819
 
$
3,436
 
$
16,195
 
(1) Other primarily represents immaterial purchase accounting adjustment for prior year company acquisitions.

The carrying amount and accumulated amortization of intangible assets consist of the following (in millions):

 
November 30, 2015
August 31, 2015
Gross Amortizable Intangible Assets
 
 
 
 
 
 
Customer relationships
$
1,344
 
$
1,409
 
Purchased prescription files
 
899
 
 
885
 
Loyalty card holders
 
718
 
 
730
 
Trade names and trademarks
 
783
 
 
675
 
Favorable lease interests
 
459
 
 
440
 
Non-compete agreements
 
157
 
 
154
 
Purchasing and payer contracts
 
94
 
 
94
 
Total gross amortizable intangible assets
 
4,454
 
 
4,387
 
Accumulated amortization
 
 
 
 
 
 
Customer relationships
 
157
 
 
132
 
Purchased prescription files
 
505
 
 
470
 
Loyalty card holders
 
34
 
 
41
 
Trade names and trademarks
 
97
 
 
83
 
Favorable lease interests
 
225
 
 
207
 
Non-compete agreements
 
100
 
 
92
 
Purchasing and payer contracts
 
67
 
 
65
 
Total accumulated amortization
 
1,185
 
 
1,090
 
Total amortizable intangible assets, net
$
3,269
 
$
3,297
 
Indefinite Lived Intangible Assets
 
 
 
 
 
 
Trade names and trademarks
$
6,363
 
$
6,590
 
Pharmacy licenses
 
2,408
 
 
2,464
 
Total indefinite lived intangible assets
$
8,771
 
$
9,054
 
Total intangible assets, net
$
12,040
 
$
12,351
 

Amortization expense for intangible assets was $92 million and $69 million for the three-month periods ended November 30, 2015 and November 30, 2014, respectively.

Estimated annual amortization expense for intangible assets recorded at November 30, 2015 is as follows (in millions):

 
2016
2017
2018
2019
2020
Estimated annual amortization expense
$
408
 
$
364
 
$
318
 
$
291
 
$
237
 

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Note 10. Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt consist of the following (all amounts are presented in millions of U.S. dollars and debt issuances are denominated in U.S. dollars, unless otherwise noted):

 
November 30, 2015
August 31, 2015
Short-Term Borrowings (1)
 
 
 
 
 
 
Unsecured variable rate notes due 2016
$
749
 
$
747
 
Other (2)
 
334
 
 
321
 
Total short-term borrowings
$
1,083
 
$
1,068
 
Long-Term Debt (1)
 
 
 
 
 
 
Unsecured Pound Sterling variable rate term loan due 2019 (3)
$
2,178
 
$
2,229
 
1.750% unsecured notes due 2017
 
746
 
 
746
 
5.250% unsecured notes due 2019 (4)
 
251
 
 
250
 
2.700% unsecured notes due 2019
 
1,243
 
 
1,243
 
2.875% unsecured Pound Sterling notes due 2020 (3)
 
598
 
 
612
 
3.300% unsecured notes due 2021
 
1,241
 
 
1,241
 
3.100% unsecured notes due 2022
 
1,193
 
 
1,193
 
3.800% unsecured notes due 2024
 
1,985
 
 
1,985
 
3.600% unsecured Pound Sterling notes due 2025 (3)
 
449
 
 
459
 
2.125% unsecured Euro notes due 2026 (5)
 
788
 
 
836
 
4.500% unsecured notes due 2034
 
494
 
 
494
 
4.400% unsecured notes due 2042
 
492
 
 
492
 
4.800% unsecured notes due 2044
 
1,491
 
 
1,491
 
Other (6)
 
45
 
 
44
 
Total long-term debt
$
13,194
 
$
13,315
 
(1) All notes are presented net of unamortized discount and debt issuance costs, where applicable.
(2) Other short-term borrowings represent a mix of fixed and variable rate borrowings with various maturities and working capital facilities denominated in various foreign currencies including bank overdrafts.
(3) Pound Sterling denominated notes are translated at the November 30, 2015 spot rate of $1.50 to one British Pound Sterling.
(4) Also includes interest rate swap fair market value adjustments . S ee Note 12, Fair Value Measurements for additional fair value disclosures.
(5) Euro denominated notes are translated at the November 30, 2015 spot rate of $1.06 to one Euro.
(6) Other long-term debt represents a mix of fixed and variable rate borrowings in various foreign currencies with various maturities.

$8.0 Billion Note Issuance

On November 18, 2014, Walgreens Boots Alliance received net proceeds (after deducting underwriting discounts and estimated offering expenses) of $7.9 billion from a public offering of notes with varying maturities and interest rates, the majority of which are fixed rate. The notes are unsecured, unsubordinated debt obligations of Walgreens Boots Alliance and rank equally in right of payment with all other unsecured and unsubordinated indebtedness of Walgreens Boots Alliance from time to time outstanding. The notes were fully and unconditionally guaranteed on an unsecured and unsubordinated basis by Walgreens until August 10, 2015, when such guarantees were unconditionally released and discharged (as described below). Total issuance costs relating to the notes, including underwriting discounts and estimated offering expenses, were $44 million. The fair value of the notes as of November 30, 2015 was $7.8 billion. Fair value for these notes was determined based upon quoted market prices.

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The following table summarizes each tranche of notes issued:

Notes Issued
(in millions)
Maturity Date
Interest Rate
Interest Payment Dates
$
750
 
May 18, 2016
Variable; three-month U.S. dollar LIBOR, reset quarterly, plus 45 basis points
February 18, May 18, August 18, and November 18; commencing on February 18, 2015
 
750
 
November 17, 2017
Fixed 1.750%
May 17 and November 17; commencing on May 17, 2015
 
1,250
 
November 18, 2019
Fixed 2.700%
May 18 and November 18; commencing on May 18, 2015
 
1,250
 
November 18, 2021
Fixed 3.300%
May 18 and November 18; commencing on May 18, 2015
 
2,000
 
November 18, 2024
Fixed 3.800%
May 18 and November 18; commencing on May 18, 2015
 
500
 
November 18, 2034
Fixed 4.500%
May 18 and November 18; commencing on May 18, 2015
 
1,500
 
November 18, 2044
Fixed 4.800%
May 18 and November 18; commencing on May 18, 2015
$
8,000
 
 
 
 

Redemption Option

Walgreens Boots Alliance may redeem (a) the notes due 2017, at any time in whole or from time to time in part, (b) the notes due 2019, at any time prior to October 18, 2019 in whole or from time to time prior to October 18, 2019 in part, (c) the notes due 2021, at any time prior to September 18, 2021 in whole or from time to time prior to September 18, 2021 in part, (d) the notes due 2024, at any time prior to August 18, 2024 in whole or from time to time prior to August 18, 2024 in part, (e) the notes due 2034, at any time prior to May 18, 2034 in whole or from time to time prior to May 18, 2034 in part, and (f) the notes due 2044, at any time prior to May 18, 2044 in whole or from time to time prior to May 18, 2044 in part, in each case, at Walgreens Boots Alliance’s option for the sum of accrued and unpaid interest plus a redemption price equal to the greater of:

(1) 100% of the principal amount of the fixed rate notes being redeemed; and

(2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the redemption date), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the applicable series of notes), plus 15 basis points for the notes due 2017, 15 basis points for the notes due 2019, 20 basis points for the notes due 2021, 20 basis points for the notes due 2024, 20 basis points for the notes due 2034 and 25 basis points for the notes due 2044.

In addition, at any time on or after October 18, 2019 with respect to the notes due 2019, September 18, 2021 with respect to the notes due 2021, August 18, 2024 with respect to the notes due 2024, May 18, 2034 with respect to the notes due 2034, or May 18, 2044 with respect to the notes due 2044, Walgreens Boots Alliance may redeem some or all of the applicable series of fixed rate notes at its option, at a redemption price equal to 100% of the principal amount of the applicable fixed rate notes being redeemed, plus accrued and unpaid interest on the fixed rate notes being redeemed to, but excluding, the redemption date.

Change in Control

If Walgreens Boots Alliance experiences a change of control triggering event, unless Walgreens Boots Alliance has exercised its option to redeem the fixed rate notes or has defeased the notes as described in the indenture, Walgreens Boots Alliance will be required to offer payment of cash equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest.

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£ 700 Million and 750 Million Notes Issuance

On November 20, 2014, Walgreens Boots Alliance issued three series of debt securities denominated in Euros and Pound Sterling in a public offering, each with varying maturities and interest rates. Interest on all notes is payable annually on November 20, commencing on November 20