Annual Report 2017

Annual Report 2017

Annual Report 2016

Board of Directors

As of 24 October 2017

Back Row (from left to right)

Jos? (Joe) E. Almeida Chairman of the Board and Chief Executive Officer, Baxter International Inc.

William C. Foote Former Chairman and Chief Executive Officer, USG Corporation

Dominic Murphy Founder and Chief Executive Officer, 8C Capital LLP

John A. Lederer Senior Advisor, Sycamore Partners

Middle Row (from left to right)

Ginger L. Graham Former President and Chief Executive Officer, Amylin Pharmaceuticals

David J. Brailer, MD Chairman, Health Evolution Partners

Janice M. Babiak Former Managing Partner, Ernst & Young LLP

Front Row (from left to right)

James A. Skinner Executive Chairman, Walgreens Boots Alliance, Inc.

Stefano Pessina Executive Vice Chairman and Chief Executive Officer, Walgreens Boots Alliance, Inc.

Nancy M. Schlichting Former Chief Executive Officer, Henry Ford Health System

Leonard D. Schaeffer Judge Robert Maclay Widney Chair and Professor, University of Southern California

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended August 31, 2017

` 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 (State of incorporation)

47-1758322 (I.R.S. Employer Identification No.)

108 Wilmot Road, Deerfield, Illinois (Address of principal executive offices)

60015 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Stock ($.01 Par Value) 2.875% Notes due 2020 3.600% Notes due 2025 2.125% Notes due 2026

The NASDAQ Stock Market LLC New York Stock Exchange New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ? No `

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ` No ?

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 `

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 `

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and

will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ?

Accelerated filer

`

Non-accelerated filer `

Smaller reporting company `

Emerging growth company `

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standards provided pursuant to the Section 13(a) of the Exchange Act. `

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ` No ?

As of February 28, 2017, the aggregate market value of Walgreens Boots Alliance, Inc. common stock held by non-affiliates (based upon the closing transaction price on such date) was approximately $80.7 billion. As of September 30, 2017, there were 1,009,549,218 shares of Walgreens Boots Alliance, Inc. common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for our Annual Meeting of Stockholders planned to be held on January 17, 2018 are incorporated by reference into Part III of this Form 10-K as indicated herein.

Walgreens Boots Alliance, Inc. Annual Report on Form 10-K

Table of Contents

Part I

Page

Item 1. Business

1

Item 1A. Risk factors

10

Item 1B. Unresolved staff comments

32

Item 2. Properties

32

Item 3. Legal proceedings

33

Item 4. Mine safety disclosures

33

Executive officers of the registrant

33

Part II

Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of

equity securities

36

Item 6. Selected financial data

37

Item 7. Management's discussion and analysis of financial condition and results of operations

39

Item 7A. Qualitative and quantitative disclosures about market risk

65

Item 8. Financial statements and supplementary data

67

Item 9. Changes in and disagreements with accountants on accounting and financial disclosure

119

Item 9A. Controls and procedures

119

Item 9B. Other information

119

Part III

Item 10. Directors, executive officers and corporate governance

121

Item 11. Executive compensation

121

Item 12. Security ownership of certain beneficial owners and management and related stockholder

matters

121

Item 13. Certain relationships and related transactions and director independence

121

Item 14. Principal accounting fees and services

121

Part IV

Item 15. Exhibits and financial statement schedules

122

Item 16. Form 10-K summary

133

Signatures

134

On December 31, 2014, Walgreens Boots Alliance, Inc. became the successor of Walgreen Co. ("Walgreens") pursuant to a merger to effect a reorganization of Walgreens into a holding company structure (the "Reorganization"), with Walgreens Boots Alliance, Inc. becoming the parent holding company.

References in this Annual Report on Form 10-K (this "Form 10-K") to the "Company," "we," "us" or "our" refer to Walgreens Boots Alliance, Inc. 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, and in each case do not include unconsolidated partially-owned entities, except as otherwise indicated or the context otherwise requires. Our fiscal year ends on August 31, and references herein to "fiscal 2017" refer to our fiscal year ended August 31, 2017.

This Form 10-K includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See cautionary note regarding forward-looking statements in management's discussion and analysis of financial condition and results of operations in part II, item 7 below.

All trademarks, trade names and service marks used herein are the property of their respective owners.

PART I

Item 1. Business

Overview

Walgreens Boots Alliance, Inc., a Delaware corporation ("Walgreens Boots Alliance") is the first global, pharmacy-led health and wellbeing enterprise with sales of $118.2 billion in the fiscal year ended August 31, 2017. Our purpose is to help people across the world lead healthier and happier lives.

Walgreens Boots Alliance is the largest retail pharmacy, health and daily living destination across the U.S. and Europe. Walgreens Boots Alliance and the companies in which it has equity method investments together have a presence in more than 251 countries and employ more than 385,0001 people. The company is a global leader in pharmacy-led, health and wellbeing retail and, together with the companies in which it has equity method investments, has over 13,2001 stores in 111 countries as well as one of the largest global pharmaceutical wholesale and distribution networks, with over 3901 distribution centers delivering to more than 230,0002 pharmacies, doctors, health centers and hospitals each year in more than 201 countries. In addition, Walgreens Boots Alliance is one of the world's largest purchasers of prescription drugs and many other health and wellbeing products.

Our portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Soap & Glory, Liz Earle, Sleek MakeUP and Botanics. Our global brands portfolio is enhanced by our in-house product research and development capabilities. We seek to further drive innovative ways to address global health and wellness challenges. We believe we are well positioned to expand customer offerings in existing markets and become a health and wellbeing partner of choice in emerging markets.

Walgreens Boots Alliance was incorporated in Delaware in 2014 and, as described below, is the successor of Walgreen Co., an Illinois corporation, which was formed in 1909 as a successor to a business founded in 1901. Our principal executive offices are located at 108 Wilmot Road, Deerfield, Illinois 60015. Our common stock trades on the NASDAQ Stock Market under the symbol "WBA".

Recent transactions

On March 31, 2017, Walgreens Boots Alliance and pharmacy benefit manager Prime Therapeutics LLC closed a transaction to form a combined central specialty pharmacy and mail services company, AllianceRx Walgreens Prime, as part of a strategic alliance. AllianceRx Walgreens Prime is consolidated by Walgreens Boots Alliance and reported within the Retail Pharmacy USA division in its financial statements. See note 6, acquisitions to the Consolidated Financial Statements for further information.

On March 18, 2016, we exercised warrants to purchase 22,696,912 shares of AmerisourceBergen Corporation ("AmerisourceBergen") common stock at an exercise price of $51.50 per share for an aggregate exercise price payment of $1.17 billion. On August 25, 2016, we exercised additional warrants to purchase 22,696,912 shares of AmerisourceBergen common stock at an exercise price of $52.50 per share for an aggregate exercise price payment of $1.19 billion. Following the August 25, 2016 warrant exercise, we do not hold any further warrants to purchase shares of AmerisourceBergen common stock. As of August 31, 2017 and 2016, we owned 56,854,867 AmerisourceBergen common shares, representing approximately 26% and 24% of the outstanding AmerisourceBergen common stock, respectively, and had designated one member of AmerisourceBergen's board of directors. As of August 31, 2017, we can acquire up to an additional 8,398,752 AmerisourceBergen shares in the open market and thereafter designate a second member of AmerisourceBergen's board of directors, subject in

1 As of August 31, 2017, using publicly available information for AmerisourceBergen. 2 For 12 months ending August 31, 2017, using publicly available information for AmerisourceBergen.

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