Business Performance on Track; Quarter Ahead of
Company's Expectations
Second quarter highlights, year-over-year
- Sales increased 3.7 percent to $35.8 billion, up 4.1 percent on
a constant currency basis
- Operating income decreased 18.7 percent to $1.2 billion;
Adjusted operating income decreased 12.0 percent to $1.7 billion,
on both a reported and constant currency basis
- EPS decreased 14.0 percent to $1.07; Adjusted EPS decreased 7.3
percent to $1.52, on both a reported and constant currency
basis
Year-to-date highlights
- Net cash provided by operating activities in the first half of
fiscal 2020 was $2.5 billion, an increase of $1.3 billion compared
with the same period a year ago; Free cash flow was $1.8 billion,
an increase of $1.4 billion
Fiscal 2020 outlook
- Prior to the COVID-19 pandemic, the company was on track to
maintain fiscal 2020 guidance of roughly flat growth in adjusted
EPS, at constant currency rates, plus or minus 3 percent
- Future impacts of COVID-19 uncertain; updates will be provided
in the next earnings report
Transformational Cost Management Program
- Company on target to deliver in excess of $1.8 billion in
annual cost savings by fiscal 2022
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the second quarter of fiscal 2020, which
ended February 29, 2020.
Executive Vice Chairman and CEO Stefano Pessina said, “We are
pleased to report second quarter results exceeding our
expectations, with sequential improvement in comparable U.S.
prescription volume and retail sales. During these unprecedented
times of global uncertainty, Walgreens Boots Alliance is on the
front lines of combating the COVID-19 pandemic. Our number one
priority is to continue to provide essential services, products and
information at this critical moment of need, demonstrating our
unwavering commitment to our customers and patients, and to our
people.”
Overview of Second Quarter Results
Fiscal 2020 second quarter net earnings attributable to WBA
decreased 18.2 percent to $946 million compared with the same
quarter a year ago, while net earnings per share1 decreased 14.0
percent to $1.07 compared with the same quarter a year ago.
Adjusted net earnings attributable to WBA2 decreased 11.8
percent to $1.3 billion, on both a reported and constant currency
basis, compared with the same quarter a year ago. Adjusted earnings
per share were $1.52, a decrease of 7.3 percent on both a reported
and constant currency basis, compared with the same quarter a year
ago.
Sales in the second quarter were $35.8 billion, an increase of
3.7 percent from the year-ago quarter, and an increase of 4.1
percent on a constant currency basis. Effects from the COVID-19
pandemic began at the end of the second quarter and were not
material to overall results.
Compared to the same quarter a year ago, operating income was
$1.2 billion, a decrease of 18.7 percent, and adjusted operating
income was $1.7 billion, a decrease of 12.0 percent, on both a
reported and constant currency basis, reflecting lower U.S.
pharmacy gross margin and year-over-year bonus changes, partially
offset by cost savings from the Transformational Cost Management
Program.
Net cash provided by operating activities was $1.4 billion in
the second quarter and free cash flow was $1.1 billion.
Overview of Fiscal 2020 Year-to-Date Results
For the first six months of fiscal 2020, net earnings
attributable to WBA decreased 21.4 percent to $1.8 billion compared
with the same period a year ago, while net earnings per share1
decreased 16.8 percent to $2.01 compared with the same period a
year ago.
Adjusted net earnings attributable to WBA2 for the first six
months of fiscal 2020, decreased 11.8 percent to $2.6 billion, down
11.7 percent on a constant currency basis, compared with the same
period a year ago. Adjusted earnings per share for the first six
months of fiscal 2020 were $2.88, a decrease of 6.6 percent on a
reported basis and a decrease of 6.5 percent on a constant currency
basis, compared with the same period a year ago.
Sales in the first six months of fiscal 2020 were $70.2 billion,
an increase of 2.7 percent from the same period a year ago, and an
increase of 3.2 percent on a constant currency basis.
Operating income in the first six months of fiscal 2020 was $2.2
billion, a decrease of 23.0 percent from the same period a year
ago. Adjusted operating income in the first six months of the
fiscal year was $3.2 billion, a decrease of 13.7 percent from the
same period a year ago, and a decrease of 13.6 percent on a
constant currency basis.
Net cash provided by operating activities was $2.5 billion in
the first six months of fiscal 2020, an increase of $1.3 billion
from the same period last year, and free cash flow was $1.8
billion, an increase of $1.4 billion from the same period a year
ago, reflecting strong working capital performance, prior year
headwinds and favorable timing.
Company Outlook
Prior to the COVID-19 pandemic, the company was on track to
maintain its guidance for full-year fiscal 2020, of roughly flat
growth in adjusted EPS, at constant currency rates, with a range of
plus or minus 3 percent. Second quarter financial performance
exceeded the company’s expectations. Although the COVID-19
situation is ultimately temporary, given the many rapidly changing
variables related to the pandemic, at this time WBA is not in a
position to accurately forecast the future impacts. The company
will continue to closely assess and manage this situation, and will
provide further updates in the next earnings report when both the
potential positive and negative effects of the pandemic will be
known in more detail.
Progress on Strategic Priorities
During the second quarter of fiscal 2020, and since the close of
the quarter, the company made substantial progress on its four
strategic priorities: accelerating digitalization; transforming and
restructuring its retail offering; creating neighborhood health
destinations; and the Transformational Cost Management Program.
- Walgreens Express used by more than 1 million patients for
seamless prescription experience
- Save A Trip Refills program, which aims to drive better
clinical outcomes, patient enrollment up 4 percent from the first
quarter
- Find Care visits increased 40 percent, to 2 million, from the
previous quarter
- Boots UK partnership with LIVI will provide video general
practitioner services and access to Boots pharmacy
- Continued strong growth in Boots.com, with sales advancing 23
percent compared to a year ago
- Progress on expansion of shared services
Actions to Support Customers, Patients and Team Members
During COVID-19
WBA has taken numerous steps to support customers, patients and
team members during the COVID-19 pandemic. The following are some
examples:
- Ensuring locations remain open and safe for customers and team
members
- Leveraging the company's broad footprint of convenient,
community locations to provide critical products
- Expanded use of drive-thru for certain health, cleaning and
grocery items
- Free home delivery of prescriptions and products, and for
online purchases in the U.S.
- Providing health advice to customers on behalf of government
agencies
- Collaborating with health plans, physicians and governments to
provide access to medications
- Partnering with U.S. and UK governments to initiate
testing
- Expanded temporary benefits for certain team members
Business Divisions
Retail Pharmacy USA:
Retail Pharmacy USA had second quarter sales of $27.2 billion,
an increase of 3.8 percent over the year-ago quarter. Sales in
comparable stores increased 2.7 percent from the year-ago quarter.
Comparable data in this press release exclude the favorable impact
of the 2020 leap day.
Pharmacy sales increased 5.3 percent compared with the year-ago
quarter, reflecting higher brand inflation and prescription volume,
and specialty growth of 17.7 percent. Comparable pharmacy sales
increased 3.7 percent. The division filled 296.8 million
prescriptions, including immunizations, adjusted to 30-day
equivalents in the quarter, an increase of 3.7 percent over the
year-ago quarter. Prescriptions filled in comparable stores
increased 4.9 percent compared with the same quarter a year
ago.
The division’s retail prescription market share on a 30-day
adjusted basis in the second quarter decreased approximately 50
basis points over the year-ago quarter to 21.0 percent, as reported
by IQVIA.3
Retail sales decreased 0.3 percent in the second quarter
compared with the year-ago period. Comparable retail sales were up
0.6 percent in the quarter, mostly due to strong growth in health
and wellness, including a favorable cough, cold and flu season.
Excluding tobacco and e-cigarettes, comparable retail sales
increased 1.9 percent.
Gross profit decreased 4.3 percent compared with the same
quarter a year ago and adjusted gross profit decreased 3.7 percent,
with procurement savings, prescription growth and solid retail
growth more than offset by reimbursement pressure.
Second quarter selling, general and administrative expenses
(SG&A) as a percentage of sales decreased by 0.7 percentage
point compared with the year-ago quarter. Adjusted SG&A as a
percentage of sales decreased by 0.8 percentage point. Both
decreases include savings from the Transformational Cost Management
Program.
Operating income in the second quarter decreased 21.5 percent
from the year-ago quarter to $963 million. Excluding costs related
to the acquisition of Rite Aid stores and to the Transformational
Cost Management Program, adjusted operating income in the second
quarter decreased 12.9 percent from the year-ago quarter to $1.3
billion, reflecting the year-on-year bonus impact and a
reimbursement contract true-up.
Retail Pharmacy International:
Retail Pharmacy International had second quarter sales of $3.1
billion, a decrease of 0.8 percent from the year-ago quarter,
including a favorable currency impact of 0.9 percent. Sales
decreased 1.7 percent on a constant currency basis, mainly due to a
1.2 percent decline in Boots UK sales and lower sales in Thailand
and Chile.
Comparable pharmacy sales in Boots UK increased 1.8 percent on a
constant currency basis, reflecting higher National Health Service
(NHS) reimbursement, partially offset by lower prescription volume.
Boots UK comparable retail sales decreased 4.6 percent on a
constant currency basis. Overall, the business held share in its
categories, in a declining market.
Gross profit increased 0.3 percent compared with the same
quarter a year ago, including a favorable currency impact of 0.8
percent. Adjusted gross profit decreased 2.5 percent, on a constant
currency basis, reflecting lower retail sales and margin in Boots
UK.
SG&A as a percentage of sales increased 2.3 percentage
points, including incremental costs associated with the
Transformational Cost Management Program. Adjusted SG&A as a
percentage of sales, on a constant currency basis, increased 1.6
percentage points. Both reflected the higher year-on-year bonus
impact and higher technology investments.
Operating income in the second quarter decreased 31.4 percent
from the year-ago quarter to $132 million, while adjusted operating
income decreased 22.9 percent to $198 million, down 24.0 percent on
a constant currency basis.
Pharmaceutical Wholesale:
Pharmaceutical Wholesale had second quarter sales of $6.1
billion, an increase of 5.7 percent from the year-ago quarter,
including an adverse currency impact of 2.3 percent. On a constant
currency basis, sales increased 8.0 percent, led by emerging
markets and the UK.
Operating income in the second quarter was $136 million, which
included $28 million from the company’s equity earnings in
AmerisourceBergen. This compared with operating income of $100
million in the year-ago quarter, which included $83 million from
the company's equity earnings in AmerisourceBergen.
Adjusted operating income increased 4.6 percent to $235 million,
up 5.2 percent on a constant currency basis, reflecting strong
sales growth and a higher contribution from AmerisourceBergen,
partially offset by lower gross margin.
Dividends Declared
During the second quarter, the company declared a quarterly
dividend of 45.75 cents per share, unchanged from the previous
quarter and an increase of 4 percent from the year-ago quarter. The
dividend was payable March 12, 2020 to stockholders of record as of
February 19, 2020.
Conference Call
WBA will hold a one-hour conference call to discuss the second
quarter results beginning at 8:30 a.m. Eastern time today, April 2,
2020. The conference call will be simulcast through the WBA
investor relations website at: http://investor.walgreensbootsalliance.com. A
replay of the conference call will be archived on the website for
12 months after the call.
The replay also will be available from 11:30 a.m. Eastern time,
April 2 through April 9, 2020, by calling +1 800 585 8367 within
the U.S. and Canada, or +1 416 621 4642 outside the U.S. and
Canada, using replay code 4048187.
1 All references to earnings per share (EPS) are to diluted EPS
attributable to WBA.
2 Please see the “Supplemental Information (Unaudited) Regarding
Non-GAAP Financial Measures” at the end of this press release for
more detailed information regarding non-GAAP financial measures
used, including all measures presented as "adjusted" or on a
"constant currency" basis, and free cash flow.
3 Due to revisions made by IQVIA to the methodology used for its
retail prescription database, market share has been restated for
the comparable year-ago period.
Cautionary Note Regarding Forward-Looking Statements: All
statements in this release that are not historical including,
without limitation, those regarding estimates of and goals for
future tax, financial and operating performance and results
(including those under “Company Outlook” and “Progress on Strategic
Priorities” above), the expected execution and effect of our
business strategies, our cost-savings and growth initiatives, pilot
programs, strategic partnerships and initiatives, restructuring
activities and the amounts and timing of their expected impact and
the delivery of annual cost savings and the potential impacts on
our business of the spread and impact of the COVID-19 pandemic are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “expect,” “likely,” “outlook,” “forecast,”
“preliminary,” “pilot,” “would,” “could,” “should,” “can,” “will,”
“project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,”
“continue,” “sustain,” “synergy,” “transform,” “accelerate,”
“model,” “long-term,” “on track,” “on schedule,” “headwind,”
“tailwind,” “believe,” “seek,” “estimate,” “anticipate,”
“upcoming,” “to come,” “may,” “possible,” “assume,” and variations
of such words and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to risks,
uncertainties and assumptions, known or unknown, that could cause
actual results to vary materially from those indicated or
anticipated, including, but not limited to, those relating to the
impact of private and public third-party payers’ efforts to reduce
prescription drug reimbursements, fluctuations in foreign currency
exchange rates, the timing and magnitude of the impact of branded
to generic drug conversions and changes in generic drug prices, our
ability to realize synergies and achieve financial, tax and
operating results in the amounts and at the times anticipated, the
inherent risks, challenges and uncertainties associated with
forecasting financial results of large, complex organizations in
rapidly evolving industries, particularly over longer time periods,
our supply, commercial and framework arrangements and transactions
with AmerisourceBergen and their possible effects, the risks
associated with the company’s equity method investment in
AmerisourceBergen, circumstances that could give rise to the
termination, cross-termination or modification of any of our
contractual obligations, the amount of costs, fees, expenses and
charges incurred in connection with strategic transactions, whether
the costs and charges associated with restructuring initiatives
will exceed estimates, our ability to realize expected savings and
benefits from cost-savings initiatives, restructuring activities
and acquisitions and joint ventures in the amounts and at the times
anticipated, the timing and amount of any impairment or other
charges, the timing and severity of cough, cold and flu season,
risks relating to the spread and impact of COVID-19, risks related
to pilot programs and new business initiatives and ventures
generally, including the risks that anticipated benefits may not be
realized, changes in management’s plans and assumptions, the risks
associated with governance and control matters, the ability to
retain key personnel, changes in economic and business conditions
generally or in particular markets in which we participate, changes
in financial markets, credit ratings and interest rates, the risks
relating to the terms, timing, and magnitude of any share
repurchase activity, the risks associated with international
business operations, including the risks associated with the
withdrawal of the United Kingdom from the European Union and
international trade policies, tariffs, including tariff
negotiations between the United States and China, and relations,
the risks associated with cybersecurity or privacy breaches related
to customer information, changes in vendor, customer and payer
relationships and terms, including changes in network participation
and reimbursement terms and the associated impacts on volume and
operating results, risks related to competition, including changes
in market dynamics, participants, product and service offerings,
retail formats and competitive positioning, risks associated with
new business areas and activities, risks associated with
acquisitions, divestitures, joint ventures and strategic
investments, including those relating to the asset acquisition from
Rite Aid, the risks associated with the integration of complex
businesses, the impact of regulatory restrictions and outcomes of
legal and regulatory matters, and risks associated with changes in
laws, including those related to the December 2017 U.S. tax law
changes, regulations or interpretations thereof. These and other
risks, assumptions and uncertainties are described in Item 1A (Risk
Factors) of our Annual Report on Form 10-K for the fiscal year
ended August 31, 2019 and in other documents that we file or
furnish with the Securities and Exchange Commission. Should one or
more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such
forward-looking statements. Accordingly, you are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date they are made.
We do not undertake, and expressly disclaim, any duty or
obligation to update publicly any forward-looking statement after
the date of this release, whether as a result of new information,
future events, changes in assumptions or otherwise.
Please refer to the supplemental information presented below for
reconciliations of the non-GAAP financial measures used in this
release to the most comparable GAAP financial measure and related
disclosures.
Notes to Editors:
About Walgreens Boots Alliance
Walgreens Boots Alliance (Nasdaq: WBA) is a global leader in
retail and wholesale pharmacy, touching millions of lives every day
through dispensing and distributing medicines, its convenient
retail locations, digital platforms and health and beauty products.
The company has more than 100 years of trusted health care heritage
and innovation in community pharmacy and pharmaceutical
wholesaling.
Including equity method investments, WBA has a presence in more
than 25 countries, employs more than 440,000 people and has more
than 18,750 stores.
WBA’s purpose is to help people across the world lead healthier
and happier lives. The company is proud of its contributions to
healthy communities, a healthy planet, an inclusive workplace and a
sustainable marketplace. The company’s businesses have been
recognized for their Corporate Social Responsibility. Walgreens was
named to FORTUNE* magazine’s 2019 Companies that Change the World
list and Boots UK was recognized as Responsible Business of the
Year 2019-2020 by Business in the Community.
WBA is included in FORTUNE’s 2020 list of the World’s Most
Admired Companies. This is the 27th consecutive year that WBA or
its predecessor company, Walgreen Co., has been named to the
list.
More company information is available at www.walgreensbootsalliance.com.
*© 2019, Fortune Media IP Limited. Used under license.
(WBA-ER)
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF EARNINGS
(UNAUDITED)
(in millions, except per share
amounts)
Three months ended
Six months ended
February 29, 2020
February 28, 2019
February 29, 2020
February 28, 2019
Sales
$
35,820
$
34,528
$
70,160
$
68,321
Cost of sales
28,307
26,773
55,384
52,925
Gross profit
7,513
7,754
14,776
15,395
Selling, general and administrative
expenses
6,308
6,320
12,570
12,599
Equity earnings in AmerisourceBergen
28
83
41
121
Operating income
1,233
1,517
2,247
2,918
Other income
25
19
60
45
Earnings before interest and income tax
provision
1,259
1,536
2,307
2,963
Interest expense, net
162
181
328
342
Earnings before income tax provision
1,097
1,356
1,979
2,621
Income tax provision
160
226
193
406
Post tax earnings from other equity method
investments
15
9
7
24
Net earnings
952
1,138
1,793
2,238
Net earnings (loss) attributable to
noncontrolling interests
5
(18
)
2
(41
)
Net earnings attributable to Walgreens
Boots Alliance, Inc.
$
946
$
1,156
$
1,791
$
2,279
Net earnings per common share:
Basic
$
1.07
$
1.25
$
2.02
$
2.43
Diluted
$
1.07
$
1.24
$
2.01
$
2.42
Weighted average common shares
outstanding:
Basic
884.5
928.4
887.9
938.3
Diluted
885.5
930.7
889.1
941.1
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
February 29, 2020
August 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
792
$
1,023
Accounts receivable, net
7,572
7,226
Inventories
9,652
9,333
Other current assets
893
1,118
Total current assets
18,909
18,700
Non-current assets:
Property, plant and equipment, net
13,482
13,478
Operating lease right-of-use assets
21,755
—
Goodwill
16,788
16,560
Intangible assets, net
10,929
10,876
Equity method investments
6,921
6,851
Other non-current assets
1,218
1,133
Total non-current assets
71,094
48,899
Total assets
$
90,003
$
67,598
Liabilities and equity
Current liabilities:
Short-term debt
$
5,984
$
5,738
Trade accounts payable
14,968
14,341
Operating lease obligation
2,278
—
Accrued expenses and other liabilities
5,408
5,474
Income taxes
23
216
Total current liabilities
28,662
25,769
Non-current liabilities:
Long-term debt
10,625
11,098
Operating lease obligation
21,959
—
Deferred income taxes
1,637
1,785
Other non-current liabilities
2,786
4,795
Total non-current liabilities
37,007
17,678
Total equity
24,334
24,152
Total liabilities and equity
$
90,003
$
67,598
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six months ended
February 29, 2020
February 28, 2019
Cash flows from operating
activities:
Net earnings
$
1,793
$
2,238
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
969
990
Deferred income taxes
(45
)
161
Stock compensation expense
67
63
Equity (earnings) from equity method
investments
(47
)
(145
)
Other
37
155
Changes in operating assets and
liabilities:
Accounts receivable, net
(324
)
(1,164
)
Inventories
(242
)
(557
)
Other current assets
56
(61
)
Trade accounts payable
555
682
Accrued expenses and other liabilities
139
(542
)
Income taxes
(355
)
(522
)
Other non-current assets and
liabilities
(119
)
(104
)
Net cash provided by operating
activities
2,484
1,195
Cash flows from investing
activities:
Additions to property, plant and
equipment
(705
)
(793
)
Proceeds from sale-leaseback
transactions
333
—
Proceeds from sale of other assets
37
54
Business, investment and asset
acquisitions, net of cash acquired
(286
)
(347
)
Other
3
41
Net cash used for investing activities
(617
)
(1,046
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
(655
)
336
Proceeds from debt
9,860
6,414
Payments of debt
(9,465
)
(3,117
)
Stock purchases
(913
)
(3,113
)
Proceeds related to employee stock
plans
28
138
Cash dividends paid
(857
)
(841
)
Other
(82
)
67
Net cash used for financing activities
(2,085
)
(115
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1
)
—
Changes in cash, cash equivalents and
restricted cash:
Net increase (decrease) in cash, cash
equivalents and restricted cash
(218
)
34
Cash, cash equivalents and restricted cash
at beginning of period
1,207
975
Cash, cash equivalents and restricted
cash at end of period
$
988
$
1,009
WALGREENS BOOTS ALLIANCE, INC. AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION (UNAUDITED)
REGARDING NON-GAAP FINANCIAL MEASURES (in millions, except
per share amounts)
The following information provides reconciliations of the
supplemental non-GAAP financial measures, as defined under SEC
rules, presented in this press release to the most directly
comparable financial measures calculated and presented in
accordance with generally accepted accounting principles in the
United States (GAAP). The company has provided the non-GAAP
financial measures in the press release, which are not calculated
or presented in accordance with GAAP, as supplemental information
and in addition to the financial measures that are calculated and
presented in accordance with GAAP.
These supplemental non-GAAP financial measures are presented
because management has evaluated the company’s financial results
both including and excluding the adjusted items or the effects of
foreign currency translation, as applicable, and believe that the
supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core
operating performance of the company’s business from period to
period and trends in the company’s historical operating results.
These supplemental non-GAAP financial measures should not be
considered superior to, as a substitute for or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the press release. The company does
not provide a reconciliation for non-GAAP estimates on a
forward-looking basis (including the information under “Company
Outlook” above) where it is unable to provide a meaningful or
accurate calculation or estimation of reconciling items and the
information is not available without unreasonable effort. This is
due to the inherent difficulty of forecasting the timing or amount
of various items that have not yet occurred, are out of the
company’s control and/or cannot be reasonably predicted, and that
would impact diluted net earnings per share, the most directly
comparable forward-looking GAAP financial measure. For the same
reasons, the company is unable to address the probable significance
of the unavailable information. Forward-looking non-GAAP financial
measures provided without the most directly comparable GAAP
financial measures may vary materially from the corresponding GAAP
financial measures.
Constant currency
The company also presents certain information related to current
period operating results in “constant currency,” which is a
non-GAAP financial measure. These amounts are calculated by
translating current period results at the foreign currency exchange
rates used in the comparable period in the prior year. The company
presents such constant currency financial information because it
has significant operations outside of the United States reporting
in currencies other than the U.S. dollar and this presentation
provides a framework to assess how its business performed excluding
the impact of foreign currency exchange rate fluctuations.
Comparable sales
Fiscal 2020 second-quarter comparable sales and prescriptions
filled figures for the company's Retail Pharmacy divisions exclude
the benefit of this year's leap day.
For the company's Retail Pharmacy divisions, comparable stores
are defined as those that have been open for at least twelve
consecutive months without closure for seven or more consecutive
days and without a major remodel or being subject to a natural
disaster in the past twelve months. Relocated stores are not
included as comparable stores for the first twelve months after the
relocation. Acquired stores are not included as comparable stores
for the first twelve months after acquisition or conversion, when
applicable, whichever is later. Comparable store sales, comparable
pharmacy sales and comparable retail sales refer to total sales,
pharmacy sales and retail sales, respectively, in such stores. For
the Retail Pharmacy USA division, comparable numbers of
prescriptions refer to number of prescriptions in such stores. The
method of calculating comparable sales varies across the retail
industry. As a result, the company's method of calculating
comparable sales may not be the same as other retailers’
methods.
With respect to the Retail Pharmacy International division,
comparable store sales, comparable pharmacy sales and comparable
retail sales, are presented on a constant currency basis, which are
non-GAAP financial measures. Refer to the discussion above in
"Constant currency" for further details on constant currency
calculations.
Key Performance Indicators
The company considers certain metrics, including all comparable
metrics, number of prescriptions, number of 30-day equivalent
prescriptions and number of locations at period end, to be key
performance indicators because the company's management has
evaluated its results of operations using these metrics and
believes that these key performance indicators presented provide
additional perspective and insights when analyzing the core
operating performance of the company from period to period and
trends in its historical operating results. These key performance
indicators should not be considered superior to, as a substitute
for or as an alternative to, and should be considered in
conjunction with, the GAAP financial measures presented herein.
These measures may not be comparable to similarly-titled
performance indicators used by other companies.
NET EARNINGS AND DILUTED NET EARNINGS
PER SHARE
Three months ended
Six months ended
February 29, 2020
February 28, 2019
February 29, 2020
February 28, 2019
Net earnings attributable to Walgreens
Boots Alliance, Inc. (GAAP)
$
946
$
1,156
$
1,791
$
2,279
Adjustments to operating
income:
Acquisition-related amortization and
impairment
117
123
235
246
Acquisition-related costs
99
82
223
148
Transformational cost management
123
150
209
179
Adjustments to equity earnings in
AmerisourceBergen
73
9
152
54
LIFO provision
28
8
61
48
Store optimization
30
31
39
51
Certain legal and regulatory accruals and
settlements
—
14
—
24
Total adjustments to operating income
469
417
919
749
Adjustments to other income
(expense):
Net investment hedging (gain) loss
7
6
(4)
2
Gain on sale of equity method
investment
—
—
(1)
—
Total adjustments to other income
(expense)
6
6
(5)
2
Adjustments to income tax
provision:
Equity method non-cash tax
1
15
(1)
19
U.S. tax law changes1
—
9
(6)
(3)
Tax impact of adjustments2
(97
)
(81
)
(177
)
(139
)
Total adjustments to income tax
provision
(95
)
(57
)
(184
)
(123
)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments3
15
—
43
—
Total adjustments to post tax equity
earnings from other equity method investments
15
—
43
—
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,343
$
1,522
$
2,565
$
2,908
Diluted net earnings per common share
(GAAP)
$
1.07
$
1.24
$
2.01
$
2.42
Adjustments to operating income
0.53
0.45
1.03
0.80
Adjustments to other income (expense)
0.01
0.01
(0.01
)
—
Adjustments to income tax provision
(0.11
)
(0.06
)
(0.21
)
(0.13
)
Adjustments to equity earnings in other
equity method investments3
0.02
—
0.05
—
Adjusted diluted net earnings per
common share (Non-GAAP measure)
$
1.52
$
1.64
$
2.88
$
3.09
Weighted average common shares
outstanding, diluted (in millions)
885.5
930.7
889.1
941.1
1
Discrete tax-only items.
2
Represents the adjustment to the GAAP
basis tax provision commensurate with non-GAAP adjustments and the
adjusted tax rate true-up.
3
Beginning in the quarter ended May 31,
2019, management reviewed and refined its practice to reflect the
proportionate share of certain equity method investees’ non-cash
items or unusual or infrequent items consistent with the company’s
non-GAAP measures in order to provide investors with a comparable
view of performance across periods. These adjustments include
acquisition-related amortization and acquisition-related costs and
were immaterial for the prior periods presented. Although the
company may have shareholder rights and board representation
commensurate with its ownership interests in these equity method
investees, adjustments relating to equity method investments are
not intended to imply that the company has direct control over
their operations and resulting revenue and expenses. Moreover,
these non-GAAP financial measures have limitations in that they do
not reflect all revenue and expenses of these equity method
investees.
Three months ended February
29, 2020
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
27,245
$
3,056
$
6,066
$
(546
)
$
35,820
Gross profit (GAAP)
$
5,806
$
1,182
$
523
$
3
$
7,513
Acquisition-related costs
32
—
—
—
32
Transformational cost management
3
—
—
—
3
LIFO provision
28
—
—
—
28
Store optimization
1
—
—
—
1
Adjusted gross profit (Non-GAAP
measure)
$
5,870
$
1,182
$
523
$
3
$
7,577
Selling, general and administrative
expenses (GAAP)
$
4,844
$
1,050
$
414
$
—
$
6,308
Acquisition-related amortization and
impairment
(79
)
(19
)
(19
)
—
(117
)
Acquisition-related costs
(67
)
—
—
—
(67
)
Transformational cost management
(66
)
(47
)
(6
)
—
(120
)
Store optimization
(29
)
—
—
—
(29
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,602
$
984
$
388
$
—
$
5,974
Operating income (GAAP)
$
963
$
132
$
136
$
2
$
1,233
Acquisition-related amortization and
impairment
79
19
19
—
117
Acquisition-related costs
99
—
—
—
99
Transformational cost management
69
47
6
—
123
Adjustments to equity earnings in
AmerisourceBergen
—
—
73
—
73
LIFO provision
28
—
—
—
28
Store optimization
30
—
—
—
30
Adjusted operating income (Non-GAAP
measure)
$
1,267
$
198
$
235
$
2
$
1,703
Gross margin (GAAP)
21.3
%
38.7
%
8.6
%
21.0
%
Adjusted gross margin (Non-GAAP
measure)
21.5
%
38.7
%
8.6
%
21.2
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.8
%
34.4
%
6.8
%
17.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.9
%
32.2
%
6.4
%
16.7
%
Operating margin2
3.5
%
4.3
%
1.8
%
3.4
%
Adjusted operating margin (Non-GAAP
measure)2
4.7
%
6.5
%
2.2
%
4.5
%
1
Operating income for Pharmaceutical
Wholesale includes equity earnings in AmerisourceBergen. As a
result of the two month reporting lag, operating income for the
three and six month period ended February 29, 2020 includes
AmerisourceBergen equity earnings for the period of October 1, 2019
through December 31, 2019 and July 1, 2019 through December 31,
2019, respectively. Operating income for the three and six month
period ended February 28, 2019 includes AmerisourceBergen equity
earnings for the period of October 1, 2018 through December 31,
2018 and July 1, 2018 through December 31, 2018, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
Three months ended February
28, 2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
26,257
$
3,082
$
5,738
$
(549
)
$
34,528
Gross profit (GAAP)
$
6,067
$
1,179
$
511
$
(2
)
$
7,754
Acquisition-related costs
19
—
—
—
19
Transformational cost management
—
23
—
—
23
LIFO provision
8
—
—
—
8
Store optimization
1
—
—
—
1
Adjusted gross profit (Non-GAAP
measure)
$
6,095
$
1,202
$
511
$
(2
)
$
7,806
Selling, general and administrative
expenses (GAAP)
$
4,840
$
987
$
493
$
—
$
6,320
Acquisition-related amortization and
impairment
(79
)
(25
)
(20
)
—
(123
)
Acquisition-related costs
(63
)
—
—
—
(63
)
Transformational cost management
(14
)
(16
)
(96
)
—
(126
)
Store optimization
(30
)
—
—
—
(30
)
Certain legal and regulatory accruals and
settlements
(14
)
—
—
—
(14
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,640
$
946
$
378
$
—
$
5,963
Operating income (GAAP)
$
1,226
$
192
$
100
$
(1
)
$
1,517
Acquisition-related amortization and
impairment
79
25
20
—
123
Acquisition-related costs
82
—
—
—
82
Transformational cost management
14
40
96
—
150
Adjustments to equity earnings in
AmerisourceBergen
—
—
9
—
9
LIFO provision
8
—
—
—
8
Store optimization
31
—
—
—
31
Certain legal and regulatory accruals and
settlements
14
—
—
—
14
Adjusted operating income (Non-GAAP
measure)
$
1,455
$
256
$
225
$
(1
)
$
1,935
Gross margin (GAAP)
23.1
%
38.2
%
8.9
%
22.5
%
Adjusted gross margin (Non-GAAP
measure)
23.2
%
39.0
%
8.9
%
22.6
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.4
%
32.0
%
8.6
%
18.3
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.7
%
30.7
%
6.6
%
17.3
%
Operating margin2
4.7
%
6.2
%
0.3
%
4.2
%
Adjusted operating margin (Non-GAAP
measure)2
5.5
%
8.3
%
2.3
%
5.3
%
1
Operating income for Pharmaceutical
Wholesale includes equity earnings in AmerisourceBergen. As a
result of the two month reporting lag, operating income for the
three and six month period ended February 29, 2020 includes
AmerisourceBergen equity earnings for the period of October 1, 2019
through December 31, 2019 and July 1, 2019 through December 31,
2019, respectively. Operating income for the three and six month
period ended February 28, 2019 includes AmerisourceBergen equity
earnings for the period of October 1, 2018 through December 31,
2018 and July 1, 2018 through December 31, 2018, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
Six months ended February 29,
2020
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
53,377
$
5,801
$
12,072
$
(1,091
)
$
70,160
Gross profit (GAAP)
$
11,497
$
2,238
$
1,039
$
2
$
14,776
Acquisition-related costs
60
—
—
—
60
Transformational cost management
3
3
—
—
6
LIFO provision
61
—
—
—
61
Store optimization
1
—
—
—
1
Adjusted gross profit (Non-GAAP
measure)
$
11,622
$
2,241
$
1,039
$
2
$
14,904
Selling, general and administrative
expenses (GAAP)
$
9,686
$
2,062
$
822
$
—
$
12,570
Acquisition-related amortization and
impairment
(156
)
(41
)
(39
)
—
(235
)
Acquisition-related costs
(161
)
—
(1
)
—
(163
)
Transformational cost management
(133
)
(56
)
(14
)
—
(203
)
Store optimization
(38
)
—
—
—
(38
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
9,199
$
1,964
$
768
$
—
$
11,931
Operating income (GAAP)
$
1,811
$
176
$
258
$
2
$
2,247
Acquisition-related amortization and
impairment
156
41
39
—
235
Acquisition-related costs
221
—
1
—
223
Transformational cost management
136
59
14
—
209
Adjustments to equity earnings in
AmerisourceBergen
—
—
152
—
152
LIFO provision
61
—
—
—
61
Store optimization
39
—
—
—
39
Adjusted operating income (Non-GAAP
measure)
$
2,423
$
276
$
464
$
2
$
3,166
Gross margin (GAAP)
21.5
%
38.6
%
8.6
%
21.1
%
Adjusted gross margin (Non-GAAP
measure)
21.8
%
38.6
%
8.6
%
21.2
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.1
%
35.6
%
6.8
%
17.9
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.2
%
33.9
%
6.4
%
17.0
%
Operating margin2
3.4
%
3.0
%
1.8
%
3.1
%
Adjusted operating margin (Non-GAAP
measure)2
4.5
%
4.8
%
2.2
%
4.2
%
1
Operating income for Pharmaceutical
Wholesale includes equity earnings in AmerisourceBergen. As a
result of the two month reporting lag, operating income for the
three and six month period ended February 29, 2020 includes
AmerisourceBergen equity earnings for the period of October 1, 2019
through December 31, 2019 and July 1, 2019 through December 31,
2019, respectively. Operating income for the three and six month
period ended February 28, 2019 includes AmerisourceBergen equity
earnings for the period of October 1, 2018 through December 31,
2018 and July 1, 2018 through December 31, 2018, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
Six months ended February 28,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
51,979
$
5,982
$
11,446
$
(1,086
)
$
68,321
Gross profit (GAAP)
$
12,067
$
2,306
$
1,023
$
(1
)
$
15,395
Acquisition-related costs
28
—
—
—
28
Transformational cost management
—
25
—
—
25
LIFO provision
48
—
—
—
48
Store optimization
1
—
—
—
1
Adjusted gross profit (Non-GAAP
measure)
$
12,144
$
2,331
$
1,023
$
(1
)
$
15,498
Selling, general and administrative
expenses (GAAP)
$
9,675
$
2,036
$
889
$
(1
)
$
12,599
Acquisition-related amortization and
impairment
(155
)
(52
)
(39
)
—
(246
)
Acquisition-related costs
(120
)
—
—
—
(120
)
Transformational cost management
(16
)
(42
)
(96
)
—
(154
)
Store optimization
(49
)
—
—
—
(49
)
Certain legal and regulatory accruals and
settlements
(24
)
—
—
—
(24
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
9,311
$
1,943
$
753
$
(1
)
$
12,006
Operating income (GAAP)
$
2,393
$
270
$
255
$
—
$
2,918
Acquisition-related amortization and
impairment
155
52
39
—
246
Acquisition-related costs
148
—
—
—
148
Transformational cost management
16
67
96
—
179
Adjustments to equity earnings in
AmerisourceBergen
—
—
54
—
54
LIFO provision
48
—
—
—
48
Store optimization
51
—
—
—
51
Certain legal and regulatory accruals and
settlements
24
—
—
—
24
Adjusted operating income (Non-GAAP
measure)
$
2,834
$
388
$
445
$
—
$
3,667
Gross margin (GAAP)
23.2
%
38.6
%
8.9
%
22.5
%
Adjusted gross margin (Non-GAAP
measure)
23.4
%
39.0
%
8.9
%
22.7
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.6
%
34.0
%
7.8
%
18.4
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.9
%
32.5
%
6.6
%
17.6
%
Operating margin2
4.6
%
4.5
%
1.2
%
4.1
%
Adjusted operating margin (Non-GAAP
measure)2
5.5
%
6.5
%
2.4
%
5.1
%
1
Operating income for Pharmaceutical
Wholesale includes equity earnings in AmerisourceBergen. As a
result of the two month reporting lag, operating income for the
three and six month period ended February 29, 2020 includes
AmerisourceBergen equity earnings for the period of October 1, 2019
through December 31, 2019 and July 1, 2019 through December 31,
2019, respectively. Operating income for the three and six month
period ended February 28, 2019 includes AmerisourceBergen equity
earnings for the period of October 1, 2018 through December 31,
2018 and July 1, 2018 through December 31, 2018, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
EQUITY EARNINGS IN
AMERISOURCEBERGEN
Three months ended
Six months ended
February 29, 2020
February 28, 2019
February 29, 2020
February 28, 2019
Equity earnings in AmerisourceBergen
(GAAP)
$
28
$
83
$
41
$
121
Acquisition-related amortization
31
33
61
63
Litigation settlements and other
8
(17
)
44
(24
)
Asset Impairment
29
—
29
6
LIFO provision
3
(1
)
14
15
PharMEDium remediation costs
3
4
6
10
U.S. tax law changes
—
(10
)
—
(17
)
Anti-Trust
(2
)
—
(2
)
—
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
101
$
92
$
193
$
175
ADJUSTED EFFECTIVE TAX
RATE
Three months ended February
29, 2020
Three months ended February
28, 2019
Earnings before income tax
provision
Income tax provision
Effective tax rate
Earnings before income tax
provision
Income tax provision
Effective tax rate
Effective tax rate (GAAP)
$
1,097
$
160
14.6
%
$
1,356
$
226
16.7
%
Impact of non-GAAP adjustments
476
89
423
84
U.S. tax law changes
—
—
—
(9
)
Equity method non-cash tax
—
(1
)
—
(15
)
Adjusted tax rate true-up
—
8
—
(3
)
Subtotal
$
1,573
$
256
$
1,779
$
283
Exclude adjusted equity earnings in
AmerisourceBergen
(101
)
—
(92
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,472
$
256
17.4
%
$
1,687
$
283
16.8
%
Six months ended February 29,
2020
Six months ended February 28,
2019
Earnings before income tax
provision
Income tax
Effective tax rate
Earnings before income tax
provision
Income tax
Effective tax rate
Effective tax rate (GAAP)
$
1,979
$
193
9.7
%
$
2,621
$
406
15.5
%
Impact of non-GAAP adjustments
914
173
751
139
U.S. tax law changes
—
6
—
3
Equity method non-cash tax
—
1
—
(19
)
Adjusted tax rate true-up
—
3
—
—
Subtotal
$
2,893
$
376
$
3,372
$
529
Exclude adjusted equity earnings in
AmerisourceBergen
(193
)
—
(175
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
2,700
$
376
13.9
%
$
3,197
$
529
16.5
%
FREE CASH FLOW
Three months ended
Six months ended
February 29, 2020
February 28, 2019
February 29, 2020
February 28, 2019
Net cash provided by operating
activities (GAAP)
$
1,423
$
735
$
2,484
$
1,195
Less: Additions to property, plant and
equipment
(318
)
(324
)
(705
)
(793
)
Free cash flow (Non-GAAP measure)1
$
1,105
$
411
$
1,779
$
401
1
Free cash flow is defined as net cash
provided by operating activities in a period less additions to
property, plant and equipment (capital expenditures) made in that
period. This measure does not represent residual cash flows
available for discretionary expenditures as the measure does not
deduct the payments required for debt service and other contractual
obligations or payments for future business acquisitions.
Therefore, we believe it is important to view free cash flow as a
measure that provides supplemental information to our entire
statements of cash flows.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200402005260/en/
Media Relations U.S. / Morry Smulevitz +1 847 315 0517
International +44(0)2079808585 Investor Relations Gerald
Gradwell and Jay Spitzer +1 847 315 2922
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