Company Accelerates Healthcare and
Omnichannel Investments
First quarter results, year-over-year
- Sales increased 5.7 percent to $36.3 billion, up 5.2 percent on
a constant currency basis
- Loss per share was $0.36, compared to EPS of $0.95 in the
year-ago quarter, including a $1.73 per share charge from the
company's equity earnings in AmerisourceBergen; Adjusted EPS
decreased 11.2 percent to $1.22, down 11.6 percent on a constant
currency basis, reflecting an estimated adverse COVID-19 impact of
$0.26 to $0.30 per share
- Net cash provided by operating activities was $1.2 billion, an
increase of $134 million; Free cash flow was $763 million, an
increase of $90 million, or 13 percent
Fiscal 2021 outlook
- Company maintained guidance of low single-digit growth in
adjusted earnings per share at constant currency rates.
Strategic transactions
- Company executes portfolio transformation with divestiture of
pharmaceutical wholesale business. For more information click
here.
- Company accelerates its investment in VillageMD and boosts the
large-scale rollout of full-service primary care clinics in stores.
For more information click here.
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the first quarter of fiscal 2021, which ended
Nov. 30, 2020.
Executive Vice Chairman and CEO Stefano Pessina said, "Our first
quarter results exceeded expectations as we continue to deliver on
our strategic priorities. As announced yesterday we have taken a
major step forward in our transformation; we are divesting our
pharmaceutical wholesale business with plans to use the proceeds to
accelerate our investments in healthcare. While the business
environment remains challenging, we are rising to the occasion with
agility and discipline and we are confident in our outlook for
adjusted EPS for the fiscal year. Our role in the healthcare system
has never been more important, as the communities we serve continue
to turn to our trusted brands and expert pharmacists. I am so proud
of our teams and the historic and critical role they are playing to
help the world emerge from the pandemic, administering COVID-19
vaccinations to frontline healthcare workers and vulnerable members
of our society."
Overview of First Quarter Results
WBA had fiscal 2021 first quarter sales of $36.3 billion, an
increase of 5.7 percent from the year-ago quarter, and an increase
of 5.2 percent on a constant currency basis1, reflecting growth in
Retail Pharmacy USA and Pharmaceutical Wholesale.
The company had an operating loss of $440 million in the first
quarter, compared to operating income of $1.0 billion in the same
quarter a year ago, entirely due to a $1.5 billion charge from the
company's equity earnings in AmerisourceBergen. Adjusted operating
income was $1.3 billion, a decrease of 9.9 percent from the same
quarter a year ago and a decrease of 10.1 percent on a constant
currency basis.
Net loss attributable to WBA2 was $308 million for the first
quarter of fiscal 2021 compared with net profit of $845 million in
the same quarter a year ago. The loss was entirely due to the
AmerisourceBergen charge. Loss per share was $0.36, compared to
earnings per share (EPS) of $0.95 in the same quarter a year
ago.
Adjusted net earnings decreased 13.9 percent to $1.1 billion,
down 14.3 percent on a constant currency basis, compared with the
same quarter a year ago. Adjusted EPS was $1.22, a decrease of 11.2
percent on a reported basis and a decrease of 11.6 percent on a
constant currency basis, compared with the same quarter a year ago,
reflecting an estimated adverse COVID-19 impact of $0.26 to $0.30
per share.
Net cash provided by operating activities was $1.2 billion in
the first quarter and free cash flow was $763 million, an increase
of 13 percent compared with the year-ago quarter.
Company Outlook
The company maintained fiscal 2021 guidance of low single-digit
growth in adjusted earnings per share at constant currency rates,
with the profile skewed to opportunity:
- The first quarter exceeded expectations, reflecting strength in
Boots UK and Boots Opticians.
- While the second quarter is expected to see higher adverse
impacts from COVID-19 (including the weaker cough, cold and flu
season), the company anticipates first-half fiscal 2021 adjusted
EPS to be broadly in line with prior expectations.
- On a full-year basis, the opportunity from the distribution of
vaccinations is likely to be offset by COVID-19 related lock-downs
and restrictions, and by increased growth investments.
Progress on Strategic Priorities
Selected highlights of the company's recent progress on
strategic initiatives - creating neighborhood health destinations
around a more modern pharmacy, accelerating digitalization,
transforming and restructuring the company's retail offering and
transformational cost management - include the following:
- Walgreens pharmacists are playing a key, expanded role in
fighting the COVID-19 pandemic.
- Since COVID-19 testing began, Walgreens has administered more
than 2.8 million tests.
- Working with federal and state governments, Walgreens is
vaccinating residents and staff at more than 35,000 long-term care
facilities in 49 states.
- Walgreens launched myWalgreens, a complete reinvention of its
customer loyalty program.
- Walgreens is now offering the fastest same-day retail pick-up
in the U.S., with orders available in as little as 30 minutes. More
than 1.7 million pick-up orders have been completed since launch in
November.
- Walgreens announced an acceleration of its investment in
VillageMD and boosted the rollout of Village Medical at Walgreens
full-service primary care clinics.
- Boots.com significantly expanded capacity and sales doubled
from the year-ago quarter, outperforming the market.
Business Divisions
Retail Pharmacy USA:
Retail Pharmacy USA had first quarter sales of $27.2 billion, an
increase of 3.9 percent from the year-ago quarter, including the
impact of previously announced store optimization programs. Sales
in comparable stores increased 3.7 percent from the year-ago
quarter reflecting a 5.0 percent increase in comparable pharmacy
sales and a 0.4 percent growth in comparable retail sales. The
estimated adverse COVID-19 impact on comparable sales included
lower foot traffic in stores, weak retail cough, cold and flu
sales, lower seasonal flu scripts and reduced new-to-therapy
scripts.
In comparable stores, prescriptions filled in the first quarter
increased 2.7 percent from a year earlier, including an estimated
negative impact of 210 basis points from COVID-19. Total
prescriptions filled in the quarter increased 1.1 percent, compared
with the same quarter a year earlier. The number of prescriptions
filled was 297.3 million, including immunizations, adjusted to
30-day equivalents. Pharmacy sales, which accounted for 76.8
percent of the division's sales in the quarter, increased 5.9
percent compared with the year-ago quarter. Comparable pharmacy
sales increased 5.0 percent.
The division’s retail prescription market share on a 30-day
adjusted basis in the first quarter decreased approximately 15
basis points over the year-ago quarter to 20.7 percent, as reported
by IQVIA, an improvement over the decline in the fourth quarter and
entirely driven by store optimization programs.
Retail sales decreased 2.2 percent in the first quarter compared
with the year-ago period, including the impact of the store
optimization programs.
Comparable retail sales grew 0.4 percent compared with the same
quarter a year ago, held back by the significantly weaker cough,
cold and flu season, which had an adverse impact of 150 basis
points. Comparable retail sales, excluding tobacco and
e-cigarettes, increased 1.9 percent. Within comparable retail store
sales, a 13.1 percent decrease in beauty category sales and a 1.3
percent decrease in personal care category sales were partially
offset by a 4.1 percent increase in health and wellness category
sales. Excluding the impact of the weaker cough, cold and flu
season, sales in the health and wellness category increased by 11.6
percent.
Gross profit decreased 1.3 percent compared with the same
quarter a year ago and adjusted gross profit decreased 1.8 percent,
in both cases primarily due to pharmacy reimbursement pressure,
partly offset by pharmacy procurement savings and a higher retail
gross margin.
First quarter SG&A decreased by 0.4 percent, primarily due
to non-recurring costs related to the acquisition of Rite Aid
stores in the year-ago quarter, and adjusted SG&A increased by
1.4 percent, as cost savings from the Transformational Cost
Management Program partly offset higher growth investments and
COVID-19 related costs of $83 million.
Operating income in the first quarter decreased 6.6 percent to
$792 million from the year-ago quarter, due to pharmacy
reimbursement pressure and adverse impact from COVID-19, partly
offset by savings from the Transformational Cost Management Program
and non-recurring acquisition-related costs related to Rite Aid
stores in the year-ago quarter. Adjusted operating income decreased
14.4 percent, to $989 million, due to pharmacy reimbursement
pressure and adverse impacts from COVID-19, partly offset by
savings from the Transformational Cost Management Program.
Retail Pharmacy International:
Retail Pharmacy International had first quarter sales of $2.6
billion, a decrease of 6.2 percent from the year-ago quarter,
including a favorable currency impact of 1.9 percent. Sales
decreased 8.2 percent on a constant currency basis, mainly due to
an 11.5 percent decrease in Boots UK sales resulting from COVID-19
related impacts.
Boots UK comparable pharmacy sales increased 2.5 percent
compared to the year-ago quarter, reflecting favorable timing of
National Health System (NHS) reimbursement, which mitigated the
impact of lower prescription volume and reduced demand for pharmacy
services during the pandemic.
Boots UK comparable retail sales decreased 9.1 percent compared
to the year-ago quarter. COVID-19 continued to impact footfall,
particularly in major high street, train station and airport
stores. The ongoing recovery in footfall trends in September and
October was set back by the re-introduction of stricter
restrictions for the month of November. However, Boots.com
continued to perform very strongly with sales up 106 percent
compared with the year-ago quarter, partially offsetting the
reduced footfall.
Boots UK market share was lower in all categories except beauty,
as the pandemic continued to impact heavily on buying habits and
consumers temporarily shifted purchasing to one-stop grocery
shopping.
Gross profit decreased 9.0 percent compared with the same
quarter a year ago, including a favorable currency impact of 2.3
percent. Adjusted gross profit decreased 11.5 percent, on a
constant currency basis, reflecting lower UK retail sales and
higher fulfillment costs, partly offset by the favorable timing of
NHS reimbursement.
SG&A in the quarter decreased 8.4 percent from the prior
year quarter to $928 million, including an adverse currency impact
of 2.0 percent. On a constant currency basis, adjusted SG&A
decreased 12.5 percent. The decreases in SG&A and adjusted
SG&A both reflect short-term cost mitigation actions and cost
savings from the Transformational Cost Management Program.
Operating income decreased 22.7 percent to $34 million,
reflecting increased investment in the Transformational Cost
Management Program. Adjusted operating income was $84 million, an
increase of 6.4 percent from the year-ago quarter. On a constant
currency basis, adjusted operating income increased 0.6 percent
from the year-ago quarter, as decisive cost management actions and
strong Boots.com performance fully mitigated the impact of
COVID-19.
Pharmaceutical Wholesale:
Pharmaceutical Wholesale had first quarter sales of $7.1
billion, an increase of 18.6 percent from the year-ago quarter. On
a constant currency basis, sales increased 16.3 percent, including
results of the company's new joint venture in Germany, which were
consolidated as of November.
The division had an operating loss of $1.3 billion in the first
quarter entirely due to a loss of $1.4 billion related to the
company’s equity method investment in AmerisourceBergen. This
compared with operating income of $122 million in the year-ago
quarter, which included $13 million from the company's equity
earnings in AmerisourceBergen.
Adjusted operating income increased 6.7 percent to $244 million,
up 7.4 percent on a constant currency basis, reflecting strong
sales growth and a higher contribution from AmerisourceBergen.
Conference Call
WBA will hold a conference call to discuss the first quarter
results beginning at 8:30 a.m. Eastern time today, Jan. 7, 2021.
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,
Jan. 7 through Jan. 14, 2021, 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 2692416.
1 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.
2 All references to loss per share and to EPS are to diluted
loss per share and diluted EPS attributable to WBA.
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 "Strategic Transactions," "Progress on
Strategic Priorities” and "Company Outlook" above), the expected
execution and effect of our business strategies, the potential
impacts on our business of the spread and effects of the COVID-19
pandemic, including the estimated impacts herein, and any future
pandemic, our cost-savings and growth initiatives, pilot programs,
strategic partnerships and initiatives, the closing of the sale of
certain pharmaceutical wholesale operations to AmerisourceBergen
and restructuring activities and the amounts and timing of their
expected impact and the delivery of annual cost savings 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
spread and impacts of COVID-19, any mutations thereof or future
pandemic and the acceptance and effectiveness of any therapies or
vaccines related thereto, the impact of private and public
third-party payers’ efforts to reduce prescription drug
reimbursements, the risks associated with the withdrawal of the
United Kingdom from the European Union and the agreement related
thereto, 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, and during
periods with increased volatility and uncertainties, 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 looting and vandalism in regions in which we
operate and the scope and magnitude of any property damage,
inventory loss or other adverse impacts, 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 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 and the sale of certain pharmaceutical wholesale
operations to AmerisourceBergen, 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
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, 2020 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. All forward-looking statements we make
or that are made on our behalf are qualified by these cautionary
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 450,000 people and has more
than 21,000 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. WBA is a Participant of the United Nations
Global Compact and adheres to its principles-based approach to
responsible business.
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.
*© 2020, 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 November
30,
2020
2019
Sales
$
36,307
$
34,339
Cost of sales
29,168
27,077
Gross profit
7,139
7,263
Selling, general and administrative
expenses
6,207
6,262
Equity earnings (loss) in
AmerisourceBergen
(1,373
)
13
Operating income (loss)
(440
)
1,013
Other income (expense)
60
35
Earnings (loss) before interest and income
tax provision
(380
)
1,048
Interest expense, net
140
166
Earnings (loss) before income tax
provision
(520
)
882
Income tax provision (benefit)
(199
)
32
Post tax earnings (loss) from other equity
method investments
23
(9
)
Net earnings (loss)
(299
)
842
Net earnings (loss) attributable to
noncontrolling interests
9
(3
)
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.
$
(308
)
$
845
Net earnings (loss) per common
share:
Basic
$
(0.36
)
$
0.95
Diluted
$
(0.36
)
$
0.95
Weighted average common shares
outstanding:
Basic
865.3
891.4
Diluted
865.3
892.6
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
November 30, 2020
August 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,111
$
516
Accounts receivable, net
7,869
7,132
Inventories
11,180
9,451
Other current assets
924
974
Total current assets
21,084
18,073
Non-current assets:
Property, plant and equipment, net
13,277
13,342
Operating lease right-of-use assets
21,951
21,724
Goodwill
15,299
15,268
Intangible assets, net
10,706
10,753
Equity method investments
6,019
7,338
Other non-current assets
831
677
Total non-current assets
68,083
69,101
Total assets
$
89,167
$
87,174
Liabilities, redeemable noncontrolling
interest and equity
Current liabilities:
Short-term debt
$
5,245
$
3,538
Trade accounts payable
16,212
14,458
Operating lease obligation
2,435
2,426
Accrued expenses and other liabilities
6,320
6,539
Income taxes
167
110
Total current liabilities
30,379
27,070
Non-current liabilities:
Long-term debt
10,973
12,203
Operating lease obligation
22,166
21,973
Deferred income taxes
1,277
1,498
Other non-current liabilities
3,631
3,294
Total non-current liabilities
38,047
38,968
Redeemable noncontrolling interest
178
—
Total equity
20,563
21,136
Total liabilities, redeemable
noncontrolling interest and equity
$
89,167
$
87,174
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three months ended November
30,
2020
2019
Cash flows from operating
activities:
Net earnings (loss)
$
(299
)
$
842
Adjustments to reconcile net earnings
(loss) to net cash provided by operating activities:
Depreciation and amortization
475
477
Deferred income taxes
(348
)
(62
)
Stock compensation expense
36
28
Equity (earnings) loss from equity method
investments
1,350
(4
)
Other
(71
)
28
Changes in operating assets and
liabilities:
Accounts receivable, net
(259
)
(116
)
Inventories
(1,225
)
(1,099
)
Other current assets
36
(5
)
Trade accounts payable
1,398
924
Accrued expenses and other liabilities
(105
)
45
Income taxes
132
2
Other non-current assets and
liabilities
74
1
Net cash provided by operating
activities
1,195
1,061
Cash flows from investing
activities:
Additions to property, plant and
equipment
(431
)
(387
)
Proceeds from sale-leaseback
transactions
231
147
Proceeds from sale of other assets
29
22
Business, investment and asset
acquisitions, net of cash acquired
(77
)
(180
)
Other
(10
)
(4
)
Net cash used for investing activities
(259
)
(402
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
(347
)
(392
)
Proceeds from debt
3,310
5,072
Payments of debt
(2,807
)
(4,702
)
Stock purchases
(110
)
(473
)
Proceeds related to employee stock
plans
4
14
Cash dividends paid
(405
)
(410
)
Other
4
24
Net cash used for financing activities
(352
)
(866
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
10
1
Changes in cash, cash equivalents and
restricted cash:
Net increase (decrease) in cash, cash
equivalents and restricted cash
594
(206
)
Cash, cash equivalents and restricted cash
at beginning of period
746
1,207
Cash, cash equivalents and restricted
cash at end of period
$
1,339
$
1,000
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. Please refer to the notes to the
“Net Earnings and Diluted Net Earnings (Loss) Per Share”
reconciliation table on page 13 for definitions of non-GAAP
financial measures and related adjustments presented in this press
release.
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 believes 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
For the company's Retail Pharmacy divisions, comparable sales
are defined as sales from stores that have been open for at least
12 consecutive months without closure for seven or more consecutive
days, including due to looting or store damage, and without a major
remodel or being subject to a natural disaster in the past 12
months as well as e-commerce sales. E-commerce sales include
digitally initiated sales online or through mobile applications.
Relocated stores are not included as comparable stores for the
first 12 months after the relocation. Acquired stores are not
included as comparable sales for the first 12 months after
acquisition or conversion, when applicable, whichever is later.
Comparable sales, comparable pharmacy sales, comparable retail
sales, comparable number of prescriptions and comparable number of
30-day equivalent prescriptions refer to total sales, pharmacy
sales, retail sales, number of prescriptions and number of 30-day
equivalent prescriptions, respectively. Comparable retail sales for
previous periods have been restated to include e-commerce sales.
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 sales, comparable pharmacy sales and comparable retail
sales, are presented on a constant currency basis, which is a
non-GAAP financial measure. 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
(LOSS) AND DILUTED NET EARNINGS (LOSS) PER SHARE
Three months ended November
30,
2020
2019
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc. (GAAP)
$
(308
)
$
845
Adjustments to operating income
(loss):
Adjustments to equity earnings (loss) in
AmerisourceBergen1
1,481
80
Acquisition-related amortization2
116
118
Transformational cost management3
104
86
LIFO provision4
33
33
Acquisition-related costs5
23
124
Store optimization3
—
9
Total adjustments to operating income
(loss)
1,759
449
Adjustments to other income
(expense):
Net investment hedging (gain) loss6
9
(11
)
Gain on sale of equity method
investment7
—
(1
)
Total adjustments to other income
(expense)
9
(12
)
Adjustments to income tax
provision:
U.S. tax law changes8
—
(6
)
Tax impact of adjustments8
(67
)
(80
)
Equity method non-cash tax8
(346
)
(2
)
Total adjustments to income tax
provision
(412
)
(88
)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments9
13
28
Total adjustments to post tax equity
earnings from other equity method investments
13
28
Adjustments to net earnings (loss)
attributable to noncontrolling interests:
Acquisition-related amortization2
(4
)
—
LIFO provision4
(3
)
—
Total adjustments to net earnings (loss)
attributable to noncontrolling interests
(8
)
—
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,052
$
1,222
Diluted net earnings (loss) per common
share (GAAP)10
$
(0.36
)
$
0.95
Adjustments to operating income (loss)
2.03
0.50
Adjustments to other income (expense)
0.01
(0.01
)
Adjustments to income tax provision
(0.48
)
(0.10
)
Adjustments to equity earnings in other
equity method investments9
0.01
0.03
Adjustments to net earnings (loss)
attributable to noncontrolling interests
(0.01
)
—
Adjusted diluted net earnings per
common share (Non-GAAP measure)11
$
1.22
$
1.37
Weighted average common shares
outstanding, diluted (in millions)11
865.3
892.6
1
Adjustments to equity earnings (loss) in
AmerisourceBergen consist of the Company’s proportionate share of
non-GAAP adjustments reported by AmerisourceBergen consistent with
the Company’s non-GAAP measures. The Company recognized equity
losses in AmerisourceBergen of $1,373 million during the three
months ended November 30, 2020. These equity losses are primarily
due to AmerisourceBergen recognition of $5.6 billion, net of tax,
charges related to its ongoing opioid litigation in its financial
statements for the three months period ended September 30,
2020.
2
Acquisition-related amortization includes
amortization of acquisition-related intangible assets and inventory
valuation adjustments. Amortization of acquisition-related
intangible assets includes amortization of intangibles assets such
as customer relationships, trade names, trademarks and contract
intangibles. Intangible asset amortization excluded from the
related non-GAAP measure represents the entire amount recorded
within the Company’s GAAP financial statements, the revenue
generated by the associated intangible assets has not been excluded
from the related non-GAAP measures. Amortization expense, unlike
the related revenue, is not affected by operations of any
particular period unless an intangible asset becomes impaired or
the estimated useful life of an intangible asset is revised. These
charges are primarily recorded within selling, general and
administrative expenses. Business combination accounting principles
require us to measure acquired inventory at fair value. The fair
value of the inventory reflects cost of acquired inventory and a
portion of the expected profit margin. The acquisition-related
inventory valuation adjustments excludes the expected profit margin
component from cost of sales recorded under the business
combination accounting principles.
3
Transformational Cost Management Program
and Store Optimization Program charges are costs associated with a
formal restructuring plan. These charges are primarily recorded
within selling, general and administrative expenses. These costs do
not reflect current operating performance and are impacted by the
timing of restructuring activity.
4
The Company’s Retail Pharmacy USA segment
inventory is accounted for using the last-in-first-out (“LIFO”)
method. This adjustment represents the impact on cost of sales as
if Retail Pharmacy USA segment inventory is accounted for using
first-in first-out (“FIFO”) method. The LIFO provision is affected
by changes in inventory quantities, product mix, and manufacturer
pricing practices, which may be impacted by market and other
external influences. Therefore, the Company cannot control the
amounts recognized or timing of these items.
5
Acquisition-related costs are transaction
and integration costs associated with certain merger and
acquisition related activities. These costs include all charges
incurred on certain mergers and acquisition related activities, for
example, including costs related to integration efforts for
successful merger and acquisition activities. These charges are
primarily recorded within selling, general and administrative
expenses. These costs are significantly impacted by the timing and
complexity of the underlying merger and acquisition related
activities and do not reflect the Company’s current operating
performance.
6
Gain or loss on certain derivative
instruments used as economic hedges of the Company’s net
investments in foreign subsidiaries. These charges are recorded
within other income (expense). We do not believe this volatility
related to mark-to-market adjustment on the underlying derivative
instruments reflects the Company’s operational performance.
7
Includes significant gain on sale of
equity method investment and related adjustments.
8
Adjustments to income tax provision
include adjustments to the GAAP basis tax provision commensurate
with non-GAAP adjustments and certain discrete tax items including
U.S. tax law changes, a UK tax rate change and equity method
non-cash tax. These charges are recorded within income tax
provision (benefit).
9
Adjustments to post tax equity earnings
from other equity method investments consist of the proportionate
share of certain equity method investees’ non-cash items or unusual
or infrequent items consistent with the Company’s non-GAAP
adjustments. These charges are recorded within post tax earnings
(loss) from other equity method investments. 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.
10
Due to the anti-dilutive effect resulting
from the reported net loss, the impact of potentially dilutive
securities on the per share amounts has been omitted from the
quarterly calculation of weighted-average common shares outstanding
for diluted earnings per share for the three months ended November
30, 2020.
11
Includes impact of potentially dilutive
securities in the quarterly calculation of weighted-average common
shares, diluted for adjusted diluted net earnings per common share
calculation purposes for the three months ended November 30,
2020.
Three months ended November
30, 2020
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
27,163
$
2,574
$
7,125
$
(555
)
$
36,307
Gross profit (GAAP)
$
5,617
$
961
$
560
$
1
$
7,139
Transformational cost management
(1
)
—
—
—
—
LIFO provision
33
—
—
—
33
Adjusted gross profit (Non-GAAP
measure)
$
5,649
$
961
$
561
$
1
$
7,172
Selling, general and administrative
expenses (GAAP)
$
4,825
$
928
$
455
$
—
$
6,207
Acquisition-related amortization
(76
)
(20
)
(20
)
—
(116
)
Transformational cost management
(71
)
(28
)
(6
)
—
(104
)
Acquisition-related costs
(17
)
(2
)
(5
)
—
(23
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,660
$
878
$
425
$
—
$
5,963
Operating income (loss) (GAAP)
$
792
$
34
$
(1,268
)
$
1
$
(440
)
Adjustments to equity earnings (loss) in
AmerisourceBergen
—
—
1,481
—
1,481
Acquisition-related amortization
76
20
20
—
116
Transformational cost management
70
28
6
—
104
LIFO provision
33
—
—
—
33
Acquisition-related costs
17
2
5
—
23
Adjusted operating income (Non-GAAP
measure)
$
989
$
84
$
244
$
1
$
1,318
Gross margin (GAAP)
20.7
%
37.3
%
7.9
%
19.7
%
Adjusted gross margin (Non-GAAP
measure)
20.8
%
37.3
%
7.9
%
19.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.8
%
36.0
%
6.4
%
17.1
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.2
%
34.1
%
6.0
%
16.4
%
Operating margin2
2.9
%
1.3
%
1.5
%
2.6
%
Adjusted operating margin (Non-GAAP
measure)2
3.6
%
3.3
%
1.9
%
3.3
%
1
Operating income (loss) for Pharmaceutical
Wholesale includes equity earnings (loss) in AmerisourceBergen. As
a result of the two month reporting lag, operating income (loss)
for the three month period ended November 30, 2020 includes
AmerisourceBergen equity earnings (loss) for the period of July 1,
2020 through September 30, 2020. Operating income for the three
month period ended November 30, 2019 includes AmerisourceBergen
equity earnings for the period of July 1, 2019 through September
30, 2019, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings (loss) in
AmerisourceBergen and adjusted equity earnings (loss) in
AmerisourceBergen, respectively.
Three months ended November
30, 2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
26,133
$
2,745
$
6,007
$
(545
)
$
34,339
Gross profit (GAAP)
$
5,691
$
1,056
$
517
$
(1
)
$
7,263
Transformational cost management
—
3
—
—
3
LIFO provision
33
—
—
—
33
Acquisition-related costs
28
—
—
—
28
Adjusted gross profit (Non-GAAP
measure)
$
5,753
$
1,059
$
517
$
(1
)
$
7,327
Selling, general and administrative
expenses (GAAP)
$
4,843
$
1,012
$
407
$
—
$
6,262
Acquisition-related amortization
(77
)
(22
)
(19
)
—
(118
)
Transformational cost management
(66
)
(10
)
(7
)
—
(83
)
Acquisition-related costs
(94
)
—
(1
)
—
(95
)
Store optimization
(8
)
—
—
—
(8
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,597
$
980
$
380
$
—
$
5,957
Operating income (GAAP)
$
848
$
44
$
122
$
—
$
1,013
Adjustments to equity earnings in
AmerisourceBergen
—
—
80
—
80
Acquisition-related amortization
77
22
19
—
118
Transformational cost management
66
12
7
—
86
LIFO provision
33
—
—
—
33
Acquisition-related costs
122
—
1
—
124
Store optimization
9
—
—
—
9
Adjusted operating income (Non-GAAP
measure)
$
1,155
$
79
$
229
$
—
$
1,463
Gross margin (GAAP)
21.8
%
38.5
%
8.6
%
21.1
%
Adjusted gross margin (Non-GAAP
measure)
22.0
%
38.6
%
8.6
%
21.3
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.5
%
36.9
%
6.8
%
18.2
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.6
%
35.7
%
6.3
%
17.3
%
Operating margin2
3.2
%
1.6
%
1.8
%
2.9
%
Adjusted operating margin (Non-GAAP
measure)2
4.4
%
2.9
%
2.3
%
4.0
%
1
Operating income (loss) for Pharmaceutical
Wholesale includes equity earnings (loss) in AmerisourceBergen. As
a result of the two month reporting lag, operating income (loss)
for the three month period ended November 30, 2020 includes
AmerisourceBergen equity earnings (loss) for the period of July 1,
2020 through September 30, 2020. Operating income for the three
month period ended November 30, 2019 includes AmerisourceBergen
equity earnings for the period of July 1, 2019 through September
30, 2019, respectively.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings (loss) in
AmerisourceBergen and adjusted equity earnings (loss) in
AmerisourceBergen, respectively.
EQUITY EARNINGS
(LOSS) IN AMERISOURCEBERGEN
Three months ended November
30,
2020
2019
Equity earnings (loss) in
AmerisourceBergen (GAAP)
$
(1,373
)
$
13
Litigation settlements and other
1,548
36
Acquisition-related amortization
30
30
Certain discrete tax benefits
6
—
New York State Opioid Stewardship Act
3
—
Asset Impairment
3
—
PharMEDium remediation costs
—
3
Anti-Trust
—
(1
)
LIFO provision
(7
)
12
Tax reform
(100
)
—
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
108
$
92
ADJUSTED
EFFECTIVE TAX RATE
Three months ended November
30, 2020
Three months ended November
30, 2019
Earnings (loss) before income
tax provision
Income tax
Effective tax rate
Earnings before income tax
provision
Income tax
Effective tax rate
Effective tax rate (GAAP)
$
(520
)
$
(199
)
38.2
%
$
882
$
32
3.6
%
Impact of non-GAAP adjustments
1,767
61
437
84
Equity method non-cash tax
—
346
—
2
Adjusted tax rate true-up
—
5
—
(4
)
U.S. tax law changes
—
—
—
6
Subtotal
$
1,247
$
213
$
1,320
$
120
Exclude adjusted equity earnings in
AmerisourceBergen
(108
)
—
(92
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,139
$
213
18.7
%
$
1,227
$
120
9.8
%
FREE CASH
FLOW
Three months ended November
30,
2020
2019
Net cash provided by operating
activities (GAAP)
$
1,195
$
1,061
Less: Additions to property, plant and
equipment
(431
)
(387
)
Free cash flow (Non-GAAP
measure)1
$
763
$
674
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/20210107005275/en/
Media Relations U.S. / Morry Smulevitz, +1 847 315 0517
International, +44 (0)20 7980 8585 Investor Relations Gerald
Gradwell and Jay Spitzer, +1 847 315 2922
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