Delivering Strong Results and Progress on
Strategic Priorities
First quarter highlights
- First quarter earnings per share (EPS*) from continuing
operations was $4.13, compared with a loss of $0.45 in the year-ago
quarter; continuing operations adjusted** EPS increased to $1.68,
up 53.1 percent on a constant currency basis
- First quarter sales from continuing operations increased 7.8
percent to $33.9 billion, up 7.6 percent on a constant currency
basis
- First quarter operating income from continuing operations
increased to $1.3 billion, compared with a loss of $535 million in
the year-ago quarter; adjusted operating income from continuing
operations increased to $1.8 billion, up 48.5 percent on a constant
currency basis
- VillageMD and Shields majority investments closed on November
24th and October 29th, respectively
Strong operational performance
- Results surpassed expectations across business segments, driven
by COVID-19 vaccinations and testing, U.S. retail comparable sales
up 10.6 percent, and Boots UK retail comparable sales up 16.3
percent
- WBA continues to play a leading role in fighting the COVID-19
pandemic, with Walgreens administering over 56 million vaccines to
date, including 15.6 million in the first quarter
- Transformational Cost Management Program is on track to deliver
$3.3 billion in annual cost savings by fiscal 2024
Fiscal 2022 outlook
- Increasing full year adjusted EPS guidance to low-single digit
growth, from flat previously, to reflect first quarter performance
and continued positive momentum; now includes 2 percentage point
impact from incremental investments in team members
- Outlook continues to include 4 percentage point negative impact
from previously planned healthcare investments
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the first quarter of fiscal 2022, which ended
November 30, 2021.
Chief Executive Officer Rosalind Brewer said:
“First quarter results exceeded our expectations, with a very
encouraging performance across all our business segments. I am
particularly excited about the progress we’re making in building
out Walgreens Health. Our majority investments in VillageMD and
Shields closed during the quarter, and we’re rolling out VillageMD
primary care co-locations and Walgreens Health Corners at pace. The
strong start to the fiscal year reinforces our confidence in the
future, and as a result, we are raising our guidance for the full
year and increasing investments in our people. Looking ahead, we
are well positioned for sustainable, long-term value creation.”
Overview of First Quarter Results
WBA first quarter sales from continuing operations increased 7.8
percent from the year-ago quarter to $33.9 billion, an increase of
7.6 percent on a constant currency basis, reflecting strong
comparable sales growth at Walgreens and in the International
segment.
Operating income from continuing operations was $1.3 billion in
the first quarter compared to an operating loss of $535 million in
the year-ago quarter. This was partly driven by a $1.5 billion
charge from the company's equity earnings in AmerisourceBergen in
the year ago quarter. Adjusted operating income from continuing
operations was $1.8 billion, an increase of 48.5 percent on a
constant currency basis. The increases reflect strong adjusted
gross profit growth across both pharmacy and retail in the United
States and a continued rebound in International segment sales and
profitability.
Net earnings from continuing operations were $3.6 billion in the
first quarter compared to a loss of $391 million from the year-ago
quarter, reflecting a $2.5 billion after-tax gain due to the
valuation of the company's previously held minority equity and debt
investments in VillageMD and Shields in the three months ended
November 30, 2021, and a $1.2 billion charge, net of tax, from the
company's equity earnings in AmerisourceBergen in the year ago
quarter. Adjusted net earnings from continuing operations increased
to $1.5 billion, up 53.5 percent on a reported and constant
currency basis compared with the year-ago quarter.
EPS from continuing operations in the first quarter was $4.13,
compared with a loss of $0.45 in the year-ago quarter. Adjusted EPS
from continuing operations was $1.68, an increase of 53.2 percent
on a reported basis and an increase of 53.1 percent on a constant
currency basis.
Net cash provided by operating activities was $1.1 billion in
the first quarter and free cash flow was $645 million, a $118
million decrease compared with the year-ago quarter primarily
driven by phasing of working capital, COVID-19 related government
support in the year-ago quarter and increased capital
expenditures.
Business Highlights
WBA continued to build on its strategy and achieve strong
results across its business, including:
Growing the core
- Playing a leading role in COVID-19 vaccinations and testing
- Walgreens administered 15.6 million vaccinations and 6.5
million tests in 1Q
- Over 9 million boosters administered to date
- Largest pediatric vaccine provider in the pharmacy channel
- U.S. retail comparable sales growth of 10.6 percent was the
highest in over 20 years
- Strong growth in U.S. omnichannel business with digital sales
up 88 percent in 1Q, driven by 3.6 million same day pick-up
orders
- MyWalgreens membership at 92.4 million members in 1Q, up 7.2
million since 4Q
- Investing in our team members, to attract, retain, and develop
industry-leading talent
- Boots UK delivered 2.0 million flu vaccinations in 1Q, up 150
percent versus last year
- Further development of Boots healthcare services, both in store
and online, including mental health support
- Boots UK opened 27 new Beauty halls in regional locations
- Boots online sales nearly doubled versus pre-COVID levels
Developing Walgreens Health
- Closed VillageMD and Shields majority investments; CareCentrix
closing expected by the end of 3Q
- Rollout of VillageMD continues with 81 co-located centers now
open, and 160+ targeted for CY22 year-end
- 47 Walgreens Health Corners launched to date, including 10 in
California in 1Q, on track toward 100+ by CY22 year-end
- Walgreens Health consumer app launched with Blue Shield of
California and Clover Health
Refocusing the portfolio
- Consolidated holding in AllianceRx Walgreens Prime from 55% to
100%
- Consolidated holding in German wholesale JV from 70% to
100%
Business Segments
United States: The United States segment had first
quarter sales of $28.0 billion, an increase of 3.2 percent from the
year-ago quarter, held back by a decline in the AllianceRx
Walgreens Prime business. Comparable sales increased 7.9 percent
from the year-ago quarter.
Pharmacy sales increased 1.1 percent. Excluding the AllianceRx
Walgreens Prime business, sales grew 5.8 percent in the quarter.
Comparable pharmacy sales increased 6.8 percent in the quarter
compared to a year-ago, with prescriptions filled increasing by 6.2
percent, including a positive impact of approximately 535 basis
points from COVID-19 vaccinations.
Retail sales increased 10.1 percent and comparable retail sales
increased 10.6 percent in the first quarter compared with the
year-ago quarter. Excluding tobacco and e-cigarettes, comparable
retail sales increased 11.7 percent, reflecting broad based growth
across all categories. In particular, health and wellness increased
24.7 percent aided by at-home COVID-19 tests and cough cold flu,
and beauty and personal care increased 16.6 percent and 11.6
percent, respectively.
Gross profit increased 12.6 percent compared with the year-ago
quarter. Adjusted gross profit increased 12.3 percent driven by
strong sales growth, partially offset by reimbursement.
Selling, general and administrative expenses (SG&A)
increased 6.7 percent compared with the year ago quarter. Adjusted
SG&A increased 4.2 percent, driven by investments to support
COVID-19 vaccinations and testing, and labor investments, partially
offset by savings from the Transformational Cost Management program
and timing benefits.
Operating income in the first quarter increased to $1.4 billion
compared to a net operating loss of $504 million in the year-ago
quarter. Adjusted operating income increased 46.3 percent, to $1.7
billion.
International: The International segment had first
quarter sales of $5.8 billion, an increase of 35.8 percent from the
year-ago quarter, including a favorable currency impact of 1.6
percent. Sales increased 34.2 percent on a constant currency basis,
including higher sales associated with the formation of company's
wholesale joint venture in Germany. Excluding this benefit,
International segment sales on a constant currency basis increased
8.6 percent, reflecting the ongoing recovery in the UK market,
following the lifting of COVID-19 restrictions in July.
Boots UK comparable pharmacy sales increased 8.8 percent
compared with the year-ago quarter, reflecting stronger demand for
pharmacy services. Boots UK comparable retail sales increased 16.3
percent compared with the year-ago quarter. Footfall improved but
traffic still remains below pre-COVID-19 levels. Boots.com
continued to perform well, with digital sales in the first quarter
almost doubling compared with the equivalent quarter
pre-COVID-19.
Gross profit increased 21.9 percent compared with the same
quarter a year ago, including a favorable currency impact of 3.7
percent. Adjusted gross profit increased 18.2 percent on a constant
currency basis, reflecting strong UK growth, and higher gross
profit associated with inclusion of a full quarter of results from
the company's wholesale joint venture in Germany, partly offset by
favorable timing of NHS reimbursement in the year-ago quarter.
SG&A in the quarter increased 21.1 percent from the year-ago
quarter to $1.2 billion, including an adverse currency impact of
4.0 percent. Adjusted SG&A increased 11.4 percent on a constant
currency basis. The increase in both SG&A and adjusted SG&A
reflects higher costs associated with the company's wholesale joint
venture in Germany, and COVID-19 related government support in the
year-ago quarter.
Operating income grew 39.8 percent, including an adverse
currency impact of 3.8 percent, to $54 million. Adjusted operating
income grew strongly to $164 million, an increase of 88.6 percent
on a constant currency basis, compared with the year-ago
quarter.
Walgreens Health: In conjunction with the launch of its
new consumer-centric healthcare strategy, in fiscal 2022, the
company announced the creation of a new operating segment,
Walgreens Health. As a result, beginning in fiscal year 2022, the
company is now aligned into three reportable segments: United
States, International and Walgreens Health.
The company’s Walgreens Health segment is a consumer-centric,
technology-enabled healthcare business that engages consumers
through a personalized, omni-channel experience across the care
journey. Walgreens Health delivers improved health outcomes and
lower costs for payors and providers by delivering care through
owned and partnered assets.
The Walgreens Health segment currently consists of:
- A majority position in VillageMD, a leading, national provider
of value-based primary care services;
- A majority position in Shields, a specialty pharmacy integrator
and accelerator for hospitals; and
- The Walgreens Health organically-developed business that
contracts with payors and providers to deliver clinical healthcare
services to their members and members’ caregivers through both
digital and physical channels.
The Walgreens Health segment had first quarter sales of $51
million resulting from the acquisition of Shields on October 29 and
VillageMD on November 24.
Gross profit was $20 million and adjusted gross profit was $20
million, both reflecting results from Shields and VillageMD. First
quarter SG&A was $65 million, and adjusted SG&A was $33
million reflecting the two acquisitions and acceleration of
investments in Walgreens Health. Operating loss was $45 million.
Adjusted operating loss was $13 million.
Conference Call
WBA will hold a Virtual Investor Conference to discuss strategic
priorities for the future, first quarter earnings results beginning
at 8:30 a.m. Eastern time today, 2022. A live simulcast as well as
related presentation materials will be available through WBA’s
investor relations website at:
http://investor.walgreensbootsalliance.com. A replay of the
conference will be archived on the website for at least 12 months
after the event.
*All references to EPS and net earnings are to diluted EPS and
diluted net earnings, in each case attributable to WBA.
**"Adjusted," "constant currency" and free cash flow amounts are
non-GAAP financial measures. See the appendix to this release for a
discussion of non-GAAP financial measures, including a
reconciliation to the most closely correlated GAAP measure.
Cautionary Note Regarding Forward-Looking Statements: This
release contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These include, without limitation, estimates of and
goals for future operating, financial and tax performance and
results, including our fiscal year 2022 guidance, our long-term
growth algorithm and related assumptions and drivers, as well as
forward-looking statements concerning the expected execution and
effect of our business strategies, the potential impacts on our
business of the spread and impacts of the COVID-19 pandemic, our
cost-savings and growth initiatives, including statements relating
to our expected cost savings under our Transformational Cost
Management and expansion of our Walgreens Health segment. All
statements in the future tense and all statements accompanied by
words such as “expect,” “outlook,” “forecast,” “would,” “could,”
“should,” “can,” “will,” “project,” “intend,” “plan,” “goal,”
“guidance,” “target,” “aim,” continue,” “transform,” “accelerate,”
“model,” “long-term,” “believe,” “seek,” “estimate,” “anticipate,”
“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.
These risks, assumptions and uncertainties include those
described in Item 1A (Risk Factors) of our Form 10-K for the fiscal
year ended August 31, 2021, as amended, and in other documents that
we file or furnish with the Securities and Exchange Commission. If
one or more of these risks or uncertainties materializes, or if
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. You should not place undue reliance on 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 an integrated
healthcare, pharmacy and retail leader serving millions of
customers and patients every day, with a 170-year heritage of
caring for communities.
A trusted, global innovator in retail pharmacy with
approximately 13,000 locations across the U.S., Europe and Latin
America, WBA plays a critical role in the healthcare ecosystem. The
company is reimagining local healthcare and well-being for all as
part of its purpose – to create more joyful lives through better
health. Through dispensing medicines, improving access to a wide
range of health services, providing high quality health and beauty
products and offering anytime, anywhere convenience across its
digital platforms, WBA is shaping the future of healthcare.
WBA has more than 315,000 team members and a presence in nine
countries through its portfolio of consumer brands: Walgreens,
Boots, Duane Reade, the No7 Beauty Company, Benavides in Mexico and
Ahumada in Chile. Additionally, WBA has a portfolio of
healthcare-focused investments located in several countries,
including China and the U.S.
The company is proud of its contributions to healthy
communities, a healthy planet, an inclusive workplace and a
sustainable marketplace. WBA has been recognized for its commitment
to operating sustainably: it is an index component of the Dow Jones
Sustainability Indices (DJSI) and was named to the 100 Best
Corporate Citizens 2021.
More company information is available at
www.walgreensbootsalliance.com.
(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,
2021
2020
Sales
$
33,901
$
31,438
Cost of sales
26,326
24,808
Gross profit
7,574
6,630
Selling, general and administrative
expenses
6,391
5,792
Equity earnings (loss) in
AmerisourceBergen
100
(1,373
)
Operating income (loss)
1,283
(535
)
Other income
2,617
63
Earnings (loss) before interest and
tax
3,900
(472
)
Interest expense, net
86
136
Earnings (loss) before tax
3,814
(607
)
Income tax provision (benefit)
275
(207
)
Post tax (loss) earnings from other equity
method investments
(7
)
15
Net earnings (loss) from continuing
operations
3,531
(385
)
Net earnings from discontinued
operations
—
87
Net earnings (loss)
3,531
(299
)
Net (loss) earnings attributable to
noncontrolling interests - continuing operations
(48
)
5
Net earnings attributable to
noncontrolling interests - discontinued operations
—
4
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.
3,580
(308
)
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.:
Continuing operations
$
3,580
$
(391
)
Discontinued operations
—
83
Total
$
3,580
$
(308
)
Basic net earnings (loss) per common
share:
Continuing operations
$
4.13
$
(0.45
)
Discontinued operations
—
0.10
Total
$
4.13
$
(0.36
)
Diluted net earnings (loss) per common
share:
Continuing operations
$
4.13
$
(0.45
)
Discontinued operations
—
0.10
Total
$
4.13
$
(0.36
)
Weighted average common shares
outstanding:
Basic
865.8
865.3
Diluted
867.6
865.3
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
November 30, 2021
August 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
4,135
$
1,193
Accounts receivable, net
5,960
5,663
Inventories
9,475
8,159
Other current assets
745
800
Total current assets
20,314
15,814
Non-current assets:
Property, plant and equipment, net
12,295
12,247
Operating lease right-of-use assets
21,826
21,893
Goodwill
21,520
12,421
Intangible assets, net
12,770
9,936
Equity method investments
6,367
6,987
Other non-current assets
1,413
1,987
Total non-current assets
76,192
65,471
Total assets
$
96,507
$
81,285
Liabilities, redeemable noncontrolling
interest and equity
Current liabilities:
Short-term debt
$
2,647
$
1,305
Trade accounts payable
12,452
11,136
Operating lease obligations
2,266
2,259
Accrued expenses and other liabilities
6,973
7,260
Income taxes
110
94
Total current liabilities
24,447
22,054
Non-current liabilities:
Long-term debt
11,199
7,675
Operating lease obligations
22,103
22,153
Deferred income taxes
1,970
1,850
Other non-current liabilities
3,422
3,413
Total non-current liabilities
38,694
35,091
Redeemable noncontrolling interest
2,787
319
Total equity
30,579
23,822
Total liabilities, redeemable
noncontrolling interest and equity
$
96,507
$
81,285
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three months ended November
30,
2021
2020
Cash flows from operating
activities:
Net earnings
$
3,531
$
(299
)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
500
475
Deferred income taxes
164
(348
)
Stock compensation expense
35
36
Equity (earnings) loss from equity method
investments
(93
)
1,350
Gain on previously held investment
interests
(2,576
)
—
Other
95
(71
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(127
)
(259
)
Inventories
(1,352
)
(1,225
)
Other current assets
(58
)
36
Trade accounts payable
1,335
1,398
Accrued expenses and other liabilities
(399
)
(105
)
Income taxes
79
132
Other non-current assets and
liabilities
(36
)
74
Net cash provided by operating
activities
1,099
1,195
Cash flows from investing
activities:
Additions to property, plant and
equipment
(454
)
(431
)
Proceeds from sale-leaseback
transactions
202
231
Business, investment and asset
acquisitions, net of cash acquired
(1,800
)
(77
)
Other
95
19
Net cash (used for) investing
activities
(1,958
)
(259
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
937
(347
)
Proceeds from debt
7,940
3,310
Payments of debt
(4,444
)
(2,807
)
Stock purchases
(154
)
(110
)
Proceeds related to employee stock
plans
19
4
Cash dividends paid
(413
)
(405
)
Other
(7
)
4
Net cash provided by (used for) financing
activities
3,877
(352
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(20
)
10
Changes in cash, cash equivalents and
restricted cash:
Net increase in cash, cash equivalents and
restricted cash
2,998
594
Cash, cash equivalents and restricted cash
at beginning of period
1,270
746
Cash, cash equivalents and restricted
cash at end of period
$
4,268
$
1,339
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 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 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 United States and
International segments, 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 International segment, 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,
2021
2020
Net earnings (loss) from continuing
operations (GAAP)
$
3,580
$
(391
)
Adjustments to operating income
(loss):
Transformational cost management 1
203
100
Acquisition-related amortization 2
165
95
Acquisition-related costs 3
71
21
Adjustments to equity earnings (loss) in
AmerisourceBergen 4
43
1,481
LIFO provision 5
14
33
Total adjustments to operating income
(loss)
495
1,731
Adjustments to other income:
Net investment hedging (gain) loss6
1
9
Gain on previously held investments 7
(2,576
)
—
Total adjustments to other income
(2,574
)
9
Adjustments to income tax provision
(benefit):
Equity method non-cash tax 8
18
(346
)
Tax impact of adjustments 8
(26
)
(61
)
Total adjustments to income tax provision
(benefit)
(8
)
(407
)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments 9
15
13
Total adjustments to post tax (loss)
earnings from other equity method investments
15
13
Adjustments to net (loss) earnings
attributable to noncontrolling interests:
Transformational cost management 1
(1
)
—
Acquisition-related amortization 2
(32
)
(4
)
Acquisition-related costs 3
(17
)
—
LIFO provision 5
—
(3
)
Total adjustments to net (loss) earnings
attributable to noncontrolling interests
(50
)
(8
)
Adjusted net earnings attributable to
Continuing Operations (Non-GAAP measure)
$
1,455
$
948
Net earnings attributable to Walgreens
Boots Alliance, Inc. – discontinued operations (GAAP)
—
83
Acquisition-related amortization 2
—
21
Acquisition-related costs 3
—
2
Transformational cost management 1
—
4
Tax impact of adjustments 8
—
(5
)
Total adjustments to net earnings
attributable to Walgreens Boots Alliance, Inc. – discontinued
operations
$
—
$
22
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. - discontinued operations (Non-GAAP
measure)
$
—
$
105
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,455
$
1,052
Diluted net earnings per common share -
continuing operations (GAAP) 10
$
4.13
$
(0.45
)
Adjustments to operating income
0.57
2.00
Adjustments to other income
(2.97
)
0.01
Adjustments to income tax provision
(benefit)
(0.01
)
(0.47
)
Adjustments to post tax (loss) earnings
from other equity method investments 9
0.02
0.01
Adjustments to net (loss) earnings
attributable to noncontrolling interests
(0.06
)
(0.01
)
Adjusted diluted net earnings per
common share - continuing operations (Non-GAAP measure)
$
1.68
$
1.09
Diluted net earnings per common share -
discontinued operations (GAAP)
$
—
$
0.10
Total adjustments to net earnings (loss)
attributable to Walgreens Boots Alliance, Inc. – discontinued
operations
—
0.03
Adjusted diluted net earnings per
common share - discontinued operations (Non-GAAP measure)
$
—
$
0.12
Adjusted diluted net earnings per
common share (Non-GAAP measure)
$
1.68
$
1.22
Weighted average common shares
outstanding, diluted (in millions) 11
867.6
865.3
1
Transformational Cost Management 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.
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
Acquisition-related costs are transaction
and integration costs associated with certain merger, acquisition
and divestitures related activities. These costs include all
charges incurred on certain mergers, acquisition and divestitures
related activities, for example, including costs related to
integration efforts for successful merger, acquisition and
divestitures activities. Examples of such costs include deal costs,
severance and stock compensation. 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, acquisition and divestitures related
activities and do not reflect the Company’s current operating
performance.
4
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's 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.
5
The Company’s United States segment
inventory is accounted for using the last-in-first-out (“LIFO”)
method. This adjustment represents the impact on cost of sales as
if the United States 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.
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 (loss). 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 gains on business
combinations due to the remeasurement of previously held minority
equity interests and debt securities to fair value. During the
three months ended November 30, 2021, the Company recorded such
pretax gains of $2,174 million and $402 million for VillageMD and
Shields respectively.
8
Adjustments to income tax provision
(benefit) include adjustments to the GAAP basis tax provision
(benefit) commensurate with non-GAAP adjustments and certain
discrete tax items including U.S. tax law changes and equity method
non-cash tax. These charges are recorded within income tax
provision (benefit).
9
Adjustments to post tax (loss) 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 (loss)
earnings 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 EPS 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.
NON-GAAP RECONCILIATIONS BY
SEGMENT
(in millions)
Three months ended November
30, 2021
United States1
International
Walgreens Health
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
28,032
$
5,818
$
51
$
—
$
33,901
Gross profit (GAAP)
$
6,347
$
1,207
$
20
$
—
$
7,574
LIFO provision
14
—
—
—
14
Acquisition-related amortization
7
—
—
—
7
Adjusted gross profit (Non-GAAP
measure)
$
6,368
$
1,207
$
20
$
—
$
7,595
Selling, general and administrative
expenses (GAAP)
$
5,091
$
1,153
$
65
$
82
$
6,391
Acquisition-related costs
3
(39
)
(24
)
(11
)
(71
)
Transformational cost management
(141
)
(54
)
—
(9
)
(203
)
Acquisition-related amortization
(133
)
(17
)
(8
)
—
(158
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,821
$
1,043
$
33
$
64
$
5,961
Operating income (loss) (GAAP)
$
1,356
$
54
$
(45
)
$
(82
)
$
1,283
Adjustments to equity earnings in
AmerisourceBergen
43
—
—
—
43
Acquisition-related amortization
140
17
8
—
165
Transformational cost management
141
54
—
9
203
LIFO provision
14
—
—
—
14
Acquisition-related costs
(3
)
39
24
11
71
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,690
$
164
$
(13
)
$
(63
)
$
1,777
Gross margin (GAAP)
22.6
%
20.7
%
40.3
%
22.3
%
Adjusted gross margin (Non-GAAP
measure)
22.7
%
20.7
%
40.3
%
22.4
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.2
%
19.8
%
128.9
%
18.9
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.2
%
17.9
%
65.5
%
17.6
%
Operating margin2
4.5
%
0.9
%
(88.6)
%
3.5
%
Adjusted operating margin (Non-GAAP
measure)2
5.5
%
2.8
%
(25.2)
%
4.8
%
1
Operating income (loss) for United States
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, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of July 1,
2021 through September 30, 2021. 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 31, 2020.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings (loss) in
AmerisourceBergen and adjusted equity earnings (loss) in
AmerisourceBergen, respectively.
(in millions)
Three months ended November
30, 2020
United States1
International
Walgreens Health3
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,163
$
4,285
$
—
$
(10
)
$
31,438
Gross profit (GAAP)
$
5,639
$
990
$
—
$
1
$
6,630
Transformational cost management
(1
)
—
—
—
(1
)
LIFO provision
33
—
—
—
33
Adjusted gross profit (Non-GAAP
measure)
$
5,671
$
990
$
—
$
1
$
6,663
Selling, general and administrative
expenses (GAAP)
$
4,770
$
952
$
3
$
67
$
5,792
Acquisition-related amortization
(76
)
(19
)
—
—
(95
)
Transformational cost management
(61
)
(27
)
—
(12
)
(100
)
Acquisition-related costs
(8
)
(2
)
—
(12
)
(21
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,625
$
904
$
3
$
43
$
5,574
Operating income (loss) (GAAP)
$
(504
)
$
39
$
(3
)
$
(66
)
$
(535
)
Adjustments to equity earnings (loss) in
AmerisourceBergen
1,481
—
—
—
1,481
Acquisition-related amortization
76
19
—
—
95
Transformational cost management
60
27
—
12
100
LIFO provision
33
—
—
—
33
Acquisition-related costs
8
2
—
12
21
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,155
$
87
$
(3
)
$
(42
)
$
1,196
Gross margin (GAAP)
20.8
%
23.1
%
—
%
21.1
%
Adjusted gross margin (Non-GAAP
measure)
20.9
%
23.1
%
—
%
21.2
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.6
%
22.2
%
—
%
18.4
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.0
%
21.1
%
—
%
17.7
%
Operating margin2
3.2
%
0.9
%
—
%
2.7
%
Adjusted operating margin (Non-GAAP
measure)2
3.9
%
2.0
%
—
%
3.5
%
1
Operating income (loss) for United States
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, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of July 1,
2021 through September 30, 2021. 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 31, 2020.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings (loss) in
AmerisourceBergen and adjusted equity earnings (loss) in
AmerisourceBergen, respectively.
3
Fiscal 2021 data related to Walgreens
Health operating segment has been reclassified to conform to the
current period presentation.
EQUITY EARNINGS (LOSS) IN
AMERISOURCEBERGEN
Three months ended November
30,
2021
2020
Equity earnings in AmerisourceBergen
(GAAP)
$
100
$
(1,373
)
Acquisition-related intangibles
amortization
35
30
Employee severance, litigation, and
other
13
1,548
Impairment of non-customer note
receivable
4
—
Gains from antitrust litigation
settlements
3
—
Impairment of assets
3
3
Tax reform
3
(100
)
Goodwill impairment
2
—
Certain discrete tax benefits
—
6
New York State Opioid Stewardship Act
—
3
LIFO credit
(1
)
(7
)
Non-controlling interest
(2
)
—
Gain on remeasurement of equity
investment
(18
)
—
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
143
$
108
ADJUSTED EFFECTIVE TAX
RATE
Three months ended November
30, 2021
Three months ended November
30, 2020
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)
$
3,814
$
275
7.2
%
$
(607
)
$
(207
)
.
(34.0
)%
Impact of non-GAAP adjustments
(2,080
)
4
1,740
55
Equity method non-cash tax
—
(18
)
—
346
Adjusted tax rate true-up
—
22
—
6
Subtotal
$
1,733
$
284
$
1,132
$
200
Exclude adjusted equity earnings in
AmerisourceBergen
(143
)
—
(108
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,591
$
284
17.8
%
$
1,024
$
200
19.5
%
FREE CASH
FLOW
Three months ended November
30,
2021
2020
Net cash provided by operating
activities (GAAP)
$
1,099
$
1,195
Less: Additions to property, plant and
equipment - as reported
(454
)
(431
)
Free cash flow - (Non-GAAP
measure)1
$
645
$
763
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/20220106005276/en/
Media Relations U.S. / Morry Smulevitz, +1 847 315 0517
International, +44 (0)20 7980 8585
Investor Relations Tiffany Kanaga, +1 847 315 2922
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