Maintains Full Year Adjusted EPS
Guidance
First quarter highlights, year-over-year
- Sales increased 1.6 percent to $34.3 billion, up 2.3 percent on
a constant currency basis
- Operating income decreased 27.6 percent to $1.0 billion;
Adjusted operating income decreased 15.6 percent to $1.5 billion,
down 15.4 percent on a constant currency basis
- EPS decreased 19.8 percent to $0.95; Adjusted EPS decreased 6.0
percent to $1.37, down 5.7 percent on a constant currency
basis
- Net cash provided by operating activities was $1.1 billion, an
increase of $601 million; Free cash flow was $674 million, an
increase of $684 million
Fiscal 2020 outlook
- Company maintained its guidance of roughly flat growth in
fiscal 2020 adjusted EPS on a constant currency basis
Transformational Cost Management Program
- On track to deliver in excess of $1.8 billion in annual cost
savings by fiscal 2022
Strategic updates announced after end of quarter
- WBA agreed to create German wholesale joint venture with
McKesson
- Kroger and Walgreens formed group purchasing organization
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the first quarter of fiscal 2020, which ended
November 30, 2019.
Executive Vice Chairman and CEO Stefano Pessina said, “We are
maintaining our outlook for the year despite a soft first quarter.
We are confident our strategic plans are the right ones to drive
long-term sustainable growth going forward. In addition, during the
quarter we were very satisfied with the progress made in our
Transformational Cost Management Program and with the strong cash
flow we delivered.”
Overview of First Quarter Results
Fiscal 2020 first quarter net earnings attributable to Walgreens
Boots Alliance decreased 24.8 percent to $845 million compared with
the same quarter a year ago, while net earnings per share1
decreased 19.8 percent to $0.95 compared with the same quarter a
year ago.
Adjusted net earnings attributable to Walgreens Boots Alliance2
decreased 11.8 percent to $1.2 billion, down 11.6 percent on a
constant currency basis, compared with the same quarter a year ago.
Adjusted earnings per share were $1.37, a decrease of 6.0 percent
on a reported currency basis and a decrease of 5.7 percent on a
constant currency basis, compared with the same quarter a year
ago.
Sales in the first quarter were $34.3 billion, an increase of
1.6 percent from the year-ago quarter, and an increase of 2.3
percent on a constant currency basis.
Compared to the same quarter a year ago, operating income was
$1.0 billion, a decrease of 27.6 percent, and adjusted operating
income was $1.5 billion, a decrease of 15.6 percent, down 15.4
percent on a constant currency basis, including more than 5
percentage points of adverse items such as year-over-year bonus
changes. Operating income also reflected costs related to the
acquisition of Rite Aid stores and to the implementation of the
Transformational Cost Management Program.
Net cash provided by operating activities was $1.1 billion in
the first quarter, an increase of $601 million from the same
quarter last year, and free cash flow was $674 million, an increase
of $684 million from the same quarter a year earlier, reflecting
working capital efficiencies as the company executed against
optimization initiatives.
Company Outlook
The company maintained guidance of roughly flat growth in fiscal
2020 adjusted earnings per share at constant currency rates, with a
range of plus or minus 3 percent.
Progress on Strategic Priorities
During the first 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 retail offering; creating neighborhood health
destinations; and the Transformational Cost Management Program.
Selected highlights include the following:
- WBA and McKesson announced an agreement to create a German
joint venture, combining their wholesale operations to drive long
term value in a key European market;
- Walgreens and Kroger formed a group purchasing organization,
expanding their collaboration with a new joint venture aimed at
delivering cost savings and other benefits across owned brand
sourcing;
- Flagship No7 beauty brand saw sales growth in the mid teens in
the U.S.;
- Jenny Craig health and weight loss management on track to
locate in approximately 100 Walgreens by the end of January;
- The first two of five VillageMD primary care clinics, Village
Medical at Walgreens, opened in Houston;
- Walgreens expansion of Save A Trip Refills program to drive
better clinical outcomes;
- Record on-line sales over Black Friday weekend in the U.S. and
the UK; and
- Boots UK announced an exclusive franchise agreement in the UK
with Mothercare.
Business Divisions
Retail Pharmacy USA:
Retail Pharmacy USA had first quarter sales of $26.1 billion, an
increase of 1.6 percent over the year-ago quarter. Sales in
comparable stores increased by the same percentage.
Pharmacy sales increased 2.9 percent compared with the year-ago
quarter, reflecting higher brand inflation and prescription volume,
and strong growth in central specialty. Comparable pharmacy sales
increased 2.5 percent. The division filled 294.0 million
prescriptions, including immunizations, adjusted to 30-day
equivalents in the quarter, an increase of 1.4 percent over the
year-ago quarter. Prescriptions filled in comparable stores
increased 2.8 percent compared with the same quarter a year
ago.
The division’s retail prescription market share on a 30-day
adjusted basis in the first quarter decreased approximately 55
basis points over the year-ago quarter to 20.9 percent, which was
in line with the fourth quarter of fiscal 2019, as reported by
IQVIA.3 The year-over-year change includes the impact of the store
optimization program.
Retail sales decreased 2.2 percent in the first quarter compared
with the year-ago period. Comparable retail sales were down 0.5
percent in the quarter, mostly due to continued de-emphasis of
tobacco. Excluding tobacco and e-cigarettes, comparable retail
sales increased around 0.8 percent, reflecting solid growth in the
core health and wellness and beauty categories.
Gross profit decreased 5.2 percent compared with the same
quarter a year ago and adjusted gross profit decreased 4.9 percent,
with procurement savings and pharmacy prescription growth
insufficient to offset year-on-year reimbursement pressure.
First quarter selling, general and administrative expenses
(SG&A) as a percentage of sales decreased by 0.3 percentage
point compared with the year-ago quarter. Adjusted SG&A as a
percentage of sales decreased by 0.6 percentage point in the same
period. Both decreases reflect strong cost savings, which more than
offset incremental investments, impact of inflation and higher
year-on-year bonus impact.
Operating income in the first quarter decreased 27.3 percent
from the year-ago quarter to $848 million. Excluding costs related
to the acquisition of Rite Aid stores and to the Transformational
Cost Management Program, adjusted operating income in the first
quarter decreased 16.2 percent from the year-ago quarter to $1.2
billion.
Retail Pharmacy International:
Retail Pharmacy International had first quarter sales of $2.7
billion, a decrease of 5.4 percent from the year-ago quarter,
reflecting an adverse currency impact of 2.7 percent. Sales
decreased 2.7 percent on a constant currency basis, mainly due to
lower retail sales in Boots UK and lower sales in Chile, reflecting
social unrest.
Comparable pharmacy sales increased 0.6 percent on a constant
currency basis, primarily due to the UK, driven by higher National
Health Service (NHS) reimbursement and increased sales of services,
partially offset by lower prescription volume. Comparable retail
sales decreased 3.0 percent on a constant currency basis, with
Boots UK holding share in a declining market.
Gross profit decreased 6.3 percent compared with the same
quarter a year ago, including an adverse currency impact of 2.6
percent. On a constant currency basis, gross profit and adjusted
gross profit decreased 3.7 percent and 3.6 percent, respectively,
reflecting lower retail sales and margin in Boots UK.
SG&A as a percentage of sales increased 0.7 percentage point
and adjusted SG&A as a percentage of sales, on a constant
currency basis, increased 1.3 percentage points, both reflecting
higher year-on-year bonus impact and technology investments.
Operating income in the first quarter decreased 43.7 percent
from the year-ago quarter to $44 million, while adjusted operating
income decreased 40.5 percent to $79 million, down 39.1 percent on
a constant currency basis.
Pharmaceutical Wholesale:
Pharmaceutical Wholesale had first quarter sales of $6.0
billion, an increase of 5.2 percent from the year-ago quarter,
including an adverse currency impact of 3.0 percent. On a constant
currency basis, comparable sales increased 8.3 percent, led by
emerging markets and the UK, including a customer contract change
in the UK.
Operating income in the first quarter was $122 million, which
included $13 million from the company’s equity earnings in
AmerisourceBergen. This compared with operating income of $155
million in the year-ago quarter, which included $39 million from
the company's equity earnings in AmerisourceBergen.
Adjusted operating income increased 4.1 percent to $229 million,
up 4.9 percent on a constant currency basis, reflecting strong
revenue growth and higher contribution from AmerisourceBergen.
Dividends Declared
During the first 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 December 12, 2019 to stockholders of record as
of November 18, 2019.
Conference Call
Walgreens Boots Alliance will hold a one-hour conference call to
discuss the first quarter results beginning at 8:30 a.m. Eastern
time today, January 8, 2020. The conference call will be simulcast
through the Walgreens Boots Alliance 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,
January 8, 2020 through January 15, 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 4998459.
1 All references to earnings per share (EPS) are to diluted EPS
attributable to Walgreens Boots Alliance.
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, 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,” “transform,” “accelerate,”
“model,” “long-term,” “continue,” “sustain,” “synergy,” “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 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 proposed 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, 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. Except to the extent
required by law, 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 2019 list of the World’s Most
Admired Companies, ranked first in the food and drugstore category.
This is the 26th 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 November
30,
2019
2018
Sales
$
34,339
$
33,793
Cost of sales
27,077
26,152
Gross profit
7,263
7,641
Selling, general and administrative
expenses
6,262
6,280
Equity earnings in AmerisourceBergen
13
39
Operating income
1,013
1,400
Other income
35
26
Earnings before interest and income tax
provision
1,048
1,427
Interest expense, net
166
161
Earnings before income tax provision
882
1,265
Income tax provision
32
180
Post tax earnings (loss) from other equity
method investments
(9
)
15
Net earnings
842
1,100
Net loss attributable to noncontrolling
interests
(3
)
(23
)
Net earnings attributable to Walgreens
Boots Alliance, Inc.
$
845
$
1,123
Net earnings per common share:
Basic
$
0.95
$
1.18
Diluted
$
0.95
$
1.18
Weighted average common shares
outstanding:
Basic
891.4
948.2
Diluted
892.6
951.4
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
November 30, 2019
August 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
811
$
1,023
Accounts receivable, net
7,435
7,226
Inventories
10,536
9,333
Other current assets
822
1,118
Total current assets
19,604
18,700
Non-current assets:
Property, plant and equipment, net
13,620
13,478
Operating lease right-of-use assets
21,674
—
Goodwill
16,800
16,560
Intangible assets, net
11,055
10,876
Equity method investments
6,902
6,851
Other non-current assets
1,152
1,133
Total non-current assets
71,203
48,899
Total assets
$
90,807
$
67,598
Liabilities and equity
Current liabilities:
Short-term debt
$
6,225
$
5,738
Trade accounts payable
15,401
14,341
Operating lease obligation
2,288
—
Accrued expenses and other liabilities
5,370
5,474
Income taxes
210
216
Total current liabilities
29,494
25,769
Non-current liabilities:
Long-term debt
10,628
11,098
Operating lease obligation
21,894
—
Deferred income taxes
1,618
1,785
Other non-current liabilities
2,861
4,795
Total non-current liabilities
37,000
17,678
Total equity
24,314
24,152
Total liabilities and equity
$
90,807
$
67,598
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three months ended November
30,
2019
2018
Cash flows from operating
activities:
Net earnings
$
842
$
1,100
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
477
490
Deferred income taxes
(62
)
24
Stock compensation expense
28
27
Equity (earnings) from equity method
investments
(4
)
(54
)
Other
28
97
Changes in operating assets and
liabilities:
Accounts receivable, net
(116
)
(515
)
Inventories
(1,099
)
(1,424
)
Other current assets
(5
)
(83
)
Trade accounts payable
924
1,097
Accrued expenses and other liabilities
45
(341
)
Income taxes
2
94
Other non-current assets and
liabilities
1
(54
)
Net cash provided by operating
activities
1,061
460
Cash flows from investing
activities:
Additions to property, plant and
equipment
(387
)
(470
)
Proceeds from sale-leaseback
transactions
147
—
Proceeds from sale of other assets
22
30
Business, investment and asset
acquisitions, net of cash acquired
(180
)
(200
)
Other
(4
)
5
Net cash used for investing activities
(402
)
(635
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
(392
)
1,067
Proceeds from debt
5,072
1,085
Payments of debt
(4,702
)
(545
)
Stock purchases
(473
)
(912
)
Proceeds related to employee stock
plans
14
101
Cash dividends paid
(410
)
(422
)
Other
24
16
Net cash (used for) provided by financing
activities
(866
)
390
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
1
(6
)
Changes in cash, cash equivalents and
restricted cash:
Net increase (decrease) in cash, cash
equivalents and restricted cash
(206
)
208
Cash, cash equivalents and restricted cash
at beginning of period
1,207
975
Cash, cash equivalents and restricted
cash at end of period
$
1,000
$
1,183
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
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. For
the Pharmaceutical Wholesale division, comparable sales are defined
as sales excluding acquisitions and dispositions. 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 Internal division,
comparable store sales, comparable pharmacy sales and comparable
retail sales, and with respect to the Pharmaceutical Wholesale
division, comparable 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.
NET EARNINGS AND DILUTED NET EARNINGS
PER SHARE
Three months ended November
30,
2019
2018
Net earnings attributable to Walgreens
Boots Alliance, Inc. (GAAP)
$
845
$
1,123
Adjustments to operating
income:
Acquisition-related costs
124
66
Acquisition-related amortization and
impairment
118
123
Transformational cost management
86
30
Adjustments to equity earnings in
AmerisourceBergen
80
44
LIFO provision
33
39
Store optimization
9
20
Certain legal and regulatory accruals and
settlements
—
10
Total adjustments to operating income
449
332
Adjustments to other income:
Gain on sale of equity method
investment
(1
)
—
Net investment hedging gain
(11
)
(3
)
Total adjustments to other income
(12
)
(3
)
Adjustments to income tax
provision:
Equity method non-cash tax
(2
)
4
U.S. tax law changes1
(6
)
(12
)
Tax impact of adjustments2
(80
)
(57
)
Total adjustments to income tax
provision
(88
)
(65
)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments3
28
—
Total adjustments to post tax equity
earnings from other equity method investments
28
—
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,222
$
1,386
Diluted net earnings per common share
(GAAP)
$
0.95
$
1.18
Adjustments to operating income
0.50
0.35
Adjustments to other income (expense)
(0.01
)
—
Adjustments to income tax provision
(0.10
)
(0.07
)
Adjustments to equity earnings in other
equity method investments3
0.03
—
Adjusted diluted net earnings per
common share (Non-GAAP measure)
$
1.37
$
1.46
Weighted average common shares
outstanding, diluted (in millions)
892.6
951.4
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 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
Acquisition-related costs
28
—
—
—
28
Transformational cost management
—
3
—
—
3
LIFO provision
33
—
—
—
33
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 costs
(94
)
—
(1
)
—
(95
)
Acquisition-related amortization and
impairment
(77
)
(22
)
(19
)
—
(118
)
Transformational cost management
(66
)
(10
)
(7
)
—
(83
)
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
Acquisition-related costs
122
—
1
—
124
Acquisition-related amortization and
impairment
77
22
19
—
118
Transformational cost management
66
12
7
—
86
Adjustments to equity earnings in
AmerisourceBergen
—
—
80
—
80
LIFO provision
33
—
—
—
33
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 for Pharmaceutical
Wholesale includes equity earnings in AmerisourceBergen. As a
result of the two month reporting lag, 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. Operating income for the three month
period ended November 30, 2018 includes AmerisourceBergen equity
earnings for the period of July 1, 2018 through September 30,
2018.
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 November
30, 2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Sales
$
25,721
$
2,901
$
5,708
$
(537
)
$
33,793
Gross profit (GAAP)
$
6,000
$
1,128
$
512
$
1
$
7,641
Acquisition-related costs
9
—
—
—
9
Transformational cost management
—
2
—
—
2
LIFO provision
39
—
—
—
39
Adjusted gross profit (Non-GAAP
measure)
$
6,049
$
1,129
$
512
$
1
$
7,692
Selling, general and administrative
expenses (GAAP)
$
4,834
$
1,050
$
396
$
—
$
6,280
Acquisition-related costs
(57
)
—
—
—
(57
)
Acquisition-related amortization and
impairment
(76
)
(27
)
(20
)
—
(123
)
Transformational cost management
(2
)
(25
)
(1
)
—
(28
)
Store optimization
(19
)
—
—
—
(19
)
Certain legal and regulatory accruals and
settlements
(10
)
—
—
—
(10
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,670
$
997
$
375
$
—
$
6,043
Operating income (GAAP)
$
1,166
$
78
$
155
$
1
$
1,400
Acquisition-related costs
66
—
—
—
66
Acquisition-related amortization and
impairment
76
27
20
—
123
Transformational cost management
2
27
1
—
30
Adjustments to equity earnings in
AmerisourceBergen
—
—
44
—
44
LIFO provision
39
—
—
—
39
Store optimization
20
—
—
—
20
Certain legal and regulatory accruals and
settlements
10
—
—
—
10
Adjusted operating income (Non-GAAP
measure)
$
1,379
$
132
$
220
$
1
$
1,732
Gross margin (GAAP)
23.3
%
38.9
%
9.0
%
22.6
%
Adjusted gross margin (Non-GAAP
measure)
23.5
%
38.9
%
9.0
%
22.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.8
%
36.2
%
6.9
%
18.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
18.2
%
34.4
%
6.6
%
17.9
%
Operating margin2
4.5
%
2.7
%
2.0
%
4.0
%
Adjusted operating margin (Non-GAAP
measure)2
5.4
%
4.6
%
2.4
%
4.9
%
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 month period ended November 30, 2019 includes
AmerisourceBergen equity earnings for the period of July 1, 2019
through September 30, 2019. Operating income for the three month
period ended November 30, 2018 includes AmerisourceBergen equity
earnings for the period of July 1, 2018 through September 30,
2018.
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 November
30,
2019
2018
Equity earnings in AmerisourceBergen
(GAAP)
$
13
$
39
U.S. tax law changes
—
(7
)
Acquisition-related amortization
30
31
LIFO provision
12
16
Anti-Trust
(1
)
—
Litigation settlements and other
36
(7
)
Asset Impairment
—
6
PharMEDium remediation costs
3
5
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
92
$
83
ADJUSTED EFFECTIVE TAX
RATE
Three months ended November
30, 2019
Three months ended November
30, 2018
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)
$
882
$
32
3.6
%
$
1,265
$
180
14.2
%
Impact of non-GAAP adjustments
437
84
329
55
U.S. tax law changes
—
6
—
12
Equity method non-cash tax
—
2
—
(4
)
Adjusted tax rate true-up
—
(4
)
—
2
Subtotal
$
1,320
$
120
$
1,593
$
245
Exclude adjusted equity earnings in
AmerisourceBergen
(92
)
—
(83
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,227
$
120
9.8
%
$
1,510
$
245
16.2
%
FREE CASH FLOW
Three months ended November
30,
2019
2018
Net cash provided by operating
activities (GAAP)
$
1,061
$
460
Less: Additions to property, plant and
equipment
(387
)
(470
)
Free cash flow (Non-GAAP measure)1
$
674
$
(10
)
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200108005237/en/
Media Relations U.S. / Fiona Ortiz +1 847 315 6402
International +44 (0)20 7980 8585
Investor Relations Gerald Gradwell and Jay Spitzer +1 847
315 2922
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