Company Raises Full-Year Guidance to Around
10 Percent EPS Growth
Third quarter results, year-over-year,
including discontinued operations
- Total earnings per share (EPS), including discontinued
operations, were $1.38, compared with a loss of $1.95 in the
year-ago quarter; total adjusted EPS increased 83.4 percent to
$1.51, up 81.4 percent on a constant currency basis
Third quarter results, year-over-year, from continuing
operations
- Sales increased 12.1 percent to $34.0 billion, up 10.4 percent
on a constant currency basis
- EPS from continuing operations was $1.27, compared with a loss
of $2.05 in the year-ago quarter; continuing operations adjusted
EPS increased 95.1 percent to $1.38, up 93.6 percent on a constant
currency basis
Year-to-date results, year over year, from continuing
operations
- Sales increased 7.2 percent to $98.2 billion, up 6.1 percent on
a constant currency basis
- EPS from continuing operations was $1.89 compared with a loss
of $0.18. Adjusted EPS from continuing operations was $3.74, an
increase of 10.7 percent on a reported basis and up 9.9 percent on
a constant currency basis
Additional highlights
- Net cash provided by operating activities in the first nine
months of fiscal 2021 was $4.3 billion, an increase of $912 million
compared with the year-ago period; Free cash flow was $3.3 billion,
up $873 million year-over-year
- Walgreens has administered more than 25 million COVID-19
vaccinations to date
Fiscal 2021 outlook
- Company raised guidance to around 10 percent growth in constant
currency adjusted EPS from continuing operations
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the third quarter of fiscal 2021, which ended
May 31, 2021.
Chief Executive Officer Rosalind Brewer said, “This quarter’s
results demonstrate continued momentum, and while challenges lie
ahead, we are in a strong position to grow and innovate our core
retail and pharmacy businesses for the future. We are accelerating
our investments to advance our operational excellence, including
technology innovations that support mass personalization, pharmacy
of the future and the next phase of growth in tech-enabled
healthcare. These investments are fueled by our Alliance Healthcare
divestiture. I remain proud of our team members and the essential
role they are playing to help end the pandemic as the communities
we serve continue to turn to our trusted brands and expert
pharmacists.”
Completion of Strategic Transaction with
AmerisourceBergen
WBA completed the divestiture of the Alliance Healthcare
businesses to AmerisourceBergen for a total consideration of $6.5
billion, made up of $6.275 billion in cash (subject to a customary
net cash and working capital adjustment, which will result in an
additional net cash inflow of approximately $0.3 billion) and 2
million shares of AmerisourceBergen common stock. The company has
used a portion of the proceeds to eliminate $3.3 billion in debt
from its balance sheet and will deploy the remainder to accelerate
growth of its core retail pharmacy and healthcare businesses.
Overview of Third Quarter Results
WBA third quarter sales from continuing operations increased
12.1 percent from the year-ago quarter to $34.0 billion, an
increase of 10.4 percent on a constant currency basis1, reflecting
strong growth in the International segment, aided by the formation
of the company's joint venture in Germany during the fiscal year,
and solid growth in the United States segment.
Operating income from continuing operations was $1.1 billion in
the third quarter, compared with a loss of $1.7 billion in the
year-ago quarter, primarily due to $2 billion non-cash impairment
charges in the year-ago quarter related to goodwill and intangible
assets in Boots UK. Adjusted operating income from continuing
operations increased 82.9 percent on a reported currency basis to
$1.5 billion, an increase of 82.4 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 rebound
in International segment sales and profitability due to less severe
COVID-19 restrictions in the UK.
Total net earnings attributable to WBA were $1.2 billion
compared with a loss of $1.7 billion in the year-ago quarter,
reflecting non-cash impairment charges in the previous period,
increased operating income in both segments and earnings from the
company's equity method investment related to Option Care Health;
this was partially offset by a higher effective tax rate driven by
discrete items in the year-ago quarter. Total adjusted net earnings
in constant currency increased 79.5 percent to $1.3 billion.
Total EPS2 in the third quarter was $1.38, compared with a loss
of $1.95 in the year-ago quarter. Total adjusted EPS increased 83.4
percent to $1.51, up 81.4 percent on a constant currency basis.
Net earnings from continuing operations in the third quarter
were $1.1 billion, up from a loss of $1.8 billion in the year-ago
quarter. Adjusted net earnings from continuing operations increased
93.1 percent to $1.2 billion, up 91.6 percent on a constant
currency basis compared with the year-ago quarter.
EPS from continuing operations was $1.27 compared with a loss of
$2.05 in the year-ago quarter. Adjusted EPS from continuing
operations was $1.38 compared with $0.71 the year-ago quarter,
reflecting an increase of 93.6 percent on a constant currency
basis.
Net cash provided by operating activities was $1.8 billion in
the third quarter and free cash flow was $1.4 billion, a $788
million increase compared with the year-ago quarter.
Overview of Fiscal 2021 Year-to-Date Results
Sales from continuing operations in the first nine months of
fiscal 2021 increased 7.2 percent from the year-ago period to $98.2
billion, an increase of 6.1 percent on a constant currency
basis1.
Operating income from continuing operations in the first nine
months of fiscal 2021 increased $1.1 billion from the year-ago
period to $1.4 billion, with the $2 billion in non-cash impairment
charges in the year-ago period partially offset by a $1.5 billion
charge from the company's equity earnings in AmerisourceBergen in
the first quarter of fiscal 2021. Adjusted operating income from
continuing operations in the first nine months of the fiscal year
was $3.9 billion, an increase of 4.2 percent from the year-ago
period on a reported basis, up 3.9 percent on a constant currency
basis.
For the first nine months of fiscal 2021, total net earnings
attributable to WBA were $1.9 billion, compared with $83 million in
the year-ago period. Total adjusted net earnings in constant
currency increased 8.0 percent to $3.6 billion.
Total EPS2, including discontinued operations, was $2.21, up
from $0.09 at the same time last year. Total adjusted EPS increased
11.2 percent to $4.13, up 10.3 percent on a constant currency
basis.
Net earnings from continuing operations were $1.6 billion,
compared with a loss of $157 million in the year-ago period.
Adjusted net earnings from continuing operations increased 8.4
percent compared with the year-ago period, to $3.2 billion, up 7.6
percent on a constant currency basis.
EPS from continuing operations for the first nine months of
fiscal 2021 increased to $1.89, compared with a loss of $0.18 in
the year-ago period. Adjusted EPS from continuing operations was
$3.74, an increase of 10.7 percent on a reported basis and an
increase of 9.9 percent on a constant currency basis.
Net cash provided by operating activities was $4.3 billion in
the first nine months of fiscal 2021, an increase of $912 million
from the year-ago period, and free cash flow was $3.3 billion, an
increase of $873 million from the year-ago period.
Company Outlook
The company raised fiscal 2021 guidance from mid-to-high single
digit growth to around 10 percent growth in constant currency
adjusted EPS from continuing operations. The revised guidance
reflects strong results in the third quarter and greater clarity on
the impact of COVID-19 vaccinations.
Fighting the Pandemic
Walgreens and Boots UK pharmacists continue to play a critical
role on the front lines of the pandemic, including the following
examples through June.
- Walgreens has administered more than 25 million COVID-19
vaccinations to date and has expanded vaccination models to ensure
convenient access, including same-day and walk-in appointments,
mobile clinics, employer partnerships and extended hours at over
4,000 locations as part of the Biden Administration's National
Month of Action in June.
- Walgreens has administered more than 8 million COVID-19 tests
to date as part of its Test & Protect efforts, including
over-the-counter self tests.
- Boots is one of the UK’s leading COVID-19 test providers with
more than 3 million COVID-19 tests administered, the majority in
partnership with the National Health Service (NHS), and a growing
private test offering with several at home and in-store tests
available, in addition to testing partnerships with several major
airlines.
Selected Highlights of Progress on Strategic
Priorities:
- Creating neighborhood health destinations around a more
modern pharmacy
- WBA and VillageMD opened 46 previously announced Village
Medical at Walgreens locations and plan to open the next 35
locations by the end of calendar 2021, for a total of approximately
80 co-locations.
- As part of iA pharmacy automation efforts aimed at improving
health outcomes over time by empowering pharmacists to deliver
healthcare services, two micro-fulfillment centers are operating in
Phoenix and Dallas; these currently support approximately 550
Walgreens locations, and will soon support approximately 1,000
locations.
- Boots UK launched the Boots Health Hub, an innovative
marketplace that serves as a gateway to Boots and third party
online healthcare services.
- Accelerating digitalization
- Walgreens Find Care platform use increased to more than 135
million visits in the third quarter, mostly driven by COVID-19
testing and vaccinations.
- Walgreens completed the nationwide deployment of its SAP
S/4HANA front of store technology platform.
- Transforming and restructuring the company's retail
offering
- MyWalgreens membership has grown to 75 million, up from 56
million in the second quarter.
- Mass personalization boosted Walgreens retail sales by 100
basis points in the third quarter.
- Walgreens debit and credit cards will launch nationwide in
early fall as part of its expanded financial services
offering.
- More than 500 beauty brands are now available at Boots, with 34
new brands launched this fiscal year.
- Driving the Transformational Cost Management Program
- The company is on track to deliver in excess of $2 billion in
annual cost savings by fiscal 2022.
Business Segments
United States:
The United States segment had third quarter sales of $28.7
billion, an increase of 5.1 percent from the year-ago quarter.
Comparable sales increased 6.4 percent from the year-ago quarter
reflecting an 8.4 percent increase in comparable pharmacy sales and
a 1.7 percent increase in comparable retail sales.
Within comparable sales, prescriptions filled in the third
quarter increased 9.8 percent from a year earlier, including a
positive impact of approximately 600 basis points from COVID-19
vaccinations. Total prescriptions filled in the quarter increased
8.7 percent to 312.1 million, including immunizations, adjusted to
30-day equivalents. Pharmacy sales, which accounted for 75.7
percent of the segment's sales in the quarter, increased 6.3
percent compared with the year-ago quarter.
Retail sales increased 1.4 percent in the third quarter compared
with the year-ago quarter, including adverse impacts from the store
optimization programs.
Comparable retail sales increased 1.7 percent compared with the
year-ago quarter, reflecting mass personalization and strength in
beauty and photo aided by improved traffic trends. Comparable
retail sales excluding tobacco and e-cigarettes increased 2.6
percent.
Gross profit increased 15.5 percent compared with the year-ago
quarter and adjusted gross profit increased 14.5 percent, in both
cases reflecting strong sales growth, favorable retail margin due
to product mix and improved pharmacy margin entirely due to product
mix from COVID-19 vaccinations.
Third quarter SG&A decreased by 0.4 percent, and adjusted
SG&A increased by 6.5 percent, primarily driven by a negative
impact of approximately 500 basis points from COVID-19 related
costs, mainly related to the vaccination program, as well as higher
growth investments, partially offset by cost savings related to the
Transformational Cost Management Program.
Operating income in the third quarter increased to $1.2 billion
compared with $528 million in the year-ago quarter. Adjusted
operating income increased 50.3 percent, to $1.5 billion,
reflecting strong adjusted gross profit across both pharmacy and
retail, partly offset by significant costs related to the
vaccination program and higher growth investments.
International:
The International segment had third quarter sales of $5.3
billion, an increase of 75.8 percent from the year-ago quarter,
including a favorable currency impact of 17.1 percent. Sales
increased 58.7 percent on a constant currency basis, which includes
the impact of the company's wholesale joint venture in Germany,
which was consolidated as of November 2020. Excluding incremental
sales from the joint venture, International segment sales on a
constant currency basis increased 12.1 percent, reflecting a
partial recovery in the UK market as COVID-19 restrictions were
eased.
Boots UK comparable pharmacy sales increased 3.7 percent
compared with the year-ago quarter, reflecting stronger pharmacy
services and favorable timing of NHS reimbursement, partially
offset by lower prescription volume.
Boots UK comparable retail sales increased 38.7 percent compared
with the year-ago quarter. Footfall on the high street showed early
signs of recovery amid a partial easing of strict lockdown
measures, though travel locations in airports and train stations
continued to face challenges.
Boots.com continued to perform strongly, with sales growth of
42.3 percent compared with the year-ago quarter.
Gross profit increased 55.0 percent compared with the year-ago
quarter, including a favorable currency impact of 16.3 percent.
Adjusted gross profit increased 38.6 percent on a constant currency
basis, reflecting the ongoing recovery in UK retail sales.
SG&A in the quarter decreased 63.9 percent from the prior
year quarter to $1.0 billion, including an adverse currency impact
of 3.8 percent and the non-cash impairment charges in the year-ago
quarter. On a constant currency basis, adjusted SG&A increased
5.2 percent, due entirely to the higher SG&A associated with
the formation of the Germany joint venture. Excluding the Germany
joint venture impact, both SG&A and adjusted SG&A
decreased, reflecting cost savings from the Transformational Cost
Management Program.
Operating income, including a favorable currency impact of 0.1
percent, was $36 million compared with a loss of $2.2 billion,
which was primarily a result of the non-cash impairment charges.
Adjusted operating income was $94 million, an increase of $222
million on a constant currency basis compared with the year-ago
quarter, reflecting less severe UK COVID-19 restrictions, Boots.com
performance and cost management actions.
Conference Call
WBA will hold a conference call to discuss the third quarter
results beginning at 8:30 a.m. Eastern time today, July 1, 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,
July 1 through July 8, 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 9083634.
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 net earnings are to net earnings
attributable to WBA and all references to EPS are to 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 operating, financial and tax performance and results
(including those under "Company Outlook" and "Selected Highlights
of Progress on Strategic Priorities” 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, 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,”
“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, our ability to access therapies and
vaccines on time and in quantities to meet consumer demand and our
ability to process and distribute such therapies and vaccines
efficiently, the impact of private and public third-party payers’
efforts to reduce prescription drug reimbursements, including the
timing and amount of reimbursements for COVID-19 vaccinations,
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 operating, financial and tax 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 our Alliance Healthcare business 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 pharmacy, impacting millions of lives every day through
dispensing medicines, and providing accessible, high-quality care.
With more than 170 years of trusted healthcare heritage and
innovation in community pharmacy, the company is meeting customers'
and patients' needs through its convenient retail locations,
digital platforms and health and beauty products.
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 2021 list of the
World's Most Admired Companies.* This is the 28th 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.
*© 2021, 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 May
31,
Nine months ended May
31,
2021
2020
2021
2020
Sales
$
34,030
$
30,364
$
98,247
$
91,612
Cost of sales
26,877
24,406
77,684
71,858
Gross profit
7,153
5,959
20,564
19,753
Selling, general and administrative
expenses
6,116
7,884
17,936
19,663
Equity earnings (loss) in
AmerisourceBergen
97
243
(1,196)
284
Operating income (loss)
1,134
(1,683)
1,432
374
Other income (expense)
159
(32)
473
32
Earnings (loss) before interest and
tax
1,294
(1,715)
1,905
407
Interest expense, net
545
148
817
463
Earnings (loss) before tax
749
(1,862)
1,088
(56)
Income tax provision (benefit)
246
(43)
81
129
Post tax earnings from other equity method
investments
575
6
604
5
Net earnings (loss) from continuing
operations
1,078
(1,813)
1,610
(180)
Net earnings from discontinued
operations
95
88
289
248
Net earnings (loss)
1,173
(1,726)
1,899
68
Net (loss) attributable to noncontrolling
interests - continuing operations
(27)
(20)
(25)
(23)
Net earnings attributable to
noncontrolling interests - discontinued operations
2
2
9
7
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.
1,197
(1,708)
1,915
83
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.:
Continuing operations
$
1,105
$
(1,794)
$
1,636
$
(157)
Discontinued operations
92
86
279
241
Total
$
1,197
$
(1,708)
$
1,915
$
83
Basic earnings (loss) per common
share:
Continuing operations
$
1.28
$
(2.05)
$
1.89
$
(0.18)
Discontinued operations
0.11
0.10
0.32
0.27
Total
$
1.38
$
(1.95)
$
2.21
$
0.09
Diluted earnings (loss) per common
share:
Continuing operations
$
1.27
$
(2.05)
$
1.89
$
(0.18)
Discontinued operations
0.11
0.10
0.32
0.27
Total
$
1.38
$
(1.95)
$
2.21
$
0.09
Weighted average common shares
outstanding:
Basic
864.7
875.4
864.7
883.7
Diluted
867.0
875.4
866.2
884.7
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
May 31, 2021
August 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,345
$
469
Accounts receivable, net
5,153
4,110
Inventories
8,333
7,917
Other current assets
680
598
Assets of discontinued operations -
current
11,097
4,979
Total current assets
26,607
18,073
Non-current assets:
Property, plant and equipment, net
12,450
12,796
Operating lease right-of-use assets
21,874
21,453
Goodwill
12,493
12,013
Intangible assets, net
10,435
10,072
Equity method investments
6,778
7,204
Other non-current assets
1,282
581
Assets of discontinued operations -
non-current
—
4,983
Total non-current assets
65,313
69,101
Total assets
$
91,920
$
87,174
Liabilities, redeemable noncontrolling
interest and equity
Current liabilities:
Short-term debt
$
7,963
$
3,265
Trade accounts payable
11,290
10,145
Operating lease obligations
2,327
2,358
Accrued expenses and other liabilities
6,632
5,861
Income taxes
71
95
Liabilities of discontinued operations -
current
6,191
5,347
Total current liabilities
34,475
27,070
Non-current liabilities:
Long-term debt
7,732
12,203
Operating lease obligations
22,088
21,765
Deferred income taxes
1,309
1,367
Other non-current liabilities
3,410
3,222
Liabilities of discontinued operations -
non-current (see note 2)
—
412
Total non-current liabilities
34,539
38,968
Redeemable noncontrolling interest
310
—
Total equity
22,596
21,136
Total liabilities, redeemable
noncontrolling interest and equity
$
91,920
$
87,174
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine months ended May
31,
2021
2020
Cash flows from operating
activities:
Net earnings
$
1,899
$
68
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
1,455
1,447
Deferred income taxes
(210)
(102)
Stock compensation expense
120
101
Equity (earnings) loss from equity method
investments
577
(297)
Goodwill and intangible impairments
—
2,001
Loss on early extinguishment of debt
419
—
Gain on sale of equity method
investment
(290)
—
Other
(141)
305
Changes in operating assets and
liabilities:
Accounts receivable, net
(897)
141
Inventories
71
(227)
Other current assets
18
59
Trade accounts payable
927
(210)
Accrued expenses and other liabilities
428
569
Income taxes
54
(353)
Other non-current assets and
liabilities
(120)
(102)
Net cash provided by operating
activities
4,310
3,398
Cash flows from investing
activities:
Additions to property, plant and
equipment
(1,001)
(962)
Proceeds from sale-leaseback
transactions
662
557
Proceeds from sale of other assets
406
52
Business, investment and asset
acquisitions, net of cash acquired
(1,394)
(345)
Other
(14)
37
Net cash used for investing activities
(1,341)
(660)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
1,556
196
Proceeds from debt
12,720
16,336
Payments of debt
(11,050)
(16,871)
Stock purchases
(110)
(1,374)
Proceeds related to employee stock
plans
41
40
Cash dividends paid
(1,212)
(1,260)
Early debt extinguishment
(3,687)
—
Other
(114)
(66)
Net cash used for financing activities
(1,856)
(2,998)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(55)
(3)
Changes in cash, cash equivalents and
restricted cash:
Net increase (decrease) in cash, cash
equivalents and restricted cash
1,058
(263)
Cash, cash equivalents and restricted cash
at beginning of period
746
1,207
Cash, cash equivalents and restricted
cash at end of period
$
1,803
$
943
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 14 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 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
(in millions)
Three months ended May
31,
Nine months ended May
31,
2021
2020
2021
2020
Net Earnings (loss) From Continuing
Operations (GAAP)
$
1,105
$
(1,794)
$
1,636
$
(157)
Adjustments to Operating income
(loss):
Adjustments to equity earnings (loss) in
AmerisourceBergen 1
48
(105)
1,575
47
Acquisition-related amortization 2
158
94
367
290
Transformational cost management 3
60
310
338
508
Certain legal and regulatory accruals and
settlements 4
—
—
60
—
LIFO provision 5
51
29
85
90
Acquisition-related costs 6
9
68
25
291
Impairment of goodwill and intangible
assets 12
—
2,001
—
2,001
Store optimization 3
—
10
—
49
Store damage and inventory losses 13
—
75
—
75
Total adjustments to operating income
325
2,481
2,449
3,350
Adjustments to Other income
(expense):
Net investment hedging (gain) loss7
5
(2)
6
(6)
Impairment of equity method investment
—
71
—
71
Gain on sale of equity method investment
8
(98)
—
(290)
(1)
Total adjustments to other income
(expense)
(94)
69
(284)
64
Adjustments to interest expense,
net:
Early debt extinguishment 11
419
—
419
—
Total adjustments to interest expense,
net
419
—
419
—
Adjustments to income tax provision
(benefit):
U.S. tax law changes 9
—
—
—
(6)
Tax impact of adjustments 9
10
(180)
(104)
(350)
Equity method non-cash tax 9
17
53
(309)
52
Total adjustments to income tax provision
(benefit)
27
(127)
(412)
(303)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments10
(557)
3
(520)
47
Total adjustments to post tax equity
earnings from other equity method investments
(557)
3
(520)
47
Adjustments to net (loss) attributable
to noncontrolling interests:
Transformational cost management 3
—
—
2
—
Impairment of goodwill and intangible
assets 12
—
(14)
—
(14)
LIFO provision 5
(1)
—
(7)
—
Acquisition-related amortization 2
(30)
—
(46)
—
Total adjustments to net (loss)
attributable to noncontrolling interests
(30)
(14)
(50)
(14)
Adjusted net earnings attributable to
Continuing Operations (Non-GAAP measure)
$
1,194
$
618
$
3,237
$
2,985
Net earnings attributable to Walgreens
Boots Alliance, Inc. – discontinued operations (GAAP)
$
92
$
86
$
279
$
241
Acquisition-related amortization 2
—
$
19
28
$
57
Acquisition-related costs 6
39
$
—
49
$
—
Transformational cost management 3
(8)
$
4
1
$
15
Tax impact of adjustments 9
(5)
$
(4)
(15)
$
(11)
Total adjustments to net earnings
attributable to Walgreens Boots Alliance, Inc. – discontinued
operations
$
26
$
19
$
62
$
61
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. – discontinued operations (Non-GAAP
measure)
$
119
$
105
$
342
$
303
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. - (Non-GAAP measure)
$
1,313
$
723
$
3,579
$
3,288
Diluted net earnings per common share -
continuing operations (GAAP) 14
$
1.27
$
(2.05)
$
1.89
$
(0.18)
Adjustments to operating income
0.38
2.83
2.83
3.79
Adjustments to other income (expense)
(0.11)
0.08
(0.33)
0.07
Adjustments to interest expense, net
0.48
—
0.48
—
Adjustments to income tax provision
(benefit)
0.03
(0.14)
(0.48)
(0.34)
Adjustments to earnings from other equity
method investments10
(0.64)
—
(0.60)
0.05
Adjustments to net earnings (loss)
attributable to noncontrolling interests
(0.03)
(0.02)
(0.06)
(0.02)
Adjusted diluted net earnings per
common share - continuing operations (Non-GAAP measure)
$
1.38
$
0.71
$
3.74
$
3.37
Diluted net earnings per common share -
discontinued operations (GAAP)
$
0.11
$
0.10
$
0.32
$
0.27
Total adjustments to net earnings (loss)
attributable to Walgreens Boots Alliance, Inc. – discontinued
operations
0.03
0.02
0.07
0.07
Adjusted diluted net earnings per
common share - discontinued operations (Non-GAAP measure)
$
0.14
$
0.12
$
0.39
$
0.34
Adjusted diluted net earnings per
common share (Non-GAAP measure)
$
1.51
$
0.83
$
4.13
$
3.72
Weighted average common shares
outstanding, diluted (in millions) 15
867.0
876.1
866.2
884.7
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
Certain legal and regulatory accruals and
settlements relate to significant charges associated with certain
legal proceedings. The Company excludes these charges when
evaluating operating performance because it does not incur such
charges on a predictable basis and exclusion of such charges
enables more consistent evaluation of the Company’s operating
performance. These charges are recorded within selling, general and
administrative expenses.
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
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. 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.
7
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.
8
Includes significant gain on sale of
equity method investment. During the three and nine months ended
May 31, 2021, the Company recorded a gain of $98 million and $290
million respectively, in Other income due to a partial sale of
ownership interests in Option Care Health by the Company's equity
method investee HC Group Holdings.
9
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 and equity method non-cash tax. These charges
are recorded within income tax provision (benefit).
10
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. In the three
months ended May 31, 2021 due to partial sales of ownership
interests in Option Care Health, our equity method investee HC
Group Holdings lost the ability to control Option Care Health and,
therefore, deconsolidated Option Care Health in its financial
statements. As a result of this deconsolidation, HC Group Holdings
recognized a gain of $1.2 billion and the Company recorded its
share of equity earnings in HC Group Holdings of $576 million
during the three months ended May 31, 2021.
11
Loss on early extinguishment of debt
related to the Company's cash tender offers to partially purchase
and retire $3.3 billion of long term U.S. denominated notes. The
Company excludes these charges to enable a more consistent
evaluation of the Company's financial performance.
12
Goodwill and intangible assets arising
from acquisition related activities are recorded by the Company
following the analysis to determine the fair value of consideration
paid and the assignment of fair values to all tangible and
intangible assets acquired. Impairment of goodwill and intangible
assets do not relate to the ordinary course of the Company’s
business. The Company excludes these charges when evaluating
operating performance because it does not incur such charges on a
predictable basis and exclusion of such charges enables more
consistent evaluation of the Company’s operating performance. These
charges are recorded within selling, general and administrative
expenses.
13
Store damage and inventory losses as a
result of looting in the U.S., net of insurance recoveries.
14
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 and nine months ended May 31,
2020.
15
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 and nine months ended May 31,
2020.
NON-GAAP RECONCILIATIONS BY
SEGMENT
(in millions)
Three months ended May 31,
2021
United States1
International
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
28,743
$
5,288
$
—
$
34,030
Gross profit (GAAP)
$
6,093
$
1,060
$
—
$
7,153
LIFO provision
51
—
—
51
Acquisition-related amortization
5
—
—
5
Adjusted gross profit (Non-GAAP
measure)
$
6,149
$
1,060
$
—
$
7,208
Selling, general and administrative
expenses (GAAP)
$
4,971
$
1,025
$
120
$
6,116
Acquisition-related costs
(3)
(5)
(1)
(9)
Transformational cost management
(12)
(34)
(14)
(60)
Acquisition-related amortization
(132)
(20)
—
(152)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,824
$
966
$
104
$
5,894
Operating income (loss) (GAAP)
$
1,219
$
36
$
(120)
$
1,134
Adjustments to equity earnings (loss) in
AmerisourceBergen
48
—
—
48
Acquisition-related amortization
138
20
—
158
Transformational cost management
12
33
14
60
LIFO provision
51
—
—
51
Acquisition-related costs
3
5
1
9
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,471
$
94
$
(105)
$
1,459
Gross margin (GAAP)
21.2
%
20.1
%
21.0
%
Adjusted gross margin (Non-GAAP
measure)
21.4
%
20.0
%
21.2
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.3
%
19.4
%
18.0
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.8
%
18.3
%
17.3
%
Operating margin2
3.9
%
0.7
%
3.0
%
Adjusted operating margin (Non-GAAP
measure)2
4.6
%
1.8
%
3.9
%
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 and nine month period ended May 31, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of January
1, 2021 through March 31, 2021 and the period of July 1, 2020
through March 31, 2021, respectively. Operating income (loss) for
the three and nine month period ended May 31, 2020 includes
AmerisourceBergen equity earnings for the period of January 1, 2020
through March 31, 2020, and the period of July 1, 2019 through
March 31, 2020, 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.
(in millions)
Three months ended May 31,
2020
United States1
International
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,357
$
3,008
$
—
$
30,364
Gross profit (GAAP)
$
5,275
$
684
$
—
$
5,959
Transformational cost management
—
1
—
1
LIFO provision
29
—
—
29
Acquisition-related costs
7
—
—
7
Store damage and inventory losses
60
—
—
60
Adjusted gross profit (Non-GAAP
measure)
$
5,372
$
685
$
—
$
6,056
Selling, general and administrative
expenses (GAAP)
$
4,990
$
2,835
$
60
$
7,884
Acquisition-related costs
(57)
(1)
(3)
(61)
Transformational cost management
(269)
(29)
(11)
(309)
Acquisition-related amortization
(77)
(16)
—
(94)
Impairment of goodwill and intangible
assets
(32)
(1,969)
—
(2,001)
Store optimization
(10)
—
—
(10)
Store damage and inventory losses
(15)
—
—
(15)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,531
$
820
$
46
$
5,396
Operating income (loss) (GAAP)
$
528
$
(2,151)
$
(60)
$
(1,683)
Adjustments to equity earnings (loss) in
AmerisourceBergen
(105)
—
—
(105)
Acquisition-related amortization
77
16
—
94
Transformational cost management
269
30
11
310
LIFO provision
29
—
—
29
Acquisition-related costs
64
1
3
68
Impairment of goodwill and intangible
assets
32
1,969
—
2,001
Store optimization
10
—
—
10
Store damage and inventory losses
75
—
—
75
Adjusted operating income (loss)
(Non-GAAP measure)
$
979
$
(135)
$
(46)
$
798
Gross margin (GAAP)
19.3
%
22.7
%
19.6
%
Adjusted gross margin (Non-GAAP
measure)
19.6
%
22.8
%
19.9
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.2
%
94.3
%
26.0
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.6
%
27.2
%
17.8
%
Operating margin2
1.0
%
(71.5)
%
(6.3)
%
Adjusted operating margin (Non-GAAP
measure)2
3.1
%
(4.5)
%
2.2
%
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 and nine month period ended May 31, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of January
1, 2021 through March 31, 2021 and the period of July 1, 2020
through March 31, 2021, respectively. Operating income (loss) for
the three and nine month period ended May 31, 2020 includes
AmerisourceBergen equity earnings for the period of January 1, 2020
through March 31, 2020, and the period of July 1, 2019 through
March 31, 2020, 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.
(in millions)
Nine months ended May 31,
2021
United States1
International
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
83,250
$
14,998
$
—
$
98,247
Gross profit (GAAP)
$
17,434
$
3,130
$
—
$
20,564
Transformational cost management
—
(1)
—
(1)
LIFO provision
85
—
—
85
Acquisition-related amortization
5
—
—
5
Adjusted gross profit (Non-GAAP
measure)
$
17,525
$
3,129
$
—
$
20,654
Selling, general and administrative
expenses (GAAP)
$
14,695
$
2,949
$
292
$
17,936
Acquisition-related costs
(2)
(8)
(14)
(25)
Certain legal and regulatory accruals and
settlements
(60)
—
—
(60)
Transformational cost management
(213)
(81)
(44)
(338)
Acquisition-related amortization
(305)
(56)
—
(361)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
14,115
$
2,803
$
234
$
17,151
Operating income (loss) (GAAP)
$
1,543
$
181
$
(292)
$
1,432
Adjustments to equity earnings (loss) in
AmerisourceBergen
1,575
—
—
1,575
Acquisition-related amortization
311
56
—
367
Transformational cost management
213
80
44
338
LIFO provision
85
—
—
85
Certain legal and regulatory accruals and
settlements
60
—
—
60
Acquisition-related costs
2
8
14
25
Adjusted operating income (loss)
(Non-GAAP measure)
$
3,789
$
326
$
(233)
$
3,881
Gross margin (GAAP)
20.9
%
20.9
%
20.9
%
Adjusted gross margin (Non-GAAP
measure)
21.1
%
20.9
%
21.0
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.7
%
19.7
%
18.3
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.0
%
18.7
%
17.5
%
Operating margin2
3.3
%
1.2
%
2.7
%
Adjusted operating margin (Non-GAAP
measure)2
4.1
%
2.2
%
3.6
%
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 and nine month period ended May 31, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of January
1, 2021 through March 31, 2021 and the period of July 1, 2020
through March 31, 2021, respectively. Operating income (loss) for
the three and nine month period ended May 31, 2020 includes
AmerisourceBergen equity earnings for the period of January 1, 2020
through March 31, 2020, and the period of July 1, 2019 through
March 31, 2020, 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.
(in millions)
Nine months ended May 31,
2020
United States1
International
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
80,734
$
10,878
$
—
$
91,612
Gross profit (GAAP)
$
16,816
$
2,936
$
2
$
19,753
Transformational cost management
4
3
—
7
LIFO provision
90
—
—
90
Acquisition-related costs
67
—
—
67
Store damage and inventory losses
60
—
—
60
Store optimization
1
—
—
1
Adjusted gross profit (Non-GAAP
measure)
$
17,038
$
2,939
$
2
$
19,978
Selling, general and administrative
expenses (GAAP)
$
14,595
$
4,895
$
172
$
19,663
Transformational cost management
(387)
(83)
(31)
(501)
Acquisition-related amortization
(233)
(58)
—
(290)
Acquisition-related costs
(217)
(2)
(5)
(224)
Store damage and inventory losses
(15)
—
—
(15)
Store optimization
(47)
—
—
(47)
Impairment of goodwill and intangible
assets
(32)
(1,969)
—
(2,001)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
13,665
$
2,783
$
137
$
16,585
Operating income (loss) (GAAP)
$
2,505
$
(1,960)
$
(171)
$
374
Transformational cost management
390
86
31
508
Acquisition-related amortization
233
58
—
290
LIFO provision
90
—
—
90
Acquisition-related costs
284
2
5
291
Store optimization
49
—
—
49
Adjustments to equity earnings (loss) in
AmerisourceBergen
47
—
—
47
Store damage and inventory losses
75
—
—
75
Impairment of goodwill and intangible
assets
32
1,969
—
2,001
Adjusted operating income (loss)
(Non-GAAP measure)
$
3,704
$
155
$
(135)
$
3,724
Gross margin (GAAP)
20.8
%
27.0
%
21.6
%
Adjusted gross margin (Non-GAAP
measure)
21.1
%
27.0
%
21.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.1
%
45.0
%
21.5
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.9
%
25.6
%
18.1
%
Operating margin2
2.8
%
(18.0)
%
0.1
%
Adjusted operating margin (Non-GAAP
measure)2
4.2
%
1.4
%
3.7
%
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 and nine month period ended May 31, 2021 includes
AmerisourceBergen equity earnings (loss) for the period of January
1, 2021 through March 31, 2021 and the period of July 1, 2020
through March 31, 2021, respectively. Operating income (loss) for
the three and nine month period ended May 31, 2020 includes
AmerisourceBergen equity earnings for the period of January 1, 2020
through March 31, 2020, and the period of July 1, 2019 through
March 31, 2020, 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 May
31,
Nine months ended May
31,
2021
2020
2021
2020
Equity earnings in AmerisourceBergen
(GAAP)
$
97
$
243
$
(1,196)
$
284
Litigation settlements and other
17
14
1,581
58
Acquisition-related amortization
30
29
89
90
Certain discrete tax benefits
—
(206)
—
(206)
New York State Opioid Stewardship Act
—
—
3
—
Asset Impairment
—
46
3
76
PharMEDium remediation costs
—
7
—
13
Other
—
(1)
—
(1)
Anti-Trust
—
—
—
(2)
LIFO provision
(4)
5
(18)
19
Tax reform
7
—
(83)
—
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
145
$
138
$
379
$
331
ADJUSTED EFFECTIVE TAX
RATE
Three months ended May 31,
2021
Three months ended May 31,
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)
$
749
$
246
32.9%
$
(1,862)
$
(43)
2.3%
Impact of non-GAAP adjustments
650
(8)
2,549
191
Equity method non-cash tax
—
(17)
—
(53)
Adjusted tax rate true-up
—
(1)
—
(11)
Subtotal
$
1,399
$
219
$
687
$
83
Exclude adjusted equity earnings in
AmerisourceBergen
(145)
—
(138)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,253
$
219
17.5%
$
550
$
83
15.1%
Nine months ended May 31,
2021
Nine months ended May 31,
2020
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)
$
1,088
$
81
7.5%
$
(56)
$
129
(230.0)%
Impact of non-GAAP adjustments
2,584
78
3,414
354
Equity method non-cash tax
—
309
—
(52)
Adjusted tax rate true-up
—
26
—
(5)
U.S. tax law changes
—
—
—
6
Subtotal
$
3,672
$
494
$
3,358
$
432
Exclude adjusted equity earnings in
AmerisourceBergen
(379)
—
(331)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
3,293
$
494
15.0%
$
3,027
$
432
14.3%
FREE CASH FLOW
Three months ended May
31,
Nine months ended May
31,
2021
2020
2021
2020
Net cash provided by operating
activities (GAAP)1
$
1,754
$
914
$
4,310
$
3,398
Less: Additions to property, plant and
equipment - as reported
(309)
(257)
(1,001)
(962)
Free cash flow - (Non-GAAP
measure)1
$
1,445
$
657
$
3,309
$
2,436
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/20210701005253/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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