Note 20. Subsequent events
On June 1, 2021, the Company completed the previously announced sale of the majority of the Company's Alliance Healthcare business as well as a portion of the Company’s retail pharmacy international businesses in Europe, per the Share Purchase Agreement with AmerisourceBergen. See Note 2 Discontinued Operations for further information. The Company estimates the fair value of the proceeds from the Transaction to be approximately $6.8 billion to $6.9 billion (subject to net cash and working capital adjustments), the gain before currency translation adjustments to be approximately $1.0 billion to $1.1 billion and net gain on disposal to be approximately $0.3 billion to $0.4 billion. As of the date of this report, the Company has not completed the calculation of net gain on disposal of discontinued operations and therefore estimates presented are subject to further refinement and may result in changes.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 2. Management’s discussion and analysis of financial condition and results of operations
The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes included elsewhere herein and the Consolidated Condensed Financial Statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations and other disclosures contained in the Walgreens Boots Alliance, Inc. Annual Report on Form 10-K for the fiscal year ended August 31, 2020. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed below under “Cautionary note regarding forward-looking statements”, and in item 1A, risk factors, in our Form 10-K for the fiscal year ended August 31, 2020. References herein to the “Company”, “we”, “us”, or “our” refer to Walgreens Boots Alliance, Inc. and its subsidiaries, except as otherwise indicated or the context otherwise requires.
Certain amounts in the management's discussion and analysis of financial condition and results of operations may not add due to rounding. All percentages have been calculated using unrounded amounts for the three and nine months ended May 31, 2021 and May 31, 2020.
INTRODUCTION AND SEGMENTS
Walgreens Boots Alliance, Inc. and its subsidiaries (“Walgreens Boots Alliance” or the “Company”) is a global leader in retail pharmacy. Its operations are conducted through two reportable segments:
•United States; and
•International
See Note 15 Segment reporting and Note 16 Sales to the Consolidated Condensed Financial Statements for further information.
RECENT DEVELOPMENTS
Pharmaceutical Wholesale Transaction
On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen. Pursuant to the terms and subject to the conditions set forth in the Share Purchase Agreement, AmerisourceBergen agreed to purchase the majority of the Company's Alliance Healthcare business as well as a portion of the Company’s retail pharmacy international businesses in Europe for approximately $6.5 billion, comprised of $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of AmerisourceBergen common stock. Alliance Healthcare’s investment in China and Italy and its operations in Germany are not part of the Transaction. The Company's retail pharmacy international operations in The Netherlands, Norway and Lithuania are part of the Transaction. On June 1, 2021 the Company completed the previously announced sale of the Company's Alliance Healthcare business per the Share Purchase Agreement with AmerisourceBergen. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See Note 20 Subsequent events to the Consolidated Condensed Financial Statements for further information.
The Disposal Group met the criteria to be reported as discontinued operations. Therefore, the related assets, liabilities and operating results of the Disposal Group are reported as discontinued operations for all periods presented.
In connection with the closing of the Transaction, the Company and AmerisourceBergen also agreed to (i) a three-year extension through 2029 of the U.S. pharmaceutical distribution agreement pursuant to which branded and generic pharmaceutical products are sourced from AmerisourceBergen in the U.S., (ii) a three-year extension of the agreement, that provides AmerisourceBergen the ability to access generics pharmaceutical products through Walgreens Boots Alliance Development GmbH, the Company’s global sourcing enterprise, (iii) a distribution agreement pursuant to which AmerisourceBergen will supply branded and generic pharmaceutical products to the Company’s Boots UK business following the closing of the Transaction and (iv) explore a series of strategic initiatives designed to create incremental growth and efficiencies in sourcing, logistics and distribution.
See Note 2 Discontinued operations to the Consolidated Condensed Financial Statements for additional information.
VillageMD investment
On January 6, 2021, the Company and VillageMD announced that the Company had accelerated its investment in VillageMD to support the opening of 600 to 700 Village Medical at Walgreens primary care clinics in more than 30 U.S. markets within the next four years, with the intent to build hundreds more thereafter.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
In July 2020, the Company and VillageMD announced an expansion of their partnership and the intent to open 500 to 700 clinics over a five-year period, supported by the Company’s investment in VillageMD over three years of $1.0 billion in equity and convertible debt, which included an initial $250 million equity investment. The Company completed the remaining $750 million investment during the nine months ended May 31, 2021, which allows the Company to increase the minimum number of clinics to 600 and expand the rollout at a faster pace.
iA acquisition
On December 29, 2020, the Company acquired a majority equity interest in Innovation Associates, Inc. for a cash consideration of $451 million. Innovation Associates, Inc. is a leading-edge provider of software enabled automation solutions for retail, hospital and federal healthcare and mail-order pharmacy markets. The Company accounted for this acquisition as a business combination and consolidates Innovation Associates, Inc. within the United States segment in its financial statements. See Note 3 Acquisitions to the Consolidated Condensed Financial Statements for further information. Considering the contractual terms related to the remaining noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets. See Note 19 Supplemental information for more details on redeemable noncontrolling interest. The goodwill arising from this acquisition reflects the expected operational synergies and cost savings to be derived as a result of this acquisition.
Pharmaceutical Wholesale business in Germany
On November 1, 2020, the Company and McKesson Corporation closed a transaction to form a combined pharmaceutical wholesale business in Germany, as part of a strategic alliance. The Company owns a 70% controlling equity interest in the combined business which is consolidated by the Company and reported within the International segment in its financial statements. The Company accounted for this acquisition as a business combination involving noncash purchase consideration of $296 million consisting of the issuance of an equity interest in the combined business. See Note 3 Acquisitions to the Consolidated Condensed Financial Statements for further information.
FACTORS AFFECTING OUR RESULTS AND COMPARABILITY
The Company has been, and we expect it to continue to be affected by a number of factors that may cause actual results to differ from our historical results or current expectations. These factors include: the impact of the COVID-19 pandemic (“COVID-19”) on our operations and financial results; the financial performance of our equity method investees, including AmerisourceBergen; the influence of certain holidays; seasonality; foreign currency rates; changes in vendor, payer and customer relationships and terms and associated reimbursement pressure; strategic transactions and acquisitions, dispositions, joint ventures and other strategic collaborations; changes in laws, including U.S. tax law changes; changes in trade, tariffs, including trade relations between the U.S. and China, and international relations, including the UK's withdrawal from the European Union and its impact on our operations and prospects and those of our customers and counterparties; the timing and magnitude of cost reduction initiatives, including under our Transformational Cost Management Program (as defined below); the timing and severity of the cough, cold and flu season; fluctuations in variable costs; the impacts of looting, natural disasters, war, terrorism and other catastrophic events, and changes in general economic conditions in the markets in which the Company operates. These and other factors can affect the Company’s operations and net earnings for any period and may cause such results not to be comparable to the same period in previous years. The results presented in this report are not necessarily indicative of future operating results.
Estimated COVID-19 impacts and uncertainties
COVID-19 has severely impacted, and is expected to continue to impact, the economies of the U.S., the UK and other countries around the world. COVID-19 has created significant public health concerns as well as significant volatility, uncertainty and economic disruption in every region in which we operate, all of which have been adversely affected and may again adversely affect our industries and our business operations. Further, financial and credit markets have experienced and may again experience volatility. Policies and initiatives designed to reduce the transmission of COVID-19 have resulted in, among other things, temporary closure or reduced hours of operation of certain store locations in U.S., the UK and other countries, reduced customer traffic and sales in our retail pharmacies and the adoption of work-from-home policies.
COVID-19 continued to affect global economic conditions during the three months ended May 31, 2021. The situation surrounding COVID-19 remains fluid, and we are actively managing our response in collaboration with customers, government officials, team members and business partners and assessing potential impacts to our financial position and operating results, as well as developments in our business. As COVID-19 impacts the economies of the U.S., the UK and other countries around the world, the Company has put preparedness plans in place at our facilities to maintain continuity of our operations, while also taking steps to keep our team members healthy and safe.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
In response to COVID-19, various domestic and foreign federal, state and local governmental legislation, regulations, orders, policies and initiatives have been implemented that are designed to reduce the transmission of COVID-19, as well as to help address economic and market volatility and instability resulting from COVID-19. The Company has assessed and will continue to assess the impact of these governmental actions on the Company. It has participated in certain of these programs, including for example availing itself to certain tax deferrals which were introduced by the CARES Act in the U.S. and certain tax deferral and benefit and employee wage support in the UK, and may continue to do so in the future.
During the three months ended May 31, 2021, sales growth within the United States segment was aided by the acceleration of COVID-19 vaccination rollout and retail recovery as store traffic accelerated with key markets continuing to reopen. The International segment experienced a rebound in retail sales resulting from the phased reopening of the UK high street and less severe COVID-19 restrictions. However, store transactions remain below pre-COVID-19 levels due to the slower pace of reopening in the UK. The Company incurred labor and other costs related to the vaccination program and continued to take measures to keep stores open, incurring incremental selling, general and administrative expenses to safeguard store environments. The Company continued to take certain actions during the three months ended May 31, 2021 to partly mitigate the impact of COVID-19 through cost containment across the International segment, including reducing rent at some locations.
The Company continues to play a critical role in fighting the COVID-19 pandemic. To continue to work with customers and manage through the pandemic, the Company launched a COVID-19 testing program in fiscal 2020. Since the launch of the program, the Company has administered more than 8 million COVID-19 tests in the U.S. as part of its Test & Protect efforts, including over-the counter self tests. In the International segment, Boots administered more than 3 million COVID-19 tests in the UK, mostly undertaken in partnership with the National Health Service (“NHS”). Boots UK also have a growing private test offering with several at home and in-store tests available, in addition to testing partnerships with several major airlines.
The Company has worked with the Centers for Disease Control and Prevention (“CDC”), U.S. Department of Health and Human Services (“HHS”) and the U.S. government to help administer COVID-19 vaccines to high priority groups, including long-term care facility residents and staff. The United States segment also 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 of the date of this report, the United States segment has provided more than 25 million, COVID-19 vaccination, including 17 million in the three months ended May 31, 2021. The Company expects a lower level of COVID-19 vaccination in the three months ending August 31, 2021 compared to the three months ended May 31, 2021.
The Company anticipates additional mandates and directives, including revisions thereto, from foreign, federal, state, county and city authorities throughout the continuation of the COVID-19 pandemic and for some time thereafter. The impact of this activity on the U.S. and global economies and consumer, customer and health care utilization patterns depends upon the evolving factors and future developments related to COVID-19. As a result, the financial and/or operational impact these COVID-19 related governmental actions and inactions will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact, singularly or collectively, could be material and adverse.
The Company’s current expectations described above are forward-looking statements and our actual results may differ. Factors that might cause a difference include, but are not limited to, those discussed below under “Cautionary note regarding forward-looking statements” and in Item 1A, Risk factors, in our Form 10-K for the fiscal year ended August 31, 2020.
The potential impacts of Brexit
As a result of a referendum in June 2016, the UK withdrew from the European Union (“Brexit”) on January 31, 2020. It began a transition period in which to negotiate a new trading relationship for goods and services that ended on December 31, 2020. On December 24, 2020, the EU and UK agreed to a trade deal with no tariffs nor quotas on products, regulatory and customs cooperation mechanisms as well as provisions ensuring a level playing field for open and fair competition. Given the lack of comparable precedent, it is uncertain what financial, trade, regulatory and legal implications the agreed Brexit trade deal will have on our business, particularly our UK and other European operations; however, Brexit and its related effects could have a material adverse impact on the Company’s consolidated financial position and results of operations.
TRANSFORMATIONAL COST MANAGEMENT PROGRAM
On December 20, 2018, the Company announced a transformational cost management program that was expected to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 (the “Transformational Cost Management Program”). The Company continues to expect to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 from continuing operations, after excluding amounts related to the Disposal Group.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies. To date, the Company has taken actions across all aspects of the Transformational Cost Management Program. The actions under the Transformational Cost Management Program focus on the two reportable segments and the Company’s corporate and global functions. Divisional optimization within each of the Company’s segments includes activities such as optimization of stores including current plans to close approximately 200 Boots stores in the UK and approximately 250 stores in the U.S.
The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its generally accepted accounting principles in the U.S. (“GAAP”) financial results of approximately $2.1 billion to $2.3 billion, subject to approval, of which $1.8 billion to $2.0 billion are expected to be recorded as exit and disposal activities. The Company estimates that approximately 85% of the cumulative pre-tax charges will be associated with cash expenditures, primarily related to employee severance and business transition costs, IT transformation costs and lease and real estate payments.
The Company currently estimates that it will recognize aggregate pre-tax charges to its GAAP financial results in continuing operations related to Transformational Cost Management Program as follows:
|
|
|
|
|
|
|
|
Transformational Cost Management Program Activities
|
Range of Charges
|
|
Lease obligations and other real estate costs1
|
$450 to 500 million
|
|
Asset impairments2
|
$275 to 300 million
|
|
Employee severance and business transition costs
|
$800 to 850 million
|
|
Information technology transformation and other exit costs
|
$275 to 300 million
|
|
Total cumulative pre-tax exit and disposal costs
|
$1.8 to 2.0 billion
|
|
Other IT transformation costs
|
$300 to 350 million
|
|
Total estimated pre-tax costs
|
$2.1 to 2.3 billion
|
1Includes impairments relating to operating lease right-of-use and finance lease assets.
2Primarily related to asset write-offs from store closures and other asset write-offs.
In addition to the impacts discussed above, as a result of the actions related to store closures taken under the Transformational Cost Management Program, the Company recorded $508 million of transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard (Topic 842) on September 1, 2019.
Since the inception of the Transformational Cost Management Program to May 31, 2021, the Company has recognized aggregate cumulative pre-tax charges to its financial results in accordance with GAAP of $1.4 billion, of which $1.2 billion are recorded as exit and disposal activities. See Note 4 Exit and disposal activities, to the Consolidated Condensed Financial Statements for additional information. These charges included $293 million related to lease obligations and other real estate costs, $245 million in asset impairments, $517 million in employee severance and business transition costs, $153 million of information technology transformation and other exit costs and $175 million other IT costs.
Costs from continuing operations under the Transformational Cost Management Program, which were primarily recorded in selling, general and administrative expenses for the three and nine months ended May 31, 2021 and May 31, 2020, were as follows (in millions):
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended May 31, 2021
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
Lease obligations and other real estate costs
|
$
|
15
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
Asset impairments
|
5
|
|
|
9
|
|
|
—
|
|
|
14
|
|
|
Employee severance and business transition costs
|
(19)
|
|
|
2
|
|
|
14
|
|
|
(2)
|
|
|
Information technology transformation and other exit costs
|
1
|
|
|
10
|
|
|
|
|
11
|
|
|
Total pre-tax exit and disposal costs
|
$
|
2
|
|
|
$
|
27
|
|
|
$
|
14
|
|
|
$
|
44
|
|
|
Other IT transformation costs
|
10
|
|
|
6
|
|
|
—
|
|
|
16
|
|
|
Total pre-tax costs
|
$
|
13
|
|
|
$
|
33
|
|
|
$
|
14
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended May 31, 2021
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
Lease obligations and other real estate costs
|
$
|
56
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
Asset impairment
|
9
|
|
|
10
|
|
|
—
|
|
|
19
|
|
|
Employee severance and business transition costs
|
92
|
|
|
36
|
|
|
44
|
|
|
172
|
|
|
Information technology transformation and other exit costs
|
14
|
|
|
11
|
|
|
1
|
|
|
26
|
|
|
Total pre-tax exit and disposal charges
|
$
|
172
|
|
|
$
|
63
|
|
|
$
|
44
|
|
|
$
|
279
|
|
|
Other IT transformation costs
|
42
|
|
|
17
|
|
|
—
|
|
|
59
|
|
|
Total pre-tax charges
|
$
|
213
|
|
|
$
|
80
|
|
|
$
|
44
|
|
|
$
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended May 31, 2020
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
Lease obligations and other real estate costs
|
$
|
170
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
173
|
|
|
Asset impairments
|
19
|
|
|
10
|
|
|
—
|
|
|
29
|
|
|
Employee severance and business transition costs
|
47
|
|
|
(2)
|
|
|
11
|
|
|
56
|
|
|
Information technology transformation and other exit costs
|
17
|
|
|
16
|
|
|
—
|
|
|
33
|
|
|
Total pre-tax exit and disposal costs
|
$
|
253
|
|
|
$
|
27
|
|
|
$
|
11
|
|
|
$
|
290
|
|
|
Other IT transformation costs
|
17
|
|
|
4
|
|
|
—
|
|
|
20
|
|
|
Total pre-tax costs
|
$
|
269
|
|
|
$
|
30
|
|
|
$
|
11
|
|
|
$
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended May 31, 2020
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
Lease obligations and other real estate costs
|
$
|
179
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
184
|
|
|
Asset impairment
|
31
|
|
|
13
|
|
|
—
|
|
|
44
|
|
|
Employee severance and business transition costs
|
111
|
|
|
33
|
|
|
18
|
|
|
162
|
|
|
Information technology transformation and other exit costs
|
27
|
|
|
26
|
|
|
12
|
|
|
65
|
|
|
Total pre-tax exit and disposal charges
|
$
|
348
|
|
|
$
|
76
|
|
|
$
|
31
|
|
|
$
|
455
|
|
|
Other IT transformation costs
|
43
|
|
|
11
|
|
|
—
|
|
|
53
|
|
|
Total pre-tax charges
|
$
|
390
|
|
|
$
|
87
|
|
|
$
|
31
|
|
|
$
|
508
|
|
The amounts and timing of all estimates are subject to change until finalized. The actual amounts and timing may vary materially based on various factors. See “Cautionary note regarding forward-looking statements” below.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
INVESTMENT IN AMERISOURCEBERGEN
As of May 31, 2021, the Company owned 56,854,867 shares of AmerisourceBergen common stock, representing approximately 27.7% of its outstanding common stock based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q, and may, subject to certain conditions, acquire up to an additional 8,398,752 AmerisourceBergen shares in the open market.
The Company accounts for its investment in AmerisourceBergen using the equity method of accounting, subject to a two-month reporting lag, with the net earnings (loss) attributable to the investment classified within the operating income of the Company’s United States segment. During the nine months ended May 31, 2021, the Company recognized equity losses in AmerisourceBergen of $1,196 million, which included a loss of $1,373 million recognized during the three months ended November 30, 2020. These equity losses were primarily due to AmerisourceBergen recognition of $5.6 billion, net of tax, and charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.
On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen agreed to purchase the majority of the Company's pharmaceutical wholesale operations, as well as a portion of the Company’s retail pharmacy international businesses in Europe among other assets, for $6.275 billion in cash (subject to customary purchase price adjustments) and 2 million shares of common stock of AmerisourceBergen. On June 1, 2021 the Company completed the previously announced sale of the Company's Alliance Healthcare business per the Share Purchase Agreement with AmerisourceBergen. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See Recent developments above and Note 2 Discontinued operations to the Consolidated Condensed Financial Statements for additional information.
The financial performance of AmerisourceBergen will impact the Company’s results of operations. Additionally, a substantial and sustained decline in the price of AmerisourceBergen’s common stock could trigger an impairment evaluation of our investment. These considerations may materially and adversely affect the Company’s financial condition and results of operations.
For more information, see Note 6 Equity method investments to the Consolidated Condensed Financial Statements.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
The following table presents certain key financial statistics.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
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
|
|
|
Adjusted operating income (Non-GAAP measure)1
|
1,459
|
|
|
798
|
|
|
3,881
|
|
|
3,724
|
|
|
Earnings (loss) before interest and income tax provision
|
1,294
|
|
|
(1,715)
|
|
|
1,905
|
|
|
407
|
|
|
Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP)
|
1,105
|
|
|
(1,794)
|
|
|
1,636
|
|
|
(157)
|
|
|
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure)1
|
1,194
|
|
|
618
|
|
|
3,237
|
|
|
2,985
|
|
|
Diluted net earnings (loss) per common share - continuing operations (GAAP)
|
1.27
|
|
|
(2.05)
|
|
|
1.89
|
|
|
(0.18)
|
|
|
Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure)1
|
1.38
|
|
|
0.71
|
|
|
3.74
|
|
|
3.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage increases (decreases)
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Sales
|
12.1
|
|
0.1
|
|
7.2
|
|
1.4
|
|
Gross profit
|
20.0
|
|
(14.4)
|
|
4.1
|
|
(7.7)
|
|
Selling, general and administrative expenses
|
(22.4)
|
|
35.4
|
|
(8.8)
|
|
12.0
|
|
Operating income
|
NM
|
|
NM
|
|
282.6
|
|
(90.5)
|
|
Adjusted operating income (Non-GAAP measure)1
|
82.9
|
|
(50.0)
|
|
4.2
|
|
(26.2)
|
|
Earnings before interest and income tax provision
|
NM
|
|
NM
|
|
368.3
|
|
(90.3)
|
|
Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP)
|
NM
|
|
NM
|
|
NM
|
|
NM
|
|
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure)1
|
93.1
|
|
(50.4)
|
|
8.4
|
|
(25.0)
|
|
Diluted net earnings per common share - continuing operations (GAAP)
|
NM
|
|
NM
|
|
NM
|
|
NM
|
|
Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure)1
|
95.1
|
|
(48.4)
|
|
10.7
|
|
(21.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent to sales
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Gross margin
|
21.0
|
|
19.6
|
|
20.9
|
|
21.6
|
|
Selling, general and administrative expenses
|
18.0
|
|
26.0
|
|
18.3
|
|
21.5
|
1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
NM - Not meaningful. Percentage increases/decreases when one period includes income and other period includes loss are considered not meaningful.
WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS
Net earnings from continuing operations
Net earnings attributable to the Company for the three months ended May 31, 2021 was $1.1 billion compared to net loss of $1.8 billion for the prior year quarter. Diluted net earnings per share was $1.27 compared to diluted net loss per share of $2.05 for the prior year quarter. The increases in net earnings and diluted net earnings per share are primarily due to $2.0 billion non-cash impairment charges in the International segment, related to goodwill and intangible assets in the prior year period, increased operating income in the United States and International Segments and earnings related to the Company's equity method investment in HC Group Holdings I, LLC (“HC Group Holdings”) partially offset by higher effective tax rate in the quarter.
Net earnings attributable to the Company for the nine months ended May 31, 2021 was $1.6 billion compared to net loss of $157 million for the prior year period. Diluted net earnings per share was $1.89 compared to diluted net loss per share of $0.18 for the prior year period. The increases in net earnings and diluted net earnings per share are primarily due to $2.0 billion non-cash impairment charges in the International segment, related to goodwill and intangible assets in the prior year period, earnings related to the Company's equity method investee HC Group Holdings and gain on partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings partially offset by equity losses in AmerisourceBergen of $1.4 billion during the three months ended November 30, 2020.
Other income for the three and nine months ended May 31, 2021 was $159 million and $473 million respectively. Other income for the three and nine months ended May 31, 2020 was an expense of $32 million and an income of $32 million respectively. Increase in Other income is mainly due to a partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings.
Interest was a net expense of $545 million and $817 million for the three and nine months ended May 31, 2021, respectively, compared to $148 million and $463 million for the three and nine months ended May 31, 2020, respectively. The increases in interest expense included $419 million related to the early extinguishment of debt related to Company's cash tender offer to partially purchase and retire $3.3 billion of long-term debt in advance of its maturity.
The effective tax rate for the three months ended May 31, 2021 was 32.8%, compared to 2.3% for the three months ended May 31, 2020. The tax rate for the current period includes a discrete tax expense on equity earnings of $576 million from HC Group Holdings. The effective tax rate for the prior period reflects a tax benefit on a pretax loss and is primarily driven by the impact of a non-deductible goodwill impairment charge. The effective tax rate for the nine months ended May 31, 2021 was 7.4% compared to 230.0% in prior period, primarily due to the discrete tax effect of equity losses in AmerisourceBergen, partially offset by the tax effect of equity earnings of HC Group Holdings.
Adjusted net earnings from continuing operations (Non-GAAP measure)
Adjusted net earnings attributable to the Company for the three months ended May 31, 2021 increased 93.1% compared with the prior year quarter to $1.2 billion. Adjusted diluted net earnings per share increased 95.1% compared with the year-ago quarter to $1.38. Adjusted diluted net earnings and adjusted diluted net earnings per share were both positively impacted by 1.5 percentage points, respectively, as a result of currency translation.
The increases in adjusted net earnings and adjusted diluted net earnings per share for the three months ended May 31, 2021 primarily reflect strong adjusted gross profit growth across both pharmacy and retail in the United States and a rebound in International sales and profitability due to less severe COVID-19 restrictions in the UK. Adjusted diluted net earnings per share for the three months ended May 31, 2021 benefited from a lower number of shares outstanding compared with the prior year quarter. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
Adjusted net earnings attributable to the Company for the nine months ended May 31, 2021 increased 8.4% compared with the prior year period to $3.2 billion. Adjusted diluted net earnings per share increased compared with the year-ago period 10.7% to $3.74. Adjusted diluted net earnings and adjusted diluted net earnings per share were both positively impacted by 0.8 percentage points as a result of currency translation.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The increases in adjusted net earnings and adjusted diluted net earnings per share for the nine months ended May 31, 2021 primarily reflect growth in operating income due to less severe impacts from COVID-19 and lower interest expense. Adjusted diluted net earnings per share for the nine months ended May 31, 2021 benefited from a lower number of shares outstanding compared with the prior year period. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
RESULTS OF OPERATIONS BY SEGMENT
United States
The Company's United States segment includes the Walgreens business which includes the operations of retail drugstores, health and wellness services, and mail and central specialty pharmacy services, and its equity method investment in AmerisourceBergen. Sales for the segment are principally derived from the sale of prescription drugs and a wide assortment of retail products, including health and wellness, beauty, personal care and consumables and general merchandise.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL PERFORMANCE
|
(in millions, except location amounts)
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Sales
|
$
|
28,743
|
|
|
$
|
27,357
|
|
|
$
|
83,250
|
|
|
$
|
80,734
|
|
|
Gross profit
|
6,093
|
|
|
5,275
|
|
|
17,434
|
|
|
16,816
|
|
|
Selling, general and administrative expenses
|
4,971
|
|
|
4,990
|
|
|
14,695
|
|
|
14,595
|
|
|
Equity earnings (loss) in AmerisourceBergen
|
97
|
|
|
243
|
|
|
(1,196)
|
|
|
284
|
|
|
Operating income
|
1,219
|
|
|
528
|
|
|
1,543
|
|
|
2,505
|
|
|
Adjusted operating income (Non-GAAP measure)1
|
1,471
|
|
|
979
|
|
|
3,789
|
|
|
3,704
|
|
|
Number of prescriptions2
|
214.1
|
|
|
196.9
|
|
|
613.9
|
|
|
623.2
|
|
|
30-day equivalent prescriptions2,3
|
312.1
|
|
|
287.0
|
|
|
898.1
|
|
|
877.7
|
|
|
Number of locations at period end
|
8,992
|
|
|
9,095
|
|
|
8,992
|
|
|
9,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage increases (decreases)
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Sales
|
5.1
|
|
3.2
|
|
3.1
|
|
2.9
|
|
Gross profit
|
15.5
|
|
(9.7)
|
|
3.7
|
|
(6.4)
|
|
Selling, general and administrative expenses
|
(0.4)
|
|
4.0
|
|
0.7
|
|
1.3
|
|
Operating income
|
130.8
|
|
(48.5)
|
|
(38.4)
|
|
(31.6)
|
|
Adjusted operating income (Non-GAAP measure)1
|
50.3
|
|
(32.6)
|
|
2.3
|
|
(19.2)
|
|
|
|
|
|
|
|
|
|
|
Comparable sales4
|
6.4
|
|
3.1
|
|
4.1
|
|
2.5
|
|
Pharmacy sales
|
6.3
|
|
4.6
|
|
5.1
|
|
4.3
|
|
Comparable pharmacy sales4
|
8.4
|
|
3.5
|
|
6.0
|
|
3.3
|
|
Retail sales
|
1.4
|
|
(0.7)
|
|
(2.6)
|
|
(1.0)
|
|
Comparable retail sales4
|
1.7
|
|
2.1
|
|
(0.5)
|
|
0.7
|
|
Comparable number of prescription2,4
|
9.8
|
|
(5.8)
|
|
—
|
|
(1.2)
|
|
Comparable 30-day equivalent prescriptions2,3,4
|
9.8
|
|
0.4
|
|
3.8
|
|
2.7
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent to sales
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Gross margin
|
21.2
|
|
19.3
|
|
20.9
|
|
20.8
|
|
Selling, general and administrative expenses
|
17.3
|
|
18.2
|
|
17.7
|
|
18.1
|
1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
2Includes immunizations.
3Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.
4Comparable sales are defined as sales from stores that have been open for at least twelve 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 twelve 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 sales for the first twelve months after the relocation. Acquired stores are not included as comparable sales for the first twelve 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 and our method of calculating comparable sales may not be the same as other retailers’ methods.
Sales for the three months ended May 31, 2021 and May 31, 2020
The United States segment's sales for the three months ended May 31, 2021 increased 5.1% compared with the year-ago quarter to $28.7 billion. Sales in comparable stores increased 6.4% compared with the year-ago quarter.
Pharmacy sales increased 6.3% for the three months ended May 31, 2021 and represented 75.7% of the segment’s sales. The increase is primarily due to higher brand inflation, COVID-19 vaccination volume and increased prescription volume partially offset by higher generic utilization and lower reimbursement. In the year-ago quarter, pharmacy sales increased 4.6% and represented 74.9% of the segment’s sales. Comparable pharmacy sales increased 8.4% for the three months ended May 31, 2021 compared to increase of 3.5% in the year-ago quarter. The effect of generic drugs, which have a lower retail price, replacing brand name drugs reduced prescription sales by 0.5% in the three months ended May 31, 2021 compared to a reduction of 2.7% in the year-ago quarter. The effect of generics mix on segment sales caused a reduction of 0.4% for the three months ended May 31, 2021 compared to a reduction of 1.9% for the year-ago quarter. Third party sales, where reimbursement is received from managed care organizations, governmental agencies, employers or private insurers, were 97.5% of prescription sales for the three months ended May 31, 2021 compared to 95.4% in the year-ago quarter. The total number of prescriptions (including immunizations) filled for the three months ended May 31, 2021 was 214.1 million compared to 196.9 million in the year-ago quarter. Prescriptions (including immunizations) filled adjusted to 30-day equivalents were 312.1 million in the three months ended May 31, 2021 compared to 287.0 million in the year-ago quarter.
Retail sales for the three months ended May 31, 2021 increased 1.4%, including the impact of the store closures, and were 24.3% of the segment’s sales. In the year-ago quarter, retail sales decreased 0.7% and comprised 25.1% of the segment’s sales. Comparable retail sales increased 1.7% in the three months ended May 31, 2021 compared to increase of 2.1% in the year-ago quarter. The increase in the current quarter is driven primarily by an increase in health and wellness excluding cough, cold and flu and beauty categories reflecting mass personalization and improved traffic trends partially offset by a decline in consumables and general merchandise categories.
Operating income for the three months ended May 31, 2021 and May 31, 2020
The United States segment’s operating income for the three months ended May 31, 2021 increased 130.8% to $1.2 billion including $97 million from the Company’s share of equity earnings in AmerisourceBergen. The increase was primarily driven by higher gross profit from pharmacy reflecting improved pharmacy margin entirely due to product mix from COVID-19 vaccinations, and higher gross profit from retail reflecting favorable product mix, higher costs related to Transformational Cost Management program in the year ago quarter, partially offset by incremental costs related to the vaccination program.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Gross margin was 21.2% for the three months ended May 31, 2021 compared to 19.3% in the year-ago quarter. Gross margin was positively impacted in the current quarter by increased pharmacy margin due to favorable mix from vaccinations and retail margin expansion due to product mix.
Selling, general and administrative expenses as a percentage of sales were 17.3% in the three months ended May 31, 2021 compared to 18.2% in the year-ago quarter. As a percentage of sales, expenses were lower in the current quarter primarily due to higher costs related to Transformational Cost Management Program in the year ago quarter and savings this year from Transformational Cost Management program partially offset by incremental COVID-19 related costs, mainly related to the vaccination program as well as higher growth investments.
Adjusted operating income (Non-GAAP measure) for the three months ended May 31, 2021 and May 31, 2020
The United States segment’s adjusted operating income, which included $145 million from the Company’s share of adjusted earnings in AmerisourceBergen, was $1.5 billion for the three months ended May 31, 2021, an increase of 50.3% from the year-ago quarter. The increase was primarily driven by higher gross profit from pharmacy reflecting improved pharmacy margin entirely due to product mix from COVID-19 vaccinations, and higher gross profit from retail reflecting favorable product mix and costs savings from the Transformational Cost Management Program, offset by costs related to the COVID-19 vaccination program and higher growth investments. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
Sales for the nine months ended May 31, 2021 and May 31, 2020
The United States segment’s sales for the nine months ended May 31, 2021 increased 3.1% compared with the year-ago period to $83.3 billion. Sales in comparable stores increased 4.1% compared with the year-ago period.
Pharmacy sales increased 5.1% for the nine months ended May 31, 2021 and represented 75.8% of the segment’s sales. The increase is primarily due to higher brand and generic inflation and COVID-19 vaccination partially offset by pharmacy reimbursements and COVID-19 impacts. In the year-ago period, pharmacy sales increased 4.3% and represented 74.4% of the segment’s sales. Comparable pharmacy sales increased 6.0% for the nine months ended May 31, 2021 compared to increase of 3.3% in the year-ago period. The effect of generic drugs, which have a lower retail price, replacing brand name drugs reduced prescription sales by 0.4% in the nine months ended May 31, 2021 compared to a reduction of 2.6% in the year-ago period. The effect of generics mix on segment sales caused a reduction of 0.3% for the nine months ended May 31, 2021 compared to a reduction of 1.8% for the year-ago period. Third party sales, where reimbursement is received from managed care organizations, governmental agencies, employers or private insurers, were 97.5% of prescription sales for the nine months ended May 31, 2021 compared to 97.2% in the year-ago period. The total number of prescriptions (including immunizations) filled for the nine months ended May 31, 2021 was 613.9 million compared to 623.2 million in the year-ago period. Prescriptions (including immunizations) filled adjusted to 30-day equivalents were 898.1 million in the nine months ended May 31, 2021 compared to 877.7 million in the year-ago period.
Retail sales for the nine months ended May 31, 2021 decreased 2.6% and were 24.2% of the segment’s sales. In the year-ago period, retail sales decreased 1.0% and comprised 25.6% of the segment’s sales. Comparable retail sales decreased 0.5% in the nine months ended May 31, 2021 compared to increase of 0.7% in the year-ago period. The decrease in the current period was driven by slight declines in discretionary categories.
Operating income for the nine months ended May 31, 2021 and May 31, 2020
The United States segment’s operating income for the nine months ended May 31, 2021 decreased 38.4% compared to the year-ago period to $1.5 billion, including a loss of $1.2 billion from the Company’s share of equity earnings in AmerisourceBergen. Excluding the Company's share of equity earnings in AmerisourceBergen, the increase was primarily due to cost savings from the Transformation Cost Management Program.
Gross margin was 20.9% for the nine months ended May 31, 2021 compared to 20.8% in the year-ago period. Gross margin was impacted in the current fiscal year by pharmacy margins, which includes adverse impact of specialty, and higher retail margins.
Selling, general and administrative expenses as a percentage of sales were 17.7% in the nine months ended May 31, 2021 compared to 18.1% in the year-ago period. As a percentage of sales, expenses were lower in the current period primarily due to savings related to the Transformational Cost Management Program partially offset by incremental COVID-19 related costs, mainly related to the vaccination program as well as higher growth investments.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted operating income (Non-GAAP measure) for the nine months ended May 31, 2021 and May 31, 2020
The United States segment’s adjusted operating income was $3.8 billion and $3.7 billion for the nine months ended May 31, 2021 and May 31, 2020, respectively. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
International
The Company's International segment consists of pharmacy-led health and beauty retail businesses outside the U.S. and pharmaceutical wholesaling and distribution business in Germany. Pharmacy-led health and beauty retail businesses include Boots branded stores in the UK, the Republic of Ireland and Thailand, the Benavides brand in Mexico and the Ahumada brand in Chile. Sales for these businesses are principally derived from the sale of prescription drugs and health and wellness, beauty, personal care and other consumer products.
The International segment operates in currencies other than the U.S. dollar, including the British pound sterling, Euro, Chilean peso and Mexican peso and therefore the segment’s results are impacted by movements in foreign currency exchange rates. See Item 3, “Quantitative and qualitative disclosure about market risk, foreign currency exchange rate risk”, for further information on currency risk.
The Company presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. Comparable sales in constant currency, comparable pharmacy sales in constant currency and comparable retail sales in constant currency exclude the effects of fluctuations in foreign currency exchange rates. See “--Non-GAAP Measures.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL PERFORMANCE
|
(in millions, except location amounts)
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Sales
|
$
|
5,288
|
|
|
$
|
3,008
|
|
|
$
|
14,998
|
|
|
$
|
10,878
|
|
|
Gross profit
|
1,060
|
|
|
684
|
|
|
3,130
|
|
|
2,936
|
|
|
Selling, general and administrative expenses
|
1,025
|
|
|
2,835
|
|
|
2,949
|
|
|
4,895
|
|
|
Operating income (loss)
|
36
|
|
|
(2,151)
|
|
|
181
|
|
|
(1,960)
|
|
|
Adjusted operating income (loss) (Non-GAAP measure)1
|
94
|
|
|
(135)
|
|
|
326
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
Number of locations at period end
|
4,062
|
|
|
4,265
|
|
|
4,062
|
|
|
4,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage increases (decreases)
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Sales
|
75.8
|
|
(21.1)
|
|
37.9
|
|
(8.1)
|
|
Gross profit
|
55.0
|
|
(38.8)
|
|
6.6
|
|
(14.5)
|
|
Selling, general and administrative expenses
|
(63.9)
|
|
183.9
|
|
(39.8)
|
|
61.3
|
|
Operating income (loss)
|
NM
|
|
NM
|
|
NM
|
|
NM
|
|
Adjusted operating income (loss) (Non-GAAP measure)1
|
NM
|
|
NM
|
|
109.7
|
|
(72.5)
|
|
|
|
|
|
|
|
|
|
|
Comparable sales in constant currency2
|
21.0
|
|
(22.8)
|
|
0.7
|
|
(8.2)
|
|
Pharmacy sales
|
15.2
|
|
(11.5)
|
|
5.2
|
|
(4.6)
|
|
Comparable pharmacy sales in constant currency2
|
6.0
|
|
(2.2)
|
|
4.8
|
|
(0.1)
|
|
Retail sales
|
55.9
|
|
(44.6)
|
|
(0.1)
|
|
(16.4)
|
|
Comparable retail sales in constant currency2
|
35.7
|
|
(36.1)
|
|
(1.9)
|
|
(12.5)
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent to sales
|
|
|
Three months ended May 31,
|
|
Nine months ended May 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Gross margin
|
20.1
|
|
22.7
|
|
20.9
|
|
27.0
|
|
Selling, general and administrative expenses
|
19.4
|
|
94.3
|
|
19.7
|
|
45.0
|
1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
2Comparable sales in constant currency are defined as sales from stores that have been open for at least twelve 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 twelve months as well as e-commerce sales. Comparable sales in constant currency exclude wholesale sales. E-commerce sales include digitally initiated sales online or through mobile applications. Relocated stores are not included as comparable stores for the first twelve months after the relocation. Acquired stores are not included as comparable sales for the first twelve months after acquisition or conversion, when applicable, whichever is later. Comparable sales in constant currency, comparable pharmacy sales in constant currency and comparable retail sales in constant currency refer to total sales, pharmacy sales and retail sales, respectively. Comparable retail sales in constant currency for previous periods have been restated to include e-commerce sales. The method of calculating comparable sales in constant currency varies across the retail industry and our method of calculating comparable sales in constant currency may not be the same as other retailers’ methods.
NM - Not meaningful. Percentage increases/decreases when one period includes income and other period includes loss are considered not meaningful.
Sales for the three months ended May 31, 2021 and May 31, 2020
The International segment’s sales for the three months ended May 31, 2021 increased 75.8% from the year-ago quarter to $5.3 billion, resulting from an increase in the Company’s combined wholesale and distribution business in Germany which were consolidated as of November 2020. The favorable impact of currency translation was 17.1 percentage points. Comparable sales, which exclude pharmaceutical wholesale sales in Germany, increased 21.0%, mainly due to higher sales in Boots UK and Republic of Ireland driven by recovery in store foot traffic as COVID-19 restrictions eased.
Pharmacy sales increased 15.2% in the three months ended May 31, 2021 and represented 18.1% of the segment’s sales. The favorable impact of currency translation on pharmacy sales was 13.0 percentage points. Comparable pharmacy sales increased 6.0% from the year-ago quarter primarily due to stronger pharmacy services, and favorable timing of National Health Service (“NHS”) reimbursement in the UK as well as growth in Mexico, partially offset by the impact of lower prescription volumes in the UK.
Retail sales increased 55.9% for the three months ended May 31, 2021 and represented 27.4% of the segment’s sales. The favorable impact of currency translation on retail sales was 17.0 percentage points. Comparable retail sales increased 35.7%, from the year-ago quarter reflecting higher Boots UK and Republic of Ireland retail sales driven by recovery in store foot traffic as COVID-19 restrictions eased, as well as strong performance of Boots.com.
Operating income for the three months ended May 31, 2021 and May 31, 2020
The International segment’s operating income for the three months ended May 31, 2021 was $36 million, compared to a loss of $2.2 billion in the year-ago quarter. The increase was primarily due to goodwill and intangible asset impairment charges in the Boots reporting unit in the year ago quarter, higher gross profit attributable to higher sales from less severe COVID-19 restrictions in the UK, as well as decisive cost management actions and strong performance of Boots.com.
Gross profit increased 55.0% from the year-ago quarter. Gross profit was favorably impacted by 16.3 percentage points ($111 million) of currency translation. Excluding the impact of currency translation, the increase was primarily due to higher retail sales in the UK as a result of the recovery in store foot traffic as COVID-19 restrictions eased, as well as incremental gross profit associated with the Germany combined business.
Selling, general and administrative expenses decreased 63.9% from the year-ago quarter. Expenses were impacted by 3.8 percentage points ($108 million) as a result of currency translation. Excluding the impact of currency translation, the decrease was mainly due to goodwill and intangible asset impairment charges in the Boots reporting unit in the year ago quarter, cost
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
savings from the Transformational Cost Management Program, partly offset by lower short term mitigation actions as COVID-19 restrictions eased and higher selling, general and administrative expenses associated with the Germany combined business. As a percentage of sales, selling, general and administrative expenses were 19.4% in the three months ended May 31, 2021 compared to 94.3% in the year-ago quarter.
Adjusted operating income (Non-GAAP measure) for the three months ended May 31, 2021 and May 31, 2020
International segment’s adjusted operating income for the three months ended May 31, 2021 was $94 million, an increase of $229 million compared with the year-ago quarter. Adjusted operating income was positively impacted by 5.1 percentage points ($7 million) of currency translation. Excluding the impact of currency translation, the increase in adjusted operating income was primarily due to higher sales as a result of the recovery in store foot traffic as COVID-19 restrictions eased, strong performance of Boots.com and decisive cost mitigation actions. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
Sales for the nine months ended May 31, 2021 and May 31, 2020
The International segment’s sales for the nine months ended May 31, 2021, increased 37.9% compared to the prior year period to $15.0 billion, resulting from an increase from the Company’s combined wholesale and distribution business in Germany which were consolidated as of November 2020. Sales were favorably impacted in the period by 9.6 percentage points ($1.0 billion) as a result of currency translation. Comparable sales in constant currency, which exclude pharmaceutical wholesale sales in Germany, increased 0.7%, primarily due to growth in Ireland and Mexico partially offset by lower sales in Boots UK, including adverse COVID-19 impacts.
Pharmacy sales increased 5.2% for the nine months ended May 31, 2021 compared to the prior year period and represented 18.6% of the segment’s sales. The favorable impact of currency translation on pharmacy sales in the period was 5.8 percentage points. Comparable pharmacy sales in constant currency increased 4.8% from the prior year period primarily due to favorable timing of NHS reimbursement and stronger pharmacy services in the UK, and pharmacy volumes in Mexico. This is partially offset by lower prescription volume in the UK.
Retail sales decreased 0.1% for the nine months ended May 31, 2021 compared to the prior year period and represented 30.7% of the segment’s sales. The favorable impact of currency translation on retail sales in the period was 5.6% percentage points. Comparable retail sales in constant currency decreased 1.9% from the prior year period reflecting lower store retail sales in Boots UK, including COVID-19 impacts, partially offset by higher retail sales in Ireland as well as the ongoing strong performance of Boots.com.
Operating income for the nine months ended May 31, 2021 and May 31, 2020
The International segment’s operating income for the nine months ended May 31, 2021 was $181 million, compared to an operating loss in the prior year period of $2.0 billion. The increase was primarily due to goodwill and intangible asset impairment charges in the Boots reporting unit in the year ago period, decisive cost management actions and strong performance of Boots.com, partly offset by lower sales from lower store foot traffic from the relative duration of COVID-19 restrictions.
Gross profit increased 6.6% from the prior year period. Gross profit in the period was favorably impacted by 6.5 percentage points ($190 million) as a result of currency translation. Excluding the impact of currency translation, the increase was primarily due to incremental gross profit associated with the Germany combined business and favorable timing of NHS reimbursement, largely offset by lower retail sales in Boots UK.
Selling, general and administrative expenses decreased 39.8% from the prior year period. Expenses in the period were adversely impacted by 3.6 percentage points ($177 million) as a result of currency translation. Excluding the impact of currency translation, the decrease was largely due to goodwill and intangible asset impairment charges in the Boots reporting unit in the prior year period, cost savings from the Transformational Cost Management Program and short term cost mitigation, partly offset by higher selling, general and administrative expenses associated with the Germany combined business. As a percentage of sales, selling, general and administrative expenses were 19.7% in the nine months ended May 31, 2021 compared to 45.0% in the prior year period.
Adjusted operating income (Non-GAAP measure) for the nine months ended May 31, 2021 and May 31, 2020
The International segment’s adjusted operating income for the nine months ended May 31, 2021 increased compared to the prior year period to $326 million. Adjusted operating income in the period was positively impacted by 12.0 percentage points
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
($19 million) as a result of currency translation. Excluding the impact of currency translation, the increase was mainly due to decisive cost mitigation actions and strong performance of Boots.com, partially offset by the impact of lower store foot traffic, compared to the prior year period. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
NON-GAAP MEASURES
The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the SEC, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, 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. See notes to the “Net Earnings (loss) From Continuing Operations (GAAP)” to “Adjusted diluted net earnings per common share (Non-GAAP measure)” reconciliation table for definitions of non-GAAP financial measures and related adjustments presented below.
These supplemental non-GAAP financial measures are presented because the Company's management has evaluated its 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 from period to period and trends in its 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.
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 U.S. reporting in currencies other than the U.S. dollar and such presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations.
NON-GAAP RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Three months ended May 31, 2021
|
|
|
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
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
|
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Three months ended May 31, 2020
|
|
|
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Nine months ended May 31, 2021
|
|
|
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Nine months ended May 31, 2020
|
|
|
|
United States
|
|
International
|
|
Corporate and Other
|
|
Walgreens Boots Alliance, Inc.
|
|
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
|
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) loss 7
|
|
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 investments 10
|
|
(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)
|
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (loss) 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 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
|
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
|
|
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's recognition of $5.6 billion, net of tax, charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.
|
|
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.
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company considers certain metrics presented in this report, such as comparable sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions, and comparable 30-day equivalent prescriptions, 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, which are described in more detail in this report, may not be comparable to similarly-titled performance indicators used by other companies.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and restricted cash were $1.8 billion (including $0.7 billion in non-U.S. jurisdictions) as of May 31, 2021, compared to $0.9 billion (including $0.4 billion in non-U.S. jurisdictions) as of May 31, 2020. Short-term investment objectives are primarily to minimize risk and maintain liquidity. To attain these objectives, investment limits are placed on the amount, type and issuer of securities. Investments are principally in U.S. Treasury money market funds.
The Company's long-term capital policy is to: maintain a strong balance sheet and financial flexibility; reinvest in its core strategies; invest in strategic opportunities that reinforce its core strategies and meet return requirements; and return surplus cash flow to stockholders in the form of dividends and share repurchases over the long term. In June 2018, the Company’s Board of Directors reviewed and refined the Company’s dividend policy to set forth the Company’s current intention to increase its dividend each year.
Cash provided by operations and the incurrence of debt are the principal sources of funds for expansion, investments, acquisitions, remodeling programs, dividends to stockholders and stock repurchases. Net cash provided by operating activities for the nine months ended May 31, 2021 was $4.3 billion, compared to $3.4 billion for the prior year period. The $0.9 billion increase in cash provided by operating activities reflects increase in operating performance and higher cash inflows from trade accounts payable, partially offset by higher cash outflows from accounts receivables. Changes in trade accounts payables and accounts receivables are mainly driven by timing of payments and receipts.
Net cash used for investing activities was $1.3 billion for the nine months ended May 31, 2021 compared to $0.7 billion for the prior year period. The $0.7 billion increase in cash used by investing activities is primarily driven by higher cash outflows from business, investment and asset acquisitions partially offset by higher cash inflows from proceeds from sale of assets. Changes in business, investment and asset acquisitions in the period was primarily driven by acquisition in Innovation Associates and increased investment in VillageMD. Changes in proceeds from sale of assets was primarily driven by partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings. Proceeds from sale-leaseback transactions was $0.7 billion for the nine months ended May 31, 2021 compared to $0.6 billion for the prior year period.
For the nine months ended May 31, 2021, additions to property, plant and equipment were $1.0 billion compared to $1.0 billion in the prior year period. Capital expenditures were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended May 31,
|
|
|
|
2021
|
|
2020
|
|
United States
|
|
$
|
745
|
|
|
$
|
743
|
|
|
International
|
|
162
|
|
|
169
|
|
|
Corporate
|
|
28
|
|
|
5
|
|
|
Discontinued operations
|
|
67
|
|
|
45
|
|
|
Total
|
|
$
|
1,001
|
|
|
$
|
962
|
|
Significant capital expenditures primarily relate to growth initiatives and information technology projects.
Net cash used for financing activities for the nine months ended May 31, 2021 was $1.9 billion, compared to $3.0 billion in the prior year period. In the nine months ended May 31, 2021 there were $14.3 billion in net debt proceeds primarily from revolving credit facilities described below and commercial paper debt compared to $16.5 billion in net proceeds in the prior year period. In the nine months ended May 31, 2021 there were $11.1 billion in payments of debt made primarily for revolving credit facilities and commercial paper debt compared to $16.9 billion in nine months ended May 31, 2020. Financing activities during the three months ended May 31, 2021 include partial purchase and retirement of $3.3 billion of long term debt using
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
proceeds from the $3.8 billion delayed draw term loan. The Company repurchased shares totaling $110 million in the nine months ended May 31, 2021 to support the needs of its employee stock plans compared to $1.4 billion in the prior year period which also included stock repurchase program described below. Cash dividends paid were $1.2 billion during the nine months ended May 31, 2021, compared to $1.3 billion for the prior year period.
The Company expects to fund its working capital needs, capital expenditures, future acquisitions, dividend payments and debt service obligations from liquidity sources including cash flow from operations, availability under existing credit facilities, commercial paper programs, working capital financing arrangements and current cash and investment balances. The Company believes that these sources, and the ability to obtain other financing will provide adequate cash funds for the Company’s foreseeable working capital needs, capital expenditures, future acquisitions, dividend payments and debt service obligations for at least the next 12 months. The Company’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements. Additionally, the Company’s cash requirements, and its ability to generate cash flow, have been and may continue to be adversely affected by COVID-19 and the resulting market volatility and instability. For further information regarding the impact of COVID-19 on the Company, including on its liquidity and capital resources, please see Item 1A, Risk factors in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020.
See Item 3, Qualitative and quantitative disclosures about market risk, below for a discussion of certain financing and market risks.
Stock repurchase program
In June 2018, the Company's Board of Director's approved a stock repurchase program (the “June 2018 stock repurchase program”), which authorized the repurchase of up to $10.0 billion of the Company's common stock of which the Company had repurchased $8.0 billion as of May 31, 2021. The June 2018 stock repurchase program has no specified expiration date. In July 2020, the Company announced that it was suspending activities under this program. The Company may continue to repurchase stock to offset anticipated dilution from equity incentive plans.
The Company determines the timing and amount of repurchases, including repurchases to offset anticipated dilution from equity incentive plans, based on its assessment of various factors, including prevailing market conditions, alternate uses of capital, liquidity and the economic environment. The Company has repurchased, and may from time to time in the future repurchase, shares on the open market through Rule 10b5-1 plans, which enable the Company to repurchase shares at times when we otherwise might be precluded from doing so under federal securities laws.
Commercial paper
The Company periodically borrows under its commercial paper program and may borrow under it in future periods. The Company had average daily U.S. commercial paper outstanding of $2.3 billion and $2.6 billion at a weighted average interest rate of 0.47% and 2.33% for the nine months ended May 31, 2021 and May 31, 2020, respectively. A subsidiary of the Company had average daily commercial paper outstanding, which was issued under the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program, of £300 million or approximately $424 million at a weighted average interest rate of 0.43% for the nine months ended May 31, 2021. The subsidiary of the Company repaid the commercial paper issued under the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program on May 14, 2021.
Financing actions
On August 29, 2018, the Company entered into a revolving credit agreement (the “August 2018 Revolving Credit Agreement”) with the lenders and letter of credit issuers from time to time party thereto. The August 2018 Revolving Credit Agreement is an unsecured revolving credit facility with aggregate commitment in the amount of $3.5 billion, with a letter of credit subfacility commitment amount of $500 million. The facility termination date is the earlier of (a) August 29, 2023, subject to extension thereof pursuant to the August 2018 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the revolving commitments pursuant to the August 2018 Revolving Credit Agreement. Borrowings under the August 2018 Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company's option, the alternate base rate or the Eurocurrency rate, in each case, plus an applicable margin calculated based on the Company's credit ratings. As of May 31, 2021, there were no borrowings outstanding under the August 2018 Revolving Credit Agreement.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
On November 30, 2018, the Company entered into a $1.0 billion credit agreement, consisting of a $500 million senior unsecured revolving credit facility and a $500 million senior unsecured term loan facility, with the lenders from time to time party thereto, on March 25, 2019, the Company entered into an amendment to such credit agreement (such credit agreement as so amended, the “November 2018 Credit Agreement”) reflecting certain changes to the borrowing notice provisions thereto. On April 2, 2020, the Company entered into a second amendment to the November 2018 Credit Agreement (such credit agreement as so further amended, the “Amended November 2018 Credit Agreement”), which amendment became effective as of May 29, 2020. As of May 29, 2020, the $500 million revolving credit facility portion of the November 2018 Credit Agreement was converted into a term loan facility, such that the Amended November 2018 Credit Agreement consists of a $1.0 billion senior unsecured term loan facility. The facility termination date is the earlier of (a) May 29, 2021 and (b) the date of acceleration of all loans under the Amended November 2018 Credit Agreement pursuant to its terms. Borrowings under the Amended November 2018 Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of 1.25% in the case of Eurocurrency rate loans and 0.125% in the case of alternative base rate loans. The November 2018 Credit Agreement was repaid in full on April 23, 2021.
On December 5, 2018, the Company entered into a $1.0 billion term loan credit agreement with the lenders from time to time party thereto and, on August 9, 2019, the Company entered into an amendment to such credit agreement (such credit agreement as so amended, the “December 2018 Credit Agreement”) to permit the Company to borrow, repay and reborrow amounts borrowed thereunder prior to the maturity date. On April 2, 2020, the Company amended and restated the December 2018 Credit Agreement (such credit agreement as so amended and restated, the “A&R December 2018 Credit Agreement”).
The A&R December 2018 Credit Agreement governs a $2.0 billion senior unsecured revolving credit facility, consisting of the initial $1.0 billion senior unsecured revolving facility (the “Initial Facility”) previously governed by the December 2018 Credit Agreement and a new $1.0 billion senior unsecured revolving credit facility (the “New Facility”). The facility termination date is the earlier of (a) January 29, 2021 (the “Initial Maturity Date”) (which date shall be extended to February 26, 2021 or July 31, 2021 pursuant to the terms of the A&R December 2018 Credit Agreement if the Company extends the maturity date of certain of its existing credit agreements or enters into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the A&R December 2018 Credit Agreement) and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the A&R December 2018 Credit Agreement. Borrowings under the A&R December 2018 Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of (i) in the case of the Initial Facility from April 2, 2020 through and including the Initial Maturity Date, 0.75% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans and (ii) in the case of the New Facility and the Initial Facility after the Initial Maturity Date, 1.50% in the case of Eurocurrency rate loans and 0.50% in the case of alternate base rate loans. The A&R December 2018 Credit Agreement was further amended on December 23, 2020 whereby the new facility was terminated in full and the existing facility matured in January 2021.
On January 18, 2019, the Company entered into a $2.0 billion 364-day revolving credit agreement (as extended, the “January 2019 364-Day Revolving Credit Agreement”) with the lenders from time to time party thereto. The January 2019 364-Day Revolving Credit Agreement is a senior unsecured 364-day revolving credit facility, with an original facility termination date of 364 days following January 31, 2019, subject to extension. On December 18, 2019, the Company entered into an Extension Agreement (the “Extension Agreement”) relating to the January 2019 364-Day Revolving Credit Agreement with the lenders party thereto and Mizuho, as administrative agent. The Extension Agreement extended the Maturity Date (as defined in the January 2019 364-Day Revolving Credit Agreement) for an additional period of 364 days to January 28, 2021. Such extension became effective on January 30, 2020. Borrowings under the January 2019 364-Day Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company's option, the alternate base rate or the Eurocurrency rate, in each case, plus an applicable margin calculated based on the Company’s credit ratings. The January 2019 364-Day Revolving Credit Agreement was partially terminated in accordance with its terms and conditions, reducing the amount available to $0.5 billion as of December 23, 2020, concurrently with the execution of the 2020 Revolving Credit Agreement described below. The outstanding facility amount of $1.5 billion was terminated on January 28, 2021.
On August 30, 2019, the Company entered into three $500 million revolving credit agreements (together, the “August 2019 Revolving Credit Agreements” and each individually, an “August 2019 Revolving Credit Agreement”) with the lenders from time to time party thereto. Each of the August 2019 Revolving Credit Agreements are senior unsecured revolving credit facilities, with facility termination dates of the earlier of (a) 18 months following August 30, 2019, subject to extension thereof pursuant to the applicable August 2019 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the applicable August 2019 Revolving Credit Agreement. Borrowings under each of the August 2019 Revolving Credit Agreements will bear interest at a fluctuating rate per annum equal to, at the Company's option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of 0.95% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company entered into a $750 million revolving credit agreement on April 1, 2020 (the “April 2020 Revolving Bilateral Credit Agreement”) and a $1.325 billion revolving credit agreement on April 2, 2020 (the “April 2020 Revolving Club Credit Agreement” and together with the April 2020 Revolving Bilateral Credit Agreement, the “Other April 2020 Revolving Credit Agreements”) with the lenders from time to time party thereto. Each of the Other April 2020 Revolving Credit Agreements is a senior unsecured revolving credit facility, with a facility termination dates of the earlier of (a) March 31, 2021 (which date shall be shortened pursuant to the terms of the applicable Other April 2020 Revolving Credit Agreement if the Company does not extend the maturity date of certain of its existing credit agreements or enter into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the applicable April 2020 Revolving Credit Agreement) and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the applicable Other April 2020 Revolving Credit Agreement. Borrowings under the Other April 2020 Revolving Credit Agreements bear interest at a fluctuating rate per annum equal to, at the Company’s option, the Eurocurrency rate or the alternate base rate, plus an applicable margin of 1.25% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.
On April 7, 2020, the Company and with WBA Financial Services Limited, a private limited company incorporated under the laws of England and Wales (“WBAFSL”), as co-borrowers, entered into a $500 million revolving credit agreement (the “April 7, 2020 Revolving Credit Agreement”) with the lenders from time to time party thereto. The April 7, 2020 Revolving Credit Agreement is a senior unsecured revolving credit facility, with a facility termination date of the earlier of (a) 364-days from April 7, 2020 and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the April 7, 2020 Revolving Credit Agreement. The Company and WBAFSL are co-borrowers under the April 7, 2020 Revolving Credit Agreement. Pursuant to the terms of the April 7, 2020 Revolving Credit Agreement, the Company provides a guarantee of any obligations of WBAFSL under the April 7, 2020 Revolving Credit Agreement. Borrowings under the April 7, 2020 Revolving Credit Agreement bear interest at a fluctuating rate per annum equal to, at the Company’s option, the Eurocurrency rate or the alternate base rate, plus an applicable margin of 1.50% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.
On April 15, 2020, the Company issued in an underwritten public offering $0.5 billion of 3.20% notes due 2030 and $1.0 billion of 4.10% notes due 2050. Total issuance costs relating to the notes, including underwriting discounts and estimated offering expenses were $13 million. The Company partially purchased and retired $0.2 billion of its outstanding $1.0 billion, 4.10% notes due 2050 pursuant to the debt tender offer completed on April 26, 2021.
On October 20, 2020, the Company redeemed in full the £400 million aggregate principal amount outstanding of its 2.875% notes due 2020 issued by the Company on November 20, 2014.
On December 23, 2020, the Company entered into a $1.25 billion senior unsecured 364-day revolving credit agreement and a $2.25 billion senior unsecured 18-month revolving credit facility, with a swing line subfacility commitment amount of $350 million, with designated borrowers from time to time party thereto and lenders from time to time party thereto. The 364-Day Facility’s termination date is the earlier of (i) 364 days from December 23, 2020, the effective date (subject to the extension thereof pursuant to the 2020 Revolving Credit Agreement) and (ii) the date of termination in whole of the aggregate amount of the revolving commitments under the 364-Day Facility pursuant to the 2020 Revolving Credit Agreement. The 18-Month Facility’s termination date is the earlier of (i) 18 months from the effective date (subject to the extension thereof pursuant to the 2020 Revolving Credit Agreement) and (ii) the date of termination in whole of the aggregate amount of the revolving commitments under the 18-Month Facility pursuant to the 2020 Revolving Credit Agreement. As of May 31, 2021, there were $400 million borrowings outstanding under the 2020 Revolving Credit Agreement.
After the entry into the 2020 Revolving Credit Agreement and the full or partial termination of the Company’s other credit agreements as discussed herein, as of May 31, 2021, the Company had an aggregate borrowing capacity of $10.8 billion including funds already drawn.
On April 9, 2021 the Company entered into a delayed draw term loan credit agreement (the “April 2021 Credit Agreement”) with the lenders from time to time party thereto. The purpose of the loan was to fund the Company's April 26, 2021 cash tender offer to partially purchase and retire $3.30 billion of long term U.S. dollar denominated notes. The April 2021 Credit Agreement was initially a $2.75 billion senior unsecured delayed draw term loan facility, with an original facility termination date (the "Initial Maturity Date") of the earliest of (x) October 9, 2021, (y) the date of acceleration of all term loans and termination of all commitments pursuant to the April 2021 Credit Agreement and (z) the date of prepayment of all loans and the termination of all commitments pursuant to the April 2021 Credit Agreement. Borrowings under the April 2021 Credit
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Agreement bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of (i) on and prior to the Initial Maturity Date, 0.70% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans and (ii) after the Initial Maturity Date, 0.75% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans. On April 23, 2021 the April 2021 Credit Agreement term loan facility amount was increased to $3.8 billion. As of May 31, 2021, there were $3.8 billion of borrowings outstanding under the April 2021 Credit Agreement. On June 1, 2021 the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all borrowings outstanding under the April 9, 2021 Credit Agreement.
Tender offer to purchase debt
On April 26, 2021, the Company entered into a cash tender offer to partially purchase and retire $3.3 billion of long term U.S. dollar denominated notes with a weighted average interest rate of 4.02%, using funds drawn down from the $3.8 billion April 2021 Credit Agreement. The Company recognized a loss of $419 million related to the early extinguishment of debt, within Interest expense, which includes $386 million of redemption premium paid in cash. The cash payments related to the early extinguishment of debt are classified as cash outflows from financing activities in the consolidated statement of cash flows. On June 1, 2021, the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all of the outstanding amount owed on the April 2021 Credit Agreement that funded the bond tender completed by the Company on April 26, 2021.
Debt covenants
Each of the Company’s credit facilities described above contain a covenant to maintain, as of the last day of each fiscal quarter, a ratio of consolidated debt to total capitalization not to exceed 0.60:1.00, subject to increase in certain circumstances set forth in the applicable credit agreement. The credit facilities also contain various other customary covenants. As of May 31, 2021, the Company was in compliance with all such applicable covenants.
Credit ratings
As of June 30, 2021, the credit ratings of Walgreens Boots Alliance were:
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Rating agency
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Long-term debt rating
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Commercial paper rating
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Outlook
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Fitch
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BBB-
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F3
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Negative
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Moody’s
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Baa2
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P-2
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Negative
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Standard & Poor’s
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BBB
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A-2
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Negative
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In assessing the Company’s credit strength, each rating agency considers various factors including the Company’s business model, capital structure, financial policies and financial performance. There can be no assurance that any particular rating will be assigned or maintained. The Company’s credit ratings impact its borrowing costs, access to capital markets and operating lease costs. The rating agency ratings are not recommendations to buy, sell or hold the Company’s debt securities or commercial paper. Each rating may be subject to revision or withdrawal at any time by the assigning rating agency and should be evaluated independently of any other rating.
AmerisourceBergen relationship
As of May 31, 2021, the Company owned 56,854,867 AmerisourceBergen common shares representing approximately 27.7% of its outstanding common stock based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q and had designated one member of AmerisourceBergen’s board of directors. As of May 31, 2021, the Company can acquire up to an additional 8,398,752 AmerisourceBergen shares in the open market and thereafter designate another member of AmerisourceBergen’s board of directors, subject in each case to applicable legal and contractual requirements. The amount of permitted open market purchases is subject to increase or decrease in certain circumstances. Subject to applicable legal and contractual requirements, share purchases may be made from time to time in open market transactions or pursuant to instruments and plans complying with Rule 10b5-1. See Note 6 Equity method investments, to the Consolidated Condensed Financial Statements for further information.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen agreed to purchase the majority of the Company's pharmaceutical wholesale operations, as well as a portion of the Company’s retail pharmacy international businesses in Europe, for $6.275 billion in cash (subject to customary purchase price adjustments) and 2 million shares of common stock of AmerisourceBergen. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See “Recent Developments” above and Note 2 Discontinued operations to the Consolidated Condensed Financial Statements for additional information.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any unconsolidated special purpose entities and, except as described herein, the Company does not have significant exposure to any off-balance sheet arrangements. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity not consolidated by the Company is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
There have been no material changes, outside of the ordinary course of business, in the Company's outstanding contractual obligations disclosed in the Company's Annual Report on Form 10-K for the year ended August 31, 2020.
CRITICAL ACCOUNTING POLICIES
The Consolidated Condensed Financial Statements are prepared in accordance with GAAP and include amounts based on management’s prudent judgments and estimates. Actual results may differ from these estimates. Management believes that any reasonable deviation from those judgments and estimates would not have a material impact on our consolidated financial position or results of operations. To the extent that the estimates used differ from actual results, however, adjustments to the statement of earnings and corresponding balance sheet accounts would be necessary. These adjustments would be made in future periods. For a discussion of our significant accounting policies, please see the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020. Some of the more significant estimates include business combinations, leases, goodwill and indefinite-lived intangible asset impairment, cost of sales and inventory, equity method investments, pension and postretirement benefits and income taxes.
NEW ACCOUNTING PRONOUNCEMENTS
A discussion of new accounting pronouncements is described in Note 18 New accounting pronouncements, to the Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and other documents that we file or furnish with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, on the Company’s website or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, conference calls and other communications. Some of such forward-looking statements may be based on certain data and forecasts relating to our business and industry that we have obtained from internal surveys, market research, publicly available information and industry publications. Industry publications, surveys and market research generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Statements that are not historical facts are forward-looking statements, including, without limitation, those regarding estimates of and goals for future financial and operating performance as well as forward-looking statements concerning the potential impacts on our business of the spread and impact of COVID-19, 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 delivery of estimated cost savings, our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, estimates of the impact of developments on our earnings, earnings per share and other financial and operating metrics, cough, cold and flu season, prescription volume, pharmacy sales trends, prescription margins and reimbursement rates, changes in generic prescription drug prices, retail margins, number and location of new store openings, network participation, vendor, payer and
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
customer relationships and terms, possible new contracts or contract extensions, competition, economic and business conditions, outcomes of litigation and regulatory matters, the level of capital expenditures, industry trends, demographic trends, growth strategies, financial results, cost reduction initiatives, impairment or other charges, acquisition and joint venture synergies, competitive strengths and changes in legislation or regulations. All statements in the future tense and all statements accompanied by 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, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated. These risks, assumptions and uncertainties include those described in Item 1A, Risk factors, in the Walgreens Boots Alliance 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 SEC. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements we make or that are made on our behalf are qualified by these cautionary statements. 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 report, whether as a result of new information, future events, changes in assumptions or otherwise.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 3. Quantitative and qualitative disclosure about market risk
Interest rate risk
The Company is exposed to interest rate volatility with regard to existing variable-rate debt instruments and future incurrences of fixed or variable-rate debt, which exposure primarily relates to movements in various interest rates, such as U.S treasury rates and commercial paper rates. From time to time, the Company uses interest rate swaps and forward-starting interest rate swaps to hedge its exposure to the impact of interest rate changes on existing debt and future debt issuances respectively, to reduce the volatility of financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed-rate versus floating-rate debt. Generally under these swaps, the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount.
On March 5, 2021, the UK Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, issued an announcement on the future cessation or loss of representativeness of LIBOR benchmark settings currently published by ICE Benchmark Administration. That announcement confirmed that LIBOR will either cease to be provided by any administrator or will no longer be representative after December 31, 2021 for all non-USD LIBOR reference rates, and for 1W and 2M USD LIBOR and after June 30, 2023 for other USD LIBOR reference rates. Certain of our credit facilities provide that, under certain circumstances set forth in such credit facilities, we and the administrative agent may amend the applicable credit facility to replace LIBOR with an alternate benchmark rate, giving due consideration to any evolving or then existing convention for similar syndicated credit facilities in the U.S. market for alternative benchmarks. Such alternative benchmark rate could include the secured overnight financing rate, also known as SOFR, published by the Federal Reserve Bank of New York
Information regarding the Company's transactions are set forth in Note 9 Financial instruments, to the Consolidated Condensed Financial Statements. These financial instruments are sensitive to changes in interest rates. On May 31, 2021, the Company had no material long-term debt obligations that had floating interest rates. The amounts exclude the impact of any associated derivative contracts.
Foreign currency exchange rate risk
The Company is exposed to fluctuations in foreign currency exchange rates, primarily with respect to the British pound sterling and Euro, and certain other foreign currencies, which may affect its net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. The Company is also exposed to the translation of foreign currency earnings to the U.S. dollar. The Company enters into foreign currency forward contracts to hedge against the effect of exchange rate fluctuations on non-functional currency cash flows. These transactions are almost exclusively less than 12 months in maturity. In addition, the Company enters into foreign currency forward contracts that are not designated in hedging relationships to offset, in part, the impacts of certain intercompany activities (primarily associated with intercompany financing transactions).
The Company’s foreign currency derivative instruments are sensitive to changes in exchange rates. A hypothetical 1% change in foreign currency exchange rates versus the U.S. dollar would change the fair value of the foreign currency derivatives held as of May 31, 2021, by approximately $43 million. The foreign currency derivatives are intended to partially hedge anticipated transactions, foreign currency trade payables and receivables and net investments in foreign subsidiaries.
Equity price risk
Changes in AmerisourceBergen common stock price may have a significant impact on the fair value of the equity investment in AmerisourceBergen described in Note 6 Equity method investments, to the Consolidated Condensed Financial Statements. See “--Investment in AmerisourceBergen” above.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
Item 4. Controls and procedures
Evaluation of disclosure controls and procedures
Management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon the controls evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
In the ordinary course of business, the Company reviews its internal control over financial reporting and makes changes to its systems and processes that are intended to enhance such controls and increase efficiency while maintaining an effective internal control environment. Changes may include such activities as updating existing systems, automating manual processes, standardizing controls and modifying monitoring controls.
As we transform our business processes, we continue to make strategic changes in how we perform certain key business functions. These changes include the continued leveraging of extended workforces via third-party outsource arrangements as well as our continued implementation of new information systems. Specifically, the Company is currently implementing a new enterprise resource planning (ERP) system. This project is a multi-year initiative and is intended to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. These initiatives are not being implemented in response to any identified internal control deficiency or weakness. As these changes occur, we will evaluate quarterly whether such changes materially affect, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
In connection with the evaluation pursuant to Exchange Act Rule 13a-15(d) of the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) by the Company’s management, including its CEO and CFO, no changes during the quarter ended May 31, 2021 were identified that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent limitations on effectiveness of controls
Our management, including the CEO and CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Part II. Other Information
Item 1. Legal proceedings
The information in response to this item is incorporated herein by reference to Note 11 Commitments and contingencies, to the Consolidated Condensed Financial Statements of this Quarterly Report.
As previously disclosed, the Company has been under investigation by certain counties within the State of California for alleged noncompliance with state hazardous waste regulations. The Company has worked with state and local officials in an effort to resolve this matter. The Company executed a settlement agreement in October 2020 which includes a monetary payment and injunctive provisions, including funding of supplemental environmental projects. The total settlement value is $3.5 million. On November 16, 2020, a number of California District Attorneys submitted the signed settlement agreement and a complaint to a California state court in Alameda County (People of the State of California v. Walgreen Co., Case No. RG20081172) for review and approval. The settlement was approved by the court on December 17, 2020 and shall be in effect for three years.
Item 1A. Risk factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in item 1A. “Risk factors” in the Walgreens Boots Alliance Annual Report on Form 10-K for the year ended August 31, 2020, which could materially affect our business, financial condition or future results.
Item 2. Unregistered sales of equity securities and use of proceeds
The following table provides information about purchases by the Company during the quarter ended May 31, 2021 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act. Subject to applicable law, share purchases may be made from time to time in open market transactions, privately negotiated transactions including accelerated share repurchase agreements, or pursuant to instruments and plans complying with Rule 10b5-1.
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Issuer purchases of equity securities
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Period
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Total number of shares purchased by month
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Average price paid per share
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Total number of shares purchased by month as part of publicly announced repurchase programs1
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Approximate dollar value of shares that may yet be purchased under the plans or program1
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03/01/21 - 03/31/21
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—
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$
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—
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—
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$
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2,003,419,960
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04/01/21 - 04/30/21
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—
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—
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—
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2,003,419,960
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05/01/21 - 05/31/21
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—
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—
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—
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2,003,419,960
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—
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$
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—
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—
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$
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2,003,419,960
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1In June 2018, Walgreens Boots Alliance authorized a stock repurchase program, which authorized the repurchase of up to $10.0 billion of Walgreens Boots Alliance common stock. This program has no specified expiration date. In July 2020, the Company announced that it had suspended activities under this program.
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 5. Other information
None
Item 6. Exhibits
The agreements included as exhibits to this report are included to provide information regarding their terms and not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement that were made solely for the benefit of the other parties to the applicable agreement, and:
•should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
•may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
•may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
•were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.
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Exhibit No.
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Description
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SEC Document Reference
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Amended and Restated Certificate of Incorporation of Walgreens Boots Alliance, Inc.
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Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014.
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Amended and Restated Bylaws of Walgreens Boots Alliance, Inc.
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Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on June 10, 2016.
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Amended and Restated AmerisourceBergen Shareholders Agreement, dated as of June 1, 2021, between AmerisourceBergen Corporation and Walgreens Boots Alliance, Inc.
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Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on June 4, 2021.
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Agreement between Walgreens Boots Alliance Services Limited and Alexander W. Gourlay, dated June 30, 2021.
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Filed herewith.
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Form of Restricted Stock Unit Award agreement.
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Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 26, 2021.
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Delayed Draw Term Loan Credit Agreement, dated as of April 9, 2021, by and among Walgreens Boots Alliance, Inc., the Lenders from time to time party thereto and Wells Fargo Bank, National Association, as Administrative Agent.
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Incorporated by reference to Exhibit 10.4 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 9, 2021.
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Increase Amendment, dated April 23, 2021, to the Delayed Draw Term Loan Credit Agreement.
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Incorporated by reference to Exhibit 10.5 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 23, 2021.
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith.
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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed herewith.
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Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
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Furnished herewith.
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Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
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Furnished herewith.
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101.INS
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Inline XBRL Instance Document (The following financial information from this Quarterly Report on Form 10-Q for the quarter ended May 31, 2021 formatted in Inline XBRL (Extensive Business Reporting Language) includes: (i) the Consolidated Condensed Balance Sheets; (ii) the Consolidated Condensed Statements of Equity; (iii) the Consolidated Condensed Statement of Earnings; (iv) the Consolidated Condensed Statements of Comprehensive Income; (v) the Consolidated Condensed Statements of Cash Flows; and (vi) Notes Financial Statements).
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Filed herewith.
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101.SCH
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Inline XBRL Taxonomy Extension Schema Document
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Filed herewith.
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101.CAL
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith.
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101.DEF
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Inline XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith.
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101.LAB
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Inline XBRL Taxonomy Extension Label Linkbase Document
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Filed herewith.
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101.PRE
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Inline XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith.
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104
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Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101)
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Filed herewith.
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___________________________
* Management contract or compensatory plan or arrangement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Walgreens Boots Alliance, Inc.
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(Registrant)
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Dated: July 1, 2021
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/s/ James Kehoe
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James Kehoe
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Executive Vice President, Global Chief Financial Officer and Acting Chief Accounting Officer
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(Principal Financial Officer & Principal Accounting Officer)
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