Results In Line with Expectations; On Track to
Full-Year Guidance
Second quarter financial highlights and recent
equity sales
- Second quarter earnings per share (EPS*) decreased 20.3 percent
to $0.81; adjusted EPS decreased 27.2 percent to $1.16, down 25.8
percent on a constant currency basis reflecting a 26 percent
headwind from lower COVID-19 vaccine and testing volumes
- Second quarter sales increased 3.3 percent year-over-year, to
$34.9 billion, up 4.5 percent on a constant currency basis
- Invested $3.5 billion in debt and equity to support VillageMD's
acquisition of Summit Health in January, accelerating U.S.
Healthcare segment sales and path to profitability
- Approximately $1.5 billion in after-tax proceeds from the
partial sale of holdings in AmerisourceBergen and Option Care
Health in the second quarter and March
Fiscal 2023 outlook
- Maintaining full-year adjusted EPS guidance of $4.45 to $4.65
as strong core business growth is more than offset by lapping peak
COVID-19 demand; pivoting to mid-twenties percent adjusted EPS
growth in the second half of fiscal 2023 at the midpoint
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the second quarter of fiscal 2023, which
ended February 28, 2023.
Chief Executive Officer Rosalind Brewer said:
"WBA exited a solid second quarter with acceleration in
February, adding to our confidence in driving strong growth in the
second half of the year. With the closing of VillageMD's
acquisition of Summit Health, WBA is now one of the largest players
in primary care, with best-in-class assets across the care
continuum. Both Walgreens and Boots are performing well by
delivering compelling value to consumers, playing a critical role
as community health destinations, and successfully navigating a
challenging environment. We will continue to take bold actions to
create sustainable long-term shareholder value."
Overview of Second Quarter Results
WBA second quarter sales increased 3.3 percent from the year-ago
quarter to $34.9 billion, an increase of 4.5 percent on a constant
currency basis.
Operating income was $0.2 billion in the second quarter compared
to $1.2 billion in the year-ago quarter. Operating income in the
quarter reflects a $306 million pre-tax charge for opioid-related
claims and litigation, Summit Health acquisition costs and higher
costs related to the Transformational Cost Management Program.
Adjusted operating income was $1.2 billion, a decrease of 25.4
percent on a constant currency basis, reflecting lower volumes of
COVID-19 vaccinations and testing lapping the year-ago period's
Omicron surge, planned payroll investments in U.S. Retail Pharmacy,
and investments in U.S. Healthcare, partly offset by improved
retail contributions in the U.S., and International growth.
Net earnings in the second quarter were $703 million compared to
$883 million in the year-ago quarter. This decrease is driven by
lower operating income partially offset by a $454 million after-tax
gain from the partial sale of the Company's equity method
investment in AmerisourceBergen. Adjusted net earnings were $1.0
billion, down 26.0 percent on a constant currency basis, primarily
driven by significantly lower COVID-19 vaccine and testing volumes
compared to the prior year.
EPS in the second quarter was $0.81, compared to EPS of $1.02 in
the year-ago quarter. Adjusted EPS decreased 27.2 percent to $1.16,
a decrease of 25.8 percent on a constant currency basis, mainly due
to a COVID-19 headwind of approximately 26 percent.
Net cash provided by operating activities was $745 million in
the second quarter. Free cash flow was $677 million, a $7 million
increase compared with the year-ago quarter.
Overview of Fiscal 2023 Year-to-Date Results
Sales in the first six months of fiscal 2023 were $68.2 billion,
an increase of 0.9 percent from the year-ago period, and an
increase of 2.8 percent on a constant currency basis.
Operating loss in the first six months of fiscal 2023 was $6.0
billion compared to operating income of $2.5 billion in the
year-ago period. Operating loss in the period reflects a $6.8
billion pre-tax charge for opioid-related claims and litigation.
Adjusted operating income was $2.2 billion, a decrease of 34.1
percent on a constant currency basis, reflecting a COVID-19
headwind of approximately 24 percent, planned payroll and IT
investments in U.S. Retail Pharmacy and growth investments in U.S.
Healthcare, partly offset by improved retail contributions in the
U.S., and International growth.
For the first six months of fiscal 2023, net loss was $3.0
billion compared to net earnings of $4.5 billion in the year-ago
period. This decrease is driven by a $5.4 billion after-tax charge
for opioid-related claims and litigation offset by a $1.4 billion
after-tax gain from the partial sale of the Company's equity method
investment in AmerisourceBergen, and lapping a $2.5 billion
after-tax gain on the Company's investments in VillageMD and
Shields Health Solutions in the year-ago period. Adjusted net
earnings were $2.0 billion, a decrease of 28.1 percent on a
constant currency basis, primarily driven by lower adjusted
operating income.
Loss per share for the first six months of fiscal 2023 was $3.50
compared to EPS of $5.15 from the year-ago period. Adjusted EPS
decreased 29.0 percent to $2.32, reflecting a decrease of 27.9
percent on a constant currency basis, mainly due to a COVID-19
headwind of approximately 22 percent.
Net cash provided by operating activities was $1.2 billion in
the first six months of fiscal 2023, a decrease of $0.9 billion
from the year-ago period, and free cash flow was $560 million, a
decrease of $754 million from the year-ago period driven by lower
earnings and increased capital expenditures in growth initiatives,
partially offset by ongoing working capital optimization.
Business Highlights
WBA continues to achieve strong results across its business and
strategic priorities, including:
Transform and align the core
- U.S. pharmacy comparable script volume growth of 3.5 percent
excluding immunizations, ahead of expectations and sequentially
improving vs. the first quarter of fiscal 2023
- Addressed industry-wide pharmacist labor shortage by returning
an incremental ~500 stores to normal pharmacy operating hours, with
~1,900 stores still impacted at quarter-end
- Continuing to play a leading role in COVID-19 vaccinations and
testing, administering 2.4 million vaccinations in the quarter
compared to 11.8 million in the prior year
- U.S. retail comparable sales decline of (1.0) percent,
including a 500 basis point headwind from lower OTC test kits, on
top of a very strong prior year performance of 14.7 percent
- Operating nine automated micro-fulfillment centers at
quarter-end, supporting ~3,600 stores
- Boots UK retail comparable sales growth of 16.0 percent, on top
of robust prior year growth of 22.0 percent
Build our next growth engine with consumer-centric healthcare
solutions
- Invested $3.5 billion to support VillageMD’s acquisition of
Summit Health, closed January 3, 2023
- Signed Horizon Blue Cross Blue Shield of New Jersey as fourth
payor partner for Walgreens Health
- Closed full acquisition of Shields on December 28, 2022
- Full acquisition of CareCentrix expected to close in the third
quarter of fiscal 2023
- Managing approximately 806,000 value-based lives under
VillageMD/Summit Health
- Operating 210 co-located VillageMD clinics, part of
approximately 730 total locations inclusive of Summit Health
- Operating 117 Walgreens Health Corners
- Signed the Company's first five clinical trials contracts
Focus the portfolio; optimize capital allocation
- Sold 15.5 million shares of Option Care Health common stock in
March, with after-tax cash proceeds of $466 million
- Sold 6.0 million shares of AmerisourceBergen common stock in
December, with after-tax cash proceeds of $972 million
- Sold entire stake of Guangzhou Pharmaceuticals in December for
approximately $150 million
Build a high-performance culture and a winning team
- Appointed Rick Gates as senior vice president and chief
pharmacy officer, Walgreens
- Appointed Tracey Brown as executive vice president, retail and
chief customer officer, Walgreens
- Launched FY22 Environmental, Social, and Governance (ESG)
Report
- Included as part of the Dow Jones Sustainability Indices (DJSI)
for the third consecutive year, scoring in the 87th percentile
within the Food & Staples Retailing industry group
Business Segments
U.S. Retail Pharmacy:
The U.S. Retail Pharmacy segment had second quarter sales of
$27.6 billion, a decrease of 0.3 percent from the year-ago quarter.
Comparable sales increased 3.1 percent from the year-ago quarter
while lapping strong comparable sales growth of 9.5 percent in the
year-ago quarter, which included a significant contribution from
COVID-19 vaccinations and testing.
Pharmacy sales increased 0.3 percent compared to the year-ago
quarter, negatively impacted by a 3.5 percentage point headwind
from AllianceRx Walgreens. Comparable pharmacy sales increased 4.9
percent in the quarter, benefiting from branded drug inflation.
Comparable prescriptions filled in the quarter increased 0.2
percent, while comparable prescriptions excluding immunizations
increased 3.5 percent, a sequential improvement of 140 basis points
compared to the prior quarter. Total prescriptions filled in the
quarter, including immunizations, adjusted to 30-day equivalents,
decreased 0.7 percent to 298.0 million.
Retail sales decreased 1.8 percent and comparable retail sales
decreased 1.0 percent in the second quarter compared to comparable
sales growth of 14.7 percent in the prior year quarter. Excluding
tobacco, comparable retail sales decreased 0.5 percent including a
500 basis point headwind from lower sales of OTC test kits, partly
offset by strong core growth across all categories.
Gross profit decreased 10.2 percent compared with the year-ago
quarter. Adjusted gross profit decreased 9.8 percent. Gross profit
and adjusted gross profit were entirely driven by a 10 percentage
point headwind from lower contributions from COVID-19 vaccinations
and testing. Reimbursement net of procurement savings was offset by
higher retail gross profit from gross margin expansion and strong
underlying sales performance across categories.
Selling, general and administrative expenses (SG&A)
increased 6.3 percent to $5.5 billion, including a $306 million
pre-tax charge for opioid-related claims and litigation in the
current quarter. Adjusted SG&A decreased 3.2 percent to $4.9
billion, driven by reduced labor for lower volumes of COVID-19
vaccinations and testing and savings from the Transformational Cost
Management Program, partly offset by increased labor
investments.
Operating income in the second quarter was $0.4 billion compared
to operating income of $1.4 billion from the year-ago quarter,
reflecting the $306 million charge related to opioid claims and
litigation in the current quarter. Adjusted operating income
decreased 32.8 percent to $1.1 billion from the year-ago quarter,
reflecting a 29 percentage point headwind from lower contributions
of COVID-19 vaccinations and testing, continued reimbursement
pressure net of procurement, and planned labor investments. These
impacts were partly offset by improved retail gross profit, driven
by gross margin expansion and strong underlying sales performance
across categories.
International:
The International segment had second quarter sales of $5.7
billion, an increase of 1.6 percent from the year-ago quarter, held
back by an adverse currency impact of 7.5 percentage points. Sales
increased 9.0 percent on a constant currency basis, with Boots UK
sales growing 11.0 percent, and the Germany wholesale business
growing 7.5 percent.
Boots UK comparable pharmacy sales increased 2.0 percent
compared with the year-ago quarter held back by lower demand for
COVID-19 services. Boots UK comparable retail sales increased 16.0
percent compared to the year-ago quarter, growing market share for
the eighth consecutive quarter. Footfall improved by 16 percent,
compared to the year-ago quarter. Boots.com continued to perform
well, accounting for over 15 percent of retail sales in the quarter
compared to approximately 9 percent pre-pandemic.
Gross profit decreased 0.7 percent compared with the year-ago
quarter, including an adverse currency impact of 8.2 percentage
points. Gross profit increased 7.5 percent on a constant currency
basis, reflecting higher UK retail sales and solid execution in the
Germany wholesale business, partly offset by lower demand for
COVID-19 related services in the UK and the adverse gross margin
impact of National Health Service pharmacy funding.
SG&A in the quarter decreased 18.2 percent from the year-ago
quarter to $846 million, including a favorable currency impact of
7.6 percentage points, and lower acquisition related costs.
Adjusted SG&A decreased 5.9 percent on a constant currency
basis, reflecting real estate gains from the company's cash
mobilization program in Germany, and effective cost management,
partly offset in the UK by increased in-store and marketing
activities, higher inflation, and lapping temporary COVID-19
related benefits in the year-ago quarter.
Operating income increased 104.0 percent from the year-ago
quarter to $353 million. Adjusted operating income increased 55.8
percent to $352 million, an increase of 65.7 percent on a constant
currency basis.
U.S. Healthcare:
The U.S. Healthcare segment had second quarter sales of $1.6
billion, an increase of $1.1 billion compared to the year-ago
quarter. On a pro forma basis, the segment's businesses grew sales
at a combined rate of 30 percent in the quarter. VillageMD,
including Summit Health, grew pro forma sales 30 percent,
reflecting existing clinic growth, and clinic footprint expansion.
Shields grew pro forma sales 41 percent, driven by recent contract
wins, further expansion of existing partnerships, and strong
executional focus. CareCentrix grew pro forma sales 25 percent as a
result of additional service offerings with existing partners.
Gross profit was $32 million as Shields and CareCentrix gross
profit was more than offset by VillageMD's expansion. VillageMD
added 133 clinics compared to the year-ago quarter. Adjusted gross
profit was $110 million, an increase of $95 million compared to the
year-ago period as the segment continues to rapidly scale.
Second quarter SG&A was $504 million, and adjusted SG&A
was $269 million. Adjusted SG&A increased by $177 million
compared to the year-ago quarter, primarily due to the acquisitions
of CareCentrix and Summit Health which were not included in the
year-ago quarter, and higher investments in the organic
business.
Operating loss was $472 million. Adjusted operating loss was
$159 million, which excludes certain costs related to stock
compensation, amortization of acquired intangible assets, and
acquisition related costs. Adjusted EBITDA loss was $109 million,
reflecting VillageMD expansion and higher organic business
investments, partly offset by positive contributions from Shields
and CareCentrix.
Conference Call
WBA will hold a conference call to discuss the second quarter
results beginning at 8:30 a.m. Eastern time today, March 28, 2023.
A live simulcast as well as related presentation materials will be
available through WBA’s investor relations website at:
https://investor.walgreensbootsalliance.com. A replay of the
conference will be archived on the website for at least 12 months
after the event.
*All references to net earnings or net loss are to net earnings
or net loss attributable to WBA, and all references to EPS are to
diluted EPS attributable to WBA.
**"Adjusted," "constant currency" and free cash flow amounts are
non-GAAP financial measures. See the appendix to this release for a
discussion of non-GAAP financial measures, including a
reconciliation to the most closely correlated GAAP measure. The
Company defines Adjusted EBITDA as segment operating income/(loss)
before depreciation, amortization, and stock-based compensation; in
addition to these items, the Company excludes certain other
non-GAAP adjustments, when they occur, as further defined.
Cautionary Note Regarding Forward-Looking Statements: This
release contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These include, without limitation, estimates of and
goals for future operating, financial and tax performance and
results, including our fiscal year 2023 guidance, our long-term
growth algorithm, outlook and targets and related assumptions and
drivers, as well as forward-looking statements concerning the
expected execution and effect of our business strategies, including
the potential impacts on our business of COVID-19, our cost-savings
and growth initiatives, including statements relating to our
expected cost savings under our Transformational Cost Management
Program and expansion and future operating and financial results of
our U.S. Healthcare segment, including our long-term sales targets
and profitability expectations. All statements in the future tense
and all statements accompanied by words such as “expect,”
“outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,”
“project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,”
continue,” “transform,” “accelerate,” “model,” “long-term,”
“believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,”
“assume,” and variations of such words and similar expressions are
intended to identify such forward-looking statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties and
assumptions, known or unknown, that could cause actual results to
vary materially from those indicated or anticipated.
These risks, assumptions and uncertainties include those
described in Item 1A (Risk Factors) of our Form 10-K for the fiscal
year ended August 31, 2022, as amended, and in other documents that
we file or furnish with the Securities and Exchange Commission. If
one or more of these risks or uncertainties materializes, or if
underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such
forward-looking statements. All forward-looking statements we make
or that are made on our behalf are qualified by these cautionary
statements. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made.
We do not undertake, and expressly disclaim, any duty or
obligation to update publicly any forward-looking statement after
the date of this release, whether as a result of new information,
future events, changes in assumptions or otherwise.
Please refer to the supplemental information presented below for
reconciliations of the non-GAAP financial measures used in this
release to the most comparable GAAP financial measure and related
disclosures.
Notes to Editors:
About Walgreens Boots Alliance
Walgreens Boots Alliance (Nasdaq: WBA) is an integrated
healthcare, pharmacy and retail leader serving millions of
customers and patients every day, with a 170-year heritage of
caring for communities.
A trusted, global innovator in retail pharmacy with
approximately 13,000 locations across the U.S., Europe and Latin
America, WBA plays a critical role in the healthcare ecosystem. The
Company is reimagining local healthcare and well-being for all as
part of its purpose – to create more joyful lives through better
health. Through dispensing medicines, improving access to a wide
range of health services, providing high quality health and beauty
products and offering anytime, anywhere convenience across its
digital platforms, WBA is shaping the future of healthcare.
WBA employs more than 325,000 people and has a presence in nine
countries through its portfolio of consumer brands: Walgreens,
Boots, Duane Reade, the No7 Beauty Company, Benavides in Mexico and
Ahumada in Chile. Additionally, WBA has a portfolio of
healthcare-focused investments located in several countries,
including China and the U.S.
The Company is proud of its contributions to healthy
communities, a healthy planet, an inclusive workplace and a
sustainable marketplace. WBA has been recognized for its commitment
to operating sustainably: the Company is an index component of the
Dow Jones Sustainability Indices (DJSI) and was named to the 100
Best Corporate Citizens 2022.
More Company information is available at
www.walgreensbootsalliance.com.
(WBA-ER)
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF EARNINGS
(UNAUDITED)
(in millions, except per share
amounts)
Three months ended February
28,
Six months ended February
28,
2023
2022
2023
2022
Sales
$
34,862
$
33,756
$
68,244
$
67,656
Cost of sales
27,807
26,047
54,236
52,374
Gross profit
7,055
7,708
14,008
15,283
Selling, general and administrative
expenses
6,934
6,565
20,091
12,956
Equity earnings in AmerisourceBergen
75
103
129
202
Operating income (loss)
197
1,246
(5,954
)
2,529
Other income (expense), net
552
(198
)
1,544
2,418
Earnings (loss) before interest and income
tax provision (benefit)
749
1,047
(4,410
)
4,947
Interest expense, net
141
100
252
186
Earnings (loss) before income tax
provision (benefit)
607
947
(4,662
)
4,761
Income tax provision (benefit)
70
172
(1,377
)
447
Post-tax earnings from other equity method
investments
6
31
13
24
Net earnings (loss)
544
806
(3,272
)
4,337
Net loss attributable to non-controlling
interests
(159
)
(78
)
(253
)
(126
)
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.
$
703
$
883
$
(3,018
)
$
4,463
Net earnings (loss) per common
share:
Basic
$
0.81
$
1.02
$
(3.50
)
$
5.16
Diluted
$
0.81
$
1.02
$
(3.50
)
$
5.15
Weighted average common shares
outstanding:
Basic
862.6
863.5
863.1
864.6
Diluted
863.4
865.2
863.1
866.4
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
February 28, 2023
August 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
1,088
$
1,358
Marketable securities
752
1,114
Accounts receivable, net
5,730
5,017
Inventories
8,757
8,353
Other current assets
1,362
1,059
Total current assets
17,689
16,902
Non-current assets:
Property, plant and equipment, net
11,576
11,729
Operating lease right-of-use assets
22,024
21,259
Goodwill
28,343
22,280
Intangible assets, net
13,864
10,730
Equity method investments
4,069
5,495
Other non-current assets
2,913
1,730
Total non-current assets
82,790
73,222
Total assets
$
100,479
$
90,124
Liabilities, redeemable non-controlling
interests and equity
Current liabilities:
Short-term debt
$
4,222
$
1,059
Trade accounts payable
12,720
11,255
Operating lease obligations
2,340
2,286
Accrued expenses and other liabilities
8,822
7,899
Income taxes
124
84
Total current liabilities
28,228
22,583
Non-current liabilities:
Long-term debt
8,820
10,615
Operating lease obligations
22,195
21,517
Deferred income taxes
2,081
1,442
Accrued litigation obligations
6,365
551
Other non-current liabilities
3,193
3,009
Total non-current liabilities
42,654
37,134
Redeemable non-controlling interests
158
1,042
Total equity
29,439
29,366
Total liabilities, redeemable
non-controlling interests and equity
$
100,479
$
90,124
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six months ended February
28,
2023
2022
Cash flows from operating
activities:
Net (loss) earnings
$
(3,272
)
$
4,337
Adjustments to reconcile net (loss)
earnings to net cash provided by operating activities:
Depreciation and amortization
1,055
1,024
Deferred income taxes
(1,600
)
94
Stock compensation expense
293
170
Earnings from equity method
investments
(143
)
(226
)
Gain on previously held investment
interests
—
(2,576
)
Gain on sale of equity method
investments
(1,512
)
—
Impairment of equity method investments
and investments in equity securities
8
190
Other
(383
)
(60
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(221
)
495
Inventories
(237
)
(803
)
Other current assets
(107
)
(37
)
Trade accounts payable
1,279
46
Accrued expenses and other liabilities
(684
)
(476
)
Income taxes
92
154
Accrued litigation obligations
6,795
—
Other non-current assets and
liabilities
(125
)
(147
)
Net cash provided by operating
activities
1,239
2,184
Cash flows from investing
activities:
Additions to property, plant and
equipment
(1,108
)
(870
)
Proceeds from sale-leaseback
transactions
942
475
Proceeds from sale of other assets
3,261
33
Business, investment and asset
acquisitions, net of cash acquired
(6,813
)
(1,918
)
Other
134
99
Net cash used for investing activities
(3,583
)
(2,181
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
1,128
1,289
Proceeds from debt
1,716
9,928
Payments of debt
(1,530
)
(7,331
)
Acquisition of non-controlling
interests
(1,039
)
(2,108
)
Proceeds from issuance of non-controlling
interests
2,523
—
Stock purchases
(150
)
(187
)
Proceeds related to employee stock plans,
net
22
32
Cash dividends paid
(829
)
(833
)
Other
(75
)
(22
)
Net cash provided by financing
activities
1,766
769
Effect of exchange rate changes on cash,
cash equivalents, marketable securities and restricted cash
13
(16
)
Changes in cash, cash equivalents,
marketable securities and restricted cash:
Net (decrease) increase in cash, cash
equivalents, marketable securities and restricted cash
(566
)
756
Cash, cash equivalents, marketable
securities and restricted cash at beginning of period
2,558
1,270
Cash, cash equivalents, marketable
securities and restricted cash at end of period
$
1,993
$
2,027
WALGREENS BOOTS ALLIANCE, INC. AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION (UNAUDITED)
REGARDING NON-GAAP FINANCIAL MEASURES
The following information provides reconciliations of the
supplemental non-GAAP financial measures, as defined under SEC
rules, presented in this press release to the most directly
comparable financial measures calculated and presented in
accordance with generally accepted accounting principles in the
United States (GAAP). The Company has provided the non-GAAP
financial measures in the press release, which are not calculated
or presented in accordance with GAAP, as supplemental information
and in addition to the financial measures that are calculated and
presented in accordance with GAAP.
These supplemental non-GAAP financial measures are presented
because management has evaluated the Company’s financial results
both including and excluding the adjusted items or the effects of
foreign currency translation, as applicable, and believes that the
supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core
operating performance of the Company’s business from period to
period and trends in the Company’s historical operating results.
These supplemental non-GAAP financial measures should not be
considered superior to, as a substitute for or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the press release.
The Company does not provide a reconciliation for non-GAAP
estimates on a forward-looking basis where it is unable to provide
a meaningful or accurate calculation or estimation of reconciling
items and the information is not available without unreasonable
effort. This is due to the inherent difficulty of forecasting the
timing or amount of various items that have not yet occurred, are
out of the Company’s control and/or cannot be reasonably predicted,
such as unusual one-time charges, tax expenses, and material
litigation expenses, and that would impact diluted net earnings per
share, the most directly comparable forward-looking GAAP financial
measure. For the same reasons, the Company is unable to address the
probable significance of the unavailable information.
Forward-looking non-GAAP financial measures provided without the
most directly comparable GAAP financial measures may vary
materially from the corresponding GAAP financial measures.
Constant currency
The Company also presents certain information related to current
period operating results in “constant currency,” which is a
non-GAAP financial measure. These amounts are calculated by
translating current period results at the foreign currency exchange
rates used in the comparable period in the prior year. The Company
presents such constant currency financial information because it
has significant operations outside of the U.S. transacting in
currencies other than the U.S. dollar and this presentation
provides a framework to assess how its business performed excluding
the impact of foreign currency exchange rate fluctuations.
Comparable sales
For the Company's U.S. Retail Pharmacy and International
segments, comparable 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 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. The method
of calculating comparable sales varies across the retail industry.
As a result, the Company's method of calculating comparable sales
may not be the same as other retailers’ methods.
With respect to the International segment, comparable sales,
comparable pharmacy sales and comparable retail sales, are
presented on a constant currency basis, which is a non-GAAP
financial measure. Refer to the discussion above in "Constant
currency" for further details on constant currency
calculations.
Key Performance Indicators
The Company considers certain metrics, such as comparable sales,
comparable pharmacy sales, comparable retail sales, comparable
number of prescriptions, comparable 30-day equivalent
prescriptions, number of payor/ provider partnerships, number of
locations of Walgreens Health Corners, number of VillageMD
co-located clinics and number of total VillageMD/Summit/CityMD
locations, at period end, to be key performance indicators because
the Company’s management has evaluated its results of operations
using these metrics and believes that these key performance
indicators presented provide additional perspective and insights
when analyzing the core operating performance of the Company from
period to period and trends in its historical operating results.
These key performance indicators should not be considered superior
to, as a substitute for or as an alternative to, and should be
considered in conjunction with, the GAAP financial measures
presented herein. These measures may not be comparable to
similarly-titled performance indicators used by other
companies.
With respect to the total number of VillageMD locations,
locations are defined as the primary care locations where the
Company or the Company’s affiliates lease or license space and the
providers are employed by either the Company or one of the
Company’s affiliates. These locations are primarily branded as
Village Medical where the Company employs the providers but, in
some instances, may operate under their own brands.
NET EARNINGS
(LOSS) AND DILUTED NET EARNINGS (LOSS) PER SHARE
(in millions, except per share
amounts)
Three months ended February
28,
Six months ended February
28,
2023
2022
2023
2022
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc. (GAAP)
$
703
$
883
$
(3,018
)
$
4,463
Adjustments to operating income
(loss):
Certain legal and regulatory accruals and
settlements 1
427
—
6,981
—
Acquisition-related amortization 2
247
250
577
415
Transformational cost management 3
145
70
283
273
Acquisition-related costs 4
148
44
187
115
Adjustments to equity earnings in
AmerisourceBergen 5
31
51
117
94
LIFO provision 6
20
(5
)
38
9
Total adjustments to operating income
(loss)
1,018
411
8,183
906
Adjustments to other income (expense),
net:
Gain on sale of equity method investments
7
(544
)
—
(1,513
)
—
Net investment hedging loss 8
—
—
—
1
Impairment of equity method investment and
investment in equity securities 9
—
190
—
190
Gain on previously held investments 10
—
—
—
(2,576
)
Adjustment to gain on disposal of
discontinued operations 11
—
38
—
38
Total adjustments to other income
(expense), net
(544
)
228
(1,513
)
(2,347
)
Adjustments to income tax provision
(benefit):
Equity method non-cash tax 12
14
12
23
30
Tax impact of adjustments 12
(122
)
(109
)
(1,560
)
(135
)
Total adjustments to income tax provision
(benefit)
(108
)
(97
)
(1,537
)
(105
)
Adjustments to post-tax earnings from
other equity method investments:
Adjustments to earnings from other equity
method investments 13
13
10
22
24
Total adjustments to post-tax earnings
from other equity method investments
13
10
22
24
Adjustments to net loss attributable to
non-controlling interests:
Transformational cost management 3
—
—
—
(1
)
Acquisition-related costs 4
(40
)
(3
)
(54
)
(20
)
Acquisition-related amortization 2
(42
)
(56
)
(78
)
(88
)
Total adjustments to net loss attributable
to non-controlling interests
(82
)
(59
)
(133
)
(109
)
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,000
$
1,377
$
2,004
$
2,833
Diluted net earnings (loss) per common
share (GAAP) 14
$
0.81
$
1.02
$
(3.50
)
$
5.15
Adjustments to operating income (loss)
1.18
0.48
9.47
1.05
Adjustments to other income (expense),
net
(0.63
)
0.26
(1.75
)
(2.71
)
Adjustments to income tax provision
(benefit)
(0.12
)
(0.11
)
(1.78
)
(0.12
)
Adjustments to post-tax earnings from
other equity method investments
0.02
0.01
0.03
0.03
Adjustments to net loss attributable to
non-controlling interests
(0.09
)
(0.07
)
(0.15
)
(0.13
)
Adjusted diluted net earnings per
common share (Non-GAAP measure) 15
$
1.16
$
1.59
$
2.32
$
3.27
Weighted average common shares
outstanding, diluted (in millions) 15
863.4
865.2
863.8
866.4
1
Certain legal and regulatory accruals and
settlements relate to significant charges associated with certain
legal proceedings, including legal defense costs. 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. During the three and
six months ended February 28, 2023, the Company recorded charges
related to the previously announced opioid litigation settlement
frameworks and certain other opioid-related matters.
2
Acquisition-related amortization includes
amortization of acquisition-related intangible assets, inventory
valuation adjustments and stock-based compensation fair valuation
adjustments. Amortization of acquisition-related intangible assets
includes amortization of intangible assets such as customer
relationships, trade names, trademarks, developed technology 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. The stock-based compensation fair
valuation adjustment reflects the difference between the fair value
based remeasurement of awards under purchase accounting and the
grant date fair valuation. Post-acquisition compensation expense
recognized in excess of the original grant date fair value of
acquiree awards are excluded from the related non-GAAP measures as
these arise from acquisition-related accounting requirements or
agreements, and are not reflective of normal operating
activities.
3
Transformational Cost Management Program
charges are costs associated with a formal restructuring plan.
These charges are primarily recorded within Selling, general and
administrative expenses. These costs do not reflect current
operating performance and are impacted by the timing of
restructuring activity.
4
Acquisition-related costs are transaction
and integration costs associated with certain merger, acquisition
and divestitures related activities. These costs include charges
incurred related to certain mergers, acquisition and divestitures
related activities recorded in operating income, for example, costs
related to integration efforts for merger, acquisition and
divestitures activities. Examples of such costs include deal costs,
severance, stock compensation and employee transaction success
bonuses. 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.
5
Adjustments to equity earnings in
AmerisourceBergen consist of the Company’s proportionate share of
non-GAAP adjustments reported by AmerisourceBergen consistent with
the Company’s non-GAAP measures.
6
The Company’s U.S. Retail Pharmacy 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 U.S. Retail Pharmacy 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.
7
Includes significant gains on the sale of
equity method investments. During the three and six months ended
February 28, 2023, the Company recorded a gain of $492 million and
$1.5 billion, respectively, in Other income (expense), net, due to
a partial sale of its equity method investment in
AmerisourceBergen.
8
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), net. We do not believe this
volatility related to mark-to-market adjustment on the underlying
derivative instruments reflects the Company’s operational
performance.
9
Impairment of equity method investment and
investment in equity securities includes impairment of certain
investments. The Company excludes these charges when evaluating
operating performance because these do not relate to the ordinary
course of the Company’s business and it does not incur such charges
on a predictable basis. Exclusion of such charges enables more
consistent evaluation of the Company’s operating performance. These
charges are recorded within Other income (expense), net.
10
Includes significant gains on business
combinations due to the remeasurement of previously held minority
equity interests and debt securities to fair value. During the
three months ended November 30, 2021, the Company recorded such
pre-tax gains of $2.2 billion and $402 million for VillageMD and
Shields, respectively.
11
During the three months ended February 28,
2022, the Company finalized the working capital adjustments with
AmerisourceBergen related to the sale of the Alliance Healthcare
business, resulting in a $38 million charge recorded to Other
income (expense), net in the Consolidated Condensed Statement of
Earnings.
12
Adjustments to income tax provision
(benefit) include adjustments to the GAAP basis tax (benefit)
provision commensurate with non-GAAP adjustments and certain
discrete tax items including U.S. and UK tax law changes and equity
method non-cash tax. These charges are recorded within income tax
provision (benefit).
13
Adjustments to post-tax 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
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.
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
calculation of weighted-average common shares outstanding for
diluted EPS for the six months ended February 28, 2023.
15
Includes impact of potentially dilutive
securities in the calculation of weighted-average common shares,
diluted for adjusted diluted net earnings per common share
calculation purposes.
NON-GAAP RECONCILIATIONS BY
SEGMENT
(in millions)
Three months ended February
28, 2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,577
$
5,651
$
1,634
$
—
$
34,862
Gross profit (GAAP)
$
5,825
$
1,198
$
32
$
—
$
7,055
Acquisition-related amortization
5
—
18
—
23
Acquisition-related costs
—
—
60
—
60
LIFO provision
20
—
—
—
20
Adjusted gross profit (Non-GAAP
measure)
$
5,850
$
1,198
$
110
$
—
$
7,158
Selling, general and administrative
expenses (GAAP)
$
5,527
$
846
$
504
$
56
$
6,934
Certain legal and regulatory accruals and
settlements
(427
)
—
—
—
(427
)
Acquisition-related amortization
(72
)
(15
)
(137
)
—
(224
)
Transformational cost management
(138
)
(4
)
—
(2
)
(145
)
Acquisition-related costs
—
20
(98
)
(10
)
(88
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,890
$
846
$
269
$
44
$
6,050
Operating income (loss) (GAAP)
$
373
$
353
$
(472
)
$
(56
)
$
197
Certain legal and regulatory accruals and
settlements
427
—
—
—
427
Acquisition-related amortization
78
15
154
—
247
Transformational cost management
138
4
—
2
145
Acquisition-related costs
—
(20
)
158
10
148
Adjustments to equity earnings in
AmerisourceBergen
31
—
—
—
31
LIFO provision
20
—
—
—
20
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,067
$
352
$
(159
)
$
(44
)
$
1,215
Gross margin (GAAP)
21.1
%
21.2
%
2.0
%
20.2
%
Adjusted gross margin (Non-GAAP
measure)
21.2
%
21.2
%
6.7
%
20.5
%
Selling, general and administrative
expenses percent to sales (GAAP)
20.0
%
15.0
%
30.9
%
19.9
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.7
%
15.0
%
16.5
%
17.4
%
Operating margin2
1.1
%
6.2
%
(28.9
)%
0.3
%
Adjusted operating margin (Non-GAAP
measure)2
3.5
%
6.2
%
(9.8
)%
3.2
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in AmerisourceBergen. As a result of the
two-month reporting lag, operating income for the three month
period ended February 28, 2023 includes AmerisourceBergen equity
earnings for the period of October 1, 2022 through December 31,
2022.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
(in millions)
Three months ended February
28, 2022
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,667
$
5,563
$
527
$
(1
)
$
33,756
Gross profit (GAAP)
$
6,487
$
1,206
$
15
$
—
$
7,708
LIFO provision
(5
)
—
—
—
(5
)
Acquisition-related amortization
5
—
—
—
5
Adjusted gross profit (Non-GAAP
measure)
$
6,487
$
1,206
$
15
$
—
$
7,709
Selling, general and administrative
expenses (GAAP)
$
5,199
$
1,033
$
227
$
106
$
6,565
Acquisition-related costs
—
(23
)
—
(21
)
(44
)
Transformational cost management
(52
)
(13
)
—
(5
)
(71
)
Acquisition-related amortization
(93
)
(17
)
(135
)
—
(245
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
5,053
$
981
$
92
$
79
$
6,205
Operating income (loss) (GAAP)
$
1,390
$
173
$
(212
)
$
(106
)
$
1,246
Adjustments to equity earnings in
AmerisourceBergen
51
—
—
—
51
Acquisition-related amortization
99
17
135
—
250
Transformational cost management
52
13
—
5
70
LIFO provision
(5
)
—
—
—
(5
)
Acquisition-related costs
—
23
—
21
44
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,588
$
226
$
(77
)
$
(79
)
$
1,657
Gross margin (GAAP)
23.4
%
21.7
%
2.9
%
22.8
%
Adjusted gross margin (Non-GAAP
measure)
23.4
%
21.7
%
2.9
%
22.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.8
%
18.6
%
43.1
%
19.4
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
18.3
%
17.6
%
17.5
%
18.4
%
Operating margin2
4.7
%
3.1
%
(40.2
)%
3.4
%
Adjusted operating margin (Non-GAAP
measure)2
5.2
%
4.1
%
(14.6
)%
4.4
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in AmerisourceBergen. As a result of the
two-month reporting lag, operating income for the three month
period ended February 28, 2022 includes AmerisourceBergen equity
earnings for the period of October 1, 2021 through December 31,
2021.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
(in millions)
Six months ended February 28,
2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
54,781
$
10,840
$
2,622
$
—
$
68,244
Gross profit (GAAP)
$
11,711
$
2,248
$
49
$
—
$
14,008
Acquisition-related amortization
11
—
44
—
54
Acquisition-related costs
—
—
60
—
60
LIFO provision
38
—
—
—
38
Adjusted gross profit (Non-GAAP
measure)
$
11,760
$
2,248
$
153
$
—
$
14,161
Selling, general and administrative
expenses (GAAP)
$
17,225
$
1,789
$
958
$
119
$
20,091
Certain legal and regulatory accruals and
settlements
(6,981
)
—
—
—
(6,981
)
Acquisition-related amortization
(145
)
(29
)
(348
)
—
(522
)
Transformational cost management
(265
)
(11
)
—
(7
)
(283
)
Acquisition-related costs
(1
)
32
(146
)
(12
)
(127
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
9,833
$
1,780
$
464
$
100
$
12,177
Operating (loss) income (GAAP)
$
(5,385
)
$
459
$
(909
)
$
(119
)
$
(5,954
)
Certain legal and regulatory accruals and
settlements
6,981
—
—
—
6,981
Acquisition-related amortization
155
29
392
—
577
Transformational cost management
265
11
—
7
283
Acquisition-related costs
1
(32
)
206
12
187
Adjustments to equity earnings in
AmerisourceBergen
117
—
—
—
117
LIFO provision
38
—
—
—
38
Adjusted operating income (loss)
(Non-GAAP measure)
$
2,172
$
468
$
(311
)
$
(100
)
$
2,229
Gross margin (GAAP)
21.4
%
20.7
%
1.9
%
20.5
%
Adjusted gross margin (Non-GAAP
measure)
21.5
%
20.7
%
5.8
%
20.7
%
Selling, general and administrative
expenses percent to sales (GAAP)
31.4
%
16.5
%
36.5
%
29.4
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.9
%
16.4
%
17.7
%
17.8
%
Operating margin2
(10.1
)%
4.2
%
(34.6
)%
(8.9
)%
Adjusted operating margin (Non-GAAP
measure)2
3.5
%
4.3
%
(11.9
)%
2.9
%
1
Operating loss for U.S. Retail Pharmacy
includes equity earnings in AmerisourceBergen. As a result of the
two-month reporting lag, operating loss for the six month period
ended February 28, 2023 includes AmerisourceBergen equity earnings
for the period of July 1, 2022 through December 31, 2022.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
(in millions)
Six months ended February 28,
2022
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
55,699
$
11,381
$
577
$
(1
)
$
67,656
Gross profit (GAAP)
$
12,834
$
2,413
$
36
$
—
$
15,283
LIFO provision
9
—
—
—
9
Acquisition-related amortization
12
—
—
—
12
Adjusted gross profit (Non-GAAP
measure)
$
12,855
$
2,413
$
36
$
—
$
15,304
Selling, general and administrative
expenses (GAAP)
$
10,290
$
2,186
$
292
$
188
$
12,956
Transformational cost management
(193
)
(66
)
—
(14
)
(273
)
Acquisition-related amortization
(226
)
(34
)
(143
)
—
(403
)
Acquisition-related costs
3
(62
)
(24
)
(32
)
(115
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
9,874
$
2,024
$
126
$
143
$
12,166
Operating income (loss) (GAAP)
$
2,746
$
227
$
(257
)
$
(188
)
$
2,529
Transformational cost management
193
66
—
14
273
Acquisition-related amortization
238
34
143
—
415
LIFO provision
9
—
—
—
9
Acquisition-related costs
(3
)
62
24
32
115
Adjustments to equity earnings in
AmerisourceBergen
94
—
—
—
94
Adjusted operating income (loss)
(Non-GAAP measure)
$
3,277
$
389
$
(90
)
$
(143
)
$
3,434
Gross margin (GAAP)
23.0
%
21.2
%
6.2
%
22.6
%
Adjusted gross margin (Non-GAAP
measure)
23.1
%
21.2
%
6.2
%
22.6
%
Selling, general and administrative
expenses percent to sales (GAAP)
18.5
%
19.2
%
50.6
%
19.1
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.7
%
17.8
%
21.7
%
18.0
%
Operating margin2
4.6
%
2.0
%
(44.4
)%
3.4
%
Adjusted operating margin (Non-GAAP
measure)2
5.4
%
3.4
%
(15.6
)%
4.6
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in AmerisourceBergen. As a result of the
two-month reporting lag, operating income for the six month period
ended February 28, 2022 includes AmerisourceBergen equity earnings
for the period of July 1, 2021 through December 31, 2021.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in
AmerisourceBergen and adjusted equity earnings in
AmerisourceBergen, respectively.
OPERATING LOSS TO ADJUSTED EBITDA FOR
U.S. HEALTHCARE SEGMENT
(in millions)
Three months ended February
28,
Six months ended February
28,
2023
2022
2023
2022
Operating loss (GAAP) 1
$
(472
)
$
(212
)
$
(909
)
$
(257
)
Acquisition-related amortization 2
154
135
392
143
Acquisition-related costs 3
158
—
206
24
Adjusted operating loss (Non-GAAP
measure)
(159
)
(77
)
(311
)
(90
)
Depreciation expense
34
11
49
13
Stock-based compensation expense 4
16
5
29
5
Adjusted EBITDA (Non-GAAP
measure)
$
(109
)
$
(62
)
$
(233
)
$
(72
)
1
The Company reconciles Adjusted EBITDA for
the U.S. Healthcare segment to Operating loss as the closest GAAP
measure for the segment profitability. The Company does not measure
Net earnings attributable to Walgreens Boots Alliance, Inc. for its
segments.
2
Acquisition-related amortization includes
amortization of acquisition-related intangible assets, inventory
valuation adjustments and stock-based compensation fair valuation
adjustments. Amortization of acquisition-related intangible assets
includes amortization of intangible assets such as customer
relationships, trade names, trademarks, developed technology 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. The stock-based compensation fair
valuation adjustment reflects the difference between the fair value
based remeasurement of awards under purchase accounting and the
grant date fair valuation. Post-acquisition compensation expense
recognized in excess of the original grant date fair value of
acquiree awards are excluded from the related non-GAAP measures as
these arise from acquisition-related accounting requirements or
agreements, and are not reflective of normal operating
activities.
3
Acquisition-related costs are transaction
and integration costs associated with certain merger, acquisition
and divestitures related activities. These costs include charges
incurred related to certain mergers, acquisition and divestitures
related activities recorded in operating income, for example, costs
related to integration efforts for merger, acquisition and
divestitures activities. Examples of such costs include deal costs,
severance, stock compensation and employee transaction success
bonuses. These charges are primarily recorded within Selling,
general and administrative expenses. These costs are significantly
impacted by the timing and complexity of the underlying merger,
acquisition and divestitures related activities and do not reflect
the Company’s current operating performance.
4
Includes GAAP stock-based compensation
expense excluding expenses related to acquisition-related
amortization and acquisition-related costs.
EQUITY EARNINGS IN
AMERISOURCEBERGEN
(in millions)
Three months ended February
28,
Six months ended February
28,
2023
2022
2023
2022
Equity earnings in AmerisourceBergen
(GAAP)
$
75
$
103
$
129
$
202
Gain from antitrust litigation
settlements
(8
)
—
(8
)
3
Turkey hyperinflation impact
1
—
5
—
LIFO expense / (credit)
3
(10
)
24
(10
)
Acquisition-related intangibles
amortization
27
41
65
75
Litigation and opioid-related expenses
2
—
5
—
Acquisition integration and restructuring
expenses
5
—
23
—
Tax reform
1
1
4
4
Employee severance, litigation, and
other
—
15
—
27
Impairment of non-customer note
receivable
—
—
—
4
Impairment of assets
—
1
—
5
Goodwill impairment
—
—
—
2
Certain discrete tax expense
—
3
(2
)
3
Gain on remeasurement of equity
investment
—
—
—
(18
)
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
107
$
154
$
246
$
297
ADJUSTED EFFECTIVE TAX
RATE
(in millions)
Three months ended February
28, 2023
Three months ended February
28, 2022
Earnings before income tax
provision
Income tax provision
Effective tax rate
Earnings before income tax
provision
Income tax provision
Effective tax rate
Effective tax rate (GAAP)
$
607
$
70
11.5%
$
947
$
172
18.2%
Impact of non-GAAP adjustments
474
96
639
55
Adjusted tax rate true-up
—
26
—
53
Equity method non-cash tax
—
(14
)
—
(12
)
Subtotal
$
1,081
$
177
$
1,586
$
268
Exclude adjusted equity earnings in
AmerisourceBergen
(107
)
—
(154
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
975
$
177
18.2%
$
1,432
$
268
18.7%
(in millions)
Six months ended February 28,
2023
Six months ended February 28,
2022
(Loss) earnings before income
tax (benefit) provision
Income tax (benefit)
provision
Effective tax rate
Earnings before income tax
provision
Income tax provision
Effective tax rate
Effective tax rate (GAAP)
$
(4,662
)
$
(1,377
)
29.5%
$
4,761
$
447
9.4%
Impact of non-GAAP adjustments
6,671
1,369
(1,441
)
60
Adjusted tax rate true-up
—
191
—
75
Equity method non-cash tax
—
(23
)
—
(30
)
Subtotal
$
2,009
$
160
$
3,319
$
552
Exclude adjusted equity earnings in
AmerisourceBergen
(246
)
—
(297
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,763
$
160
9.1%
$
3,023
$
552
18.3%
FREE CASH FLOW
(in millions)
Three months ended February
28,
Six months ended February
28,
2023
2022
2023
2022
Net cash provided by operating
activities (GAAP)
$
745
$
1,085
$
1,239
$
2,184
Less: Additions to property, plant and
equipment
$
(497
)
$
(416
)
(1,108
)
(870
)
Plus: Acquisition related payments 2
$
429
$
—
429
—
Free cash flow (Non-GAAP measure)
1
$
677
$
669
$
560
$
1,314
1
Free cash flow is defined as net cash
provided by operating activities in a period less additions to
property, plant and equipment (capital expenditures), plus
acquisition related payments made in that period. This measure does
not represent residual cash flows available for discretionary
expenditures as the measure does not deduct the payments required
for debt service and other contractual obligations or payments for
future business acquisitions. Therefore, we believe it is important
to view free cash flow as a measure that provides supplemental
information to our entire statements of cash flows.
2
During the three months ended February 28,
2023, the Company paid $335 million to settle liability classified
share-based payment awards related to acquiring the remaining 30%
equity interest in Shields. The Company also paid one-time
compensation costs related to VillageMD's acquisition of Summit.
The payments are not indicative of normal operating
performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230328005332/en/
Media Relations U.S. / Jim Cohn +1 224 813 9057
International +44 (0)20 7980 8585
Investor Relations Tiffany Kanaga +1 847 315 2922
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