Company Appoints Tim Wentworth as Chief
Executive Officer
Fourth quarter and fiscal year financial highlights
- Fourth quarter loss per share* was $0.21 versus $0.48 in the
year-ago quarter; adjusted earnings per share (EPS*) was $0.67,
down 18.0 percent on a constant currency basis, reflecting a 23.5
percent headwind from significantly lower COVID-19 vaccine and
testing volumes
- Fiscal 2023 loss per share was $3.57 compared with $5.01
earnings per share in the year-ago period; adjusted EPS was $3.98,
down 20.3 percent on a constant currency basis, impacted by a 20.7
percent headwind from significantly lower COVID-19 vaccine and
testing volumes
- Fourth quarter sales increased 9.2 percent year-over-year to
$35.4 billion, up 8.3 percent on a constant currency basis
- Fiscal 2023 sales increased 4.8 percent to $139.1 billion, up
5.6 percent on a constant currency basis
Fiscal 2024 guidance
- Expecting fiscal 2024 adjusted EPS of $3.20 to $3.50, with
underlying earnings growth more than offset by lower sale and
leaseback contribution, a higher tax rate, and lower COVID-19
contribution
- Expecting U.S. Healthcare adjusted EBITDA to be breakeven at
the midpoint of the guidance range of ($50) to $50 million
- Not providing guidance beyond fiscal 2024; continuing to
evaluate macroeconomic trends and challenges, and expecting to
provide long-term guidance, if any, in the future
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the fiscal year and fourth quarter that ended
Aug. 31, 2023.
Interim Chief Executive Officer Ginger Graham said:
“Our performance this year has not reflected WBA’s strong
assets, brand legacy, or our commitment to our customers and
patients. In just six weeks, we have taken a number of steps to
align our cost structure with our business performance, including
planned cost reductions of at least $1 billion, and lowered capital
expenditures by approximately $600 million. We anticipate seeing
the impact of these actions in fiscal 2024, beginning in the second
quarter. We are also intently focused on accelerating our
profitability in the U.S. Healthcare segment. As we welcome our new
Chief Executive Officer, Tim Wentworth, who brings deep healthcare
experience and the skills needed to propel WBA forward, along with
the support of the Board, I am confident in our company's future
and the ability to deliver greater value to our customers,
shareholders, partners, and employees."
Overview of Fourth Quarter Results
WBA fourth quarter sales increased 9.2 percent from the year-ago
quarter to $35.4 billion, an increase of 8.3 percent on a constant
currency basis, reflecting sales growth in the U.S. Retail Pharmacy
and International segments, and sales contribution from the U.S.
Healthcare segment.
Fourth quarter operating loss was $450 million compared to an
operating loss of $822 million in the year-ago quarter. Operating
loss in the current quarter reflects certain legal and regulatory
accruals and settlements, and higher costs related to the
Transformational Cost Management Program. Year over year
improvement in operating loss is due to lapping a $783 million
non-cash impairment charge related to intangible assets in Boots UK
in the year-ago quarter. Adjusted operating income was $683
million, a decrease of 9.8 percent on a constant currency basis,
reflecting lower volumes of COVID-19 vaccinations and testing, and
lower levels of sale leaseback contribution, partly offset by
improvements in underlying U.S. pharmacy, lower incentive accruals,
strong International growth, and improved profitability in U.S.
Healthcare.
Net loss in the fourth quarter was $180 million compared to a
net loss of $415 million in the year-ago quarter, primarily driven
by a lower operating loss. Adjusted net earnings decreased 17.1
percent to $575 million, down 18.1 percent on a constant currency
basis, primarily driven by lower adjusted operating income and a
higher adjusted effective tax rate primarily due to timing and
release of valuation allowance related to capital loss
carryforwards in the year-ago quarter.
Loss per share was $0.21, compared to a loss per share of $0.48
in the year-ago quarter. Adjusted earnings per share decreased 17.0
percent to $0.67, reflecting a decrease of 18.0 percent on a
constant currency basis.
Net cash provided by operating activities was $1.0 billion in
the fourth quarter and free cash flow was $549 million, a $956
million increase compared with the year-ago quarter driven
primarily by phasing of working capital, partially offset by opioid
settlement payments.
Overview of Fiscal Year Results
Sales in fiscal 2023 were $139.1 billion, an increase of 4.8
percent from the year-ago period, and an increase of 5.6 percent on
a constant currency basis, reflecting sales growth in the U.S.
Retail Pharmacy and International segments, and sales contribution
from the U.S. Healthcare segment.
Operating loss in fiscal 2023 was $6.9 billion compared to
operating income of $1.4 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, partly offset by higher Boots
UK intangible assets impairment charges in the year ago period.
Adjusted operating income was $3.9 billion, a decrease of 24.1
percent on a constant currency basis, reflecting a COVID-19
headwind of 23.3 percent and planned payroll investments in U.S.
Retail Pharmacy, partly offset by lower incentive accruals,
International growth and improved retail contributions in the
U.S.
Net loss in fiscal 2023 was $3.1 billion, compared with net
earnings of $4.3 billion in the year-ago period. This decrease is
driven by a $5.5 billion after-tax charge for opioid-related claims
and litigation in the period and lapping of a $2.5 billion
after-tax gain on the Company's investments in VillageMD and
Shields Health Solutions in the year-ago period, partly offset by a
$1.7 billion after-tax gain from the partial sale of the Company's
investments in Cencora and the complete sale of the Company's
investment in Option Care Health. Adjusted net earnings were $3.4
billion, a decrease of 20.5 percent on a constant currency basis,
primarily driven by lower adjusted operating income.
Loss per share for fiscal 2023 decreased to $3.57, compared with
EPS of $5.01 in the year-ago period. Adjusted EPS was $3.98, a
decrease of 20.9 percent on a reported basis and a decrease of 20.3
percent on a constant currency basis.
Net cash provided by operating activities was $2.3 billion in
fiscal 2023. Free cash flow was $0.7 billion, a decrease of $1.5
billion from fiscal 2022 driven by lower earnings, opioid
settlement payments, and increased capital expenditures including
growth initiatives related to U.S. pharmacy and U.S.
Healthcare.
Business Segments
U.S. Retail Pharmacy
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Sales
$
27,666
$
26,683
$
110,314
$
109,078
Adjusted operating income ***
$
554
$
786
$
3,689
$
5,029
The U.S. Retail Pharmacy segment had fourth quarter sales of
$27.7 billion, an increase of 3.7 percent from the year-ago
quarter. Comparable sales increased 5.7 percent from the year-ago
quarter.
Pharmacy sales increased 6.4 percent compared to the year-ago
quarter. Comparable pharmacy sales increased 9.2 percent in the
fourth quarter, aided by higher brand inflation and mix impacts.
Comparable prescriptions filled in the fourth quarter increased 0.9
percent while comparable prescriptions excluding immunizations
increased 1.6 percent compared with the year-ago quarter. Total
prescriptions filled in the quarter, including immunizations,
adjusted to 30-day equivalents, decreased 0.5 percent to 297
million, impacted by lower market growth due to a weaker
respiratory season.
Retail sales decreased 4.3 percent and comparable retail sales
decreased 3.3 percent versus the year-ago quarter, reflecting
macroeconomic-driven consumer pressure, a 1.0 percentage point
impact from a weaker respiratory season and a 1.6 percentage point
impact from lower sales of COVID-19 OTC test kits.
Adjusted operating income decreased 29.4 percent to $554 million
compared to $786 million in the year-ago quarter, reflecting
reduced COVID-19 contributions (estimated $215 million) and lower
levels of benefits from the sale and leaseback program, partly
offset by underlying pharmacy gross profit and lower incentive
accruals.
International
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Sales
$
5,784
$
5,144
$
22,198
$
21,830
Adjusted operating income ***
$
259
$
163
$
935
$
726
The International segment had fourth quarter sales of $5.8
billion, an increase of 12.4 percent from the year-ago quarter,
including a favorable currency impact of 5.7 percent. Sales
increased 6.7 percent on a constant currency basis, with Boots UK
sales growing 10.9 percent, and the Company's Germany wholesale
business sales growing 3.5 percent.
Boots UK comparable pharmacy sales increased 9.9 percent
compared with the year-ago quarter. Boots UK comparable retail
sales increased 11.7 percent compared to the year-ago quarter, with
growth across all categories and footfall improving 4 percent.
Boots.com continued to perform strongly with sales growing 28.9
percent, representing over 13 percent of Boots total retail
sales.
Adjusted operating income increased 59.0 percent to $259
million, an increase of 52.2 percent on a constant currency basis,
reflecting gross profit growth across all markets, led by strong
retail sales in the UK and pharmacy margin.
U.S. Healthcare
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Sales
$
1,972
$
622
$
6,570
$
1,795
Operating loss
$
(294
)
$
(338
)
$
(1,725
)
$
(829
)
Adjusted operating loss ***
$
(83
)
$
(151
)
$
(566
)
$
(370
)
Adjusted EBITDA (Non-GAAP measure)
$
(30
)
$
(133
)
$
(376
)
$
(312
)
The U.S. Healthcare segment had fourth quarter sales of $2.0
billion, reflecting the acquisition of CareCentrix, the acquisition
of Summit Health by VillageMD, and pro forma growth in all
businesses. On a pro forma basis, the segment's businesses grew
sales at a combined rate of 19 percent in the quarter. VillageMD
grew 17 percent, reflecting existing clinic growth and clinic
footprint expansion. CareCentrix grew pro forma sales 24 percent
due to additional service offerings and expansion into additional
markets with existing partners. Shields grew 29 percent, driven by
key contract wins, further expansion of existing partnerships, and
strong executional focus.
Operating loss in the quarter of $294 million compared to $338
million in the prior year period. Adjusted operating loss, which
excludes certain costs related to stock compensation expense and
amortization of acquired intangible assets, was $83 million
compared to $151 million in the year-ago quarter. Fourth quarter
adjusted EBITDA loss of $30 million improved by $103 million versus
the prior year quarter. Improvement in adjusted operating loss
versus the year ago quarter was driven by growth at Shields and
CareCentrix, and cost management at Walgreens Health.
Fiscal 2024 Outlook
2024
Sales
$141.0 to $145.0 Billion
Adjusted operating income (Non-GAAP
measure)
$3.4 to $3.7 Billion
Adjusted EPS (Non-GAAP measure)
$3.20 to $3.50
For fiscal 2024, Walgreens Boots Alliance expects adjusted EPS
of $3.20 to $3.50 reflecting incremental cost savings across the
business and accelerating profitability in U.S. Healthcare, more
than offset by lower sale and leaseback contribution, a higher tax
rate, and lower COVID-19 contribution.
The Company expects U.S. Healthcare adjusted EBITDA to be
breakeven at the midpoint of the guidance range of ($50) to $50
million.
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.
Conference Call
WBA will hold a conference call to discuss fourth quarter and
fiscal 2023 earnings results beginning at 8:30 a.m. Eastern time
today, Oct. 12, 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 uses Adjusted operating income (loss) as its
principal measure of segment performance as it enhances the
Company’s ability to compare past financial performance with
current performance and analyze underlying segment performance and
trends. The consolidated WBA measure is not determined in
accordance with GAAP and should not be considered a substitute for,
or superior to, the most directly comparable GAAP measure,
consolidated operating income. See the appendix to this release for
a discussion of non-GAAP financial measures, including a
reconciliation to the most closely correlated GAAP measure.
Cautionary Note Regarding Forward-Looking Statements: This
release contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These include, without limitation, estimates of and
goals for future operating, financial and tax performance and
results, including our fiscal year 2024 outlook, our long-term
growth outlook and targets and related assumptions and drivers, as
well as forward-looking statements concerning future leadership and
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,” “preliminary 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,” “commentary,”
“potential,” “preliminary,” 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, 2023 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 331,000 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 being an inclusive workplace. In fiscal 2023, the Company
received a score of 100 from the Human Rights Campaign’s Corporate
Equality Index, scored 100 percent on the Disability Equality Index
for disability inclusion and was named Disability:IN’s 2023
Employer of the Year. In addition, WBA has been recognized for its
commitment to operating sustainably as the company is an index
component of the Dow Jones Sustainability Indices (DJSI).
More Company information is available at
www.walgreensbootsalliance.com.
(WBA-ER)
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS
(UNAUDITED)
(in millions, except per share
amounts)
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Sales
$
35,422
$
32,449
$
139,081
$
132,703
Cost of sales
28,947
26,038
112,009
104,437
Gross profit
6,475
6,410
27,072
28,265
Selling, general and administrative
expenses
6,991
7,320
34,205
27,295
Equity earnings in Cencora
65
88
252
418
Operating (loss) income
(450
)
(822
)
(6,882
)
1,387
Other income, net
231
169
2,043
2,998
(Loss) earnings before interest and income
tax benefit
(220
)
(652
)
(4,839
)
4,385
Interest expense, net
155
105
580
400
(Loss) earnings before income tax
benefit
(375
)
(758
)
(5,419
)
3,985
Income tax benefit
(151
)
(235
)
(1,858
)
(30
)
Post-tax earnings from other equity method
investments
16
21
33
50
Net (loss) earnings
(208
)
(501
)
(3,528
)
4,065
Net loss attributable to non-controlling
interests
(28
)
(86
)
(448
)
(271
)
Net (loss) earnings attributable to
Walgreens Boots Alliance, Inc.
$
(180
)
$
(415
)
$
(3,080
)
$
4,337
Net (loss) earnings per common
share:
Basic
$
(0.21
)
$
(0.48
)
$
(3.57
)
$
5.02
Diluted
$
(0.21
)
$
(0.48
)
$
(3.57
)
$
5.01
Weighted average common shares
outstanding:
Basic
864.3
864.5
863.2
864.4
Diluted
864.3
864.5
863.2
865.9
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(in millions)
August 31, 2023
August 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
728
$
1,358
Marketable securities
11
1,114
Accounts receivable, net
5,381
5,017
Inventories
8,257
8,353
Other current assets
1,127
1,059
Total current assets
15,503
16,902
Non-current assets:
Property, plant and equipment, net
11,587
11,729
Operating lease right-of-use assets
21,667
21,259
Goodwill
28,187
22,280
Intangible assets, net
13,635
10,730
Equity method investments
3,497
5,495
Other non-current assets
2,550
1,730
Total non-current assets
81,125
73,222
Total assets
$
96,628
$
90,124
Liabilities, redeemable non-controlling
interests and equity
Current liabilities:
Short-term debt
$
917
$
1,059
Trade accounts payable
12,635
11,255
Operating lease obligations
2,347
2,286
Accrued expenses and other liabilities
8,426
7,899
Income taxes
209
84
Total current liabilities
24,535
22,583
Non-current liabilities:
Long-term debt
8,145
10,615
Operating lease obligations
22,124
21,517
Deferred income taxes
1,318
1,442
Accrued litigation obligations
6,261
551
Other non-current liabilities
5,757
3,009
Total non-current liabilities
43,605
37,134
Redeemable non-controlling interests
167
1,042
Total equity
28,322
29,366
Total liabilities, redeemable
non-controlling interests and equity
$
96,628
$
90,124
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
(in millions)
Twelve months ended August
31,
2023
2022
Cash flows from operating
activities:
Net (loss) earnings
$
(3,528
)
$
4,065
Adjustments to reconcile net (loss)
earnings to net cash provided by operating activities:
Depreciation and amortization
2,257
1,990
Deferred income taxes
(2,371
)
(366
)
Stock compensation expense
385
391
Earnings from equity method
investments
(286
)
(468
)
Impairment of intangibles and long-lived
assets
1,293
1,214
Loss on early extinguishment of debt
—
6
Gain on previously held investment
interests
—
(2,576
)
Gain on sale of equity method
investments
(1,855
)
(559
)
Gain on sale-leaseback transactions
(925
)
(619
)
Other
(157
)
326
Changes in operating assets and
liabilities:
Accounts receivable, net
72
808
Inventories
287
(433
)
Other current assets
(188
)
(72
)
Trade accounts payable
1,243
244
Accrued expenses and other liabilities
(561
)
(138
)
Income taxes
441
(51
)
Accrued litigation obligations
6,378
—
Other non-current assets and
liabilities
(228
)
137
Net cash provided by operating
activities
2,258
3,899
Cash flows from investing
activities:
Additions to property, plant and
equipment
(2,117
)
(1,734
)
Proceeds from sale-leaseback
transactions
1,767
1,308
Proceeds from sale of other assets
4,495
1,334
Business, investment and asset
acquisitions, net of cash acquired
(7,313
)
(2,189
)
Other
75
216
Net cash used for investing activities
(3,094
)
(1,064
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
(1
)
(11
)
Proceeds from debt
6,276
11,958
Payments of debt
(8,978
)
(8,360
)
Acquisition of non-controlling
interests
(1,316
)
(2,108
)
Proceeds from issuance of non-controlling
interests
2,725
—
Proceeds from variable prepaid forward
2,568
—
Treasury stock purchases
(150
)
(187
)
Proceeds related to employee stock plans,
net
45
27
Cash dividends paid
(1,659
)
(1,659
)
Early debt extinguishment
—
(1,591
)
Other
(396
)
432
Net cash used for financing activities
(887
)
(1,499
)
Effect of exchange rate changes on cash,
cash equivalents, marketable securities and restricted cash
20
(47
)
Changes in cash, cash equivalents,
marketable securities and restricted cash
Net (decrease) increase in cash, cash
equivalents, marketable securities and restricted cash
(1,702
)
1,288
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
$
856
$
2,558
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
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. 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.
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
(in constant currency), comparable pharmacy sales (in constant
currency), comparable retail sales (in constant currency),
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 may not be comparable to
similarly-titled performance indicators used by other
companies.
NET (LOSS) EARNINGS TO ADJUSTED NET
EARNINGS AND DILUTED NET (LOSS) EARNINGS PER SHARE TO ADJUSTED
DILUTED NET EARNINGS PER SHARE
(in millions, except per share
amounts)
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Net (loss) earnings attributable to
Walgreens Boots Alliance, Inc. (GAAP)
$
(180
)
$
(415
)
$
(3,080
)
$
4,337
Adjustments to operating (loss)
income:
Certain legal and regulatory accruals and
settlements 1
217
34
7,466
768
Transformational cost management 2
485
305
1,181
763
Acquisition-related amortization 3
275
239
1,126
855
Acquisition-related costs 4
65
69
323
223
Impairment of intangible assets 5
—
783
299
783
Adjustments to equity earnings in Cencora
6
33
63
211
218
LIFO provision 7
97
71
187
135
Store damage and inventory loss insurance
recovery 8
(40
)
—
(40
)
—
Total adjustments to operating (loss)
income
1,133
1,565
10,752
3,746
Adjustments to other income,
net:
Impairment of equity method investment and
investments in debt and equity securities 9
—
—
—
190
Loss on disposal of business 10
34
—
34
38
(Gain) loss on certain non-hedging
derivatives 11
(45
)
—
(19
)
1
Gain on investments, net 12
(32
)
—
(109
)
(2,576
)
Gain on sale of equity method investment
13
(163
)
(138
)
(1,855
)
(559
)
Total adjustments to other income, net
(207
)
(138
)
(1,949
)
(2,906
)
Adjustments to interest expense,
net:
Early debt extinguishment 14
—
—
—
4
Total adjustments to interest expense,
net
—
—
—
4
Adjustments to income tax
benefit:
Equity method non-cash tax 15
11
16
44
70
Tax impact of adjustments 15
(219
)
(285
)
(2,187
)
(752
)
Total adjustments to income tax
benefit
(208
)
(270
)
(2,143
)
(681
)
Adjustments to post-tax earnings from
other equity method investments:
Adjustments to earnings in other equity
method investments 16
9
9
40
58
Total adjustments to post-tax earnings
from other equity method investments
9
9
40
58
Adjustments to net loss attributable to
non-controlling interests:
Discrete tax items 15
108
—
108
—
Transformational cost management 2
—
—
—
(1
)
Early debt extinguishment 14
—
—
—
(1
)
Loss on business disposition 10
(14
)
—
(14
)
—
Acquisition-related costs 4
(10
)
(13
)
(80
)
(32
)
Acquisition-related amortization 3
(56
)
(45
)
(196
)
(164
)
Total adjustments to net loss attributable
to non-controlling interests
28
(58
)
(182
)
(198
)
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
575
$
694
$
3,439
$
4,360
Diluted net (loss) earnings per common
share (GAAP) 17
$
(0.21
)
$
(0.48
)
$
(3.57
)
$
5.01
Adjustments to operating (loss) income
1.31
1.81
12.45
4.33
Adjustments to other income, net
(0.24
)
(0.16
)
(2.26
)
(3.36
)
Adjustments to interest expense, net
—
—
—
0.01
Adjustments to income tax benefit
(0.24
)
(0.31
)
(2.48
)
(0.79
)
Adjustments to post-tax earnings from
other equity method investments
0.01
0.01
0.05
0.07
Adjustments to net loss attributable to
non-controlling interests
0.03
(0.07
)
(0.21
)
(0.23
)
Adjusted diluted net earnings per
common share (Non-GAAP measure) 18
$
0.67
$
0.80
$
3.98
$
5.04
Weighted average common shares
outstanding, diluted (in millions) 18
864.3
865.3
864.0
865.9
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 within the
Consolidated Statement of Earnings. In fiscal 2023, the Company
recorded charges related to the opioid litigation settlement
frameworks and certain other legal matters. In fiscal 2022, the
Company recorded charges related to a settlement agreement with the
State of Florida to resolve all claims related to the distribution
and dispensing of prescription opioid medications across the
Company’s pharmacies in the State of Florida.
2
Transformational Cost Management Program
charges are costs associated with a formal restructuring plan.
These charges are primarily recorded within Selling, general and
administrative expenses within the Consolidated Statement of
Earnings. These costs do not reflect current operating performance
and are impacted by the timing of restructuring activity.
3
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.
4
Acquisition-related costs are transaction
and integration costs associated with certain merger, acquisition
and divestitures related activities recorded in operating income
within the Consolidated Statement of Earnings. 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
Impairment of 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.
In fiscal 2023, the Company recognized a $431 million impairment of
pharmacy license intangible assets in Boots UK of which $132
million was attributed to additional store closures recognized as
part of the Transformational Cost Management Program. In fiscal
2022, the Company recorded an impairment loss of $783 million,
related to indefinite-lived pharmacy license and trade name
intangible assets in the Boots reporting unit, part of the
International segment.
6
Adjustments to equity earnings in Cencora
consist of the Company’s proportionate share of non-GAAP
adjustments reported by Cencora consistent with the Company’s
non-GAAP measures.
7
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.
8
Store damage and inventory loss insurance
recovery for losses incurred in fiscal 2020 as a result of looting
in the U.S.
9
Impairment of equity method investment and
investments in debt and 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,
net.
10
Includes losses related to the sale of
businesses. These charges are recorded to Other income, net, in the
Consolidated Statement of Earnings.
11
Includes fair value gains or losses on the
variable prepaid forward derivatives and certain derivative
instruments used as economic hedges of the Company’s net
investments in foreign subsidiaries. These charges are recorded
within Other income, net. The Company does not believe this
volatility related to the mark-to-market adjustments on the
underlying derivative instruments reflects the Company’s
operational performance.
12
Includes significant gains resulting from
the change in classification of investments as well as fair value
adjustments recorded on investments in equity securities to Other
income, net. In fiscal 2023, the Company recorded pre-tax gains of
$109 million related to the change in classification of its
previously held equity method investment in Option Care Health to
an investment in equity security held at fair value and subsequent
related fair value adjustments. In fiscal 2022, the Company
recorded pre-tax gains of $2.2 billion and $402 million for
VillageMD and Shields, respectively, related to the change in
classification of previously held minority equity interests and
debt securities to fair value on business combinations. These gains
were recorded in Other income, net.
13
In fiscal 2023 and 2022, the Company
recorded gains within Other income, net within the Consolidated
Statement of Earnings resulting from the partial sale of its
investments in Cencora and full sale of its equity method
investment in Option Care Health.
14
In fiscal 2022, the Company incurred a $4
million loss in connection with the early extinguishment of debt
related to the integration of Shields. The Company excludes these
charges as related activities do not reflect the Company’s ongoing
financial performance.
15
Adjustments to income tax benefit include
adjustments to the GAAP basis tax benefit commensurate with
non-GAAP adjustments and certain discrete tax items including UK
tax law changes and equity method non-cash tax. These charges are
recorded within income tax benefit.
16
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.
17
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 net loss per common share for the three months ended August
31, 2022, and for the three and twelve months ended August 31,
2023.
18
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 August 31,
2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,666
$
5,784
$
1,972
$
—
$
35,422
Gross profit (GAAP)
$
5,077
$
1,284
$
114
$
—
$
6,475
LIFO provision
97
—
—
—
97
Acquisition-related amortization
5
—
32
—
38
Store damage and inventory loss insurance
recovery
(14
)
—
—
—
(14
)
Adjusted gross profit (Non-GAAP
measure)
$
5,166
$
1,284
$
147
$
—
$
6,596
Selling, general and administrative
expenses (GAAP)
$
5,460
$
1,061
$
409
$
61
$
6,991
Transformational cost management
(462
)
(16
)
(2
)
(5
)
(485
)
Acquisition-related amortization
(80
)
(16
)
(141
)
—
(237
)
Certain legal and regulatory accruals and
settlements
(217
)
—
—
—
(217
)
Acquisition-related costs
(16
)
(5
)
(36
)
(9
)
(65
)
Store damage and inventory loss insurance
recovery
25
—
—
—
25
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,710
$
1,025
$
230
$
48
$
6,012
Operating (loss) income (GAAP)
$
(317
)
$
222
$
(294
)
$
(61
)
$
(450
)
Transformational cost management
462
16
2
5
485
Acquisition-related amortization
86
16
173
—
275
Certain legal and regulatory accruals and
settlements
217
—
—
—
217
LIFO provision
97
—
—
—
97
Acquisition-related costs
16
5
36
9
65
Adjustments to equity earnings in
Cencora
33
—
—
—
33
Store damage and inventory loss insurance
recovery
(40
)
—
—
—
(40
)
Adjusted operating income (loss)
(Non-GAAP measure)
$
554
$
259
$
(83
)
$
(48
)
$
683
Gross margin (GAAP)
18.4
%
22.2
%
5.8
%
18.3
%
Adjusted gross margin (Non-GAAP
measure)
18.7
%
22.2
%
7.4
%
18.6
%
Selling, general and administrative
expenses percent to sales (GAAP)
19.7
%
18.3
%
20.7
%
19.7
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.0
%
17.7
%
11.7
%
17.0
%
Operating margin 2
(1.4
)%
3.8
%
(14.9
)%
(1.5
)%
Adjusted operating margin (Non-GAAP
measure) 2
1.6
%
4.5
%
(4.2
)%
1.6
%
1
Operating loss for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two month
reporting lag, operating loss for the three month period ended
August 31, 2023 includes Cencora equity earnings for the period of
April 1, 2023 through June 30, 2023.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
NON-GAAP RECONCILIATIONS BY
SEGMENT
( in millions)
Three months ended August 31,
2022
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
26,683
$
5,144
$
622
$
—
$
32,449
Gross profit (loss) (GAAP)
$
5,337
$
1,110
$
(37
)
$
—
$
6,410
LIFO provision
71
—
—
—
71
Acquisition-related amortization
5
—
28
—
34
Adjusted gross profit (loss) (Non-GAAP
measure)
$
5,413
$
1,110
$
(9
)
$
—
$
6,515
Selling, general and administrative
expenses (GAAP)
$
5,174
$
1,783
$
301
$
62
$
7,320
Impairment of intangible assets
—
(783
)
—
—
(783
)
Transformational cost management
(285
)
(19
)
—
(1
)
(305
)
Acquisition-related amortization
(75
)
(16
)
(115
)
—
(206
)
Acquisition-related costs
—
(16
)
(44
)
(8
)
(69
)
Certain legal and regulatory accruals and
settlements
(34
)
—
—
—
(34
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,779
$
947
$
143
$
53
$
5,922
Operating income (loss) (GAAP)
$
251
$
(672
)
$
(338
)
$
(62
)
$
(822
)
Impairment of intangible assets
—
783
—
—
783
Transformational cost management
285
19
—
1
305
Acquisition-related amortization
80
16
143
—
239
LIFO provision
71
—
—
—
71
Acquisition-related costs
—
16
44
8
69
Adjustments to equity earnings in
Cencora
63
—
—
—
63
Certain legal and regulatory accruals and
settlements
34
—
—
—
34
Adjusted operating income (loss)
(Non-GAAP measure)
$
786
$
163
$
(151
)
$
(53
)
$
744
Gross margin (GAAP)
20.0
%
21.6
%
(5.9
)%
19.8
%
Adjusted gross margin (Non-GAAP
measure)
20.3
%
21.6
%
(1.4
)%
20.1
%
Selling, general and administrative
expenses percent to sales (GAAP)
19.4
%
34.7
%
48.4
%
22.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.9
%
18.4
%
23.0
%
18.3
%
Operating margin 2
0.6
%
(13.1
)%
(54.4
)%
(2.8
)%
Adjusted operating margin (Non-GAAP
measure) 2
2.4
%
3.2
%
(24.3
)%
1.8
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two month
reporting lag, operating income for the three month period ended
August 31, 2022 includes Cencora equity earnings for the period of
April 1, 2022 through June 30, 2022.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
NON-GAAP RECONCILIATIONS BY
SEGMENT
(in millions)
Twelve months ended August 31,
2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
110,314
$
22,198
$
6,570
$
—
$
139,081
Gross profit (GAAP)
$
22,115
$
4,704
$
252
$
—
$
27,072
LIFO provision
187
—
—
—
187
Acquisition-related amortization
21
—
102
—
123
Acquisition-related costs
—
—
60
—
60
Store damage and inventory loss insurance
recovery
(14
)
—
—
—
(14
)
Adjusted gross profit (Non-GAAP
measure)
$
22,309
$
4,704
$
414
$
—
$
27,427
Selling, general and administrative
expenses (GAAP)
$
27,674
$
4,326
$
1,977
$
228
$
34,205
Certain legal and regulatory accruals and
settlements
(7,466
)
—
—
—
(7,466
)
Transformational cost management
(830
)
(222
)
(115
)
(14
)
(1,181
)
Acquisition-related amortization
(301
)
(60
)
(642
)
—
(1,003
)
Impairment of intangible assets
—
(299
)
—
—
(299
)
Acquisition-related costs
(19
)
25
(241
)
(27
)
(263
)
Store damage and inventory loss insurance
recovery
25
—
—
—
25
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
19,083
$
3,769
$
980
$
187
$
24,019
Operating (loss) income (GAAP)
$
(5,307
)
$
379
$
(1,725
)
$
(228
)
$
(6,882
)
Certain legal and regulatory accruals and
settlements
7,466
—
—
—
7,466
Transformational cost management
830
222
115
14
1,181
Acquisition-related amortization
322
60
743
—
1,126
Acquisition-related costs
19
(25
)
301
27
323
Impairment of intangible assets
—
299
—
—
299
Adjustments to equity earnings in
Cencora
211
—
—
—
211
LIFO provision
187
—
—
—
187
Store damage and inventory loss insurance
recovery
(40
)
—
—
—
(40
)
Adjusted operating income (loss)
(Non-GAAP measure)
$
3,689
$
935
$
(566
)
$
(187
)
$
3,871
Gross margin (GAAP)
20.0
%
21.2
%
3.8
%
19.5
%
Adjusted gross margin (Non-GAAP
measure)
20.2
%
21.2
%
6.3
%
19.7
%
Selling, general and administrative
expenses percent to sales (GAAP)
25.1
%
19.5
%
30.1
%
24.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.3
%
17.0
%
14.9
%
17.3
%
Operating margin 2
(5.0
)%
1.7
%
(26.3
)%
(5.1
)%
Adjusted operating margin (Non-GAAP
measure) 2
2.9
%
4.2
%
(8.6
)%
2.4
%
1
Operating loss for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two month
reporting lag, operating loss for the twelve month period ended
August 31, 2023 includes Cencora equity earnings for the period of
July 1, 2022 through June 30, 2023.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
NON-GAAP RECONCILIATIONS BY
SEGMENT
(in millions)
Twelve months ended August 31,
2022
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
109,078
$
21,830
$
1,795
$
—
$
132,703
Gross profit (loss) (GAAP)
$
23,669
$
4,618
$
(22
)
$
—
$
28,265
LIFO provision
135
—
—
—
135
Acquisition-related amortization
23
—
28
—
51
Adjusted gross profit (Non-GAAP
measure)
$
23,827
$
4,618
$
6
$
—
$
28,452
Selling, general and administrative
expenses (GAAP)
$
21,180
$
4,964
$
806
$
345
$
27,295
Acquisition-related amortization
(375
)
(66
)
(363
)
—
(804
)
Impairment of intangible assets
—
(783
)
—
—
(783
)
Certain legal and regulatory accruals and
settlements
(768
)
—
—
—
(768
)
Transformational cost management
(605
)
(133
)
—
(26
)
(763
)
Acquisition-related costs
2
(89
)
(67
)
(69
)
(223
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
19,434
$
3,893
$
376
$
251
$
23,954
Operating income (loss) (GAAP)
$
2,907
$
(346
)
$
(829
)
$
(345
)
$
1,387
Acquisition-related amortization
398
66
392
—
855
Impairment of intangible assets
—
783
—
—
783
Certain legal and regulatory accruals and
settlements
768
—
—
—
768
Transformational cost management
604
133
—
26
763
Acquisition-related costs
(2
)
89
67
69
223
Adjustments to equity earnings in
Cencora
218
—
—
—
218
LIFO provision
135
—
—
—
135
Adjusted operating income (loss)
(Non-GAAP measure)
$
5,029
$
726
$
(370
)
$
(251
)
$
5,133
Gross margin (GAAP)
21.7
%
21.2
%
(1.2
)%
21.3
%
Adjusted gross margin (Non-GAAP
measure)
21.8
%
21.2
%
0.3
%
21.4
%
Selling, general and administrative
expenses percent to sales (GAAP)
19.4
%
22.7
%
44.9
%
20.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.8
%
17.8
%
20.9
%
18.1
%
Operating margin 2
2.3
%
(1.6
)%
(46.2
)%
0.7
%
Adjusted operating margin (Non-GAAP
measure) 2
4.0
%
3.3
%
(20.6
)%
3.4
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two month
reporting lag, operating income for the twelve month period ended
August 31, 2022 includes Cencora equity earnings for the period of
July 1, 2021 through June 30, 2022.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
OPERATING LOSS TO ADJUSTED EBITDA FOR
THE U.S. HEALTHCARE SEGMENT
(in millions)
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Operating loss (GAAP) 1
$
(294
)
$
(338
)
$
(1,725
)
$
(829
)
Acquisition-related amortization 2
173
143
743
392
Acquisition-related costs 3
36
44
301
67
Transformational cost management 4
2
—
115
—
Adjusted operating loss (Non-GAAP
measure)
(83
)
(151
)
(566
)
(370
)
Depreciation expense
37
14
129
36
Stock-based compensation expense 5
16
4
61
22
Adjusted EBITDA (Non-GAAP
measure)
$
(30
)
$
(133
)
$
(376
)
$
(312
)
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 recorded in operating income
within the Consolidated Statement of Earnings. 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
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.
5
Includes GAAP stock-based compensation
expense excluding expenses related to acquisition-related
amortization and acquisition-related costs.
EQUITY EARNINGS IN
CENCORA
(in millions)
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Equity earnings in Cencora
(GAAP)
$
65
$
88
$
252
$
418
Acquisition-related intangibles
amortization
36
38
133
152
LIFO expense/ (credit)
4
5
35
(8
)
Employee severance, litigation, and
other
—
13
21
58
Restructuring and other expenses
8
—
18
—
Acquisition integration and restructuring
expenses
2
—
18
—
Turkey hyperinflation impact
9
8
16
8
Tax reform
1
5
5
12
Goodwill impairment
—
7
—
8
Impairment of assets
—
—
—
5
Impairment of non-customer note
receivable
—
—
—
4
Gain on sale of businesses
—
(12
)
—
(12
)
Recovery of non-customer note
receivable
(1
)
—
(1
)
—
Gain on remeasurement of equity
investment
—
—
(1
)
(18
)
Certain discrete tax expense
—
—
(2
)
7
Litigation and opioid-related expenses
(12
)
—
(8
)
—
Gain from antitrust litigation
settlements
(15
)
—
(23
)
3
Adjusted equity earnings in Cencora
(Non-GAAP measure)
$
98
$
152
$
463
$
636
ADJUSTED EFFECTIVE TAX
RATE
(in millions)
Three months ended August 31,
2023
Three months ended August 31,
2022
(Loss) earnings before income
tax provision
Income tax (benefit)
provision
Effective tax rate
(Loss) earnings before income
tax provision
Income tax (benefit)
provision
Effective tax rate
Effective tax rate (GAAP)
$
(375
)
$
(151
)
40.3
%
$
(758
)
$
(235
)
31.1
%
Impact of non-GAAP adjustments
926
394
1,428
323
Adjusted tax rate true-up
—
(174
)
—
(37
)
Equity method non-cash tax
—
(11
)
—
(16
)
Subtotal
$
551
$
57
$
670
$
35
Exclude adjusted equity earnings in
Cencora
(98
)
—
(152
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in Cencora (Non-GAAP measure)
$
453
$
57
12.6
%
$
519
$
35
6.7
%
(in millions)
Twelve months ended August 31,
2023
Twelve months ended August 31,
2022
(Loss) earnings before income
tax provision
Income tax (benefit)
provision
Effective tax rate
Earnings before income tax
provision
Income tax (benefit)
provision
Effective tax rate
Effective tax rate (GAAP)
$
(5,419
)
$
(1,858
)
34.3
%
$
3,985
$
(30
)
(0.8
)%
Impact of non-GAAP adjustments
8,804
2,180
845
752
Adjusted tax rate true-up
—
7
—
—
Equity method non-cash tax
—
(44
)
—
(70
)
Subtotal
$
3,384
$
285
$
4,830
$
651
Exclude adjusted equity earnings in
Cencora
(463
)
—
(636
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in Cencora (Non-GAAP measure)
$
2,921
$
285
9.8
%
$
4,194
$
651
15.5
%
FREE CASH FLOW
(in millions)
Three months ended August
31,
Twelve months ended August
31,
2023
2022
2023
2022
Net cash provided by operating
activities (GAAP)
$
1,039
$
85
$
2,258
$
3,899
Less: Additions to property, plant and
equipment
(484
)
(493
)
(2,117
)
(1,734
)
Plus: Acquisition related payments 1
$
(6
)
$
—
$
524
$
—
Free cash flow (Non-GAAP measure)
2
$
549
$
(407
)
$
665
$
2,165
1
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.
During the three months ended May 31, 2023, the Company paid $101
million to settle liability classified share-based payment awards
related to acquiring the remaining 45% equity interest in
CareCentrix. These payments are not indicative of normal operating
performance.
2
Free cash flow is defined as net cash
provided by operating activities in a period less additions to
property, plant and equipment (capital expenditures) made in that
period. This measure does not represent residual cash flows
available for discretionary expenditures as the measure does not
deduct the payments required for debt service and other contractual
obligations or payments for future business acquisitions.
Therefore, we believe it is important to view free cash flow as a
measure that provides supplemental information to the entire
statements of cash flows.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231012999586/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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