Third quarter highlights, year-over-year
- Sales increased 0.7 percent to $34.6 billion
- Operating income decreased 24.7 percent to $1.2 billion;
Adjusted operating income decreased 11.7 percent to $1.7
billion
- EPS decreased 16.5 percent to $1.13; Adjusted EPS decreased 4.0
percent to $1.47
2019 fiscal year guidance
- Maintains guidance for fiscal 2019 adjusted EPS growth: roughly
flat at constant currency rates
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the third quarter of fiscal 2019, which ended
May 31, 2019.
Executive Vice Chairman and CEO Stefano Pessina said, “Following
a difficult second quarter, we made progress in the third quarter
against the strategic goals we set, and are pleased to report an
improvement in our U.S. comparable growth compared with the first
half of the year. We will continue our aggressive response to
rapidly shifting trends, and have already seen improved U.S. retail
sales and prescription growth and are making good progress in
implementing our Transformational Cost Management Program.
Together, this gives us the confidence to reiterate the fiscal 2019
guidance we previously provided.”
Overview of Third Quarter Results Fiscal 2019 third
quarter net earnings attributable to Walgreens Boots Alliance
decreased 23.6 percent to $1.0 billion compared with the same
quarter a year ago, while net earnings per share1 decreased 16.5
percent to $1.13 compared with the same quarter a year ago.
Adjusted net earnings attributable to Walgreens Boots Alliance2
decreased 12.1 percent to $1.3 billion, down 10.7 percent on a
constant currency basis, compared with the same quarter a year ago.
Adjusted earnings per share were $1.47, a decrease of 4.0 percent
on a reported basis and a decrease of 2.4 percent on a constant
currency basis, compared with the same quarter a year ago.
Sales in the third quarter were $34.6 billion, an increase of
0.7 percent from the year-ago quarter, and an increase of 2.9
percent on a constant currency basis, primarily due to growth in
the Retail Pharmacy USA and Pharmaceutical Wholesale divisions.
Operating income was $1.2 billion, a decrease of 24.7 percent
from the same quarter a year ago, including the impact of costs
related to the Transformational Cost Management Program and a lower
contribution from the company's equity earnings in
AmerisourceBergen due to the impairment of PharMEDium's long-lived
assets in the quarter. Adjusted operating income was $1.7 billion,
a decrease of 11.7 percent from the same quarter a year ago, and a
decrease of 10.4 percent on a constant currency basis, primarily
due to lower U.S. pharmacy margins and retail sales, and Boots
UK.
Net cash provided by operating activities was $2.0 billion in
the third quarter, and free cash flow was $1.6 billion.
Overview of Fiscal 2019 Year-to-Date Results For the
first nine months of fiscal 2019, net earnings attributable to
Walgreens Boots Alliance decreased 5.9 percent to $3.3 billion
compared with the same period a year ago, while net earnings per
share1 increased 1.1 percent to $3.55 compared with the same period
a year ago.
Adjusted net earnings attributable to Walgreens Boots Alliance2
for the first nine months of fiscal 2019 decreased 6.4 percent to
$4.2 billion, down 5.4 percent on a constant currency basis,
compared with the same period a year ago. Adjusted earnings per
share for the first nine months of fiscal 2019 were $4.56, an
increase of 0.6 percent on a reported basis and an increase of 1.6
percent on a constant currency basis, compared with the same period
a year ago.
Sales in the first nine months of fiscal 2019 were $102.9
billion, an increase of 4.9 percent from the same period a year
ago, and an increase of 6.8 percent on a constant currency
basis.
Operating income in the first nine months of fiscal 2019 was
$4.1 billion, a decrease of 15.8 percent from the same period a
year ago. Adjusted operating income in the first nine months of the
fiscal year was $5.4 billion, a decrease of 8.9 percent from the
same period a year ago, and a decrease of 7.8 percent on a constant
currency basis.
Net cash provided by operating activities was $3.2 billion in
the first nine months of fiscal 2019, and free cash flow was $2.0
billion.
Third Quarter Business Division Highlights
Retail Pharmacy USA: Retail Pharmacy USA had third
quarter sales of $26.5 billion, an increase of 2.3 percent over the
year-ago quarter. Excluding the impact of store optimization
following the acquisition of Rite Aid stores, organic sales growth
was 2.9 percent in the quarter.
Pharmacy sales, which accounted for 73.9 percent of the
division’s sales in the quarter, increased 4.3 percent compared
with the year-ago quarter, reflecting higher brand inflation and
prescription volume, and strong growth in central specialty.
Comparable pharmacy sales increased 6.0 percent. The division
filled 290.7 million prescriptions, including immunizations,
adjusted to 30-day equivalents in the quarter, an increase of 1.9
percent over the year-ago quarter. Prescriptions filled in
comparable stores increased 4.7 percent from the same quarter a
year ago.
Retail prescription market share on a 30-day adjusted basis in
the third quarter decreased approximately 50 basis points over the
year-ago quarter to 21.2 percent, as reported by IQVIA.3 This
decrease reflects store optimization.
Retail sales decreased 2.9 percent in the third quarter compared
with the year-ago period, including the impact of store
optimization following the acquisition of Rite Aid stores.
Comparable retail sales were down 1.1 percent in the quarter,
primarily due to continued de-emphasis of tobacco.
Gross profit decreased 3.6 percent compared with the same
quarter a year ago and adjusted gross profit decreased 3.9 percent,
primarily due to reimbursement pressure in pharmacy and lower
retail sales.
Third quarter selling, general and administrative expenses
(SG&A) as a percentage of sales improved 0.3 percentage point
compared with the year-ago quarter. On an adjusted basis, SG&A
as a percentage of sales improved 0.5 percentage point in the same
period. The third quarter of fiscal 2019 included $40 million of
costs related to previously announced store and labor
investments.
Operating income in the third quarter decreased 20.6 percent
from the year-ago quarter to $1.0 billion. Adjusted operating
income in the third quarter decreased 13.8 percent from the
year-ago quarter to $1.3 billion. The decreases include an adverse
impact of 3.2 percentage points and 2.7 percentage points,
respectively, from the store and labor investments mentioned
above.
Retail Pharmacy International: Retail Pharmacy
International had third quarter sales of $2.8 billion, a decrease
of 7.3 percent from the year-ago quarter, reflecting an adverse
currency impact of 5.7 percent. Sales decreased 1.6 percent on a
constant currency basis, mainly due to a 1.0 percent decline in
Boots UK.
In the UK, comparable pharmacy sales increased 0.8 percent and
comparable retail sales decreased 2.6 percent with Boots UK broadly
gaining retail market share amid weakness in certain
categories.
Gross profit decreased 8.5 percent compared with the same
quarter a year ago and, on a constant currency basis, adjusted
gross profit decreased 1.6 percent, due to lower pharmacy margin
and retail sales in Boots UK.
SG&A as a percentage of sales increased 0.8 percentage
point. Adjusted SG&A as a percentage of sales, on a constant
currency basis, increased 0.6 percentage point.
Operating income in the third quarter decreased 28.6 percent
from the year-ago quarter to $119 million, while adjusted operating
income decreased 14.9 percent to $165 million, down 10.5 percent on
a constant currency basis.
Pharmaceutical Wholesale: Pharmaceutical Wholesale had
third quarter sales of $5.9 billion, a decrease of 1.7 percent from
the year-ago quarter, due to an adverse currency impact of 10.0
percent. On a constant currency basis, sales increased 8.3 percent,
primarily reflecting growth in emerging markets.
Operating income in the third quarter was $87 million, which
included a loss of $16 million from the company’s equity earnings
in AmerisourceBergen due to the impairment of PharMEDium's
long-lived assets in the quarter. This compared with operating
income of $177 million in the year-ago quarter, which included $52
million from the company's equity earnings in
AmerisourceBergen.
Adjusted operating income increased 2.6 percent to $265 million.
On a constant currency basis, adjusted operating income increased
9.4 percent.
Company Outlook The company maintained adjusted EPS
guidance for fiscal 2019 of roughly flat, at constant currency
rates. On a reported currency basis, the company anticipates
approximately $0.06 per share of adverse currency impact.
Dividends Declared During the third quarter, the company
declared a regular quarterly dividend of 44 cents per share. The
dividend was payable June 12, 2019 to stockholders of record as of
May 18, 2019.
Conference Call Walgreens Boots Alliance will hold a
one-hour conference call to discuss the third quarter results
beginning at 8:30 a.m. Eastern time today, June 27. The conference
call will be simulcast through the Walgreens Boots Alliance
investor relations website at: http://investor.walgreensbootsalliance.com. A
replay of the conference call will be archived on the website for
12 months after the call.
The replay also will be available from 11:30 a.m. Eastern time,
June 27 through July 4, 2019, by calling +1 800 585 8367 within the
U.S. and Canada, or +1 416 621 4642 outside the U.S. and Canada,
using replay code 6984232.
1 All references to earnings per share (EPS) are to diluted EPS
attributable to Walgreens Boots Alliance.
2 Please see the “Supplemental Information (Unaudited) Regarding
Non-GAAP Financial Measures” at the end of this press release for
more detailed information regarding non-GAAP financial measures
used, including all measures presented as "adjusted" or on a
"constant currency" basis, and free cash flow.
3 Due to revisions made by IQVIA to the methodology used for its
retail prescription database, market share has been restated for
the comparable year-ago period.
Cautionary Note Regarding Forward-Looking Statements: All
statements in this release that are not historical including,
without limitation, those regarding estimates of and goals for
future tax, financial and operating performance and results
(including those under “Company Outlook” above), the expected
execution and effect of our business strategies, our cost-savings
and growth initiatives, pilot programs and initiatives, and
restructuring activities and the amounts and timing of their
expected impact and the delivery of annual cost savings are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “expect,” “likely,” “outlook,” “forecast,”
“preliminary,” “pilot,” “would,” “could,” “should,” “can,” “will,”
“project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,”
"transform," "accelerate," "model," "long-term," “continue,”
“sustain,” “synergy,” “on track,” “on schedule,” “headwind,”
“tailwind,” “believe,” “seek,” “estimate,” “anticipate,”
“upcoming,” “to come,” “may,” “possible,” “assume,” and variations
of such words and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to risks,
uncertainties and assumptions, known or unknown, that could cause
actual results to vary materially from those indicated or
anticipated, including, but not limited to, those relating to the
impact of private and public third-party payers’ efforts to reduce
prescription drug reimbursements, fluctuations in foreign currency
exchange rates, the timing and magnitude of the impact of branded
to generic drug conversions and changes in generic drug prices, our
ability to realize synergies and achieve financial, tax and
operating results in the amounts and at the times anticipated, the
inherent risks, challenges and uncertainties associated with
forecasting financial results of large, complex organizations in
rapidly evolving industries, particularly over longer time periods,
supply arrangements including our commercial agreement with
AmerisourceBergen, the arrangements and transactions contemplated
by our framework agreement with AmerisourceBergen and their
possible effects, the risks associated with the company’s equity
method investment in AmerisourceBergen, circumstances that could
give rise to the termination, cross-termination or modification of
any of our contractual obligations, the amount of costs, fees,
expenses and charges incurred in connection with strategic
transactions, whether the costs and charges associated with
restructuring initiatives will exceed estimates, our ability to
realize expected savings and benefits from cost-savings
initiatives, restructuring activities and acquisitions and joint
ventures in the amounts and at the times anticipated, the timing
and amount of any impairment or other charges, the timing and
severity of cough, cold and flu season, risks related to pilot
programs and new business initiatives and ventures generally,
including the risks that anticipated benefits may not be realized,
changes in management’s plans and assumptions, the risks associated
with governance and control matters, the ability to retain key
personnel, changes in economic and business conditions generally or
in particular markets in which we participate, changes in financial
markets, credit ratings and interest rates, the risks relating to
the terms, timing, and magnitude of any share repurchase activity,
the risks associated with international business operations,
including the risks associated with the proposed withdrawal of the
United Kingdom from the European Union and international trade
policies, tariffs, including tariff negotiations between the United
States and China, and relations, the risks associated with
cybersecurity or privacy breaches related to customer information,
changes in vendor, customer and payer relationships and terms,
including changes in network participation and reimbursement terms
and the associated impacts on volume and operating results, risks
related to competition, including changes in market dynamics,
participants, product and service offerings, retail formats and
competitive positioning, risks associated with new business areas
and activities, risks associated with acquisitions, divestitures,
joint ventures and strategic investments, including those relating
to the asset acquisition from Rite Aid, the risks associated with
the integration of complex businesses, regulatory restrictions and
outcomes of legal and regulatory matters, and risks associated with
changes in laws, including those related to the December 2017 U.S.
tax law changes, regulations or interpretations thereof. These and
other risks, assumptions and uncertainties are described in Item 1A
(Risk Factors) of our Annual Report on Form 10-K for the fiscal
year ended August 31, 2018, the Quarterly Report on Form 10-Q for
the quarter ended February 28, 2019 and in other documents that we
file or furnish with the Securities and Exchange Commission. Should
one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such
forward-looking statements. Accordingly, you are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date they are made. Except to the extent
required by law, we do not undertake, and expressly disclaim, any
duty or obligation to update publicly any forward-looking statement
after the date of this release, whether as a result of new
information, future events, changes in assumptions or
otherwise.
Please refer to the supplemental information presented below for
reconciliations of the non-GAAP financial measures used in this
release to the most comparable GAAP financial measure and related
disclosures.
Certain amounts in the tables in the appendix to this press
release may not add due to rounding. All percentages have been
calculated using unrounded amounts for the three and nine months
ended May 31, 2019.
Notes to Editors:
About Walgreens Boots Alliance
Walgreens Boots Alliance (Nasdaq: WBA) is the first global
pharmacy-led, health and wellbeing enterprise. The company's
heritage of trusted health care services through community pharmacy
care and pharmaceutical wholesaling dates back more than 100
years.
Walgreens Boots Alliance is the largest retail pharmacy, health
and daily living destination across the U.S. and Europe. Walgreens
Boots Alliance and the companies in which it has equity method
investments together have a presence in more than 25 countries and
employ more than 415,000 people. The company is a global leader in
pharmacy-led, health and wellbeing retail and, together with its
equity method investments, has more than 18,500 stores in 11
countries as well as one of the largest global pharmaceutical
wholesale and distribution networks, with more than 390
distribution centers delivering to more than 230,000 pharmacies,
doctors, health centers and hospitals each year in more than 20
countries. In addition, Walgreens Boots Alliance is one of the
world’s largest purchasers of prescription drugs and many other
health and wellbeing products.
The company’s portfolio of retail and business brands includes
Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as
increasingly global health and beauty product brands, such as No7,
Soap & Glory, Liz Earle, Sleek MakeUP and Botanics.
Walgreens Boots Alliance is proud to be a force for good,
leveraging many decades of experience and its international scale,
to care for people and the planet through numerous social
responsibility and sustainability initiatives that have an impact
on the health and wellbeing of millions of people.
Walgreens Boots Alliance is included in Fortune magazine’s 2019
list of the World’s Most Admired Companies and ranked first in the
food and drugstore category. This is the 26th consecutive year that
Walgreens Boots Alliance or its predecessor company, Walgreen Co.,
has been named to the list.
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 May
31,
Nine months ended May
31,
2019
2018
2019
2018
Sales
$
34,591
$
34,334
$
102,912
$
98,095
Cost of sales
27,138
26,554
80,063
74,878
Gross profit
7,453
7,780
22,849
23,217
Selling, general and administrative
expenses
6,235
6,235
18,834
18,466
Equity earnings (loss) in
AmerisourceBergen
(16
)
52
105
142
Operating income
1,203
1,597
4,120
4,893
Other income (expense)
182
—
227
(122
)
Earnings before interest and income tax
provision
1,385
1,597
4,347
4,771
Interest expense, net
187
157
529
457
Earnings before income tax provision
1,198
1,440
3,819
4,314
Income tax provision
156
109
562
839
Post tax earnings (loss) from other equity
method investments
(5
)
15
19
42
Net earnings
1,037
1,346
3,275
3,517
Net earnings (loss) attributable to
noncontrolling interests
12
4
(29
)
5
Net earnings attributable to Walgreens
Boots Alliance, Inc.
$
1,025
$
1,342
$
3,305
$
3,512
Net earnings per common share:
Basic
$
1.13
$
1.35
$
3.56
$
3.52
Diluted
$
1.13
$
1.35
$
3.55
$
3.51
Weighted average common shares
outstanding:
Basic
909.9
992.1
928.8
996.4
Diluted
911.2
995.3
931.1
1,000.6
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
May 31, 2019
August 31, 2018
Assets
Current assets:
Cash and cash equivalents
$
839
$
785
Accounts receivable, net
7,239
6,573
Inventories
9,874
9,565
Other current assets
1,070
923
Total current assets
19,021
17,846
Non-current assets:
Property, plant and equipment, net
13,717
13,911
Goodwill
16,717
16,914
Intangible assets, net
11,325
11,783
Equity method investments
6,673
6,610
Other non-current assets
1,133
1,060
Total non-current assets
49,565
50,278
Total assets
$
68,586
$
68,124
Liabilities and equity
Current liabilities:
Short-term debt
$
5,483
$
1,966
Trade accounts payable
14,130
13,566
Accrued expenses and other liabilities
5,185
5,862
Income taxes
263
273
Total current liabilities
25,060
21,667
Non-current liabilities:
Long-term debt
12,127
12,431
Deferred income taxes
1,860
1,815
Other non-current liabilities
4,768
5,522
Total non-current liabilities
18,754
19,768
Total equity
24,771
26,689
Total liabilities and equity
$
68,586
$
68,124
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine months ended May
31,
2019
2018
Cash flows from operating
activities:
Net earnings
$
3,275
$
3,517
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
1,512
1,300
Deferred income taxes
109
(382
)
Stock compensation expense
87
91
Equity (earnings) from equity method
investments
(124
)
(184
)
Other
42
266
Changes in operating assets and
liabilities:
Accounts receivable, net
(730
)
(762
)
Inventories
(354
)
230
Other current assets
(80
)
(4
)
Trade accounts payable
662
675
Accrued expenses and other liabilities
(642
)
16
Income taxes
(372
)
793
Other non-current assets and
liabilities
(171
)
(110
)
Net cash provided by operating
activities
3,215
5,446
Cash flows from investing
activities:
Additions to property, plant and
equipment
(1,246
)
(983
)
Proceeds from sale of other assets
95
221
Business, investment and asset
acquisitions, net of cash acquired
(467
)
(4,220
)
Other
51
(129
)
Net cash used for investing activities
(1,569
)
(5,111
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
299
596
Proceeds from debt
10,291
5,043
Payments of debt
(7,332
)
(3,507
)
Stock purchases
(3,726
)
(2,525
)
Proceeds related to employee stock
plans
156
118
Cash dividends paid
(1,244
)
(1,291
)
Other
(17
)
(217
)
Net cash used for financing activities
(1,573
)
(1,783
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(12
)
27
Changes in cash, cash equivalents and
restricted cash:
Net increase (decrease) in cash, cash
equivalents and restricted cash
62
(1,422
)
Cash, cash equivalents and restricted cash
at beginning of period
975
3,496
Cash, cash equivalents and restricted
cash at end of period
$
1,038
$
2,074
WALGREENS BOOTS ALLIANCE, INC. AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION (UNAUDITED)
REGARDING NON-GAAP FINANCIAL MEASURES (in millions, except
per share amounts)
The following information provides reconciliations of the
supplemental non-GAAP financial measures, as defined under SEC
rules, presented in this press release to the most directly
comparable financial measures calculated and presented in
accordance with generally accepted accounting principles in the
United States (GAAP). The company has provided the non-GAAP
financial measures in the press release, which are not calculated
or presented in accordance with GAAP, as supplemental information
and in addition to the financial measures that are calculated and
presented in accordance with GAAP.
These supplemental non-GAAP financial measures are presented
because management has evaluated the company’s financial results
both including and excluding the adjusted items or the effects of
foreign currency translation, as applicable, and believe that the
supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core
operating performance of the company’s business from period to
period and trends in the company’s historical operating results.
These supplemental non-GAAP financial measures should not be
considered superior to, as a substitute for or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the press release. The company does
not provide a reconciliation for non-GAAP estimates on a
forward-looking basis (including the information under “Company
Outlook” above) where it is unable to provide a meaningful or
accurate calculation or estimation of reconciling items and the
information is not available without unreasonable effort. This is
due to the inherent difficulty of forecasting the timing or amount
of various items that have not yet occurred, are out of the
company’s control and/or cannot be reasonably predicted, and that
would impact diluted net earnings per share, the most directly
comparable forward-looking GAAP financial measure. For the same
reasons, the company is unable to address the probable significance
of the unavailable information. Forward-looking non-GAAP financial
measures provided without the most directly comparable GAAP
financial measures may vary materially from the corresponding GAAP
financial measures.
Constant currency The company also presents certain information
related to current period operating results in “constant currency,”
which is a non-GAAP financial measure. These amounts are calculated
by translating current period results at the foreign currency
exchange rates used in the comparable period in the prior year. The
company presents such constant currency financial information
because it has significant operations outside of the United States
reporting in currencies other than the U.S. dollar and this
presentation provides a framework to assess how its business
performed excluding the impact of foreign currency exchange rate
fluctuations.
Comparable sales For our Retail Pharmacy divisions, comparable
stores are defined as those that have been open for at least 12
consecutive months and that have not been closed for seven or more
consecutive days, undergone a major remodel or been subject to a
natural disaster during the past 12 months. Relocated stores are
not included as comparable stores for the first twelve months after
the relocation. Acquired stores are not included as comparable
stores for the first twelve months after acquisition or conversion,
when applicable, whichever is later. Comparable store sales,
comparable pharmacy sales and comparable retail sales refer to
total sales, pharmacy sales and retail sales, respectively, in such
stores. For our Pharmaceutical Wholesale division, comparable sales
are defined as sales excluding acquisitions and dispositions. The
method of calculating comparable sales varies across the retail
industry. As a result, our method of calculating comparable sales
may not be the same as other retailers’ methods.
Comparable sales are presented on a constant currency basis for
the Retail Pharmacy International and Pharmaceutical Wholesale
divisions. In the third quarter of fiscal 2019 compared to the
year-ago quarter, the Retail Pharmacy International division’s
comparable store sales on a reported currency basis decreased 6.8
percent, comparable pharmacy sales on a reported currency basis
decreased 4.9 percent and comparable retail sales on a reported
currency basis decreased 7.9 percent. The Pharmaceutical Wholesale
division’s comparable sales excluding acquisitions and dispositions
on a reported currency basis decreased 1.7 percent.
Organic sales Organic sales are defined as sales excluding
non-comparable acquisitions and divestitures including joint
ventures and are considered a non-GAAP financial measure. Retail
Pharmacy USA's third quarter sales were $26.5 billion, an increase
of 2.3 percent over the year-ago quarter. Non-comparable
acquisitions and divestitures including joint ventures had a
negative impact of 0.6 percentage point, or $99 million.
NET EARNINGS AND
DILUTED NET EARNINGS PER SHARE
Three months ended May
31,
Nine months ended May
31,
2019
2018
2019
2018
Net earnings attributable to Walgreens
Boots Alliance, Inc. (GAAP)
$
1,025
$
1,342
$
3,305
$
3,512
Adjustments to operating
income:
Acquisition-related amortization
127
131
373
329
Transformational cost management
86
—
265
—
Acquisition-related costs
80
57
228
173
Adjustments to equity earnings in
AmerisourceBergen
137
60
191
136
Store optimization
49
24
99
24
LIFO provision
29
69
77
166
Certain legal and regulatory accruals and
settlements1
7
5
31
120
Asset recovery
—
—
—
(15
)
Hurricane-related costs
—
—
—
83
Total adjustments to operating income
515
346
1,264
1,016
Adjustments to other income
(expense):
Net investment hedging (gain) loss
8
(3
)
10
(36
)
Impairment of equity method investment
—
8
—
178
Termination of option granted to Rite
Aid
(173
)
—
(173
)
—
Total adjustments to other income
(expense)
(165
)
5
(163
)
142
Adjustments to interest expense,
net:
Prefunded acquisition financing costs
—
—
—
29
Total adjustments to interest expense,
net
—
—
—
29
Adjustments to income tax
provision:
Equity method non-cash tax
(10
)
8
9
19
U.S. tax law changes2
—
(140
)
(3
)
44
Tax impact of adjustments3
(50
)
(39
)
(189
)
(224
)
Total adjustments to income tax
provision
(60
)
(171
)
(183
)
(161
)
Adjustments to post tax equity earnings
from other equity method investments:
Adjustments to equity earnings in other
equity method investments4
23
—
23
—
Total adjustments to post tax equity
earnings from other equity method investments
23
—
23
—
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
1,338
$
1,522
$
4,246
$
4,538
Diluted net earnings per common share
(GAAP)
$
1.13
$
1.35
$
3.55
$
3.51
Adjustments to operating income
0.56
0.35
1.36
1.02
Adjustments to other income (expense)
(0.18
)
0.01
(0.17
)
0.14
Adjustments to interest expense, net
—
—
—
0.03
Adjustments to income tax provision
(0.07
)
(0.18
)
(0.20
)
(0.16
)
Adjustments to equity earnings in other
equity method investments
$
0.02
$
—
$
0.02
$
—
Adjusted diluted net earnings per
common share (Non-GAAP measure)
$
1.47
$
1.53
$
4.56
$
4.54
Weighted average common shares
outstanding, diluted
911.2
995.3
931.1
1,000.6
1
As previously disclosed,
beginning in the quarter ended August 31, 2018, management reviewed
and refined its practice to include all charges related to the
matters included in certain legal and regulatory accruals and
settlements. In order to present non-GAAP measures on a consistent
basis for fiscal year 2018, the company included adjustments in the
quarter ended August 31, 2018 of $14 million, $50 million and $5
million which were previously accrued in the company’s financial
statements for the quarters ended November 30, 2017, February 28,
2018, and May 31, 2018, respectively. These additional adjustments
impact the comparability of such results to the results reported in
prior and future quarters.
2
Discrete tax-only items.
3
Represents the adjustment to the
GAAP basis tax provision commensurate with non-GAAP adjustments and
the adjusted tax rate true-up.
4
Beginning in the quarter ended
May 31, 2019, management reviewed and refined its practice to
reflect the proportionate share of certain equity method investees’
non-cash items or unusual or infrequent items consistent with the
Company’s non-GAAP measures in order to provide investors with a
comparable view of performance across periods. These adjustments
include acquisition-related amortization and acquisition-related
costs and were immaterial for the prior periods presented. Although
the Company may have shareholder rights and board representation
commensurate with its ownership interests in these equity method
investees, adjustments relating to equity method investments are
not intended to imply that the Company has direct control over
their operations and resulting revenue and expenses. Moreover,
these non-GAAP financial measures have limitations in that they do
not reflect all revenue and expenses of these equity method
investees.
GROSS PROFIT BY
DIVISION
Three months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Gross profit (GAAP)
$
5,813
$
1,112
$
527
$
2
$
7,453
Transformational cost management
—
16
—
—
16
Acquisition-related costs
21
—
—
—
21
Store optimization
1
—
—
—
1
LIFO provision
29
—
—
—
29
Adjusted gross profit (Non-GAAP
measure)
$
5,864
$
1,128
$
527
$
2
$
7,521
Sales
$
26,513
$
2,776
$
5,865
$
(563
)
$
34,591
Gross margin (GAAP)
21.9
%
40.0
%
9.0
%
21.5
%
Adjusted gross margin (Non-GAAP
measure)
22.1
%
40.6
%
9.0
%
21.7
%
Three months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Gross profit (GAAP)
$
6,029
$
1,215
$
536
$
—
$
7,780
Acquisition-related amortization
6
—
—
—
6
LIFO provision
69
—
—
—
69
Adjusted gross profit (Non-GAAP
measure)
$
6,104
$
1,215
$
536
$
—
$
7,855
Sales
$
25,917
$
2,995
$
5,965
$
(543
)
$
34,334
Gross margin (GAAP)
23.3
%
40.6
%
9.0
%
22.7
%
Adjusted gross margin (Non-GAAP
measure)
23.6
%
40.6
%
9.0
%
22.9
%
Nine months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Gross profit (GAAP)
$
17,880
$
3,418
$
1,549
$
1
$
22,849
Transformational cost management
—
41
—
—
41
Acquisition-related costs
50
—
—
—
50
Store optimization
2
—
—
—
2
LIFO provision
77
—
—
—
77
Adjusted gross profit (Non-GAAP
measure)
$
18,009
$
3,459
$
1,549
$
1
$
23,018
Sales
$
78,491
$
8,759
$
17,311
$
(1,649
)
$
102,912
Gross margin (GAAP)
22.8
%
39.0
%
9.0
%
22.2
%
Adjusted gross margin (Non-GAAP
measure)
22.9
%
39.5
%
9.0
%
22.4
%
Nine months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Gross profit (GAAP)
$
17,898
$
3,733
$
1,590
$
(4
)
$
23,217
Acquisition-related amortization
14
—
—
—
14
LIFO provision
166
—
—
—
166
Hurricane-related costs
43
—
—
—
43
Adjusted gross profit (Non-GAAP
measure)
$
18,121
$
3,733
$
1,590
$
(4
)
$
23,440
Sales
$
72,884
$
9,395
$
17,438
$
(1,622
)
$
98,095
Gross margin (GAAP)
24.6
%
39.7
%
9.1
%
23.7
%
Adjusted gross margin (Non-GAAP
measure)
24.9
%
39.7
%
9.1
%
23.9
%
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES BY DIVISION
Three months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Selling, general and administrative
expenses (GAAP)
$
4,818
$
993
$
424
$
1
$
6,235
Acquisition-related amortization
(82
)
(25
)
(20
)
—
(127
)
Transformational cost management
(43
)
(5
)
(22
)
—
(70
)
Acquisition-related costs
(59
)
—
—
—
(59
)
Store optimization
(48
)
—
—
—
(48
)
Certain legal and regulatory accruals and
settlements
(7
)
—
—
—
(7
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,578
$
963
$
382
$
1
$
5,924
Sales
$
26,513
$
2,776
$
5,865
$
(563
)
$
34,591
Selling, general and administrative
expenses percent to sales (GAAP)
18.2
%
35.8
%
7.2
%
18.0
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.3
%
34.7
%
6.5
%
17.1
%
Three months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Selling, general and administrative
expenses (GAAP)1
$
4,776
$
1,048
$
411
$
—
$
6,235
Acquisition-related amortization
(78
)
(26
)
(21
)
—
(125
)
Acquisition-related costs
(57
)
—
—
—
(57
)
Store optimization
(24
)
—
—
—
(24
)
Certain legal and regulatory accruals and
settlements2
(5
)
—
—
—
(5
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)1
$
4,612
$
1,022
$
390
$
—
$
6,024
Sales
$
25,917
$
2,995
$
5,965
$
(543
)
$
34,334
Selling, general and administrative
expenses percent to sales (GAAP)
18.4
%
35.0
%
6.9
%
18.2
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.8
%
34.1
%
6.5
%
17.5
%
Nine months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Selling, general and administrative
expenses (GAAP)
$
14,492
$
3,029
$
1,313
$
—
$
18,834
Acquisition-related amortization
(237
)
(76
)
(59
)
—
(373
)
Transformational cost management
(59
)
(46
)
(119
)
—
(224
)
Acquisition-related costs
(178
)
—
—
—
(178
)
Store optimization
(97
)
—
—
—
(97
)
Certain legal and regulatory accruals and
settlements
(31
)
—
—
—
(31
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
13,889
$
2,906
$
1,135
$
—
$
17,930
Sales
$
78,491
$
8,759
$
17,311
$
(1,649
)
$
102,912
Selling, general and administrative
expenses percent to sales (GAAP)
18.5
%
34.6
%
7.6
%
18.3
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.7
%
33.2
%
6.6
%
17.4
%
Nine months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale
Eliminations
Walgreens Boots Alliance,
Inc.
Selling, general and administrative
expenses (GAAP)1
$
14,115
$
3,139
$
1,217
$
(5
)
$
18,466
Acquisition-related amortization
(172
)
(80
)
(63
)
—
(315
)
Acquisition-related costs
(173
)
—
—
—
(173
)
Store optimization
(24
)
—
—
—
(24
)
Certain legal and regulatory accruals and
settlements2
(120
)
—
—
—
(120
)
Asset recovery
15
—
—
—
15
Hurricane-related costs
(40
)
—
—
—
(40
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)1
$
13,601
$
3,059
$
1,154
$
(5
)
$
17,809
Sales
$
72,884
$
9,395
$
17,438
$
(1,622
)
$
98,095
Selling, general and administrative
expenses percent to sales (GAAP)
19.4
%
33.4
%
7.0
%
18.8
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
18.7
%
32.6
%
6.6
%
18.2
%
1
The Company adopted new
accounting guidance in Accounting Standards Update 2017-07 as of
September 1, 2018 (fiscal 2019) on a retrospective basis for the
Consolidated Condensed Statements of Earnings presentation. This
change resulted in reclassification of all the other net cost
components (excluding service cost component) of net pension cost
and net postretirement benefit cost from selling, general and
administrative expenses to other income (expense) with no impact on
the Company’s net earnings.
2
See note 1 on page 12.
EQUITY EARNINGS
IN AMERISOURCEBERGEN
Three months ended May
31,
Nine months ended May
31,
2019
2018
2019
2018
Equity earnings (loss) in
AmerisourceBergen (GAAP)
$
(16
)
$
52
$
105
$
142
Asset Impairment
115
8
120
8
Acquisition-related amortization
32
30
95
87
PharMEDium remediation costs
3
4
12
4
Litigation settlements and other
13
7
8
185
LIFO provision
(13
)
—
2
(12
)
Gain on sale of equity investment
(3
)
—
(3
)
—
U.S. tax law changes
—
—
(17
)
(152
)
Anti-Trust
(9
)
—
(28
)
—
Loss on previously held equity
interest
—
11
—
11
Early debt extinguishment
—
—
—
5
Adjusted equity earnings in
AmerisourceBergen (Non-GAAP measure)
$
121
$
112
$
296
$
278
OPERATING INCOME
BY DIVISION
Three months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Operating income (GAAP)
$
995
$
119
$
87
$
1
$
1,203
Acquisition-related amortization
82
25
20
—
127
Transformational cost management
43
21
22
—
86
Acquisition-related costs
80
—
—
—
80
Adjustments to equity earnings in
AmerisourceBergen
—
—
137
—
137
Store optimization
49
—
—
—
49
LIFO provision
29
—
—
—
29
Certain legal and regulatory accruals and
settlements
7
—
—
—
7
Adjusted operating income (Non-GAAP
measure)
$
1,286
$
165
$
265
$
1
$
1,717
Sales
$
26,513
$
2,776
$
5,865
$
(563
)
$
34,591
Operating margin (GAAP)2
3.8
%
4.3
%
1.7
%
3.5
%
Adjusted operating margin (Non-GAAP
measure)2
4.9
%
5.9
%
2.5
%
4.6
%
Three months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Operating income (GAAP)3
$
1,253
$
167
$
177
$
—
$
1,597
Acquisition-related amortization
84
26
21
—
131
Acquisition-related costs
57
—
—
—
57
Adjustments to equity earnings in
AmerisourceBergen
—
—
60
—
60
Store optimization
24
—
—
—
24
LIFO provision
69
—
—
—
69
Certain legal and regulatory accruals and
settlements4
5
—
—
—
5
Adjusted operating income (Non-GAAP
measure)3
$
1,492
$
193
$
258
$
—
$
1,943
Sales
$
25,917
$
2,995
$
5,965
$
(543
)
$
34,334
Operating margin (GAAP)2
4.8
%
5.6
%
2.1
%
4.5
%
Adjusted operating margin (Non-GAAP
measure)2
5.8
%
6.4
%
2.4
%
5.3
%
Nine months ended May 31,
2019
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Operating income (GAAP)
$
3,388
$
389
$
342
$
1
$
4,120
Acquisition-related amortization
237
76
59
—
373
Transformational cost management
59
88
119
—
265
Acquisition-related costs
228
—
—
—
228
Adjustments to equity earnings in
AmerisourceBergen
—
—
191
—
191
Store optimization
99
—
—
—
99
LIFO provision
77
—
—
—
77
Certain legal and regulatory accruals and
settlements
31
—
—
—
31
Adjusted operating income
(Non-GAAP measure)
$
4,119
$
553
$
710
$
1
$
5,384
Sales
$
78,491
$
8,759
$
17,311
$
(1,649
)
$
102,912
Operating margin (GAAP)2
4.3
%
4.4
%
1.4
%
3.9
%
Adjusted operating margin (Non-GAAP
measure)2
5.2
%
6.3
%
2.4
%
4.9
%
Nine months ended May 31,
2018
Retail Pharmacy USA
Retail Pharmacy
International
Pharmaceutical
Wholesale1
Eliminations
Walgreens Boots Alliance,
Inc.
Operating income (GAAP)3
$
3,783
$
594
$
515
$
1
$
4,893
Acquisition-related amortization
186
80
63
—
329
Acquisition-related costs
173
—
—
—
173
Adjustments to equity earnings in
AmerisourceBergen
—
—
136
—
136
Store optimization
24
—
—
—
24
LIFO provision
166
—
—
—
166
Certain legal and regulatory accruals and
settlements4
120
—
—
—
120
Asset recovery
(15
)
—
—
—
(15
)
Hurricane-related costs
83
—
—
—
83
Adjusted operating income
(Non-GAAP measure)3
$
4,520
$
674
$
714
$
1
$
5,909
Sales
$
72,884
$
9,395
$
17,438
$
(1,622
)
$
98,095
Operating margin (GAAP)2
5.2
%
6.3
%
2.1
%
4.8
%
Adjusted operating margin (Non-GAAP
measure)2
6.2
%
7.2
%
2.5
%
5.7
%
1
Operating income for
Pharmaceutical Wholesale includes equity earnings in
AmerisourceBergen. As a result of the two month reporting lag,
operating income for the three and nine month periods ended May 31,
2019 includes AmerisourceBergen equity earnings for the periods of
January 1, 2019 through March 31, 2019 and July 1, 2018 through
March 31, 2019, respectively. Operating income for the three and
nine month periods ended May 31, 2018 includes AmerisourceBergen
equity earnings for the periods of January 1, 2018 through March
31, 2018 and July 1, 2017 through March 31, 2018,
respectively.
2
Operating margins and adjusted
operating margins have been calculated excluding equity earnings in
AmerisourceBergen.
3
See note 1 on page 15.
4
See note 1 on page 12.
ADJUSTED
EFFECTIVE TAX RATE
Three months ended May 31,
2019
Three months ended May 31,
2018
Earnings before income tax
provision
Income tax provision
Effective tax rate
Earnings before income tax
provision
Income tax provision
Effective tax rate
Effective tax rate (GAAP)
$
1,198
$
156
13.0
%
$
1,440
$
109
7.6
%
Impact of non-GAAP adjustments
350
42
351
71
U.S. tax law changes
—
—
—
140
Equity method non-cash
—
10
—
(8
)
Adjusted tax rate true-up
—
8
—
(32
)
Subtotal
$
1,548
$
216
$
1,791
$
280
Exclude adjusted equity earnings in
AmerisourceBergen
(121
)
—
(112
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
1,427
$
216
15.1
%
$
1,679
$
280
16.7
%
Nine months ended May 31,
2019
Nine months ended May 31,
2018
Earnings before income tax
provision
Income tax provision
Effective tax rate
Earnings before income tax
provision
Income tax provision
Effective tax rate
Effective tax rate (GAAP)
$
3,819
$
562
14.7
%
$
4,314
$
839
19.4
%
Impact of non-GAAP adjustments
1,101
181
1,187
213
U.S. tax law changes
—
3
—
(44
)
Equity method non-cash
—
(9
)
—
(19
)
Adjusted tax rate true-up
—
8
—
11
Subtotal
4,920
745
5,501
1,000
Exclude adjusted equity earnings in
AmerisourceBergen
(296
)
—
(278
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in AmerisourceBergen (Non-GAAP
measure)
$
4,624
$
745
16.1
%
$
5,223
$
1,000
19.1
%
FREE CASH
FLOW
Three months ended May
31,
Nine months ended May
31,
2019
2018
2019
2018
Net cash provided by operating
activities (GAAP)1
$
2,021
$
2,237
$
3,215
$
5,446
Less: Additions to property, plant and
equipment
(453
)
(317
)
(1,246
)
(983
)
Free cash flow (Non-GAAP
measure)2
$
1,568
$
1,920
$
1,969
$
4,463
1
The company adopted new
accounting guidance in Accounting Standards Update 2016-18 as of
September 1, 2018 (fiscal 2019) on a retrospective basis for the
Consolidated Condensed Statements of Cash Flows presentation. This
change resulted in restricted cash being included with cash and
cash equivalents when reconciling the beginning-of-period and
end-of-period total amounts shown on the Consolidated Condensed
Statement of Cash Flows.
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 our entire
statements of cash flows.
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Walgreens Boots Alliance (NASDAQ:WBA)
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From Mar 2024 to Apr 2024
Walgreens Boots Alliance (NASDAQ:WBA)
Historical Stock Chart
From Apr 2023 to Apr 2024
