Lowering Guidance in Continued Challenging
Environment; Provides Strategic Update
Third quarter financial highlights
- Third quarter earnings per share (EPS)* was $0.40 compared to
earnings per share of $0.14 in the year-ago quarter which included
a non-cash impairment of pharmacy license intangible assets in
Boots UK
- Adjusted EPS** was $0.63, down 36.6 percent on a constant
currency basis compared to the year-ago quarter, including a $0.24
impact from lower sale-leaseback gains, a challenging U.S. retail
environment, and recent pharmacy industry trends
- Third quarter sales increased 2.6 percent year-over-year to
$36.4 billion, up 2.5 percent on a constant currency basis
Fiscal 2024 guidance
- Lowering fiscal 2024 adjusted EPS** guidance to $2.80 to $2.95
reflecting challenging pharmacy industry trends and a
worse-than-expected U.S. consumer environment
Update on strategic review
- Finalizing significant multiyear footprint optimization program
to close certain underperforming U.S. stores
- Launching U.S. Retail Pharmacy action plan to invest in and
deliver an improved customer and patient experience across
channels
- Aligning U.S. Pharmacy and Healthcare organizations for
enhanced go-to-market capabilities
- Simplifying and focusing the U.S. Healthcare portfolio
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the third quarter of fiscal 2024, which ended
May 31, 2024.
Chief Executive Officer Tim Wentworth said:
"We continue to face a difficult operating environment,
including persistent pressures on the U.S. consumer and the impact
of recent marketplace dynamics which have eroded pharmacy margins.
Our results and outlook reflect these headwinds, despite solid
performance in both our International and U.S. Healthcare
segments.
Informed by our strategic review, we are focused on improving
our core business: retail pharmacy, which is central to the future
of healthcare. We are addressing critical issues with urgency and
working to unlock opportunities for growth. Many of these actions
will take time, but I am confident that we have the right team and
the right strategy to lead a business turnaround for the Walgreens
that our customers and patients need.”
Overview of Third Quarter Results
WBA third quarter sales increased 2.6 percent from the year-ago
quarter to $36.4 billion, an increase of 2.5 percent on a constant
currency basis, reflecting sales growth across all segments.
Third quarter operating income was $111 million compared to an
operating loss of $477 million in the year-ago quarter, an increase
of $588 million, which reflects lapping a $431 million non-cash
impairment of pharmacy license intangible assets in Boots UK in the
year-ago quarter. Adjusted operating income** was $613 million, a
decrease of 36.3 percent on a constant currency basis reflecting
lower sale-leaseback gains and softer U.S. retail and pharmacy
performance, partly offset by cost savings initiatives and improved
profitability in the U.S. Healthcare segment.
Net earnings in the third quarter were $344 million compared to
net earnings of $118 million in the year-ago quarter, an increase
of $225 million reflecting higher operating income. Adjusted net
earnings** were $545 million, down 36.5 percent on a constant
currency basis, reflecting lower adjusted operating income**.
EPS in the third quarter was $0.40 compared to $0.14 in the
year-ago quarter, reflecting an increase of $0.26. Adjusted EPS**
was $0.63, reflecting a decrease of 36.6 percent, or $0.36 on both
a reported and constant currency basis.
Net cash provided by operating activities was $605 million in
the third quarter and free cash flow** was $334 million, a $778
million increase compared with the year-ago quarter, each driven
primarily by phasing and optimization of working capital. The
increase in free cash flow also benefited from decreased capital
expenditures.
Overview of Fiscal 2024 Year-to-Date Results
Sales in the first nine months of fiscal 2024 increased 6.2
percent from the year-ago period to $110.1 billion, an increase of
5.6 percent on a constant currency basis, reflecting growth across
all segments.
Operating loss in the first nine months of fiscal 2024 was $13.1
billion compared to an operating loss of $6.4 billion in the
year-ago period, an increase in operating loss of $6.7 billion.
Operating loss in the current period reflects a $12.4 billion
non-cash impairment charge related to VillageMD goodwill, which
resulted in a $5.8 billion charge attributable to WBA, net of tax
and non-controlling interest. Operating loss in the current period
also reflects a $455 million non-cash impairment charge related to
certain long-lived assets in the U.S. Retail Pharmacy segment.
Prior year operating loss reflects a $6.8 billion pre-tax charge
for opioid-related claims and litigation and a $431 million
non-cash impairment of pharmacy license intangible assets in Boots
UK. Adjusted operating income** was $2.2 billion, a decrease of
31.5 percent on a constant currency basis reflecting a challenging
U.S. retail environment, reimbursement pressure and lower
sale-leaseback gains, partly offset by cost savings and improved
profitability in the U.S. Healthcare segment.
Net loss for the first nine months of fiscal 2024 was $5.6
billion compared to a net loss of $2.9 billion in the year-ago
period, an increase in net loss of $2.7 billion, reflecting the
non-cash impairment charges and lapping a $1.5 billion gain on
sales of Cencora and Option Care Health shares last year. Adjusted
net earnings** decreased 24.9 percent, or $712 million to $2.2
billion, down 25.3 percent on a constant currency basis, reflecting
lower adjusted operating income** partly offset by a lower adjusted
effective tax** rate due to the recognition of deferred tax assets
in foreign jurisdictions in the second quarter.
Loss per share for the first nine months of fiscal 2024 was
$6.53 compared to a loss per share of $3.36 in the year-ago period,
an increase in loss per share of $3.17. Adjusted EPS** decreased
24.9 percent, or $0.83, to $2.49, reflecting a decrease of 25.3
percent on a constant currency basis.
Net cash used for operating activities was $314 million in the
first nine months of fiscal 2024 and free cash flow** was negative
$1.1 billion, a $1.2 billion decrease compared with the year-ago
period, with each driven primarily by lower earnings, $780 million
in higher payments related to legal matters and phasing of working
capital. The decrease in free cash flow was partly offset by $497
million in decreased capital expenditures.
Business Segments
U.S. Retail Pharmacy
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Sales
$
28,503
$
27,866
$
86,308
$
82,648
Adjusted operating income ***
$
501
$
962
$
1,947
$
3,134
The U.S. Retail Pharmacy segment had third quarter sales of
$28.5 billion, an increase of 2.3 percent from the year-ago quarter
driven entirely by comparable pharmacy sales, partly offset by a
retail decline. Comparable sales increased 3.5 percent from the
year-ago quarter.
Pharmacy sales increased 4.4 percent and comparable pharmacy
sales increased 5.7 percent compared to the year-ago quarter,
benefiting from higher branded drug inflation and script growth.
Comparable prescriptions filled in the third quarter, adjusted to
30-day equivalents increased 1.6 percent from the year-ago quarter
while comparable prescriptions excluding immunizations increased
1.7 percent. Total prescriptions filled in the quarter, including
immunizations, adjusted to 30-day equivalents was 306.4 million, an
increase of 0.5 percent versus the prior year quarter. Pharmacy
margin was negatively impacted by brand mix impacts and
reimbursement pressure.
Retail sales decreased 4.0 percent and comparable retail sales
decreased 2.3 percent compared with the year-ago quarter,
reflecting a challenging retail environment and continued channel
shift. Retail margin was negatively affected by increased
promotional activity and higher shrink levels.
Adjusted operating income** decreased 47.9 percent to $501
million compared to $1.0 billion in the year-ago quarter,
reflecting lower sale and leaseback gains, a challenging retail
environment and reimbursement pressure, net of procurement savings,
partly offset by cost savings initiatives.
International
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Sales
$
5,727
$
5,573
$
17,581
$
16,414
Adjusted operating income ***
$
175
$
208
$
562
$
676
The International segment had third quarter sales of $5.7
billion, an increase of 2.8 percent from the year-ago quarter,
including a favorable currency impact of 1.1 percent. Sales
increased 1.6 percent on a constant currency basis, with the
Germany wholesale business growing 4.9 percent and Boots UK sales
growing 1.6 percent.
Boots UK comparable pharmacy sales increased 5.8 percent on a
constant currency basis compared with the year-ago quarter. Boots
UK comparable retail sales increased 6.0 percent on a constant
currency basis compared to the year-ago quarter with growth across
all categories, and increased total retail market share. Boots.com
continued to perform strongly with sales growing 13.8 percent
representing 15.6 percent of Boots total retail sales.
Adjusted operating income decreased 15.8 percent to $175
million, a decrease of 16.6 percent on a constant currency basis
compared with the year-ago quarter, due to lapping real estate
gains in the year-ago period.
U.S. Healthcare
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Sales
$
2,125
$
1,975
$
6,232
$
4,597
Operating loss
$
(220
)
$
(522
)
$
(13,715
)
$
(1,431
)
Adjusted operating loss ***
$
(22
)
$
(172
)
$
(151
)
$
(483
)
Adjusted EBITDA (Non-GAAP measure)
$
23
$
(113
)
$
1
$
(346
)
The U.S. Healthcare segment had third quarter sales of $2.1
billion, an increase of 7.6 percent compared to the year-ago
quarter, led by VillageMD and Shields. VillageMD grew 7 percent,
reflecting additional lives in risk and fee-for-service. Shields
grew 24 percent, driven by growth within existing partnerships.
Operating loss was $220 million compared to an operating loss of
$522 million in the year-ago quarter. Adjusted operating loss**,
which excludes certain costs related to amortization of acquired
intangible assets and stock compensation expense, was $22 million
compared to $172 million in the year-ago quarter.
Adjusted EBITDA** of $23 million improved by $136 million versus
the prior year quarter and represents the second consecutive
quarter of positive adjusted EBITDA** for the segment, driven by
cost discipline and growth from VillageMD and Shields.
Conference Call
WBA will hold a conference call to discuss the third quarter
results beginning at 8:30 a.m. Eastern time today, June 27, 2024. 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. Measures identified as "comparable"
constitute key performance indicators. See the appendix to this
release for a discussion of non-GAAP financial measures, including
a reconciliation to the most closely correlated GAAP measure, and
key performance indicators.
*** 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 the impact of opioid related claims and
litigation settlements, our fiscal year 2024 guidance, outlook and
targets and related assumptions and drivers, as well as
forward-looking statements concerning the expected execution and
effect of our business strategies, including the breadth, timing
and impact of the actions related to our strategic review, our
ability to successfully turn around the business and return to
growth and the potential impacts on our business of COVID-19, the
impact of adverse global macroeconomic conditions caused by factors
including, among others, inflation, high interest rates, labor
shortages, supply chain disruptions and pandemics like COVID-19 on
our operations and financial results, the financial performance of
our equity method investees, including Cencora, the amount of our
goodwill impairment charge (which is based in part on estimates of
future performance), the influence of certain holidays and
seasonality, our cost-savings and growth initiatives, including
statements relating to our expected cost savings under our
Transformational Cost Management Program and expansion and future
operating and financial results of our U.S. Healthcare segment,
including our long-term sales targets and profitability
expectations. All statements in the future tense and all statements
accompanied by words such as “expect,” “outlook,” “forecast,”
“would,” “could,” “should,” “can,” “will,” “project,” “intend,”
“plan,” “goal,” "opportunity," “guidance,” "projection," “target,”
“aim,” "strive," "enable," "create," "position," continue,”
“transform,” “accelerate,” “model,” “long-term,” “believe,” “seek,”
“estimate,” “anticipate,” “may,” “possible,” “assume,” "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, as amended, and in other documents that
we file or furnish with the Securities and Exchange Commission (the
"SEC"). If one or more of these risks or uncertainties
materializes, or if underlying assumptions prove incorrect, actual
results may vary materially from those indicated or anticipated by
such forward-looking statements. All forward-looking statements we
make or that are made on our behalf are qualified by these
cautionary statements. 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 12,500 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 330,000 people and has a presence in eight
countries through its portfolio of consumer brands: Walgreens,
Boots, Duane Reade, the No7 Beauty Company and Benavides in Mexico.
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 CONDENSED
STATEMENTS OF EARNINGS
(UNAUDITED)
(in millions, except per share
amounts)
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Sales
$
36,351
$
35,415
$
110,111
$
103,659
Cost of sales
29,892
28,826
89,840
83,062
Gross profit
6,460
6,588
20,271
20,596
Selling, general and administrative
expenses
6,393
7,123
21,165
27,215
Impairment of goodwill
—
—
12,369
—
Equity earnings in Cencora
44
58
164
187
Operating income (loss)
111
(477
)
(13,099
)
(6,431
)
Other income, net
254
268
229
1,812
Earnings (loss) before interest and income
tax provision (benefit)
365
(209
)
(12,870
)
(4,619
)
Interest expense, net
113
173
351
425
Earnings (loss) before income tax
provision (benefit)
251
(382
)
(13,221
)
(5,044
)
Income tax provision (benefit)
20
(330
)
(836
)
(1,707
)
Post-tax (loss) earnings from other equity
method investments
(1
)
4
15
18
Net earnings (loss)
230
(48
)
(12,370
)
(3,320
)
Net loss attributable to non-controlling
interests
(114
)
(166
)
(6,739
)
(420
)
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc.
$
344
$
118
$
(5,631
)
$
(2,900
)
Net earnings (loss) per common
share:
Basic
$
0.40
$
0.14
$
(6.53
)
$
(3.36
)
Diluted
$
0.40
$
0.14
$
(6.53
)
$
(3.36
)
Weighted average common shares
outstanding:
Basic
863.1
863.1
862.9
863.1
Diluted
864.3
863.8
862.9
863.1
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
May 31, 2024
August 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
703
$
739
Accounts receivable, net
5,949
5,381
Inventories
8,578
8,257
Other current assets
1,107
1,127
Total current assets
16,337
15,503
Non-current assets:
Property, plant and equipment, net
9,952
11,587
Operating lease right-of-use assets
21,020
21,667
Goodwill
15,821
28,187
Intangible assets, net
12,836
13,635
Equity method investments
2,961
3,497
Other non-current assets
4,059
2,550
Total non-current assets
66,648
81,125
Total assets
$
82,985
$
96,628
Liabilities, redeemable non-controlling
interests and equity
Current liabilities:
Short-term debt
$
1,506
$
917
Trade accounts payable
13,100
12,635
Operating lease obligations
2,384
2,347
Accrued expenses and other liabilities
7,753
8,426
Income taxes
292
209
Total current liabilities
25,034
24,535
Non-current liabilities:
Long-term debt
7,407
8,145
Operating lease obligations
21,379
22,124
Deferred income taxes
1,221
1,318
Accrued litigation obligations
5,890
6,261
Other non-current liabilities
6,624
5,757
Total non-current liabilities
42,521
43,605
Redeemable non-controlling interests
173
167
Total equity
15,257
28,322
Total liabilities, redeemable
non-controlling interests and equity
$
82,985
$
96,628
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine months ended May
31,
2024
2023
Cash flows from operating
activities:
Net loss
$
(12,370
)
$
(3,320
)
Adjustments to reconcile net loss to net
cash (used for) provided by operating activities:
Depreciation and amortization
1,837
1,652
Deferred income taxes
(1,242
)
(2,098
)
Stock compensation expense
143
348
Earnings from equity method
investments
(179
)
(206
)
Impairment of goodwill, intangibles and
long-lived assets
13,618
815
Gain on sale of equity method
investments
(847
)
(1,691
)
Gain on sale-leaseback transactions
(268
)
(825
)
Loss on variable prepaid forward
contracts
733
26
Other
(151
)
(124
)
Changes in certain assets and
liabilities:
Accounts receivable, net
(592
)
(411
)
Inventories
(315
)
326
Other current assets
58
(184
)
Trade accounts payable
446
627
Accrued expenses and other liabilities
(474
)
(588
)
Income taxes
167
216
Accrued litigation obligations
(330
)
6,835
Other non-current assets and
liabilities
(548
)
(179
)
Net cash (used for) provided by operating
activities
(314
)
1,219
Cash flows from investing
activities:
Additions to property, plant and
equipment
(1,135
)
(1,633
)
Proceeds from sale-leaseback
transactions
773
1,549
Proceeds from sale of other assets
1,726
3,798
Business, investment and asset
acquisitions, net of cash acquired
(206
)
(7,072
)
Other
(53
)
110
Net cash provided by (used for) investing
activities
1,106
(3,249
)
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
(1
)
147
Proceeds from debt
23,074
5,240
Payments of debt
(23,128
)
(5,232
)
Acquisition of non-controlling
interests
—
(1,316
)
Proceeds from issuance of non-controlling
interests
—
2,735
Proceeds from variable prepaid forward
contracts
424
644
Treasury stock purchases
(69
)
(150
)
Cash dividends paid
(1,044
)
(1,244
)
Other
(168
)
(251
)
Net cash (used for) provided by financing
activities
(912
)
573
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
3
17
Changes in cash, cash equivalents and
restricted cash:
Net decrease in cash, cash equivalents and
restricted cash
(117
)
(1,441
)
Cash, cash equivalents and restricted cash
at beginning of period
856
2,558
Cash, cash equivalents and restricted
cash at end of period
$
740
$
1,117
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 the 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 from period to period and
trends in the Company’s historical operating results. The Company
also uses non-GAAP financial measures as a basis for certain
compensation programs it sponsors. 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 to the most directly comparable GAAP financial measures
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. reporting in
currencies other than the U.S. dollar and such presentation
provides a framework to assess how its business performed excluding
the impact of foreign currency exchange rate fluctuations.
Comparable sales
The nine months ended May 31, 2024 comparable sales and
prescriptions filled figures for the Company exclude the benefit of
this year's leap day.
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. Comparable sales in constant currency exclude
wholesale sales in Germany and sales from dispositions in the
current period. 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, comparable prescriptions
excluding immunizations, 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 EARNINGS
(LOSS) TO ADJUSTED NET EARNINGS AND DILUTED NET EARNINGS
(LOSS) PER SHARE TO ADJUSTED DILUTED NET EARNINGS PER
SHARE
(in millions, except per share
amounts)
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc. (GAAP)
$
344
$
118
$
(5,631
)
$
(2,900
)
Adjustments to operating income
(loss):
Impairment of goodwill, intangibles and
long-lived assets 1
—
299
13,091
299
Acquisition-related costs 2
68
70
480
257
Acquisition-related amortization 3
266
274
811
851
Certain legal and regulatory accruals and
settlements 4
52
268
376
7,249
Transformational cost management 5
95
414
401
697
Adjustments to equity earnings in Cencora
6
57
61
129
178
LIFO provision 7
(36
)
51
11
89
Total adjustments to operating income
(loss)
502
1,436
15,299
9,620
Adjustments to other income,
net:
(Gain) loss on certain non-hedging
derivatives 8
(155
)
26
733
26
Gain on sale of equity method investment
9
(88
)
(179
)
(940
)
(1,692
)
Gain on investments, net 10
—
(76
)
—
(76
)
Loss on disposal of business 11
—
—
4
—
Total adjustments to other income, net
(244
)
(229
)
(203
)
(1,742
)
Adjustments to interest expense,
net:
Interest expense on debt 12
6
—
12
—
Total adjustments to interest expense,
net
6
—
12
—
Adjustments to income tax provision
(benefit):
Equity method non-cash tax 13
6
10
20
33
Tax impact of adjustments 13
(23
)
(408
)
(821
)
(1,968
)
Total adjustments to income tax provision
(benefit)
(17
)
(397
)
(800
)
(1,935
)
Adjustments to post-tax (loss) earnings
from other equity method investments:
Adjustments to earnings in other equity
method investments 14
6
9
25
31
Total adjustments to post-tax (loss)
earnings from other equity method investments
6
9
25
31
Adjustments to net loss attributable to
non-controlling interests:
Transformational cost management 5
(1
)
—
(1
)
—
Impairment of goodwill, intangibles and
long-lived assets 1
—
—
(6,195
)
—
Acquisition-related costs 2
(14
)
(16
)
(200
)
(71
)
Acquisition-related amortization 3
(37
)
(61
)
(153
)
(139
)
Total adjustments to net loss attributable
to non-controlling interests
(52
)
(77
)
(6,549
)
(210
)
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
545
$
860
$
2,152
$
2,864
Diluted net earnings (loss) per common
share (GAAP) 15
$
0.40
$
0.14
$
(6.53
)
$
(3.36
)
Adjustments to operating income (loss)
0.58
1.66
17.70
11.14
Adjustments to other income, net
(0.28
)
(0.27
)
(0.23
)
(2.02
)
Adjustments to interest expense, net
0.01
—
0.01
—
Adjustments to income tax provision
(benefit)
(0.02
)
(0.46
)
(0.93
)
(2.24
)
Adjustments to post-tax (loss) earnings
from other equity method investments
0.01
0.01
0.03
0.04
Adjustments to net loss attributable to
non-controlling interests
(0.06
)
(0.09
)
(7.58
)
(0.24
)
Adjusted diluted net earnings per
common share (Non-GAAP measure) 16
$
0.63
$
1.00
$
2.49
$
3.32
Weighted average common shares
outstanding, diluted (in millions) 16
864.3
863.8
864.3
863.8
1
Impairment of goodwill, intangibles and
long-lived assets recognized in the nine months ended May 31, 2024
resulted from the interim goodwill impairment assessment for the
VillageMD reporting unit. These charges 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 in Selling,
general and administrative expenses and Impairment of goodwill
within the Consolidated Condensed Statements of Earnings.
2
Acquisition-related costs are transaction
and integration costs associated with certain merger, acquisition
and divestitures related activities recorded in Operating income
(loss) within the Consolidated Condensed Statement of Earnings.
Examples of such costs include deal costs, severance, stock-based
compensation, employee transaction success bonuses, and other
integration related exit and disposal charges. These charges are
primarily recorded within Selling, general and administrative
expenses within the Consolidated Condensed Statements of Earnings.
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.
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 in Selling, general and
administrative expenses within the Consolidated Condensed
Statements of Earnings. 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
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 in
Selling, general and administrative expenses within the
Consolidated Condensed Statements of Earnings. In fiscal 2023, the
Company recorded charges related to the opioid litigation
settlement frameworks and certain other legal matters.
5
Transformational Cost Management Program
charges are costs associated with a formal restructuring plan.
These charges are primarily recorded in Selling, general and
administrative expenses within the Consolidated Condensed
Statements of Earnings. These costs do not reflect current
operating performance and are impacted by the timing of
restructuring activity.
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
Includes fair value gains or losses on the
VPF 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.
9
Gains on the sale of equity method
investments are recorded in Other income, net within the
Consolidated Condensed Statements of Earnings. The Company excludes
these charges when evaluating operating performance because these
do not relate to the ordinary course of the Company’s business.
10
Includes significant gains resulting from
the change in classification of investments as well as the fair
value adjustments recorded to Other income, net. During the three
months ended May 31, 2023, the Company recorded pre-tax gains of
$76 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.
11
Includes losses related to the sale of
businesses. These charges are recorded in Other income net, within
the Consolidated Condensed Statements of Earnings.
12
Includes interest expense on external debt
to fund incremental contributions to the Boots Plan required to
complete the Trustee's acquisition of a bulk annuity policy (the
"Buy-In") from Legal & General. The payments and related
incremental interest expense are not indicative of normal operating
performance.
13
Adjustments to income tax provision
(benefit) include adjustments to the GAAP basis tax benefit
commensurate with non-GAAP adjustments and certain discrete tax
items including U.S. and UK tax law changes and equity method
non-cash tax. These charges are recorded in Income tax provision
(benefit) within the Consolidated Condensed Statements of
Earnings.
14
Adjustments to post-tax (loss) 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 in Post-tax (loss) earnings
from other equity method investments within the Consolidated
Condensed Statements of Earnings. 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.
15
Due to the anti-dilutive effect resulting
from periods where the Company reports a 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.
16
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 AND
ON A CONSOLIDATED BASIS
(in millions)
Three months ended May 31,
2024
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
28,503
$
5,727
$
2,125
$
(3
)
$
36,351
Gross profit (GAAP)
$
5,033
$
1,222
$
181
$
23
$
6,460
Acquisition-related amortization
5
—
22
—
27
Transformational cost management
21
—
—
—
21
LIFO provision
(36
)
—
—
—
(36
)
Adjusted gross profit (Non-GAAP
measure)
$
5,022
$
1,222
$
203
$
23
$
6,471
Selling, general and administrative
expenses (GAAP)
$
4,840
$
1,079
$
402
$
73
$
6,393
Acquisition-related amortization
(92
)
(16
)
(132
)
—
(239
)
Transformational cost management
(59
)
(14
)
(1
)
(1
)
(75
)
Acquisition-related costs
(15
)
(2
)
(44
)
(7
)
(68
)
Certain legal and regulatory accruals and
settlements
(52
)
—
—
—
(52
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,622
$
1,047
$
225
$
65
$
5,959
Operating income (loss) (GAAP)
$
237
$
143
$
(220
)
$
(50
)
$
111
Acquisition-related amortization
97
16
154
—
266
Transformational cost management
80
14
1
1
95
Acquisition-related costs
15
2
44
7
68
Adjustments to equity earnings in
Cencora
57
—
—
—
57
Certain legal and regulatory accruals and
settlements
52
—
—
—
52
LIFO provision
(36
)
—
—
—
(36
)
Adjusted operating income (loss)
(Non-GAAP measure)
$
501
$
175
$
(22
)
$
(42
)
$
613
Gross margin (GAAP)
17.7
%
21.3
%
8.5
%
17.8
%
Adjusted gross margin (Non-GAAP
measure)
17.6
%
21.3
%
9.6
%
17.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.0
%
18.8
%
18.9
%
17.6
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.2
%
18.3
%
10.6
%
16.4
%
Operating margin 2
0.7
%
2.5
%
(10.4
)%
0.2
%
Adjusted operating margin (Non-GAAP
measure) 2
1.4
%
3.1
%
(1.0
)%
1.4
%
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 three month period ended
May 31, 2024 includes Cencora equity earnings for the period of
January 1, 2024 through March 31, 2024.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
(in millions)
Three months ended May 31,
2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
27,866
$
5,573
$
1,975
$
—
$
35,415
Gross profit (GAAP)
$
5,327
$
1,173
$
89
$
—
$
6,588
LIFO provision
51
—
—
—
51
Acquisition-related amortization
5
—
25
—
31
Adjusted gross profit (Non-GAAP
measure)
$
5,383
$
1,173
$
114
$
—
$
6,670
Selling, general and administrative
expenses (GAAP)
$
4,990
$
1,475
$
611
$
48
$
7,123
Transformational cost management
(103
)
(194
)
(113
)
(3
)
(414
)
Impairment of intangible assets
—
(299
)
—
—
(299
)
Certain legal and regulatory accruals and
settlements
(268
)
—
—
—
(268
)
Acquisition-related amortization
(76
)
(15
)
(152
)
—
(243
)
Acquisition-related costs
(3
)
(2
)
(59
)
(6
)
(70
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,540
$
965
$
286
$
39
$
5,830
Operating income (loss) (GAAP)
$
395
$
(302
)
$
(522
)
$
(48
)
$
(477
)
Transformational cost management
103
194
113
3
414
Impairment of intangible assets
—
299
—
—
299
Acquisition-related amortization
81
15
178
—
274
Certain legal and regulatory accruals and
settlements
268
—
—
—
268
Acquisition-related costs
3
2
59
6
70
Adjustments to equity earnings in
Cencora
61
—
—
—
61
LIFO provision
51
—
—
—
51
Adjusted operating income (loss)
(Non-GAAP measure)
$
962
$
208
$
(172
)
$
(39
)
$
959
Gross margin (GAAP)
19.1
%
21.0
%
4.5
%
18.6
%
Adjusted gross margin (Non-GAAP
measure)
19.3
%
21.0
%
5.8
%
18.8
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.9
%
26.5
%
30.9
%
20.1
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.3
%
17.3
%
14.5
%
16.5
%
Operating margin 2
1.2
%
(5.4
)%
(26.4
)%
(1.5
)%
Adjusted operating margin (Non-GAAP
measure) 2
3.0
%
3.7
%
(8.7
)%
2.4
%
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 three month period ended
May 31, 2023 includes Cencora equity earnings for the period of
January 1, 2023 through March 31, 2023.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
(in millions)
Nine months ended May 31,
2024
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
86,308
$
17,581
$
6,232
$
(9
)
$
110,111
Gross profit (GAAP)
$
16,030
$
3,720
$
498
$
23
$
20,271
Acquisition-related amortization
16
—
62
—
78
Transformational cost management
29
—
—
—
29
LIFO provision
11
—
—
—
11
Adjusted gross profit (Non-GAAP
measure)
$
16,086
$
3,720
$
560
$
23
$
20,389
Selling, general and administrative
expenses (GAAP) 3
$
15,957
$
3,252
$
14,212
$
114
$
33,534
Impairment of goodwill, intangibles and
long-lived assets
(478
)
—
(12,579
)
(34
)
(13,091
)
Acquisition-related amortization
(271
)
(47
)
(416
)
—
(733
)
Acquisition-related costs
(75
)
(11
)
(502
)
108
(480
)
Certain legal and regulatory accruals and
settlements
(376
)
—
—
—
(376
)
Transformational cost management
(325
)
(37
)
(5
)
(6
)
(373
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
14,432
$
3,158
$
711
$
182
$
18,482
Operating income (loss) (GAAP)
$
238
$
468
$
(13,715
)
$
(90
)
$
(13,099
)
Impairment of goodwill, intangibles and
long-lived assets
478
—
12,579
34
13,091
Acquisition-related amortization
287
47
478
—
811
Acquisition-related costs
75
11
502
(108
)
480
Certain legal and regulatory accruals and
settlements
376
—
—
—
376
Transformational cost management
354
37
5
6
401
Adjustments to equity earnings in
Cencora
129
—
—
—
129
LIFO provision
11
—
—
—
11
Adjusted operating income (loss)
(Non-GAAP measure)
$
1,947
$
562
$
(151
)
$
(158
)
$
2,200
Gross margin (GAAP)
18.6
%
21.2
%
8.0
%
18.4
%
Adjusted gross margin (Non-GAAP
measure)
18.6
%
21.2
%
9.0
%
18.5
%
Selling, general and administrative
expenses percent to sales (GAAP) 3
18.5
%
18.5
%
NM
30.5
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.7
%
18.0
%
11.4
%
16.8
%
Operating margin 2
0.1
%
2.7
%
NM
(12.0
)%
Adjusted operating margin (Non-GAAP
measure) 2
1.9
%
3.2
%
(2.4
)%
1.7
%
NM - Not meaningful. Percentage increases
above 200% or when one period includes income and other period
includes loss are considered not meaningful.
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 nine month period ended May
31, 2024 includes Cencora equity earnings for the period of July 1,
2023 through March 31, 2024.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
3
Includes goodwill impairment of $12.4
billion in U.S. Healthcare for the nine months ended May 31,
2024.
(in millions)
Nine months ended May 31,
2023
U.S. Retail Pharmacy1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
82,648
$
16,414
$
4,597
$
—
$
103,659
Gross profit (GAAP)
$
17,038
$
3,421
$
138
$
—
$
20,596
LIFO provision
89
—
—
—
89
Acquisition-related amortization
16
—
69
—
85
Acquisition-related costs
—
—
60
—
60
Adjusted gross profit (Non-GAAP
measure)
$
17,143
$
3,421
$
267
$
—
$
20,831
Selling, general and administrative
expenses (GAAP)
$
22,215
$
3,264
$
1,569
$
167
$
27,215
Certain legal and regulatory accruals and
settlements
(7,249
)
—
—
—
(7,249
)
Acquisition-related amortization
(221
)
(45
)
(501
)
—
(766
)
Transformational cost management
(368
)
(206
)
(113
)
(10
)
(697
)
Impairment of intangible assets
—
(299
)
—
—
(299
)
Acquisition-related costs
(4
)
29
(205
)
(18
)
(197
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
14,373
$
2,745
$
750
$
139
$
18,007
Operating (loss) income (GAAP)
$
(4,990
)
$
156
$
(1,431
)
$
(167
)
$
(6,431
)
Certain legal and regulatory accruals and
settlements
7,249
—
—
—
7,249
Acquisition-related amortization
236
45
570
—
851
Transformational cost management
368
206
113
10
697
Impairment of intangible assets
—
299
—
—
299
Acquisition-related costs
4
(29
)
265
18
257
Adjustments to equity earnings in
Cencora
178
—
—
—
178
LIFO provision
89
—
—
—
89
Adjusted operating income (loss)
(Non-GAAP measure)
$
3,134
$
676
$
(483
)
$
(139
)
$
3,188
Gross margin (GAAP)
20.6
%
20.8
%
3.0
%
19.9
%
Adjusted gross margin (Non-GAAP
measure)
20.7
%
20.8
%
5.8
%
20.1
%
Selling, general and administrative
expenses percent to sales (GAAP)
26.9
%
19.9
%
34.1
%
26.3
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
17.4
%
16.7
%
16.3
%
17.4
%
Operating margin 2
(6.3
)%
1.0
%
(31.1
)%
(6.4
)%
Adjusted operating margin (Non-GAAP
measure) 2
3.4
%
4.1
%
(10.5
)%
2.7
%
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 nine month period ended May
31, 2023 includes Cencora equity earnings for the period of July 1,
2022 through March 31, 2023.
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
U.S. HEALTHCARE SEGMENT
(in millions)
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Operating loss (GAAP) 1
$
(220
)
$
(522
)
$
(13,715
)
$
(1,431
)
Impairment of goodwill, intangibles and
long-lived assets 2
—
—
12,579
—
Acquisition-related amortization 3
154
178
478
570
Acquisition-related costs 4
44
59
502
265
Transformational cost management 5
1
113
5
113
Adjusted operating loss
(22
)
(172
)
(151
)
(483
)
Depreciation expense
32
43
113
92
Stock-based compensation expense 6
13
16
39
45
Adjusted EBITDA (Non-GAAP
measure)
$
23
$
(113
)
$
1
$
(346
)
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
Impairment of goodwill, intangibles and
long-lived assets recognized in the nine months ended May 31, 2024
resulted from the interim goodwill impairment assessment for the
VillageMD reporting unit. These charges 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 in Selling,
general and administrative expenses and Impairment of goodwill
within the Consolidated Condensed Statements of Earnings.
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 in Selling, general and
administrative expenses within the Consolidated Condensed
Statements of Earnings. 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
(loss) within the Consolidated Condensed Statement of Earnings.
Examples of such costs include deal costs, severance, stock-based
compensation, employee transaction success bonuses, and other
integration related exit and disposal charges. These charges are
primarily recorded within Selling, general and administrative
expenses within the Consolidated Condensed Statements of Earnings.
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
Transformational Cost Management Program
charges are costs associated with a formal restructuring plan.
These charges are primarily recorded in Selling, general and
administrative expenses within the Consolidated Condensed
Statements of Earnings. These costs do not reflect current
operating performance and are impacted by the timing of
restructuring activity.
6
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 May
31,
Nine months ended May
31,
2024
2023
2024
2023
Equity earnings in Cencora
(GAAP)
$
44
$
58
$
164
$
187
Acquisition-related intangibles
amortization
27
32
93
98
Restructuring and other expenses
8
10
19
10
Turkey hyperinflation impact
3
1
10
6
Acquisition-related deal and integration
expenses
2
10
9
15
Tax reform
(4
)
—
(1
)
4
Amortization of basis difference in
OneOncology investment
1
—
2
—
Gain on remeasurement of equity
investment
—
—
—
(1
)
Certain discrete tax expense
—
—
—
(2
)
Gain/Loss from divestitures
—
—
(7
)
—
LIFO expense
(2
)
7
3
31
Gain from antitrust litigation
settlements
(1
)
—
(15
)
(8
)
Litigation and opioid-related expenses
23
2
14
4
Employee severance, litigation, and
other
—
—
—
21
Adjusted equity earnings in Cencora
(Non-GAAP measure)
$
101
$
119
$
293
$
365
ADJUSTED EFFECTIVE TAX
RATE
(in millions)
Three months ended May 31,
2024
Three months ended May 31,
2023
Earnings before income tax
provision
Income tax provision
Effective tax rate
(Loss) Earnings before income
tax (benefit) provision
Income tax (benefit)
provision
Effective tax rate
Effective tax rate (GAAP)
$
251
$
20
8.0
%
$
(382
)
$
(330
)
86.3
%
Impact of non-GAAP adjustments
264
37
1,207
417
Equity method non-cash tax
—
(6
)
—
(10
)
Adjusted tax rate true-up
—
(15
)
—
(10
)
Subtotal
$
516
$
37
$
825
$
68
Exclude adjusted equity earnings in
Cencora
(101
)
—
(119
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in Cencora (Non-GAAP measure)
$
415
$
37
9.0
%
$
706
$
68
9.6
%
(in millions)
Nine months ended May 31,
2024
Nine months ended May 31,
2023
(Loss) Earnings before income
tax benefit
Income tax benefit
Effective tax rate
(Loss) Earnings before income
tax (benefit) provision
Income tax (benefit)
provision
Effective tax rate
Effective tax rate (GAAP)
$
(13,221
)
$
(836
)
6.3
%
$
(5,044
)
$
(1,707
)
33.8
%
Impact of non-GAAP adjustments
15,108
969
7,878
1,787
Equity method non-cash tax
—
(20
)
—
(33
)
Adjusted tax rate true-up
—
(148
)
—
181
Subtotal
$
1,887
$
(35
)
$
2,833
$
228
Exclude adjusted equity earnings in
Cencora
(293
)
—
(365
)
—
Adjusted effective tax rate excluding
adjusted equity earnings in Cencora (Non-GAAP measure)
$
1,594
$
(35
)
(2.2
)%
$
2,468
$
228
9.2
%
FREE CASH FLOW
(in millions)
Three months ended May
31,
Nine months ended May
31,
2024
2023
2024
2023
Net cash provided (used for) by
operating activities (GAAP)
$
605
$
(20
)
$
(314
)
$
1,219
Less: Additions to property, plant and
equipment
(278
)
(525
)
(1,135
)
(1,633
)
Plus: Acquisition related payments 2
—
101
—
530
Plus: Bulk Purchase Annuity premium
contributions 3
7
—
386
—
Free cash flow (Non-GAAP measure)
1
$
334
$
(444
)
$
(1,063
)
$
116
1
Free cash flow is defined as net cash
provided by operating activities in a period less additions to
property, plant and equipment (capital expenditures), plus
acquisition related payments and incremental pension payments made
in that period. This measure does not represent residual cash flows
available for discretionary expenditures as the measure does not
deduct the payments required for debt service and other contractual
obligations or payments for future business acquisitions.
Therefore, we believe it is important to view free cash flow as a
measure that provides supplemental information to the Consolidated
Condensed Statement of Cash Flows.
2
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. In addition to the $101 million,
during the nine months ended May 31, 2023, the Company paid $335
million to settle liability classified share-based payment awards
related to acquiring the remaining 30% equity interest in Shields.
The Company also paid one-time compensation costs related to
VillageMD's acquisition of Summit. The payments are not indicative
of normal operating performance.
3
During the three and nine months ended May
31, 2024, the Company made incremental pension contributions of $7M
and $386M, respectively, to the Boots Plan as part of the Trustee's
acquisition of a bulk annuity policy (the "Buy-In") from Legal and
General. The payments are not indicative of normal operating
performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240627386068/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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