EX-99.1 2 d32665dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Walgreens Boots Alliance Reports Fiscal 2015 Year-End and Fourth Quarter Results

 

  •   Adjusted fiscal year 2015 net earnings attributable to Walgreens Boots Alliance per diluted share increase 18.3 percent to $3.88 compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance per diluted share increase 100 percent to $4.00

 

  •   Adjusted fiscal year 2015 net earnings attributable to Walgreens Boots Alliance increase 28.9 percent to $4.1 billion compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance increase 118.4 percent to $4.2 billion

 

  •   Adjusted fourth quarter net earnings attributable to Walgreens Boots Alliance per diluted share increase 14.3 percent to $0.88 compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance per diluted share were $0.02 compared with a loss of $0.23 in last year’s fourth quarter

 

  •   Adjusted fourth quarter net earnings attributable to Walgreens Boots Alliance increase 30.1 percent to $969 million compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance were $26 million compared with a loss of $221 million in last year’s fourth quarter

 

  •   Free cash flow totals $4.4 billion in fiscal year 2015, $1.1 billion in the quarter; GAAP operating cash flow totals $5.7 billion in fiscal year 2015, $1.5 billion in the quarter

DEERFIELD, Ill., 28 October 2015 – Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for fiscal year and fourth quarter 2015 that ended 31 August 2015.

Executive Vice Chairman and CEO Stefano Pessina said, “We are pleased with our progress and performance in the fourth quarter and in our first fiscal year since launching Walgreens Boots Alliance. While we have much work to do and operate in some challenging markets, we are excited and energized by the outlook and opportunities ahead as we put in place our strategies for long-term, sustainable growth. We believe we can shape the future of health care around the world through our ability to bring global solutions to local communities, benefiting all participants, populations and stakeholders.”

Overview of Fiscal Year and Fourth Quarter Results

In fiscal 2015, GAAP net earnings attributable to Walgreens Boots Alliance increased 118.4 percent to $4.2 billion compared with the same period a year ago, while GAAP net earnings attributable to Walgreens Boots Alliance per diluted share increased 100 percent to $4.00 compared with the same period a year ago.

Adjusted net earnings attributable to Walgreens Boots Alliance for fiscal year 2015 increased 28.9 percent to $4.1 billion compared with the same period a year ago. Adjusted net earnings attributable to Walgreens Boots Alliance per diluted share for fiscal year 2015 increased 18.3 percent to $3.88 compared with the same period a year ago. Earnings adjustments in fiscal year 2015 were a net reduction of GAAP net earnings attributable to Walgreens Boots Alliance of $135 million or $0.12 per

diluted share. (Please see the “Reconciliation of Non-GAAP Financial Measures” table and accompanying disclosures at the end of this press release for more detailed information regarding non-GAAP financial measures herein, including the items reflected in adjusted net earnings calculations.)

Net sales in fiscal year 2015 increased 35.4 percent to $103.4 billion compared with the same period a year ago.

Fiscal 2015 fourth quarter net earnings attributable to Walgreens Boots Alliance determined in accordance with GAAP were $26 million compared with a loss of $221 million in the same quarter a year ago, while GAAP net earnings attributable to Walgreens Boots Alliance per diluted share were $0.02 compared with a loss of $0.23 in the same quarter a year ago.

Adjusted fiscal 2015 fourth quarter net earnings attributable to Walgreens Boots Alliance increased 30.1 percent to $969 million compared with the same quarter a year ago. Adjusted net earnings attributable to Walgreens Boots Alliance per diluted share for the quarter increased 14.3 percent to $0.88 compared with the same quarter a year ago. Fiscal 2015 fourth quarter earnings adjustments were a net increase of GAAP net earnings attributable to Walgreens Boots Alliance of $943 million or 86 cents per diluted share.

Net sales in the fourth quarter increased 49.7 percent to $28.5 billion compared with the same quarter a year ago, largely due to the inclusion of Alliance Boots consolidated results.

Combined net synergies for fiscal 2015 were $799 million. This includes $81 million classified as synergies in the fourth quarter which related to activities commencing in prior fiscal years. The company continues to expect to reach at least $1.0 billion in combined net synergies in fiscal 2016. This excludes the synergy benefits related to the company’s strategic, long-term relationship with AmerisourceBergen and the benefits of refinancing the legacy Alliance Boots indebtedness at a lower cost.

Walgreens Boots Alliance generated free cash flow of $4.4 billion in the fiscal year and $1.1 billion in the quarter. GAAP operating cash flow totaled $5.7 billion in the fiscal year and $1.5 billion in the quarter.

Company Outlook

The company today introduced guidance for fiscal year 2016 with anticipated adjusted net earnings per share attributable to Walgreens Boots Alliance of $4.25 to $4.55 on a diluted basis. This guidance assumes no material accretion from the agreement to acquire Rite Aid (as covered separately yesterday), which is expected to close in the second half of calendar 2016, but reflects an adverse impact on adjusted earnings per share due to the suspension of the balance of the company’s $3 billion share repurchase program to partly fund the transaction.

Restructuring Program

The company previously announced a $1.5 billion cost transformation program through the end of fiscal year 2017, primarily in its Retail Pharmacy USA division, to restructure and invest in the company’s future in a way that is better for customers and simpler for employees, resulting in a faster and more agile company. During the fourth quarter of fiscal 2015, the company continued to make good progress

 

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with the program and has achieved more than half of the program’s expected savings as of the end of the fiscal year. In the Retail Pharmacy USA division, this effort included: closing 75 stores in the quarter for a total of 84 store closings in fiscal year 2015 as part of a plan to close approximately 200 stores; reorganizing divisional and field operations; driving operating efficiencies; and streamlining information technology and other functions. Actions taken in the quarter resulted in pre-tax charges to the company’s GAAP financial results in the quarter of $382 million ($179 million in real estate costs, $120 million in asset impairments and $83 million in severance and other business transition and exit costs, with $372 million recorded in the Retail Pharmacy USA division and $10 million recorded in the Retail Pharmacy International division) and for the program to date of $542 million ($223 million in asset impairments, $202 million in real estate costs and $117 million in severance and other business transition costs and exit costs, with $523 million recorded in the Retail Pharmacy USA division and $19 million recorded in the Retail Pharmacy International division).

Business Segment Highlights

Retail Pharmacy USA:

The Retail Pharmacy USA division, whose principal retail pharmacy brands are Walgreens and Duane Reade, had fiscal year 2015 total sales of $81.0 billion, an increase of 6.0 percent over the previous fiscal year. Total sales in comparable drugstores (those open at least a year) increased 6.4 percent compared with the previous year. Comparable retail sales increased 1.5 percent in the fiscal year, with an increase in basket size partially offset by lower customer traffic compared with the previous fiscal year.

Pharmacy sales, which represented 66.1 percent of division total sales in fiscal year 2015, increased 8.2 percent compared with the previous year, while comparable pharmacy sales increased 9.3 percent. The division filled 894 million prescriptions (including immunizations) on a 30-day adjusted basis in the fiscal year, an increase of 4.4 percent over the previous year. Prescriptions filled in comparable stores increased 4.6 percent compared with the previous year. For the year ending 31 August 2015, the division’s retail prescription market share in the USA on a 30-day adjusted basis increased approximately 20 basis points over the year-ago period to 19.1 percent, as reported by IMS Health.

GAAP operating income in fiscal year 2015 decreased 7.2 percent over the year-ago period to $3.9 billion. Adjusted operating income in fiscal year 2015 increased 4.8 percent over the year-ago period to $5.1 billion.

Fourth quarter total sales for the Retail Pharmacy USA division were $19.9 billion, an increase of 4.7 percent over the year-ago quarter. Total sales in comparable drugstores increased 6.5 percent compared with the same quarter a year ago. Comparable retail sales increased 0.4 percent in the fourth quarter with an increase in basket size partially offset by lower customer traffic compared with last year’s fourth quarter.

Pharmacy sales, which accounted for 67.4 percent of division total sales in the quarter, increased 6.6 percent compared with the year-ago quarter, while comparable pharmacy sales increased 10.0 percent. The division filled 222 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 4.6 percent over last year’s fourth quarter. Prescriptions filled in comparable stores increased 5.1 percent compared with the same quarter last year. For the quarter ending 31 August 2015, the division’s retail prescription market share in the USA on a 30-day adjusted basis increased approximately 20 basis points over a year ago to 19.1 percent, as reported by IMS Health.

 

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GAAP operating income in the fiscal 2015 fourth quarter decreased 48.2 percent over the year-ago quarter to $511 million. Adjusted operating income in the fourth quarter decreased 10.1 percent over the year-ago quarter to $1.1 billion. The decrease in adjusted operating income primarily resulted from having no equity earnings in Alliance Boots in the current period versus three months in the comparable period.

The 2015 fiscal year (for periods subsequent to 31 December 2014) and fourth quarter for the Retail Pharmacy USA division include results of operations, the allocation of synergy benefits including Walgreens Boots Alliance Development GmbH (WBAD) and an allocation of combined corporate costs. The 2014 fiscal year and quarter included all corporate costs of Walgreen Co., the full consolidated results of WBAD and equity income from Walgreen Co.’s pre-closing 45 percent interest in Alliance Boots.

As of 31 August 2015, the division operated 8,173 drugstores across all 50 states, the District of Columbia, Puerto Rico and the US Virgin Islands, a net decrease of 34 stores since the end of the prior fiscal year.

Retail Pharmacy International:

The Retail Pharmacy International division, whose principal retail brands are Boots in the UK, Thailand, Norway, the Republic of Ireland and The Netherlands, Benavides in Mexico and Ahumada in Chile, had total sales of $8.8 billion in the fiscal year since the 31 December 2014 combination. On a pro forma constant currency basis, comparable store sales in the fiscal year since 31 December 2014 increased 3.6 percent compared with the same period a year ago. GAAP operating income for the fiscal year was $409 million, while adjusted operating income was $616 million.

Fourth quarter total sales for the Retail Pharmacy International division were $3.5 billion. On a pro forma constant currency basis, comparable store sales in the fourth quarter increased 4.3 percent compared with the same period a year ago. GAAP operating income was $196 million, while adjusted operating income was $242 million.

As of 31 August 2015, the division operated 4,582 pharmacy-led health and beauty retail stores in eight countries, a net increase of 20 stores since 31 December 2014.

Pharmaceutical Wholesale:

The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, had total sales of $15.3 billion in the fiscal year since 31 December 2014. On a pro forma constant currency basis, sales in the fiscal year since 31 December 2014 increased 1.8 percent compared with the same period a year ago. GAAP operating income for the period was $376 million, while adjusted operating income was $450 million.

 

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Fourth quarter total sales for the Pharmaceutical Wholesale division were $5.8 billion. On a pro forma constant currency basis, sales increased 5.0 percent compared with the same period a year ago. GAAP operating income was $133 million, while adjusted operating income was $158 million.

Comparability of Results

Walgreens Boots Alliance has organized its operations and reports results in three segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. Segmental reporting includes the allocation of synergy benefits, including WBAD’s results, and the combined corporate costs for periods subsequent to 31 December 2014. The company has determined that it is impracticable to allocate historical results to the current segmental presentation.

Following the combination, the company eliminated the three-month reporting lag and recast prior period results with no lag. The combination on 31 December 2014 also means fiscal year 2015 reporting includes the results of Alliance Boots for eight months (January through August 2015) on a fully consolidated basis and four months (September through December 2014) as equity income from Walgreen Co.’s pre-closing 45 percent interest.

The company’s balance sheet reflects the full consolidation of Alliance Boots assets and liabilities as a result of the close of the combination on 31 December 2014. The company’s purchase accounting remains preliminary as contemplated by U.S. generally accepted accounting principles (GAAP) and, as a result, there may be upon further review future changes to the value, as well as allocation, of the acquired assets and liabilities, associated amortization expense, goodwill and the gain on the previously held equity interest.

Year-over-year comparisons of results require consideration of the foregoing factors and are not directly comparable.

Conference Call

Walgreens Boots Alliance will hold a one-hour conference call to discuss the fourth quarter results and yesterday’s acquisition announcement beginning at 8:30 a.m. Eastern time today, 28 October 2015. 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, 28 October 2015 through 4 November 2015, by calling 855-859-2056 within the USA and Canada, or 404-537-3406 outside the USA and Canada, using replay code 42212047.

Cautionary Note Regarding Forward-Looking Statements: All statements in this release that are not historical including, without limitation, estimates of and goals for future financial and operating performance (including those under “Company Outlook” above), the expected execution and effect of our business strategies, our cost-savings and growth initiatives and restructuring activities and the amounts and timing of their expected impact, and our pending agreement with Rite Aid and the transactions contemplated thereby and their possible effects, are forward-looking statements made pursuant to the

 

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safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “continue,” “sustain,” “synergy,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that could cause actual results to vary materially from those indicated, including, but not limited to, those relating to the impact of private and public third-party payers’ efforts to reduce prescription drug reimbursements, the impact of generic prescription drug inflation, the timing and magnitude of the impact of branded to generic drug conversions, our ability to realize anticipated synergies and achieve anticipated financial, tax and operating results in the amounts and at the times anticipated, supply arrangements including our commercial agreement with AmerisourceBergen Corporation, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, the risks associated with equity investments in AmerisourceBergen including whether the warrants to invest in AmerisourceBergen will be exercised and the ramifications thereof, the occurrence of any event, change or other circumstance 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 actual costs associated with restructuring activities will exceed estimates, our ability to realize expected savings and benefits from cost-savings initiatives, restructuring activities and acquisitions in the amounts and at the times anticipated, the timing and amount of any impairment or other charges, changes in management’s assumptions, the risks associated with governance and control matters, the ability to retain key personnel, changes in economic and business conditions generally or in the markets in which we participate, changes in financial markets, interest rates and foreign currency exchange rates, the risks associated with international business operations, the risk of unexpected costs, liabilities or delays, changes in vendor, customer and payer relationships and terms, including changes in network participation and reimbursement terms, risks of inflation in the cost of goods, risks associated with the operation and growth of our customer loyalty programs, risks associated with acquisitions, divestitures, joint ventures and strategic investments, including our ability to satisfy the closing conditions and consummate the pending acquisition of Rite Aid and related financing matters on a timely basis or at all, the risks associated with the integration of complex businesses, subsequent adjustments to preliminary purchase accounting determinations, outcomes of legal and regulatory matters, including with respect to regulatory review and actions in connection with the pending acquisition of Rite Aid, and changes in legislation, regulations or interpretations thereof. These and other risks, assumptions and uncertainties are described in Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2015, which is incorporated herein by reference, 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.

 

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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.

ENDS

Notes to Editors:

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is the first global pharmacy-led, health and wellbeing enterprise.

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

The company employs more than 370,000* people and has a presence in more than 25* countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is a global leader in pharmacy-led, health and wellbeing retail with over 13,100* stores in 11* countries. The company includes one of the largest global pharmaceutical wholesale and distribution networks with over 350* distribution centers delivering to more than 200,000** pharmacies, doctors, health centers and hospitals each year in 19* countries. In addition, Walgreens Boots Alliance is one of the world’s largest purchasers of prescription drugs and many other health and wellbeing products.

Its 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, Botanics, Liz Earle and Soap & Glory. More company information is available at www.walgreensbootsalliance.com.

 

* As at 31 August 2015 including equity method investments
** For 12 months ended 31 August 2015 including equity method investments

 

Media Relations     Contact

USA / Michael Polzin

International / Laura Vergani

    

+1 847 315 2935

+44 (0)207 980 8585

Investor Relations     Contact
Gerald Gradwell and Ashish Kohli     +1 847 315 2922

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions, Except Per Share Amounts)

 

     Three Months Ended     Twelve Months Ended  
     August 31,     August 31,     August 31,      August 31,  
     2015     2014     2015      2014  

Net sales

    $ 28,522      $ 19,057      $ 103,444       $ 76,392   

Cost of sales

      21,257        13,730        76,520         54,823   
  

 

 

    

 

 

    

 

 

     

 

 

  

Gross Profit

      7,265        5,327        26,924         21,569   

Selling, general and administrative expenses

      6,429        4,493        22,571         17,992   

Equity earnings in Alliance Boots

      —          152        315         617   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating Income

      836        986        4,668         4,194   

Gain on previously held equity interest

      (143 )      —          563         —     

Other income (expense)

      (479 )      (771 )      685         (481 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings Before Interest and Income Tax Provision (EBIT)

      214        215        5,916         3,713   

Interest expense, net

      255        43        605         156   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings (Loss) Before Income Tax Provision

      (41 )      172        5,311         3,557   

Income tax (benefit) provision

      (64 )      359        1,056         1,526   

Post tax earnings from equity method investments

      9        —          24         —     
  

 

 

    

 

 

    

 

 

     

 

 

  

Net Earnings (Loss)

      32        (187 )      4,279         2,031   

Net earnings attributable to noncontrolling interests

      6        34        59         99   
  

 

 

    

 

 

    

 

 

     

 

 

  

Net Earnings (Loss) Attributable to Walgreens Boots Alliance, Inc.

    $ 26      $ (221 )    $ 4,220       $ 1,932   
  

 

 

    

 

 

    

 

 

     

 

 

  

Net earnings (loss) per common share attributable to Walgreens Boots Alliance, Inc. :

          

Basic

    $ 0.02      $ (0.23 )    $ 4.05       $ 2.03   
  

 

 

    

 

 

    

 

 

     

 

 

  

Diluted

    $ 0.02      $ (0.23 )    $ 4.00       $ 2.00   
  

 

 

    

 

 

    

 

 

     

 

 

  

Dividends declared per share

    $ 0.3600      $ 0.3375      $ 1.3725       $ 1.2825   

Average shares outstanding

      1,091.9        956.0        1,043.2         953.1   

Dilutive effect of stock options

      10.6        11.9        10.7         12.1   
  

 

 

    

 

 

    

 

 

     

 

 

  

Average Diluted Shares

      1,102.5        967.9        1,053.9         965.2   
  

 

 

    

 

 

    

 

 

     

 

 

  

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions)

 

     August 31,
2015		      August 31,
2014		  

Assets

      

Current Assets:

      

Cash and cash equivalents

    $ 3,000       $ 2,646   

Accounts receivable, net

      6,849         3,218   

Inventories

      8,678         6,076   

Other current assets

      1,130         302   
  

 

 

     

 

 

  

Total Current Assets

      19,657         12,242   

Non-Current Assets:

      

Property, plant and equipment, at cost, less accumulated depreciation and amortization

      15,068         12,257   

Equity investment in Alliance Boots

      —           7,336   

Goodwill

      16,372         2,359   

Intangible assets

      12,351         1,180   

Other non-current assets

      5,334         1,876   
  

 

 

     

 

 

  

Total Non-Current Assets

      49,125         25,008   
  

 

 

     

 

 

  

Total Assets

    $ 68,782       $ 37,250   
  

 

 

     

 

 

  

Liabilities and Equity

      

Current Liabilities:

      

Short-term borrowings

    $ 1,068       $ 774   

Trade accounts payable

      10,088         4,315   

Accrued expenses and other liabilities

      5,225         3,701   

Income taxes

      176         105   
  

 

 

     

 

 

  

Total Current Liabilities

      16,557         8,895   

Non-Current Liabilities:

      

Long-term debt

      13,315         3,716   

Deferred income taxes

      3,538         1,080   

Other non-current liabilities

      4,072         2,942   
  

 

 

     

 

 

  

Total Non-Current Liabilities

      20,925         7,738   
  

 

 

     

 

 

  

Equity

      31,300         20,617   
  

 

 

     

 

 

  

Total Liabilities and Equity

    $ 68,782       $ 37,250   
  

 

 

     

 

 

  

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions)

 

     Twelve Months Ended  
     August 31,
2015		     August 31,
2014		  

Cash flows from operating activities:

     

Net earnings

    $ 4,279      $ 2,031   

Adjustments to reconcile net earnings to net cash provided by operating activities -

     

Depreciation and amortization

      1,742        1,316   

Change in fair value of warrants and related amortization

      (779 )      (385 ) 

Loss on exercise of call option

      —          866   

Gain on previously held equity interest

      (563 )      —     

Deferred income taxes

      (32 )      177   

Stock compensation expense

      109        114   

Equity earnings in Alliance Boots

      (315 )      (617 ) 

Other

      728        181   

Changes in operating assets and liabilities -

     

Accounts receivable, net

      (338 )      (616 ) 

Inventories

      719        860   

Other current assets

      22        (10 ) 

Trade accounts payable

      268        (339 ) 

Accrued expenses and other liabilities

      170        195   

Income taxes

      (335 )      17   

Other non-current assets and liabilities

      (11 )      103   
  

 

 

    

 

 

  

Net cash provided by operating activities

      5,664        3,893   
  

 

 

    

 

 

  

Cash flows from investing activities:

     

Additions to property, plant and equipment

      (1,251 )      (1,106 ) 

Proceeds from sale leaseback transactions

      867        67   

Proceeds related to the sale of businesses

      814        93   

Proceeds from sale of other assets

      184        139   

Alliance Boots acquisition, net of cash acquired

      (4,461 )      —     

Other business and intangible asset acquisitions, net of cash acquired

      (371 )      (344 ) 

Purchases of short-term investments held to maturity

      (49 )      (59 ) 

Proceeds from short-term investments held to maturity

      50        58   

Investment in AmerisourceBergen

      —          (493 ) 

Other

      (59 )      (86 ) 
  

 

 

    

 

 

  

Net cash used for investing activities

      (4,276 )      (1,731 ) 
  

 

 

    

 

 

  

 

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Cash flows from financing activities:

     

Payments of short-term borrowings, net

      (226 )      —     

Proceeds from issuance of long-term debt

      12,285        —     

Payments of long-term debt

      (10,472 )      (550 ) 

Proceeds from financing leases

      —          268   

Stock purchases

      (1,226 )      (705 ) 

Proceeds related to employee stock plans

      503        612   

Cash dividends paid

      (1,384 )      (1,199 ) 

Other

      (395 )      (48 ) 
  

 

 

    

 

 

  

Net cash used for financing activities

      (915 )      (1,622 ) 

Effect of exchange rate changes on cash and cash equivalents

      (119 )      —     

Changes in cash and cash equivalents:

     

Net increase in cash and cash equivalents

      354        540   

Cash and cash equivalents at beginning of period

      2,646        2,106   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 3,000      $ 2,646   
  

 

 

    

 

 

  

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

RECONCILIATION OF 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 these 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 and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company’s business from period to period and trends in the company’s historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release.

NET EARNINGS AND EARNINGS PER SHARE

 

     Three months ended      Twelve months ended  
     August 31,
2015		      August 31,
2014		      August 31,
2015		      August 31,
2014		  

Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP)

    $ 26       $ (221 )     $ 4,220       $ 1,932   

Alliance Boots call option loss

      —           866         —           866   

Acquisition-related amortization

      84         58         367         238   

Cost transformation

      224         —           338         —     

LIFO provision (benefit)

      53         (12 )       178         86   

Transaction foreign currency hedging loss

      —           —           166         —     

Asset impairment

      —           —           69         —     

Alliance Boots equity method non-cash tax

      —           41         71         180   

Early debt extinguishment

      62         —           62         —     

Acquisition-related costs

      —           13         54         54   

Store closures and other optimization costs

      —           95         35         179   

Prefunded interest expense

      —           —           26         —     

Loss (gain) on sale of business

      (1 )       (6 )       11         (6 ) 

Gain on previously held equity interest

      143         —           (671 )       —     

Decrease (increase) in fair market value of warrants

      408         (89 )       (567 )       (359 ) 

Release of capital loss valuation allowance

      (5 )       —           (220 )       —     

Net investment hedging gain(1)

      (54 )       —           (54 )       —     

Adjusted tax rate true-up

      29         —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)

    $ 969       $ 745       $ 4,085       $ 3,170   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net earnings (loss) per common share attributable to Walgreens Boots Alliance, Inc. – diluted (GAAP)

    $ 0.02       $ (0.23 )     $ 4.00       $ 2.00   

Alliance Boots call option loss

      —           0.90         —           0.90   

 

12

Acquisition-related amortization

      0.08         0.06         0.35         0.25   

Cost transformation

      0.20         —           0.32         —     

LIFO provision (benefit)

      0.05         (0.01 )       0.17         0.09   

Transaction foreign currency hedging loss

      —           —           0.16         —     

Asset impairment

      —           —           0.07         —     

Alliance Boots equity method non-cash tax

      —           0.04         0.07         0.18   

Early debt extinguishment

      0.06         —           0.06         —     

Acquisition-related costs

      —           0.01         0.05         0.06   

Store closures and other optimization costs

      —           0.10         0.03         0.18   

Prefunded interest expense

      —           —           0.03         —     

Loss (gain) on sale of business

      —           (0.01 )       0.01         (0.01 ) 

Gain on previously held equity interest

      0.13         —           (0.64 )       —     

Decrease (increase) in fair market value of warrants

      0.37         (0.09 )       (0.54 )       (0.37 ) 

Release of capital loss valuation allowance

      —           —           (0.21 )       —     

Net investment hedging gain(1)

      (0.05 )       —           (0.05 )       —     

Adjusted tax rate true-up

      0.02         —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Adjusted net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted (Non-GAAP measure)

    $ 0.88       $ 0.77       $ 3.88       $ 3.28   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1)  Net investment hedge gains/losses are reported as an adjustment prospectively beginning in FY15 4Q. Net investment hedge gains of $10 million or $0.01 per share in FY15 2Q and $7 million or $0.01 per share in FY15 3Q were included in the company’s GAAP and adjusted net earnings. There were no net investment hedge gains/losses in FY15 1Q.

OPERATING INCOME BY SEGMENT

 

     Three months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		      Pharmaceutical
Wholesale		      Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Operating Income (GAAP)

    $ 511      $ 196       $ 133       $ (4 )    $ 836   

Cost transformation

      372        10         —           —          382   

Acquisition-related amortization

      52        36         25         —          113   

LIFO provision

      109        —           —           —          109   

Store closures and other optimization costs

      5        —           —           —          5   

Loss on sale of business

      5        —           —           —          5   
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Operating Income (Non-GAAP measure)

    $ 1,054      $ 242       $ 158       $ (4 )    $ 1,450   
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  
     Three months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		      Pharmaceutical
Wholesale		      Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Operating Income (GAAP)

    $ 986      $ —         $ —         $ —        $ 986   

Store closures and other optimization costs

      146        —           —           —          146   

Acquisition-related amortization

      90        —           —           —          90   

LIFO benefit

      (18 )      —           —           —          (18 ) 

Acquisition-related costs

      20        —           —           —          20   

Increase in fair market value of warrants

      (42 )      —           —           —          (42 ) 

Gain on sale of business

      (9 )      —           —           —          (9 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Operating Income (Non-GAAP measure)

    $ 1,173      $ —         $ —         $ —        $ 1,173   
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

 

13

     Twelve months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		      Pharmaceutical
Wholesale		      Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Operating Income (GAAP)

    $ 3,890      $ 409       $ 376       $ (7 )    $ 4,668   

Cost transformation

      523        19         —           —          542   

Acquisition-related amortization

      260        188         67         —          515   

LIFO provision

      285        —           —           —          285   

Asset impairment

      110        —           —           —          110   

Acquisition-related costs

      80        —           7         —          87   

Store closures and other optimization costs

      56        —           —           —          56   

Loss on sale of business

      17        —           —           —          17   

Increase in fair market value of warrants

      (123 )      —           —           —          (123 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Operating Income (Non-GAAP measure)

    $ 5,098      $ 616       $ 450       $ (7 )    $ 6,157   
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  
     Twelve months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		      Pharmaceutical
Wholesale		      Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Operating Income (GAAP)

    $ 4,194      $ —         $ —         $ —        $ 4,194   

Acquisition-related amortization

      364        —           —           —          364   

Store closures and other optimization costs

      271        —           —           —          271   

LIFO provision

      132        —           —           —          132   

Acquisition-related costs

      82        —           —           —          82   

Increase in fair market value of warrants

      (168 )      —           —           —          (168 ) 

Gain on sale of business

      (9 )      —           —           —          (9 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Operating Income (Non-GAAP measure)

    $ 4,866      $ —         $ —         $ —        $ 4,866   
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

GROSS PROFIT BY SEGMENT

 

     Three months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Gross Profit (GAAP)

    $ 5,253      $ 1,477      $ 539      $ (4 )    $ 7,265   

LIFO provision

      109        —          —          —          109   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted gross profit (Non-GAAP measure)

    $ 5,362      $ 1,477      $ 539      $ (4 )    $ 7,374   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 19,947      $ 3,466      $ 5,754      $ (645 )    $ 28,522   

Gross Margin (GAAP)

      26.3 %      42.6 %      9.4 %      NMF        25.5 % 

Adjusted gross margin (Non-GAAP measure)

      26.9 %      42.6 %      9.4 %      NMF        25.9 % 

 

14

     Three months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Gross Profit (GAAP)

    $ 5,327      $ —        $ —        $ —        $ 5,327   

Store closures and other optimization costs

      7        —          —          —          7   

LIFO benefit

      (18 )      —          —          —          (18 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted gross profit (Non-GAAP measure)

    $ 5,316      $ —        $ —        $ —        $ 5,316   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 19,057      $ —        $ —        $ —        $ 19,057   

Gross Margin (GAAP)

      28.0 %      —   %      —   %      —   %      28.0 % 

Adjusted gross margin (Non-GAAP measure)

      27.9 %      —   %      —   %      —   %      27.9 % 
     Twelve months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Gross Profit (GAAP)

    $ 21,822      $ 3,623      $ 1,486      $ (7 )    $ 26,924   

LIFO provision

      285        —          —          —          285   

Acquisition-related amortization

      —          100        6        —          106   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted gross profit (Non-GAAP measure)

    $ 22,107      $ 3,723      $ 1,492      $ (7 )    $ 27,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 80,974      $ 8,781      $ 15,327      $ (1,638 )    $ 103,444   

Gross Margin (GAAP)

      26.9 %      41.3 %      9.7 %      NMF        26.0 % 

Adjusted gross margin (Non-GAAP measure)

      27.3 %      42.4 %      9.7 %      NMF        26.4 % 
     Twelve months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Gross Profit (GAAP)

    $ 21,569      $ —        $ —        $ —        $ 21,569   

LIFO provision

      132        —          —          —          132   

Store closures and other optimization costs

      12        —          —          —          12   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted gross profit (Non-GAAP measure)

    $ 21,713      $ —        $ —        $ —        $ 21,713   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 76,392      $ —        $ —        $ —        $ 76,392   

Gross Margin (GAAP)

      28.2 %      —   %      —   %      —   %      28.2 % 

Adjusted gross margin (Non-GAAP measure)

      28.4 %      —   %      —   %      —   %      28.4 % 

NMF    Not meaningful

 

15

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BY SEGMENT

 

     Three months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Selling, general and administrative expenses (GAAP)

    $ 4,742      $ 1,281      $ 406      $ —        $ 6,429   

Cost transformation

      372        10        —          —          382   

Acquisition-related amortization

      52        36        25        —          113   

Store closures and other optimization costs

      5        —          —          —          5   

Loss on sale of business

      5        —          —          —          5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted selling, general and administrative expenses (Non-GAAP measure)

    $ 4,308      $ 1,235      $ 381      $ —        $ 5,924   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 19,947      $ 3,466      $ 5,754      $ (645 )    $ 28,522   

Selling, general and administrative expenses percent to sales (GAAP)

      23.8 %      37.0 %      7.1 %      —   %      22.5 % 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

      21.6 %      35.6 %      6.6 %      —   %      20.8 % 
     Three months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Selling, general and administrative expenses (GAAP)

    $ 4,493      $ —        $ —        $ —        $ 4,493   

Store closures and other optimization costs

      139        —          —          —          139   

Acquisition-related amortization

      68        —          —          —          68   

Acquisition-related costs

      20        —          —          —          20   

Gain on sale of business

      (9 )      —          —          —          (9 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted selling, general and administrative expenses (Non-GAAP measure)

    $ 4,275      $ —        $ —        $ —        $ 4,275   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 19,057      $ —        $ —        $ —        $ 19,057   

Selling, general and administrative expenses percent to sales (GAAP)

      23.6 %      —   %      —   %      —   %      23.6 % 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

      22.4 %      —   %      —   %      —   %      22.4 % 

 

16

     Twelve months ended August 31, 2015  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Selling, general and administrative expenses (GAAP)

    $ 18,247      $ 3,214      $ 1,110      $ —        $ 22,571   

Cost transformation

      523        19        —          —          542   

Acquisition-related amortization

      230        88        61        —          379   

Asset impairment

      110        —          —          —          110   

Acquisition-related costs

      80        —          7        —          87   

Store closures and other optimization costs

      56        —          —          —          56   

Loss on sale of business

      17        —          —          —          17   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted selling, general and administrative expenses (Non-GAAP measure)

    $ 17,231      $ 3,107      $ 1,042      $ —        $ 21,380   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 80,974      $ 8,781      $ 15,327      $ (1,638 )    $ 103,444   

Selling, general and administrative expenses percent to sales (GAAP)

      22.5 %      36.6 %      7.2 %      —   %      21.8 % 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

      21.3 %      35.4 %      6.8 %      —   %      20.7 % 
     Twelve months ended August 31, 2014  
     Retail
Pharmacy
USA		     Retail
Pharmacy
International		     Pharmaceutical
Wholesale		     Eliminations
and Other		     Walgreens
Boots
Alliance, Inc.		  

Selling, general and administrative expenses (GAAP)

   $ 17,992      $ —        $ —        $ —        $ 17,992   

Acquisition-related amortization

      282        —          —          —          282   

Store closures and other optimization costs

      259        —          —          —          259   

Acquisition-related costs

      82        —          —          —          82   

Gain on sale of business

      (9 )      —          —          —          (9 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted selling, general and administrative expenses (Non-GAAP measure)

    $ 17,378      $ —        $ —        $ —        $ 17,378   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Sales

    $ 76,392      $ —        $ —        $ —        $ 76,392   

Selling, general and administrative expenses percent to sales (GAAP)

      23.6 %      —   %      —   %      —   %      23.6 % 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

      22.7 %      —   %      —   %      —   %      22.7 % 

FREE CASH FLOW

 

     Three months
ended		      Twelve
months ended		  
     August 31,
2015		      August 31,
2015		  

Net cash provided by operating activities (GAAP)

    $ 1,505       $ 5,664   

Less: Additions to property, plant and equipment

      361         1,251   
  

 

 

     

 

 

  

Free cash flow(1)

    $ 1,144       $ 4,413   
  

 

 

     

 

 

  

 

(1)

Free cash flow is defined as net cash provided by operating activities in a period minus additions to property, plant and equipment (capital expenditures) made in that period. This measure does not

 

17

  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.

#    #    #    #    #

 

18