Equity method investments

6 Months Ended

Feb. 28, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity method investments as of February 28, 2021 and August 31, 2020, were as follows (in millions, except percentages):


	February 28, 2021			August 31, 2020
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	4,121	28%	$	5,446	28%
Others	2,081		8% - 50%	1,758		8% - 50%
Total	$	6,202		$	7,204

AmerisourceBergen investment

As of February 28, 2021 and August 31, 2020, the Company owned 56,854,867 AmerisourceBergen common shares, representing approximately 28% of its outstanding common stock, based on the most recent share count publicly reported by AmerisourceBergen. The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings (loss) attributable to the Company’s investment being classified within the operating income of its United States segment. Due to the timing and availability of financial information of AmerisourceBergen, the Company accounts for this equity method investment on a financial reporting lag of two months. Equity earnings (loss) from AmerisourceBergen are reported as a separate line in the Consolidated Condensed Statements of Earnings. During the six months ended February 28, 2021, the Company recognized equity losses in AmerisourceBergen of $1,293 million, which included a loss of $1,373 million recognized during the three months ended November 30, 2020. These equity losses were primarily due to AmerisourceBergen recognition of $5.6 billion, net of tax, charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at February 28, 2021 was $5.8 billion. As of February 28, 2021, the Company’s investment in AmerisourceBergen carrying value exceeded its proportionate share of the net assets of AmerisourceBergen by $3.9 billion. This premium of $3.9 billion was recognized as part of the carrying value in the Company’s equity investment in AmerisourceBergen. The difference was primarily related to goodwill and the fair value of AmerisourceBergen intangible assets.

On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen will purchase the majority of the Company's pharmaceutical wholesale operations. See Note 2 Discontinued operations for additional information.

Other investments

The Company’s other equity method investments include its investments in U.S. which include VillageMD, BrightSpring Health Services (previously PharMerica Corporation), Shields Health Solutions and Option Care Health and the Company's China investments in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd, Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited.

The Company reported $13 million of post-tax equity earnings and $12 million of post-tax equity earnings from other equity method investments, including equity method investments classified as operating, for the three months ended February 28, 2021 and February 29, 2020, respectively. The Company reported $29 million of post-tax equity earnings and $1 million of post-tax equity losses from other equity method investments, including equity method investments classified as operating, for the six months ended February 28, 2021 and February 29, 2020, respectively.

During the three months ended February 28, 2021, the Company recorded a gain of $191 million in Other income due to a partial sale of its equity method investment in Option Care Health.

During the three months ended February 28, 2021, the Company made an additional investment of $750 million in VillageMD of which $250 million is recorded as an equity method investment and $500 million is recorded as an investment in convertible debt securities within Other non-current assets.

Summarized financial information

Summarized financial information for the Company’s equity method investments in aggregate is as follows:

Statements of earnings (loss) (in millions)


	Three months ended				Six months ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Sales	$	59,425	$	53,482	$	115,527	$	104,610
Gross profit	2,672		2,182		5,089		4,224
Net earnings (loss)	486		249		(4,329)		356
Share of earnings (loss) from equity method investments	94		40		(1,264)		40

The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported for the three and six months ended February 28, 2021 and February 29, 2020, respectively.