Discontinued operations

12 Months Ended

Aug. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen Corporation (“AmerisourceBergen”). Pursuant to the terms and subject to the conditions set forth in the Share Purchase Agreement, AmerisourceBergen agreed to purchase the majority of the Company's Alliance Healthcare business as well as a portion of the Company’s retail pharmacy international businesses in Europe (“Disposal Group”) for approximately $6.5 billion, comprised of $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of AmerisourceBergen common stock (the “Alliance Healthcare Sale”). Alliance Healthcare’s investment in China and Italy and its operations in Germany were not included in the Disposal Group, and the Company's retail pharmacy international operations in The Netherlands, Norway and Lithuania were included in the Disposal Group.

On June 1, 2021 the Company completed the Alliance Healthcare Sale, for total consideration of $6.9 billion, which includes estimated cash consideration of $6.7 billion, subject to net working capital and net cash adjustments. The Company recorded a gain before currency translation adjustments of $1.1 billion and a net gain on disposal of $322 million. The gain on sale was presented as part of results of the discontinued operations.

The following table shows the fair value of proceeds from the Alliance Healthcare Sale and net carrying value of the assets disposed. As of the date of this report, the Company had not finalized net working capital and net cash adjustments for discontinued operations and therefore proceeds and gain amounts presented are subject to further refinement and may result in changes.


Transaction proceeds and net assets disposed ($ in billions)
Estimated fair value of proceeds from disposition 1	$	6.9
Estimated net assets disposed	5.8
Estimated gain before currency translation adjustments	1.1
Estimated amount of currency translation loss released due to disposition	(0.8)
Net gain on disposal of discontinued operation 2	$	0.3

1Includes base consideration of $6.275 billion adjusted for net working capital and net cash adjustments as set forth in the Share Purchase Agreement.

2The Company recorded insignificant amount of tax expense due to utilization of capital losses.

As of August 31, 2021, the Company recorded a $98 million receivable for purchase price consideration due from AmerisourceBergen that is subject to change upon the finalization of net working capital and net cash adjustments.

The assets and liabilities and operating results of the Disposal Group are reported as discontinued operations, for all periods presented, as the disposition reflects a strategic shift that has, or will have, a major effect on the Company’s operations and financial results. The Company classified assets and liabilities of the Disposal Group as held for sale in the Consolidated Balance Sheets at the lower of its carrying amount or fair value less cost to sell. Depreciation and amortization ceased on assets classified as held for sale. The Company allocated goodwill to the Disposal Group using relative fair value of the Disposal Group and businesses retained within the respective reporting units.

Results of discontinued operations were as follows (in millions):


	For the years ending August 31,
	2021		2020		2019
Sales	$	16,070	$	19,349	$	18,618
Cost of sales	14,486		17,409		16,701
Gross profit	1,584		1,940		1,917
Selling, general and administrative expense 1	1,254		1,610		1,685
Operating income from discontinued operations	329		330		232
Other income (expense) 2	314		(8)		(11)
Interest expense, net	(23)		(25)		(54)
Earnings before income tax – discontinued operations	621		297		168
Income tax provision	78		21		11
Post tax earnings from other equity method investments	15		10		15
Net earnings from discontinued operations	$	557	$	286	$	172

1 Includes $44 million of divestiture related costs incurred post completion of the Alliance Healthcare Sale.

2 Includes $322 million of gain on sale of discontinued operations.

Sales from the Disposal Group to the Company's continuing operations aggregate to (in millions):


	For the years ending August 31,
	2021 1		2020		2019
Sales	$	1,385	$	1,794	$	1,826

1 Sales in Fiscal 2021 until date of disposal.

The following table presents cash flows from operating and investing activities for discontinued operations (in millions):


	Twelve months ended August 31,
	2021		2020		2019
Cash (used in) provided by operating activities - discontinued operations	$	(132)	$	334	$	302
Cash (used in) provided by for investing activities - discontinued operations	(58)		(80)		(97)

Asset and liabilities of discontinued operations were as follows (in millions):


	August 31, 2021		August 31, 2020
Cash and cash equivalents	$	—	$	47
Accounts receivable, net	—		3,022
Inventories	—		1,534
Other current assets	—		376



Assets of discontinued operations - current	$	—	$	4,979
Property, plant and equipment, net 1	$	—	$	816
Goodwill and intangibles	—		3,936
Other non-current assets	—		230
Assets of discontinued operations - non-current	$	—	$	4,983
Short term debt	$	—	$	273
Trade accounts payables	—		4,313
Accrued expenses and other liabilities	—		746
Income taxes	—		14


Liabilities of discontinued operations - current	$	—	$	5,347
Deferred income taxes	$	—	$	131
Other non-current liabilities	—		280
Liabilities of discontinued operations - non-current	$	—	$	412

1 Includes Operating lease right-of-use assets.

See Note 6 Equity method investments and Note 19 Related parties, for more information on the Company's equity method investment in AmerisourceBergen and the Company's continuing involvement.