Equity method investments

6 Months Ended

Feb. 28, 2022

Equity Method Investments and Joint Ventures [Abstract]

Note 6. Equity method investments

Equity method investments were as follows (in millions, except percentages):


	February 28, 2022			August 31, 2021
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	4,363	28%	$	4,407	28%
Others	1,884		8% - 50%	2,580		8% - 50%
Total	$	6,247		$	6,987

AmerisourceBergen investment

As of February 28, 2022 and August 31, 2021, the Company owned 58,854,867 AmerisourceBergen common shares, representing approximately 28.2% of its outstanding common stock based on the most recent share count publicly reported by AmerisourceBergen in its most recent quarterly report on Form 10-Q.

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, 2022 and 2021, the Company recognized equity income of $202 million and equity losses of $1.3 billion, in AmerisourceBergen, respectively. The equity losses for the period ended February 28, 2021 were primarily due to AmerisourceBergen's recognition of loss of $5.6 billion, net of tax, related to its ongoing opioid litigation in its financial statements for the three months ended September 30, 2020.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at February 28, 2022 and August 31, 2021 was $8.4 billion and $7.2 billion, respectively. As of February 28, 2022 the carrying value of the Company’s investment in AmerisourceBergen exceeded its proportionate share of the net assets of AmerisourceBergen by $4.3 billion. This premium of $4.3 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.

Other investments

The Company’s other equity method investments include its U.S. investments in Option Care Health, through its subsidiary HC Group Holdings I, LLC, and BrightSpring Health Services, and the Company’s investments in China in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd, Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited.

The Company reported $31 million and $13 million of post-tax equity earnings from other equity method investments for the three months ended February 28, 2022 and 2021, respectively. The Company reported $24 million and $29 million of post-tax equity earnings from other equity method investments for the six months ended February 28, 2022 and 2021, respectively.

During the three months ended February 28, 2022, the Company recognized an other-than-temporary impairment of $124 million related to an equity method investment in China. The impairment was derived using Level 3 inputs, including financial projections and market multiples of comparable companies.

During the three months ended November 30, 2021, the Company acquired majority equity interests in VillageMD and Shields. The Company accounted for these acquisitions as business combinations resulting in the remeasurement of its previously held minority equity interests and convertible debt securities at fair value resulting in pre-tax gains of $2.2 billion and $402 million for VillageMD and Shields, respectively, recognized in Other income in the Consolidated Condensed Statements of Earnings. As a result of these transactions, the Company now consolidates VillageMD and Shields within the Walgreens Health segment in its financial statements. During the three months ended February 28, 2021, the Company recorded a gain of $191 million in Other (expense) income due to a partial sale of its equity method investment in Option Care Health.

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 February 28,				Six months ended February 28,
	2022		2021		2022		2021
Sales	$	67,955	$	59,425	$	135,543	$	115,527
Gross Profit	3,389		2,672		6,809		5,089
Net earnings (loss)	564		486		872		(4,329)
Share of earnings (loss) from equity method investments	133		94		226		(1,264)

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, 2022 and 2021, respectively.