Equity method investments

9 Months Ended

May 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Note 6. Equity method investments

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


	May 31, 2022			August 31, 2021
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	3,965	25%	$	4,407	28%
Others	1,811		8% - 50%	2,580		8% - 50%
Total	$	5,777		$	6,987

AmerisourceBergen investment

On May 11, 2022, the Company sold 6.0 million shares of AmerisourceBergen common stock pursuant to Rule 144 at a price of $150 per share for a total consideration of $900 million, decreasing the Company's ownership of AmerisourceBergen’s common stock from 58,854,867 shares, held at August 31, 2021 to 52,854,867 shares held as of May 31, 2022. The transaction resulted in the Company recording a pre-tax gain of $424 million in Other income in the Consolidated Condensed Statements of Earnings, including a $25 million loss reclassified from within Accumulated other comprehensive income in the Consolidated Condensed Balance Sheets. As of May 31, 2022, the Company holds approximately 25.2% of AmerisourceBergen outstanding common stock, based on the 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 in Operating income within the 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 nine months ended May 31, 2022 and 2021, the Company recognized equity income of $330 million and equity losses of $1.2 billion in AmerisourceBergen, respectively. The equity losses for the period ended May 31, 2021 were primarily due to AmerisourceBergen's recognition of a 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 May 31, 2022 and August 31, 2021 was $8.2 billion and $7.2 billion, respectively. As of May 31, 2022 the carrying value of the Company’s investment in AmerisourceBergen exceeded its proportionate share of the net assets of AmerisourceBergen by $3.8 billion. This premium of $3.8 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 primarily 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 recorded $5 million and $575 million of post-tax equity earnings from other equity method investments for the three months ended May 31, 2022 and 2021, respectively. The Company recorded $29 million and $604 million of post-tax equity earnings from other equity method investments for the nine months ended May 31, 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 and nine months ended May 31, 2021, the Company recorded gains of $98 million and $290 million, respectively, in Other income due to the partial sale of ownership interest in Option Care Health by the Company's then equity method investee HC Group Holdings I, LLC. During the three months ended May 31, 2021, as a result of these sales HC Group Holdings I, LLC lost the ability to control Option Care Health and, therefore, deconsolidated Option Care Health in its financial statements. As a result of this deconsolidation, HC Group Holdings I, LLC recognized a gain of $1.2 billion and the Company recorded its share of equity earnings in HC Group Holdings I, LLC of $576 million in Post-tax earnings from other equity method investments.

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 May 31,				Nine months ended May 31,
	2022		2021		2022		2021
Sales	$	65,085	$	55,890	$	200,628	$	171,417
Gross Profit	3,308		2,558		10,117		7,647
Net earnings (loss)	602		489		1,474		(3,841)
Share of earnings (loss) from equity method investments	132		672		359		(591)

The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported for the three and nine months ended May 31, 2022 and 2021, respectively.