Equity method investments

3 Months Ended

Nov. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

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


	November 30, 2023			August 31, 2023
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
Cencora	$	2,430	15%	$	2,534	16%
Others	970		8% - 50%	963		8% - 50%
Total	$	3,400		$	3,497

Cencora investment

As of November 30, 2023 and August 31, 2023, the Company owned 30.5 million and 31.8 million shares of Cencora, Inc. (“Cencora”) common stock, respectively, representing approximately 15.3% and 15.9% of its outstanding common stock based on the share count publicly reported by Cencora in its most recent filings with the SEC.

During the three months ended November 30, 2023 and 2022, the Company sold shares of Cencora common stock for total consideration of approximately $250 million and $2.0 billion, respectively. These transactions resulted in the Company recording pre-tax gains of $139 million and $969 million, respectively, in Other (expense) income, net within the Consolidated Condensed Statements of Earnings, including $8 million and $110 million of losses, respectively, reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

As of November 30, 2023 and August 31, 2023 the Company has pledged 20.0 million and 17.3 million shares of Cencora common stock, respectively, as collateral upon entering into variable prepaid forward (“VPF”) transactions. See Note 8. Financial instruments for further information.

The Company accounts for its equity investment in Cencora using the equity method of accounting, with the net earnings attributable to the Company’s investment being classified within the operating income of its U.S. Retail Pharmacy segment. Due to the timing and availability of financial information of Cencora, the Company accounts for this equity method investment on a financial reporting lag of two months. Equity earnings from Cencora are reported as a separate line item in the Consolidated Condensed Statements of Earnings.

The Level 1 fair market value of the Company’s equity investment in Cencora common stock at November 30, 2023 and August 31, 2023 was $6.2 billion and $5.6 billion, respectively. As of November 30, 2023 the carrying value of the Company’s investment in Cencora exceeded its proportionate share of the net assets of Cencora by $2.4 billion. This premium of $2.4 billion was recognized as part of the carrying value in the Company’s equity investment in Cencora. The difference is primarily related to goodwill and the fair value of Cencora intangible assets.

Summarized financial information

Summarized financial information for the Company’s equity method investment in Cencora is as follows (in millions):


	Three months ended November 30,
Statements of earnings	2023		2022
Sales	$	68,922	$	61,174
Gross profit	2,211		1,998
Net earnings	351		295
Share of earnings from equity method investments	42		53

Other investments

At November 30, 2023, the Company’s other equity method investments primarily include its U.S. investment in BrightSpring Health Services, and the Company’s investments in China in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd and Nanjing Pharmaceutical Company Limited. On June 8, 2023 and December 15, 2022, the Company sold its remaining investments in Option Care Health and Guangzhou Pharmaceuticals Corporation, respectively.