☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
WALGREENS BOOTS ALLIANCE, INC. | ||
(Exact name of registrant as specified in its charter) | ||
Delaware | 47-1758322 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
108 Wilmot Road, Deerfield, Illinois | 60015 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock ($.01 Par Value) | The NASDAQ Stock Market LLC | |
2.875% Notes due 2020 | New York Stock Exchange | |
3.600% Notes due 2025 | New York Stock Exchange | |
2.125% Notes due 2026 | New York Stock Exchange |
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
Emerging growth company ☐ |
Part I | ||
Page | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | ||
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
Part III | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
Part IV | ||
Item 15. | ||
Item 16. | ||
1 | As of August 31, 2018, using publicly available information for AmerisourceBergen. |
2 | For 12 months ending August 31, 2018, using publicly available information for AmerisourceBergen. |
• | Retail Pharmacy USA; |
• | Retail Pharmacy International; and |
• | Pharmaceutical Wholesale. |
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | |||||||
Pharmacy | 72 | % | 69 | % | 67 | % | |||
Retail | 28 | % | 31 | % | 33 | % | |||
Total | 100 | % | 100 | % | 100 | % |
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | |||||||
Pharmacy | 35 | % | 35 | % | 35 | % | |||
Retail | 65 | % | 65 | % | 65 | % | |||
Total | 100 | % | 100 | % | 100 | % |
• | compliance with a wide variety of foreign laws and regulations, including retail and wholesale pharmacy, licensing, tax, foreign trade, intellectual property, privacy and data protection, immigration, currency, political and other business restrictions and requirements and local laws and regulations, whose interpretation and enforcement vary significantly among jurisdictions and can change significantly over time; |
• | additional U.S. and other regulation of non-domestic operations, including regulation under the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws; |
• | potential difficulties in managing foreign operations, mitigating credit risks in foreign markets, enforcing agreements and collecting receivables through foreign legal systems; |
• | price controls imposed by foreign countries; |
• | tariffs, duties or other restrictions on foreign currencies or trade sanctions and other trade barriers imposed by foreign countries that restrict or prohibit business transactions in certain markets; |
• | potential adverse tax consequences, including tax withholding laws and policies and restrictions on repatriation of funds to the United States; |
• | fluctuations in currency exchange rates; |
• | impact of recessions and economic slowdowns in economies outside the United States, including foreign currency devaluation, higher interest rates, inflation, and increased government regulation or ownership of traditional private businesses; |
• | the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets; and |
• | developing and emerging markets may be especially vulnerable to periods of instability and unexpected changes, and consumers in those markets may have relatively limited resources to spend on products and services. |
• | Our Retail Pharmacy International and Pharmaceutical Wholesale divisions have substantial operations in the United Kingdom and other member countries of the European Union. In June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the European Union, which proposed exit (and the political, economic and other uncertainties it has raised) has exacerbated and may further exacerbate many of the risks and uncertainties described above. Subsequently, in March 2017, the United Kingdom’s government invoked Article 50 of the Treaty on European Union, which formally triggered the two-year negotiation process to exit the European Union. Negotiations to determine the United Kingdom’s future relationship with the European Union, including terms of trade, are complex, and there can be no assurance regarding the terms, timing or consummation of any such arrangements. The proposed withdrawal could, among other potential outcomes, adversely affect the tax, tax treaty, currency, operational, legal and regulatory regimes to which our businesses in the region are subject. The withdrawal could also, among other potential outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union and significantly disrupt trade between the United Kingdom and the European Union and other parties. Further, uncertainty around and developments regarding these and related issues could adversely impact consumer and investor confidence and the economy of the United Kingdom and the economies of other countries in which we operate and cause significant volatility in currency exchange rates. |
• | Many of the products we sell are manufactured in whole or in part outside of the United States. In some cases, these products are imported by others and sold to us. In the United States, the Presidential Administration has discussed, and in some cases implemented, changes with respect to certain tax and trade policies, tariffs and other government regulations affecting trade between the United States and other countries. For example, there are growing concerns regarding trade relations between the United States and China, as both countries recently indicated their intention to impose significant tariffs on the importation of certain product categories. As a significant portion of our retail products are sourced from China, the imposition on the United States of new tariffs on certain goods imported from China could adversely impact the cost and profitability of retail product sales in our Retail Pharmacy USA division. While it is not possible to predict whether or when any future changes will occur or what form they may take, significant changes in tax or trade policies, tariffs or trade relations between the United States and other countries could result in significant increases in our costs, restrict our access to certain suppliers and adversely impact economic |
• | requiring us to dedicate significant cash flow from operations to the payment of principal, interest and other amounts payable on our debt, which would reduce the funds we have available for other purposes, such as working capital, capital expenditures, acquisitions, share repurchases and dividends; |
• | making it more difficult or expensive for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements, debt refinancing, acquisitions or other purposes; |
• | reducing our flexibility in planning for or reacting to changes in our industry and market conditions; |
• | making us more vulnerable in the event of a downturn in our business operations; and |
• | exposing us to interest rate risk given that a portion of our debt obligations is at variable interest rates. |
• | actual or anticipated variations in quarterly operating results and the results of competitors; |
• | changes in financial estimates by us or by any securities analysts that might cover us; |
• | conditions or trends in the industry, including regulatory changes or changes in the securities marketplace; |
• | announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; |
• | announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; |
• | additions or departures of key personnel; |
• | issuances or sales of our common stock, including sales of shares by our directors and officers or key investors, including the SP Investors; and |
• | various other market factors or perceived market factors, including rumors or speculation, whether or not correct, involving or affecting us or our industries, vendors, customers, strategic partners or competitors. |
• | If we are unsuccessful in establishing effective advertising, marketing and promotional programs, our sales or sales margins could be negatively affected. |
• | Our operating costs may be subject to increases outside the control of our businesses, whether due to inflation, new or increased taxes, adverse fluctuations in foreign currency exchange rates, changes in market conditions or otherwise. |
• | Our success depends on our ability to attract, engage and retain store, professional and management personnel, including in executive and other key strategic positions, and the loss of key personnel could have an adverse effect on the results of our operations, financial condition or cash flow. |
• | Natural disasters, civil unrest, severe weather conditions, terrorist activities, global political and economic developments, war, health epidemics or pandemics or the prospect of these events can interrupt or otherwise adversely impact our operations or damage our facilities or those of our strategic partners, vendors and customers and have an adverse impact on consumer confidence levels and spending on our products and services. |
• | If we or our affiliates were to incur significant liabilities or expense relating to the protection of the environment, related health and safety matters, environmental remediation or compliance with environmental laws and regulations, including those governing exposure to, and the management and disposal of, hazardous substances, it could have a material adverse effect on our results of operations, financial condition and cash flow. |
• | The long-term effects of climate change on general economic conditions and the pharmacy industry in particular are unclear, and changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and delivery may affect the availability or cost of goods and services, including natural resources, necessary to run our businesses. |
• | We are at risk of adverse publicity and potential losses, liabilities and reputational harm stemming from any public incident (whether occurring online, in social media, in our stores or other company facilities, or elsewhere) involving our company, our personnel or our brands, including any such public incident involving our customers, products, services, stores or other property, or those of any of our vendors or other parties with which we do business. |
• | If negative publicity, even if unwarranted, related to safety or quality, human and workplace rights, or other issues damage our brand image and corporate reputation, or that of any of our vendors or strategic allies, our businesses and results of operations may suffer. |
Retail stores | ||
Retail Pharmacy USA: | ||
United States | 9,451 | |
Puerto Rico | 108 | |
U.S. Virgin Islands | 1 | |
9,560 | ||
Retail Pharmacy International: | ||
United Kingdom | 2,485 | |
Mexico | 1,240 | |
Chile | 424 | |
Thailand | 285 | |
Norway | 160 | |
The Republic of Ireland | 87 | |
The Netherlands | 59 | |
Lithuania | 27 | |
4,767 | ||
Walgreens Boots Alliance total | 14,327 |
Name | Age | Office(s) held | ||
James A. Skinner | 73 | Executive Chairman of the Board | ||
Stefano Pessina | 77 | Executive Vice Chairman and Chief Executive Officer | ||
Ornella Barra | 64 | Co-Chief Operating Officer | ||
Alexander W. Gourlay | 58 | Co-Chief Operating Officer | ||
James Kehoe | 55 | Executive Vice President and Global Chief Financial Officer | ||
Ken Murphy | 52 | Executive Vice President, Chief Commercial Officer and President of Global Brands | ||
Marco Pagni | 56 | Executive Vice President, Global Chief Administrative Officer and General Counsel | ||
Kimberly R. Scardino | 47 | Senior Vice President, Global Controller and Chief Accounting Officer | ||
Kathleen Wilson-Thompson | 61 | Executive Vice President and Global Chief Human Resources Officer |
Quarter ended | ||||||||||||||||||||||
November | February | May | August | Fiscal year | ||||||||||||||||||
Fiscal 2018 | High | $ | 82.74 | $ | 80.27 | $ | 70.60 | $ | 70.25 | $ | 82.74 | |||||||||||
Low | 64.48 | 68.22 | 62.23 | 59.70 | 59.70 | |||||||||||||||||
Fiscal 2017 | High | $ | 85.53 | $ | 87.73 | $ | 86.77 | $ | 83.38 | $ | 87.73 | |||||||||||
Low | 77.18 | 80.47 | 80.16 | 76.34 | 76.34 |
Quarter ended | 2018 | 2017 | ||||||
November | $ | 0.400 | $ | 0.375 | ||||
February | 0.400 | 0.375 | ||||||
May | 0.400 | 0.375 | ||||||
August | 0.440 | 0.400 | ||||||
$ | 1.640 | $ | 1.525 |
Issuer purchases of equity securities | ||||||||||||||
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced repurchase programs1 | Approximate dollar value of shares that may yet be purchased under the plans or programs1 | ||||||||||
6/1/18 - 6/30/18 | — | $ | — | — | $ | 10,000,000,000 | ||||||||
7/1/18 - 7/31/18 | 31,855,404 | 64.13 | 31,855,404 | 7,956,840,007 | ||||||||||
8/1/18 - 8/31/18 | 9,714,240 | 67.93 | 41,569,644 | 7,296,839,059 | ||||||||||
41,569,644 | $ | 65.02 | 41,569,644 | $ | 7,296,839,059 |
1 | In June 2018, Walgreens Boots Alliance authorized a stock repurchase program, which authorized the repurchase of up to $10.0 billion of Walgreens Boots Alliance common stock. This program has no specified expiration date. |
Fiscal year | 2018 | 2017 | 2016 | 20155 | 2014 | ||||||||||||||
Sales | $ | 131,537 | $ | 118,214 | $ | 117,351 | $ | 103,444 | $ | 76,392 | |||||||||
Cost of sales | 100,745 | 89,052 | 87,477 | 76,691 | 54,823 | ||||||||||||||
Gross profit | 30,792 | 29,162 | 29,874 | 26,753 | 21,569 | ||||||||||||||
Selling, general and administrative expenses | 24,569 | 23,740 | 23,910 | 22,400 | 17,992 | ||||||||||||||
Equity earnings in AmerisourceBergen1 | 191 | 135 | 37 | — | — | ||||||||||||||
Equity earnings in Alliance Boots2 | — | — | — | 315 | 617 | ||||||||||||||
Operating income | 6,414 | 5,557 | 6,001 | 4,668 | 4,194 | ||||||||||||||
Gain on previously held equity interest3 | — | — | — | 563 | — | ||||||||||||||
Other income (expense)4 | 177 | (11 | ) | (261 | ) | 685 | (481 | ) | |||||||||||
Earnings before interest and income tax provision | 6,591 | 5,546 | 5,740 | 5,916 | 3,713 | ||||||||||||||
Interest expense, net | 616 | 693 | 596 | 605 | 156 | ||||||||||||||
Earnings before income tax provision | 5,975 | 4,853 | 5,144 | 5,311 | 3,557 | ||||||||||||||
Income tax provision | 998 | 760 | 997 | 1,056 | 1,526 | ||||||||||||||
Post tax earnings from other equity method investments | 54 | 8 | 44 | 24 | — | ||||||||||||||
Net earnings | 5,031 | 4,101 | 4,191 | 4,279 | 2,031 | ||||||||||||||
Net earnings attributable to noncontrolling interests | 7 | 23 | 18 | 59 | 99 | ||||||||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. | $ | 5,024 | $ | 4,078 | $ | 4,173 | $ | 4,220 | $ | 1,932 | |||||||||
Per Common Share | |||||||||||||||||||
Net earnings | |||||||||||||||||||
Basic | $ | 5.07 | $ | 3.80 | $ | 3.85 | $ | 4.05 | $ | 2.03 | |||||||||
Diluted | 5.05 | 3.78 | 3.82 | 4.00 | 2.00 | ||||||||||||||
Dividends declared | 1.640 | 1.525 | 1.455 | 1.373 | 1.283 | ||||||||||||||
Balance Sheet | |||||||||||||||||||
Total assets | $ | 68,124 | $ | 66,009 | $ | 72,688 | $ | 68,782 | $ | 37,250 | |||||||||
Long-term debt | 12,431 | 12,684 | 18,705 | 13,315 | 3,716 | ||||||||||||||
Total Walgreens Boots Alliance, Inc. shareholders’ equity | 26,007 | 27,466 | 29,880 | 30,861 | 20,513 | ||||||||||||||
Noncontrolling interests | 682 | 808 | 401 | 439 | 104 | ||||||||||||||
Total equity | $ | 26,689 | $ | 28,274 | $ | 30,281 | $ | 31,300 | $ | 20,617 |
1 | Effective March 18, 2016, the Company began accounting for its investment in AmerisourceBergen using the equity method of accounting, subject to a two-month reporting lag. |
2 | On August 2, 2012, the Company completed the acquisition of 45% of the issued and outstanding share capital of Alliance Boots in exchange for cash and Company shares. The Company accounted for this investment under the equity method until it completed the acquisition of the remaining 55% of Alliance Boots on December 31, 2014. As a result, fiscal 2015 includes the results of Alliance Boots for eight months (January through August 2015) on a fully consolidated basis and four months (September through December 2014) as equity earnings in Alliance Boots reflecting Walgreens’ pre-merger 45% interest. |
3 | In fiscal 2015, as a result of acquiring the remaining 55% interest in Alliance Boots, the Company’s previously held 45% interest was remeasured to fair value, resulting in a gain of $563 million. |
4 | Fiscal 2018 includes the gain on sale of the Company’s equity interest in Premise Health, partially offset by the impairment of the Company’s equity method investment in Guangzhou Pharmaceuticals Corporation. In fiscal 2016, 2015 and 2014, the Company recorded other income (expense) of $(517) million, $779 million and $385 million, respectively, from fair value adjustments of the AmerisourceBergen warrants and the amortization of the deferred credit associated with the initial value of the warrants. Fiscal 2016 also includes income of $268 million related to the change in accounting method for the Company’s investment in AmerisourceBergen. Fiscal 2015 also includes a $94 million loss on derivative contracts that were not designated as accounting hedges. In fiscal 2014, the Company recognized a non-cash loss of $866 million related |
5 | To improve comparability, certain classification changes were made to prior period sales, cost of sales and selling, general and administrative expenses. These changes had no impact on operating income. The reclassifications were made in the fourth quarter of fiscal 2016. |
• | Retail Pharmacy USA; |
• | Retail Pharmacy International; and |
• | Pharmaceutical Wholesale |
(in millions, except per share amounts) | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 131,537 | $ | 118,214 | $ | 117,351 | ||||||
Gross profit | 30,792 | 29,162 | 29,874 | |||||||||
Selling, general and administrative expenses | 24,569 | 23,740 | 23,910 | |||||||||
Equity earnings in AmerisourceBergen | 191 | 135 | 37 | |||||||||
Operating income | 6,414 | 5,557 | 6,001 | |||||||||
Adjusted operating income (Non-GAAP measure)1 | 7,804 | 7,540 | 7,208 | |||||||||
Earnings before interest and income tax provision | 6,591 | 5,546 | 5,740 | |||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. | 5,024 | 4,078 | 4,173 | |||||||||
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)1 | 5,985 | 5,503 | 5,009 | |||||||||
Net earnings per common share – diluted | 5.05 | 3.78 | 3.82 | |||||||||
Adjusted net earnings per common share – diluted (Non-GAAP measure)1 | 6.02 | 5.10 | 4.59 |
Percentage increases (decreases) | ||||||
2018 | 2017 | 2016 | ||||
Sales | 11.3 | 0.7 | 13.4 | |||
Gross profit | 5.6 | (2.4) | 11.7 | |||
Selling, general and administrative expenses | 3.5 | (0.7) | 6.7 | |||
Operating income | 15.4 | (7.4) | 28.6 | |||
Adjusted operating income (Non-GAAP measure)1 | 3.5 | 4.6 | 17.1 | |||
Earnings before interest and income tax provision | 18.8 | (3.4) | (3.0) | |||
Net earnings attributable to Walgreens Boots Alliance, Inc. | 23.2 | (2.3) | (1.1) | |||
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)1 | 8.8 | 9.9 | 22.6 | |||
Net earnings per common share – diluted | 33.6 | (1.0) | (4.5) | |||
Adjusted net earnings per common share – diluted (Non-GAAP measure)1 | 18.0 | 11.1 | 18.3 |
Percent to sales | ||||||
2018 | 2017 | 2016 | ||||
Gross margin | 23.4 | 24.7 | 25.5 | |||
Selling, general and administrative expenses | 18.7 | 20.1 | 20.4 |
1 | See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. |
(in millions, except location amounts) | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 98,392 | $ | 87,302 | $ | 83,802 | ||||||
Gross profit | 23,758 | 22,450 | 22,323 | |||||||||
Selling, general and administrative expenses | 18,862 | 18,255 | 17,918 | |||||||||
Operating income | 4,896 | 4,195 | 4,405 | |||||||||
Adjusted operating income (Non-GAAP measure)1 | 5,923 | 5,707 | 5,357 | |||||||||
Number of prescriptions2 | 823.1 | 764.4 | 740.1 | |||||||||
30-day equivalent prescriptions2,3 | 1,094.4 | 989.7 | 928.5 | |||||||||
Number of locations at period end | 9,569 | 8,109 | 8,184 |
Percentage increases (decreases) | ||||||
2018 | 2017 | 2016 | ||||
Sales | 12.7 | 4.2 | 3.5 | |||
Gross profit | 5.8 | 0.6 | 2.3 | |||
Selling, general and administrative expenses | 3.3 | 1.9 | (1.8) | |||
Operating income | 16.7 | (4.8) | 13.2 | |||
Adjusted operating income (Non-GAAP measure)1 | 3.8 | 6.5 | 5.1 | |||
Comparable store sales4 | 1.5 | 2.8 | 3.8 | |||
Pharmacy sales | 17.2 | 7.3 | 5.5 | |||
Comparable pharmacy sales4 | 3.4 | 4.7 | 6.0 | |||
Retail sales | 2.4 | (2.4) | (0.3) | |||
Comparable retail sales4 | (2.4) | (1.0) | (0.3) | |||
Comparable number of prescriptions2,4 | 0.8 | 4.0 | 2.3 | |||
Comparable 30-day equivalent prescriptions2,3,4 | 3.5 | 7.1 | 4.0 |
Percent to sales | ||||||
2018 | 2017 | 2016 | ||||
Gross margin | 24.1 | 25.7 | 26.6 | |||
Selling, general and administrative expenses | 19.2 | 20.9 | 21.4 |
1 | See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. |
2 | Includes immunizations. |
3 | Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. |
4 | Comparable stores are defined as those that have been open for at least twelve consecutive months without closure for seven or more consecutive days and without a major remodel or subject to a natural disaster in the past twelve months. Relocated and acquired stores are not included as comparable stores for the first twelve months after the relocation or acquisition. The method of calculating comparable sales varies across the retail industry. As a result, the Company’s method of calculating comparable sales may not be the same as other retailers’ methods. The fiscal year ended August 31, 2016 figures include an adjustment to remove February 29, 2016 results due to the leap year. |
(in millions, except location amounts) | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 12,281 | $ | 11,813 | $ | 13,256 | ||||||
Gross profit | 4,958 | 4,753 | 5,432 | |||||||||
Selling, general and administrative expenses | 4,116 | 4,012 | 4,403 | |||||||||
Operating income | 842 | 741 | 1,029 | |||||||||
Adjusted operating income (Non-GAAP measure)1 | 947 | 909 | 1,155 | |||||||||
Number of locations at period end | 4,767 | 4,722 | 4,673 |
Percentage increases (decreases) | ||||||
2018 | 2017 | 2016 | ||||
Sales | 4.0 | (10.9) | 53.1 | |||
Gross profit | 4.3 | (12.5) | 57.4 | |||
Selling, general and administrative expenses | 2.6 | (8.9) | 44.7 | |||
Operating income | 13.6 | (28.0) | 151.6 | |||
Adjusted operating income (Non-GAAP measure)1 | 4.2 | (21.3) | 87.5 | |||
Comparable store sales2 | 4.7 | (10.6) | NA | |||
Comparable store sales in constant currency2,3 | (1.4) | (0.2) | NA | |||
Pharmacy sales | 4.3 | (10.5) | 46.2 | |||
Comparable pharmacy sales2 | 4.7 | (10.7) | NA | |||
Comparable pharmacy sales in constant currency2,3 | (1.2) | (1.0) | NA | |||
Retail sales | 3.8 | (11.1) | 57.1 | |||
Comparable retail sales2 | 4.7 | (10.6) | NA | |||
Comparable retail sales in constant currency2,3 | (1.5) | 0.2 | NA |
Percent to sales | ||||||
2018 | 2017 | 2016 | ||||
Gross margin | 40.4 | 40.2 | 41.0 | |||
Selling, general and administrative expenses | 33.5 | 34.0 | 33.2 |
NA | Not Applicable |
1 | See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. |
2 | Comparable stores are defined as those that have been open for at least twelve consecutive months without closure for seven or more consecutive days and without a major remodel or a natural disaster in the past twelve months. Relocated and acquired stores are not included as comparable stores for the first twelve months after the relocation or acquisition. The method of calculating comparable sales varies across the retail industry. As a result, the Company’s method of calculating comparable sales may not be the same as other retailers’ methods. The fiscal year ended August 31, 2016 comparable sales figures include an adjustment to remove February 29, 2016 results due to the leap year. |
3 | The Company presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the United States reporting in currencies other than the U.S. dollar and this presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations. See “--Non-GAAP Measures” below. |
(in millions) | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 23,006 | $ | 21,188 | $ | 22,571 | ||||||
Gross profit | 2,081 | 1,965 | 2,131 | |||||||||
Selling, general and administrative expenses | 1,596 | 1,479 | 1,589 | |||||||||
Equity earnings from AmerisourceBergen | 191 | 135 | 37 | |||||||||
Operating income | 676 | 621 | 579 | |||||||||
Adjusted operating income (Non-GAAP measure)1 | 934 | 924 | 708 |
Percentage increases (decreases) | ||||||
2018 | 2017 | 2016 | ||||
Sales | 8.6 | (6.1) | 47.3 | |||
Gross profit | 5.9 | (7.8) | 43.4 | |||
Selling, general and administrative expenses | 7.9 | (6.9) | 43.2 | |||
Equity earnings from AmerisourceBergen | 41.5 | 264.9 | NA | |||
Operating income | 8.9 | 7.3 | 54.0 | |||
Adjusted operating income (Non-GAAP measure)1 | 1.1 | 30.5 | 57.3 | |||
Comparable sales2 | 8.6 | (3.9) | NA | |||
Comparable sales in constant currency2,3 | 4.2 | 4.7 | NA |
Percent to sales | ||||||
2018 | 2017 | 2016 | ||||
Gross margin | 9.0 | 9.3 | 9.4 | |||
Selling, general and administrative expenses | 6.9 | 7.0 | 7.0 |
NA | Not Applicable |
1 | See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable GAAP measure and related disclosures. |
2 | Comparable Sales are defined as sales excluding acquisitions and dispositions. The fiscal year ended August 31, 2016 comparable sales figures include an adjustment to remove February 29, 2016 results due to the leap year. |
3 | The Company presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the United States reporting in currencies other than the U.S. dollar and this presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations. See “--Non-GAAP Measures” below. |
(in millions) | ||||||||||||||||||||
Twelve months ended August 31, 2018 | ||||||||||||||||||||
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Eliminations | Walgreens Boots Alliance, Inc. | ||||||||||||||||
Operating income (GAAP) | $ | 4,896 | $ | 842 | $ | 676 | $ | — | $ | 6,414 | ||||||||||
Acquisition-related amortization | 260 | 105 | 83 | — | 448 | |||||||||||||||
Certain legal and regulatory accruals and settlements1 | 284 | — | — | — | 284 | |||||||||||||||
Acquisition-related costs | 231 | — | — | — | 231 | |||||||||||||||
Adjustments to equity earnings in AmerisourceBergen | — | — | 175 | — | 175 | |||||||||||||||
Store optimization | 100 | — | — | — | 100 | |||||||||||||||
LIFO provision | 84 | — | — | — | 84 | |||||||||||||||
Hurricane-related costs | 83 | — | — | — | 83 | |||||||||||||||
Asset recovery | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Adjusted operating income (Non-GAAP measure) | $ | 5,923 | $ | 947 | $ | 934 | $ | — | $ | 7,804 |
(in millions) | ||||||||||||||||||||
Twelve months ended August 31, 2017 | ||||||||||||||||||||
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Eliminations | Walgreens Boots Alliance, Inc. | ||||||||||||||||
Operating income (GAAP) | $ | 4,195 | $ | 741 | $ | 621 | $ | — | $ | 5,557 | ||||||||||
Acquisition-related amortization | 152 | 101 | 79 | — | 332 | |||||||||||||||
Acquisition-related costs | 474 | — | — | — | 474 | |||||||||||||||
Adjustments to equity earnings in AmerisourceBergen | — | — | 187 | — | 187 | |||||||||||||||
LIFO provision | 166 | — | — | — | 166 | |||||||||||||||
Cost transformation | 731 | 67 | 37 | — | 835 | |||||||||||||||
Asset recovery | (11 | ) | — | — | — | (11 | ) | |||||||||||||
Adjusted operating income (Non-GAAP measure) | $ | 5,707 | $ | 909 | $ | 924 | $ | — | $ | 7,540 |
(in millions) | ||||||||||||||||||||
Twelve months ended August 31, 2016 | ||||||||||||||||||||
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Eliminations | Walgreens Boots Alliance, Inc. | ||||||||||||||||
Operating income (GAAP) | $ | 4,405 | $ | 1,029 | $ | 579 | $ | (12 | ) | $ | 6,001 | |||||||||
Acquisition-related amortization | 185 | 97 | 87 | — | 369 | |||||||||||||||
Certain legal and regulatory accruals and settlements | 47 | — | — | — | 47 | |||||||||||||||
Acquisition-related costs | 102 | — | — | — | 102 | |||||||||||||||
Adjustments to equity earnings in AmerisourceBergen | — | — | 21 | — | 21 | |||||||||||||||
LIFO provision | 214 | — | — | — | 214 | |||||||||||||||
Cost transformation | 374 | 29 | 21 | — | 424 | |||||||||||||||
Asset impairment | 30 | — | — | — | 30 | |||||||||||||||
Adjusted operating income (Non-GAAP measure) | $ | 5,357 | $ | 1,155 | $ | 708 | $ | (12 | ) | $ | 7,208 |
1 | Beginning in the quarter ended August 31, 2018, management reviewed and refined its practice to include all charges related to the matters included in certain legal and regulatory accruals and settlements. This non-GAAP measure is presented on a consistent basis for fiscal year 2018. |
(in millions) | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. (GAAP) | $ | 5,024 | $ | 4,078 | $ | 4,173 | ||||||
Adjustments to operating income: | ||||||||||||
Acquisition-related amortization | 448 | 332 | 369 | |||||||||
Certain legal and regulatory accruals and settlements1 | 284 | — | 47 | |||||||||
Acquisition-related costs | 231 | 474 | 102 | |||||||||
Adjustments to equity earnings in AmerisourceBergen | 175 | 187 | 21 | |||||||||
Store optimization | 100 | — | — | |||||||||
LIFO provision | 84 | 166 | 214 | |||||||||
Hurricane-related costs | 83 | — | — | |||||||||
Cost transformation | — | 835 | 424 | |||||||||
Asset impairment (recovery) | (15 | ) | (11 | ) | 30 | |||||||
Total adjustments to operating income | 1,390 | 1,983 | 1,207 | |||||||||
Adjustments to other income (expense): | ||||||||||||
Impairment of equity method investment | 178 | — | — | |||||||||
Change in fair market value of AmerisourceBergen warrants | — | — | 517 | |||||||||
Impact of change in accounting method for AmerisourceBergen equity investment | — | — | (268 | ) | ||||||||
Net investment hedging (gain) loss | (21 | ) | 48 | 12 | ||||||||
Gain on sale of equity method investment | (322 | ) | — | — | ||||||||
Total adjustments to other income (expense) | (165 | ) | 48 | 261 | ||||||||
Adjustments to interest expense, net: | ||||||||||||
Prefunded acquisition financing costs | 29 | 203 | 46 | |||||||||
Total adjustments to interest expense, net | 29 | 203 | 46 | |||||||||
Adjustments to income tax provision: | ||||||||||||
Equity method non-cash tax | 25 | 23 | 10 | |||||||||
UK tax rate change2 | — | (77 | ) | (178 | ) | |||||||
U.S. tax law changes2 | (125 | ) | — | — | ||||||||
Tax impact of adjustments3 | (193 | ) | (755 | ) | (510 | ) | ||||||
Total adjustments to income tax provision | (293 | ) | (809 | ) | (678 | ) | ||||||
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) | $ | 5,985 | $ | 5,503 | $ | 5,009 |
2018 | 2017 | 2016 | ||||||||||
Diluted net earnings per common share (GAAP) | $ | 5.05 | $ | 3.78 | $ | 3.82 | ||||||
Adjustments to operating income | 1.40 | 1.84 | 1.11 | |||||||||
Adjustments to other income (expense) | (0.17 | ) | 0.04 | 0.24 | ||||||||
Adjustments to interest expense, net | 0.03 | 0.19 | 0.04 | |||||||||
Adjustments to income tax provision | (0.29 | ) | (0.75 | ) | (0.62 | ) | ||||||
Adjusted diluted net earnings per common share (Non-GAAP measure) | $ | 6.02 | $ | 5.10 | $ | 4.59 | ||||||
Weighted average common shares outstanding, diluted | 995.0 | 1,078.5 | 1,091.1 |
1 | Beginning in the quarter ended August 31, 2018, management reviewed and refined its practice to include all charges related to the matters included in certain legal and regulatory accruals and settlements. This non-GAAP measure is presented on a consistent basis for fiscal year 2018. |
2 | Discrete tax-only items. |
3 | Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments. |
2018 | 2017 | 2016 | ||||||||||
Retail Pharmacy USA | $ | 1,022 | $ | 860 | $ | 777 | ||||||
Retail Pharmacy International | 241 | 384 | 444 | |||||||||
Pharmaceutical Wholesale | 104 | 107 | 104 | |||||||||
Total | $ | 1,367 | $ | 1,351 | $ | 1,325 |
Rating Agency | Long-Term Debt Rating | Commercial Paper Rating | Outlook |
Fitch | BBB | F2 | Stable |
Moody’s | Baa2 | P-2 | Stable |
Standard & Poor’s | BBB | A-2 | Stable |
Payments due by period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | Over 5 years | ||||||||||||||||
Operating leases1 | $ | 31,088 | $ | 3,372 | $ | 5,989 | $ | 5,002 | $ | 16,725 | ||||||||||
Purchase obligations: | 2,836 | 2,408 | 419 | 3 | 6 | |||||||||||||||
Open inventory purchase orders | 1,862 | 1,862 | — | — | — | |||||||||||||||
Real estate development | 382 | 342 | 40 | — | — | |||||||||||||||
Other obligations | 592 | 204 | 379 | 3 | 6 | |||||||||||||||
Short-term debt and long-term debt* | 14,477 | 1,969 | 1,796 | 2,450 | 8,262 | |||||||||||||||
Interest payment on short-term debt and long-term debt | 5,155 | 453 | 819 | 684 | 3,199 | |||||||||||||||
Insurance* | 602 | 296 | 152 | 64 | 90 | |||||||||||||||
Retirement benefit obligations | 737 | 47 | 108 | 87 | 495 | |||||||||||||||
Closed location obligations1 | 1,648 | 156 | 343 | 282 | 867 | |||||||||||||||
Capital lease obligations*1 | 1,167 | 63 | 125 | 115 | 864 | |||||||||||||||
Finance lease obligations | 306 | 18 | 36 | 36 | 216 | |||||||||||||||
Other liabilities reflected on the balance sheet*2,3 | 920 | 163 | 417 | 114 | 226 | |||||||||||||||
Total | $ | 58,936 | $ | 8,945 | $ | 10,204 | $ | 8,837 | $ | 30,950 |
* | Recorded on balance sheet. |
1 | Amounts do not include certain operating expenses under these leases such as common area maintenance, insurance and real estate taxes, where appropriate. These expenses were $532 million for the fiscal year ended August 31, 2018. |
2 | Includes $543 million ($121 million in less than 1 year, $354 million in 1-3 years, $53 million in 3-5 years and $15 million over 5 years) of unrecognized tax benefits recorded under Accounting Standards Codification Topic 740, Income Taxes. |
3 | Amounts do not include provisional one-time transition tax liability as a result of the U.S. tax law changes. The Company recorded a provisional one-time transition tax expense of $750 million during the fiscal year 2018. The Company will make an election to pay the transition tax liability in installments over eight years and, therefore, $682 million of the resulting income taxes liability was recorded as noncurrent income taxes payable in the consolidated balance sheet as of August 31, 2018. |
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 785 | $ | 3,301 | ||||
Accounts receivable, net | 6,573 | 6,528 | ||||||
Inventories | 9,565 | 8,899 | ||||||
Other current assets | 923 | 1,025 | ||||||
Total current assets | 17,846 | 19,753 | ||||||
Non-current assets: | ||||||||
Property, plant and equipment, net | 13,911 | 13,642 | ||||||
Goodwill | 16,914 | 15,632 | ||||||
Intangible assets, net | 11,783 | 10,156 | ||||||
Equity method investments (see note 5) | 6,610 | 6,320 | ||||||
Other non-current assets | 1,060 | 506 | ||||||
Total non-current assets | 50,278 | 46,256 | ||||||
Total assets | $ | 68,124 | $ | 66,009 | ||||
Liabilities and equity | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 1,966 | $ | 251 | ||||
Trade accounts payable (see note 17) | 13,566 | 12,494 | ||||||
Accrued expenses and other liabilities | 5,862 | 5,473 | ||||||
Income taxes | 273 | 329 | ||||||
Total current liabilities | 21,667 | 18,547 | ||||||
Non-current liabilities: | ||||||||
Long-term debt | 12,431 | 12,684 | ||||||
Deferred income taxes | 1,815 | 2,281 | ||||||
Other non-current liabilities | 5,522 | 4,223 | ||||||
Total non-current liabilities | 19,768 | 19,188 | ||||||
Commitments and contingencies (see note 10) | ||||||||
Equity: | ||||||||
Preferred stock $.01 par value; authorized 32 million shares, none issued | — | — | ||||||
Common stock $.01 par value; authorized 3.2 billion shares; issued 1,172,513,618 at August 31, 2018 and 2017 | 12 | 12 | ||||||
Paid-in capital | 10,493 | 10,339 | ||||||
Retained earnings | 33,551 | 30,137 | ||||||
Accumulated other comprehensive loss | (3,002 | ) | (3,051 | ) | ||||
Treasury stock, at cost; 220,380,200 shares at August 31, 2018 and 148,664,548 at August 31, 2017 | (15,047 | ) | (9,971 | ) | ||||
Total Walgreens Boots Alliance, Inc. shareholders’ equity | 26,007 | 27,466 | ||||||
Noncontrolling interests | 682 | 808 | ||||||
Total equity | 26,689 | 28,274 | ||||||
Total liabilities and equity | $ | 68,124 | $ | 66,009 |
Equity attributable to Walgreens Boots Alliance, Inc. | ||||||||||||||||||||||||||
Common stock shares | Common stock amount | Treasury stock amount | Paid-in capital | Employee stock loan receivable | Accumulated other comprehensive income (loss) | Retained earnings | Noncontrolling interests | Total equity | ||||||||||||||||||
August 31, 2015 | 1,089,910,344 | $ | 12 | $ | (3,977 | ) | $ | 9,953 | $ | (2 | ) | $ | (214 | ) | $ | 25,089 | $ | 439 | $ | 31,300 | ||||||
Net earnings | — | — | — | — | — | — | 4,173 | 18 | 4,191 | |||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | (2,778 | ) | — | (56 | ) | (2,834 | ) | ||||||||||||||
Dividends declared | — | — | — | — | — | — | (1,578 | ) | — | (1,578 | ) | |||||||||||||||
Treasury stock purchases | (13,815,558 | ) | — | (1,152 | ) | — | — | — | — | — | (1,152 | ) | ||||||||||||||
Employee stock purchase and option plans | 6,891,805 | — | 195 | 43 | — | — | — | — | 238 | |||||||||||||||||
Stock-based compensation | — | — | — | 115 | — | — | — | — | 115 | |||||||||||||||||
Employee stock loan receivable | — | — | — | — | 1 | — | — | — | 1 | |||||||||||||||||
August 31, 2016 | 1,082,986,591 | $ | 12 | $ | (4,934 | ) | $ | 10,111 | $ | (1 | ) | $ | (2,992 | ) | $ | 27,684 | $ | 401 | $ | 30,281 | ||||||
Net earnings | — | — | — | — | — | — | 4,078 | 23 | 4,101 | |||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | (59 | ) | — | (36 | ) | (95 | ) | ||||||||||||||
Dividends declared and distributions | — | — | — | — | — | — | (1,625 | ) | (98 | ) | (1,723 | ) | ||||||||||||||
Treasury stock purchases | (64,589,677 | ) | — | (5,220 | ) | — | — | — | — | — | (5,220 | ) | ||||||||||||||
Employee stock purchase and option plans | 5,452,156 | — | 183 | 34 | 1 | — | — | — | 218 | |||||||||||||||||
Stock-based compensation | — | — | 91 | — | — | — | — | 91 | ||||||||||||||||||
Noncontrolling interests acquired and arising on business combinations | — | — | — | 103 | — | — | — | 518 | 621 | |||||||||||||||||
August 31, 2017 | 1,023,849,070 | $ | 12 | $ | (9,971 | ) | $ | 10,339 | $ | — | $ | (3,051 | ) | $ | 30,137 | $ | 808 | $ | 28,274 | |||||||
Net earnings | — | — | — | — | — | — | 5,024 | 7 | 5,031 | |||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | — | 49 | — | 1 | 50 | |||||||||||||||||
Dividends declared and distributions | — | — | — | — | — | — | (1,610 | ) | (138 | ) | (1,748 | ) | ||||||||||||||
Treasury stock purchases | (76,069,557 | ) | — | (5,228 | ) | — | — | — | — | — | (5,228 | ) | ||||||||||||||
Employee stock purchase and option plans | 4,353,905 | — | 152 | 22 | — | — | — | — | 174 | |||||||||||||||||
Stock-based compensation | — | — | — | 130 | — | — | — | — | 130 | |||||||||||||||||
Noncontrolling interests contribution and other | — | — | — | 2 | — | — | — | 4 | 6 | |||||||||||||||||
August 31, 2018 | 952,133,418 | $ | 12 | $ | (15,047 | ) | $ | 10,493 | $ | — | $ | (3,002 | ) | $ | 33,551 | $ | 682 | $ | 26,689 |
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 131,537 | $ | 118,214 | $ | 117,351 | ||||||
Cost of sales | 100,745 | 89,052 | 87,477 | |||||||||
Gross profit | 30,792 | 29,162 | 29,874 | |||||||||
Selling, general and administrative expenses | 24,569 | 23,740 | 23,910 | |||||||||
Equity earnings in AmerisourceBergen | 191 | 135 | 37 | |||||||||
Operating income | 6,414 | 5,557 | 6,001 | |||||||||
Other income (expense) | 177 | (11 | ) | (261 | ) | |||||||
Earnings before interest and income tax provision | 6,591 | 5,546 | 5,740 | |||||||||
Interest expense, net | 616 | 693 | 596 | |||||||||
Earnings before income tax provision | 5,975 | 4,853 | 5,144 | |||||||||
Income tax provision | 998 | 760 | 997 | |||||||||
Post tax earnings from other equity method investments | 54 | 8 | 44 | |||||||||
Net earnings | 5,031 | 4,101 | 4,191 | |||||||||
Net earnings attributable to noncontrolling interests | 7 | 23 | 18 | |||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. | $ | 5,024 | $ | 4,078 | $ | 4,173 | ||||||
Net earnings per common share: | ||||||||||||
Basic | $ | 5.07 | $ | 3.80 | $ | 3.85 | ||||||
Diluted | $ | 5.05 | $ | 3.78 | $ | 3.82 | ||||||
Dividends declared per share | $ | 1.640 | $ | 1.525 | $ | 1.455 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 991.0 | 1,073.5 | 1,083.1 | |||||||||
Diluted | 995.0 | 1,078.5 | 1,091.1 |
2018 | 2017 | 2016 | ||||||||||
Comprehensive income: | ||||||||||||
Net earnings | $ | 5,031 | $ | 4,101 | $ | 4,191 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Pension/postretirement obligations | 240 | 73 | (241 | ) | ||||||||
Unrealized gain on cash flow hedges | 3 | 4 | 3 | |||||||||
Unrecognized (loss) on available-for-sale investments | — | (2 | ) | (257 | ) | |||||||
Share of other comprehensive income (loss) of equity method investments | 5 | (1 | ) | (1 | ) | |||||||
Currency translation adjustments | (198 | ) | (169 | ) | (2,338 | ) | ||||||
Total other comprehensive income (loss) | 50 | (95 | ) | (2,834 | ) | |||||||
Total comprehensive income | 5,081 | 4,006 | 1,357 | |||||||||
Comprehensive income (loss) attributable to noncontrolling interests | 8 | (13 | ) | (39 | ) | |||||||
Comprehensive income attributable to Walgreens Boots Alliance, Inc. | $ | 5,073 | $ | 4,019 | $ | 1,396 |
2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 5,031 | $ | 4,101 | $ | 4,191 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,770 | 1,654 | 1,718 | |||||||||
Change in fair value of warrants and related amortization | — | — | 516 | |||||||||
Gain on previously held equity interest | (337 | ) | — | — | ||||||||
Deferred income taxes | (322 | ) | (434 | ) | (442 | ) | ||||||
Stock compensation expense | 130 | 91 | 115 | |||||||||
Equity earnings from equity method investments | (244 | ) | (143 | ) | (81 | ) | ||||||
Other | 296 | 364 | 148 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | (391 | ) | (153 | ) | 115 | |||||||
Inventories | 331 | 98 | (644 | ) | ||||||||
Other current assets | (22 | ) | — | 66 | ||||||||
Trade accounts payable | 1,323 | 1,690 | 1,572 | |||||||||
Accrued expenses and other liabilities | 281 | (128 | ) | 313 | ||||||||
Income taxes | 694 | 44 | 202 | |||||||||
Other non-current assets and liabilities | (275 | ) | 67 | 58 | ||||||||
Net cash provided by operating activities | 8,265 | 7,251 | 7,847 | |||||||||
Cash flows from investing activities: | ||||||||||||
Additions to property, plant and equipment | (1,367 | ) | (1,351 | ) | (1,325 | ) | ||||||
Proceeds from sale leaseback transactions | — | 444 | 60 | |||||||||
Proceeds from sale of businesses | — | — | 74 | |||||||||
Proceeds from sale of other assets | 655 | 59 | 155 | |||||||||
Business, investment and asset acquisitions, net of cash acquired | (4,793 | ) | (88 | ) | (126 | ) | ||||||
Investment in AmerisourceBergen | — | — | (2,360 | ) | ||||||||
Other | 4 | 93 | 5 | |||||||||
Net cash used for investing activities | (5,501 | ) | (843 | ) | (3,517 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Net change in short-term debt with maturities of 3 months or less | 586 | 33 | 29 | |||||||||
Proceeds from debt | 5,900 | — | 5,991 | |||||||||
Payments of debt | (4,890 | ) | (6,196 | ) | (791 | ) | ||||||
Stock purchases | (5,228 | ) | (5,220 | ) | (1,152 | ) | ||||||
Proceeds related to employee stock plans | 174 | 217 | 235 | |||||||||
Cash dividends paid | (1,739 | ) | (1,723 | ) | (1,563 | ) | ||||||
Other | (98 | ) | (45 | ) | (143 | ) | ||||||
Net cash (used for) provided by financing activities | (5,295 | ) | (12,934 | ) | 2,606 | |||||||
Effect of exchange rate changes on cash and cash equivalents | 15 | 20 | (129 | ) | ||||||||
Changes in cash and cash equivalents: | ||||||||||||
Net (decrease) increase in cash and cash equivalents | (2,516 | ) | (6,506 | ) | 6,807 | |||||||
Cash and cash equivalents at beginning of period | 3,301 | 9,807 | 3,000 | |||||||||
Cash and cash equivalents at end of period | $ | 785 | $ | 3,301 | $ | 9,807 |
Estimated useful life | 2018 | 2017 | ||||||||
Land and land improvements | 20 | $ | 3,593 | $ | 3,470 | |||||
Buildings and building improvements | 3 to 50 | 7,874 | 7,431 | |||||||
Fixtures and equipment | 3 to 20 | 9,750 | 9,209 | |||||||
Capitalized system development costs and software | 3 to 8 | 2,464 | 2,105 | |||||||
Capital lease properties | 743 | 745 | ||||||||
24,424 | 22,960 | |||||||||
Less: accumulated depreciation and amortization | 10,513 | 9,318 | ||||||||
Balance at end of year | $ | 13,911 | $ | 13,642 |
• | Changes in the fair value of a derivative designated as a fair value hedge, along with the gain or loss on the hedged asset or liability attributable to the hedged risk, are recorded in the Consolidated Statements of Earnings in the same line item, generally interest expense, net. |
• | Changes in the fair value of a derivative designated as a cash flow hedge are recorded in accumulated other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income and reclassified into earnings in the period or periods during which the hedged item affects earnings and is presented in the same line item as the earnings effect of the hedged item. |
• | Changes in the fair value of a derivative designated as a hedge of a net investment in a foreign operation are recorded in cumulative translation adjustments within accumulated other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income. Recognition in earnings of amounts previously recorded in cumulative translation adjustments is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged investments in foreign operations. |
• | Changes in the fair value of a derivative not designated in a hedging relationship are recognized in the Consolidated Statements of Earnings. |
Consideration | $ | 4,330 | |
Identifiable assets acquired and liabilities assumed | |||
Inventories | $ | 1,171 | |
Property, plant and equipment | 490 | ||
Intangible assets | 2,054 | ||
Accrued expenses and other liabilities | (54 | ) | |
Deferred income taxes | 285 | ||
Other non-current liabilities | (960 | ) | |
Total identifiable net assets | 2,986 | ||
Goodwill | $ | 1,344 |
Definite-lived intangible assets | Weighted-average useful life (in years) | Amount (in millions) | ||
Customer relationships | 12 | $ | 1,810 | |
Favorable lease interests | 10 | 224 | ||
Trade names | 2 | 20 | ||
Total | $ | 2,054 |
(in millions) | 20181 | 2017 | |||||
Sales | $ | 135,503 | $ | 127,893 |
1 | Impacted by store closures due to the Store Optimization Program. |
(in millions) | 2018 | ||
Sales | $ | 5,112 |
Total consideration | $ | 720 | |
Identifiable assets acquired and liabilities assumed | |||
Accounts receivable | $ | 217 | |
Inventories | 149 | ||
Property, plant and equipment | 11 | ||
Intangible assets | 331 | ||
Trade accounts payable | (90 | ) | |
Accrued expenses and other liabilities | (1 | ) | |
Total identifiable net assets | 617 | ||
Goodwill | $ | 103 |
Fiscal year ended August 31, 2018 | |||
Lease obligations and other real estate costs | $ | 19 | |
Employee severance and other exit costs | 81 | ||
Total costs | $ | 100 |
Lease obligations and other real estate costs | Employee severance and other exit costs | Total | |||||||||
Balance at August 31, 2017 | $ | — | $ | — | $ | — | |||||
Costs | 19 | 81 | 100 | ||||||||
Payments | (18 | ) | (60 | ) | (78 | ) | |||||
Other - non cash1 | 307 | — | 307 | ||||||||
Balance at August 31, 2018 | $ | 308 | $ | 21 | $ | 329 |
1 | Primarily represents unfavorable lease liabilities from acquired Rite Aid stores. |
Real estate costs | Severance and other business transition and exit costs | Total | |||||||||
Balance at August 31, 2017 | $ | 521 | $ | 79 | $ | 600 | |||||
Payments | (139 | ) | (68 | ) | (207 | ) | |||||
Other - non cash | 32 | (3 | ) | 29 | |||||||
Currency translation adjustments | — | (1 | ) | (1 | ) | ||||||
Balance at August 31, 2018 | $ | 414 | $ | 7 | $ | 421 |
Fiscal year ended 2017 | Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Walgreens Boots Alliance, Inc. | |||||||||||
Asset impairments | $ | 272 | $ | 21 | $ | 2 | $ | 295 | |||||||
Real estate costs | 372 | — | — | 372 | |||||||||||
Severance and other business transition and exit costs | 87 | 46 | 35 | 168 | |||||||||||
Total costs | $ | 731 | $ | 67 | $ | 37 | $ | 835 |
Fiscal year ended 2016 | Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Walgreens Boots Alliance, Inc. | |||||||||||
Asset impairments | $ | 215 | $ | 10 | $ | — | $ | 225 | |||||||
Real estate costs | 89 | 1 | 1 | 91 | |||||||||||
Severance and other business transition and exit costs | 70 | 18 | 20 | 108 | |||||||||||
Total costs | $ | 374 | $ | 29 | $ | 21 | $ | 424 |
Finance lease obligation | Capital lease | Operating lease1 | |||||||||
2019 | $ | 18 | $ | 63 | $ | 3,528 | |||||
2020 | 18 | 63 | 3,304 | ||||||||
2021 | 18 | 62 | 3,028 | ||||||||
2022 | 18 | 58 | 2,762 | ||||||||
2023 | 18 | 57 | 2,522 | ||||||||
Later | 216 | 864 | 17,592 | ||||||||
Total minimum lease payments | $ | 306 | $ | 1,167 | $ | 32,736 |
1 | Includes $1.6 billion of minimum rental commitments on closed locations |
2018 | 2017 | |||||||
Balance at beginning of period | $ | 718 | $ | 466 | ||||
Provision for present value of non-cancelable lease payments on closed facilities | 52 | 344 | ||||||
Changes in assumptions | 19 | 13 | ||||||
Accretion expense | 58 | 37 | ||||||
Other - non cash1 | 338 | — | ||||||
Cash payments, net of sublease income | (221 | ) | (142 | ) | ||||
Balance at end of period | $ | 964 | $ | 718 |
1 | Represents unfavorable lease liabilities from acquired Rite Aid stores. |
2018 | 2017 | 2016 | ||||||||||
Minimum rentals | $ | 3,447 | $ | 3,259 | $ | 3,355 | ||||||
Contingent rentals | 68 | 59 | 60 | |||||||||
Less: sublease rental income | (67 | ) | (55 | ) | (49 | ) | ||||||
$ | 3,448 | $ | 3,263 | $ | 3,366 |
2018 | 2017 | |||||||||||
Carrying value | Ownership percentage | Carrying value | Ownership percentage | |||||||||
AmerisourceBergen | $ | 5,138 | 26% | $ | 5,024 | 26% | ||||||
Others | 1,472 | 8% - 50% | 1,296 | 8% - 50% | ||||||||
Total | $ | 6,610 | $ | 6,320 |
Year ended August 31, | |||||||
2018 | 2017 | ||||||
Current assets | $ | 34,493 | $ | 29,707 | |||
Non-current assets | 14,971 | 12,999 | |||||
Current liabilities | 34,055 | 30,559 | |||||
Non-current liabilities | 8,759 | 7,362 | |||||
Shareholders’ equity1 | 6,650 | 4,785 |
Year ended August 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Sales | $ | 179,887 | $ | 164,844 | $ | 55,153 | |||||
Gross profit | 6,875 | 5,958 | 2,672 | ||||||||
Net earnings | 1,315 | 1,040 | 534 | ||||||||
Share of earnings from equity method investments | 245 | 143 | 81 |
1 | Shareholders’ equity at August 31, 2018 and 2017 includes $445 million and $204 million, respectively, related to noncontrolling interests. |
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Walgreens Boots Alliance, Inc. | |||||||||||||
August 31, 2016 | $ | 9,036 | $ | 3,369 | $ | 3,122 | $ | 15,527 | ||||||||
Acquisitions | 103 | — | 1 | 104 | ||||||||||||
Currency translation adjustments | — | 23 | (22 | ) | 1 | |||||||||||
August 31, 2017 | $ | 9,139 | $ | 3,392 | $ | 3,101 | $ | 15,632 | ||||||||
Acquisitions | 1,344 | — | 4 | 1,348 | ||||||||||||
Currency translation adjustments | — | (22 | ) | (44 | ) | (66 | ) | |||||||||
August 31, 2018 | $ | 10,483 | $ | 3,370 | $ | 3,061 | $ | 16,914 |
August 31, 2018 | August 31, 2017 | ||||||
Gross amortizable intangible assets | |||||||
Customer relationships and loyalty card holders1 | $ | 4,235 | $ | 2,510 | |||
Favorable lease interests and non-compete agreements | 680 | 523 | |||||
Trade names and trademarks | 489 | 504 | |||||
Purchasing and payer contracts | 390 | 391 | |||||
Total gross amortizable intangible assets | 5,794 | 3,928 | |||||
Accumulated amortization | |||||||
Customer relationships and loyalty card holders1 | $ | 997 | $ | 780 | |||
Favorable lease interests and non-compete agreements | 359 | 355 | |||||
Trade names and trademarks | 206 | 155 | |||||
Purchasing and payer contracts | 78 | 51 | |||||
Total accumulated amortization | 1,640 | 1,341 | |||||
Total amortizable intangible assets, net | $ | 4,154 | $ | 2,587 | |||
Indefinite-lived intangible assets | |||||||
Trade names and trademarks | $ | 5,557 | $ | 5,514 | |||
Pharmacy licenses | 2,072 | 2,055 | |||||
Total indefinite lived intangible assets | $ | 7,629 | $ | 7,569 | |||
Total intangible assets, net | $ | 11,783 | $ | 10,156 |
1 | Includes purchased prescription files. |
2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||
Estimated annual amortization expense | $ | 531 | $ | 461 | $ | 410 | $ | 390 | $ | 354 |
August 31, 2018 | August 31, 2017 | ||||||
Short-term debt 1 | |||||||
Commercial paper | $ | 430 | $ | — | |||
Credit facilities 2 | 999 | — | |||||
$1 billion note issuance 3,4 | |||||||
5.250% unsecured notes due 2019 5 | 249 | — | |||||
Other 6 | 288 | 251 | |||||
Total short-term debt | $ | 1,966 | $ | 251 |
Long-term debt 1 | |||||||
$6 billion note issuance 3,7 | |||||||
3.450% unsecured notes due 2026 | $ | 1,888 | $ | 1,887 | |||
4.650% unsecured notes due 2046 | 590 | 590 | |||||
$8 billion note issuance 3,7 | |||||||
2.700% unsecured notes due 2019 | 1,248 | 1,246 | |||||
3.300% unsecured notes due 2021 | 1,245 | 1,244 | |||||
3.800% unsecured notes due 2024 | 1,990 | 1,988 | |||||
4.500% unsecured notes due 2034 | 495 | 495 | |||||
4.800% unsecured notes due 2044 | 1,492 | 1,492 | |||||
£700 million note issuance 3,7 | |||||||
2.875% unsecured Pound sterling notes due 2020 | 517 | 513 | |||||
3.600% unsecured Pound sterling notes due 2025 | 387 | 384 | |||||
€750 million note issuance 3,7 | |||||||
2.125% unsecured Euro notes due 2026 | 868 | 884 | |||||
$4 billion note issuance 3,4 | |||||||
3.100% unsecured notes due 2022 | 1,196 | 1,195 | |||||
4.400% unsecured notes due 2042 | 492 | 492 | |||||
$1 billion note issuance 3,4 | |||||||
5.250% unsecured notes due 2019 5 | — | 250 | |||||
Other 8 | 23 | 24 | |||||
Total long-term debt, less current portion | $ | 12,431 | $ | 12,684 |
1 | Carry values are presented net of unamortized discount and debt issuance costs, where applicable, and foreign currency denominated borrowings have been translated using the spot rates at August 31, 2018 and 2017, respectively. |
2 | Credit facilities includes borrowings outstanding under the February 2017 Revolving Credit Agreement, the August 2017 Revolving Credit Agreement and the 2017 Term Loan Credit Agreement, which are described in more detail below. From time to time, the Company may also enter into other credit facilities, including in March 2018, a $350 million short-term unsecured revolving credit facility which was undrawn as of August 31, 2018. |
3 | The $6 billion, $8 billion, £0.7 billion, €0.75 billion, $4 billion and $1 billion note issuances as of August 31, 2018 had a fair value and carrying value of $2.4 billion and $2.5 billion, $6.3 billion and $6.5 billion, $0.9 billion and $0.9 billion, $0.9 billion and $0.9 billion, $1.7 billion and $1.7 billion, and $0.3 billion and $0.2 billion, respectively. The fair values of the notes outstanding are Level 1 fair value measures and determined based on quoted market price and translated at the August 31, 2018 spot rate, as applicable. The fair values and carrying values of these issuances do not include notes that have been redeemed or repaid as of August 31, 2018. |
4 | Notes are senior debt obligations of Walgreen Co. and rank equally with all other unsecured and unsubordinated indebtedness of Walgreen Co. On December 31, 2014, Walgreens Boots Alliance fully and unconditionally guaranteed the outstanding notes on an unsecured and unsubordinated basis. The guarantee, for so long as it is in place, is an unsecured, |
5 | Includes interest rate swap fair market value adjustments. See note 9, fair value measurements, for additional fair value disclosures. |
6 | Other short-term debt represents a mix of fixed and variable rate borrowings with various maturities and working capital facilities denominated in various currencies. |
7 | Notes are unsubordinated debt obligations of Walgreens Boots Alliance and rank equally in right of payment with all other unsecured and unsubordinated indebtedness of Walgreens Boots Alliance from time to time outstanding. |
8 | Other long-term debt represents a mix of fixed and variable rate borrowings in various currencies with various maturities. |
Amount | |||
2019 | $ | 1,969 | |
2020 | 1,277 | ||
2021 | 519 | ||
2022 | 1,250 | ||
2023 | 1,200 | ||
Later | 8,262 | ||
Total estimated future maturities | $ | 14,477 |
August 31, 2018 | Notional | Fair value | Location in Consolidated Balance Sheets | |||||||
Derivatives designated as hedges: | ||||||||||
Interest rate swaps | $ | 250 | $ | 1 | Other current liabilities | |||||
Foreign currency forwards | 15 | — | Other current assets | |||||||
Derivatives not designated as hedges: | ||||||||||
Foreign currency forwards | 3,273 | 52 | Other current assets | |||||||
Foreign currency forwards | 825 | 4 | Other current liabilities |
August 31, 2017 | Notional | Fair value | Location in Consolidated Balance Sheets | |||||||
Derivatives designated as hedges: | ||||||||||
Interest rate swaps | $ | 250 | $ | — | Other non-current assets | |||||
Foreign currency forwards | 24 | — | Other current assets | |||||||
Derivatives not designated as hedges: | ||||||||||
Foreign currency forwards | 221 | — | Other current assets | |||||||
Foreign currency forwards | 2,816 | 19 | Other current liabilities |
Location in Consolidated Statements of Earnings | 2018 | 2017 | 2016 | |||||||||||
Foreign currency forwards | Selling, general and administrative expense | $ | 17 | $ | 11 | $ | 19 | |||||||
Foreign currency forwards | Other income (expense) | 22 | (48 | ) | (12 | ) |
Location in Consolidated Statements of Earnings | 2018 | 2017 | 2016 | |||||||||||
Warrants | Other income (expense) | $ | — | $ | — | $ | (546 | ) |
Level 1 - | Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
Level 2 - | Observable inputs other than quoted prices in active markets. |
Level 3 - | Unobservable inputs for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
August 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Money market funds1 | $ | 227 | $ | 227 | $ | — | $ | — | ||||||||
Available-for-sale investments2 | 1 | 1 | — | — | ||||||||||||
Foreign currency forwards3 | 52 | — | 52 | — | ||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps4 | 1 | — | 1 | — | ||||||||||||
Foreign currency forwards3 | 4 | — | 4 | — |
August 31, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Money market funds1 | $ | 2,096 | $ | 2,096 | $ | — | $ | — | ||||||||
Available-for-sale investments2 | 1 | 1 | — | — | ||||||||||||
Liabilities: | ||||||||||||||||
Foreign currency forwards3 | 19 | — | 19 | — |
1 | Money market funds are valued at the closing price reported by the fund sponsor. |
2 | Fair values of quoted investments are based on bid prices as of August 31, 2018 and 2017. |
3 | The fair value of forward currency contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates. |
4 | The fair value of interest rate swaps is calculated by discounting the estimated future cash flows based on the applicable observable yield curves. See note 8, financial instruments, for additional information. |
2018 | 2017 | 2016 | ||||||||||
U.S. | $ | 3,292 | $ | 1,953 | $ | 2,577 | ||||||
Non–U.S. | 2,683 | 2,900 | 2,567 | |||||||||
Total | $ | 5,975 | $ | 4,853 | $ | 5,144 |
2018 | 2017 | 2016 | ||||||||||
Current provision | ||||||||||||
Federal | $ | 866 | $ | 759 | $ | 999 | ||||||
State | 103 | 45 | 56 | |||||||||
Non–U.S. | 353 | 390 | 371 | |||||||||
1,322 | 1,194 | 1,426 | ||||||||||
Deferred provision | ||||||||||||
Federal – tax law change | (648 | ) | — | — | ||||||||
Federal – excluding tax law change | 304 | (306 | ) | (183 | ) | |||||||
State | 78 | (24 | ) | 6 | ||||||||
Non–U.S. – tax law change | — | (80 | ) | (182 | ) | |||||||
Non–U.S. – excluding tax law change | (58 | ) | (24 | ) | (70 | ) | ||||||
(324 | ) | (434 | ) | (429 | ) | |||||||
Income tax provision | $ | 998 | $ | 760 | $ | 997 |
2018 | 2017 | 2016 | |||||||
Federal statutory rate | 25.7 | % | 35.0 | % | 35.0 | % | |||
State income taxes, net of federal benefit | 2.3 | 0.3 | 0.8 | ||||||
Foreign income taxed at non-U.S. rates | (12.2 | ) | (11.8 | ) | (7.8 | ) | |||
Non-taxable income | (5.2 | ) | (5.3 | ) | (4.4 | ) | |||
Non-deductible expenses | 2.1 | 1.5 | 1.1 | ||||||
Transition tax | 12.4 | — | — | ||||||
Tax law changes | (10.9 | ) | (1.6 | ) | (3.5 | ) | |||
Change in valuation allowance | 8.7 | 0.7 | 1.7 | ||||||
Tax credits | (6.9 | ) | (2.9 | ) | (1.5 | ) | |||
Other | 0.7 | (0.2 | ) | (2.0 | ) | ||||
Effective income tax rate | 16.7 | % | 15.7 | % | 19.4 | % |
2018 | 2017 | |||||||
Deferred tax assets: | ||||||||
Postretirement benefits | $ | — | $ | 134 | ||||
Compensation and benefits | 152 | 207 | ||||||
Insurance | 74 | 109 | ||||||
Accrued rent | 271 | 174 | ||||||
Outside basis difference | — | 55 | ||||||
Allowance for doubtful accounts | 27 | 55 | ||||||
Tax attributes | 2,351 | 555 | ||||||
Stock compensation | 44 | 73 | ||||||
Deferred income | 110 | 220 | ||||||
Other | 44 | 88 | ||||||
3,073 | 1,670 | |||||||
Less: valuation allowance | 2,226 | 408 | ||||||
Total deferred tax assets | 847 | 1,262 | ||||||
Deferred tax liabilities: | ||||||||
Accelerated depreciation | 603 | 841 | ||||||
Inventory | 301 | 416 | ||||||
Intangible assets | 1,234 | 1,277 | ||||||
Equity method investment | 459 | 1,002 | ||||||
2,597 | 3,536 | |||||||
Net deferred tax liabilities | $ | 1,750 | $ | 2,274 |
2018 | 2017 | 2016 | ||||||||||
Balance at beginning of year | $ | 409 | $ | 269 | $ | 261 | ||||||
Gross increases related to tax positions in a prior period | 123 | 151 | 21 | |||||||||
Gross decreases related to tax positions in a prior period | (15 | ) | (36 | ) | (47 | ) | ||||||
Gross increases related to tax positions in the current period | 29 | 33 | 68 | |||||||||
Settlements with taxing authorities | (87 | ) | (2 | ) | (17 | ) | ||||||
Currency | — | (1 | ) | (11 | ) | |||||||
Lapse of statute of limitations | (3 | ) | (5 | ) | (6 | ) | ||||||
Balance at end of year | $ | 456 | $ | 409 | $ | 269 |
August 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||||
Equity securities: | ||||||||||||||||
Equity securities1 | $ | 1,030 | $ | — | $ | 1,030 | $ | — | ||||||||
Debt securities: | ||||||||||||||||
Fixed interest government bonds2 | 901 | — | 901 | — | ||||||||||||
Index linked government bonds2 | 2,880 | — | 2,880 | — | ||||||||||||
Corporate bonds3 | 2,542 | — | 2,536 | 6 | ||||||||||||
Real estate: | ||||||||||||||||
Real estate4 | 501 | — | — | 501 | ||||||||||||
Other: | ||||||||||||||||
Other investments5 | 822 | 64 | 531 | 227 | ||||||||||||
Total | $ | 8,676 | $ | 64 | $ | 7,878 | $ | 734 |
August 31, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Equity securities: | ||||||||||||||||
Equity securities1 | $ | 956 | $ | — | $ | 956 | $ | — | ||||||||
Debt securities: | ||||||||||||||||
Fixed interest government bonds2 | 217 | — | 217 | — | ||||||||||||
Index linked government bonds2 | 3,354 | — | 3,354 | — | ||||||||||||
Corporate bonds3 | 3,251 | — | 3,251 | — | ||||||||||||
Real estate: | ||||||||||||||||
Real estate4 | 461 | — | — | 461 | ||||||||||||
Other: | ||||||||||||||||
Other investments5 | 741 | 58 | 583 | 100 | ||||||||||||
Total | $ | 8,980 | $ | 58 | $ | 8,361 | $ | 561 |
1 | Equity securities, which mainly comprise investments in commingled funds, are valued based on quoted prices and are primarily exchange-traded. Securities for which official close or last trade pricing on an active exchange is available are classified as Level 1 investments. If closing prices are not available, or the investments are in a commingled fund, |
2 | Debt securities: government bonds comprise fixed interest and index linked bonds issued by central governments and are valued based on quotes received from independent pricing services or from dealers who make markets in such securities. Pricing services utilize pricing which considers readily available inputs such as the yield or price of bonds of comparable quality, coupon, maturity and type, as well as dealer-supplied prices. Government bonds are classified as Level 2 investments. |
3 | Debt securities: corporate bonds comprise bonds issued by corporations in both segregated and commingled funds |
4 | Real estate comprises investments in certain property funds which are valued based on the underlying properties. These properties are valued using a number of standard industry techniques such as cost, discounted cash flows, independent appraisals and market based comparable data. Real estate investments are categorized as Level 3 investments. Changes in |
5 | Other investments mainly comprise cash and cash equivalents, derivatives and direct private placements. Cash is categorized as a Level 1 investment and cash in commingled funds is categorized as Level 2 investments. Cash equivalents are valued using observable yield curves, discounting and interest rates and are categorized as Level 2 investments. Derivatives which are exchange-traded and for which market quotations are readily available are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market, or exchange on which they are traded, and are categorized as Level 1 investments. Over-the-counter derivatives typically are valued by independent pricing services and are categorized as Level 2 investments. Direct private placements are typically bonds valued by reference to comparable bonds and are categorized as Level 3 investments. Changes in Level 3 investments during fiscal 2018 were primarily driven by purchases during the year. |
Boots and other pension plans | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Service costs | $ | 5 | $ | 5 | $ | 4 | ||||||
Interest costs | 193 | 174 | 308 | |||||||||
Expected returns on plan assets/other | (209 | ) | (146 | ) | (249 | ) | ||||||
Total net periodic pension (income) cost | $ | (11 | ) | $ | 33 | $ | 63 |
2018 | 2017 | |||||||
Benefit obligation at beginning of year | $ | 8,880 | $ | 9,463 | ||||
Service costs | 5 | 5 | ||||||
Interest costs | 193 | 174 | ||||||
Amendments/other | (4 | ) | (11 | ) | ||||
Net actuarial gain | (466 | ) | (295 | ) | ||||
Benefits paid | (398 | ) | (298 | ) | ||||
Currency translation adjustments | 83 | (158 | ) | |||||
Benefit obligation at end of year | $ | 8,293 | $ | 8,880 |
2018 | 2017 | |||||||
Plan assets at fair value at beginning of year | $ | 8,980 | $ | 9,428 | ||||
Employer contributions | 65 | 70 | ||||||
Benefits paid | (398 | ) | (298 | ) | ||||
Return on assets/other | (55 | ) | (52 | ) | ||||
Currency translation adjustments | 84 | (168 | ) | |||||
Plan assets at fair value at end of year | $ | 8,676 | $ | 8,980 |
2018 | 2017 | |||||||
Other non-current assets | $ | 554 | $ | 278 | ||||
Accrued expenses and other liabilities | (7 | ) | (7 | ) | ||||
Other non-current liabilities | (164 | ) | (171 | ) | ||||
Net asset (liability) recognized at end of year | $ | 383 | $ | 100 |
2018 | 2017 | |||||||
Net actuarial (gain) loss | $ | (27 | ) | $ | 171 |
2018 | 2017 | |||||||
Projected benefit obligation | $ | 8,293 | $ | 8,880 | ||||
Accumulated benefit obligation | 8,285 | 8,861 | ||||||
Fair value of plan assets | 8,676 | 8,980 |
Estimated future benefit payments | |||
2019 | $ | 396 | |
2020 | 259 | ||
2021 | 271 | ||
2022 | 287 | ||
2023 | 302 | ||
2024-2028 | 1,699 |
2018 | 2017 | |||||
Weighted-average assumptions used to determine benefit obligations | ||||||
Discount rate | 2.67 | % | 2.41 | % | ||
Rate of compensation increase | 2.68 | % | 2.83 | % | ||
Weighted-average assumptions used to determine net periodic benefit cost | ||||||
Discount rate | 2.12 | % | 2.16 | % | ||
Expected long-term return on plan assets | 2.27 | % | 1.69 | % | ||
Rate of compensation increase | 2.64 | % | 2.44 | % |
Pension/post-retirement obligations | Unrecognized gain (loss) on available-for- sale investments | Unrealized gain (loss) on cash flow hedges | Share of OCI of equity method investments | Cumulative translation adjustments | Total | ||||||||||||||||||
Balance at August 31, 2015 | $ | 29 | $ | 259 | $ | (40 | ) | $ | — | $ | (462 | ) | $ | (214 | ) | ||||||||
Other comprehensive income (loss) before reclassification adjustments | (303 | ) | (148 | ) | — | (1 | ) | (2,279 | ) | (2,731 | ) | ||||||||||||
Amounts reclassified from accumulated OCI | — | (268 | ) | 5 | — | (3 | ) | (266 | ) | ||||||||||||||
Tax benefit (provision) | 62 | 159 | (2 | ) | — | — | 219 | ||||||||||||||||
Net other comprehensive income (loss) | (241 | ) | (257 | ) | 3 | (1 | ) | (2,282 | ) | (2,778 | ) | ||||||||||||
Balance at August 31, 2016 | $ | (212 | ) | $ | 2 | $ | (37 | ) | $ | (1 | ) | $ | (2,744 | ) | $ | (2,992 | ) | ||||||
Other comprehensive income (loss) before reclassification adjustments | (34 | ) | (2 | ) | — | (1 | ) | (133 | ) | (170 | ) | ||||||||||||
Amounts reclassified from accumulated OCI1 | 109 | — | 5 | — | — | 114 | |||||||||||||||||
Tax benefit (provision) | (2 | ) | — | (1 | ) | — | — | (3 | ) | ||||||||||||||
Net other comprehensive income (loss) | 73 | (2 | ) | 4 | (1 | ) | (133 | ) | (59 | ) | |||||||||||||
Balance at August 31, 2017 | $ | (139 | ) | $ | — | $ | (33 | ) | $ | (2 | ) | $ | (2,877 | ) | $ | (3,051 | ) | ||||||
Other comprehensive income (loss) before reclassification adjustments | 417 | — | — | (4 | ) | (207 | ) | 206 | |||||||||||||||
Amounts reclassified from accumulated OCI1 | (120 | ) | — | 4 | 11 | 8 | (97 | ) | |||||||||||||||
Tax benefit (provision) | (57 | ) | — | (1 | ) | (2 | ) | — | (60 | ) | |||||||||||||
Net other comprehensive income (loss) | 240 | — | 3 | 5 | (199 | ) | 49 | ||||||||||||||||
Balance at August 31, 2018 | $ | 101 | $ | — | $ | (30 | ) | $ | 3 | $ | (3,076 | ) | $ | (3,002 | ) |
1 | Includes amendment to U.S. postretirement healthcare plan resulting in a curtailment gain. See note 13, retirement benefits. |
• | The Retail Pharmacy USA segment consists of the Walgreens business, which includes the operation of retail drugstores, convenient care clinics and mail and central specialty pharmacy services. Sales for the segment are principally derived from the sale of prescription drugs and a wide assortment of retail products, including health and wellness, beauty and personal care and consumables and general merchandise. |
• | The Retail Pharmacy International segment consists of pharmacy-led health and beauty retail businesses and optical practices. These businesses include Boots branded stores in the United Kingdom, Thailand, Norway, the Republic of Ireland and the Netherlands, Benavides in Mexico and Ahumada in Chile. Sales for the segment are principally derived from the sale of prescription drugs and health and wellness, beauty and personal care and other consumer products. |
• | The Pharmaceutical Wholesale segment consists of the Alliance Healthcare pharmaceutical wholesaling and distribution businesses and an equity method investment in AmerisourceBergen. Wholesale operations are located in the United Kingdom, Germany, France, Turkey, Spain, the Netherlands, Egypt, Norway, Romania, Czech Republic and Lithuania. Sales for the segment are principally derived from the wholesaling and distribution of a comprehensive offering of brand-name pharmaceuticals (including specialty pharmaceutical products) and generic pharmaceuticals, health and beauty products, home healthcare supplies and equipment and related services to pharmacies and other healthcare providers. |
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Eliminations | Walgreens Boots Alliance, Inc. | |||||||||||||||
For the year ended August 31, 2018 | |||||||||||||||||||
Sales to external customers | $ | 98,392 | $ | 12,281 | $ | 20,864 | $ | — | $ | 131,537 | |||||||||
Intersegment sales | — | — | 2,142 | (2,142 | ) | — | |||||||||||||
Sales | $ | 98,392 | $ | 12,281 | $ | 23,006 | $ | (2,142 | ) | $ | 131,537 | ||||||||
Adjusted operating income | $ | 5,923 | $ | 947 | $ | 934 | $ | — | $ | 7,804 | |||||||||
Depreciation and amortization | $ | 1,196 | $ | 419 | $ | 155 | $ | — | $ | 1,770 | |||||||||
Additions to property, plant and equipment | 1,022 | 241 | 104 | — | 1,367 | ||||||||||||||
For the year ended August 31, 2017 | |||||||||||||||||||
Sales to external customers | $ | 87,302 | $ | 11,813 | $ | 19,099 | $ | — | $ | 118,214 | |||||||||
Intersegment sales | — | — | 2,089 | (2,089 | ) | — | |||||||||||||
Sales | $ | 87,302 | $ | 11,813 | $ | 21,188 | $ | (2,089 | ) | $ | 118,214 | ||||||||
Adjusted operating income | $ | 5,707 | $ | 909 | $ | 924 | $ | — | $ | 7,540 | |||||||||
Depreciation and amortization | $ | 1,090 | $ | 414 | $ | 150 | $ | — | $ | 1,654 | |||||||||
Additions to property, plant and equipment | 860 | 384 | 107 | — | 1,351 | ||||||||||||||
For the year ended August 31, 2016 | |||||||||||||||||||
Sales to external customers | $ | 83,802 | $ | 13,256 | $ | 20,293 | $ | — | $ | 117,351 | |||||||||
Intersegment sales | — | — | 2,278 | (2,278 | ) | — | |||||||||||||
Sales | $ | 83,802 | $ | 13,256 | $ | 22,571 | $ | (2,278 | ) | $ | 117,351 | ||||||||
Adjusted operating income | $ | 5,357 | $ | 1,155 | $ | 708 | $ | (12 | ) | $ | 7,208 | ||||||||
Depreciation and amortization | $ | 1,134 | $ | 401 | $ | 166 | $ | 17 | $ | 1,718 | |||||||||
Additions to property, plant and equipment | 777 | 444 | 104 | — | 1,325 |
Retail Pharmacy USA | Retail Pharmacy International | Pharmaceutical Wholesale | Eliminations | Walgreens Boots Alliance, Inc. | |||||||||||
For the year ended August 31, 2018 | |||||||||||||||
Adjusted operating income | $ | 5,923 | $ | 947 | $ | 934 | $ | — | $ | 7,804 | |||||
Acquisition-related amortization | (448 | ) | |||||||||||||
Certain legal and regulatory accruals and settlements1 | (284 | ) | |||||||||||||
Acquisition-related costs | (231 | ) | |||||||||||||
Adjustments to equity earnings in AmerisourceBergen | (175 | ) | |||||||||||||
Store optimization | (100 | ) | |||||||||||||
LIFO provision | (84 | ) | |||||||||||||
Hurricane-related costs | (83 | ) | |||||||||||||
Asset recovery | 15 | ||||||||||||||
Operating income | $ | 6,414 | |||||||||||||
For the year ended August 31, 2017 | |||||||||||||||
Adjusted operating income | $ | 5,707 | $ | 909 | $ | 924 | $ | — | $ | 7,540 | |||||
Acquisition-related amortization | (332 | ) | |||||||||||||
Acquisition-related costs | (474 | ) | |||||||||||||
Adjustments to equity earnings in AmerisourceBergen | (187 | ) | |||||||||||||
LIFO provision | (166 | ) | |||||||||||||
Cost transformation | (835 | ) | |||||||||||||
Asset recovery | 11 | ||||||||||||||
Operating income | $ | 5,557 | |||||||||||||
For the year ended August 31, 2016 | |||||||||||||||
Adjusted operating income | $ | 5,357 | $ | 1,155 | $ | 708 | $ | (12 | ) | $ | 7,208 | ||||
Acquisition-related amortization | (369 | ) | |||||||||||||
Certain legal and regulatory accruals and settlements | (47 | ) | |||||||||||||
Acquisition-related costs | (102 | ) | |||||||||||||
Adjustments to equity earnings in AmerisourceBergen | (21 | ) | |||||||||||||
LIFO provision | (214 | ) | |||||||||||||
Cost transformation | (424 | ) | |||||||||||||
Asset recovery | (30 | ) | |||||||||||||
Operating income | $ | 6,001 |
1 | Beginning in the quarter ended August 31, 2018, management reviewed and refined its practice to include all charges related to the matters included in certain legal and regulatory accruals and settlements. This non-GAAP measure is presented on a consistent basis for fiscal year 2018. |
2018 | 2017 | 2016 | |||||||||
United States of America | $ | 98,392 | $ | 87,302 | $ | 83,802 | |||||
United Kingdom | 13,297 | 12,552 | 14,081 | ||||||||
Europe (excluding the United Kingdom) | 17,594 | 16,224 | 16,793 | ||||||||
Other | 2,254 | 2,136 | 2,675 | ||||||||
Sales | $ | 131,537 | $ | 118,214 | $ | 117,351 |
2018 | 2017 | ||||||
United States of America | $ | 10,678 | $ | 10,344 | |||
United Kingdom | 2,458 | 2,502 | |||||
Europe (excluding the United Kingdom) | 576 | 616 | |||||
Other | 199 | 180 | |||||
Total long-lived assets | $ | 13,911 | $ | 13,642 |
2018 | 2017 | 2016 | ||||||||||
Purchases, net | $ | 53,161 | $ | 43,571 | $ | 41,889 | ||||||
Trade accounts payable, net | $ | 6,274 | $ | 4,384 | $ | 3,456 |
Quarter ended | |||||||||||||||||||||
November | February | May | August | Fiscal year | |||||||||||||||||
Fiscal 2018 | |||||||||||||||||||||
Sales | $ | 30,740 | $ | 33,021 | $ | 34,334 | $ | 33,442 | $ | 131,537 | |||||||||||
Gross profit | 7,341 | 8,096 | 7,780 | 7,575 | 30,792 | ||||||||||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. | 821 | 1,349 | 1,342 | 1,512 | 5,024 | ||||||||||||||||
Net earnings per common share: | |||||||||||||||||||||
Basic | $ | 0.82 | $ | 1.36 | $ | 1.35 | $ | 1.55 | $ | 5.07 | |||||||||||
Diluted | 0.81 | 1.36 | 1.35 | 1.55 | 5.05 | ||||||||||||||||
Cash dividends declared per common share | $ | 0.400 | $ | 0.400 | $ | 0.400 | $ | 0.440 | $ | 1.640 | |||||||||||
Fiscal 2017 | |||||||||||||||||||||
Sales | $ | 28,501 | $ | 29,446 | $ | 30,118 | $ | 30,149 | $ | 118,214 | |||||||||||
Gross profit | 7,116 | 7,561 | 7,145 | 7,340 | 29,162 | ||||||||||||||||
Net earnings attributable to Walgreens Boots Alliance, Inc. | 1,054 | 1,060 | 1,162 | 802 | 4,078 | ||||||||||||||||
Net earnings per common share: | |||||||||||||||||||||
Basic | $ | 0.97 | $ | 0.98 | $ | 1.08 | $ | 0.76 | $ | 3.80 | |||||||||||
Diluted | 0.97 | 0.98 | 1.07 | 0.76 | 3.78 | ||||||||||||||||
Cash dividends declared per common share | $ | 0.375 | $ | 0.375 | $ | 0.375 | $ | 0.400 | $ | 1.525 |
/s/ | Stefano Pessina | /s/ | James Kehoe | ||
Stefano Pessina | James Kehoe | ||||
Executive Vice Chairman and Chief Executive Officer | Executive Vice President and Global Chief Financial Officer |
(a) | Documents filed as part of this report: |
(1) | Financial statements. The following financial statements, supplementary data and reports of independent public accountants appear in part II, item 8 of this Form 10-K and are incorporated herein by reference. |
(2) | Financial statement schedules and supplementary information |
(3) | Exhibits. Exhibits 10.1 through 10.64 constitute management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 15(b) of this Form 10-K. |
• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
• | may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
(b) | Exhibits |
Exhibit No. | Description | SEC Document Reference | |
2.1* | Purchase and Option Agreement by and among Walgreen Co., Alliance Boots GmbH and AB Acquisitions Holdings Limited dated June 18, 2012 and related annexes. | Incorporated by reference to Annex B-1 to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 (File No. 333-198768) filed with the SEC pursuant to Rule 424(b)(3) on November 24, 2014. | |
2.2* | Amendment No. 1, dated August 5, 2014, to the Purchase and Option Agreement and Walgreen Co. Shareholders Agreement, by and among Walgreen Co., Alliance Boots GmbH, AB Acquisitions Holdings Limited, Walgreen Scotland Investments LP, KKR Sprint (European II) Limited, KKR Sprint (2006) Limited and KKR Sprint (KPE) Limited, Alliance Santé Participations S.A., Stefano Pessina and Kohlberg Kravis Roberts & Co. L.P. | Incorporated by reference to Annex B-2 to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 (File No. 333-198768) filed with the SEC pursuant to Rule 424(b)(3) on November 24, 2014. |
Reorganization Agreement and Plan of Merger, dated October 17, 2014, by and among Walgreen Co., Walgreens Boots Alliance, Inc. and Ontario Merger Sub, Inc. | Incorporated by reference to Annex A to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 (File No. 333-198768) filed with the SEC pursuant to Rule 424(b)(3) on November 24, 2014. | ||
Amendment No. 1, dated December 23, 2014, to the Reorganization Agreement and Plan of Merger, dated October 17, 2014, by and among Walgreen Co., Walgreens Boots Alliance, Inc. and Ontario Merger Sub, Inc. | Incorporated by reference to Exhibit 2.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on December 24, 2014. | ||
Amendment No. 2, dated December 29, 2014, to the Reorganization Agreement and Plan of Merger, dated October 17, 2014, as amended December 23, 2014, by and among Walgreen Co., Walgreens Boots Alliance, Inc. and Ontario Merger Sub, Inc. | Incorporated by reference to Exhibit 2.3 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2014 (File No. 1-36759) filed with the SEC on December 30, 2014. | ||
2.6* | Amended and Restated Asset Purchase Agreement, dated as of September 18, 2017, by and among Walgreens Boots Alliance, Inc., Walgreen Co. and Rite Aid Corporation | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on September 19, 2017. | |
Amended and Restated Certificate of Incorporation of Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014. | ||
Amended and Restated Bylaws of Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on June 10, 2016. | ||
4.1** | Indenture, dated as of July 17, 2008, between Walgreen Co. and Wells Fargo Bank, National Association, as trustee. | Incorporated by reference to Exhibit 4.3 to Walgreen Co.’s registration statement on Form S-3ASR (File No. 333-152315) filed with the SEC on July 14, 2008. | |
Form of Walgreen Co. 5.25% Note due 2019. | Incorporated by reference to Exhibit 4.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on January 13, 2009. | ||
Form of Walgreen Co. 3.100% Note due 2022. | Incorporated by reference to Exhibit 4.4 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on September 13, 2012. | ||
Form of Walgreen Co. 4.400% Note due 2042. | Incorporated by reference to Exhibit 4.5 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on September 13, 2012. | ||
Form of Guarantee of Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 4.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014. | ||
Indenture dated November 18, 2014 among Walgreens Boots Alliance, Inc. and Wells Fargo Bank, National Association, as trustee. | Incorporated by reference to Exhibit 4.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. | ||
Form of 2.700% Notes due 2019. | Incorporated by reference to Exhibit 4.4 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. | ||
Form of 3.300% Notes due 2021. | Incorporated by reference to Exhibit 4.5 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. | ||
Form of 3.800% Notes due 2024. | Incorporated by reference to Exhibit 4.6 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. | ||
Form of 4.500% Notes due 2034. | Incorporated by reference to Exhibit 4.7 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. | ||
Form of 4.800% Notes due 2044. | Incorporated by reference to Exhibit 4.8 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 18, 2014. |
Form of 2.875% Notes due 2020 (£). | Incorporated by reference to Exhibit 4.2 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 20, 2014. | ||
Form of 3.600% Notes due 2025 (£). | Incorporated by reference to Exhibit 4.3 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 20, 2014. | ||
Form of 2.125% Notes due 2026 (€). | Incorporated by reference to Exhibit 4.4 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 20, 2014. | ||
Indenture, dated as of December 17, 2015, between Walgreens Boots Alliance, Inc. and Wells Fargo Bank, National Association, as trustee | Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (File No. 333-208587) filed with the SEC on December 17, 2015. | ||
Form of 3.450% Notes due 2026 | Incorporated by reference to Exhibit 4.5 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on June 1, 2016. | ||
Form of 4.650% Notes due 2046 | Incorporated by reference to Exhibit 4.6 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on June 1, 2016. | ||
Shareholders Agreement, dated as of August 2, 2012, among Walgreen Co., Stefano Pessina, KKR Sprint (European II) Limited, KKR Sprint (2006) Limited and KKR Sprint (KPE) Limited, Alliance Santé Participations S.A., Kohlberg Kravis Roberts & Co. L.P. and certain other investors party thereto. | Incorporated by reference to Exhibit 4.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on August 6, 2012. | ||
Amendment No. 1, dated August 5, 2014, to the Purchase and Option Agreement and Walgreen Co. Shareholders Agreement, by and among Walgreen Co., Alliance Boots GmbH, AB Acquisitions Holdings Limited, Walgreen Scotland Investments LP, KKR Sprint (European II) Limited, KKR Sprint (2006) Limited and KKR Sprint (KPE) Limited, Alliance Santé Participations S.A., Stefano Pessina and Kohlberg Kravis Roberts & Co. L.P. | Incorporated by reference to Annex B-2 to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 (File No. 333-198768) filed with the SEC pursuant to Rule 424(b)(3) on November 24, 2014. | ||
Amendment No. 2, dated December 31, 2014, to the Purchase and Option Agreement and Walgreen Co. Shareholders Agreement, as Amended by Amendment No. 1, dated as of August 5, 2014, by and among Walgreen Co., Alliance Boots GmbH, AB Acquisitions Holdings Limited, Ontario Holdings WBS Limited, KKR Sprint (European II) Limited, KKR Sprint (2006) Limited and KKR Sprint (KPE) Limited, Alliance Santé Participations S.A., Stefano Pessina and Kohlberg Kravis Roberts & Co. L.P. | Incorporated by reference to Exhibit E to the Schedule 13D filed by Alliance Santé Participations S.A. (File No. 005-88481) filed with the SEC on December 31, 2014). | ||
Walgreens Boots Alliance, Inc. Management Incentive Plan (as amended and restated effective July 1, 2016). | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2016 (File No. 1-36759) filed with the SEC on October 20, 2016. | ||
Walgreens Boots Alliance, Inc. 2011 Cash-Based Incentive Plan (as amended and restated effective July 1, 2016). | Incorporated by reference to Exhibit 10.4 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2016 (File No. 1-36759) filed with the SEC on October 20, 2016. | ||
Walgreens Boots Alliance, Inc. 2013 Omnibus Incentive Plan (as amended and restated). | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on January 19, 2018. | ||
Form of Performance Share Award agreement (effective October 2017). | Incorporated by reference to Exhibit 10.5 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2017 (File No. 1-36759) filed with the SEC on October 25, 2017. |
Form of Performance Share Award agreement (effective October 2015). | Incorporated by reference to Exhibit 10.5 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Form of Stock Option Award agreement (effective October 2017). | Incorporated by reference to Exhibit 10.7 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2017 (File No. 1-36759) filed with the SEC on October 25, 2017. | ||
Form of Stock Option Award agreement (effective July 2016). | Incorporated by reference to Exhibit 10.8 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2016 (File No. 1-36759) filed with the SEC on October 20, 2016. | ||
Form of Stock Option Award agreement (effective October 2015). | Incorporated by reference to Exhibit 10.6 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Form of Performance Share Award agreement for CEO (November 2017). | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2017 (File No. 1-36759) filed with the SEC on January 4, 2018. | ||
Form of Performance Share Award agreement for CEO (November 2016). | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 (File No. 1-36759) filed with the SEC on January 5, 2017. | ||
Form of Performance Share Award agreement for CEO (February 2016). | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2016 (File No. 1-36759) filed with the SEC on April 5, 2016. | ||
Form of Stock Option Award agreement for CEO (November 2017). | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2017 (File No. 1-36759) filed with the SEC on January 4, 2018. | ||
Form of Stock Option Award agreement for CEO (November 2016). | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 (File No. 1-36759) filed with the SEC on January 5, 2017. | ||
Form of Stock Option Award agreement for CEO (February 2016). | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2016 (File No. 1-36759) filed with the SEC on April 5, 2016. | ||
Form of Restricted Stock Unit Award agreement for Executive Chairman (November 2017). | Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2017 (File No. 1-36759) filed with the SEC on January 4, 2018. | ||
Form of Restricted Stock Unit Award agreement for Executive Chairman (November 2016). | Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 (File No. 1-36759) filed with the SEC on January 5, 2017. | ||
Form of Restricted Stock Unit Award agreement for Executive Chairman (February 2016). | Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2016 (File No. 1-36759) filed with the SEC on April 5, 2016. | ||
Form of Restricted Stock Unit Award agreement for James Kehoe (June 2018). | Filed herewith. | ||
Form of Amendment to Stock Option Award agreements. | Incorporated by reference to Exhibit 10.11 to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2014 (File No. 1-00604) filed with the SEC on October 20, 2014. | ||
UK Sub-Plan under the Walgreens Boots Alliance, Inc. 2013 Omnibus Incentive Plan. | Incorporated by reference to Exhibit 10.16 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. |
Form of Stock Option Award agreement under UK Sub-plan (effective October 2015). | Incorporated by reference to Exhibit 10.17 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Form of Stock Option Award agreement under UK Sub-plan (effective July 2016). | Incorporated by reference to Exhibit 10.23 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2016 (File No. 1-36759) filed with the SEC on October 20, 2016. | ||
Form of Stock Option Award agreement under UK Sub-plan (effective October 2017). | Incorporated by reference to Exhibit 10.24 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2017 (File No. 1-36759) filed with the SEC on October 25, 2017. | ||
Walgreen Co. Long-Term Performance Incentive Plan (amendment and restatement of the Walgreen Co. Restricted Performance Share Plan). | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on January 11, 2007. | ||
Walgreen Co. Long-Term Performance Incentive Plan Amendment No. 1 (effective January 10, 2007). | Incorporated by reference to Exhibit 10.2 to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2007 (File No. 1-00604). | ||
Walgreen Co. Long-Term Performance Incentive Plan Amendment No. 2. | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on April 14, 2011. | ||
Form of Restricted Stock Unit Award Agreement (August 15, 2011 grants). | Incorporated by reference to Exhibit 10.5 to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2011 (File No. 1-00604). | ||
Walgreen Co. Executive Stock Option Plan (as amended and restated effective January 13, 2010). | Incorporated by reference to Exhibit 99.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on January 20, 2010. | ||
Walgreen Co. 2002 Executive Deferred Compensation/Capital Accumulation Plan. | Incorporated by reference to Exhibit 10(g) to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2002 (File No. 1-00604). | ||
Amendment to the Walgreen Co. 2002 et. al. Executive Deferred Compensation/ Capital Accumulation Plans. | Incorporated by reference to Exhibit 10.3 to Walgreen Co.’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2009 (File No. 1-00604). | ||
Walgreen Co. 2006 Executive Deferred Compensation/Capital Accumulation Plan (effective January 1, 2006). | Incorporated by reference to Exhibit 10(b) to Walgreen Co.’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2005 (File No. 1-00604). | ||
Walgreen Co. 2011 Executive Deferred Compensation Plan. | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on November 12, 2010. | ||
Amendment No. 1 to the Walgreen Co. 2011 Executive Deferred Compensation Plan. | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on January 19, 2011. | ||
Walgreens Boots Alliance, Inc. Executive Deferred Profit-Sharing Plan (as amended and restated effective December 31, 2014). | Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014. | ||
Share Walgreens Stock Purchase/Option Plan (effective October 1, 1992), as amended. | Incorporated by reference to Exhibit 10(d) to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2003 (File No. 1-00604). | ||
Share Walgreens Stock Purchase/Option Plan Amendment No. 4 (effective July 15, 2005), as amended. | Incorporated by reference to Exhibit 10(h)(ii) to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2005 (File No. 1-00604). | ||
Share Walgreens Stock Purchase/Option Plan Amendment No. 5 (effective October 11, 2006). | Incorporated by reference to Exhibit 10(b) to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2006 (File No. 1-00604). | ||
Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan (as amended and restated effective December 31, 2014). | Incorporated by reference to Exhibit 10.4 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014. |
Offer Letter agreement between Stefano Pessina and Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 10.29 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Offer letter agreement dated as of March 6, 2018 between James Kehoe and Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on March 8, 2018. | ||
Employment Agreement between Alliance UniChem Plc and George Fairweather, dated March 28, 2002. | Incorporated by reference to Exhibit 10.14 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Agreement between Alliance Boots plc and George Fairweather, dated July 31, 2006. | Incorporated by reference to Exhibit 10.15 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Contract amendment dated as of March 6, 2018 between George Fairweather and Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on March 8, 2018. | ||
Corporate Travel and Expense Support letter Agreement between Walgreens Boots Alliance, Inc. and George Fairweather, dated October 28, 2015. | Incorporated by reference to Exhibit 10.54 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Employment Agreement between Alliance UniChem Services Limited and Marco Pagni, dated June 1, 2005. | Incorporated by reference to Exhibit 10.16 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Amendment, dated as of September 4, 2018, to Employment Agreement with Marco Pagni. | Filed herewith. | ||
Letter Agreement with Marco Pagni, dated May 14, 2012. | Incorporated by reference to Exhibit 10.17 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Corporate Travel and Expense Support letter Agreement between Walgreens Boots Alliance, Inc. and Marco Pagni, dated October 28, 2015. | Incorporated by reference to Exhibit 10.57 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Service Agreement between Boots UK Limited and Alex Gourlay, dated January 29, 2009. | Incorporated by reference to Exhibit 10.18 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Letter Agreement between Alliance Boots Management Services Limited and Alex Gourlay, dated June 28, 2010. | Incorporated by reference to Exhibit 10.19 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Employment Agreement between Alliance UniChem Plc and Ornella Barra dated December 10, 2002. | Incorporated by reference to Exhibit 10.20 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Agreement among Alliance Boots plc, Alliance UniChem Plc and Ornella Barra, dated July 31, 2006. | Incorporated by reference to Exhibit 10.21 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Novation of Services Agreement among Alliance Boots Holdings Limited, Alliance Boots Management Services MC S.A.M and Ornella Barra, dated June 1, 2013. | Incorporated by reference to Exhibit 10.22 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. | ||
Services Agreement between Boots Management Services Limited and Ken Murphy, dated October 1, 2013. | Incorporated by reference to Exhibit 10.24 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 (File No. 1-36759) filed with the SEC on April 9, 2015. |
Amendment, dated as of August 14, 2018, to Services Agreement with Ken Murphy. | Filed herewith. | ||
drugstore.com, inc., 2008 Equity Incentive Plan, as amended. | Incorporated by reference to Exhibit 99.2 to Walgreen Co.’s Registration Statement on Form S-8 (File No. 333-174811) filed with the SEC on June 9, 2011. | ||
Walgreens Boots Alliance, Inc. Long-Term Global Assignment Relocation Policy | Incorporated by reference to Exhibit 10.68 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K (File No. 1-36759) filed with the SEC on October 28, 2015. | ||
Secondment Agreement dated September 27, 2013 between Alliance Boots Management Services Limited and Walgreen Co. | Incorporated by reference to Exhibit 10.52 to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2013 (File No. 1-00604). | ||
Assignment Letter dated September 27, 2013 between Alexander Gourlay and Alliance Boots Management Services Ltd. | Incorporated by reference to Exhibit 10.53 to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2013 (File No. 1-00604). | ||
Extension, dated January 27, 2016, to Assignment Letter between Alexander Gourlay and Walgreens Boots Alliance Services Limited (formerly Alliance Boots Management Services Ltd.). | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on February 1, 2016. | ||
Extension, dated as of March 27, 2017, to Assignment Letter between Alexander Gourlay and Walgreens Boots Alliance Services Limited (formerly Alliance Boots Management Services Ltd.). | Incorporated by reference to Exhibit 10.6 to Walgreens Boots Alliance, Inc.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2017 (File No. 1-36759) filed with the SEC on April 5, 2017. | ||
Extension, dated as of July 13, 2017, to Assignment Letter between Alexander Gourlay and Walgreens Boots Alliance Services Limited (formerly Alliance Boots Management Services Ltd.). | Incorporated by reference to Exhibit 10.62 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2017 (File No. 1-36759) filed with the SEC on October 25, 2017. | ||
Assignment Letter between Ken Murphy and Walgreens Boots Alliance Services Limited. | Incorporated by reference to Exhibit 10.63 to Walgreens Boots Alliance, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2017 (File No. 1-36759) filed with the SEC on October 25, 2017. | ||
Offer letter agreement between Kimberly R. Scardino and Walgreens Boots Alliance, Inc. | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on August 4, 2015. | ||
Shareholders’ Agreement, dated as of August 2, 2012, by and among Alliance Boots GmbH, AB Acquisition Holdings Limited and Walgreen Co. | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on August 6, 2012. | ||
Framework Agreement, dated as of March 18, 2013, by and among Walgreen Co., Alliance Boots GmbH and AmerisourceBergen Corporation. | Incorporated by reference to Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on March 20, 2013. | ||
Shareholders Agreement, dated as of March 18, 2013, by and among Walgreen Co., Alliance Boots GmbH and AmerisourceBergen Corporation. | Incorporated by reference to Exhibit 10.2 to Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604) filed with the SEC on March 20, 2013. | ||
Revolving Credit Agreement, dated as of August 29, 2018, by and among Walgreens Boots Alliance, Inc., the lenders and letter of credit issuers from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, and the joint lead arrangers, joint bookrunners and co-syndication. | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 001-36759) filed with the SEC on August 30, 2018. | ||
Revolving Credit Agreement, dated February 1, 2017, by and between Walgreens Boots Alliance, Inc., the lenders from time to time party thereto and JPMorgan Chase Bank N.A., as administrative agent. | Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 001-36759) filed with the SEC on February 2, 2017. | ||
Amendment, dated as of August 1, 2017, to Revolving Credit Agreement, dated February 1, 2017, by and between Walgreens Boots Alliance, Inc., the lenders from time to time party thereto and JPMorgan Chase Bank N.A., as administrative agent. | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 001-36759) filed with the SEC on August 2, 2017. |
Revolving Credit Agreement, dated as of August 24, 2017, by and among Walgreens Boots Alliance, Inc., the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, and the joint lead arrangers, joint book managers and co-syndication agents named therein. | Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 001-36759) filed with the SEC on August 30, 2017. | ||
Term Loan Credit Agreement, dated August 24, 2017, among Walgreens Boots Alliance, Inc. and Sumitomo Mitsui Banking Corporation, as lender, sole lead arranger and administrative agent. | Incorporated by reference to Exhibit 10.2 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 001-36759) filed with the SEC on August 30, 2017. | ||
Computation of Ratio of Earnings to Fixed Charges | Filed herewith. | ||
Subsidiaries of the Registrant. | Filed herewith. | ||
Consent of Deloitte & Touche LLP. | Filed herewith. | ||
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | Furnished herewith. | ||
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | Furnished herewith. | ||
101.INS | XBRL Instance Document | Filed herewith. | |
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. |
* | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Copies of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request. |
** | Other instruments defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries may be omitted from Exhibit 4 in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. Copies of any such agreements will be furnished supplementally to the SEC upon request. |
WALGREENS BOOTS ALLIANCE, INC. | |||
October 11, 2018 | By: | /s/ James Kehoe | |
James Kehoe | |||
Executive Vice President and Global Chief Financial Officer |
Name | Title | Date | ||
/s/ Stefano Pessina | Executive Vice Chairman and Chief Executive Officer (Principal Executive Officer) and Director | October 11, 2018 | ||
Stefano Pessina | ||||
/s/ James Kehoe | Executive Vice President and Global Chief Financial Officer (Principal Financial Officer) | October 11, 2018 | ||
James Kehoe | ||||
/s/ Kimberly R. Scardino | Senior Vice President, Global Controller and Chief Accounting Officer (Principal Accounting Officer) | October 11, 2018 | ||
Kimberly R. Scardino | ||||
/s/ James A. Skinner | Executive Chairman | October 11, 2018 | ||
James A. Skinner | ||||
/s/ José E. Almeida | Director | October 11, 2018 | ||
José E. Almeida | ||||
/s/ Janice M. Babiak | Director | October 11, 2018 | ||
Janice M. Babiak | ||||
/s/ David J. Brailer | Director | October 11, 2018 | ||
David J. Brailer | ||||
/s/ William C. Foote | Director | October 11, 2018 | ||
William C. Foote | ||||
/s/ Ginger L. Graham | Director | October 11, 2018 | ||
Ginger L. Graham | ||||
/s/ John A. Lederer | Director | October 11, 2018 | ||
John A. Lederer | ||||
/s/ Dominic P. Murphy | Director | October 11, 2018 | ||
Dominic P. Murphy | ||||
/s/ Leonard D. Schaeffer | Director | October 11, 2018 | ||
Leonard D. Schaeffer | ||||
/s/ Nancy M. Schlichting | Director | October 11, 2018 | ||
Nancy M. Schlichting |
Exhibit No. | Description |
Form of Restricted Stock Unit Award agreement for James Kehoe (June 2018). | |
Amendment, dated as of September 4, 2018, to Employment Agreement with Marco Pagni. | |
Amendment, dated as of August 14, 2018, to Services Agreement with Ken Murphy. | |
Computation of Ratio of Earnings to Fixed Charges. | |
Subsidiaries of the Registrant. | |
Consent of Deloitte & Touche LLP. | |
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | |
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
a. | "Trade Secrets" are a form of intellectual property and may include all tangible and intangible forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs or codes, and may in particular include such things as pricing information, business records, software programs, algorithms, inventions, patent applications, and designs and processes not known outside the Company. Trade Secrets may be stored, compiled, memorialized or contained in various forms or media, such as paper, electronic media or transmission (such as disc, email, file transfers, tape, or web site features), all other forms of audio and/or video transfer, or even oral communications. |
b. | "Confidential Information" shall include Trade Secrets and, more broadly, any information or material which is not generally known to the public, and which (i) is generated or collected by or utilized in the operations of the Company and relates to the actual or anticipated business of the Company or the Company's actual or prospective vendors or clients; or (ii) is suggested by or results from any task assigned to me by the Company or work performed by me for or on |
(a) | I will not directly or indirectly, solicit any Restricted Customer for purposes of providing Competing Products or Services, or offer, provide or sell Competing Products or Services to any Restricted Customer. For purposes of this Agreement, "Competing Products or Services" means products or services that are competitive with products or services offered by, developed by, designed by or distributed by the Company to any Restricted Customer, and "Restricted Customer" means any person, company or entity which was a customer, potential customer, vendor, supplier or referral source of the Company and with which I had direct contact or about which I learned confidential information at any time during the last two years of my employment with the Company; and |
(b) | I will not, nor will I assist any third party to, directly or indirectly (i) raid, hire, solicit, or attempt to persuade any employee of the Company with whom I currently work or with whom I worked at any point during the last two years preceding the termination of my employment with the Company, and who possesses or had access to confidential information of the Company, to leave the employ of the Company; (ii) interfere with the performance by any such employee of his/her duties for the Company; or (iii) communicate with any such employee for the purposes described in items (i) and (ii) in this paragraph. |
a. | Ownership. All Intellectual Property is, shall be and shall remain the exclusive property of the Company. Employee hereby assigns to the Company all right, title and interest, if any, in and to the Intellectual Property; provided, however, that, when applicable, the Company shall own the copyrights in all copyrightable works included in the Intellectual Property pursuant to the "work-made-for-hire" doctrine (rather than by assignment), as such term is defined in the 1976 Copyright Act. All Intellectual Property shall be owned by the Company irrespective of any copyright notices or confidentiality legends to the contrary which may be placed on such works by Employee or by others. Employee shall ensure that all copyright notices and confidentiality legends on all work product authored by Employee or anyone acting on his/her behalf shall conform to the Company's practices and shall specify the Company as the owner of the work. The Company hereby provides notice to Employee that the obligation to assign does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Employee's own time, unless (a) the invention relates (i) to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by Employee for the Company. |
b. | Keep Records. Employee shall keep and maintain, or cause to be kept and maintained by anyone acting on his/her behalf, adequate and current written records of all Intellectual Property in the form of notes, sketches, drawings, computer files, reports or other documents relating thereto. Such records shall be and shall remain the exclusive property of the Company and shall be available to the Company at all times during the term of this Agreement. |
c. | Assistance. Employee shall supply all assistance requested in securing for Company's benefit any patent, copyright, trademark, service mark, license, right or other evidence of ownership of any such Intellectual Property, and will provide full information regarding any such item and execute all appropriate documentation prepared by Company in applying or otherwise registering, in Company's name, all rights to any such item or the defense and protection of such Intellectual Property. |
d. | Prior Inventions. Employee has disclosed to the Company any continuing obligations to any third party with respect to Intellectual Property. Employee claims no rights to any inventions created prior to his/her employment for which a patent application has not previously been filed, unless he/she has described them in detail on a schedule attached to this Agreement. |
e. | Trade Secret Provisions. The provisions in Paragraph 1 with regard to Trade Secrets and the TSA shall apply as well in the context of the parties' Intellectual Property rights and obligations. |
(a) | I agree that the restrictions contained in this Agreement are reasonable and necessary to protect the Company's legitimate business interests and that full compliance with the terms of this Agreement will not prevent me from earning a livelihood following the termination of my employment, and that these covenants do not place undue restraint on me. |
(b) | Because the Company's current base of operations is in Illinois and my connections thereto, (i) this Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, where this Agreement is entered into, without giving effect to any conflict of law provisions, and (ii) I consent to personal jurisdiction and the exclusive jurisdiction of the state and federal courts of Illinois with respect to any claim, dispute or declaration arising out of this Agreement. |
(c) | In the event of a breach or a threatened breach of this Agreement, I acknowledge that the Company will face irreparable injury which may be difficult to calculate in dollar terms and that the Company shall be entitled, in addition to all remedies otherwise available in law or in equity, to temporary restraining orders and preliminary and final injunctions enjoining such breach or threatened breach in any court of competent jurisdiction without the necessity of posting a surety bond, as well as to obtain an equitable accounting of all profits or benefits arising out of any violation of this Agreement. |
(d) | I agree that if a court determines that any of the provisions in this Agreement is unenforceable or unreasonable in duration, territory, or scope, then that court shall modify those provisions so they are reasonable and enforceable, and enforce those provisions as modified. |
(e) | If any phrase or provision of this Agreement is declared invalid or unenforceable by a court of competent jurisdiction, that phrase, clause or |
(f) | Notwithstanding the foregoing provisions of this Agreement, the non-competition provisions of Paragraph 2 above shall not restrict Employee from performing legal services as a licensed attorney for a Competing Business to the extent that the attorney licensure requirements in the applicable jurisdiction do not permit Employee to agree to the otherwise applicable restrictions of Paragraph 2. |
(g) | Waiver of any of the provisions of this Agreement by the Company in any particular instance shall not be deemed to be a waiver of any provision in any other instance and/or of the Company's other rights at law or under this Agreement. |
(h) | I agree that the Company may assign this Agreement to its successors and assigns and that any such successor or assign may stand in the Company's shoes for purposes of enforcing this Agreement. |
(i) | I agree to reimburse the Company for all attorneys' fees, costs, and expenses that it reasonably incurs in connection with enforcing its rights and remedies under this Agreement, but only to the extent the Company is ultimately the prevailing party in the applicable legal proceedings. |
(j) | If I violate this Agreement, then the restrictions set out in Paragraphs 2 - 6 shall be extended by the same period of time as the period of time during which the violation(s) occurred. |
(k) | I fully understand my obligations in this Agreement, have had full and complete opportunity to discuss and resolve any ambiguities or uncertainties regarding these covenants before signing this Agreement, and have voluntarily agreed to comply with these covenants for their stated terms. |
a) | The starting date of the offer will be the Grant Date, and this offer conforms to general ruling no. 336 of the Chilean superintendence of securities and insurance; |
b) | The offer deals with securities not registered in the registry of securities or in the registry of foreign securities of the Chilean superintendence of securities and insurance, and therefore such securities are not subject to its oversight; |
c) | The issuer is not obligated to provide public information in Chile regarding the foreign securities, since such securities are not registered with the Chilean superintendence of securities and insurance; and |
d) | The foreign securities shall not be subject to public offering as long as they are not registered with the corresponding registry of securities in Chile. |
a) | La fecha de inicio de la oferta será el de la fecha de otorgamiento y esta oferta se acoge a la norma de carácter general n° 336 de la superintendencia de valores y seguros chilena; |
b) | La oferta versa sobre valores no inscritos en el registro de valores o en el registro de valores extranjeros que lleva la superintendencia de valores y seguros chilena, por lo que tales valores no están sujetos a la fiscalización de ésta; |
c) | Por tratar de valores no inscritos no existe la obligación por parte del emisor de entregar en chile información pública respecto de esos valores; y |
d) | Esos valores no podrán ser objeto de oferta pública mientras no sean inscritos en el registro de valores correspondiente. |
(b) | he resigns such office of director; |
(a) | if the Executive is, at the relevant time, a director of the Company or any Group Company and the Executive ceases to hold such office of director because: |
(b) | he resigns such office of director; |
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Earnings before income tax provision | $ | 5,975 | $ | 4,853 | $ | 5,144 | $ | 5,311 | $ | 3,557 | $ | 4,047 | ||||||||||||
Add: | ||||||||||||||||||||||||
Minority interests | — | — | — | — | — | 5 | ||||||||||||||||||
Fixed charges | 2,228 | 2,379 | 2,367 | 2,054 | 1,376 | 1,383 | ||||||||||||||||||
Amortization of capitalized interest | — | — | — | 1 | 6 | 7 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Equity earnings | (106 | ) | (61 | ) | (37 | ) | (315 | ) | (617 | ) | (496 | ) | ||||||||||||
Capitalized interest | — | — | — | (1 | ) | (6 | ) | (7 | ) | |||||||||||||||
Earnings as defined | $ | 8,097 | $ | 7,171 | $ | 7,474 | $ | 7,050 | $ | 4,316 | $ | 4,939 | ||||||||||||
Interest expense, net of capitalized interest | $ | 622 | $ | 728 | $ | 628 | $ | 632 | $ | 168 | $ | 193 | ||||||||||||
Capitalized interest | — | — | — | 1 | 6 | 7 | ||||||||||||||||||
Portions of rentals representative of the interest factor | 1,606 | 1,651 | 1,739 | 1,421 | 1,202 | 1,183 | ||||||||||||||||||
Fixed charges as defined | $ | 2,228 | $ | 2,379 | $ | 2,367 | $ | 2,054 | $ | 1,376 | $ | 1,383 | ||||||||||||
Ratio of earnings to fixed charges | 3.63 | 3.01 | 3.16 | 3.43 | 3.14 | 3.57 |
Name | State or Country of Incorporation |
Walgreen Arizona Drug Co. | Arizona |
Superior Bermuda GP | Bermuda |
Walgreens Boots Alliance Holdings LLC | Delaware |
Waltrust Properties, Inc. | Delaware |
Walgreens Specialty Pharmacy, LLC | Delaware |
Prime Therapeutics Specialty Pharmacy LLC | Delaware |
WBA Investments, Inc. | Delaware |
United Company of Pharmacists SAE | Egypt |
Alliance Healthcare Répartition | France |
Alliance Healthcare Deutschland AG | Germany |
Walgreens Boots Alliance (Hong Kong) Investments Limited | Hong Kong |
Walgreen Co. | Illinois |
Bond Drug Company of Illinois, LLC | Illinois |
Boots Retail (Ireland) Limited | Ireland |
Walgreen Louisiana Co., Inc. | Louisiana |
Walgreen International S.à r.l. | Luxembourg |
Superior Luxco 1 S.à r.l. | Luxembourg |
Walgreen Investments Luxembourg S.à r.l. | Luxembourg |
WBA Luxembourg 7 S.à.r.l. | Luxembourg |
WBA Luxembourg 6 S.à r.l. | Luxembourg |
Farmacias Benavides S.A.B. de C.V. | Mexico |
Walgreen Eastern Co., Inc. | New York |
Duane Reade | New York |
Walgreen of Puerto Rico, Inc. | Puerto Rico |
FARMEXPERT D.C.I. SRL | Romania |
Alliance Healthcare España S.A. | Spain |
Alliance Healthcare Ecza Deposu Anonim Şirketi | Turkey |
Boots UK Limited | United Kingdom |
The Boots Company PLC | United Kingdom |
Alliance Healthcare (Distribution) Limited | United Kingdom |
Alliance Boots Holdings Limited | United Kingdom |
WBA Acquisitions UK Holdco 7 Limited | United Kingdom |
Superior Acquisitions Limited | United Kingdom |
WBAD Holdings Limited | United Kingdom |
WBA International Limited | United Kingdom |
Walgreens Boots Alliance Limited | United Kingdom |
WBA Acquisitions UK Topco Limited | United Kingdom |
Superior Holdings Limited | United Kingdom |
Walgreens Boots Alliance Scottish LP | United Kingdom |
1. | I have reviewed this annual report on Form 10-K of Walgreens Boots Alliance, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ | Stefano Pessina | Chief Executive Officer | Date: October 11, 2018 |
Stefano Pessina |
1. | I have reviewed this annual report on Form 10-K of Walgreens Boots Alliance, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ | James Kehoe | Global Chief Financial Officer | Date: October 11, 2018 |
James Kehoe |
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Document and Entity Information - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Sep. 30, 2018 |
Feb. 28, 2018 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Walgreens Boots Alliance, Inc. | ||
Entity Central Index Key | 0001618921 | ||
Current Fiscal Year End Date | --08-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Aug. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | false | ||
Entity Common Stock, Shares Outstanding | 949,164,514 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Shell Company | false | ||
Entity Public Float | $ 58.2 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Shareholders' Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 32,000,000 | 32,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 3,200,000,000 | 3,200,000,000 |
Common stock, issued (in shares) | 1,172,513,618 | 1,172,513,618 |
Treasury stock, issued (in shares) | 220,380,200 | 148,664,548 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Comprehensive income: | |||
Net earnings | $ 5,031 | $ 4,101 | $ 4,191 |
Other comprehensive income (loss), net of tax: | |||
Pension/postretirement obligations | 240 | 73 | (241) |
Unrealized gain on cash flow hedges | 3 | 4 | 3 |
Unrecognized (loss) on available-for-sale investments | 0 | (2) | (257) |
Share of other comprehensive income (loss) of equity method investments | 5 | (1) | (1) |
Currency translation adjustments | (198) | (169) | (2,338) |
Total other comprehensive income (loss) | 50 | (95) | (2,834) |
Total comprehensive income | 5,081 | 4,006 | 1,357 |
Comprehensive income (loss) attributable to noncontrolling interests | 8 | (13) | (39) |
Comprehensive income attributable to Walgreens Boots Alliance, Inc. | $ 5,073 | $ 4,019 | $ 1,396 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Cash flows from operating activities: | |||
Net earnings | $ 5,031,000,000 | $ 4,101,000,000 | $ 4,191,000,000 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
Depreciation and amortization | 1,770,000,000 | 1,654,000,000 | 1,718,000,000 |
Change in fair value of warrants and related amortization | 0 | 0 | 516,000,000 |
Gain on previously held equity interest | (337,000,000) | 0 | 0 |
Deferred income taxes | (322,000,000) | (434,000,000) | (442,000,000) |
Stock compensation expense | 130,000,000 | 91,000,000 | 115,000,000 |
Equity earnings from equity method investments | (244,000,000) | (143,000,000) | (81,000,000) |
Other | 296,000,000 | 364,000,000 | 148,000,000 |
Changes in operating assets and liabilities: | |||
Accounts receivable, net | (391,000,000) | (153,000,000) | 115,000,000 |
Inventories | 331,000,000 | 98,000,000 | (644,000,000) |
Other current assets | (22,000,000) | 0 | 66,000,000 |
Trade accounts payable | 1,323,000,000 | 1,690,000,000 | 1,572,000,000 |
Accrued expenses and other liabilities | 281,000,000 | (128,000,000) | 313,000,000 |
Income taxes | 694,000,000 | 44,000,000 | 202,000,000 |
Other non-current assets and liabilities | (275,000,000) | 67,000,000 | 58,000,000 |
Net cash provided by operating activities | 8,265,000,000 | 7,251,000,000 | 7,847,000,000 |
Cash flows from investing activities: | |||
Additions to property, plant and equipment | (1,367,000,000) | (1,351,000,000) | (1,325,000,000) |
Proceeds from sale leaseback transactions | 0 | 444,000,000 | 60,000,000 |
Proceeds from sale of businesses | 0 | 0 | 74,000,000 |
Proceeds from sale of other assets | 655,000,000 | 59,000,000 | 155,000,000 |
Business, investment and asset acquisitions, net of cash acquired | (4,793,000,000) | (88,000,000) | (126,000,000) |
Investment in AmerisourceBergen | 0 | 0 | (2,360,000,000) |
Other | 4,000,000 | 93,000,000 | 5,000,000 |
Net cash used for investing activities | (5,501,000,000) | (843,000,000) | (3,517,000,000) |
Cash flows from financing activities: | |||
Net change in short-term debt with maturities of 3 months or less | 586,000,000 | 33,000,000 | 29,000,000 |
Proceeds from debt | 5,900,000,000 | 0 | 5,991,000,000 |
Payments of debt | (4,890,000,000) | (6,196,000,000) | (791,000,000) |
Stock purchases | (5,228,000,000) | (5,220,000,000) | (1,152,000,000) |
Proceeds related to employee stock plans | 174,000,000 | 217,000,000 | 235,000,000 |
Cash dividends paid | (1,739,000,000) | (1,723,000,000) | (1,563,000,000) |
Other | (98,000,000) | (45,000,000) | (143,000,000) |
Net cash (used for) provided by financing activities | (5,295,000,000) | (12,934,000,000) | 2,606,000,000 |
Effect of exchange rate changes on cash and cash equivalents | 15,000,000 | 20,000,000 | (129,000,000) |
Changes in cash and cash equivalents: | |||
Net (decrease) increase in cash and cash equivalents | (2,516,000,000) | (6,506,000,000) | 6,807,000,000 |
Cash and cash equivalents at beginning of period | 3,301,000,000 | 9,807,000,000 | 3,000,000,000 |
Cash and cash equivalents at end of period | $ 785,000,000 | $ 3,301,000,000 | $ 9,807,000,000 |
Summary of major accounting policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of major accounting policies | Summary of major accounting policies Organization Walgreens Boots Alliance and its subsidiaries are a global, pharmacy-led health and wellbeing enterprise. Its operations are conducted through three reportable segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. See note 16, segment reporting, for further information. Basis of presentation The Consolidated Financial Statements include all subsidiaries in which the Company holds a controlling interest. The Company uses the equity-method of accounting for equity investments in less than majority-owned companies if the investment provides the ability to exercise significant influence. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company bases its estimates on the information available at the time, its experience and various other assumptions believed to be reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results may differ. The influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payer and customer relationships and terms, strategic transactions including acquisitions, changes in laws and general economic conditions in the markets in which the Company operates and other factors on the Company’s operations and net earnings for any period may not be comparable to the same period in previous years. Cash and cash equivalents Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. Credit and debit card receivables, which generally settle within two to seven business days, of $127 million and $98 million were included in cash and cash equivalents at August 31, 2018 and 2017, respectively. Restricted cash The Company is required to maintain cash deposits with certain banks which consist of deposits restricted under contractual agency agreements and cash restricted by law and other obligations. At August 31, 2018 and 2017, the amount of such restricted cash was $190 million and $202 million, respectively, and is reported in other current assets on the Consolidated Balance Sheets. Accounts receivable Accounts receivable are stated net of allowances for doubtful accounts. Accounts receivable balances primarily consist of trade receivables due from customers, including amounts due from third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies), clients and members. Trade receivables were $5.4 billion and $5.5 billion at August 31, 2018 and August 31, 2017, respectively. Other accounts receivable balances, which consist primarily of receivables from vendors and manufacturers, including receivables from AmerisourceBergen (see note 17, related parties), were $1.2 billion and $1.1 billion at August 31, 2018 and August 31, 2017, respectively. Charges to allowance for doubtful accounts are based on estimates of recoverability using both historical write-offs and specifically identified receivables. The allowance for doubtful accounts at August 31, 2018 and August 31, 2017 was $75 million and $158 million, respectively. Inventories The Company values inventories on a lower of cost and net realizable value or market. Inventories include product costs, inbound freight, direct labor, warehousing costs for retail pharmacy operations, overhead costs relating to the manufacture and distribution of products and vendor allowances not classified as a reduction of advertising expense. The Company’s Retail Pharmacy USA segment inventory is accounted for using the last-in-first-out (“LIFO”) method. The total carrying value of the segment inventory accounted for under the LIFO method was $6.7 billion and $5.9 billion at August 31, 2018 and 2017, respectively. At August 31, 2018 and 2017, Retail Pharmacy USA segment inventory would have been greater by $3.0 billion, if they had been valued on a lower of first-in-first-out (“FIFO”) cost and net realizable value. The Company’s Retail Pharmacy International and Pharmaceutical Wholesale segments’ inventory is primarily accounted for using the FIFO method. The total carrying value of the inventory for Retail Pharmacy International and Pharmaceutical Wholesale segments was $2.8 billion and $3.0 billion at August 31, 2018 and 2017, respectively. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Major repairs, which extend the useful life of an asset, are capitalized; routine maintenance and repairs are charged against earnings. Depreciation is provided on a straight-line basis over the estimated useful lives of owned assets. Leasehold improvements, equipment under capital lease and capital lease properties are amortized over their respective estimate of useful life or over the term of the lease, whichever is shorter. The majority of the Company’s fixtures and equipment uses the composite method of depreciation. Therefore, gains and losses on retirement or other disposition of such assets are included in earnings only when an operating location is closed, substantially remodeled or impaired. The following table summarizes the Company’s property, plant and equipment (in millions) and estimated useful lives (in years):
The Company capitalizes application development stage costs for internally developed software. These costs are amortized over a three to eight year period. Amortization expense for capitalized system development costs and software was $254 million in fiscal 2018, $245 million in fiscal 2017 and $238 million in fiscal 2016. Unamortized costs at August 31, 2018 and 2017 were $1.5 billion and $895 million, respectively. Depreciation and amortization expense for property, plant and equipment including capitalized system development costs and software was $1.4 billion in fiscal 2018, $1.3 billion in fiscal 2017 and $1.3 billion in fiscal 2016. Leases Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or the date the Company has the right to control the property. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales. Capital leases are recognized within property, plant and equipment and as a capital lease liability within accrued expenses and other liabilities and other non-current liabilities. Operating leases are expensed on a straight line basis over the lease term. See note 4, leases, for further information. Business combinations The Company allocates the fair value of purchase consideration to the tangible and intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair values of assets acquired and liabilities assumed requires estimates and the use of valuation techniques when a market value is not readily available. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is allocated to goodwill. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed. Goodwill and other intangible assets Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in business combinations. Acquired intangible assets are recorded at fair value. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value. As part of the Company’s impairment analysis, fair value of a reporting unit is determined using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. See note 6, goodwill and other intangible assets, for additional disclosure regarding the Company’s intangible assets. Equity method investments The Company uses the equity method of accounting for equity investments in companies if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee. The Company’s proportionate share of the net income or loss of these companies is included in consolidated net earnings. Judgment regarding the level of influence over each equity method investment includes considering key factors such as the Company’s ownership interest, representation on the board of directors, participation in policy-making decisions and material intra-entity transactions. The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. Factors considered by the Company when reviewing an equity method investment for impairment include the length of time (duration) and the extent (severity) to which the fair value of the equity method investment has been less than cost, the investee’s financial condition and near-term prospects and the intent and ability to hold the investment for a period of time sufficient to allow for anticipated recovery. An impairment that is other-than-temporary is recognized in the period identified. See note 5, equity method investments, for further information. Financial instruments The Company uses derivative instruments to hedge its exposure to interest rate and currency risks arising from operating and financing activities. In accordance with its risk management policies, the Company does not hold or issue derivative instruments for trading or speculative purposes. Derivatives are recognized on the Consolidated Balance Sheets at their fair values. When the Company becomes a party to a derivative instrument and intends to apply hedge accounting, it formally documents the hedge relationship and the risk management objective for undertaking the hedge which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. The accounting for changes in fair value of a derivative instrument depends on whether the Company had designated it in a qualifying hedging relationship and on the type of hedging relationship. The Company applies the following accounting policies:
Cash receipts or payments on a settlement of a derivative contract are reported in the Consolidated Statements of Cash Flows consistent with the nature of the underlying hedged item. For derivative instruments designated as hedges, the Company assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Highly effective means that cumulative changes in the fair value of the derivative are between 80% and 125% of the cumulative changes in the fair value of the hedged item. In addition, when the Company determines that a derivative is not highly effective as a hedge, hedge accounting is discontinued. When it is probable that a hedged forecasted transaction will not occur, the Company discontinues hedge accounting for the affected portion of the forecasted transaction and reclassifies any gains or losses in accumulated other comprehensive income (loss) to earnings in the Consolidated Statement of Earnings. When a derivative in a hedge relationship is terminated or the hedged item is sold, extinguished or terminated, hedge accounting is discontinued prospectively. Liabilities for facility closings The Company provides for future costs related to closed locations. The liability is based on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. The liability for facility closings, including locations closed under the Company’s restructuring actions, was $964 million as of August 31, 2018 and $718 million as of August 31, 2017. See note 4, leases, for further information. Pension and postretirement benefits The Company has various defined benefit pension plans that cover some of its non-U.S. employees. The Company also has a postretirement healthcare plan that covers qualifying U.S. employees. Eligibility and the level of benefits for these plans vary depending on participants’ status, date of hire and or length of service. Pension and postretirement plan expenses and valuations are dependent on assumptions used by third-party actuaries in calculating those amounts. These assumptions include discount rates, healthcare cost trends, long-term return on plan assets, retirement rates, mortality rates and other factors. The Company funds its pension plans in accordance with applicable regulations. See note 13, retirement benefits, for further information. Noncontrolling interests The Company presents noncontrolling interests as a component of equity on its Consolidated Balance Sheets and reports the portion of its earnings or loss for noncontrolling interest as net earnings attributable to noncontrolling interests in the Consolidated Statement of Earnings. Currency Assets and liabilities of non-U.S. dollar functional currency operations are translated into U.S. dollars at end-of-period exchange rates while revenues, expenses and cash flows are translated at average monthly exchange rates over the period. Equity is translated at historical exchange rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. Assets and liabilities not denominated in the functional currency are remeasured into the functional currency at end-of-period exchange rates, except for nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Revenues and expenses are recorded at average monthly exchange rates over the period, except for those expenses related to nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are generally included in selling, general and administrative expenses within the Consolidated Statements of Earnings. For all periods presented, there were no material operational gains or losses from foreign currency transactions. Commitments and contingencies On a quarterly basis, the Company assesses its liabilities and contingencies for outstanding legal proceedings and reserves are established on a case-by-case basis for those legal claims for which management concludes that it is probable that a loss will be incurred and that the amount of such loss can be reasonably estimated. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. With respect to litigation and other legal proceedings where the Company has determined that a loss is reasonably possible, the Company may be unable to estimate the amount or range of reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding such litigation and legal proceedings. The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. Therefore, it is possible that an unfavorable resolution of one or more pending litigation or other contingencies could have a material adverse effect on the Company’s Consolidated Financial Statements in a future fiscal period. Management’s assessment of current litigation and other legal proceedings, including the corresponding accruals, could change because of the discovery of facts with respect to legal actions or other proceedings pending against the Company which are not presently known. Adverse rulings or determinations by judges, juries, governmental authorities or other parties could also result in changes to management’s assessment of current liabilities and contingencies. Accordingly, the ultimate costs of resolving these claims may be substantially higher or lower than the amounts reserved. See note 10, commitments and contingencies, for further information. Revenue recognition Revenue is recognized when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable and (iv) collectability is reasonably assured. The following revenue recognition policies have been established for the Company’s reportable segments. Retail Pharmacy USA and Retail Pharmacy International The Company recognizes revenue, net of taxes and estimated returns, at the time it sells merchandise or dispenses prescription drugs to the customer. Returns are estimated using historical experience. The Company initially estimates revenue based on expected reimbursements from third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies) for dispensing prescription drugs. The estimates are based on historical experience and are updated to actual reimbursement amounts. Pharmaceutical Wholesale Wholesale revenue is recognized, net of taxes, upon shipment of goods, which is generally also the day of delivery. When the Company acts in the capacity of an agent or a logistics service provider, revenue is the fee received for the service and is recognized when the services have been performed. Cost of sales Cost of sales includes the purchase price of goods and cost of services rendered, store and warehouse inventory loss, inventory obsolescence, manufacturing costs and supplier rebates. In addition to product costs, cost of sales includes warehousing costs for retail operations, purchasing costs, freight costs, cash discounts and vendor allowances. Vendor allowances and supplier rebates Vendor allowances are principally received as a result of purchases, sales or promotion of vendors’ products. Allowances are generally recorded as a reduction of inventory and are recognized as a reduction of cost of sales when the related merchandise is sold. Allowances received for promoting vendors’ products are offset against advertising expense and result in a reduction of selling, general and administrative expenses to the extent of advertising costs incurred, with the excess treated as a reduction of inventory costs. Rebates or refunds received by the Company from its suppliers, mostly in cash, are considered as an adjustment of the prices of the supplier’s products purchased by the Company. Loyalty programs The Company’s loyalty rewards programs are accrued as a charge to cost of sales at the time a point is earned. Points are funded internally and through vendor participation and are credited to cost of sales at the time a vendor-sponsored point is earned. Breakage is recorded as points expire as a result of a member’s inactivity or if the points remain unredeemed after a certain period in accordance with the terms of the loyalty rewards program. Breakage income, which is reported in cost of sales, was not significant in fiscal 2018, 2017 or 2016. Selling, general and administrative expenses Selling, general and administrative expenses mainly consist of salaries and employee costs, occupancy costs, depreciation and amortization, credit and debit card fees and expenses directly related to stores. In addition, other costs included are headquarters’ expenses, advertising costs (net of vendor advertising allowances), wholesale warehousing costs and insurance. Advertising costs Advertising costs, which are reduced by the portion funded by vendors, are expensed as incurred or when services have been received. Net advertising expenses, which are included in selling, general and administrative expenses, were $665 million in fiscal 2018, $571 million in fiscal 2017 and $598 million in fiscal 2016. Impairment of long-lived assets The Company tests long-lived assets for impairment whenever events or circumstances indicate that a certain asset or asset group may be impaired. Once identified, the amount of the impairment is computed by comparing the carrying value of the assets to the fair value, which is primarily based on the discounted estimated future cash flows. Impairment charges included in selling, general and administrative expenses were $57 million in fiscal 2018. Impairment charges recognized in fiscal 2017 and 2016 were $234 million and $305 million, respectively. Stock compensation plans Stock based compensation is measured at fair value at the grant date. The Company grants stock options, performance shares and restricted units to the Company’s non-employee directors, officers and employees. The Company recognizes compensation expense on a straight-line basis over the substantive service period. See note 12, stock compensation plans, for more information on the Company’s stock-based compensation plans. Warrants Until their exercise in fiscal 2016, the warrants to acquire shares of AmerisourceBergen Corporation were accounted for as a derivative under ASC Topic 815, Derivatives and Hedging. The Company reports its warrants at fair value within other non-current assets in the Consolidated Balance Sheets and changes in the fair value of warrants are recognized in other income in the Consolidated Statements of Earnings. A deferred credit from the day-one valuation attributable to the warrants granted to Walgreens was amortized over the life of the warrants. See note 8, financial instruments, for additional disclosure regarding the Company’s warrants. Insurance The Company obtains insurance coverage for catastrophic exposures as well as those risks required by law to be insured. In general, the Company’s U.S. subsidiaries retain a significant portion of losses related to workers’ compensation, property, comprehensive general, pharmacist and vehicle liability, while non-U.S. subsidiaries manage their exposures through insurance coverage with third-party carriers. Management regularly reviews the probable outcome of claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage and the established accruals for liabilities. Liabilities for losses are recorded based upon the Company’s estimates for both claims incurred and claims incurred but not reported. The provisions are estimated in part by considering historical claims experience, demographic factors and other actuarial assumptions. Income taxes The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based upon the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. In determining the provision for income taxes, the Company uses income, permanent differences between book and tax income, the relative proportion of foreign and domestic income, enacted statutory income tax rates, projections of income subject to Subpart F rules and unrecognized tax benefits related to current year results. Discrete events such as the assessment of the ultimate outcome of tax audits, audit settlements, recognizing previously unrecognized tax benefits due to lapsing of the applicable statute of limitations, recognizing or de-recognizing benefits of deferred tax assets due to future year financial statement projections and changes in tax laws are recognized in the period in which they occur. The Company is subject to routine income tax audits that occur periodically in the normal course of business. U.S. federal, state, local and foreign tax authorities raise questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the tax benefits associated with the various tax filing positions, the Company records a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. Adjustments are made to the liability for unrecognized tax benefits in the period in which the Company determines the issue is effectively settled with the tax authorities, the statute of limitations expires for the return containing the tax position or when more information becomes available. Earnings per share The dilutive effect of outstanding stock options on earnings per share is calculated using the treasury stock method. Stock options are anti-dilutive and excluded from the earnings per share calculation if the exercise price exceeds the average market price of the common shares. Outstanding options to purchase common shares that were anti-dilutive and excluded from earnings per share totaled 10.1 million, 3.9 million and 2.5 million in fiscal 2018, 2017 and 2016, respectively. New accounting pronouncements Adoption of new accounting pronouncements Accounting for hedging activities In August 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-12, Derivative and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU expands an entity’s ability to hedge nonfinancial and financial risk components and reduces complexity in fair value hedges of interest rate risk. It eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. This ASU is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance during the third fiscal quarter of 2018. The adoption did not have any impact on the Company’s results of operations, cash flows or financial position. Measurement of inventory In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU simplifies current accounting treatments by requiring entities to measure most inventories at “the lower of cost and net realizable value” rather than using lower of cost or market. This guidance does not apply to inventories measured using last-in, first-out method or the retail inventory method. This ASU is effective for fiscal years beginning after December 15, 2016 (fiscal 2018), and interim periods within those fiscal years. The Company adopted this guidance on a prospective basis at the beginning of fiscal 2018 and adoption did not have a material impact on the Company’s results of operations, cash flows or financial position. New accounting pronouncements not yet adopted Intangibles – goodwill and other – internal-use software In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40). This ASU addresses customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019 (fiscal 2021), and interim periods within those fiscal years, with early adoption permitted. The amendments in this ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position or results of operations. Compensation – retirement benefits – defined benefit plans In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement benefits (Topic 715-20). This ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 (fiscal 2022) and must be applied on a retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial position. Fair value measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The ASU adds new disclosure requirements for Level 3 measurements. This ASU is effective for fiscal years beginning after December 15, 2019 (fiscal 2021), and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's disclosures. Compensation – stock compensation In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718). This ASU eliminated most of the differences between accounting guidance for share-based compensation granted to nonemployees and the guidance for share-based compensation granted to employees. The ASU supersedes the guidance for nonemployees and expands the scope of the guidance for employees to include both. This ASU is effective for annual periods beginning after December 15, 2018 (fiscal 2020), and interim periods within those years. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial position. Accounting for reclassification of certain tax effects from accumulated other comprehensive income In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU addresses the income tax effects of items in accumulated other comprehensive income (“AOCI”) which were originally recognized in other comprehensive income, rather than in income from continuing operations. Specifically, it permits a reclassification from AOCI to retained earnings for the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate resulting from the U.S. tax law changes enacted in December 2017. It also requires certain disclosures about these reclassifications. This ASU is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied either on a prospective basis in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. tax law changes are recognized. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position. Presentation of net periodic pension cost and net periodic postretirement benefit cost In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension cost and net periodic postretirement cost in the same line item in the statement of earnings as other compensation costs arising from services rendered by the related employees during the period. The other net cost components are required to be presented in the statement of earnings separately from the service cost component and outside a subtotal of income from operations. Additionally, the line item used in the statement of earnings to present the other net cost components must be disclosed in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, and must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Restricted cash In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Statement of Cash Flows. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s Statement of Cash Flows. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Tax accounting for intra-entity asset transfers In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Topic 740, Income Taxes, prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this ASU require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), including interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a modified retrospective basis through a cumulative effect adjustment recognized directly to retained earnings as of the date of adoption. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Classification of certain cash receipts and cash payments In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period and the new guidance must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s Statement of Cash Flows. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. Subsequently, the FASB has issued additional ASUs which further clarify this guidance. This ASU increases the transparency and comparability of organizations by requiring the capitalization of substantially all leases on the balance sheet and disclosures of key information about leasing arrangements. Under this new guidance, at the lease commencement date, a lessee recognizes a right- of-use asset and lease liability, which is initially measured at the present value of the future lease payments. For income statement purposes, a dual model was retained for lessees, requiring leases to be classified as either operating or finance leases. Under the operating lease model, lease expense is recognized on a straight-line basis over the lease term. Under the finance lease model, interest on the lease liability is recognized separately from amortization of the right-of-use asset. The new guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented (fiscal 2018) using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. In July 2018, a new ASU was issued to provide relief to the companies from restating the comparative period. Pursuant to this ASU, WBA will not restate comparative periods presented in the Company’s financial statements in the period of adoption. The Company will adopt this ASU on September 1, 2019 (fiscal 2020). The Company has begun evaluating and planning for adoption and implementation of this ASU, including implementing a new global lease accounting system, evaluating practical expedient and accounting policy elections and assessing the overall financial statement impact. This ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is being evaluated. The impact of this ASU is non-cash in nature and will not affect the Company’s cash flows. Classification and measurement of financial instruments In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Subsequently, the FASB has issued additional ASUs which further clarify this guidance. This ASU requires equity investments (except those under the equity method of accounting or those that result in the consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost less impairment, if any, and changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This simplifies the impairment assessment of equity investments previous held at cost. Separate presentation of financial assets and liabilities by measurement category is required. This ASU is effective prospectively for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. Early application is permitted, for fiscal years or interim periods that have not yet been issued as of the beginning of the fiscal year of adoption. The new guidance must be applied on a modified retrospective basis, with the exception of the amendments related to the measurement alternative for equity investments without readily determinable fair values, which must be applied on a prospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Revenue recognition on contracts with customers In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides a single principles-based revenue recognition model with a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued additional ASUs which further clarify this guidance and also defer the effective date by one year to fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. The Company will use the modified retrospective method as the transition approach when adopting this new accounting guidance on September 1, 2018 (fiscal 2019). The Company has evaluated the effect of adopting this new accounting guidance, the related amendments and the interpretive guidance on the Company's Consolidated Financial Statements and determined that adoption will not have a material impact on the Company’s results of operations and will be limited to immaterial changes to recognition of revenues related to loyalty programs and gift cards, in addition to disaggregated revenue disclosures. Specifically, the Company currently uses the cost approach to account for loyalty programs. Upon adoption, the Company will use the deferred revenue approach. Additionally, gift card breakage currently is recognized at point of sale by the Retail Pharmacy USA segment and upon expiration primarily within the Retail Pharmacy International segment. Upon adoption of the new revenue recognition guidance, all breakage will be recognized based on the pattern in which the customer redeems the gift cards. |
Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Acquisition of certain Rite Aid assets On September 19, 2017, the Company announced that it had secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid for $4.375 billion in cash and other consideration. The purchases of these stores have been accounted for as business combinations and occurred in waves during fiscal 2018. The Company purchased 1,932 stores for total cash consideration of $4.2 billion for the fiscal year ended August 31, 2018. The transition of the first distribution center and related inventory occurred in September 2018 and the transition of the remaining two distribution centers and related inventory remains subject to closing conditions set forth in the amended and restated asset purchase agreement. As of August 31, 2018, the Company had not completed the analysis to assign fair values to all assets acquired and liabilities assumed and therefore the purchase price allocation has not been finalized. The preliminary purchase price allocation will be subject to further refinement and may result in material changes as the Company is awaiting additional information to complete its assessment. During the twelve months ended August 31, 2018, the Company recorded certain measurement period adjustments based on additional information primarily to deferred income taxes, other non-current liabilities and inventories, which did not have a material impact on goodwill. The following table summarizes the consideration for the purchases and the preliminary amounts of identified assets acquired and liabilities assumed as of the fiscal year ended August 31, 2018.
The preliminary identified definite-lived intangible assets were as follows:
Consideration includes cash of $4,157 million and the fair value of the option granted to Rite Aid to become a member of the Company’s group purchasing organization, Walgreens Boots Alliance Development GmbH. The fair value for this option was determined using the income approach methodology. The fair value estimates are based on the market compensation for such services and appropriate discount rate, as relevant, that market participants would consider when estimating fair values. The goodwill of $1,344 million arising from the business combinations primarily reflects the expected operational synergies and cost savings generated from the Store Optimization Program as well as the expected growth from new customers. See note 3, exit and disposal activities, for additional information. The goodwill was allocated to the Retail Pharmacy USA segment. Substantially all of the goodwill recognized is expected to be deductible for income tax purposes. The fair value for customer relationships was determined using the multi-period excess earnings method, a form of the income approach. Real property fair values were determined using primarily the income approach and sales comparison approach. The fair value measurements of the intangible assets are based on significant inputs not observable in the market and thus represent Level 3 measurements. The fair value estimates for the intangible assets are based on projected discounted cash flows, historical and projected financial information and attrition rates, as relevant, that market participants would consider when estimating fair values. The following table presents supplemental unaudited condensed pro forma consolidated sales for the fiscal years ended 2018 and 2017 as if all 1,932 stores were acquired on September 1, 2016. Pro forma net earnings of the Company, assuming these purchases had occurred at the beginning of each period presented, would not be materially different from the results reported. See note 3, exit and disposal activities, for additional information. The unaudited condensed pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company’s results would have been had the purchases occurred at the beginning of the periods presented or results which may occur in the future.
Actual sales from acquired Rite Aid stores for the fiscal year ended 2018 included in the Consolidated Statement of Earnings are as follows:
The 1,932 Rite Aid stores acquired did not have a material impact on net earnings of the Company for the fiscal year ended 2018. AllianceRx Walgreens Prime On March 31, 2017, Walgreens Boots Alliance and pharmacy benefit manager Prime Therapeutics LLC (“Prime”) closed a transaction to form a combined central specialty pharmacy and mail services company AllianceRx Walgreens Prime, as part of a strategic alliance. AllianceRx Walgreens Prime is consolidated by Walgreens Boots Alliance and reported within the Retail Pharmacy USA division in its financial statements. The Company accounted for this acquisition of Prime’s specialty pharmacy and mail services business as a business combination involving noncash purchase consideration of $720 million consisting of the issuance of an equity interest in AllianceRx Walgreens Prime. The Company has completed the purchase accounting for the AllianceRx Walgreens Prime transaction. The following table summarizes the consideration for the acquisition and the amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions).
The identified intangible assets primarily include payer contracts. These contracts are estimated to have a weighted average useful life of 15 years. The goodwill of $103 million arising from the transaction consists of expected purchasing synergies, operating efficiencies by benchmarking performance and applying best practices across the combined company, consolidation of operations, reductions in selling, general and administrative expenses and combining workforces. Substantially all of the goodwill recognized is not expected to be deductible for income tax purposes. In accordance with ASC Topic 810, Consolidation, the noncontrolling interest was recognized based on its proportionate interest in the identifiable net assets of AllianceRx Walgreens Prime. The difference between the carrying amount of the noncontrolling interest and the fair value recognized as consideration in the business combination is recognized as additional paid in capital. Pro forma net earnings and sales of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported. The acquisition did not have a material impact on net earnings or sales of the Company for fiscal 2017. |
Exit and disposal activities |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exit and disposal activities | Exit and disposal activities Store Optimization Program On October 24, 2017, the Company’s Board of Directors approved a plan to implement a program (the “Store Optimization Program”) as part of an initiative to optimize store locations through the planned closure of approximately 600 stores and related assets within the Company’s Retail Pharmacy USA segment upon completion of the acquisition of certain stores and related assets from Rite Aid. The actions under the Store Optimization Program commenced in March 2018 and are expected to take place over an 18 month period. The Company currently estimates that it will recognize cumulative pre-tax charges to its GAAP financial results of approximately $450 million, including costs associated with lease obligations and other real estate costs, employee severance and other exit costs. The Company expects to incur pre-tax charges of approximately $270 million for lease obligations and other real estate costs and approximately $180 million for employee severance and other exit costs. The Company estimates that substantially all of these cumulative pre-tax charges will result in cash expenditures. Costs related to the Store Optimization Program, which were primarily recorded in selling, general and administrative expenses for the Company's Retail Pharmacy USA segment included in the fiscal year ended August 31, 2018, are as follows (in millions):
The changes in liabilities related to the Store Optimization Program for the fiscal year ended August 31, 2018 include the following (in millions):
Cost Transformation Program On April 8, 2015, the Walgreens Boots Alliance Board of Directors approved a plan to implement a restructuring program (the “Cost Transformation Program”) as part of an initiative to reduce costs and increase operating efficiencies. The Cost Transformation Program implemented and built on the cost-reduction initiative previously announced by the Company on August 6, 2014 and included plans to close stores across the U.S.; reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions. The actions under the Cost Transformation Program focused primarily on the Retail Pharmacy USA segment, but included activities from all segments. The Company completed the Cost Transformation Program in the fourth quarter of fiscal 2017. The changes in liabilities related to the Cost Transformation Program include the following (in millions):
Total costs by segment, which were primarily recorded in selling, general and administrative expenses included in the fiscal year ended August 31, 2017 and August 31, 2016, are as follows (in millions):
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Annual minimum rental commitments for all leases having an initial or remaining non-cancelable term of more than one year are shown below (in millions):
The capital and finance lease amounts include $813 million of imputed interest. Total minimum lease payments have not been reduced by minimum sublease rentals of $331 million due in the future under non-cancelable subleases. The Company continuously evaluates its real estate portfolio in conjunction with its capital needs. Historically, the Company has entered into several sale-leaseback transactions. In fiscal 2018, the Company did not record any proceeds from sale-leaseback transactions. In fiscal 2017 and 2016, the Company recorded proceeds from sale-leaseback transactions of $444 million and $60 million, respectively. In fiscal 2018, 2017 and 2016, the Company recorded charges of $129 million, $394 million and $127 million, respectively, for facilities that were closed or relocated. These charges are reported in selling, general and administrative expenses in the Consolidated Statements of Earnings. The changes in liability for facility closings and related lease termination charges include the following (in millions):
The Company remains secondarily liable on 16 leases for which the maximum potential undiscounted future payments are $22 million at August 31, 2018. These lease option dates vary, with some lease terms extending up to 2039. Rental expense, which includes common area maintenance, insurance and taxes, where appropriate, was as follows (in millions):
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Equity method investments |
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Aug. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity method investments | Equity method investments Equity method investments as of August 31, 2018 and 2017 were as follows (in millions, except percentages):
AmerisourceBergen Corporation (“AmerisourceBergen”) investment As of August 31, 2018 and 2017, the Company owned 56,854,867 AmerisourceBergen common shares, representing approximately 26% of the outstanding AmerisourceBergen common stock. The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings attributable to the Company’s investment being classified within the operating income of its Pharmaceutical Wholesale 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 from AmerisourceBergen are reported as a separate line in the Consolidated Statements of Earnings. The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at August 31, 2018 was $5.1 billion. As of August 31, 2018, the Company’s investment in AmerisourceBergen carrying value 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 investments in Guangzhou Pharmaceuticals Corporation (“Guangzhou Pharmaceuticals”) and Nanjing Pharmaceutical Corporation Limited, the Company’s pharmaceutical wholesale investments in China; its investment in Sinopharm Holding Guoda Drugstores Co., Ltd., the Company's retail pharmacy investment in China and the Company’s investment in Option Care Inc. in the U.S. The Company reported $53 million, $8 million and $44 million of post-tax equity earnings from other equity method investments, including equity method investments classified as operating, for the fiscal years ended 2018, 2017 and 2016, respectively. During the fiscal year ended August 31, 2018, the Company recorded an impairment of $170 million in its equity interest in Guangzhou Pharmaceuticals, which was included in other income (expense) in the Consolidated Statement of Earnings. The fair value of the Company’s equity interest in Guangzhou Pharmaceuticals was determined using the proposed sale price and thus represents Level 3 measurement. During the fiscal year ended August 31, 2018, the Company completed the sale of a 30 percent interest in Guangzhou Pharmaceuticals to its joint venture partner Guangzhou Baiyunshan Pharmaceutical Holdings resulting in a $172 million reduction in carrying value and a $8 million cumulative translation adjustment loss. In July 2018, the Company completed the sale of its minority equity interest in Premise Health, resulting in an after-tax gain on disposition of $245 million and a reduction in carrying value of $76 million. Summarized financial information Summarized financial information for the Company’s equity method investments in aggregate is as follows: Balance sheet (in millions)
Statements of earnings (in millions)
The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported at the end of each fiscal year end.
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Goodwill and other intangible assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and other intangible assets | Goodwill and other intangible assets The fair values of the Company’s reporting units exceeded their carrying amounts ranging from approximately 11% to approximately 312%. The fair value of the Boots reporting unit, within the Retail Pharmacy International segment, is in excess of its carrying value by approximately 11%. The Company will continue to monitor the UK industry and market trends and the impact it may have on the Boots reporting unit. The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both. Changes in the carrying amount of goodwill by reportable segment consist of the following activity (in millions):
In fiscal 2018, the Company purchased 1,932 stores from Rite Aid for total consideration of $4.3 billion, resulting in an increase of $1,344 million to goodwill and $2,054 million to intangible assets. In fiscal 2017, Walgreens Boots Alliance and Prime closed a transaction to form a combined central specialty pharmacy and mail services company AllianceRx Walgreens Prime, resulting in an increase of $103 million to goodwill and $331 million to intangible assets. See note 2, acquisitions, for additional information. The carrying amount and accumulated amortization of intangible assets consists of the following (in millions):
Amortization expense for intangible assets was $493 million, $385 million and $396 million in fiscal 2018, 2017 and 2016, respectively. Estimated future annual amortization expense for the next five fiscal years for intangible assets recorded at August 31, 2018 is as follows (in millions):
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Debt consists of the following (all amounts are presented in millions of U.S. dollars and debt issuances are denominated in U.S. dollars, unless otherwise noted)
At August 31, 2018, the future maturities of short-term and long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations (see note 4, leases, for the future lease obligation maturities), consisted of the following (in millions):
August 2018 Revolving Credit Agreement On August 29, 2018, the Company entered into a revolving credit agreement (the “2018 Revolving Credit Agreement”) with the lenders and letter of credit issuers from time to time party thereto. The 2018 Revolving Credit Agreement is an unsecured revolving credit facility with an aggregate commitment in the amount of $3.5 billion, with a letter of credit subfacility commitment amount of $500 million. The facility termination date is the earlier of (a) August 29, 2023, subject to the extension thereof pursuant to the 2018 Revolving Credit Agreement and (b) the date of termination in whole of the aggregate amount of the revolving commitments pursuant to the 2018 Revolving Credit Agreement. August 2017 Credit Agreements On August 24, 2017, the Company entered into a $1.0 billion revolving credit agreement with the lenders from time to time party thereto (the “August 2017 Revolving Credit Agreement”) and a $1.0 billion term loan credit agreement with Sumitomo Mitsui Banking Corporation (the “2017 Term Loan Credit Agreement”). The August 2017 Revolving Credit Agreement is an unsecured revolving credit facility with a facility termination date of the earlier of (a) January 31, 2019, subject to any extension thereof pursuant to the terms of the August 2017 Revolving Credit Agreement and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder. As of August 31, 2018, there were no borrowings outstanding under the August 2017 Revolving Credit Agreement. The 2017 Term Loan Credit Agreement is an unsecured “multi-draw” term loan facility which matures on March 30, 2019. As of August 31, 2018, Walgreens Boots Alliance had $1.0 billion of borrowings outstanding under the 2017 Term Loan Credit Agreement, and no additional commitments were available. February 2017 Revolving Credit Agreement On February 1, 2017, the Company entered into a $1.0 billion revolving credit facility (as amended, the “February 2017 Revolving Credit Agreement”) with the lenders from time to time party thereto and, on August 1, 2017, the Company entered into an amendment agreement thereto. The terms and conditions of the February 2017 Revolving Credit Agreement were unchanged by the amendment other than the extension of the facility termination date to the earlier of (a) January 31, 2019 and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder. As of August 31, 2018, there were no borrowings outstanding under the February 2017 Revolving Credit Agreement. $6.0 billion note issuance On June 1, 2016, Walgreens Boots Alliance received net proceeds of $6.0 billion from a public offering of five series of U.S. dollar notes with varying maturities and interest rates. Because the merger with Rite Aid was not consummated on or prior to June 1, 2017, the 2018 notes, the 2021 notes and the 2023 notes were redeemed on June 5, 2017 under the special mandatory redemption terms of the indenture governing such notes. Walgreens Boots Alliance was required to redeem all of the 2018 notes, the 2021 notes and the 2023 notes then outstanding, at a special mandatory redemption price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest of approximately $1 million to, but excluding, the date of redemption. The 2026 notes and 2046 notes remain outstanding in accordance with their respective terms. Debt covenants Each of the Company’s credit facilities contain a covenant to maintain, as of the last day of each fiscal quarter, a ratio of consolidated debt to total capitalization not to exceed 0.60:1.00. The credit facilities contain various other customary covenants. Commercial paper The Company periodically borrows under its commercial paper program and may borrow under it in future periods. The Company had average daily short-term borrowings of $1.4 billion of commercial paper outstanding at a weighted average interest rate of 2.11% for the fiscal year ended August 31, 2018. The Company had no activity under its commercial paper program for the fiscal year ended August 31, 2017. Interest Interest paid was $577 million in fiscal 2018, $643 million in fiscal 2017 and $580 million in fiscal 2016. |
Financial instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial instruments | Financial instruments The Company uses derivative instruments to manage its exposure to interest rate and foreign currency exchange risks. The notional amount and fair value of derivative instruments outstanding were as follows (in millions):
The Company uses interest rate swaps to manage the interest rate exposure associated with some of its fixed-rate borrowings and designates them as fair value hedges. From time to time, the Company uses forward starting interest rates swaps to hedge its interest rate exposure of some of its anticipated debt issuance. The Company utilizes foreign currency forward contracts and other foreign currency derivatives to hedge significant committed and highly probable future transactions and cash flows denominated in currencies other than the functional currency of the Company or its subsidiaries. The Company has significant non-US dollar denominated net investments and uses foreign currency denominated financial instruments, specifically foreign currency derivatives and foreign currency denominated debt, to hedge its foreign currency risk. Fair value hedges The Company holds an interest rate swap converting $250 million of its 5.250% fixed rate notes to a floating interest rate based on the six-month LIBOR in arrears plus a constant spread. All swap termination dates coincide with the notes’ maturity date, January 15, 2019. These swaps were designated as fair value hedges. The gains and losses due to changes in fair value on the swaps and on the hedged notes attributable to interest rate risk did not have a material impact on the Company’s Financial Statements. The changes in fair value of the Company’s debt that was swapped from fixed to variable rate and designated as fair value hedges are included in long-term debt on the Consolidated Balance Sheets (see note 7, debt). No material gain or losses were recorded for ineffectiveness during fiscal 2018, 2017, or 2016. Derivatives not designated as hedges The Company enters into derivative transactions that are not designated as accounting hedges. These derivative instruments are economic hedges of foreign currency risks. The income and (expense) due to changes in fair value of these derivative instruments were recognized in earnings as follows (in millions):
Warrants On March 18, 2016, the Company exercised warrants to purchase 22,696,912 shares of AmerisourceBergen common stock at an exercise price of $51.50 per share for an aggregate exercise price payment of $1.17 billion. On August 25, 2016, the Company exercised additional warrants to purchase 22,696,912 shares of AmerisourceBergen common stock at an exercise price of $52.50 per share for an aggregate exercise price payment of $1.19 billion. See note 5, equity method investments, for further information. The Company reported its warrants at fair value. The income and (expense) due to changes in fair value of the warrants recognized in earnings were as follows (in millions):
The Company held no warrants to purchase AmerisourceBergen common stock on August 31, 2018 and 2017. Derivatives credit risk Counterparties to derivative financial instruments expose the Company to credit-related losses in the event of counterparty nonperformance, and the Company regularly monitors the credit worthiness of each counterparty. Derivatives offsetting The Company does not offset the fair value amounts of derivative instruments subject to master netting agreements in the Consolidated Balance Sheets. |
Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | Fair value measurements The Company measures certain assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In addition, it establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad Levels:
Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):
There were no transfers between Levels in fiscal 2018 or 2017. The Company reports its debt instruments under the guidance of ASC Topic 825, Financial Instruments, which requires disclosure of the fair value of the Company’s debt in the footnotes to the Consolidated Financial Statements. Unless otherwise noted, the fair value for all notes was determined based upon quoted market prices and therefore categorized as Level 1. See note 7, debt, for further information. The carrying values of accounts receivable and trade accounts payable approximated their respective fair values due to their short-term nature. |
Commitments and contingencies |
12 Months Ended |
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Aug. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies The Company is involved in legal proceedings, including litigation, arbitration and other claims, and investigations, inspections, audits, claims, inquiries and similar actions by pharmacy, healthcare, tax and other governmental authorities, arising in the normal course of the Company’s business, including the matters described below. Legal proceedings, in general, and securities, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. The Company also may be named from time to time in qui tam actions initiated by private third parties. In such actions, the private parties purport to act on behalf of federal or state governments, allege that false claims have been submitted for payment by the government and may receive an award if their claims are successful. After a private party has filed a qui tam action, the government must investigate the private party's claim and determine whether to intervene in and take control over the litigation. These actions may remain under seal while the government makes this determination. If the government declines to intervene, the private party may nonetheless continue to pursue the litigation on his or her own purporting to act on behalf of the government. From time to time, the Company is also involved in legal proceedings as a plaintiff involving antitrust, tax, contract, intellectual property and other matters. Gain contingencies, if any, are recognized when they are realized. The results of legal proceedings are often uncertain and difficult to predict, and the costs incurred in litigation can be substantial, regardless of the outcome. With respect to litigation and other legal proceedings where the Company has determined that a loss is reasonably possible, the Company is unable to estimate the amount or range of reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding such litigation and legal proceedings. The Company believes that its defenses and assertions in pending legal proceedings have merit, and does not believe that any of these pending matters, after consideration of applicable reserves and rights to indemnification, will have a material adverse effect on the Company’s consolidated financial position. However, substantial unanticipated verdicts, fines and rulings do sometimes occur. As a result, the Company could from time to time incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and/or its cash flows in the period in which the amounts are paid. On December 29, 2014, a putative shareholder filed a derivative action in federal court in the Northern District of Illinois against certain current and former directors and officers of Walgreen Co., and Walgreen Co. as a nominal defendant, arising out of certain public statements the Company made regarding its former fiscal 2016 goals. The action asserts claims for breach of fiduciary duty, waste and unjust enrichment. On April 10, 2015, the defendants filed a motion to dismiss. On May 18, 2015, the case was stayed in light of a securities class action that was filed on April 10, 2015. After a ruling issued on September 30, 2016 in the securities class action, which is described below, on November 3, 2016, the Court entered a stipulation and order extending the stay until the securities case is fully resolved. On April 10, 2015, a putative shareholder filed a securities class action in federal court in the Northern District of Illinois against Walgreen Co. and certain former officers of Walgreen Co. The action asserts claims for violation of the federal securities laws arising out of certain public statements the Company made regarding its former fiscal 2016 goals. On June 16, 2015, the Court entered an order appointing a lead plaintiff. Pursuant to the Court’s order, lead plaintiff filed an amended complaint on August 17, 2015, and defendants moved to dismiss the amended complaint on October 16, 2015. On September 30, 2016, the Court issued an order granting in part and denying in part defendants’ motion to dismiss. Defendants filed their answer to the amended complaint on November 4, 2016 and filed an amended answer on January 16, 2017. Plaintiff filed its motion for class certification on April 21, 2017. The Court granted plaintiff’s motion on March 29, 2018 and merits discovery is proceeding. As of August 31, 2017, the Company was aware of two putative class action lawsuits filed by purported Rite Aid stockholders against Rite Aid and its board of directors, Walgreens Boots Alliance and Victoria Merger Sub, Inc. for claims arising out of the transactions contemplated by the original Merger Agreement (prior to its amendment on January 29, 2017) (such transactions, the “Rite Aid Transactions”). One Rite Aid action was filed in the State of Pennsylvania in the Court of Common Pleas of Cumberland County (the “Pennsylvania action”), and one action was filed in the United States District Court for the Middle District of Pennsylvania (the “federal action”). The Pennsylvania action primarily alleged that the Rite Aid board of directors breached its fiduciary duties in connection with the Rite Aid Transactions by, among other things, agreeing to an unfair and inadequate price, agreeing to deal protection devices that preclude other bidders from making successful competing offers for Rite Aid, and failing to disclose all allegedly material information concerning the proposed merger, and also alleged that Walgreens Boots Alliance and Victoria Merger Sub, Inc. aided and abetted these alleged breaches of fiduciary duty. There has been no activity in this lawsuit since the complaint was filed. The federal action alleged, among other things, that Rite Aid and its board of directors disseminated an allegedly false and misleading proxy statement in connection with the Rite Aid Transactions. The plaintiffs in the federal action also filed a motion for preliminary injunction seeking to enjoin the Rite Aid shareholder vote relating to the Rite Aid Transactions. That motion was denied, and the matter was stayed. On March 17, 2017, plaintiffs moved to lift the stay to allow plaintiffs to file an amended complaint. That motion was granted, and plaintiffs filed their amended complaint on December 11, 2017, alleging that the Company and certain of its officers made false or misleading statements regarding the Rite Aid Transactions. On July 11, 2018, the Court denied the Company’s motion to dismiss, but narrowed the time scope of the subject statements. The Company filed an answer and affirmative defenses on August 8, 2018, and on August 24, 2018 filed a new motion to dismiss based on the named plaintiff’s lack of standing. The Company was also named as a defendant in eight putative class action lawsuits filed in the Court of Chancery of the State of Delaware (the “Delaware actions”). Those actions were consolidated, and plaintiffs filed a motion for preliminary injunction seeking to enjoin the Rite Aid shareholder vote relating to the Rite Aid Transactions. That motion was denied and the plaintiffs in the Delaware actions agreed to settle this matter for an immaterial amount. The Delaware actions all have been dismissed. In December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases filed against an array of defendants by various plaintiffs such as counties, cities, hospitals, Indian tribes and others, alleging claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation, captioned In re National Prescription Opiate Litigation (MDL No. 2804), is pending in the U.S. District Court for the Northern District of Ohio. The Company is named as a defendant in a subset of the cases included in this multidistrict litigation. The Company also has been named as a defendant in several lawsuits brought in state courts relating to opioid matters. The relief sought by various plaintiffs is compensatory and punitive damages, as well as injunctive relief. Additionally, the Company has received from the Attorney Generals of several states subpoenas, civil investigative demands, and/or other requests concerning opioid matters. On September 28, 2018, the Company announced that it had reached an agreement with the SEC to fully resolve an investigation into certain forward-looking financial goals and related disclosures by Walgreens. The disclosures at issue were made prior to the strategic combination with Alliance Boots and the merger pursuant to which Walgreens Boots Alliance became the parent holding company on December 31, 2014. The settlement does not involve any of the Company’s current officers or executives, nor does it allege intentional or reckless conduct by the Company. In agreeing to the settlement, the Company neither admitted nor denied the SEC’s allegations. Pursuant to the agreement with the SEC, the Company consented to the SEC’s issuance of an administrative order, and the Company paid a $34.5 million penalty, which was fully reserved for in the Company’s Consolidated Financial Statements as of August 31, 2018. The Company has been responding to a civil investigation involving allegations under the False Claims Act by a United States Attorney’s Office, working in conjunction with several states, regarding certain dispensing practices. The Company believes it has meritorious defenses against any action that might be brought against it. The Company is cooperating with this investigation, has entered into discussions with the government concerning a potential resolution of the matter, and has established reserves in relation to such a potential resolution. |
Income taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | Income taxes U.S. tax law changes The United States government enacted comprehensive tax legislation in December 2017. The accounting guidance on income taxes generally requires the effects of new tax legislation to be recognized in the period of enactment. The SEC issued Staff Accounting Bulletin 118 (“SAB 118”), which provides for a measurement period of up to one year from the enactment date for companies to complete their accounting for the U.S. tax law changes. In accordance with the SEC staff guidance, companies must reflect the income tax effects of those aspects of the U.S. tax law changes for which the accounting is complete. To the extent a company’s accounting for the income tax effect of certain provisions of the U.S. tax law changes is incomplete but the Company is able to determine a reasonable estimate, a provisional estimate must be recorded in the Company’s financial statements. If companies cannot determine a provisional estimate for the effects of an aspect of the U.S. tax law changes, they should continue applying the accounting guidance on income taxes on the basis of the provisions of the tax laws in effect immediately before the U.S. tax law changes were enacted. The U.S. tax law changes include broad and complex changes affecting the Company’s fiscal 2018 results. Among other things, the U.S. tax law changes reduce the federal corporate tax rate from 35% to 21% effective January 1, 2018 and require companies to immediately accrue for a one-time transition tax on certain un-repatriated earnings of foreign subsidiaries, which is payable over an eight year period. The U.S. tax law changes modify the taxation of foreign earnings, repeal of the deduction for domestic production activities, limit interest deductibility and establish a global intangible low tax income (GILTI) regime. The lower corporate income tax rate of 21% became effective January 1, 2018, resulting in a U.S. statutory federal tax rate of approximately 26% for fiscal 2018 and 21% for subsequent fiscal years, which provided a benefit to the Company’s fiscal 2018 tax provision of approximately $307 million. In connection with the Company’s ongoing analysis of the impact of the U.S. tax law changes, which is provisional and subject to change, the Company recorded a net tax benefit of $125 million during fiscal 2018. This provisional net tax benefit arises from a benefit of $648 million from re-measuring the Company’s net U.S. deferred tax liabilities, partially offset by the Company’s accrual for the transition tax and other U.S. tax law changes of $523 million. The Company’s estimated accrual for transition tax and other U.S. tax law changes decreased from $679 million as at May 31, 2018 to $523 million as at August 31, 2018 due to additional foreign tax credits and refinement of the Company’s estimated impact of tax law changes. Based on the effective dates of certain aspects of the U.S. tax law changes as well as estimated data required to be used in the corresponding measurement calculations, the Company’s analysis of the income tax effects of the U.S. tax law changes could not be finalized as of August 31, 2018. While the Company made reasonable estimates of the impact of the transition tax and the remeasurement of its deferred tax assets and liabilities, the final impact of the U.S. tax law changes may differ from these estimates, due to, among other things, changes in its interpretations and assumptions, technical clarifications from the U.S. Department of the Treasury and IRS and actions the Company may take. The Company expects to finalize such provisional amounts within the time period prescribed by SAB 118. The U.S. tax law changes created new rules that allow the Company to make an accounting policy election to either treat taxes due on future GILTI inclusions in taxable income as either a current period expense or reflect such inclusions related to temporary basis differences in the Company’s measurement of deferred taxes. The Company’s analysis of the new GILTI rules is not complete; therefore, the Company has not made a policy election regarding the tax accounting treatment of the GILTI tax. The U.S. tax law changes have the potential to change the Company’s assertions with respect to whether earnings of the Company’s foreign subsidiaries should remain indefinitely reinvested. The Company continues to evaluate these changes, therefore, the Company has not made any changes to its indefinite reinvestment assertions. The components of earnings before income tax provision were (in millions):
The provision for income taxes consists of the following (in millions):
The difference between the statutory federal income tax rate and the effective tax rate is as follows:
The deferred tax assets and liabilities included in the Consolidated Balance Sheets consist of the following (in millions):
As of August 31, 2018, the Company has recorded deferred tax assets for tax attributes of $2.4 billion, primarily reflecting the benefit of $426 million in U.S. federal, $43 million in state and $8.5 billion in non-U.S. ordinary and capital losses. In addition, these deferred tax assets include $58 million of income tax credits. Of these deferred tax assets, $2.1 billion will expire at various dates from 2019 through 2035. The residual deferred tax assets of $227 million have no expiry date. The Company believes it is more likely than not that the benefit from certain deferred tax assets will not be realized. In recognition of this risk, the Company has recorded a valuation allowance of $2.2 billion against those deferred tax assets as of August 31, 2018. Income taxes paid, net of refunds were $0.6 billion, $1.1 billion and $1.1 billion for fiscal years 2018, 2017 and 2016, respectively. ASC Topic 740, Income Taxes, provides guidance regarding the recognition, measurement, presentation and disclosure in the financial statement of tax positions taken or expected to be taken on a tax return, including the decision whether to file in a particular jurisdiction. As of August 31, 2018, unrecognized tax benefits of $482 million were reported as long-term liabilities on the Consolidated Balance Sheets while $61 million were reported as current tax liabilities. Both of these amounts include interest and penalties, when applicable. The following table provides a reconciliation of the total amounts of unrecognized tax benefits (in millions):
At August 31, 2018, 2017 and 2016, $331 million, $286 million and $237 million, respectively, of unrecognized tax benefits would favorably impact the effective tax rate if recognized. During the next twelve months, based on current knowledge, it is reasonably possible the amount of unrecognized tax benefits could decrease by up to $24 million due to anticipated tax audit settlements and the expirations of statutes of limitations associated with tax positions related to multiple tax jurisdictions. The Company recognizes interest and penalties in the income tax provision in its Consolidated Statements of Earnings. At August 31, 2018 and August 31, 2017, the Company had accrued interest and penalties of $87 million and $43 million, respectively. For the year ended August 31, 2018, the amount reported in income tax expense related to interest and penalties was $44 million. The Company files a consolidated U.S. federal income tax return as well as income tax returns in various states and multiple foreign jurisdictions. It is generally no longer under audit examinations for U.S. federal income tax purposes for any years prior to fiscal 2014. With few exceptions, it is no longer subject to state and local income tax examinations by tax authorities for years before fiscal 2007. In foreign tax jurisdictions, the Company is generally no longer subject to examination by the tax authorities in Luxembourg prior to 2013, in Germany prior to 2014, in France prior to 2008 and in Turkey prior to 2014. With respect to the United Kingdom, a number of specific issues remain open to examination by the tax authorities back to 2000. The Company has received tax holidays from Swiss cantonal income taxes relative to certain of its Swiss operations. The income tax holidays are expected to extend through September 2022. The holidays had a beneficial impact of $127 million and $142 million during fiscal 2018 and 2017, respectively. This benefit is primarily included as part of the foreign income taxed at non-U.S. rates line in the effective tax rate reconciliation table above. At August 31, 2018, it is not practicable for the Company to determine the amount of the unrecognized deferred tax liability it has with respect to temporary differences related to investments in foreign subsidiaries and foreign corporate joint ventures that are essentially permanent in duration. |
Stock compensation plans |
12 Months Ended |
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Aug. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock compensation plans | Stock compensation plans The Walgreens Boots Alliance, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) which became effective in fiscal 2013, provides for incentive compensation to the Company’s non-employee directors, officers and employees and consolidates several previously existing equity compensation plans into a single plan. The Company grants stock options, performance shares and restricted units under the Omnibus Plan. Performance shares issued under the Omnibus Plan offer performance-based incentive awards and equity-based awards to key employees. The fair value of each performance share granted assumes that performance goals will be achieved at 100 percent. If such goals are not met, no compensation expense is recognized and any recognized compensation expense is reversed. Restricted stock units are also equity-based awards with performance requirements that are granted to key employees. The performance shares and restricted stock unit awards are both subject to restrictions as to continuous employment except in the case of death, normal retirement or total and permanent disability. Total stock-based compensation expense for fiscal 2018, 2017 and 2016 was $130 million, $91 million and $115 million, respectively. The recognized tax benefit was $43 million, $78 million and $21 million for fiscal 2018, 2017 and 2016, respectively. Unrecognized compensation cost related to non-vested awards at August 31, 2018 was $147 million, which will be recognized over three years. |
Retirement benefits |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement benefits | Retirement benefits The Company sponsors several retirement plans, including defined benefit plans, defined contribution plans and a postretirement health plan. Defined benefit pension plans (non-U.S. plans) The Company has various defined benefit pension plans outside the United States. The principal defined benefit pension plan is the Boots Pension Plan (the “Boots Plan”), which covers certain employees in the United Kingdom. The Boots Plan is a funded final salary defined benefit plan providing pensions and death benefits to members. The Boots Plan was closed to future accrual effective July 1, 2010, with pensions calculated based on salaries up until that date. The Boots Plan is governed by a trustee board, which is independent of the Company. The plan is subject to a full funding actuarial valuation on a triennial basis. The investment strategy of the principal defined benefit pension plan is to hold approximately 85% of its assets in a diverse portfolio which aims to broadly match the characteristics of the plan’s liabilities by investing in bonds, derivatives and other fixed income assets, with the remainder invested in predominantly return-seeking assets. Interest rate and inflation rate swaps are also employed to complement the role of fixed and index-linked bond holdings in liability risk management. The following tables present classes of defined benefit pension plan assets by fair value hierarchy (in millions):
securities are valued at the last quoted bid price and typically are categorized as Level 2 investments.
and are valued using recently executed transactions, or quoted market prices for similar assets and liabilities in active markets, or for identical assets and liabilities in markets that are not active. If there have been no market transactions in a particular fixed income security, its fair value is calculated by pricing models that benchmark the security against other securities with actual market prices. Corporate bonds are categorized as Level 2 investments.
Components of net periodic pension costs for the defined benefit pension plans (in millions):
Change in benefit obligations for the defined benefit pension plans (in millions):
Change in plan assets for the defined benefit pension plans (in millions):
Amounts recognized in the Consolidated Balance Sheets (in millions):
Cumulative pre-tax amounts recognized in accumulated other comprehensive (income) loss (in millions):
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for all pension plans, including accumulated benefit obligations in excess of plan assets, at August 31 were as follows (in millions):
Estimated future benefit payments for the next 10 years from defined benefit pension plans to participants are as follows (in millions):
The assumptions used in accounting for the defined benefit pension plans were as follows:
Based on current actuarial estimates, the Company plans to make contributions of $29 million to its defined benefit pension plans in fiscal 2019 and expects to make contributions beyond 2019, which will vary based upon many factors, including the performance of the defined benefit pension plan assets. Defined contribution plans The principal retirement plan for U.S. employees is the Walgreen Profit-Sharing Retirement Trust, to which both the Company and participating employees contribute. The Company’s contribution is in the form of a guaranteed match which is approved annually by the Walgreen Co. Board of Directors and reviewed by the Compensation Committee and Finance Committee of the Walgreens Boots Alliance Board of Directors. The profit-sharing provision was an expense of $217 million, $221 million and $226 million in fiscal 2018, 2017 and 2016, respectively. The Company’s contributions were $366 million, $220 million and $225 million in fiscal 2018, 2017 and 2016, respectively. The Company also has certain contract based defined contribution arrangements. The principal one is the Alliance Healthcare & Boots Retirement Savings Plan, which is United Kingdom based and to which both the Company and participating employees contribute. The cost recognized in the Consolidated Statement of Earnings was $142 million in fiscal 2018, $112 million in fiscal 2017 and $130 million in fiscal 2016. Postretirement healthcare plan The Company provides certain health insurance benefits to retired U.S. employees who meet eligibility requirements, including age, years of service and date of hire. The costs of these benefits are accrued over the service life of the employee. An amendment to this plan during the fourth quarter of fiscal 2018 resulted in a reduction in the benefit plan obligation of $201 million and the recognition of a curtailment gain of $112 million. An amendment during the third quarter of fiscal 2017 resulted in the recognition of a curtailment gain of $109 million. The Company’s postretirement health benefit plan obligation was $146 million and $361 million in fiscal 2018 and 2017 respectively and is not funded. The expected benefit to be paid net of the estimated federal subsidy during fiscal year 2019 is $11 million. |
Capital stock |
12 Months Ended |
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Aug. 31, 2018 | |
Capital Stock [Abstract] | |
Capital stock | Capital stock In connection with the Company’s capital policy, the Board of Directors has authorized share repurchase programs. In April 2017, Walgreens Boots Alliance authorized a stock repurchase program (the “April 2017 stock repurchase program”), which authorized the repurchase of up to $1.0 billion of Walgreens Boots Alliance common stock prior to the program’s expiration on December 31, 2017. In May 2017, the Company completed the April 2017 stock repurchase program, purchasing 11.8 million shares. In June 2017, Walgreens Boots Alliance authorized a new stock repurchase program, which authorized the repurchase of up to $5.0 billion of Walgreens Boots Alliance common stock prior to the program’s expiration on August 31, 2018, which authorization was increased by an additional $1.0 billion in October 2017 (as expanded, the “June 2017 stock repurchase program”). The June 2017 stock repurchase program was completed in October 2017. In June 2018, Walgreens Boots Alliance authorized a new stock repurchase program, which authorized the repurchase of up to $10.0 billion of Walgreens Boots Alliance common stock, which program has no specified expiration date. The Company purchased 72 million and 59 million shares under stock repurchase programs in fiscal 2018 and 2017 at a cost of $4.9 billion and $4.8 billion, respectively. The Company determines the timing and amount of repurchases based on its assessment of various factors including prevailing market conditions, alternate uses of capital, liquidity, the economic environment and other factors. The timing and amount of these purchases may change at any time and from time to time. The Company has repurchased, and may from time to time in the future repurchase, shares on the open market through Rule 10b5-1 plans, which enable a company to repurchase shares at times when it otherwise might be precluded from doing so under insider trading laws. In addition, the Company continued to repurchase shares to support the needs of the employee stock plans. Shares totaling $289 million were purchased to support the needs of the employee stock plans during fiscal 2018 as compared to $457 million and $1 billion in fiscal 2017 and fiscal 2016, respectively. At August 31, 2018, 33 million shares of common stock were reserved for future issuances under the Company’s various employee benefit plans. |
Accumulated other comprehensive income (loss) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) The following is a summary of net changes in accumulated other comprehensive income by component and net of tax for fiscal 2018, 2017 and 2016 (in millions):
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Segment reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting | Segment reporting The Company has aligned its operations into three reportable segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The operating segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker) to assess segment performance and allocate resources among the Company’s operating segments. The chief operating decision maker uses adjusted operating income to assess segment profitability. The chief operating decision maker does not use total assets by segment to make decisions regarding resources, therefore the total asset disclosure by segment has not been included.
The results of operations for each reportable segment includes procurement benefits and an allocation of corporate-related overhead costs. The “Eliminations” column contains items not allocable to the reportable segments, as the information is not utilized by the chief operating decision maker to assess segment performance and allocate resources. The following table reflects results of operations of the Company’s reportable segments (in millions):
The following table reconciles adjusted operating income to operating income (in millions):
No single customer accounted for more than 10% of the Company’s consolidated sales for any of the periods presented. In fiscal 2018, substantially all of our retail pharmacy sales were to customers covered by third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies) that agree to pay for all or a portion of a customer's eligible prescription purchases. Three third-party payers, in the Retail Pharmacy USA segment, in the aggregate accounted for approximately 32% of the Company’s consolidated sales in fiscal 2018. No third-party payer accounted for more than 10% of the Company’s consolidated sales in fiscal 2017 or fiscal 2016. Geographic data for sales is as follows (in millions):
Geographic data for long-lived assets, defined as property, plant and equipment, is as follows (in millions):
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Related parties |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related parties | Related parties The Company has a long-term pharmaceutical distribution agreement with AmerisourceBergen pursuant to which the Company sources branded and generic pharmaceutical products from AmerisourceBergen principally for its U.S. operations. Additionally, AmerisourceBergen receives sourcing services for generic pharmaceutical products. Related party transactions with AmerisourceBergen (in millions):
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Supplementary financial information |
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Supplementary Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplementary financial information | Supplementary financial information Summary of Quarterly Results (Unaudited) (in millions, except per share amounts)
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Summary of major accounting policies (Policies) |
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Aug. 31, 2018 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Basis of presentation | Basis of presentation The Consolidated Financial Statements include all subsidiaries in which the Company holds a controlling interest. The Company uses the equity-method of accounting for equity investments in less than majority-owned companies if the investment provides the ability to exercise significant influence. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company bases its estimates on the information available at the time, its experience and various other assumptions believed to be reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results may differ. The influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payer and customer relationships and terms, strategic transactions including acquisitions, changes in laws and general economic conditions in the markets in which the Company operates and other factors on the Company’s operations and net earnings for any period may not be comparable to the same period in previous years. |
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Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. Credit and debit card receivables, which generally settle within two to seven business days, of $127 million and $98 million were included in cash and cash equivalents at August 31, 2018 and 2017, respectively. |
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Restricted cash | Restricted cash The Company is required to maintain cash deposits with certain banks which consist of deposits restricted under contractual agency agreements and cash restricted by law and other obligations. |
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Accounts receivable | Accounts receivable Accounts receivable are stated net of allowances for doubtful accounts. Accounts receivable balances primarily consist of trade receivables due from customers, including amounts due from third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies), clients and members. Trade receivables were $5.4 billion and $5.5 billion at August 31, 2018 and August 31, 2017, respectively. Other accounts receivable balances, which consist primarily of receivables from vendors and manufacturers, including receivables from AmerisourceBergen (see note 17, related parties), were $1.2 billion and $1.1 billion at August 31, 2018 and August 31, 2017, respectively. Charges to allowance for doubtful accounts are based on estimates of recoverability using both historical write-offs and specifically identified receivables. |
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Inventories | Inventories The Company values inventories on a lower of cost and net realizable value or market. Inventories include product costs, inbound freight, direct labor, warehousing costs for retail pharmacy operations, overhead costs relating to the manufacture and distribution of products and vendor allowances not classified as a reduction of advertising expense. The Company’s Retail Pharmacy USA segment inventory is accounted for using the last-in-first-out (“LIFO”) method. The total carrying value of the segment inventory accounted for under the LIFO method was $6.7 billion and $5.9 billion at August 31, 2018 and 2017, respectively. At August 31, 2018 and 2017, Retail Pharmacy USA segment inventory would have been greater by $3.0 billion, if they had been valued on a lower of first-in-first-out (“FIFO”) cost and net realizable value. The Company’s Retail Pharmacy International and Pharmaceutical Wholesale segments’ inventory is primarily accounted for using the FIFO method. |
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Property, plant and equipment | Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Major repairs, which extend the useful life of an asset, are capitalized; routine maintenance and repairs are charged against earnings. Depreciation is provided on a straight-line basis over the estimated useful lives of owned assets. Leasehold improvements, equipment under capital lease and capital lease properties are amortized over their respective estimate of useful life or over the term of the lease, whichever is shorter. The majority of the Company’s fixtures and equipment uses the composite method of depreciation. Therefore, gains and losses on retirement or other disposition of such assets are included in earnings only when an operating location is closed, substantially remodeled or impaired. The Company capitalizes application development stage costs for internally developed software. |
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Leases | Leases Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or the date the Company has the right to control the property. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales. Capital leases are recognized within property, plant and equipment and as a capital lease liability within accrued expenses and other liabilities and other non-current liabilities. Operating leases are expensed on a straight line basis over the lease term. |
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Business combinations | Business combinations The Company allocates the fair value of purchase consideration to the tangible and intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair values of assets acquired and liabilities assumed requires estimates and the use of valuation techniques when a market value is not readily available. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is allocated to goodwill. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed. |
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Goodwill and other intangible assets | Goodwill and other intangible assets Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in business combinations. Acquired intangible assets are recorded at fair value. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value. As part of the Company’s impairment analysis, fair value of a reporting unit is determined using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. |
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Equity method investments | Equity method investments The Company uses the equity method of accounting for equity investments in companies if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee. The Company’s proportionate share of the net income or loss of these companies is included in consolidated net earnings. Judgment regarding the level of influence over each equity method investment includes considering key factors such as the Company’s ownership interest, representation on the board of directors, participation in policy-making decisions and material intra-entity transactions. The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. Factors considered by the Company when reviewing an equity method investment for impairment include the length of time (duration) and the extent (severity) to which the fair value of the equity method investment has been less than cost, the investee’s financial condition and near-term prospects and the intent and ability to hold the investment for a period of time sufficient to allow for anticipated recovery. An impairment that is other-than-temporary is recognized in the period identified. |
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Financial instruments | Financial instruments The Company uses derivative instruments to hedge its exposure to interest rate and currency risks arising from operating and financing activities. In accordance with its risk management policies, the Company does not hold or issue derivative instruments for trading or speculative purposes. Derivatives are recognized on the Consolidated Balance Sheets at their fair values. When the Company becomes a party to a derivative instrument and intends to apply hedge accounting, it formally documents the hedge relationship and the risk management objective for undertaking the hedge which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. The accounting for changes in fair value of a derivative instrument depends on whether the Company had designated it in a qualifying hedging relationship and on the type of hedging relationship. The Company applies the following accounting policies:
Cash receipts or payments on a settlement of a derivative contract are reported in the Consolidated Statements of Cash Flows consistent with the nature of the underlying hedged item. For derivative instruments designated as hedges, the Company assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Highly effective means that cumulative changes in the fair value of the derivative are between 80% and 125% of the cumulative changes in the fair value of the hedged item. In addition, when the Company determines that a derivative is not highly effective as a hedge, hedge accounting is discontinued. When it is probable that a hedged forecasted transaction will not occur, the Company discontinues hedge accounting for the affected portion of the forecasted transaction and reclassifies any gains or losses in accumulated other comprehensive income (loss) to earnings in the Consolidated Statement of Earnings. When a derivative in a hedge relationship is terminated or the hedged item is sold, extinguished or terminated, hedge accounting is discontinued prospectively. |
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Liabilities for facility closings | Liabilities for facility closings The Company provides for future costs related to closed locations. The liability is based on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. |
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Pension and postretirement benefits | Pension and postretirement benefits The Company has various defined benefit pension plans that cover some of its non-U.S. employees. The Company also has a postretirement healthcare plan that covers qualifying U.S. employees. Eligibility and the level of benefits for these plans vary depending on participants’ status, date of hire and or length of service. Pension and postretirement plan expenses and valuations are dependent on assumptions used by third-party actuaries in calculating those amounts. These assumptions include discount rates, healthcare cost trends, long-term return on plan assets, retirement rates, mortality rates and other factors. The Company funds its pension plans in accordance with applicable regulations. |
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Noncontrolling interests | Noncontrolling interests The Company presents noncontrolling interests as a component of equity on its Consolidated Balance Sheets and reports the portion of its earnings or loss for noncontrolling interest as net earnings attributable to noncontrolling interests in the Consolidated Statement of Earnings. |
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Currency | Currency Assets and liabilities of non-U.S. dollar functional currency operations are translated into U.S. dollars at end-of-period exchange rates while revenues, expenses and cash flows are translated at average monthly exchange rates over the period. Equity is translated at historical exchange rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. Assets and liabilities not denominated in the functional currency are remeasured into the functional currency at end-of-period exchange rates, except for nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Revenues and expenses are recorded at average monthly exchange rates over the period, except for those expenses related to nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are generally included in selling, general and administrative expenses within the Consolidated Statements of Earnings. For all periods presented, there were no material operational gains or losses from foreign currency transactions. |
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Commitments and contingencies | Commitments and contingencies On a quarterly basis, the Company assesses its liabilities and contingencies for outstanding legal proceedings and reserves are established on a case-by-case basis for those legal claims for which management concludes that it is probable that a loss will be incurred and that the amount of such loss can be reasonably estimated. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. With respect to litigation and other legal proceedings where the Company has determined that a loss is reasonably possible, the Company may be unable to estimate the amount or range of reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding such litigation and legal proceedings. The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. Therefore, it is possible that an unfavorable resolution of one or more pending litigation or other contingencies could have a material adverse effect on the Company’s Consolidated Financial Statements in a future fiscal period. Management’s assessment of current litigation and other legal proceedings, including the corresponding accruals, could change because of the discovery of facts with respect to legal actions or other proceedings pending against the Company which are not presently known. Adverse rulings or determinations by judges, juries, governmental authorities or other parties could also result in changes to management’s assessment of current liabilities and contingencies. Accordingly, the ultimate costs of resolving these claims may be substantially higher or lower than the amounts reserved. |
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Revenue recognition | Revenue recognition Revenue is recognized when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable and (iv) collectability is reasonably assured. The following revenue recognition policies have been established for the Company’s reportable segments. Retail Pharmacy USA and Retail Pharmacy International The Company recognizes revenue, net of taxes and estimated returns, at the time it sells merchandise or dispenses prescription drugs to the customer. Returns are estimated using historical experience. The Company initially estimates revenue based on expected reimbursements from third-party payers (e.g., pharmacy benefit managers, insurance companies and governmental agencies) for dispensing prescription drugs. The estimates are based on historical experience and are updated to actual reimbursement amounts. Pharmaceutical Wholesale Wholesale revenue is recognized, net of taxes, upon shipment of goods, which is generally also the day of delivery. When the Company acts in the capacity of an agent or a logistics service provider, revenue is the fee received for the service and is recognized when the services have been performed. |
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Cost of sales | Cost of sales Cost of sales includes the purchase price of goods and cost of services rendered, store and warehouse inventory loss, inventory obsolescence, manufacturing costs and supplier rebates. In addition to product costs, cost of sales includes warehousing costs for retail operations, purchasing costs, freight costs, cash discounts and vendor allowances. |
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Vendor allowances and supplier rebates | Vendor allowances and supplier rebates Vendor allowances are principally received as a result of purchases, sales or promotion of vendors’ products. Allowances are generally recorded as a reduction of inventory and are recognized as a reduction of cost of sales when the related merchandise is sold. Allowances received for promoting vendors’ products are offset against advertising expense and result in a reduction of selling, general and administrative expenses to the extent of advertising costs incurred, with the excess treated as a reduction of inventory costs. Rebates or refunds received by the Company from its suppliers, mostly in cash, are considered as an adjustment of the prices of the supplier’s products purchased by the Company. |
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Loyalty programs | Loyalty programs The Company’s loyalty rewards programs are accrued as a charge to cost of sales at the time a point is earned. Points are funded internally and through vendor participation and are credited to cost of sales at the time a vendor-sponsored point is earned. Breakage is recorded as points expire as a result of a member’s inactivity or if the points remain unredeemed after a certain period in accordance with the terms of the loyalty rewards program. |
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Selling, general and administrative expenses | Selling, general and administrative expenses Selling, general and administrative expenses mainly consist of salaries and employee costs, occupancy costs, depreciation and amortization, credit and debit card fees and expenses directly related to stores. In addition, other costs included are headquarters’ expenses, advertising costs (net of vendor advertising allowances), wholesale warehousing costs and insurance. |
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Advertising costs | Advertising costs Advertising costs, which are reduced by the portion funded by vendors, are expensed as incurred or when services have been received. |
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Impairment of long-lived assets | Impairment of long-lived assets The Company tests long-lived assets for impairment whenever events or circumstances indicate that a certain asset or asset group may be impaired. Once identified, the amount of the impairment is computed by comparing the carrying value of the assets to the fair value, which is primarily based on the discounted estimated future cash flows. |
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Stock compensation plans | Stock compensation plans Stock based compensation is measured at fair value at the grant date. The Company grants stock options, performance shares and restricted units to the Company’s non-employee directors, officers and employees. The Company recognizes compensation expense on a straight-line basis over the substantive service period. |
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Warrants | Warrants Until their exercise in fiscal 2016, the warrants to acquire shares of AmerisourceBergen Corporation were accounted for as a derivative under ASC Topic 815, Derivatives and Hedging. The Company reports its warrants at fair value within other non-current assets in the Consolidated Balance Sheets and changes in the fair value of warrants are recognized in other income in the Consolidated Statements of Earnings. A deferred credit from the day-one valuation attributable to the warrants granted to Walgreens was amortized over the life of the warrants. |
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Insurance | Insurance The Company obtains insurance coverage for catastrophic exposures as well as those risks required by law to be insured. In general, the Company’s U.S. subsidiaries retain a significant portion of losses related to workers’ compensation, property, comprehensive general, pharmacist and vehicle liability, while non-U.S. subsidiaries manage their exposures through insurance coverage with third-party carriers. Management regularly reviews the probable outcome of claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage and the established accruals for liabilities. Liabilities for losses are recorded based upon the Company’s estimates for both claims incurred and claims incurred but not reported. The provisions are estimated in part by considering historical claims experience, demographic factors and other actuarial assumptions. |
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Income taxes | Income taxes The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based upon the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. In determining the provision for income taxes, the Company uses income, permanent differences between book and tax income, the relative proportion of foreign and domestic income, enacted statutory income tax rates, projections of income subject to Subpart F rules and unrecognized tax benefits related to current year results. Discrete events such as the assessment of the ultimate outcome of tax audits, audit settlements, recognizing previously unrecognized tax benefits due to lapsing of the applicable statute of limitations, recognizing or de-recognizing benefits of deferred tax assets due to future year financial statement projections and changes in tax laws are recognized in the period in which they occur. The Company is subject to routine income tax audits that occur periodically in the normal course of business. U.S. federal, state, local and foreign tax authorities raise questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the tax benefits associated with the various tax filing positions, the Company records a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. Adjustments are made to the liability for unrecognized tax benefits in the period in which the Company determines the issue is effectively settled with the tax authorities, the statute of limitations expires for the return containing the tax position or when more information becomes available. |
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Earnings per share | Earnings per share The dilutive effect of outstanding stock options on earnings per share is calculated using the treasury stock method. Stock options are anti-dilutive and excluded from the earnings per share calculation if the exercise price exceeds the average market price of the common shares. |
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New accounting pronouncements | New accounting pronouncements Adoption of new accounting pronouncements Accounting for hedging activities In August 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-12, Derivative and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU expands an entity’s ability to hedge nonfinancial and financial risk components and reduces complexity in fair value hedges of interest rate risk. It eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. This ASU is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance during the third fiscal quarter of 2018. The adoption did not have any impact on the Company’s results of operations, cash flows or financial position. Measurement of inventory In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU simplifies current accounting treatments by requiring entities to measure most inventories at “the lower of cost and net realizable value” rather than using lower of cost or market. This guidance does not apply to inventories measured using last-in, first-out method or the retail inventory method. This ASU is effective for fiscal years beginning after December 15, 2016 (fiscal 2018), and interim periods within those fiscal years. The Company adopted this guidance on a prospective basis at the beginning of fiscal 2018 and adoption did not have a material impact on the Company’s results of operations, cash flows or financial position. New accounting pronouncements not yet adopted Intangibles – goodwill and other – internal-use software In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40). This ASU addresses customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019 (fiscal 2021), and interim periods within those fiscal years, with early adoption permitted. The amendments in this ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position or results of operations. Compensation – retirement benefits – defined benefit plans In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement benefits (Topic 715-20). This ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 (fiscal 2022) and must be applied on a retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial position. Fair value measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The ASU adds new disclosure requirements for Level 3 measurements. This ASU is effective for fiscal years beginning after December 15, 2019 (fiscal 2021), and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's disclosures. Compensation – stock compensation In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718). This ASU eliminated most of the differences between accounting guidance for share-based compensation granted to nonemployees and the guidance for share-based compensation granted to employees. The ASU supersedes the guidance for nonemployees and expands the scope of the guidance for employees to include both. This ASU is effective for annual periods beginning after December 15, 2018 (fiscal 2020), and interim periods within those years. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company's financial position. Accounting for reclassification of certain tax effects from accumulated other comprehensive income In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU addresses the income tax effects of items in accumulated other comprehensive income (“AOCI”) which were originally recognized in other comprehensive income, rather than in income from continuing operations. Specifically, it permits a reclassification from AOCI to retained earnings for the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate resulting from the U.S. tax law changes enacted in December 2017. It also requires certain disclosures about these reclassifications. This ASU is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied either on a prospective basis in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. tax law changes are recognized. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position. Presentation of net periodic pension cost and net periodic postretirement benefit cost In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension cost and net periodic postretirement cost in the same line item in the statement of earnings as other compensation costs arising from services rendered by the related employees during the period. The other net cost components are required to be presented in the statement of earnings separately from the service cost component and outside a subtotal of income from operations. Additionally, the line item used in the statement of earnings to present the other net cost components must be disclosed in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, and must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Restricted cash In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Statement of Cash Flows. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s Statement of Cash Flows. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Tax accounting for intra-entity asset transfers In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Topic 740, Income Taxes, prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this ASU require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), including interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a modified retrospective basis through a cumulative effect adjustment recognized directly to retained earnings as of the date of adoption. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Classification of certain cash receipts and cash payments In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period and the new guidance must be applied on a retrospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s Statement of Cash Flows. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. Subsequently, the FASB has issued additional ASUs which further clarify this guidance. This ASU increases the transparency and comparability of organizations by requiring the capitalization of substantially all leases on the balance sheet and disclosures of key information about leasing arrangements. Under this new guidance, at the lease commencement date, a lessee recognizes a right- of-use asset and lease liability, which is initially measured at the present value of the future lease payments. For income statement purposes, a dual model was retained for lessees, requiring leases to be classified as either operating or finance leases. Under the operating lease model, lease expense is recognized on a straight-line basis over the lease term. Under the finance lease model, interest on the lease liability is recognized separately from amortization of the right-of-use asset. The new guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented (fiscal 2018) using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. In July 2018, a new ASU was issued to provide relief to the companies from restating the comparative period. Pursuant to this ASU, WBA will not restate comparative periods presented in the Company’s financial statements in the period of adoption. The Company will adopt this ASU on September 1, 2019 (fiscal 2020). The Company has begun evaluating and planning for adoption and implementation of this ASU, including implementing a new global lease accounting system, evaluating practical expedient and accounting policy elections and assessing the overall financial statement impact. This ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is being evaluated. The impact of this ASU is non-cash in nature and will not affect the Company’s cash flows. Classification and measurement of financial instruments In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Subsequently, the FASB has issued additional ASUs which further clarify this guidance. This ASU requires equity investments (except those under the equity method of accounting or those that result in the consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost less impairment, if any, and changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This simplifies the impairment assessment of equity investments previous held at cost. Separate presentation of financial assets and liabilities by measurement category is required. This ASU is effective prospectively for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. Early application is permitted, for fiscal years or interim periods that have not yet been issued as of the beginning of the fiscal year of adoption. The new guidance must be applied on a modified retrospective basis, with the exception of the amendments related to the measurement alternative for equity investments without readily determinable fair values, which must be applied on a prospective basis. The Company has evaluated the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019). Revenue recognition on contracts with customers In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides a single principles-based revenue recognition model with a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued additional ASUs which further clarify this guidance and also defer the effective date by one year to fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. The Company will use the modified retrospective method as the transition approach when adopting this new accounting guidance on September 1, 2018 (fiscal 2019). The Company has evaluated the effect of adopting this new accounting guidance, the related amendments and the interpretive guidance on the Company's Consolidated Financial Statements and determined that adoption will not have a material impact on the Company’s results of operations and will be limited to immaterial changes to recognition of revenues related to loyalty programs and gift cards, in addition to disaggregated revenue disclosures. Specifically, the Company currently uses the cost approach to account for loyalty programs. Upon adoption, the Company will use the deferred revenue approach. Additionally, gift card breakage currently is recognized at point of sale by the Retail Pharmacy USA segment and upon expiration primarily within the Retail Pharmacy International segment. Upon adoption of the new revenue recognition guidance, all breakage will be recognized based on the pattern in which the customer redeems the gift cards. |
Summary of major accounting policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property, plant and equipment | The following table summarizes the Company’s property, plant and equipment (in millions) and estimated useful lives (in years):
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Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of identifiable assets acquired and liabilities assumed | The following table summarizes the consideration for the acquisition and the amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions).
The following table summarizes the consideration for the purchases and the preliminary amounts of identified assets acquired and liabilities assumed as of the fiscal year ended August 31, 2018.
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Schedule of identified definite and indefinite-lived assets | The preliminary identified definite-lived intangible assets were as follows:
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Schedule of pro forma information | The unaudited condensed pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company’s results would have been had the purchases occurred at the beginning of the periods presented or results which may occur in the future.
Actual sales from acquired Rite Aid stores for the fiscal year ended 2018 included in the Consolidated Statement of Earnings are as follows:
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Exit and disposal activities (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring costs and reserves | Costs related to the Store Optimization Program, which were primarily recorded in selling, general and administrative expenses for the Company's Retail Pharmacy USA segment included in the fiscal year ended August 31, 2018, are as follows (in millions):
The changes in liabilities related to the Cost Transformation Program include the following (in millions):
Total costs by segment, which were primarily recorded in selling, general and administrative expenses included in the fiscal year ended August 31, 2017 and August 31, 2016, are as follows (in millions):
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Schedule of Restructuring Reserve by Type of Cost | The changes in liabilities related to the Store Optimization Program for the fiscal year ended August 31, 2018 include the following (in millions):
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental payments for operating leases | Annual minimum rental commitments for all leases having an initial or remaining non-cancelable term of more than one year are shown below (in millions):
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Schedule of future minimum lease payments for capital leases | Annual minimum rental commitments for all leases having an initial or remaining non-cancelable term of more than one year are shown below (in millions):
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Reserve for facility closings and related lease termination charges | The changes in liability for facility closings and related lease termination charges include the following (in millions):
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Schedule of rental expense | Rental expense, which includes common area maintenance, insurance and taxes, where appropriate, was as follows (in millions):
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Equity method investments (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity method investment | Equity method investments as of August 31, 2018 and 2017 were as follows (in millions, except percentages):
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Summarized financial information of equity method investees | Summarized financial information for the Company’s equity method investments in aggregate is as follows: Balance sheet (in millions)
Statements of earnings (in millions)
The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported at the end of each fiscal year end.
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Goodwill and other intangible assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill | Changes in the carrying amount of goodwill by reportable segment consist of the following activity (in millions):
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Schedule of finite-lived intangible assets by major class | The carrying amount and accumulated amortization of intangible assets consists of the following (in millions):
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Schedule of finite-lived intangible assets, future amortization expense | Estimated future annual amortization expense for the next five fiscal years for intangible assets recorded at August 31, 2018 is as follows (in millions):
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term borrowings | Debt consists of the following (all amounts are presented in millions of U.S. dollars and debt issuances are denominated in U.S. dollars, unless otherwise noted)
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Long-term debt |
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Future maturities of long-term debt | At August 31, 2018, the future maturities of short-term and long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations (see note 4, leases, for the future lease obligation maturities), consisted of the following (in millions):
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Financial instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional Amounts of Derivative Instruments Outstanding | The notional amount and fair value of derivative instruments outstanding were as follows (in millions):
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Derivatives not designated as hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gains and Losses due to Changes in Fair Value Recognized in Earnings | These derivative instruments are economic hedges of foreign currency risks. The income and (expense) due to changes in fair value of these derivative instruments were recognized in earnings as follows (in millions):
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Warrants | Derivatives not designated as hedges: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gains and Losses due to Changes in Fair Value Recognized in Earnings | The income and (expense) due to changes in fair value of the warrants recognized in earnings were as follows (in millions):
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Fair value measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):
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Income taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income before income tax, domestic and foreign | The components of earnings before income tax provision were (in millions):
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Provisions for income taxes | The provision for income taxes consists of the following (in millions):
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Difference between the statutory federal income tax rate and the effective tax rate | The difference between the statutory federal income tax rate and the effective tax rate is as follows:
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Deferred tax assets and liabilities included in the consolidated balance sheet | The deferred tax assets and liabilities included in the Consolidated Balance Sheets consist of the following (in millions):
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Reconciliation of the total amounts of unrecognized tax benefits | The following table provides a reconciliation of the total amounts of unrecognized tax benefits (in millions):
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Retirement benefits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of defined benefit plans using fair value hierarchy | The following tables present classes of defined benefit pension plan assets by fair value hierarchy (in millions):
securities are valued at the last quoted bid price and typically are categorized as Level 2 investments.
and are valued using recently executed transactions, or quoted market prices for similar assets and liabilities in active markets, or for identical assets and liabilities in markets that are not active. If there have been no market transactions in a particular fixed income security, its fair value is calculated by pricing models that benchmark the security against other securities with actual market prices. Corporate bonds are categorized as Level 2 investments.
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Components of net periodic benefit costs | Components of net periodic pension costs for the defined benefit pension plans (in millions):
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Accumulated and projected benefit obligations | Change in benefit obligations for the defined benefit pension plans (in millions):
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Changes in fair value of plan assets | Change in plan assets for the defined benefit pension plans (in millions):
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Amounts recognized in balance sheet | Amounts recognized in the Consolidated Balance Sheets (in millions):
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Pre-tax amounts recognized in accumulated other comprehensive (income) loss | Cumulative pre-tax amounts recognized in accumulated other comprehensive (income) loss (in millions):
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Amounts in accumulated other comprehensive income (loss) to be recognized over next fiscal year | The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for all pension plans, including accumulated benefit obligations in excess of plan assets, at August 31 were as follows (in millions):
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Estimated future benefit payments | Estimated future benefit payments for the next 10 years from defined benefit pension plans to participants are as follows (in millions):
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Schedule of assumptions used | The assumptions used in accounting for the defined benefit pension plans were as follows:
|
Accumulated other comprehensive income (loss) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of accumulated other comprehensive income (loss) | The following is a summary of net changes in accumulated other comprehensive income by component and net of tax for fiscal 2018, 2017 and 2016 (in millions):
|
Segment reporting (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of revenue from segments to consolidated | The following table reflects results of operations of the Company’s reportable segments (in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of operating profit (loss) from segments to consolidated | The following table reconciles adjusted operating income to operating income (in millions):
|
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Geographic data for net sales | Geographic data for sales is as follows (in millions):
|
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Geographic data for long-lived assets | Geographic data for long-lived assets, defined as property, plant and equipment, is as follows (in millions):
|
Related parties (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | Related party transactions with AmerisourceBergen (in millions):
|
Supplementary financial information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplementary Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of quarterly results | Summary of Quarterly Results (Unaudited) (in millions, except per share amounts)
|
Summary of major accounting policies - inventory (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Inventory [Line Items] | ||
Inventories | $ 9,565 | $ 8,899 |
Retail Pharmacy USA | Operating Segments | ||
Inventory [Line Items] | ||
Inventories | 6,700 | 5,900 |
LIFO Reserve | 3,000 | 3,000 |
Retail Pharmacy International and Pharmaceutical Wholesale | Operating Segments | ||
Inventory [Line Items] | ||
Inventories | $ 2,800 | $ 3,000 |
Summary of major accounting policies - financial instruments (Details) |
Aug. 31, 2018 |
---|---|
Minimum | |
Derivative [Line Items] | |
Highly effective hedging percentage | 80.00% |
Maximum | |
Derivative [Line Items] | |
Highly effective hedging percentage | 125.00% |
Summary of major accounting policies - liabilities for store closings (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Reserve for store closings | $ 964 | $ 718 |
Summary of major accounting policies - impaired assets (Details) - Selling, general and administrative expense - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Restructuring Cost and Reserve [Line Items] | |||
Impairment charges | $ 234 | $ 305 | |
Cost Transformation Program | |||
Restructuring Cost and Reserve [Line Items] | |||
Impairment charges | $ 57 |
Acquisitions - narrative (Details) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Sep. 19, 2017
USD ($)
distribution_center
store
|
Mar. 31, 2017
USD ($)
|
Aug. 31, 2018
USD ($)
distribution_center
store
|
Aug. 31, 2017
USD ($)
|
Aug. 31, 2016
USD ($)
|
|
Business Acquisition [Line Items] | |||||
Goodwill | $ 16,914 | $ 15,632 | $ 15,527 | ||
Rite Aid | |||||
Business Acquisition [Line Items] | |||||
Number of stores expected to be acquired | store | 1,932 | ||||
Number of distribution centers expected to be acquired | distribution_center | 3 | 2 | |||
Consideration to be transferred | $ 4,375 | ||||
Number of stores acquired | store | 1,932 | ||||
Consideration | 4,330 | $ 4,157 | |||
Goodwill | $ 1,344 | ||||
AllianceRx Walgreens Prime | |||||
Business Acquisition [Line Items] | |||||
Goodwill | $ 103 | ||||
Total consideration | $ 720 | ||||
Customer Contracts | AllianceRx Walgreens Prime | |||||
Business Acquisition [Line Items] | |||||
Weighted average useful life | 15 years |
Acquisitions - identified definite-lived intangible assets (Details) - Rite Aid $ in Millions |
Sep. 19, 2017
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Amount | $ 2,054 |
Customer relationships | |
Business Acquisition [Line Items] | |
Weighted-average useful life | 12 years |
Amount | $ 1,810 |
Favorable lease interests | |
Business Acquisition [Line Items] | |
Weighted-average useful life | 10 years |
Amount | $ 224 |
Trade names | |
Business Acquisition [Line Items] | |
Weighted-average useful life | 2 years |
Amount | $ 20 |
Acquisitions - pro forma results (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Rite Aid | ||
Business Acquisition [Line Items] | ||
Sales | $ 135,503 | $ 127,893 |
Acquisitions - actual results (Details) $ in Millions |
12 Months Ended |
---|---|
Aug. 31, 2018
USD ($)
| |
Rite Aid | |
Business Acquisition [Line Items] | |
Sales | $ 5,112 |
Exit and disposal activities - narrative (Details) - Store Optimization Program $ in Millions |
Oct. 24, 2017
store
|
Aug. 31, 2018
USD ($)
|
---|---|---|
Restructuring Cost and Reserve [Line Items] | ||
Number of locations closed | store | 600 | |
Duration of restructuring plan | 18 months | |
Expected restructuring costs | $ 450 | |
Lease obligations and other real estate costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Expected restructuring costs | 270 | |
Employee severance and other exit costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Expected restructuring costs | $ 180 |
Leases - additional information (Details) |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018
USD ($)
lease
|
Aug. 31, 2017
USD ($)
|
Aug. 31, 2016
USD ($)
|
|
Operating Leased Assets [Line Items] | |||
Total minimum lease payments | $ 32,736,000,000 | ||
Imputed interest and executory costs | 813,000,000 | ||
Sublease rentals | 331,000,000 | ||
Proceeds from sale leaseback transactions | 0 | $ 444,000,000 | $ 60,000,000 |
Charges related to facilities that were closed or relocated | $ 129,000,000 | $ 394,000,000 | $ 127,000,000 |
Number of leases | lease | 16 | ||
Maximum | |||
Operating Leased Assets [Line Items] | |||
Potential undiscounted future payments | $ 22,000,000 | ||
Facility Closing | |||
Operating Leased Assets [Line Items] | |||
Total minimum lease payments | $ 1,600,000,000 |
Leases - annual minimum rental commitments (Details) $ in Millions |
Aug. 31, 2018
USD ($)
|
---|---|
Finance Lease Obligation [Abstract] | |
2019 | $ 18 |
2020 | 18 |
2021 | 18 |
2022 | 18 |
2023 | 18 |
Later | 216 |
Total minimum lease payments | 306 |
Capital Lease [Abstract] | |
2019 | 63 |
2020 | 63 |
2021 | 62 |
2022 | 58 |
2023 | 57 |
Later | 864 |
Total minimum lease payments | 1,167 |
Operating Lease [Abstract] | |
2019 | 3,528 |
2020 | 3,304 |
2021 | 3,028 |
2022 | 2,762 |
2023 | 2,522 |
Later | 17,592 |
Total minimum lease payments | $ 32,736 |
Leases - changes in reserve for facility closings and related lease termination (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Changes in Reserve for Facility Closing and Related Lease Termination Charges [Roll Forward] | ||
Balance at beginning of period | $ 718 | $ 466 |
Provision for present value of non-cancelable lease payments on closed facilities | 52 | 344 |
Changes in assumptions | 19 | 13 |
Accretion expense | 58 | 37 |
Other - non cash | 338 | 0 |
Cash payments, net of sublease income | (221) | (142) |
Balance at end of period | $ 964 | $ 718 |
Leases - rental expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Leases [Abstract] | |||
Minimum rentals | $ 3,447 | $ 3,259 | $ 3,355 |
Contingent rentals | 68 | 59 | 60 |
Less: sublease rental income | (67) | (55) | (49) |
Total rental expense | $ 3,448 | $ 3,263 | $ 3,366 |
Equity method investments - carrying value (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Schedule of Equity Method Investments [Line Items] | ||
Carrying value | $ 6,610 | $ 6,320 |
AmerisourceBergen | ||
Schedule of Equity Method Investments [Line Items] | ||
Carrying value | $ 5,138 | $ 5,024 |
Ownership percentage | 26.00% | 26.00% |
Others | ||
Schedule of Equity Method Investments [Line Items] | ||
Carrying value | $ 1,472 | $ 1,296 |
Others | Minimum | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 8.00% | 8.00% |
Others | Maximum | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 50.00% | 50.00% |
Equity method investments - summarized financial information of equity method investees (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Equity Method Investment, Summarized Financial Information [Abstract] | |||
Current assets | $ 34,493 | $ 29,707 | |
Non-current assets | 14,971 | 12,999 | |
Current liabilities | 34,055 | 30,559 | |
Non-current liabilities | 8,759 | 7,362 | |
Shareholders’ equity | 6,650 | 4,785 | |
Income Statement [Abstract] | |||
Sales | 179,887 | 164,844 | $ 55,153 |
Gross profit | 6,875 | 5,958 | 2,672 |
Net earnings | 1,315 | 1,040 | 534 |
Share of earnings from equity method investments | $ 245 | $ 143 | $ 81 |
Goodwill and other intangible assets - additional information (Details) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Sep. 19, 2017
USD ($)
|
Aug. 31, 2018
USD ($)
store
|
Aug. 31, 2017
USD ($)
|
Aug. 31, 2016
USD ($)
|
Mar. 31, 2017
USD ($)
|
|
Goodwill [Line Items] | |||||
Goodwill | $ 16,914 | $ 15,632 | $ 15,527 | ||
Amortization expense for intangible assets | $ 493 | $ 385 | $ 396 | ||
Rite Aid | |||||
Goodwill [Line Items] | |||||
Number of stores acquired | store | 1,932 | ||||
Consideration | $ 4,330 | $ 4,157 | |||
Goodwill | 1,344 | ||||
Intangible assets | $ 2,054 | ||||
AllianceRx Walgreens Prime | |||||
Goodwill [Line Items] | |||||
Goodwill | $ 103 | ||||
Intangible assets | $ 331 | ||||
Minimum | |||||
Goodwill [Line Items] | |||||
Reporting unit fair value in excess of carrying amount (as a percent) | 11.00% | ||||
Maximum | |||||
Goodwill [Line Items] | |||||
Reporting unit fair value in excess of carrying amount (as a percent) | 312.00% |
Goodwill and other intangible assets - schedule of goodwill (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 15,632 | $ 15,527 |
Acquisitions | 1,348 | 104 |
Currency translation adjustments | (66) | 1 |
Ending balance | 16,914 | 15,632 |
Operating Segments | Retail Pharmacy USA | ||
Goodwill [Roll Forward] | ||
Beginning balance | 9,139 | 9,036 |
Acquisitions | 1,344 | 103 |
Currency translation adjustments | 0 | 0 |
Ending balance | 10,483 | 9,139 |
Operating Segments | Retail Pharmacy International | ||
Goodwill [Roll Forward] | ||
Beginning balance | 3,392 | 3,369 |
Acquisitions | 0 | 0 |
Currency translation adjustments | (22) | 23 |
Ending balance | 3,370 | 3,392 |
Operating Segments | Pharmaceutical Wholesale | ||
Goodwill [Roll Forward] | ||
Beginning balance | 3,101 | 3,122 |
Acquisitions | 4 | 1 |
Currency translation adjustments | (44) | (22) |
Ending balance | $ 3,061 | $ 3,101 |
Goodwill and other intangible assets - schedule of finite-lived intangible assets, future amortization expense (Details) $ in Millions |
Aug. 31, 2018
USD ($)
|
---|---|
Estimated annual intangible assets amortization expense [Abstract] | |
2019 | $ 531 |
2020 | 461 |
2021 | 410 |
2022 | 390 |
2023 | $ 354 |
Debt - short-term borrowings (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Short-Term Borrowings [Abstract] | ||
Total short-term debt | $ 1,966 | $ 251 |
5.250% unsecured notes due 2019 | ||
Short-Term Borrowings [Abstract] | ||
Stated interest rate (as a percent) | 5.25% | |
Other Short Term Debt | ||
Short-Term Borrowings [Abstract] | ||
Total short-term debt | $ 288 | 251 |
Commercial Paper | ||
Short-Term Borrowings [Abstract] | ||
Total short-term debt | 430 | 0 |
Credit facilities | ||
Short-Term Borrowings [Abstract] | ||
Total short-term debt | 999 | 0 |
Notes Payable | 5.250% unsecured notes due 2019 | ||
Short-Term Borrowings [Abstract] | ||
Total short-term debt | $ 249 | $ 0 |
Debt - long-term debt by future maturity (Details) $ in Millions |
Aug. 31, 2018
USD ($)
|
---|---|
Long Term Debt by Future Maturity [Abstract] | |
2019 | $ 1,969 |
2020 | 1,277 |
2021 | 519 |
2022 | 1,250 |
2023 | 1,200 |
Later | 8,262 |
Total estimated future maturities | $ 14,477 |
Financial instruments - warrants (Details) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Aug. 25, 2016 |
Mar. 18, 2016 |
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
AmerisourceBergen | |||||
Warrants [Abstract] | |||||
Warrant to purchase common stock (in shares) | 22,696,912 | 22,696,912 | |||
Warrant exercise price (in dollars per share) | $ 52.50 | $ 51.50 | |||
Warrants aggregate exercise price payment | $ 1,190 | $ 1,170 | |||
Warrants | Other income (expense) | |||||
Warrants [Abstract] | |||||
Gains and losses due to changes in fair value of derivative instruments | $ 0 | $ 0 | $ (546) |
Commitments and contingencies (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 28, 2018
USD ($)
|
Aug. 31, 2018
lawsuit
|
Aug. 31, 2017
lawsuit
|
|
Rite Aid Transactions | |||
Loss Contingencies [Line Items] | |||
Number of lawsuits filed | 2 | ||
Pennsylvania Court of Common Pleas of Cumberland County | |||
Loss Contingencies [Line Items] | |||
Number of lawsuits filed | 1 | ||
Middle District of Pennsylvania | |||
Loss Contingencies [Line Items] | |||
Number of lawsuits filed | 1 | ||
Delaware Court of Chancery | |||
Loss Contingencies [Line Items] | |||
Lawsuits filed and dismissed | 8 | ||
Subsequent Event | |||
Loss Contingencies [Line Items] | |||
Payments for legal settlements | $ | $ 34.5 |
Income taxes - components of earnings before income tax provision (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
U.S. | $ 3,292 | $ 1,953 | $ 2,577 |
Non–U.S. | 2,683 | 2,900 | 2,567 |
Earnings before income tax provision | $ 5,975 | $ 4,853 | $ 5,144 |
Income taxes - provision for income taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Current provision | |||
Federal | $ 866 | $ 759 | $ 999 |
State | 103 | 45 | 56 |
Non–U.S. | 353 | 390 | 371 |
Total current provisions for income taxes | 1,322 | 1,194 | 1,426 |
Deferred provision | |||
Federal – tax law change | (648) | 0 | 0 |
Federal – excluding tax law change | 304 | (306) | (183) |
State | 78 | (24) | 6 |
Non–U.S. – tax law change | 0 | (80) | (182) |
Non–U.S. – excluding tax law change | (58) | (24) | (70) |
Total non-current provisions for income taxes | (324) | (434) | (429) |
Income tax provision | $ 998 | $ 760 | $ 997 |
Income taxes - reconciliation to effective tax rate (Details) |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Federal statutory rate | 25.70% | 35.00% | 35.00% |
State income taxes, net of federal benefit | 2.30% | 0.30% | 0.80% |
Foreign income taxed at non-U.S. rates | (12.20%) | (11.80%) | (7.80%) |
Non-taxable income | (5.20%) | (5.30%) | (4.40%) |
Non-deductible expenses | 2.10% | 1.50% | 1.10% |
Transition tax | 12.40% | 0.00% | 0.00% |
Tax law changes | (10.90%) | (1.60%) | (3.50%) |
Change in valuation allowance | 8.70% | 0.70% | 1.70% |
Tax credits | (6.90%) | (2.90%) | (1.50%) |
Other | 0.70% | (0.20%) | (2.00%) |
Effective income tax rate | 16.70% | 15.70% | 19.40% |
Income taxes - deferred tax assets and liabilities (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Deferred tax assets: | ||
Postretirement benefits | $ 0 | $ 134 |
Compensation and benefits | 152 | 207 |
Insurance | 74 | 109 |
Accrued rent | 271 | 174 |
Outside basis difference | 0 | 55 |
Allowance for doubtful accounts | 27 | 55 |
Tax attributes | 2,351 | 555 |
Stock compensation | 44 | 73 |
Deferred income | 110 | 220 |
Other | 44 | 88 |
Subtotal deferred tax assets | 3,073 | 1,670 |
Less: valuation allowance | 2,226 | 408 |
Total deferred tax assets | 847 | 1,262 |
Deferred tax liabilities: | ||
Accelerated depreciation | 603 | 841 |
Inventory | 301 | 416 |
Intangible assets | 1,234 | 1,277 |
Equity method investment | 459 | 1,002 |
Total deferred tax liabilities | 2,597 | 3,536 |
Net deferred tax liabilities | $ 1,750 | $ 2,274 |
Income taxes - unrecognized tax benefits (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Reconciliation of Unrecognized Tax Benefits | |||
Balance at beginning of year | $ 409 | $ 269 | $ 261 |
Gross increases related to tax positions in a prior period | 123 | 151 | 21 |
Gross decreases related to tax positions in a prior period | (15) | (36) | (47) |
Gross increases related to tax positions in the current period | 29 | 33 | 68 |
Settlements with taxing authorities | (87) | (2) | (17) |
Currency | 0 | (1) | (11) |
Lapse of statute of limitations | (3) | (5) | (6) |
Balance at end of year | $ 456 | $ 409 | $ 269 |
Stock compensation plans (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Expected performance goal achievement rate | 100.00% | ||
Total stock-based compensation expense | $ 130 | $ 91 | $ 115 |
Stock-based compensation, recognized tax benefit, | 43 | $ 78 | $ 21 |
Unrecognized compensation cost related to non-vested awards | $ 147 | ||
Compensation cost not yet recognized period for recognition | 3 years |
Retirement benefits - additional information (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Aug. 31, 2018 |
May 31, 2017 |
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Defined Benefit Plan Disclosure [Line Items] | |||||
Defined benefit pension plan, investments holding percentage | 85.00% | 85.00% | |||
Cash contributions to defined benefit pension plans | $ 29 | ||||
Profit sharing provision expense | 217 | $ 221 | $ 226 | ||
Contributions to profit sharing | 366 | 220 | 225 | ||
Cost recognized in the consolidated condensed statements of earnings | 142 | 112 | $ 130 | ||
Postretirement Health Benefit Plan | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Defined benefit plan, benefit obligation, period increase (decrease) | $ 201 | ||||
Curtailment gain | 112 | $ 109 | |||
Defined benefit plan obligation | 146 | 146 | $ 361 | ||
Expected benefit to be paid net of estimated federal subsidy during fiscal year 2017 | $ 11 | $ 11 |
Retirement benefits - components of net periodic pension costs (Details) - Pension Plan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Service costs | $ 5 | $ 5 | $ 4 |
Interest costs | 193 | 174 | 308 |
Expected returns on plan assets/other | (209) | (146) | (249) |
Total net periodic pension (income) cost | $ (11) | $ 33 | $ 63 |
Retirement benefits - changes in benefit obligations (Details) - Pension Plan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Change in benefit obligation [Roll Forward] | |||
Benefit obligation at beginning of year | $ 8,880 | $ 9,463 | |
Service costs | 5 | 5 | $ 4 |
Interest costs | 193 | 174 | 308 |
Amendments/other | (4) | (11) | |
Net actuarial gain | (466) | (295) | |
Benefits paid | (398) | (298) | |
Currency translation adjustments | 83 | (158) | |
Benefit obligation at end of year | $ 8,293 | $ 8,880 | $ 9,463 |
Retirement benefits - change in plan assets (Details) - Pension Plan - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] | ||
Plan assets at fair value at beginning of year | $ 8,980 | $ 9,428 |
Employer contributions | 65 | 70 |
Benefits paid | (398) | (298) |
Return on assets/other | (55) | (52) |
Currency translation adjustments | 84 | (168) |
Plan assets at fair value at end of year | $ 8,676 | $ 8,980 |
Retirement benefits - balance sheet (Details) - Pension Plan - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Defined Benefit Plan Disclosure [Line Items] | ||
Other non-current assets | $ 554 | $ 278 |
Accrued expenses and other liabilities | (7) | (7) |
Other non-current liabilities | (164) | (171) |
Net asset (liability) recognized at end of year | $ 383 | $ 100 |
Retirement benefits - accumulated other comprehensive income (Details) - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Pension Plan | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Net actuarial (gain) loss | $ (27) | $ 171 |
Retirement benefits - accumulated benefit obligations in excess of plan assets (Details) - Pension Plan - USD ($) $ in Millions |
Aug. 31, 2018 |
Aug. 31, 2017 |
---|---|---|
Defined Benefit Plan Disclosure [Line Items] | ||
Projected benefit obligation | $ 8,293 | $ 8,880 |
Accumulated benefit obligation | 8,285 | 8,861 |
Fair value of plan assets | $ 8,676 | $ 8,980 |
Retirement benefits - expected future benefit payments (Details) - Pension Plan $ in Millions |
Aug. 31, 2018
USD ($)
|
---|---|
Defined Benefit Plan Disclosure [Line Items] | |
2019 | $ 396 |
2020 | 259 |
2021 | 271 |
2022 | 287 |
2023 | 302 |
2024-2028 | $ 1,699 |
Retirement benefits - assumptions (Details) - Pension Plan |
12 Months Ended | |
---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Benefit Obligation [Abstract] | ||
Discount rate | 2.67% | 2.41% |
Rate of compensation increase | 2.68% | 2.83% |
Weighted-average assumptions used to determine net periodic benefit cost | ||
Discount rate | 2.12% | 2.16% |
Expected long-term return on plan assets | 2.27% | 1.69% |
Rate of compensation increase | 2.64% | 2.44% |
Related parties (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Related Party Transactions [Abstract] | |||
Purchases, net | $ 53,161 | $ 43,571 | $ 41,889 |
Trade accounts payable, net | $ 6,274 | $ 4,384 | $ 3,456 |
Supplementary financial information - summary of quarterly results (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2018 |
May 31, 2018 |
Feb. 28, 2018 |
Nov. 30, 2017 |
Aug. 31, 2017 |
May 31, 2017 |
Feb. 28, 2017 |
Nov. 30, 2016 |
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
|
Supplementary Financial Information [Abstract] | |||||||||||
Sales | $ 33,442 | $ 34,334 | $ 33,021 | $ 30,740 | $ 30,149 | $ 30,118 | $ 29,446 | $ 28,501 | $ 131,537 | $ 118,214 | $ 117,351 |
Gross profit | 7,575 | 7,780 | 8,096 | 7,341 | 7,340 | 7,145 | 7,561 | 7,116 | 30,792 | 29,162 | 29,874 |
Net earnings attributable to Walgreens Boots Alliance, Inc. | $ 1,512 | $ 1,342 | $ 1,349 | $ 821 | $ 802 | $ 1,162 | $ 1,060 | $ 1,054 | $ 5,024 | $ 4,078 | $ 4,173 |
Net earnings per common share [Abstract] | |||||||||||
Basic (in dollars per share) | $ 1.55 | $ 1.35 | $ 1.36 | $ 0.82 | $ 0.76 | $ 1.08 | $ 0.98 | $ 0.97 | $ 5.07 | $ 3.80 | $ 3.85 |
Diluted (in dollars per share) | 1.55 | 1.35 | 1.36 | 0.81 | 0.76 | 1.07 | 0.98 | 0.97 | 5.05 | 3.78 | 3.82 |
Cash dividends declared (in dollars per share) | $ 0.440 | $ 0.400 | $ 0.400 | $ 0.400 | $ 0.400 | $ 0.375 | $ 0.375 | $ 0.375 | $ 1.640 | $ 1.525 | $ 1.455 |
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