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8-K - FORM 8-K - Walgreens Boots Alliance, Inc.d907617d8k.htm

Exhibit 99.1

 

LOGO

Walgreens Boots Alliance Reports Fiscal 2015 Second Quarter Results

 

    Adjusted second quarter net earnings per diluted share increase 21.6 percent to $1.18; GAAP net earnings per diluted share increase 160.8 percent to $1.93

 

    Adjusted second quarter net earnings attributable to Walgreens Boots Alliance increase 33.2 percent to $1.2 billion; GAAP net earnings attributable to Walgreens Boots Alliance increase 185.2 percent to $2.0 billion

 

    Second quarter sales increase 35.5 percent to $26.6 billion

 

    Retail Pharmacy USA division comparable store sales increase 6.9 percent

 

    Company announces fiscal 2015 full year adjusted net earnings guidance of $3.45 to $3.65 per diluted share, and reaffirms fiscal 2016 adjusted net earnings per diluted share goal

 

    Free cash flow totals $1.0 billion in the quarter and $1.7 billion in the first six months, while GAAP operating cash flow totals $1.3 billion in the quarter and $2.3 billion in the first six months

 

    Company expands cost restructuring program through fiscal 2017, building on previously announced cost reduction initiative

DEERFIELD, IL, 9 April 2015 – Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the second quarter and first six months of fiscal year 2015 that ended 28 February 2015. This is the first earnings announcement for Walgreens Boots Alliance since the 31 December 2014 strategic combination of Walgreen Co. and Alliance Boots GmbH.

Executive Vice Chairman and Acting CEO Stefano Pessina said, “This quarter marked a solid start for our new company, and I remain as optimistic as ever about our long-term future. At the same time, we understand the work that is needed to proactively address headwinds such as reimbursement pressure and competition. Our work includes several key areas of focus to create value.

“The first area is improving the performance of our businesses worldwide with an emphasis on operations. Second, we will be refreshing and reinvesting in the stores of our Retail Pharmacy USA division to improve the customer experience and expand retail margins. Third, we are restructuring our cost base, with a focus primarily in the USA, to create a more efficient cost model and become a more agile company. Through these efforts, Walgreens Boots Alliance is determined to lead the way in our industry and be at the forefront of innovative, pharmacy-led health care.”

Comparability of Results

As a result of the combination of Walgreen Co. and Alliance Boots GmbH, a number of items affect the comparability of results for the company. Historically, Walgreen Co.’s operations were within one reportable segment that included the results of Walgreens and corporate costs, along with the full consolidated results of Walgreens Boots Alliance Development GmbH (WBAD) and equity earnings from Walgreen Co.’s 45 percent interest in Alliance Boots (on a three-month reporting lag).

Walgreens Boots Alliance, Inc.    |    walgreensbootsalliance.com


With the combination of the two companies on 31 December 2014, Walgreens Boots Alliance has organized its operations and is reporting results in three segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. Segmental reporting includes the allocation of synergy benefits, including WBAD results, and the combined corporate costs for periods subsequent to 31 December 2014. The company has determined that it is impracticable to allocate historical results to the current segmental presentation.

Following the combination, the company has eliminated the three-month reporting lag and has recast prior period results with no lag. The combination on 31 December 2014 also means fiscal 2015 second quarter reporting includes the results of Alliance Boots for two months (January and February) on a fully consolidated basis and one month (December) as equity income from Walgreen Co.’s pre-merger 45 percent interest.

The company’s balance sheet now reflects the full consolidation of Alliance Boots assets and liabilities as a result of the close of the combination on 31 December 2014. The company’s purchase accounting remains preliminary as contemplated by U.S. generally accepted accounting principles (GAAP) and, as a result, there may be upon further review future changes to the value, as well as allocation, of the acquired assets and liabilities, goodwill and the gain on the previously held equity interest.

Year-over-year comparisons of results require consideration of the foregoing factors and are not directly comparable.

Overview of Second Quarter and Fiscal-Year-to-Date Results

Net earnings attributable to Walgreens Boots Alliance determined in accordance with GAAP for the fiscal 2015 second quarter increased 185.2 percent to $2.0 billion compared with the same quarter a year ago, while GAAP net earnings per diluted share increased 160.8 percent to $1.93 compared with the same quarter a year ago.

Adjusted fiscal 2015 second quarter net earnings attributable to Walgreens Boots Alliance increased 33.2 percent to $1.2 billion compared with the same quarter a year ago. Adjusted net earnings per diluted share for the quarter increased 21.6 percent to $1.18 compared with the same quarter a year ago. This year’s second quarter earnings adjustments reduced GAAP net earnings by $798 million or 75 cents per diluted share. (Please see the “Reconciliation of Non-GAAP Financial Measures” table and accompanying disclosures at the end of this press release for more detailed information regarding non-GAAP financial measures herein, including the items reflected in adjusted net earnings calculations.)

Net sales in the second quarter increased 35.5 percent to $26.6 billion compared with the same quarter a year ago, largely due to the inclusion of Alliance Boots for January and February.

In the first six months of fiscal year 2015, GAAP net earnings attributable to Walgreens Boots Alliance increased 101.0 percent to $2.9 billion compared with the same period a year ago, while GAAP net earnings attributable to Walgreens Boots Alliance per diluted share increased 93.3 percent to $2.88 compared with the same period a year ago.

 

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Adjusted net earnings attributable to Walgreens Boots Alliance for the first six months of fiscal 2015 increased 22.9 percent to $2.0 billion compared with the same period a year ago. Adjusted net earnings per diluted share for the six months increased 17.2 percent to $1.98 compared with the same period a year ago. Earnings adjustments in the first six months of the fiscal year reduced GAAP net earnings by $899 million or 90 cents per diluted share.

Net sales in the first six months of fiscal 2015 increased 21.6 percent to $46.1 billion compared with the same period a year ago.

Combined net synergies for the first half of fiscal 2015 were $310 million and remain on track to reach at least $650 million in fiscal 2015. The company continues to expect to reach at least $1.0 billion in combined net synergies in fiscal 2016. This excludes the synergy benefits related to the company’s strategic, long-term relationship with AmerisourceBergen.

Walgreens Boots Alliance generated free cash flow of $1.0 billion in the quarter and $1.7 billion in the first six months of the fiscal year. GAAP operating cash flow totaled $1.3 billion in the quarter and $2.3 billion in the first six months. In connection with the company’s capital allocation policy, its board of directors in August 2014 authorized the repurchase of up to $3 billion of company stock prior to 31 August 2016. The company purchased $94 million worth of shares under the program during the first six months of the fiscal year.

Restructuring Program

The company previously announced in August 2014 a three-year, $1.0 billion cost-reduction initiative and committed to providing additional information in subsequent quarters. After a rigorous analysis, the company has identified additional opportunities for cost savings, primarily in its Retail Pharmacy USA division. These additional opportunities will increase the total expected cost savings program by $500 million to a projected $1.5 billion by the end of fiscal 2017. Significant areas of focus include plans to close approximately 200 USA stores; reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions. These actions are designed to restructure and invest in the company’s future in a way that is better for customers and simpler for employees, resulting in a faster and more agile company. The company estimates that total pre-tax charges associated with this program to its GAAP financial results will be between $1.6 billion and $1.8 billion, of which the cash component is expected to be approximately 60 percent. The restructuring charges will be recognized over time as the program is implemented in accordance with GAAP.

Company Outlook

Today the company is introducing full-year adjusted earnings guidance for fiscal 2015 with anticipated adjusted net earnings attributable to Walgreens Boots Alliance of $3.45 to $3.65 per share on a diluted basis for the full fiscal year. This includes full consolidation of Alliance Boots from 31 December 2014 with no lag. In addition, this assumes quarterly interest expense of $140 million to $150 million; an effective adjusted tax rate of approximately 29 percent; an average diluted share count for the fiscal year that is generally consistent with the current quarter; and foreign currency exchange rates that reflect current market rates over the balance of the fiscal year.

 

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The company also reaffirmed its goal of adjusted earnings per share of $4.25 to $4.60 for fiscal year 2016.

Business Segment Highlights

Retail Pharmacy USA:

The Retail Pharmacy USA division, whose principal retail pharmacy brands are Walgreens and Duane Reade, had second quarter sales of $21.0 billion, an increase of 7.4 percent over the year-ago quarter. Total sales in comparable stores (those open at least a year) increased 6.9 percent compared with the same quarter a year ago. Retail comparable store sales increased 2.5 percent in the second quarter with improved retail product margins compared with last year’s second quarter.

Pharmacy sales, which accounted for 64.4 percent of division sales in the quarter, increased 10.1 percent compared with the year-ago quarter, while pharmacy sales in comparable stores increased 9.7 percent. The division filled 224 million prescriptions (including immunizations) on a 30-day adjusted basis in the quarter, an increase of 4.8 percent over last year’s second quarter. Prescriptions filled in comparable stores increased 5.0 percent compared with the same quarter last year, driven by the positive impact of a strong cough, cold and flu season, continued growth in Medicare Part D prescriptions and market growth. For the quarter ending 28 February 2015, the division’s retail prescription market share in the USA on a 30-day adjusted basis increased 20 basis points over a year ago to 19.3 percent, as reported by IMS Health.

GAAP operating income increased 6.2 percent over the year-ago quarter to $1.3 billion. Adjusted operating income increased 13.5 percent over the year-ago quarter to $1.6 billion, resulting from strong expense control and efficiencies that offset the expected gross profit margin pressure from lower prescription reimbursement, generic drug inflation and the step down in Medicare Part D rates that began 1 January 2015. The increase in GAAP operating income was partially offset by having equity earnings in Alliance Boots for one month versus three months in the comparable period.

The last two months of the fiscal 2015 second quarter for the Retail Pharmacy USA division includes results of operations, synergy benefits including WBAD and an allocation of corporate-related overhead costs. The first month of the fiscal 2015 second quarter and all of the year-ago quarter included all corporate costs of Walgreen Co., the full consolidated results of WBAD and equity income from Walgreen Co.’s 45 percent interest in Alliance Boots.

The division opened 71 new drugstores in the first half of fiscal 2015, including 25 relocations, and closed 46 locations. At 28 February 2015, the division operated 8,232 drugstores across all 50 states, the District of Columbia, Puerto Rico and the US Virgin Islands.

Retail Pharmacy International:

The Retail Pharmacy International division, whose principal retail brands are Boots in the UK, Thailand, Norway, the Republic of Ireland and The Netherlands, Benavides in Mexico and Ahumada in Chile, had

 

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second quarter sales (comprising the post-merger months of January and February) of $2.0 billion. On a pro forma constant currency basis, comparable store sales in January and February increased 2.9 percent compared with the same period a year ago.

GAAP operating income was $8 million, while adjusted operating income was $125 million.

At 28 February 2015, the division operated 4,559 pharmacy-led health and beauty retail stores in eight countries.

Pharmaceutical Wholesale:

The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, had second quarter sales (comprising the post-merger months of January and February) of $3.9 billion. On a pro forma constant currency basis, sales were relatively flat compared with the same period a year ago. GAAP operating income was $81 million, while adjusted operating income was $121 million.

CEO Search Update

The board is progressing in its search for a permanent CEO as its search committee works with a top executive recruiting firm. Executive Chairman Jim Skinner said, “While we work through this process in a deliberate and methodical manner to fill such a critical role, we are making the necessary business decisions to move us forward and will continue to do so while we find the right candidate.”

Conference Call and Analyst Day Details

Walgreens Boots Alliance will hold a one-hour conference call to discuss the second quarter results beginning at 8:30 a.m. Eastern time today, 9 April 2015. The conference call will be simulcast through the Walgreens Boots Alliance investor relations website at: http://investor.walgreensbootsalliance.com. A replay of the conference call will be archived on the website for 12 months after the call.

The replay also will be available from 11:30 a.m. Eastern time, 9 April 2015 through 16 April 2015, by calling 855-859-2056 within the USA and Canada, or 404-537-3406 outside the USA and Canada, using replay code 73011264.

Walgreens Boots Alliance also will host its 2015 Analyst Day in New York City at the Ritz Carlton Hotel Battery Park on 15-16 April 2015, beginning at 8 a.m. Eastern time both days. The first day will include an overview of the company’s operations and strategy from senior leadership of Walgreens Boots Alliance. The second day will consist of a half-day session to review financial performance and provide management’s perspective regarding key financial variables.

Live video of the conference will be simulcast through the Walgreens Boots Alliance investor relations website. Presentation materials also will be available on the website. A replay of the conference will be archived on the website for 12 months after the conference.

Cautionary Note Regarding Forward-Looking Statements: All statements in this release that are not historical including, without limitation, estimates of and goals for future financial and operating performance, the expected execution and effect of our business strategies, our cost-savings and growth

 

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initiatives and restructuring activities and the amounts and timing of their expected impact, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “continue,” “sustain,” “synergy,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those relating to our ability to successfully integrate operations, systems and employees following completion of the strategic combination of Walgreens and Alliance Boots, the impact of private and public third-party payers efforts to reduce prescription drug reimbursements, the impact of generic prescription drug inflation, the timing and magnitude of the impact of branded to generic drug conversions, our ability to realize anticipated synergies and achieve anticipated financial, tax and operating results in the amounts and at the times anticipated, our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of our contractual obligations, whether the costs associated with restructuring activities will exceed current estimates, our ability to realize expected savings and benefits from restructuring activities in the amounts and at the times anticipated, changes in management’s assumptions, the risks associated with governance and control matters, the risks associated with equity investments in AmerisourceBergen including whether the warrants to invest in AmerisourceBergen will be exercised and the ramifications thereof, the ability to retain key personnel, changes in financial markets, interest rates and foreign currency exchange rates, the risks associated with international business operations, the risk of unexpected costs, liabilities or delays, changes in network participation and reimbursement and other terms, risks of inflation in the cost of goods, risks associated with the operation and growth of our customer loyalty programs, risks associated with acquisitions, divestitures, joint ventures and strategic investments, subsequent adjustments to preliminary purchase accounting determinations, outcomes of legal and regulatory matters, and changes in legislation or regulations. These and other risks, assumptions and uncertainties are described in Item 1A described in Item 1A (Risk Factors) of the Walgreen Co. Annual Report on Form 10-K, as amended, for the fiscal year ended August 31, 2014, which is incorporated herein by reference, and in other documents that Walgreen Co. or Walgreens Boots Alliance, Inc. files or furnishes with the Securities and Exchange Commission (including the Walgreens Boots Alliance, Inc. Form 10-Q filed on the date hereof). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

 

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Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures.

ENDS

Notes to Editors:

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is the first global pharmacy-led, health and wellbeing enterprise in the world.

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

The company employs over 370,000* people and has a presence in more than 25* countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is the global leader in pharmacy-led, health and wellbeing retail with over 13,100* stores in 11* countries. The company includes the largest global pharmaceutical wholesale and distribution network with over 350* distribution centers delivering to more than 200,000** pharmacies, doctors, health centers and hospitals each year in 19* countries. In addition, Walgreens Boots Alliance is the world’s largest purchaser of prescription drugs and many other health and wellbeing products.

Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No 7, Botanics and Soap & Glory. More company information is available at www.walgreensbootsalliance.com.

 

* As at 28 February 2015 including equity method investments

 

** For 12 months ended 28 February 2015 including equity method investments

 

Media Relations Contact

USA / Michael Polzin

International / Laura Vergani

+1 847 315 2935

+44 (0)207 980 8585

Investor Relations Contact

USA / Ashish Kohli

UK / Gerald Gradwell

+1 847 315 3810

+44 (0)207 980 8527

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions, Except Per Share Amounts)

 

     Three Months Ended     Six Months Ended  
     February 28,
2015
     February 28,
2014
    February 28,
2015
     February 28,
2014
 

Net sales

   $ 26,573       $ 19,605      $ 46,127       $ 37,934   

Cost of sales

     19,691         13,955        33,949         27,132   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross Profit

  6,882      5,650      12,178      10,802   

Selling, general and administrative expenses

  5,606      4,569      10,062      8,948   

Equity earnings in Alliance Boots

  101      136      315      330   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating Income

  1,377      1,217      2,431      2,184   

Gain on previously held equity interest

  706      —        706      —     

Other income (expense)

  504      (59   703      166   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings Before Interest and Tax Provision (EBIT)

  2,587      1,158      3,840      2,350   

Interest expense, net

  144      37      199      78   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings Before Income Tax Provision

  2,443      1,121      3,641      2,272   

Income tax provision

  391      391      712      810   

Post tax earnings from equity method investments

  8      —        8      —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Net Earnings

  2,060      730      2,937      1,462   

Net earnings attributable to noncontrolling interests

  18      14      45      23   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net Earnings Attributable to Walgreens Boots Alliance, Inc.

$ 2,042    $ 716    $ 2,892    $ 1,439   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings per common share attributable to Walgreens Boots Alliance, Inc.:

Basic

$ 1.96    $ 0.75    $ 2.91    $ 1.51   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted

$ 1.93    $ 0.74    $ 2.88    $ 1.49   
  

 

 

    

 

 

   

 

 

    

 

 

 

Dividends declared

$ 0.3375    $ 0.3150    $ 0.6750    $ 0.6300   

Average shares outstanding

  1,043.6      951.9      994.7      950.6   

Dilutive effect of stock options

  11.1      11.8      10.6      12.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Average Diluted Shares

  1,054.7      963.7      1,005.3      962.6   
  

 

 

    

 

 

   

 

 

    

 

 

 

(more)

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions)

 

     February 28,
2015
     August 31,
2014
 

Assets

     

Current Assets:

     

Cash and cash equivalents

   $ 3,005       $ 2,646   

Accounts receivable, net

     7,017         3,218   

Inventories

     9,379         6,076   

Other current assets

     1,314         302   
  

 

 

    

 

 

 

Total Current Assets

  20,715      12,242   

Non-Current Assets:

Property, plant and equipment, at cost, less accumulated depreciation and amortization

  15,646      12,257   

Equity investment in Alliance Boots

  —        7,336   

Goodwill

  17,044      2,359   

Intangible assets

  12,225      1,180   

Other non-current assets

  5,727      1,896   
  

 

 

    

 

 

 

Total Non-Current Assets

  50,642      25,028   
  

 

 

    

 

 

 

Total Assets

$ 71,357    $ 37,270   
  

 

 

    

 

 

 

Liabilities and Equity

Current Liabilities:

Short-term borrowings

$ 1,061    $ 774   

Trade accounts payable

  10,293      4,315   

Accrued expenses and other liabilities

  5,140      3,701   

Income taxes

  196      105   
  

 

 

    

 

 

 

Total Current Liabilities

  16,690      8,895   

Non-Current Liabilities:

Long-term debt

  16,001      3,736   

Deferred income taxes

  3,689      1,080   

Other non-current liabilities

  3,951      2,942   
  

 

 

    

 

 

 

Total Non-Current Liabilities

  23,641      7,758   
  

 

 

    

 

 

 

Equity

  31,026      20,617   
  

 

 

    

 

 

 

Total Liabilities and Equity

$ 71,357    $ 37,270   
  

 

 

    

 

 

 

(more)

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED AND SUBJECT TO RECLASSIFICATION)

(In Millions)

 

     Six Months Ended  
     February 28,
2015
    February 28,
2014
 

Cash flows from operating activities:

    

Net earnings

   $ 2,937      $ 1,462   

Adjustments to reconcile net earnings to net cash provided by operating activities -

    

Depreciation and amortization

     826        663   

Change in fair value of warrants and related amortization

     (859     (166

Gain on previously held equity interest

     (706     —     

Deferred income taxes

     181        29   

Stock compensation expense

     65        52   

Unrealized gain from fair value adjustments

     (68     —     

Equity earnings in Alliance Boots

     (315     (330

Other

     390        48   

Changes in operating assets and liabilities -

    

Accounts receivable, net

     (391     (117

Inventories

     106        (288

Other current assets

     21        13   

Trade accounts payable

     363        (171

Accrued expenses and other liabilities

     (20     (25

Income taxes

     (99     47   

Other non-current assets and liabilities

     (94     20   
  

 

 

   

 

 

 

Net cash provided by operating activities

  2,337      1,237   
  

 

 

   

 

 

 

Cash flows from investing activities:

Additions to property, plant and equipment

  (643   (591

Proceeds from sale of assets

  579      209   

Return of restricted cash

  74      —     

Alliance Boots acquisition, net of cash received

  (4,461   —     

Other business and intangible asset acquisitions, net of cash received

  (92   (297

Purchases of short-term investments held to maturity

  (29   (34

Proceeds from short-term investments held to maturity

  29      34   

Investment in AmerisourceBergen

  —        (430

Other

  (165   (59
  

 

 

   

 

 

 

Net cash used for investing activities

  (4,708   (1,168
  

 

 

   

 

 

 

Cash flows from financing activities:

Payments of short-term borrowings

  (330   —     

Proceeds from issuance of long-term debt

  12,279      —     

Payments of long-term debt

  (7,817   —     

Stock purchases

  (594   (205

Proceeds related to employee stock plans

  293      416   

Cash dividends paid

  (642   (597

Other

  (360   (12
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

  2,829      (398

Effect of exchange rate changes on cash and cash equivalents

  (99   —     

Changes in cash and cash equivalents:

Net increase (decrease) in cash and cash equivalents

  359      (329

Cash and cash equivalents at beginning of period

  2,646      2,106   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 3,005    $ 1,777   
  

 

 

   

 

 

 

(more)

 

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In millions, except per share amounts)

The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under SEC rules, presented in this press release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). The company has provided these non-GAAP financial measures in the press release, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the company’s financial results both including and excluding the adjusted items and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company’s business from period to period and trends in the company’s historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release.

NET EARNINGS AND EARNINGS PER SHARE

 

     Three months ended      Six months ended  
     February 28,
2015
     February 28,
2014
     February 28,
2015
     February 28,
2014
 

Net earnings attributable to Walgreens Boots Alliance, Inc. (GAAP)

   $ 2,042       $ 716       $ 2,892       $ 1,439   

Gain on previously held equity interest

     (814      —           (814      —     

(Increase) decrease in fair market value of warrants

     (376      56         (655      (150

Partial release of capital loss valuation allowance

     —           —           (86      —     

Acquisition-related amortization

     157         62         215         118   

Transaction foreign currency hedging loss

     70         —           166         —     

Asset impairment

     78         —           78         —     

LIFO provision

     42         33         76         70   

Alliance Boots equity method non-cash tax

     38         55         71         102   

Acquisition-related costs

     43         11         59         27   

Optimization costs

     12         1         30         16   

Prefunded interest expenses

     21         —           30         —     

Adjusted tax rate true-up

     (69      —           (69      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)

$ 1,244    $ 934    $ 1,993    $ 1,622   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings per common share – diluted (GAAP)

$ 1.93    $ 0.74    $ 2.88    $ 1.49   

Gain on previously held equity interest

  (0.77   —        (0.81   —     

(Increase) decrease in fair market value of warrants

  (0.35   0.06      (0.65   (0.15

Partial release of capital loss valuation allowance

  —        —        (0.09   —     

Acquisition-related amortization

  0.15      0.06      0.21      0.12   

Transaction foreign currency hedging loss

  0.07      —        0.16      —     

Asset impairment

  0.07      —        0.08      —     

LIFO provision

  0.04      0.04      0.08      0.08   

Alliance Boots equity method non-cash tax

  0.04      0.06      0.07      0.10   

Acquisition-related costs

  0.04      0.01      0.06      0.03   

Optimization costs

  0.01      —        0.03      0.02   

Prefunded interest expenses

  0.02      —        0.03      —     

Adjusted tax rate true-up

  (0.07   —        (0.07   —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted (Non-GAAP measure)

$ 1.18    $ 0.97    $ 1.98    $ 1.69   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

11


OPERATING INCOME BY SEGMENT

 

     Three months ended February 28, 2015  
     Retail
Pharmacy
USA
     Retail
Pharmacy
International
     Pharmaceutical
Wholesale
     Eliminations
and Other
    Walgreens
Boots
Alliance, Inc.
 

Operating Income (GAAP)

   $ 1,292       $ 8       $ 81       $ (4   $ 1,377   

Asset impairment

     110         —           —           —          110   

Acquisition-related amortization

     67         117         33         —          217   

LIFO provision

     55         —           —           —          55   

Acquisition-related costs

     52         —           7         —          59   

Optimization costs

     16         —           —           —          16   

Decrease in fair market value of warrants

     6         —           —           —          6   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted Operating Income (Non-GAAP measure)

$ 1,598    $ 125    $ 121    $ (4 $ 1,840   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

     Three months ended February 28, 2014  
     Retail
Pharmacy
USA
     Retail
Pharmacy
International
     Pharmaceutical
Wholesale
     Eliminations
and Other
     Walgreens
Boots
Alliance, Inc.
 

Operating Income (GAAP)

   $ 1,217       $ —         $ —         $ —         $ 1,217   

Acquisition-related amortization

     94         —           —           —           94   

LIFO provision

     51         —           —           —           51   

Acquisition-related costs

     17         —           —           —           17   

Optimization costs

     2         —           —           —           2   

Decrease in fair market value of warrants

     27         —           —           —           27   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Operating Income (Non-GAAP measure)

$ 1,408    $ —      $ —      $ —      $ 1,408   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Six months ended February 28, 2015  
     Retail
Pharmacy
USA
    Retail
Pharmacy
International
     Pharmaceutical
Wholesale
     Eliminations
and Other
    Walgreens
Boots
Alliance, Inc.
 

Operating Income (GAAP)

   $ 2,346      $ 8       $ 81       $ (4   $ 2,431   

Asset impairment

     110        —           —           —          110   

Acquisition-related amortization

     156        117         33         —          306   

LIFO provision

     107        —           —           —          107   

Acquisition-related costs

     76        —           7         —          83   

Optimization costs

     44        —           —           —          44   

Increase in fair market value of warrants

     (123     —           —           —          (123
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted Operating Income (Non-GAAP measure)

$ 2,716    $ 125    $ 121    $ (4 $ 2,958   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

12


     Six months ended February 28, 2014  
     Retail
Pharmacy
USA
    Retail
Pharmacy
International
     Pharmaceutical
Wholesale
     Eliminations
and Other
     Walgreens
Boots
Alliance, Inc.
 

Operating Income (GAAP)

   $ 2,184      $ —         $ —         $ —         $ 2,184   

Acquisition-related amortization

     183        —           —           —           183   

LIFO provision

     109        —           —           —           109   

Acquisition-related costs

     42        —           —           —           42   

Optimization costs

     26        —           —           —           26   

Increase in fair market value of warrants

     (72     —           —           —           (72
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Operating Income (Non-GAAP measure)

$ 2,472    $ —      $ —      $ —      $ 2,472   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

FREE CASH FLOW

 

     Three months
ended
February 28,
2015
     Six months
ended
February 28,
2015
 

Net cash provided by operating activities (GAAP)

   $ 1,306       $ 2,337   

Less: Additions to property, plant and equipment

     308         643   
  

 

 

    

 

 

 

Free cash flow(1)

$ 998    $ 1,694   
  

 

 

    

 

 

 

 

(1) Free cash flow is defined as net cash provided by operating activities in a period minus additions to property, plant and equipment (capital expenditures) made in that period. This measure does not represent residual cash flows available for discretionary expenditures as the measure does not deduct the payments required for debt service and other contractual obligations or payments for future business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statements of cash flows.

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13