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What changed in Walgreens Boots Alliance's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Walgreens Boots Alliance's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+546 added−529 removedSource: 10-K (2023-10-12) vs 10-K (2022-10-13)

Top changes in Walgreens Boots Alliance's 2023 10-K

546 paragraphs added · 529 removed · 378 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

101 edited+37 added−44 removed37 unchanged
Biggest changeWBA Fiscal 2022 Form 10-K 10 Table of Contents Information about our executive officers The following table sets forth, for each person currently serving as an executive officer of the Company, the name, age (as of October 13, 2022) and office(s) held by such person: Name Age Office(s) held Stefano Pessina 81 Executive Chairman of the Board Rosalind Brewer 60 Chief Executive Officer Ornella Barra 68 Chief Operating Officer, International James Kehoe 59 Executive Vice President and Global Chief Financial Officer Danielle Gray 44 Executive Vice President and Global Chief Legal Officer John Standley 1 59 Executive Vice President and President, Walgreen Co.
Biggest changeInformation about our executive officers The following table sets forth, for each person currently serving as an executive officer of the Company, the name, age (as of October 12, 2023) and office(s) held by such person: Name Age Office(s) held Stefano Pessina 82 Executive Chairman of the Board Ginger L.
Mahajan served as Vice President, Global Reporting and Technical Accounting from February 2016 to September 2019 and as Vice President, Assistant Global Controller from October 2019 to July 2021. Prior to joining the Company, Mr.
Mahajan served as Vice President, Assistant Global Controller from October 2019 to July 2021 and as Vice President, Global Reporting and Technical Accounting from February 2016 to September 2019. Prior to joining the Company, Mr.
Department of Justice from 2010 to 2011 and Associate Counsel to the President in the White House Counsel's Office from 2009 to 2010. Ms. Gray began her career serving as a law clerk to Judge Merrick Garland on the U.S. Court of Appeals for the DC Circuit and Justice Stephen Breyer on the U.S. Supreme Court. Mr.
Department of Justice from 2010 to 2011 and Associate Counsel to the President in the White House Counsel's Office from 2009 to 2010. Ms. Gray began her career serving as a law clerk to Judge Merrick Garland on the U.S. Court of Appeals for the DC Circuit and Justice Stephen Breyer on the U.S. Supreme Court. Ms.
In addition, in many European countries, the government provides or subsidizes healthcare to consumers and regulates pharmaceutical prices, patient eligibility and reimbursement levels to control costs for the government-sponsored healthcare system. Changes in law or regulation also can impact reimbursement rates and terms.
In addition, in many European countries, the government provides or subsidizes healthcare to consumers and regulates pharmaceutical prices, patient eligibility and reimbursement levels to help control costs for the government-sponsored healthcare system. Changes in law or regulation can also impact reimbursement rates and terms.
In general, in the U.S., the specialty prescription business is also growing and generates higher sales dollars per prescription, but lower gross margin, as compared to generic prescription drugs. The Company expects that market demand, government regulation, third-party reimbursement policies, government contracting requirements and other pressures will continue to cause the industries in which the Company competes to evolve.
In general, in the U.S., the specialty prescription business is also growing and generates higher sales dollars per prescription, but lower gross margin, as compared to generic prescription drugs. The Company expects that market demand, government regulation, third-party reimbursement policies, government contracting requirements and other pressures will continue to evolve across the industries in which the Company competes.
The Company expects these pressures to continue. The Company has also worked to develop and expand its relationships with commercial third-party payers to enable new and/or improved market access via participation in pharmacy provider networks they offer. The prescription volume impact of new agreements and relationships typically is incremental over time.
The Company expects these pressures to continue. The Company has also worked to develop and expand its relationships with commercial third-party payors to enable new and/or improved market access via participation in pharmacy provider networks they offer. The prescription volume impact of new agreements and relationships typically is incremental over time.
Further, the segment also has a wholesale business in Germany with 35 distribution centers which distribute prescription medicines to pharmacies and other similar healthcare facilities. The segment’s sales are subject to the influence of seasonality, with the second fiscal quarter typically the strongest as a result of the winter holiday period.
Further, the segment also has a wholesale business in Germany with 32 distribution centers which distribute prescription medicines to pharmacies and other similar healthcare facilities. The segment’s sales are subject to the influence of seasonality, with the second fiscal quarter typically the strongest as a result of the winter holiday period.
Adjusted to 30-day equivalents, prescriptions filled were 1.2 billion in fiscal 2022. The Company fills prescriptions under Medicare, Medicaid and other publicly financed or sponsored health benefit and prescription drug plans and programs, including the federal 340B drug pricing program.
Adjusted to 30-day equivalents, prescriptions filled were 1.2 billion in fiscal 2023. The Company fills prescriptions under Medicare, Medicaid and other publicly financed or sponsored health benefit and prescription drug plans and programs, including the federal 340B drug pricing program.
The Company also provides racial, ethnic, and gender composition of its U.S. work force through the Equal Employment Opportunity 2021 Employer Information Report (EEO-1) available on the Company’s website and filed with the Equal Employment Opportunity Commission (EEOC).
The Company also provides racial, ethnic, and gender composition of its U.S. work force through the Equal Employment Opportunity 2022 Employer Information Report (EEO-1) available on the Company’s website and filed with the Equal Employment Opportunity Commission (EEOC).
Barra has served as a director of AmerisourceBergen and from April 2013 to April 2019, served as a director of Assicurazioni Generali, the parent company of Generali Group, a global insurance group. Ms. Barra also serves as a director of a number of private companies, and, until February 2015, served as a director of Alliance Boots.
Barra has served as a director of Cencora and from April 2013 to April 2019, served as a director of Assicurazioni Generali, the parent company of Generali Group, a global insurance group. Ms. Barra also serves as a director of a number of private companies, and, until February 2015, served as a director of Alliance Boots. Ms.
When third-party payers or governmental authorities take actions that restrict eligibility or reduce prices or reimbursement rates, sales and margins in the retail pharmacy industry could be reduced, which would adversely affect industry profitability.
When third-party payors or governmental authorities take actions that restrict eligibility or reduce prices or reimbursement rates, sales and margins in the retail pharmacy industry could be reduced, which would adversely affect industry profitability.
Prior to the ADA, Ms. Brown was Senior Vice President, Operations and Chief Experience Officer for Sam’s Club, a division of Walmart Inc., from 2014 to June 2018. Prior to that, she served in leadership roles with RAPP Dallas, a data-driven integrated marketing agency, Direct Impact, a direct marketing agency, and Advanced Micro Devices.
Brown was Senior Vice President, Operations and Chief Experience Officer for Sam’s Club, a division of Walmart Inc., from 2014 to June 2018. Prior to that, she served in leadership roles with RAPP Dallas, a data-driven integrated marketing agency, Direct Impact, a direct marketing agency, and Advanced Micro Devices.
The Company holds assorted business licenses (such as pharmacy, occupational, liquor and cigarette) having various lives within multiple legal jurisdictions, which are necessary for the normal operation of the business.
The Company holds assorted business licenses (such as pharmacy, occupational, liquor and cigarette) having various terms within multiple legal jurisdictions, which are necessary for the normal operation of the business.
The Board currently has five female directors, two African American directors, one Asian American director and one director who identifies as LGBTQ+. Workplace Health and Safety The Company is committed to creating and upholding safe environments for employees, customers, contractors and patients across all of its business operations.
The Board currently has four female directors, one African American directors, one Asian American director and one director who identifies as LGBTQ+. Workplace Health and Safety The Company is committed to creating and upholding safe environments for employees, customers, contractors and patients across all of its business operations.
In any given year, the number of major brand name drugs that undergo a conversion from branded to generic status can vary and the timing of generic conversions can be difficult to predict, which can have a significant impact on retail pharmacy sales and gross profit dollars.
In any given year, the number of major brand name drugs that undergo a conversion from branded to generic status can vary and the timing of generic conversions can be difficult to predict, which can have a significant impact on retail pharmacy sales and gross profits.
Gray held a number of public service roles in the White House and U.S. Department of Justice from 2009 to 2014, including Assistant to the President and Cabinet Secretary from 2013 to 2014, Deputy Director of the National Economic Council from 2011 to 2013, Senior Counsel in the U.S.
Prior to this, Ms. Gray held a number of public service roles in the White House and U.S. Department of Justice from 2009 to 2014, including Assistant to the President and Cabinet Secretary from 2013 to 2014, Deputy Director of the National Economic Council from 2011 to 2013, Senior Counsel in the U.S.
The components of the segment’s fiscal year sales were as follows: Fiscal 2022 VillageMD 84 % Shields 16 % Total 100 % WBA Fiscal 2022 Form 10-K 7 Table of Contents Intellectual property and licenses The Company markets products and services under various trademarks, trade dress and trade names and relies on a combination of patent, copyright, trademark, service mark and trade secret laws, as well as contractual restrictions to establish and protect its proprietary rights.
WBA Fiscal 2023 Form 10-K 6 Table of Contents The components of the segment’s fiscal year sales were as follows: Fiscal 2023 Fiscal 2022 VillageMD 70 % 84 % Shields 7 % 16 % CareCentrix 23 % — % Total 100 % 100 % Intellectual property and licenses The Company markets products and services under various trademarks, trade dress and trade names and relies on a combination of patent, copyright, trademark, service mark and trade secret laws, as well as contractual restrictions to establish and protect its proprietary rights.
In some cases, these possible adverse effects may be partially or entirely offset by controlling inventory costs and other expenses, dispensing more higher margin generics, finding new revenue streams through pharmacy services or other offerings and/or dispensing a greater volume of prescriptions. These industry dynamics and challenges are continuous and have intensified in recent years.
In some cases, these possible adverse effects may be partially or entirely offset by controlling inventory costs and other expenses, dispensing more higher margin generics, finding new revenue streams through pharmacy services or other offerings and/or dispensing a greater volume of prescriptions. These industry dynamics and challenges have been ongoing and some have intensified in recent years.
Agreements with these payers are regularly subject to expiration, termination or renegotiation. In addition, plan changes with rate adjustments often occur in January and the Company’s reimbursement arrangements may provide for rate adjustments at prescribed intervals during their term. The Company experienced lower reimbursement rates in fiscal 2022 as compared to the same period in the prior year.
Agreements with these payors are regularly subject to expiration, termination or renegotiation. In addition, plan changes with rate adjustments often occur in January and the Company’s reimbursement arrangements may provide for rate adjustments at prescribed intervals during their term. The Company experienced lower reimbursement rates in fiscal 2023 as compared to the same period in the prior year.
Seasonal variations in business The Company’s business is affected by a number of factors including, among others, COVID-19, its sales performance during holiday periods (including particularly the winter holiday season) and during the cough, cold and flu season (the timing and severity of which is difficult to predict), significant weather conditions, the timing of its own or competitor discount programs and pricing actions and the timing of changes in levels of reimbursement from governmental agencies and other third-party payers.
Seasonal variations in business The Company’s business is affected by a number of factors including, among others, the severity of COVID-19 and the efficacy of current vaccines, its sales performance during holiday periods (including particularly the winter holiday season) and during the cough, cold and flu season (the timing and severity of which is difficult to predict), significant weather conditions, the timing of its own or competitor discount programs and pricing actions and the timing of changes in levels of reimbursement from governmental agencies and other third-party payors.
Further consolidation among generic manufacturers coupled with changes in the number of major brand name drugs anticipated to undergo a conversion from branded to generic status may also result in gross margin pressures within the industry. The Company continuously faces reimbursement pressure from PBM companies, government, health maintenance organizations, managed care organizations and other commercial third-party payers.
Further consolidation among generic manufacturers coupled with changes in the number of major brand name drugs anticipated to undergo a conversion from branded to generic status may also result in gross margin pressures within the industry. The Company continuously faces reimbursement pressure from PBMs, government, health maintenance organizations, managed care organizations and other commercial third-party payors.
The number of myWalgreens members continues to grow and as of August 31, 2022, totaled approximately 102 million. The Walgreens Find Care platform also includes telehealth service providers, connecting patients and customers with options to access convenient and affordable care from their mobile devices.
The number of myWalgreens members continues to grow and as of August 31, 2023, totaled approximately 113 million. The Walgreens Find Care platform also includes telehealth service providers, connecting patients and customers with options to access convenient and affordable care from their mobile devices.
The segment provides customers with convenient, omni-channel access to consumer goods and services, including own branded general merchandise, such as NICE!, Finest Nutrition, No7, and Soap & Glory, as well as pharmacy and health and wellness services in communities across the U.S.
The segment provides customers with convenient, omni-channel access to consumer goods and services, including own branded general merchandise, such as NICE!, Free & Pure, No7, and Soap & Glory, as well as pharmacy and health and wellness services in communities across the U.S.
Ban was Chief Medical Officer at athenahealth, Inc., a leading provider of network-enabled software and services for medical groups and health systems nationwide, from October 2017 to December 2019 and served as Population Health Executive Director from November 2015 to September 2017. WBA Fiscal 2022 Form 10-K 12 Table of Contents Ms.
Ban was Chief Medical Officer at athenahealth, Inc., a leading provider of network-enabled software and services for medical groups and health systems nationwide, from October 2017 to December 2019 and served as Population Health Executive Director from November 2015 to September 2017. WBA Fiscal 2023 Form 10-K 11 Table of Contents Mr.
Regulation In the countries in which the Company does business, the Company is subject to national, state and local laws, regulations and administrative practices concerning healthcare, retail and wholesale pharmacy operations, including regulations relating to the Company’s filling of prescriptions under Medicare, Medicaid and other publicly financed or sponsored health benefit plan and prescription drug plans and programs including the federal 340B drug pricing program; regulations prohibiting kickbacks, beneficiary inducement and the submission of false claims; the Health Insurance Portability and Accountability Act (“HIPAA”); the ACA; licensure and registration requirements concerning the operation of pharmacies and the practice of pharmacy; and regulations of the U.S.
WBA Fiscal 2023 Form 10-K 7 Table of Contents Regulation In the countries in which the Company does business, the Company is subject to national, state and local laws, regulations and administrative practices concerning healthcare, retail and wholesale pharmacy operations, including regulations relating to the Company’s filling of prescriptions under Medicare, Medicaid and other publicly financed or sponsored health benefit plan and prescription drug plans and programs including the federal 340B drug pricing program; regulations prohibiting kickbacks, beneficiary inducement and the submission of false claims; the Stark Law; the Health Insurance Portability and Accountability Act (“HIPAA”); the ACA; the IRA; licensure and registration requirements concerning the operation of pharmacies and the practice of pharmacy; and regulations of the U.S.
The components of the segment’s fiscal year sales were as follows: Fiscal 2022 Fiscal 2021 Fiscal 2020 Pharmacy 17 % 19 % 25 % Retail 32 % 30 % 41 % Wholesale 51 % 51 % 34 % Total 100 % 100 % 100 % The segment’s Pharmacy sales, gross margin and gross profit dollars are impacted by governmental agencies and other third-party payers seeking to minimize increases in the costs of healthcare, including pharmaceutical drug reimbursement rates.
The components of the segment’s fiscal year sales were as follows: Fiscal 2023 Fiscal 2022 Fiscal 2021 Pharmacy 17 % 17 % 19 % Retail 33 % 32 % 30 % Wholesale 51 % 51 % 51 % Total 100 % 100 % 100 % The segment’s Pharmacy sales, gross margin and gross profit dollars are impacted by governmental agencies and other third-party payors seeking to minimize increases in the costs of healthcare, including pharmaceutical drug reimbursement rates.
Virgin Islands. The Company operated 8,886 retail stores in the segment as of August 31, 2022. The principal retail pharmacy brands in the segment are Walgreens and Duane Reade.
Virgin Islands. The Company operated 8,701 retail stores in the segment as of August 31, 2023. The principal retail pharmacy brands in the segment are Walgreens and Duane Reade.
For further information, see the liquidity and capital resources section in Management’s discussion and analysis of financial condition and results of operations in Part II, Item 7. Customers The Company sells to numerous retail and wholesale customers. The Company also provides healthcare services to healthcare payors’ eligible members.
For further information, see the liquidity and capital resources section in Management’s discussion and analysis of financial condition and results of operations in Part II, Item 7. Customers The Company sells to numerous retail and wholesale customers. The Company also provides healthcare services to healthcare payors’ eligible members, cash-pay patients, and health systems and provider groups.
Brown has served as Senior Vice President and President of Retail Products and Chief Customer Officer, Walgreen Co. since September 2022. Ms. Brown has served as President of Retail Products and Chief Customer Officer, Walgreen Co. since November 2021. She was previously Chief Executive Officer of the American Diabetes Association (“ADA”) from June 2018 to November 2021.
Brown has served as President of Retail Products and Chief Customer Officer, Walgreen Co. since November 2021. She was previously Chief Executive Officer of the American Diabetes Association (“ADA”) from June 2018 to November 2021. Prior to the ADA, Ms.
Pessina served as Executive Deputy Chairman of Alliance Boots. Prior to the merger of Alliance UniChem and Boots Group, Mr. Pessina was Executive Deputy Chairman of Alliance UniChem, previously having been its Chief Executive for three years through December 2004. Mr.
Previously, he served as Executive Chairman of Alliance Boots from July 2007 to December 2014. Prior to that, Mr. Pessina served as Executive Deputy Chairman of Alliance Boots. Prior to the merger of Alliance UniChem and Boots Group, Mr. Pessina was Executive Deputy Chairman of Alliance UniChem, previously having been its Chief Executive for three years through December 2004. Mr.
Earlier in her career, she held leadership positions at American Express, Proctor & Gamble and Exxon Mobil. Mr. Pessina and Ms. Barra are married. There are no other family relationships among any of our directors or executive officers. Other Officers Manmohan Mahajan, 43, has served as Senior Vice President, Global Controller and Chief Accounting Officer since July 2021. Mr.
Earlier in her career, she held leadership positions at American Express, Proctor & Gamble and Exxon Mobil. Mr. Pessina and Ms. Barra are married. There are no other family relationships among any of our directors or executive officers. Other Officers Todd Heckman , 50, has served as Vice President, Interim Global Controller and Chief Accounting Officer since July 2023.
For example, the Patient Protection and Affordable Care Act (the “ACA”) was enacted to help control federal healthcare spending, including for prescription drugs, in the U.S. These changes generally are expected to reduce Medicaid reimbursements in the U.S. State Medicaid programs are also expected to continue to seek reductions in reimbursements.
As an example, the Patient Protection and Affordable Care Act (the “ACA”) was enacted to help control federal healthcare spending, including for prescription drugs, in the U.S. These changes generally have been aimed at reducing Medicaid reimbursements in the U.S. State Medicaid programs are also expected to continue to seek reductions in reimbursements.
The Company offers a comprehensive range of benefits to full- and part-time employees. In the U.S. the Company offers healthcare coverage, insurance benefits, access to a digital well-being program and an employee assistance program. In addition, the Company provides benefits such as paid time off, defined contribution plans, paid maternity and paternal leave, and a stock purchase plan.
In the U.S. the Company offers healthcare coverage, insurance benefits, access to a digital well-being program and an employee assistance program. In addition, the Company provides benefits such as paid time off, defined contribution plans, paid maternity and paternal leave, family forming, and a stock purchase plan.
Third-party payers, including the Medicare Part D plans and the state-sponsored Medicaid and related managed care Medicaid agencies in the U.S., can change eligibility requirements or reduce certain reimbursement rates.
Third-party payors, including the Medicare Part D plans and state-sponsored Medicaid and related managed care Medicaid agencies in the U.S., have the ability to change eligibility requirements and/or reduce certain reimbursement rates.
Through dispensing medicines, improving access to a wide range of health services, providing high quality health and beauty products and offering anytime, anywhere convenience across its digital platforms, the Company is shaping the future of healthcare.
By dispensing medicines, improving access to a wide range of health services, providing high quality health and beauty products and offering anytime, anywhere convenience across its digital platforms, the Company is shaping the future of healthcare in the thousands of communities it serves.
Previously, she served as Senior Vice President, Chief Legal and Administrative Officer and Corporate Secretary of Blue Cross Blue Shield of North Carolina from March 2018 to September 2021 and as a Litigation Partner with O’Melveny & Myers LLP from April 2014 to March 2018. Prior to this, Ms.
Gray has served as Executive Vice President and Global Chief Legal Officer since September 2021. Previously, she served as Senior Vice President, Chief Legal and Administrative Officer and Corporate Secretary of Blue Cross Blue Shield of North Carolina from March 2018 to September 2021 and as a Litigation Partner with O’Melveny & Myers LLP from April 2014 to March 2018.
WBA Fiscal 2022 Form 10-K 6 Table of Contents The components of the segment’s sales are Pharmacy (typically the sale of prescription drugs and provision of pharmacy-related services, subject to variation in particular jurisdictions depending upon regulatory and other factors) and Retail (primarily the sale of health and beauty products including beauty, toiletries and lifestyle merchandising, non-prescription drugs and, in the UK, the provision of optical services).
The components of the segment’s sales are Pharmacy (typically the sale of prescription drugs and provision of pharmacy-related services, subject to variation in particular jurisdictions depending upon regulatory and other factors) and Retail (primarily the sale of health and beauty products including beauty, toiletries and lifestyle merchandising, non-prescription drugs and, in the UK, the provision of optical services).
The segment is also implementing new approaches to promotions, product selection and other areas to deliver greater value to its customers in its stores, including an enhanced beauty offering.
The segment is also implementing new approaches to promotions, product selection and other areas to deliver greater value to its customers in its stores.
The components of the segment’s fiscal year sales were as follows: Fiscal 2022 Fiscal 2021 Fiscal 2020 Pharmacy 74 % 76 % 75 % Retail 26 % 24 % 25 % Total 100 % 100 % 100 % The Company filled 819.6 million prescriptions (including vaccinations) in the segment in fiscal 2022.
The components of the segment’s fiscal year sales were as follows: Fiscal 2023 Fiscal 2022 Fiscal 2021 Pharmacy 74 % 74 % 76 % Retail 26 % 26 % 24 % Total 100 % 100 % 100 % The Company filled 801 million prescriptions (including vaccinations) in the segment in fiscal 2023.
Pessina also serves on the Board of Directors of a number of private companies, and, from 2000 to 2017, served on the Board of Directors of Galenica AG, a publicly-traded Swiss healthcare group. Ms. Brewer has served as Chief Executive Officer since March 2021. Ms.
Pessina also serves on the Board of Directors of a number of private companies, and, from 2000 to 2017, served on the Board of Directors of Galenica AG, a publicly-traded Swiss healthcare group. Ms. Graham, has served as the Company’s Interim Chief Executive Officer since September 2023. Ms.
The Company expects the utilization of generic pharmaceuticals to continue to increase. In general, in the U.S., generic versions of drugs generate lower sales dollars per prescription, but higher gross profit dollars, as compared with patent-protected brand name drugs.
In general, in the U.S., generic versions of drugs generate lower sales dollars per prescription, but higher gross profit dollars as compared with patent-protected brand name drugs.
May held various senior positions with Voya Financial, a financial services company, from September 2012 to October 2016, including Senior Vice President, Human Resources from November 2014 to October 2016. Mr. Coope r has served as Executive Vice President and President, Walgreens Pharmacy since October 2022. Mr.
May held various senior positions with Voya Financial, a financial services company, from September 2012 to October 2016, including Senior Vice President, Human Resources from November 2014 to October 2016. Dr. Ban has served as Executive Vice President and Chief Medical Officer since September 2022. Mr.
Healthcare segment currently consists of a majority position in VillageMD, a leading, national provider of value-based primary care services; a majority position in Shields, a specialty pharmacy integrator and accelerator for hospitals; a majority position in CareCentrix, a leading player in the post-acute and home care management sectors, and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services and care management programs to their members and members’ caregivers through both digital and physical channels.
Healthcare segment currently consists of a majority position in VillageMD, a national provider of value-based care with primary, multi-specialty, and urgent care providers serving patients in traditional clinic settings, in patients’ homes and online appointments; Shields, a specialty pharmacy integrator and accelerator for hospitals; CareCentrix, a participant in the post-acute and home care management sectors, and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services to their members and members’ caregivers through both digital and physical channels.
The Company provides customers with convenient, omni-channel access through its portfolio of retail and business brands which includes Walgreens, Boots and Duane Reade as well as increasingly global health and beauty product brands, such as No7, NICE!, Soap & Glory, Finest Nutrition, Liz Earle, Botanics, Sleek MakeUP and YourGoodSkin.
The Company provides customers with convenient, omni-channel access through its portfolio of retail and business brands, which includes retail drugstores Walgreens, Boots, Duane Reade, Benavides and Ahumada as well its product brands such as No7, Soap & Glory, Free & Pure, NICE!, Liz Earle, Botanics, Sleek MakeUP and YourGoodSkin.
WBA Fiscal 2022 Form 10-K 8 Table of Contents The Company is also governed by national, state and local laws of general applicability in the countries in which it does business, including laws regulating matters of working conditions, health and safety and equal employment opportunity.
The Company is also governed by national, state and local laws of general applicability in the countries in which it does business, including laws regulating matters of working conditions, health and safety and equal employment opportunity.
Barra served as Co-Chief Operating Officer from June 2016 to April 2021. She served as Executive Vice President, President and Chief Executive of Global Wholesale and International Retail from December 2014 to June 2016.
She served as Executive Vice President, President and Chief Executive of Global Wholesale and International Retail from December 2014 to June 2016.
Many private organizations throughout the healthcare industry, including pharmacy benefit management (“PBM”) companies and health insurance companies, have consolidated in recent years to create larger healthcare enterprises with greater bargaining power.
Many private organizations throughout the healthcare industry, including pharmacy benefit managers (“PBMs”) and health insurance companies, have consolidated over recent years to create larger healthcare entities with greater bargaining power.
Integrated with the Company’s e-commerce platform, the Walgreens mobile application allows customers to refill prescriptions through scan technology, receive notifications when a refill is due and choose their delivery option, which includes in-store pick up, drive-through or delivery to their home.
Integrated with the Company’s e-commerce platform, the Walgreens mobile application allows customers to refill prescriptions through scan technology, receive notifications when a refill is due and choose their delivery option, which includes in-store pick up, drive-through or delivery to their home. The myWalgreens customer loyalty program provides an interface for customers to access the Company's enhanced and growing digital offering.
Subsequent events to the Consolidated Financial Statements included in Part II, Item 8 herein for further information.
Segment reporting, to the Consolidated Financial Statements included in Part II, Item 8 for further information.
In the UK, through the boots.com website and integrated mobile application, the ‘order and collect’ service normally allows customers to order from a range of over 37,000 products by 5:00 p.m. and collect the following day from approximately 98% of the UK’s retail stores.
In the UK, through the boots.com website and integrated mobile application, the ‘click and collect’ service normally allows customers to order from a range of over 41,000 products online and collect the following day from approximately 75% of the UK’s retail stores.
The Company’s policies strictly prohibit any form of discrimination or racial profiling, and the Company has several training programs in place which help identify and eliminate unconscious bias towards women and minority groups. The Company provides information on its DE&I initiatives, outcomes, and impacts through its DE&I and Environmental Social and Governance reports.
The Company’s policies strictly prohibit any form of discrimination or racial profiling, and the Company has several training programs in place which help identify and eliminate unconscious bias towards women and minority groups. WBA Fiscal 2023 Form 10-K 9 Table of Contents The Company provides information on its DE&I and ESG initiatives, outcomes, and impacts through its annual ESG report.
These cards are the first ever of their kind to reward more personalized wellbeing choices and offer industry-leading rewards at Walgreens locations, Walgreens.com, Duane Reade stores, via the Walgreens mobile app, and wherever Mastercard is accepted. AmerisourceBergen supplies and distributes a significant amount of generic and branded pharmaceutical products to the segment’s pharmacies.
These cards are the first ever of their kind to reward more personalized wellbeing choices and offer industry-leading rewards at Walgreens locations, Walgreens.com, Duane Reade stores, via the Walgreens mobile app, and wherever Mastercard is accepted. WBA Fiscal 2023 Form 10-K 4 Table of Contents Cencora supplies and distributes substantially all generic and branded pharmaceutical products to the segment’s pharmacies.
Retail Pharmacy” and the “Walgreens Health” segment was renamed to “U.S. Healthcare”. The segment name changes did not result in any change to the composition of the segments and therefore no change to the historical results of segment operations. The information for these segments for all periods included in these consolidated financial statements has been presented using the new names.
The segment name changes did not result in any change to the composition of the segments and therefore no change to the historical results of segment operations. The information for these segments for all periods included in these consolidated financial statements has been presented using the new names. In fiscal 2023, our segment sales were: U.S.
In fiscal 2022, our segment sales were: U.S. Retail Pharmacy $109.1 billion, International $21.8 billion and U.S. Healthcare $1.8 billion. Additional information relating to our segments is included in Management’s discussion and analysis of financial condition and results of operations in Part II, Item 7, and in Note 17. Segment reporting and Note 18.
Retail Pharmacy $110.3 billion, International $22.2 billion and U.S. Healthcare $6.6 billion. Additional information relating to our segments is included in Management’s discussion and analysis of financial condition and results of operations in Part II, Item 7, and in Note 17. Segment reporting and Note 18. Sales to the Consolidated Financial Statements included in Part II, Item 8. U.S.
We have taken further steps to develop our neighborhood health destinations, to provide an integrated primary care and pharmacy model that aims to drive better health outcomes, reduce costs and provide a differentiated patient experience to the communities we serve.
We have taken further steps to develop our neighborhood health destinations, to provide an integrated primary care and pharmacy model that aims to drive better health outcomes, reduce costs and provide a differentiated patient experience to the communities we serve. The Company also provides specialty pharmacy and mail services and offers certain other health and wellness services throughout the U.S.
In the U.S. the Company has created Walgreens University which provides training, leadership development and career advancement programs to employees at all levels. Walgreens University is a multi-channel platform that offers U.S. employees access to instructor-led classroom training, online learning, personal and professional development tools.
In the U.S. the Company provides training, leadership development and career advancement programs to employees at all levels via Walgreens University, a multi-channel platform that offers U.S. employees access to instructor-led classroom training, online learning, personal and professional development tools. In the UK, an apprenticeship program focused on developing career aspirations and fundamental skills is offered to Boots UK employees.
Several levels of employees participate in the Company’s annual performance management process to create development plans that support their particular career objectives. The Company offers numerous resources and programs to attract, engage, develop, advance and retain colleagues. Training and development programs provide employees the support they need to perform in their current roles while planning and preparing for future opportunities.
The Company offers numerous resources and programs to attract, engage, develop, advance and retain colleagues. Training and development programs provide employees the support they need to perform in their current roles while planning and preparing for future opportunities.
Mahajan served in positions of increasing responsibility with GE Capital, a former subsidiary of General Electric Company, most recently serving as Controller at GE Capital Americas from March 2011 until January 2016.
Mahajan served in positions of increasing responsibility with GE Capital, a former subsidiary of General Electric Company, most recently serving as Controller at GE Capital Americas from March 2011 until January 2016. Mr. Gates has served as Senior Vice President and Chief Pharmacy Officer, Walgreens Co., since March 2023. Mr.
Item 1. Business Overview Walgreens Boots Alliance, Inc., a Delaware corporation (“Walgreens Boots Alliance” or the “Company”), is an integrated healthcare, pharmacy and retail leader serving millions of customers and patients every day, with a 170-year heritage of caring for communities.
Item 1. Business Overview Walgreens Boots Alliance, Inc., a Delaware corporation incorporated in 2014 (“Walgreens Boots Alliance” or the “Company”), is an integrated healthcare, pharmacy and retail leader with a 170-year heritage of caring for customers and patients. Walgreens Boots Alliance is the successor of Walgreen Co., an Illinois corporation, which was formed in 1909.
Segments The Company's operations are conducted through three reportable segments: • U.S. Retail Pharmacy, • International, and • U.S. Healthcare. In the fourth quarter of fiscal 2022, the Company changed the name of two reportable segments to better align with the Company’s business activities, structure and strategy. The “United States” segment was renamed to “U.S.
In fiscal 2022, the Company changed the name of two reportable segments to better align with the Company’s business activities, structure and strategy. The “United States” segment was renamed to “U.S. Retail Pharmacy” and the “Walgreens Health” segment was renamed to “U.S. Healthcare”.
No single customer accounted for more than 10% of the Company’s consolidated sales for any of the periods presented. In fiscal 2022, substantially all of our retail pharmacy sales were to customers covered by third-party payors (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.
In fiscal 2023, substantially all of our retail pharmacy and healthcare services sales were to customers covered by third-party payors (e.g., PBMs, insurance companies and governmental agencies) that agree to pay for all or a portion of a customer's eligible prescription purchases. Three third-party payors accounted for approximately 33% of the Company’s consolidated sales in fiscal 2023. See Note 17.
Pessina served as Chief Executive Officer from July 2015 to March 2021 and as Executive Vice Chairman from January 2015 to March 2021. He also served as Acting Chief Executive Officer from January 2015 to July 2015. Previously, he served as Executive Chairman of Alliance Boots from July 2007 to December 2014. Prior to that, Mr.
Pessina has served as Executive Chairman of the Board since March 2021. Mr. Pessina served as Chief Executive Officer from July 2015 to March 2021 and as Executive Vice Chairman from January 2015 to March 2021. He also served as Acting Chief Executive Officer from January 2015 to July 2015.
Sales to the Consolidated Financial Statements included in Part II, Item 8. U.S. Retail Pharmacy The Company's U.S. Retail Pharmacy segment includes the Walgreens business which is comprised of the operations of retail drugstores, health and wellness services, specialty and home delivery pharmacy services, and its equity method investment in AmerisourceBergen.
Retail Pharmacy The Company's U.S. Retail Pharmacy segment includes the Walgreens business which is comprised of the operations of retail drugstores, health and wellness services, specialty and home delivery pharmacy services, and its equity method investment in Cencora, Inc. (“Cencora”), formerly known as AmerisourceBergen Corporation.
The Company is a market leader in the U.S. and, as of August 31, 2022, approximately 78% of the population of the U.S. lived within five miles of a Walgreens or Duane Reade retail pharmacy. The Company is focused on creating a neighborhood health destination and a more modern pharmacy aligned to a wider range of healthcare services.
The Company is a market leader in the U.S. and, as of August 31, 2023, approximately 78% of the population of the U.S. lived within five miles of a Walgreens or Duane Reade retail pharmacy.
The Company is proud of its contributions to healthy communities, a healthy planet, an inclusive workplace and a sustainable marketplace. Walgreens Boots Alliance is a participant of the United Nations Global Compact and adheres to its principles-based approach to responsible business.
Walgreens Boots Alliance is a participant in the United Nations Global Compact and adheres to its principles-based approach to responsible business.
The segment’s performance and relevant exchange rates are also impacted by the current environment, including the uncertainty as a result of COVID-19. For more information relating to these topics, see Risk factors in Item 1A. U.S. Healthcare The Company’s U.S.
The segment’s performance and relevant exchange rates are also impacted by the current environment, including adverse global macroeconomic conditions caused by factors including, among others, inflation, high interest rates, labor shortages, supply chain disruptions and pandemics like COVID-19. For more information relating to these topics, see Risk factors in Item 1A. U.S. Healthcare The Company’s U.S.
The Company operated 3,989 retail stores in the segment as of August 31, 2022 (see properties in Part I, Item 2 for information regarding geographic coverage) and has grown its omni-channel platform, including its online presence, in recent years.
Sales for these businesses are principally derived from the sale of prescription drugs and health and wellness, beauty, personal care and other consumer products. The Company operated 3,960 retail stores in the segment as of August 31, 2023 (see Item 2. Properties, for information regarding geographic coverage) and has grown its omni-channel platform, including its online presence, in recent years.
Pharmacists are on the frontlines of the healthcare delivery system, and the Company believes rising healthcare costs and the limited access to primary care physicians present opportunities for pharmacists and retail pharmacies to play an even greater role in driving positive outcomes for patients and payers through expanded service offerings.
The Company believes rising healthcare costs and the need for greater care coordination with primary care and other providers present opportunities for pharmacists and retail pharmacies to play an even greater role in driving positive outcomes for patients and payors through expanded service offerings and access. Healthcare services Transformation in healthcare services has accelerated following the COVID-19 pandemic.
Oversight and governance The Company’s Board of Directors (the “Board”), through its Compensation and Leadership Performance Committee (the “CLP Committee”), provides oversight of human capital matters, including the Company’s diversity and inclusion initiatives. The CLP Committee is also responsible for periodically reviewing the Company’s compensation and benefits programs as well as management development and succession planning practices and strategies.
Oversight and governance The Company’s Board of Directors (the “Board”), through its Compensation and Leadership Performance Committee (the “CLP Committee”), provides oversight of human capital matters, including the Company’s diversity, equity and inclusion (“DE&I”) initiatives.
The Company's wholesale offerings and related investments compete with pharmaceutical wholesalers as well as alternative supply sources such as importers and manufacturers who supply directly to pharmacies. The Company competes primarily on the basis of service, convenience, variety and price. Its geographic dispersion helps mitigate the impact of temporary, localized economic and competitive conditions in individual markets.
The Company competes primarily on the basis of service, convenience, variety and price. Its geographic dispersion helps mitigate the impact of temporary, localized economic and competitive conditions in individual markets.
WBA Fiscal 2022 Form 10-K 5 Table of Contents The current environment of the Company’s pharmacy business also includes ongoing reimbursement pressure, a shift in pharmacy mix towards 90-day at retail (one prescription that is the equivalent of three 30-day prescriptions), an increased volume of Medicare Part D prescriptions and increased consumer use of prescription discount cards.
The Company’s pharmacy business is subject to ongoing prescription reimbursement pressure, a shift in the fulfillment of prescriptions every thirty days towards 90-day at retail, an increased volume of Medicare Part D prescriptions and increased consumer use of prescription discount cards.
WBA Fiscal 2022 Form 10-K 9 Table of Contents Talent management and engagement The Company has a talent management process that is designed to identify and assess talent across the organization and provide equal and consistent opportunities for employees to develop their skills.
Talent management and engagement The Company has a talent management process that is designed to identify and assess talent across the organization and provide equal and consistent opportunities for employees to develop their skills. Several levels of employees participate in the Company’s annual performance management process to create development plans that support their particular career objectives.
The reports and recommendations to the Board via the CLP Committee underpin the broader framework that guides how the Company attracts, retains and develops its workforce in line with Company values. Compensation, benefits and well-being The Company’s compensation and benefits are designed to support the financial, mental, and physical well-being of employees and their families.
The CLP Committee is also responsible for periodically reviewing the Company’s compensation and benefits programs as well as management development and succession planning practices and strategies. The reports and recommendations to the Board via the CLP Committee underpin the broader framework that guides how the Company attracts, retains and develops its workforce in line with Company values.
Sales where reimbursement is received from managed care organizations, governmental agencies, PBM companies and private insurance were approximately 97% of the segment’s fiscal 2022 Pharmacy sales. The Company fills prescriptions for many state Medicaid public assistance programs. Sales from all such Medicaid plans were approximately 5% of the segment’s fiscal 2022 sales.
Sales where reimbursement is received from managed care organizations, governmental agencies, PBMs and private insurance were approximately 97% of the segment’s fiscal 2023 Pharmacy sales.
The Company conducts global employee engagement surveys that provide colleagues with an opportunity to share their opinions and helps the Company measure and improve engagement. Diversity, equity and inclusion (“DE&I”) A diverse, equitable and inclusive organization is an essential part of the Company’s business strategy, as we believe it positively impacts Company performance, growth and employee engagement.
DE&I and ESG A diverse, equitable and inclusive organization is an essential part of the Company’s business strategy, as we believe it positively impacts Company performance, growth and employee engagement.
Similarly, the specialty prescription business, which generates higher sales dollars per prescription, may result in gross margin pressures within the industry, as compared to generic prescription drugs. The segment’s performance is also impacted by the current environment, including the uncertainty as a result of COVID-19. For more information, see Risk factors in Item 1A.
Similarly, the specialty prescription business, which generates higher sales dollars per prescription, may result in gross margin pressures within the industry, as compared to generic prescription drugs.
WBA Fiscal 2022 Form 10-K 4 Table of Contents The Company also provides specialty pharmacy and mail services and offers certain other health and wellness services throughout the U.S. The Company employs more than 85,000 healthcare service providers, including pharmacists, pharmacy technicians, nurse practitioners and other health related professionals.
The Company employs more than 85,000 healthcare service providers, including pharmacists, pharmacy technicians, nurse practitioners and other health related professionals.
In the UK, an apprenticeship program focused on developing career aspirations and fundamental skills is offered to Boots UK employees. Across the globe, the Company offers on-demand self-paced learning resources for all employees regardless of role or location. The Company believes engaged employees translate directly to business success.
Across the globe, the Company offers on-demand self-paced learning resources for all employees regardless of role or location. The Company believes engaged employees translate directly to business success. The Company conducts global employee engagement surveys that provide colleagues with an opportunity to share their opinions and helps the Company measure and improve engagement.
A trusted, global innovator in retail pharmacy with approximately 13,000 locations across the U.S., Europe and Latin America, Walgreens Boots Alliance plays a critical role in the healthcare ecosystem. The Company is reimagining local healthcare and well-being for all as part of its purpose – to create more joyful lives through better health.
The Company is reimagining local healthcare and well-being for all as part of its purpose – to create more joyful lives through better health.
The Company has been recognized for its commitment to operating sustainably; it is an index component of the Dow Jones Sustainability Indices (“DJSI”) and was named to the 100 Best Corporate Citizens of 2022.
The Company has been recognized as an industry leader in several areas, including being named Disability:IN’s Employer of the Year for 2023 and for its commitment to operating sustainably the Company was named to the Dow Jones Sustainability Indices (“DJSI”) North American Index in 2022, for the third consecutive year.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRetail Pharmacy segment from prescription drug sales reimbursed by a limited number of pharmacy benefit management companies. • We could be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs as well as increases in the cost to procure prescription drugs. • Consolidation and strategic alliances in the healthcare industry could adversely affect our business operations, competitive positioning, financial condition and results of operations. • Our business results depend on our ability to successfully manage ongoing organizational change and business transformation and achieve cost savings and operating efficiency initiatives. • Changes in economic conditions could adversely affect consumer buying practices. • The industries in which we operate are highly competitive and constantly evolving and changes in market dynamics could adversely impact us. • If we do not successfully develop and maintain a relevant omni-channel experience for our customers, our businesses and results of operations could be adversely impacted. • If the merchandise and services that we offer fail to meet customer needs, our sales may be adversely affected. • Our substantial international business operations subject us to a number of operating, economic, political, regulatory and other international business risks. • We may be unable to achieve our environmental, social and governance goals.
Biggest changeHealthcare segment may face risks related to payor contracts, including if existing payors modify or discontinue their contracts with us or there are changes in the payor mix of patients or reimbursement methodologies, which could have a negative impact on our business, financial condition and results of operations. • Our business results depend on our ability to successfully manage ongoing organizational change and business transformation and achieve cost savings and operating efficiency initiatives. • The industries in which we operate are highly competitive and constantly evolving and changes in market dynamics could adversely impact us. • If we do not continuously develop and maintain a relevant omni-channel experience for our customers, our businesses and results of operations could be adversely impacted. • If the merchandise and services that we offer fail to meet customer needs, our sales may be adversely affected. • Our substantial international business operations subject us to a number of operating, economic, political, regulatory and other international business risks. • Our business is subject to evolving global ESG regulatory requirements and expectations.
Financial and Accounting Risks • We have significant outstanding debt; our debt and associated payment obligations could significantly increase in the future if we incur additional debt and do not retire existing debt. • As a holding company, we are dependent on funding from our operating subsidiaries to pay dividends and other obligations. • Our quarterly results may fluctuate significantly based on seasonality and other factors. • We have a substantial amount of goodwill and other intangible assets which could, in the future, become impaired and result in material non-cash charges to our results of operations. • We are exposed to risks associated with foreign currency exchange rate fluctuations. • We could be adversely impacted by changes in assumptions used in calculating pension assets and liabilities.
Financial and Accounting Risks • We have significant outstanding debt; our debt and associated payment obligations could significantly increase in the future if we incur additional debt and do not retire existing debt. • As a holding company, we are dependent on funding from our operating subsidiaries to pay dividends and other distributions. • Our quarterly results may fluctuate significantly based on seasonality and other factors. • We have a substantial amount of goodwill and other intangible assets which could, in the future, become impaired and result in material non-cash charges to our results of operations. • We are exposed to risks associated with foreign currency exchange rate fluctuations. • We could be adversely impacted by changes in assumptions used in calculating pension assets and liabilities.
The loss or disruption of such supply arrangements for any reason, including for issues such as COVID-19 or other health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, looting, vandalism or acts of war (such as the conflict in Ukraine) or terrorism, trade sanctions or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a material adverse impact on our business operations, financial condition and results of operations.
The loss or disruption of such supply arrangements for any reason, including from COVID-19 or other health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, looting, vandalism or acts of war (such as the conflict in Ukraine) or terrorism, trade sanctions or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a material adverse impact on our business operations, financial condition and results of operations.
If we are unable to make, improve, or develop relevant customer-facing technology in a timely manner that keeps pace with technological developments and dynamic customer expectations, our ability to compete and our results of operations could be materially and adversely affected.
If we are unable to improve or develop relevant customer-facing technology in a timely manner that keeps pace with technological developments and dynamic customer expectations, our ability to compete and our results of operations could be materially and adversely affected.
The regulations to which we are subject include, but are not limited to: country and state registration and regulation of pharmacies and drug discount card programs; dispensing and sale of controlled substances and products containing pseudoephedrine; applicable governmental payer regulations including Medicare and Medicaid; data privacy and security laws and regulations including HIPAA; the ACA or any successor thereto; laws and regulations relating to the protection of the environment and health and safety matters, each of which continues to evolve, including those governing exposure to, and the management and disposal of, hazardous substances; regulations regarding food and drug safety including those of the U.S.
The regulations to which we are subject include, but are not limited to: country and state registration and regulation of pharmacies and drug discount card programs; dispensing and sale of controlled substances and products containing pseudoephedrine; applicable governmental payor regulations including Medicare and Medicaid; data privacy and security laws and regulations including HIPAA; the ACA or any successor thereto; laws and regulations relating to the protection of the environment and health and safety matters, each of which continues to evolve, including those governing exposure to, and the management and disposal of, hazardous substances; regulations regarding food and drug safety including those of the U.S.
Other factors that may affect our quarterly operating results, some of which are beyond the control of management, include, but are not limited to the impact and duration of COVID-19, the timing of the introduction of new generic and brand name prescription drugs; inflation, including with respect to generic drug procurement costs; seasonality, including the timing and severity of the cough, cold and flu season; changes or rates of change in payer reimbursement rates and terms; the timing and amount of periodic contractual reconciliation payments, fluctuations in inventory, energy, transportation, labor, healthcare and other costs; significant acquisitions, dispositions, joint ventures and other strategic initiatives; asset impairment charges, including the performance of and impairment charges related to our equity method investments; the relative magnitude of our LIFO provision in any particular quarter; foreign currency fluctuations; market conditions, widespread looting or vandalism; and many of the other risk factors discussed herein.
Other factors that may affect our quarterly operating results, some of which are beyond the control of management, include, but are not limited to; the impact and duration of COVID-19 and other pandemics; the timing of the introduction of new generic and brand name prescription drugs; inflation, including with respect to generic drug procurement costs; the timing and severity of the cough, cold and flu season; changes or rates of change in payor reimbursement rates and terms; the timing and amount of periodic contractual reconciliation payments; fluctuations in inventory, energy, transportation, labor, healthcare and other costs; significant acquisitions, dispositions, joint ventures and other strategic initiatives; asset impairment charges, including the performance of and impairment charges related to our equity method investments; the relative magnitude of our LIFO provision in any particular quarter; foreign currency fluctuations; market conditions, widespread looting or vandalism; and many of the other risk factors discussed herein.
In addition, many state Medicaid fee-for-service programs have established pharmacy network payments on the basis of actual acquisition cost, which could have an impact on reimbursement practices in other commercial and governmental arrangements. Future changes to the pricing benchmarks used to establish pharmaceutical pricing, including changes in the basis for calculating reimbursement by third-party payers, could adversely affect us.
In addition, many state Medicaid fee-for-service programs have established pharmacy network payments on the basis of actual acquisition cost, which could have an impact on reimbursement practices in other commercial and governmental arrangements. Future changes to the pricing benchmarks used to establish pharmaceutical pricing, including changes in the basis for calculating reimbursement by third-party payors, could adversely affect us.
In the future, we may intend to relaunch a process for the sale of the businesses or contemplate other opportunities to monetize our interest in these businesses.
In the future, we may intend to relaunch a process for the sale of certain businesses or contemplate other opportunities to monetize our interest in these businesses.
Any system implementation and transition difficulty may result in operational challenges, reputational harm, and increased costs that could materially and adversely affect our business operations and results of operations. We also could be adversely affected by any significant disruption in the systems of third parties we interact with, including strategic and business partners, key payers and vendors.
Any system implementation and transition difficulty may result in operational challenges, reputational harm, and increased costs that could materially and adversely affect our business operations and results of operations. We also could be adversely affected by any significant disruption in the systems of third parties we interact with, including strategic and business partners, key payors and vendors.
These factors can also adversely affect our payers, vendors and customers in international markets, which in turn can negatively impact our businesses. We cannot assure you that one or more of these factors will not have a material adverse effect on our business operations, results of operation and financial condition.
These factors can also adversely affect our payors, vendors and customers in international markets, which in turn can negatively impact our businesses. We cannot assure you that one or more of these factors will not have a material adverse effect on our business operations, results of operation and financial condition.
Our distribution agreement with AmerisourceBergen is subject to early termination in certain circumstances and, upon the expiration or termination of the agreement, there can be no assurance that we or AmerisourceBergen will be willing to renew the agreement or enter into a new agreement, on terms favorable to us or at all.
Our distribution agreement with Cencora is subject to early termination in certain circumstances and, upon the expiration or termination of the agreement, there can be no assurance that we or Cencora will be willing to renew the agreement or enter into a new agreement, on terms favorable to us or at all.
The Company and AmerisourceBergen are parties to various agreements and arrangements, including a pharmaceutical distribution agreement between the Company and AmerisourceBergen pursuant to which we source branded and generic pharmaceutical products from AmerisourceBergen in the U.S. and an agreement which provides AmerisourceBergen the ability to access generic pharmaceutical products through our global sourcing enterprise.
The Company and Cencora are parties to various agreements and arrangements, including a pharmaceutical distribution agreement between the Company and Cencora pursuant to which we source branded and generic pharmaceutical products from Cencora in the U.S. and an agreement which provides Cencora the ability to access generic pharmaceutical products through our global sourcing enterprise.
In addition, aspects of our operations depend upon the secure transmission of confidential information over public networks. We also depend on and interact with the information technology networks and systems of third-parties for many aspects of our business operations, including payers, strategic partners and cloud service providers.
In addition, aspects of our operations depend upon the secure transmission of confidential information over public networks. We also depend on and interact with the information technology networks and systems of third-parties for many aspects of our business operations, including payors, strategic partners and cloud service providers.
For example, if AmerisourceBergen’s operations are seriously disrupted for any reason, whether due to a natural disaster, pandemic, labor disruption, regulatory action, computer or operational systems or otherwise, it could adversely affect our business and our results of operations.
For example, if Cencora’s operations are seriously disrupted for any reason, whether due to a natural disaster, pandemic, labor disruption, regulatory action, computer or operational systems or otherwise, it could adversely affect our business and our results of operations.
These changes include an increased reliance on managed care; cuts in certain Medicare and Medicaid funding in the U.S. and the funding of governmental payers in foreign jurisdictions; consolidation of competitors, suppliers and other market participants; and the development of large, sophisticated purchasing groups.
These changes include an increased reliance on managed care; cuts in certain Medicare and Medicaid funding in the U.S. and the funding of governmental payors in foreign jurisdictions; consolidation of competitors, suppliers and other market participants; and the development of large, sophisticated purchasing groups.
The Company accounts for its investment in AmerisourceBergen using the equity method of accounting, subject to a two-month reporting lag, with the net earnings attributable to the investment classified within the operating income of the Company’s U.S. Retail Pharmacy segment.
The Company accounts for its investment in Cencora using the equity method of accounting, subject to a two-month reporting lag, with the net earnings attributable to the investment classified within the operating income of the Company’s U.S. Retail Pharmacy segment.
Further, our ability to transact in AmerisourceBergen securities is subject to certain restrictions set forth in our agreements with AmerisourceBergen and arising under applicable laws and regulations, which in some circumstances could adversely impact our ability to transact in AmerisourceBergen securities in amounts and at the times desired.
Further, our ability to transact in Cencora securities is subject to certain restrictions set forth in our agreements with Cencora and arising under applicable laws and regulations, which in some circumstances could adversely impact our ability to transact in Cencora securities in amounts and at the times desired.
Like other global companies, we and businesses we interact with have experienced threats to data and systems, including from vandalism or theft of physical systems or media and from perpetrators of random or targeted malicious cyber-attacks, computer viruses, worms, phishing attacks, bot attacks or other destructive or disruptive software and attempts to misappropriate customer information, including credit card information, and cause system failures and disruptions.
Like other global companies, we and businesses we interact with have experienced and expect to continue to experience threats to data and systems, including from vandalism or theft of physical systems or media and from perpetrators of random or targeted malicious cyber-attacks, computer viruses, worms, phishing attacks, bot attacks or other destructive or disruptive software and attempts to misappropriate customer information, including credit card information, and cause system failures and disruptions.
We also have worked to develop and expand our relationships with commercial third-party payers to enable new and/or improved market access via participation in the pharmacy provider networks they offer.
We also have worked to develop and expand our relationships with commercial third-party payors to enable new and/or improved market access via participation in the pharmacy provider networks they offer.
Our substantial international business operations are subject to a number of risks, including, without limitation, compliance with a wide variety of foreign laws and regulations; potential difficulties in managing foreign operations, mitigating credit risks in foreign markets, enforcing agreements and collecting receivables through foreign legal systems; varying regional and geopolitical business conditions and demands; tax and trade policies, tariffs and other government regulations affecting trade between the U.S. and other countries; fluctuations in currency exchange rates; the impact of recessions and economic slowdowns in economies outside the U.S.; and the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets.
Our substantial international business operations are subject to a number of risks, including, without limitation, compliance with a wide variety of foreign laws and regulations; potential difficulties in managing foreign operations, mitigating credit risks in foreign markets, enforcing agreements and collecting receivables through foreign legal systems; varying regional and geopolitical business conditions and demands; tax and trade policies, tariffs and other government regulations affecting trade between the U.S. and other countries; fluctuations in currency exchange rates; the impact of recessions and economic slowdowns in economies outside the U.S.; impact of war (such as the conflict in Ukraine) and the instability of foreign economies, governments and currencies and unexpected regulatory, economic or political changes in foreign markets.
For example, the Inflation Reduction Act requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. The mechanics of the rebate calculation would mimic those of the Medicaid rebate, but the expansion of inflation-based rebates may further complicate pricing strategies, particularly as to the launch of our new products.
For example, the IRA requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. The mechanics of the rebate calculation would mimic those of the Medicaid rebate, but the expansion of inflation-based rebates may further complicate pricing strategies, particularly as to the launch of our new products.
We derive a significant portion of our sales in the U.S. Retail Pharmacy segment from prescription drug sales reimbursed by a limited number of pharmacy benefit management companies. We derive a significant portion of our sales in the U.S. Retail Pharmacy segment from prescription drug sales reimbursed through prescription drug plans administered by a limited number of PBM companies.
We derive a significant portion of our sales in the U.S. Retail Pharmacy segment from prescription drug sales reimbursed by a limited number of pharmacy benefit management companies. We derive a significant portion of our sales in the U.S. Retail Pharmacy segment from prescription drug sales reimbursed through prescription drug plans administered by a limited number of PBMs.
For example, we are a defendant in numerous litigation proceedings relating to opioid matters, including federal multidistrict litigation that consolidated numerous cases filed against an array of defendants by various plaintiffs such as counties, cities, hospitals, Indian tribes, and others, as well as numerous lawsuits brought in state courts.
For example, we have been a defendant in numerous litigation proceedings relating to opioid matters, including federal multidistrict litigation that consolidated numerous cases filed against an array of defendants by various plaintiffs such as counties, cities, hospitals, Indian tribes, and others, as well as numerous lawsuits brought in state courts.
PBM companies typically administer multiple prescription drug plans that expire at various times and provide for varying reimbursement rates, and often limit coverage to specific drug products on an approved list, known as a formulary, which might not include all of the approved drugs for a particular indication.
PBMs typically administer multiple prescription drug plans that expire at various times and provide for varying reimbursement rates, and often limit coverage to specific drug products on an approved list, known as a formulary, which might not include all of the approved drugs for a particular indication.
If we exit a pharmacy provider network and later resume participation, there can be no assurance that we will achieve any particular level of business on any particular pace, or that all clients of the PBM company will choose to include us again in the pharmacy network for their plans, initially or at all.
If we exit a pharmacy provider network and later resume participation, there can be no assurance that we will achieve any particular level of business on any particular pace, or that all clients of the PBMs will choose to include us again in the pharmacy network for their plans, initially or at all.
In addition, our reputation could suffer and our customers could lose confidence in certain payment types, which could result in higher costs and/or reduced sales and materially and adversely affect our results of operations. Additionally, we offer branded credit cards, money (wire) transfer services and sell prepaid debit, credit and gift cards at certain business units.
In addition, our reputation could suffer and our customers could lose confidence in certain payment types, which could result in higher costs and/or reduced sales and materially and adversely affect our results of operations. Additionally, we offer branded credit cards, money (wire) transfer services and sell prepaid debit, credit and gift cards.
Further, in an environment where some PBM clients utilize narrow or restricted pharmacy provider networks, some of these entities may offer pricing terms that we may not be willing to accept or otherwise restrict our participation in their networks of pharmacy providers. In addition, many payers in the U.S. are increasingly considering new metrics as the basis for reimbursement rates.
Further, in an environment where some PBMs clients utilize narrow or restricted pharmacy provider networks, some of these entities may offer pricing terms that we may not be willing to accept or otherwise restrict our participation in their networks of pharmacy providers. In addition, many payors in the U.S. are increasingly considering new metrics as the basis for reimbursement rates.
If our participation in the pharmacy provider network for a prescription drug plan administered by one or more of the large PBM companies is restricted or terminated, we expect that our sales would be adversely affected, at least in the short-term.
If our participation in the pharmacy provider network for a prescription drug plan administered by one or more of the large PBMs is restricted or terminated, we expect that our sales would be adversely affected, at least in the short-term.
WBA Fiscal 2022 Form 10-K 23 Table of Contents Privacy and data protection laws increase our compliance burden and any failure to comply could harm us. The regulatory environment surrounding data security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements across businesses and geographic areas.
WBA Fiscal 2023 Form 10-K 25 Table of Contents Privacy and data protection laws increase our compliance burden and any failure to comply could harm us. The regulatory environment surrounding data security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements across businesses and geographic areas.
Failure to comply with these laws subjects us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs. We also have contractual obligations that might be breached if we fail to comply.
Failure to comply with these laws may subject us to potential regulatory enforcement activity, fines, private litigation including class actions, and other costs. We also have contractual obligations that might be breached if we fail to comply.
The financial performance of AmerisourceBergen, including any charges which may arise relating to its ongoing opioid litigation matters, will impact the Company’s results of operations. Additionally, a substantial and sustained decline in the price of AmerisourceBergen’s common stock could trigger an impairment evaluation of our investment.
The financial performance of Cencora, including any charges which may arise relating to its ongoing opioid litigation matters, will impact the Company’s results of operations. Additionally, a substantial and sustained decline in the price of Cencora’s common stock could trigger an impairment evaluation of our investment.
Changes in pricing and other terms of our contracts with PBM companies can significantly impact our results of operations. There can be no assurance that we will continue to participate in any particular PBM company’s pharmacy provider network in any particular future time period or on terms reasonably acceptable to us.
Changes in pricing and other terms of our contracts with PBMs can significantly impact our results of operations. There can be no assurance that we will continue to participate in any particular PBMs pharmacy provider network in any particular future time period or on terms reasonably acceptable to us.
WBA Fiscal 2022 Form 10-K 24 Table of Contents We are subject to payment-related and other financial services risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business operations.
WBA Fiscal 2023 Form 10-K 26 Table of Contents We are subject to payment-related and other financial services risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business operations.
Our debt level and related debt service obligations could have negative consequences, including: • requiring us to dedicate significant cash flow from operations to amounts payable on our debt, which would reduce the funds we have available for other purposes; • making it more difficult or expensive for us to obtain any necessary future financing; • reducing our flexibility in planning for or reacting to changes in our industry and market conditions and 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 and undrawn revolving credit facilities is at variable interest rates.
Our debt level and related debt service obligations could have negative consequences, including: • requiring us to dedicate significant cash flow from operations to amounts payable on our debt, which would reduce the funds we have available for other purposes; • making it more difficult or expensive for us to obtain any necessary future financing; • reducing our flexibility in planning for or reacting to changes in our industry and market conditions and making us more vulnerable in the event of a downturn in our business operations; • exposing us to interest rate risk given that a portion of our debt obligations and undrawn revolving credit facilities is at variable interest rates; • a potential downgrade of our credit ratings; and • our ability to pursue certain operational and strategic opportunities.
In order to retain and attract talent we know that it is critical that we clearly communicate our environmental, social, and governance strategy, and a delay or inability to meet our goals on time could impact our reputation as a desirable place to work.
In order to retain and attract talent we know that it is critical that we clearly communicate our ESG strategy, and a delay or inability to meet our goals on time could impact our reputation as a desirable place to work.
The continued efforts of health maintenance organizations, managed care organizations, PBM companies, governmental agencies, and other third-party payers to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation and other legal proceedings relating to how drugs are priced, may adversely impact our results of operations.
The continued efforts of health maintenance organizations, managed care organizations, PBMs, governmental agencies, and other third-party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation and other legal proceedings relating to how drugs are priced, may adversely impact our results of operations.
We have established certain goals that allow us to better communicate and align to our environmental, social, and governance strategy. However, these goals are subject to risks and uncertainties, which are outside of our control and might prohibit us from meeting the goals.
We have established certain goals that allow us to better communicate and align to our ESG strategy. However, these goals are subject to risks and uncertainties, which are outside of our control and might prohibit us from meeting the goals.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, includes policies that are designed to have a direct impact on drug prices and reduce drug spending by the federal government, which shall take effect in 2023.
On August 16, 2022, President Biden signed into law the IRA, which, among other things, includes policies that are designed to have a direct impact on drug prices and reduce drug spending by the federal government, which shall take effect in 2023.
WBA Fiscal 2022 Form 10-K 14 Table of Contents Risks Related to Our Structure and Organization • Certain stockholders may have significant voting influence over matters requiring stockholder approval. • Conflicts of interest, or the appearance of conflicts of interest, may arise because certain of our directors and officers are also owners or directors of companies we may have dealings with. • Our certificate of incorporation and bylaws, Delaware law or our agreements with certain stockholders may impede the ability of our stockholders to make changes to our Board or impede a takeover. • We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
Risks Related to Our Structure and Organization • Certain stockholders may have significant voting influence over matters requiring stockholder approval. • Conflicts of interest, or the appearance of conflicts of interest, may arise because certain of our directors and officers are also owners or directors of companies we may have dealings with. • Our certificate of incorporation and bylaws, Delaware law or our agreements with certain stockholders may impede the ability of our stockholders to make changes to our Board or impede a takeover. • We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
Healthcare segment have also entered and intend to continue to enter risk-based contracts with payors, pursuant to which they contract with payors to receive a fee for professional services based on the number of patients assigned or attributed to U.S.
The businesses within the U.S. Healthcare segment have also entered and intend to continue to enter into value-based contracts with payors, pursuant to which they contract with payors to receive a fee for professional services based on the number of patients assigned or attributed to U.S.
The long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
Our business and operations are subject to risks related to climate change. The long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable.
Financial and Accounting Risks We have significant outstanding debt; our debt and associated payment obligations could significantly increase in the future if we incur additional debt and do not retire existing debt. We have outstanding debt and other financial obligations. As of August 31, 2022, we had approximately $11.7 billion of outstanding indebtedness, including short-term debt.
Financial and Accounting Risks We have significant outstanding debt; our debt and associated payment obligations could significantly increase in the future if we incur additional debt and do not retire existing debt. We have outstanding debt and other financial obligations. As of August 31, 2023, we had approximately $9.1 billion of outstanding indebtedness, including short-term debt.
If any of our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and may experience loss or corruption of critical data and interruptions or disruptions and delays in our ability to perform critical functions, which could materially and adversely affect our businesses and results of operations.
If any of our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them for which insurance coverage may not be wholly sufficient, and may experience loss or corruption of critical data and interruptions or disruptions and delays in our ability to perform critical functions, which could materially and adversely affect our businesses and results of operations.
Our operating results have historically varied on a quarterly basis, including increased variability during COVID-19, and may continue to fluctuate significantly in the future.
Our quarterly results may fluctuate significantly based on seasonality and other factors. Our operating results have historically varied on a quarterly basis, including increased variability during COVID-19, and may continue to fluctuate significantly in the future.
Estimated fair values could change if, for example, there are changes in the business climate, changes in the competitive environment, adverse legal or regulatory actions or developments, changes in capital structure, cost of debt and equity, capital expenditure levels, operating cash flows, or market capitalization, whether due to COVID-19 or otherwise.
Estimated fair values could change if, for example, there are changes in the business climate, changes in the competitive environment, adverse legal or regulatory actions or developments, changes in capital structure, cost of debt and equity, capital expenditure levels, operating cash flows, or market capitalization.
Failure to meet our goals could negatively impact public perception of our company with interested stakeholders. Environmental, social, and governance matters are also increasingly important to current and potential employees.
Failure to meet our goals could negatively impact public perception of our company with interested stakeholders. ESG matters are also increasingly important to current and potential employees.
Acquisitions and other strategic transactions involve numerous risks, including difficulties in successfully integrating the operations and personnel, navigating the necessary regulatory approval requirements, distraction of management from overseeing, and disruption of, our existing operations, difficulties in entering markets or lines of business in which we have no or limited direct prior experience, the possible loss of key employees and customers, and difficulties in achieving the synergies we anticipated.
Acquisitions and other strategic transactions involve numerous risks and challenges, including but not limited to difficulties in successfully integrating the operations and personnel, navigating the necessary regulatory approval requirements, distraction of management from overseeing, and disruption of, our existing operations, difficulties in entering markets or lines of business in which we have no or limited direct prior experience, the possible loss of key employees and difficulties in retaining relationships with existing or new customers and suppliers, and difficulties in achieving the synergies we anticipated.
We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions. As a large corporation with operations in the U.S. and numerous other jurisdictions, from time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability.
As a large corporation with operations in the U.S. and numerous other jurisdictions, from time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability.
If we are unable to implement the programs or deliver these expected productivity improvements, while continuing to invest in business growth, or if the volume and nature of change overwhelms available resources, our business operations, financial condition and results of operations could be materially and adversely impacted. Changes in economic conditions could adversely affect consumer buying practices.
If we are unable to implement the programs or deliver these expected productivity improvements, while continuing to invest in business growth, or if the volume and nature of change overwhelms available resources, our business operations, financial condition and results of operations could be materially and adversely impacted.
Item 1A. Risk factors In addition to the other information in this report and our other filings with the SEC, you should carefully consider the risks described below, which could materially and adversely affect our business operations, financial condition and results of operations.
Item 1A. Risk factors In addition to the other information in this report and our other filings with the SEC, you should carefully consider the risks described below, which could materially and adversely affect our business operations, financial condition and results of operations. These risks are not the only risks that we face.
As of the date of this report, AmerisourceBergen distributes substantially all of our branded and generic pharmaceutical products. Consequently, our business may be adversely affected by any operational, financial or regulatory difficulties that AmerisourceBergen experiences, including those resulting from COVID-19.
As of the date of this report, Cencora distributes substantially all of our branded and generic pharmaceutical products. Consequently, our business may be adversely affected by any operational, financial or regulatory difficulties that Cencora experiences, including those resulting from COVID-19 supply chain disruptions or global macroeconomic uncertainty.
For example, our U.S. Retail Pharmacy segment has experienced a shift in pharmacy mix towards 90-day at retail in recent years and more recently during COVID-19, and specialty pharmacy represents a significant and growing proportion of prescription drug spending in the U.S. and a larger proportion of our revenues.
Retail Pharmacy segment has experienced a shift in pharmacy mix towards 90-day at retail in recent years, and specialty pharmacy represents a significant and growing proportion of prescription drug spending in the U.S. and a larger proportion of our revenues.
We cannot provide any assurance that we will be able to successfully execute these strategic initiatives, or that these initiatives will not result in additional unanticipated costs.
These strategic initiatives may not result in improvements in future financial performance. We cannot provide any assurance that we will be able to successfully execute these strategic initiatives, or that these initiatives will not result in additional unanticipated costs.
WBA Fiscal 2022 Form 10-K 31 Table of Contents We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In June 2018, our Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $10 billion of our common stock.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In June 2018, our Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $10 billion of our common stock.
Any claims made against us or our acquired businesses that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and our providers from our operations, which could harm our business. In addition, any claims may significantly harm our business or reputation.
Any claims made against us or our acquired businesses that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and our providers from our operations, which could harm our business. Additional risks posed by the U.S.
There can be no assurance that impairments will not occur, and any impairment may have a material impact on our financial condition and results of operations. WBA Fiscal 2022 Form 10-K 26 Table of Contents We are exposed to risks associated with foreign currency exchange rate fluctuations.
There can be no assurance that impairments will not occur, and any impairment may have a material impact on our financial condition and results of operations. We are exposed to risks associated with foreign currency exchange rate fluctuations.
WBA Fiscal 2022 Form 10-K 29 Table of Contents We could be adversely affected by violations of anti-bribery, anti-corruption and/or international trade laws. We are subject to laws concerning our business operations and marketing activities in foreign countries where we conduct business. For example, we are subject to the U.S.
We could be adversely affected by violations of anti-bribery, anti-corruption and/or international trade laws. We are subject to laws concerning our business operations and marketing activities in foreign countries where we conduct business. For example, we are subject to the U.S.
The terms of leases at existing store locations may adversely affect us if the renewal terms of, or requested modifications to, those leases are unacceptable to us and we are forced to close or relocate stores.
Further, changing local demographics at existing store locations may adversely affect revenue and profitability levels at those stores. The terms of leases at existing store locations may adversely affect us if the renewal terms of, or requested modifications to, those leases are unacceptable to us and we are forced to close or relocate stores.
In addition, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, includes policies that are designed to have a direct impact on drug prices and reduce drug spending by the federal government, which shall take effect in 2023.
In addition, on August 16, 2022, President Biden signed into law the IRA, which, among other things, includes policies that are designed to have a direct impact on drug prices and reduce drug spending by the federal government.
WBA Fiscal 2022 Form 10-K 22 Table of Contents From time to time, we may choose to divest certain assets or businesses as we execute our strategy and our ability to engage in such transactions will be subject to market conditions beyond our control which will affect our ability to transact on terms favorable to us or at all.
From time to time, we may choose to divest certain assets or businesses as we execute our strategy and our ability to engage in such transactions will be subject to market conditions beyond our control which will affect our ability to transact on terms favorable to us or at all.
Risks from Changes in Public Policy and Other Legal and Regulatory Risks Changes in the healthcare industry and regulatory environments may adversely affect our businesses. Political, economic and regulatory influences are subjecting the healthcare industry to significant changes that could adversely affect our results of operations.
WBA Fiscal 2023 Form 10-K 29 Table of Contents Risks from Changes in Public Policy and Other Legal and Regulatory Risks Changes in the healthcare industry and regulatory environments may adversely affect our businesses. Political, economic and regulatory influences are subjecting the healthcare industry to significant changes that could adversely affect our results of operations.
Consolidation and strategic alliances in the healthcare industry could adversely affect our business operations, competitive positioning, financial condition and results of operations. Many organizations in the healthcare industry, including PBM companies, have consolidated in recent years to create larger healthcare enterprises with greater bargaining power, which has resulted in greater pricing pressures.
WBA Fiscal 2023 Form 10-K 16 Table of Contents Consolidation and strategic alliances in the healthcare industry could adversely affect our business operations, competitive positioning, financial condition and results of operations. Many organizations in the healthcare industry, including PBMs, have consolidated in recent years to create larger healthcare enterprises with greater bargaining power, which has resulted in greater pricing pressures.
WBA Fiscal 2022 Form 10-K 28 Table of Contents We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur.
We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur.
From time to time, we make investments in companies over which we do not have sole control and some of these companies may operate in sectors that differ from our current operations and have different risks.
WBA Fiscal 2023 Form 10-K 24 Table of Contents From time to time, we make investments in companies over which we do not have sole control and some of these companies may operate in sectors that differ from our current operations and have different risks.
Some of the factors that could materially and adversely affect our business, financial condition or results of operations include: Risks Relating to Our Business • Global health developments and economic uncertainty resulting from COVID-19 have adversely impacted, and may continue to adversely impact, our business, results of operations, cash flows and financial position. • Reductions in third-party reimbursement levels, from private or governmental agency plans, and potential changes in industry pricing benchmarks for prescription drugs could materially and adversely affect our results of operations. • A shift in pharmacy mix toward lower margin plans, products and programs could adversely affect our results of operations. • We derive a significant portion of our sales in the U.S.
Some of the factors that could materially and adversely affect our business, financial condition or results of operations include: Risks Relating to Our Business • Changes in economic conditions could adversely affect consumer buying practices. • Reductions in third-party reimbursement levels, from private or governmental agency plans, and potential changes in industry pricing benchmarks for prescription drugs could materially and adversely affect our results of operations. • A shift in pharmacy mix toward lower margin plans, products and programs could adversely affect our results of operations. • We derive a significant portion of our sales in the U.S.
These businesses have in the past been subject to medical liability claims in the ordinary course of business, and although we carry insurance covering medical malpractice claims, including professional liability insurance, in amounts we believe are appropriate in light of the risks attendant to our business, successful medical liability claims could resulting in substantial damage awards that exceed the limits of our insurance coverage.
Although we carry insurance covering medical malpractice claims, including professional liability insurance, in amounts we believe are appropriate in light of the risks attendant to our business, successful medical liability claims could result in substantial damage awards that exceed the limits of our insurance coverage.
Our long-term debt obligations include covenants that may adversely affect our ability, and the ability of certain of our subsidiaries, to incur secured indebtedness or engage in certain types of transactions.
WBA Fiscal 2023 Form 10-K 27 Table of Contents Our long-term debt obligations include covenants that may adversely affect our ability, and the ability of certain of our subsidiaries, to incur secured indebtedness or engage in certain types of transactions.
A shift in pharmacy mix toward lower margin plans, products and programs could adversely affect our results of operations. Our U.S. Retail Pharmacy segment seeks to grow prescription volume while operating in a marketplace with continuous reimbursement pressure. A shift in the mix of pharmacy prescription volume towards programs offering lower reimbursement rates could adversely affect our results of operations.
WBA Fiscal 2023 Form 10-K 15 Table of Contents A shift in pharmacy mix toward lower margin plans, products and programs could adversely affect our results of operations. Our U.S. Retail Pharmacy segment seeks to grow prescription volume while operating in a marketplace with continuous reimbursement pressure.
Our certificate of incorporation and bylaws, Delaware law or our agreements with certain stockholders may impede the ability of our stockholders to make changes to our Board or impede a takeover.
WBA Fiscal 2023 Form 10-K 33 Table of Contents Our certificate of incorporation and bylaws, Delaware law or our agreements with certain stockholders may impede the ability of our stockholders to make changes to our Board or impede a takeover.
We may be unable to achieve our environmental, social and governance goals. We recognize the rising importance of environmental, social, and governance matters among our team members, customers, and certain shareholders and are committed to upholding a culture dedicated to corporate responsibility.
Our business is subject to evolving global ESG regulatory requirements and expectations. We may be unable to achieve our ESG goals. We recognize the rising importance of ESG matters among our team members, customers, and certain shareholders and are committed to upholding a culture dedicated to corporate responsibility.
If patients, clients or partners assert liability claims against us, any ensuing litigation, regardless of outcome, could result in a substantial cost to us, divert management’s attention from operations, and decrease market acceptance of our services and care delivery model. We do not control the providers and other healthcare professionals in our U.S.
If patients, clients or partners assert liability claims against us, any ensuing litigation, regardless of outcome, could result in a substantial cost to us, divert management’s attention from operations, decrease market acceptance of our services and care delivery model and may significantly harm our business or reputation.
WBA Fiscal 2022 Form 10-K 13 Table of Contents Risks Related to Our Operations • Disruption in our global supply chain could negatively impact our businesses. • We outsource certain business processes to third-party vendors that subject us to risks, including disruptions in business and increased costs. • We use a single wholesaler of branded and generic pharmaceutical drugs as our primary source of such products. • Failure to retain and recruit, or failure to manage succession of, key personnel could have an adverse impact on our future performance. • We may be unable to keep existing store locations or open new locations in desirable places on favorable terms, which could materially and adversely affect our results of operations. • Our business and operations are subject to risks related to climate change.
Risks Related to Our Operations • Disruption in our global supply chain could negatively impact our businesses. • We outsource certain business processes to third-party vendors that subject us to risks, including disruptions in business and increased costs. • We use a single wholesaler of branded and generic pharmaceutical drugs as our primary source of such products. • Changes to management, including turnover of our top executives, could have an adverse effect on our business. • We may be unable to keep existing store locations or open new locations in desirable places on favorable terms, which could materially and adversely affect our results of operations. • Our failure to attract and retain qualified team members, increases in wage and benefit costs, changes in laws and other labor issues could materially adversely affect our financial performance. • Our business and operations are subject to risks related to climate change.
In addition, we have recently divested of a portion of our interests in AmerisourceBergen (See Part II, Item 7, Investment in AmerisourceBergen for further information) and Option Care Health, Inc. and may choose to divest more of our interests in the future.
In addition, we have recently divested of a portion of our interests in Cencora and fully divested our interests in Option Care Health, Inc. and may choose to divest more of our investment interests in the future.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations. Risks Related to Our Structure and Organization Certain stockholders may have significant voting influence over matters requiring stockholder approval.
The level of competition in the retail pharmacy, healthcare services and pharmaceutical wholesale industries is high. Changes in market dynamics or actions of competitors or manufacturers, including industry consolidation and the emergence of new competitors and strategic alliances, could materially and adversely impact us.
Changes in market dynamics or actions of competitors or manufacturers, including industry consolidation and the emergence of new competitors and strategic alliances, could materially and adversely impact us.
The Inflation Reduction Act of 2022 could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability. WBA Fiscal 2022 Form 10-K 27 Table of Contents We expect the healthcare industry to continue to change significantly in the future.
The IRA could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability. We expect the healthcare industry to continue to change significantly in the future.
A significant element of our growth strategy is to identify, pursue and successfully complete and integrate acquisitions, joint ventures and other strategic partnerships and alliances that either expand or complement our existing operations.
A significant element of our growth strategy is to identify, pursue and successfully complete and integrate acquisitions, joint ventures and other strategic partnerships and alliances that either expand or complement our existing operations. For example, in fiscal 2022, the Company acquired controlling equity interests in VillageMD, Shields and CareCentrix.
WBA Fiscal 2022 Form 10-K 18 Table of Contents Our substantial international business operations subject us to a number of operating, economic, political, regulatory and other international business risks.
Our substantial international business operations subject us to a number of operating, economic, political, regulatory and other international business risks.
As part of this impairment analysis, we determine fair value for each reporting unit using both the income and market approaches. We determine fair value of indefinite-lived intangible assets using the relief from royalty method and excess earnings method of the income approach.
As part of this impairment analysis, we determine fair value for each reporting unit using both the income and market approaches.
WBA Fiscal 2022 Form 10-K 19 Table of Contents We use a single wholesaler of branded and generic pharmaceutical drugs as our primary source of such products.
We use a single wholesaler of branded and generic pharmaceutical drugs as our primary source of such products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company's International segment operated and owned 35 pharmaceutical distribution centers in Germany, covering approximately 3 million square feet. Office facilities The Company operated 43 principal office facilities, covering approximately 2.3 million square feet, of which 4 were owned. Geographically, 29 of these principal office facilities were located in the U.S. and 14 were located outside of the U.S.
Biggest changeThe Company's International segment operated 32 pharmaceutical distribution centers in Germany, of which 8 were owned. The pharmaceutical distribution centers in Germany covered approximately 3 million square feet. Office facilities The Company operated 50 principal office facilities, covering approximately 1.8 million square feet, of which 5 were owned.
The Company owned approximately 8% and 4% of these U.S. Retail Pharmacy and International segment locations, respectively. The remaining locations, including U.S. Healthcare locations were leased or licensed. For more information on leases, see Note 5. Leases, to the Consolidated Financial Statements included in Part II, Item 8 for further information.
The Company owned approximately 5% and 4% of these U.S. Retail Pharmacy and International segment locations, respectively. The remaining locations, including all U.S. Healthcare locations were leased or licensed. See Note 5. Leases, to the Consolidated Financial Statements included in Part II, Item 8 for further information.
In addition, the Company used public warehouses and third-party distributors to handle certain retail distribution needs. The Company’s U.S. Retail Pharmacy segment operated 8 microfulfillment centers, 1 prescription mail service facility and 1 manufacturing facility, covering approximately 607 thousand, 110 thousand, and 77 thousand square feet, respectively.
In addition, the Company used public warehouses and third-party distributors to handle certain retail distribution needs. The Company’s U.S. Retail Pharmacy segment operated 10 micro-fulfillment centers, 1 prescription mail service facility and 1 manufacturing facility, covering approximately 789 thousand, 110 thousand, and 77 thousand square feet, respectively.
Virgin Islands 1 8,889 International: United Kingdom 2,573 Mexico 1,133 Chile 295 Thailand 237 The Republic of Ireland 92 4,330 U.S. Healthcare - standalone clinics 124 Walgreens Boots Alliance total 13,343 1 Includes VillageMD co-located clinics The Company’s domestic and international retail stores and clinics, which includes Boots Opticians and specialty pharmacy locations, covered approximately 143 million square feet.
Virgin Islands 1 8,706 International: United Kingdom 2 2,514 Mexico 1,151 Chile 295 Thailand 243 The Republic of Ireland 94 4,297 U.S. Healthcare - healthcare locations 529 Walgreens Boots Alliance total 13,532 1. Includes co-located VillageMD clinics 2. Includes standalone Boots Opticians locations The Company’s domestic and international retail stores and healthcare locations covered approximately 145 million square feet.
WBA Fiscal 2022 Form 10-K 32 Table of Contents Distribution centers and other facilities The Company operated 22 retail distribution centers covering approximately 14 million square feet of space, of which 12 locations were owned. Geographically, 17 of these retail distribution centers were located in the U.S. and 5 were located outside of the U.S.
Distribution centers and other facilities The Company operated 21 retail distribution centers covering approximately 13 million square feet of space, of which 11 locations were owned. Geographically, 16 of these retail distribution centers were located in the U.S. and 5 were located outside of the U.S.
Item 2. Properties The following information regarding the Company’s properties is provided as of August 31, 2022 and does not include properties of unconsolidated, partially-owned entities. Retail stores and clinics The U.S. Retail Pharmacy segment operated 8,886 retail stores and 3 specialty pharmacies. The International segment operated 3,989 retail stores and 341 standalone Boots Opticians locations. The U.S.
Item 2. Properties The following information regarding the Company’s properties is provided as of August 31, 2023 and does not include properties of unconsolidated, partially-owned entities.
Healthcare segment included 334 VillageMD clinics of which 146 were co-located clinics, 124 were standalone clinics and 64 were affiliate clinics. The following is a breakdown of the Company’s domestic and international retail stores and clinics by segment: Retail stores and clinics U.S. Retail Pharmacy: United States 1 8,784 Puerto Rico 104 U.S.
WBA Fiscal 2023 Form 10-K 34 Table of Contents Retail stores and healthcare locations The following is a breakdown of the Company’s domestic and international retail stores and healthcare locations by segment: Number of retail stores and healthcare locations U.S. Retail Pharmacy: United States 1 8,600 Puerto Rico 105 U.S.
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Geographically, 36 of these principal office facilities were located in the U.S. and 14 were located outside of the U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFuture dividends will be determined based on earnings, capital requirements, financial condition and other factors considered relevant by the Company's Board of Directors. The following table provides information about purchases made by the Company during the quarter ended August 31, 2022 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.
Biggest changeThe following table provides information about purchases made by the Company during the quarter ended August 31, 2023 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.
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 programs 1 Approximate dollar value of shares that may yet be purchased under the plans or programs 1 6/1/22 - 6/30/22 — $ — — $ 2,003,419,960 7/1/22 - 7/31/22 — — — 2,003,419,960 8/1/22 - 8/31/22 — — — 2,003,419,960 — — 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.
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 programs 1 Approximate dollar value of shares that may yet be purchased under the plans or programs 1 6/1/23 - 6/30/23 — $ — — $ 2,003,419,960 7/1/23 - 7/31/23 — — — 2,003,419,960 8/1/23 - 8/31/23 — — — 2,003,419,960 — — 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.
Item 5. Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities Walgreens Boots Alliance’s common stock is listed on the Nasdaq Stock Market under the symbol WBA. As of August 31, 2022, there were approximately 46,192 holders of record of Walgreens Boots Alliance common stock. The Company has paid cash dividends every quarter since 1933.
Item 5. Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities Walgreens Boots Alliance’s common stock is listed on the Nasdaq Stock Market under the symbol WBA. As of August 31, 2023, there were approximately 43,816 holders of record of Walgreens Boots Alliance common stock. The Company has paid cash dividends every quarter since 1933.
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Future dividends will be determined based on earnings, capital requirements, financial condition, and other debt obligations, fines and/or adverse rulings by courts or arbitrators in legal or regulatory matters, changes in federal, state or foreign income tax law, adverse global macroeconomic conditions, changes to the Company’s business model and other factors considered relevant by the Company's Board of Directors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating income (loss) (GAAP) $ 3,312 $ (2,090) $ — $ (239) $ 982 Adjustments to equity earnings (loss) in AmerisourceBergen 97 — — — 97 Acquisition-related amortization 309 75 — — 384 Transformational cost management 498 182 — 40 719 Acquisition-related costs 296 6 — 12 315 LIFO provision 95 — — — 95 Store damage and inventory losses 68 — — — 68 Store optimization 53 — — — 53 Impairment of goodwill and intangible assets 32 1,984 — — 2,016 Adjusted operating income (loss) (Non-GAAP measure) $ 4,761 $ 157 $ — $ (187) $ 4,730 WBA Fiscal 2022 Form 10-K 49 Table of Contents Net Earnings to Adjusted net earnings & Earnings per share to Adjusted Earnings per share (in millions) 2022 2021 2020 Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) $ 4,337 $ 1,994 $ 180 Adjustments to operating income: Adjustments to equity earnings (loss) in AmerisourceBergen 1 218 1,645 97 Acquisition-related amortization 2 855 523 384 Transformational cost management 3 763 417 719 Certain legal and regulatory accruals and settlements 4 768 75 — Acquisition-related costs 5 223 54 315 Impairment of goodwill and intangible assets 6 783 49 2,016 LIFO provision 7 135 13 95 Store damage and inventory losses 8 — — 68 Store optimization 3 — — 53 Total adjustments to operating income 3,746 2,775 3,747 Adjustments to other income, net: Net investment hedging loss (gain) 9 1 8 (11) Impairment of equity method investment and investment in equity securities 10 190 — 71 Adjustment to gain on disposal of discontinued operations 11 38 — — Gain on sale of equity method investment 12 (559) (290) (1) Gain on previously held investments 13 (2,576) — — Total adjustments to other income, net (2,906) (281) 59 Adjustments to interest expense, net: Early debt extinguishment 14 4 414 — Total adjustments to interest expense, net 4 414 — Adjustments to income tax (benefit) provision: UK tax rate change 15 — 378 139 U.S. tax law changes 15 — — (6) Equity method non-cash tax 15 70 (161) 60 Tax impact of adjustments 15 (752) (283) (433) Total adjustments to income tax (benefit) provision (681) (65) (240) Adjustments to post-tax earnings from other equity method investments: Adjustments to earnings in other equity method investments 16 58 (504) 54 Total adjustments to post-tax earnings from other equity method investments 58 (504) 54 Adjustments to net loss attributable to non-controlling interests - continuing operations: Acquisition-related amortization 2 (164) (75) (4) Transformational cost management 3 (1) 1 (10) Acquisition-related costs 5 (32) — — Impairment of goodwill and intangible assets 6 — — (14) LIFO provision 7 — (2) (1) Early debt extinguishment 14 (1) — — Total adjustments to net loss attributable to non-controlling interests - continuing operations (198) (77) (29) Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure) $ 4,360 $ 4,256 $ 3,772 WBA Fiscal 2022 Form 10-K 50 Table of Contents 2022 2021 2020 Net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations (GAAP) $ — $ 548 $ 277 Acquisition-related amortization 2 — 28 76 Transformational cost management 3 — 1 73 Acquisition-related costs 5 — 92 1 Gain on disposal of discontinued operations 11 — (322) — Tax impact of adjustments 15 — (6) (25) Total adjustments to net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations $ — (206) 126 Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations (Non-GAAP measure) $ — $ 342 $ 403 Adjusted net earnings attributable to Walgreens Boots Alliance, Inc.
Biggest changeWBA Fiscal 2023 Form 10-K 51 Table of Contents Net (loss) earnings to Adjusted net earnings & Diluted net (loss) earnings per share to Adjusted diluted net earnings per share (in millions) 2023 2022 2021 Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) $ (3,080) $ 4,337 $ 1,994 Adjustments to operating (loss) income: Certain legal and regulatory accruals and settlements 1 7,466 768 75 Transformational cost management 2 1,181 763 417 Acquisition-related amortization 3 1,126 855 523 Acquisition-related costs 4 323 223 54 Impairment of intangible assets 5 299 783 49 Adjustments to equity earnings in Cencora 6 211 218 1,645 LIFO provision 7 187 135 13 Store damage and inventory loss insurance recovery 8 (40) — — Total adjustments to operating (loss) income 10,752 3,746 2,775 Adjustments to other income, net: Impairment of equity method investment and investments in debt and equity securities 9 — 190 — Loss on disposal of business 10 34 38 — (Gain) loss on certain non-hedging derivatives 11 (19) 1 8 Gain on investments, net 12 (109) (2,576) — Gain on sale of equity method investment 13 (1,855) (559) (290) Total adjustments to other income, net (1,949) (2,906) (281) Adjustments to interest expense, net: Early debt extinguishment 14 — 4 414 Total adjustments to interest expense, net — 4 414 Adjustments to income tax (benefit) provision: UK tax rate change 15 — — 378 Equity method non-cash tax 15 44 70 (161) Tax impact of adjustments 15 (2,187) (752) (283) Total adjustments to income tax (benefit) provision (2,143) (681) (65) Adjustments to post-tax earnings from other equity method investments: Adjustments to earnings in other equity method investments 16 40 58 (504) Total adjustments to post-tax earnings from other equity method investments 40 58 (504) Adjustments to net loss attributable to non-controlling interests - continuing operations: LIFO provision 7 — — (2) Transformational cost management 2 — (1) 1 Early debt extinguishment 14 — (1) — Loss on business disposition 10 (14) — — Acquisition-related costs 4 (80) (32) — Discrete tax items 15 108 — — Acquisition-related amortization 3 (196) (164) (75) Total adjustments to net loss attributable to non-controlling interests - continuing operations (182) (198) (77) Adjusted net earnings attributable to Walgreens Boots Alliance, Inc.
Specialty pharmacy represents a significant and growing proportion of prescription drug spending in the U.S., a significant portion of which is dispensed outside of traditional retail pharmacies.
Specialty pharmacy Specialty pharmacy represents a significant and growing proportion of prescription drug spending in the U.S., a significant portion of which is dispensed outside of traditional retail pharmacies.
NON-GAAP MEASURES The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under SEC rules, presented herein to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP).
NON-GAAP MEASURES The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under the SEC rules, presented herein to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP).
Retail Pharmacy International U.S. Healthcare Corporate and Other Walgreens Boots Alliance, Inc.
Retail Pharmacy International U.S. Healthcare Corporate and Other Walgreens Boots Alliance, Inc.
These adjustments would be made in future periods. Some of the more significant estimates include business combinations, leases, goodwill and indefinite-lived intangible asset impairment, long-lived assets impairment, cost of sales and inventory, equity method investments, pension and post-retirement benefits, legal contingencies and income taxes.
These adjustments would be made in future periods. Some of the more significant estimates include business combinations, leases, goodwill and indefinite-lived intangible asset impairment, long-lived assets impairment, cost of sales and inventory, equity method investments, pension and post-retirement benefits, contingencies and income taxes.
The Company also compares the sum of estimated fair values of reporting units to the Company’s fair value as implied by the market value of its equity securities. This comparison provides an indication that, in total, assumptions and estimates are reasonable.
The Company also compares the sum of estimated fair values of reporting units to the Company’s fair value as implied by the market value of its equity. This comparison provides an indication that, in total, assumptions and estimates are reasonable.
These supplemental non-GAAP financial measures are presented because management has evaluated the Company’s financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, 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 are presented because management has evaluated the Company’s financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in the Company’s historical operating results.
To better serve the evolving specialty pharmacy market, in March 2017, the Company and Prime Therapeutics LLC, a PBM, closed a transaction to form a combined central specialty pharmacy and mail services company, AllianceRx Walgreens Prime, using an innovative model that sought to align pharmacy, PBM and health plans to coordinate patient care, improve health outcomes and deliver cost of care opportunities.
To better serve the evolving specialty pharmacy market, in March 2017, the Company and Prime Therapeutics LLC (“Prime”), a PBM, closed a transaction to form a combined central specialty pharmacy and mail services company, AllianceRx Walgreens Prime, using an innovative model that sought to align pharmacy, PBMs and health plans to coordinate patient care, improve health outcomes and deliver cost of care opportunities.
The Company continues to play a critical role in fighting COVID-19. The Company has worked with the Centers for Disease Control and Prevention (“CDC”), U.S. Department of Health and Human Services (“HHS”) and the U.S. government to help administer COVID-19 vaccinations to the general public and to high priority groups, including long-term care facility residents and staff. The U.S.
The Company has and continues to play a critical role in fighting COVID-19. The Company has worked with the Centers for Disease Control and Prevention, U.S. Department of Health and Human Services and the U.S. government to help administer COVID-19 vaccinations to the general public and to high priority groups, including long-term care facility residents and staff.
Net cash provided by investing activities in fiscal 2021 includes proceeds from sale of business, net of cash disposed of $5.5 billion, related to the disposition of Alliance Healthcare business, proceeds from sale of assets of $453 million driven by partial sale of ownership interest in Option Care Health by the Company's then equity method investee HC Group Holdings and proceeds from sale-leaseback transactions of $856 million.
Net cash provided by investing activities in fiscal 2021 includes proceeds from sale of business, net of cash disposed of $5.5 billion, related to the disposition of Alliance Healthcare business, cash proceeds from sale-leaseback transactions of $856 million and proceeds from the partial sale of ownership interest in Option Care Health by the Company's then equity method investee HC Group Holdings of $453 million.
Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” “transform,” “accelerate,” “model,” “long-term,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements.
Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” “transform,” “accelerate,” “model,” “long-term,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” “potential,” “preliminary,” and variations of such words and similar expressions are intended to identify such forward-looking statements.
On December 31, 2021, the Company purchased Prime’s portion of the joint venture and now wholly own the joint venture, which was renamed AllianceRx Walgreens. Certain clients of AllianceRx Walgreens are not obligated to contract through AllianceRx Walgreens, and have in the past, and may in the future, enter into specialty pharmacy and other agreements without involving AllianceRx Walgreens.
On December 31, 2021, the Company purchased Prime’s portion of the joint venture and now wholly owns the joint venture, which was renamed AllianceRx Walgreens. Certain clients of AllianceRx Walgreens are not obligated to contract through AllianceRx Walgreens, and have in the past, and may in the future, enter into specialty pharmacy and other agreements without involving AllianceRx Walgreens.
These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, discount rates, terminal growth rates, forecasts of revenue, operating income, depreciation, amortization and capital expenditures.
These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, discount rates, terminal growth rates, forecasts of revenue, operating income, depreciation, amortization, working capital requirements and capital expenditures.
Stock repurchase program In June 2018, the Company's Board of Director's approved a stock repurchase program (the “June 2018 stock repurchase program”), which authorized the repurchase of up to $10.0 billion of the Company's common stock of which the Company had repurchased $8.0 billion as of August 31, 2022. The June 2018 stock repurchase program has no specified expiration date.
Stock repurchase program In June 2018, the Company's Board of Director's approved a stock repurchase program (the “June 2018 stock repurchase program”), which authorized the repurchase of up to $10.0 billion of the Company's common stock of which the Company had repurchased $8.0 billion as of August 31, 2023. The June 2018 stock repurchase program has no specified expiration date.
If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized and the asset is written down to its estimated fair value. Indefinite-lived intangible assets fair values are estimated using the relief from royalty method and excess earnings method of the income approach.
If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized and the asset is written down to its estimated fair value. Indefinite-lived intangible assets fair values are estimated using the relief from royalty method and multi-period excess earnings method of the income approach.
WBA Fiscal 2022 Form 10-K 43 Table of Contents 4 Comparable sales are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales.
WBA Fiscal 2023 Form 10-K 44 Table of Contents 4 Comparable sales are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales.
Debt, to the Consolidated Financial Statements included in Part II, Item 8, as of the last day of each fiscal quarter, a ratio of consolidated debt to total capitalization not to exceed 0.60:1.00, subject to increase in certain circumstances set forth in the applicable credit agreement.
Debt, to the Consolidated Financial Statements included in Part II, Item 8, 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, subject to increase in certain circumstances set forth in the applicable credit agreement.
Retail Pharmacy segment includes the Walgreens business which is comprised of the operations of retail drugstores, health and wellness services, specialty and home delivery pharmacy services, and its equity method investment in AmerisourceBergen.
Retail Pharmacy segment includes the Walgreens business which is comprised of the operations of retail drugstores, health and wellness services, specialty and home delivery pharmacy services, and its equity method investment in Cencora.
WBA Fiscal 2022 Form 10-K 52 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The Company's long-term capital policy is to: maintain a strong balance sheet and financial flexibility; reinvest in its core strategies; invest in strategic opportunities that reinforce its core strategies and meet return requirements; and return surplus cash flow to stockholders in the form of dividends and share repurchases over the long term.
WBA Fiscal 2023 Form 10-K 55 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The Company's long-term capital policy is to: maintain a strong balance sheet and financial flexibility; reinvest in its core strategies; invest in strategic opportunities that reinforce its core strategies and meet return requirements; and return surplus cash flow to stockholders in the form of dividends and share repurchases over the long term.
These costs are significantly impacted by the timing and complexity of the underlying merger, acquisition and divestitures related activities and do not reflect the Company’s current operating performance. 6 Impairment of goodwill and intangible assets do not relate to the ordinary course of the Company’s business.
These costs are significantly impacted by the timing and complexity of the underlying merger, acquisition and divestitures related activities and do not reflect the Company’s current operating performance. 5 Impairment of intangible assets do not relate to the ordinary course of the Company’s business.
For discussion related to the results of operations by segment for fiscal 2021 compared to fiscal 2020, refer to Part II, Item 7. Management's discussion and analysis of financial condition and results of operations in our fiscal 2021 Form 10-K, as amended by Form 10-K/A which was filed with the United States Securities and Exchange Commission on November 24, 2021.
For discussion related to the results of operations by segment for fiscal 2022 compared to fiscal 2021, refer to Part II, Item 7. Management's discussion and analysis of financial condition and results of operations in our fiscal 2022 Form 10-K, as amended by Form 10-K/A which was filed with the United States Securities and Exchange Commission on November 23, 2022.
NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful. WBA Fiscal 2022 Form 10-K 41 Table of Contents WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS The following information summarizes our results of operations for fiscal 2022 compared to fiscal 2021.
NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful. WBA Fiscal 2023 Form 10-K 42 Table of Contents WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS The following information summarizes our results of operations for fiscal 2023 compared to fiscal 2022.
Long-lived assets related to the Company’s retail pharmacy operations include property, plant and equipment, definite-lived intangibles, right of use asset as well as operating lease liability. If the asset group fails the recoverability test, then an impairment charge is determined based on the difference between the fair value of the asset group compared to its carrying value.
Long-lived assets related to the Company’s retail pharmacy operations include property, plant and equipment, definite-lived intangibles, and right of use assets. If the asset group fails the recoverability test, then an impairment charge is determined based on the difference between the fair value of the asset group compared to its carrying value.
Its operations are conducted through three reportable segments: • U.S. Retail Pharmacy, • International, and • U.S. Healthcare. In the fourth quarter of fiscal 2022, the Company changed the name of two reportable segments to better align with the Company’s business activities, structure and strategy. The “United States” segment was renamed to “U.S.
Its operations are conducted through three reportable segments: • U.S. Retail Pharmacy, • International, and • U.S. Healthcare. In fiscal 2022, the Company changed the name of two reportable segments to better align with the Company’s business activities, structure and strategy. The “United States” segment was renamed to “U.S. Retail Pharmacy” and the “Walgreens Health” segment was renamed to “U.S.
Credit ratings As of October 12, 2022, the credit ratings of Walgreens Boots Alliance were: Rating agency Long-term debt rating Commercial paper rating Outlook Moody’s Baa2 P-2 Negative Standard & Poor’s BBB A-2 Stable In assessing the Company’s credit strength, each rating agency considers various factors including the Company’s business model, capital structure, financial policies and financial performance.
Credit ratings As of October 12, 2023, the credit ratings of Walgreens Boots Alliance were: Rating agency Long-term debt rating Commercial paper rating Outlook Moody’s Baa3 P-3 Negative Standard & Poor’s BBB A-2 Negative In assessing the Company’s credit strength, each rating agency considers various factors including the Company’s business model, capital structure, financial policies and financial performance.
Cash flows from investing activities Net cash (used for) provided by investing activities was $(1.1) billion, $4.1 billion and $(1.3) billion in fiscal 2022, 2021 and 2020.
Cash flows from investing activities Net cash (used for) provided by investing activities was $(3.1) billion, $(1.1) billion and $4.1 billion in fiscal 2023, 2022 and 2021, respectively.
The Company is currently on track to achieve the savings target. The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies.
The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies.
Inventories include product costs, inbound freight, direct labor, warehousing costs for retail pharmacy operations, distribution of products, and vendor allowances not classified as a reduction of advertising expense.The Company’s U.S. Retail Pharmacy segment inventory is accounted for using the last-in-first-out (“LIFO”) method. The Company’s International segment inventory is accounted for using average cost and the first-in-first-out (“FIFO”) method.
Inventories include product costs, inbound freight, direct labor, warehousing costs for retail pharmacy operations, and distribution costs of products, and are reduced by vendor allowances not classified as a reduction of advertising expense. The Company’s U.S. Retail Pharmacy segment inventory is accounted for using the last-in-first-out (“LIFO”) method.
Net cash used for investing activities in fiscal 2022 includes cash outflows associated with business, investment and asset acquisitions, net of cash acquired of VillageMD, Shields and CareCentrix for $0.8 billion, $0.9 billion and $0.1 billion, respectively, offset by $900 million of sale proceeds related to the Company's sale of the 6.0 million shares of AmerisourceBergen common stock and $363 million related to the Company's sale of 11.0 million shares of Option Care Health common stock and proceeds from sale-leaseback transactions of $1.3 billion.
Net cash used for investing activities in fiscal 2022 includes cash outflows associated with business, investment and asset acquisitions, net of cash acquired of VillageMD, Shields and CareCentrix for $0.8 billion, $0.9 billion and $0.1 billion, respectively, offset by cash proceeds of $1.3 billion related to the Company's sale of Cencora and Option Care Health common stock and cash proceeds of $1.3 billion from sale-leaseback transactions.
Operating income (loss) (GAAP) $ 2,907 $ (346) $ (829) $ (345) $ 1,387 Adjustments to equity earnings (loss) in AmerisourceBergen 218 — — — 218 Acquisition-related amortization 398 66 392 — 855 Transformational cost management 604 133 — 26 763 Certain legal and regulatory accruals and settlements 768 — — — 768 Acquisition-related costs (2) 89 67 69 223 Impairment of goodwill and intangible assets — 783 — — 783 LIFO provision 135 — — — 135 Adjusted operating income (loss) (Non-GAAP measure) $ 5,029 $ 726 $ (370) $ (251) $ 5,133 Fiscal 2021 U.S.
Operating income (loss) (GAAP) $ 2,907 $ (346) $ (829) $ (345) $ 1,387 Acquisition-related amortization 398 66 392 — 855 Impairment of intangible assets — 783 — — 783 Certain legal and regulatory accruals and settlements 768 — — — 768 Transformational cost management 604 133 — 26 763 Acquisition-related costs (2) 89 67 69 223 Adjustments to equity earnings in Cencora 218 — — — 218 LIFO provision 135 — — — 135 Adjusted operating income (loss) (Non-GAAP measure) $ 5,029 $ 726 $ (370) $ (251) $ 5,133 WBA Fiscal 2023 Form 10-K 50 Table of Contents Fiscal 2021 U.S.
Finance leases are recognized within property, plant and equipment and as a finance lease liability within accrued expenses and other liabilities and other noncurrent liabilities.
Finance leases are recognized within property, plant and equipment and as a finance lease liability within accrued expenses and other liabilities and other non-current liabilities.
The Company excludes these charges as related activities do not reflect the Company’s ongoing financial performance. 15 Adjustments to income tax provision (benefit) include adjustments to the GAAP basis tax provision (benefit) commensurate with non-GAAP adjustments and certain discrete tax items including U.S. and U.K. tax law changes and equity method non-cash tax.
The Company excludes these charges as related activities do not reflect the Company’s ongoing financial performance. 15 Adjustments to income tax (benefit) provision include adjustments to the GAAP basis tax (benefit) provision commensurate with non-GAAP adjustments and certain discrete tax items including UK tax law changes and equity method non-cash tax. These charges are recorded within income tax (benefit) provision.
The method of calculating comparable sales varies across the retail industry and our method of calculating comparable sales may not be the same as other retailers’ methods. NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful. Sales fiscal 2022 compared to fiscal 2021 The U.S.
The method of calculating comparable sales varies across the retail industry and our method of calculating comparable sales may not be the same as other retailers’ methods. NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.
Examples of such costs include deal costs, severance and stock compensation. These charges are primarily recorded within Selling, general and administrative expenses.
Examples of such costs include deal costs, severance, stock compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses.
The Company uses the following methods to determine its estimates: Business combinations – The Company accounts for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to non-controlling interests, be recorded at their respective fair values at the date of acquisition.
The Company uses the following methods to determine its estimates: WBA Fiscal 2023 Form 10-K 58 Table of Contents Business combinations – The Company accounts for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to non-controlling interests, be recorded at their respective fair values at the date of acquisition.
See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. International The Company's International segment consists of pharmacy-led health and beauty retail businesses outside the U.S. and the Company's pharmaceutical wholesale and distribution business in Germany.
See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. WBA Fiscal 2023 Form 10-K 45 Table of Contents International The Company's International segment consists of pharmacy-led health and beauty retail businesses outside the U.S. and the Company's pharmaceutical wholesale and distribution business in Germany.
As of August 31, 2022, the Company was in compliance with all such applicable covenants.
As of August 31, 2023, the Company was in compliance with all such applicable financial covenants.
For further information regarding the impact of COVID-19 on the Company, including on its liquidity and capital resources, please see Part I, Item 1A, Risk factors.
For further information regarding the impact of adverse macroeconomic conditions on the Company, including on its liquidity and capital resources, please see Part I, Item 1A, Risk factors.
WBA Fiscal 2022 Form 10-K 56 Table of Contents Goodwill and indefinite-lived intangible asset impairment – 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 could more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value.
Goodwill and indefinite-lived intangible asset impairment – 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 could more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value.
Healthcare segment currently consists of a majority position in Village Practice Management Company, LLC (“VillageMD”), a leading, national provider of value-based primary care services; a majority position in Shields Health Solutions Parent, LLC (“Shields”), a specialty pharmacy integrator and accelerator for hospitals, a majority position in CCX Next, LLC (“CareCentrix”), a leading player in the post-acute and home care management sectors; and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services to their members and members’ caregivers through both digital and physical channels.
Healthcare segment currently consists of a majority position in Village Practice Management Company, LLC (“VillageMD”), a national provider of value-based care with primary, multi-specialty, and urgent care providers serving patients in traditional clinic settings, in patients’ homes and online appointments; Shields Health Solutions Parent, LLC (“Shields”), a specialty pharmacy integrator and accelerator for hospitals, CCX Next, LLC (“CareCentrix”), a participant in the post-acute and home care management sectors; and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services to their members and members’ caregivers through both digital and physical channels.
WBA Fiscal 2022 Form 10-K 58 Table of Contents Contingencies – 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.
Contingencies – 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.
Financing activities in fiscal 2022 include early debt extinguishment of $1.6 billion driven by the early redemption of the $731 million 3.100% notes due 2022 and early extinguishments of $458 million and $402 million of the debt related to the integration of Shields and CareCentrix, respectively.
WBA Fiscal 2023 Form 10-K 57 Table of Contents Financing activities in fiscal 2022 include early debt extinguishment of $1.6 billion driven by the early redemption of the $731 million 3.100% notes due 2022 and early extinguishments of $458 million and $402 million of the debt related to the integration of Shields and CareCentrix, respectively.
Financing activities in fiscal 2021 includes the partial purchase and retirement of $3.3 billion of long-term debt. See Note 8. Debt, to the Consolidated Financial Statements included in Part II, Item 8 for further information. The Company acquired $2.1 billion of non-controlling interests in fiscal 2022. See Note 3.
Financing activities in fiscal 2021 includes the partial purchase and retirement of $3.3 billion of long-term debt. See Note 8. Debt, to the Consolidated Financial Statements included in Part II, Item 8 for further information.
Healthcare segment currently consists of a majority position in VillageMD, a leading, national provider of value-based primary care services; a majority position in Shields, a specialty pharmacy integrator and accelerator for hospitals; a majority position in CareCentrix, a leading player in the post-acute and home care management sectors, and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services and care management programs to their members and members’ caregivers through both digital and physical channels.
Healthcare segment currently consists of a majority position in VillageMD, a national provider of value-based care with primary, multi-specialty, and urgent care providers serving patients in traditional clinic settings, in patients’ homes and online appointments; Shields, a specialty pharmacy integrator and accelerator for hospitals; CareCentrix, a participant in the post-acute and home care management sectors, and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services and care management programs to their members and members’ caregivers through both digital and physical channels.
The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance.
The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Selling, general and administrative expenses.
WBA Fiscal 2022 Form 10-K 40 Table of Contents EXECUTIVE SUMMARY The following table presents certain key financial statistics for the Company for fiscal 2022, 2021 and 2020: (in millions, except per share amounts) 2022 2021 2020 Sales $ 132,703 $ 132,509 $ 121,982 Gross profit 28,265 28,067 26,078 Selling, general and administrative expenses 27,295 24,586 25,436 Equity earnings (loss) in AmerisourceBergen 418 (1,139) 341 Operating income 1,387 2,342 982 Adjusted operating income (Non-GAAP measure) 1 5,133 5,117 4,730 Earnings before interest and income tax provision 4,385 2,900 1,060 Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) 4,337 1,994 180 Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure) 1 4,360 4,256 3,772 Diluted net earnings per common share - continuing operations (GAAP) 5.01 2.30 0.20 Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) 1 5.04 4.91 4.28 Percentage increases (decreases) 2022 2021 2020 Sales 0.1 8.6 1.6 Gross profit 0.7 7.6 (7.4) Selling, general and administrative expenses 11.0 (3.3) 8.0 Operating income (40.8) 138.4 (79.4) Adjusted operating income (Non-GAAP measure) 1 0.3 8.2 (27.0) Earnings before interest and income tax provision 51.2 173.7 (78.8) Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) 117.5 NM (95.3) Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure) 1 2.5 12.8 (27.0) Diluted net earnings per common share - continuing operations (GAAP) 117.6 NM (95.1) Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) 1 2.5 14.6 (23.5) Percent to sales 2022 2021 2020 Gross margin 21.3 21.2 21.4 Selling, general and administrative expenses 20.6 18.6 20.9 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
WBA Fiscal 2023 Form 10-K 41 Table of Contents EXECUTIVE SUMMARY The following table presents certain key financial statistics for the Company for fiscal 2023, 2022 and 2021: (in millions, except per share amounts) 2023 2022 2021 Sales $ 139,081 $ 132,703 $ 132,509 Gross profit 27,072 28,265 28,067 Selling, general and administrative expenses 34,205 27,295 24,586 Equity earnings (loss) in Cencora 252 418 (1,139) Operating (loss) income (6,882) 1,387 2,342 Adjusted operating income (Non-GAAP measure) 1 3,871 5,133 5,117 (Loss) earnings before interest and income tax (benefit) provision (4,839) 4,385 2,900 Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) (3,080) 4,337 1,994 Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure) 1 3,439 4,360 4,256 Diluted net (loss) earnings per common share - continuing operations (GAAP) (3.57) 5.01 2.30 Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) 1 3.98 5.04 4.91 Percentage increases (decreases) 2023 2022 2021 Sales 4.8 0.1 8.6 Gross profit (4.2) 0.7 7.6 Selling, general and administrative expenses 25.3 11.0 (3.3) Operating (loss) income NM (40.8) 138.4 Adjusted operating income (Non-GAAP measure)- 1 (24.6) 0.3 8.2 (Loss) earnings before interest and income tax provision NM 51.2 173.7 Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) NM 117.5 NM Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure) 1 (21.1) 2.5 12.8 Diluted net (loss) earnings per common share - continuing operations (GAAP) NM 117.6 NM Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) 1 (20.9) 2.5 14.6 Percent to sales 2023 2022 2021 Gross margin 19.5 21.3 21.2 Selling, general and administrative expenses 24.6 20.6 18.6 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
The Company estimates that approximately 80% of the cumulative pre-tax charges relating to the Transformational Cost Management Program represent current or future cash expenditures, primarily related to employee severance and business transition costs, IT transformation and lease and other real estate payments.
The Company estimates that approximately 75% of the cumulative pre-tax charges relating to the Transformational Cost Management Program represent current or future cash expenditures, primarily related to employee severance and business transition costs, IT transformation and lease and other real estate payments. The amounts and timing of all estimates are subject to change until finalized.
WBA Fiscal 2022 Form 10-K 55 Table of Contents CRITICAL ACCOUNTING ESTIMATES The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America and include amounts based on management’s prudent judgments and estimates. Actual results may differ from these estimates.
CRITICAL ACCOUNTING ESTIMATES The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America and include amounts based on management’s prudent judgments and estimates. Actual results may differ from these estimates.
Short-term investment objectives are primarily to minimize risk and maintain liquidity. To attain these objectives, investment limits are placed on the amount, type and issuer of securities. Investments are principally in U.S. Treasury money market funds.
To attain these objectives, investment limits are placed on the amount, type and issuer of securities. Investments are principally in U.S. Treasury money market funds.
The Company considers certain metrics presented in this Annual Report on Form 10-K, such as comparable sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions, and comparable 30-day equivalent prescriptions, number of payor/ provider partnerships, number of locations of Walgreens Health Corners, number of co-located VillageMD clinics and number of total VillageMD clinics, at period end, to be key performance indicators because the Company’s management has evaluated its results of operations using these metrics and believes that these key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in its historical operating results.
The Company considers certain metrics presented in this Annual Report on Form 10-K, such as comparable sales (in constant currency), comparable pharmacy sales (in constant currency), comparable retail sales (in constant currency), comparable number of prescriptions and comparable 30-day equivalent prescriptions to be key performance indicators because the Company’s management has evaluated its results of operations using these metrics and believes that these key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in its historical operating results.
To date, the Company has taken actions across all aspects of the Transformational Cost Management Program which focus on the U.S. Retail Pharmacy and International reportable segments along with the Company's global functions.
To date, the Company has taken actions across all aspects of the Transformational Cost Management Program which focus primarily on the U.S. Retail Pharmacy and International reportable segments along with the Company's global functions. Divisional optimization within the Company’s segments includes activities such as optimization of stores.
Retail Pharmacy International Corporate and Other Walgreens Boots Alliance, Inc.
Retail Pharmacy International U.S. Healthcare Corporate and Other Walgreens Boots Alliance, Inc.
Certain clients have chosen not to renew their contracts through AllianceRx Walgreens which impacts gross sales. However, considering the relatively low margin nature of this business, the Company does not anticipate this will have a material impact on operating income. In January 2022, the Company announced a strategic review of its Boots business, including the No7 beauty company.
Certain clients have chosen not to renew their contracts through AllianceRx Walgreens which impacts gross sales. However, considering the relatively low margin nature of this business, the Company does not anticipate this will have a material impact on operating income.
Healthcare services For operations and activities related to the provision of healthcare, cost of services includes activities that are directly related to the provision of care, including medical claims expense, cost of care, clinic operating and support costs, and allocated depreciation and amortization.
WBA Fiscal 2023 Form 10-K 60 Table of Contents Healthcare services For operations and activities related to the provision of healthcare, cost of services includes activities that are directly related to the provision of care, including medical claims expense, cost of care, clinic operating and support costs, and allocated depreciation and amortization.
WBA Fiscal 2022 Form 10-K 42 Table of Contents FINANCIAL PERFORMANCE (in millions, except location amounts) 2022 2021 2020 Sales $ 109,078 $ 112,005 $ 107,701 Gross profit 23,669 23,736 22,302 Selling, general and administrative expenses 21,180 20,042 19,331 Equity earnings (loss) in AmerisourceBergen 418 (1,139) 341 Operating income 2,907 2,554 3,312 Adjusted operating income (Non-GAAP measure) 1 5,029 5,019 4,761 Number of prescriptions 2 819.6 827.5 818.0 30-day equivalent prescriptions 2,3 1,216.4 1,210.6 1,165.3 Number of locations at period end 8,901 8,973 9,028 Percentage increases (decreases) 2022 2021 2020 Sales (2.6) 4.0 3.0 Gross profit (0.3) 6.4 (5.6) Selling, general and administrative expenses 5.7 3.7 0.1 Operating income 13.8 (22.9) (26.0) Adjusted operating income (Non-GAAP measure) 1 0.2 5.4 (18.9) Comparable sales 4 5.1 5.1 2.8 Pharmacy sales (5.3) 5.5 4.3 Comparable pharmacy sales 4 4.7 6.7 3.2 Retail sales 5.6 (0.4) (0.4) Comparable retail sales 4 6.1 1.2 1.6 Comparable number of prescriptions 2,4 (1.0) 2.4 (1.3) Comparable 30-day equivalent prescriptions 2,3,4 1.3 5.0 2.9 Percent to sales 2022 2021 2020 Gross margin 21.7 21.2 20.7 Selling, general and administrative expenses 19.4 17.9 17.9 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. 2 Includes vaccinations, including COVID-19. 3 Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions.
FINANCIAL PERFORMANCE (in millions, except location amounts) 2023 2022 2021 Sales $ 110,314 $ 109,078 $ 112,005 Gross profit 22,115 23,669 23,736 Selling, general and administrative expenses 27,674 21,180 20,042 Equity earnings (loss) in Cencora 252 418 (1,139) Operating (loss) income (GAAP) (5,307) 2,907 2,554 Adjusted operating income 1 3,689 5,029 5,019 Number of prescriptions 2 800.8 819.6 827.5 30-day equivalent prescriptions 2,3 1,211.6 1,216.4 1,210.6 Number of locations at period end 8,720 8,901 8,973 Percentage increases (decreases) 2023 2022 2021 Sales 1.1 (2.6) 4.0 Gross profit (6.6) (0.3) 6.4 Selling, general and administrative expenses 30.7 5.7 3.7 Operating (loss) income NM 13.8 (22.9) Adjusted operating income 1 (26.6) 0.2 5.4 Comparable sales 4 4.9 5.1 5.1 Pharmacy sales 2.1 (5.3) 5.5 Comparable pharmacy sales 4 7.2 4.7 6.7 Retail sales (1.6) 5.6 (0.4) Comparable retail sales 4 (0.8) 6.1 1.2 Comparable number of prescriptions 2,4 (1.3) (1.0) 2.4 Comparable 30-day equivalent prescriptions 2,3,4 0.6 1.3 5.0 Percent to sales 2023 2022 2021 Gross margin 20.0 21.7 21.2 Selling, general and administrative expenses 25.1 19.4 17.9 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. 2 Includes vaccinations, including COVID-19. 3 Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions.
Amortization expense, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. These charges are primarily recorded within Selling, general and administrative expenses. Business combination accounting principles require us to measure acquired inventory at fair value.
Amortization expense, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. These charges are primarily recorded within Selling, general and administrative expenses.
Retail Pharmacy” and the “Walgreens Health” segment was renamed to “U.S. Healthcare”. The segment name changes did not result in any change to the composition of the segments and therefore no change to the historical results of segment operations. The information for these segments for all periods included in these consolidated financial statements has been presented using the new names.
Healthcare”. The segment name changes did not result in any change to the composition of the segments and therefore no change to the historical results of segment operations. The information for these segments for all periods included in these consolidated financial statements has been presented using the new names. See Note 17. Segment reporting and Note 18.
These charges are recorded within income tax provision (benefit). 16 Adjustments to post tax earnings from other equity method investments consist of the proportionate share of certain equity method investees’ non-cash items or unusual or infrequent items consistent with the Company’s non-GAAP adjustments. These charges are recorded within post tax earnings from other equity method investments.
WBA Fiscal 2023 Form 10-K 54 Table of Contents 16 Adjustments to post-tax earnings from other equity method investments consist of the proportionate share of certain equity method investees’ non-cash items or unusual or infrequent items consistent with the Company’s non-GAAP adjustments. These charges are recorded within post-tax earnings from other equity method investments.
FACTORS, TRENDS AND UNCERTAINTIES AFFECTING OUR RESULTS AND COMPARABILITY The Company has been, and we expect it to continue to be, affected by a number of factors that may cause actual results to differ from our historical results or current expectations.
Sales, to the Consolidated Financial Statements included in Part II, Item 8 for further information. FACTORS, TRENDS AND UNCERTAINTIES AFFECTING OUR RESULTS AND COMPARABILITY The Company has been, and we expect it to continue to be, affected by a number of factors that may cause actual results to differ from our historical results or current expectations.
The Company expects to fund its working capital needs, capital expenditures, pending acquisitions, continuing obligations for recently announced or completed acquisitions, dividend payments and debt service obligations from liquidity sources including cash flow from operations, availability under existing credit facilities, commercial paper programs, working capital financing arrangements, debt offerings, sale of marketable securities and current cash and investment balances.
The Company expects to fund its working capital needs, capital expenditures, expansion, acquisitions, dividend payments, stock repurchases and debt service obligations from liquidity sources including cash flow from operations, availability under existing credit facilities, commercial paper programs, working capital financing arrangements, debt offerings, sale of marketable securities, current cash, and monetization of investments and other assets.
The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions with respect to the business and financial performance of the Company’s reporting units.
WBA Fiscal 2023 Form 10-K 59 Table of Contents The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions with respect to the business and financial performance of the Company’s reporting units.
Exit and disposal activities, to the Consolidated Financial Statements included in Part II, Item 8 for further information.
Acquisitions and other investments to the Consolidated Financial Statements included in Part II, Item 8 herein for further information.
(Non-GAAP measure) $ 4,360 $ 4,598 $ 4,175 Diluted net earnings per common share - continuing operations (GAAP) $ 5.01 $ 2.30 $ 0.20 Adjustments to operating income 4.33 3.20 4.26 Adjustments to other income, net (3.36) (0.32) 0.07 Adjustments to interest expense, net 0.01 0.48 — Adjustments to income tax (benefit) provision (0.79) (0.08) (0.27) Adjustments to post tax earnings from other equity method investments 16 0.07 (0.58) 0.06 Adjustments to net loss attributable to non-controlling interests (0.23) (0.09) (0.03) Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) $ 5.04 $ 4.91 $ 4.28 Diluted net earnings per common share - discontinued operations (GAAP) — 0.63 0.31 Total adjustments to net earnings attributable to Walgreens Boots Alliance, Inc. – discontinued operations — (0.24) 0.14 Adjusted diluted net earnings per common share - discontinued operations (Non-GAAP measure) $ — $ 0.39 $ 0.46 Adjusted diluted net earnings per common share (Non-GAAP measure) $ 5.04 $ 5.31 $ 4.74 Weighted average common shares outstanding, diluted (in millions) 865.9 866.4 880.3 1 Adjustments to equity earnings (loss) in AmerisourceBergen consist of the Company’s proportionate share of non-GAAP adjustments reported by AmerisourceBergen consistent with the Company’s non-GAAP measures.
(Non-GAAP measure) $ 3,439 $ 4,360 $ 4,598 Diluted net (loss) earnings per common share - continuing operations (GAAP) 17 $ (3.57) $ 5.01 $ 2.30 Adjustments to operating (loss) income 12.45 4.33 3.20 Adjustments to other income, net (2.26) (3.36) (0.32) Adjustments to interest expense, net — 0.01 0.48 Adjustments to income tax (benefit) provision (2.48) (0.79) (0.08) Adjustments to post-tax earnings from other equity method investments 0.05 0.07 (0.58) Adjustments to net loss attributable to non-controlling interests (0.21) (0.23) (0.09) Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure) 18 $ 3.98 $ 5.04 $ 4.91 Diluted net earnings per common share - discontinued operations (GAAP) — — 0.63 Total adjustments to net earnings attributable to Walgreens Boots Alliance, Inc. – discontinued operations — — (0.24) Adjusted diluted net earnings per common share - discontinued operations (Non-GAAP measure) $ — $ — $ 0.39 Adjusted diluted net earnings per common share (Non-GAAP measure) $ 3.98 $ 5.04 $ 5.31 Weighted average common shares outstanding, diluted (in millions) 18 864.0 865.9 866.4 Operating loss to Adjusted EBITDA for the U.S.
Future declines in the overall market value of the Company’s equity securities may provide an indication that the fair value of one or more reporting units has declined below its carrying value.
Future declines in the overall market value of the Company’s equity securities may provide an indication that the fair value of one or more reporting units has declined below its carrying value. Indefinite-lived intangible assets are tested for impairment by comparing the estimated fair value of the asset to its carrying value.
The results presented in this report are not necessarily indicative of future operating results. COVID-19 Since the beginning of 2020, COVID-19 has severely impacted, and may continue to directly and indirectly impact, the economies of the U.S., the UK and other countries around the world.
COVID-19 Since 2020, COVID-19 has severely impacted, and may continue to directly and indirectly impact, the economies of the U.S., the UK and other countries around the world.
WBA Fiscal 2022 Form 10-K 59 Table of Contents
WBA Fiscal 2023 Form 10-K 62 Table of Contents
Operating income (loss) (GAAP) $ 2,554 $ 227 $ (57) $ (382) $ 2,342 Adjustments to equity earnings (loss) in AmerisourceBergen 1,645 — — — 1,645 Acquisition-related amortization 448 75 — — 523 Transformational cost management 279 91 — 46 417 Certain legal and regulatory accruals and settlements 75 — — — 75 Acquisition-related costs 6 24 — 24 54 Impairment of goodwill and intangible assets — 49 — — 49 LIFO provision 13 — — — 13 Adjusted operating income (loss) (Non-GAAP measure) $ 5,019 $ 466 $ (57) $ (311) $ 5,117 Fiscal 2020 U.S.
Operating income (loss) (GAAP) $ 2,554 $ 227 $ (57) $ (382) $ 2,342 Adjustments to equity loss in Cencora 1,645 — — — 1,645 Acquisition-related amortization 448 75 — — 523 Transformational cost management 279 91 — 46 417 Certain legal and regulatory accruals and settlements 75 — — — 75 Acquisition-related costs 6 24 — 24 54 Impairment of intangible assets — 49 — 49 LIFO provision 13 — — — 13 Adjusted operating income (loss) (Non-GAAP measure) $ 5,019 $ 466 $ (57) $ (311) $ 5,117 The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends.
These factors include: the impact of COVID-19 (“COVID-19”) on our operations and financial results; the financial performance of our equity method investees, including AmerisourceBergen; the influence of certain holidays; seasonality; foreign currency rates; changes in vendor, payer and customer relationships and terms and associated reimbursement pressure; strategic transactions and acquisitions, dispositions, joint ventures and other strategic collaborations; changes in laws, including U.S. tax law changes; changes in trade tariffs, including trade relations between the U.S. and China, and international relations, including the UK's withdrawal from the European Union and its impact on our operations and prospects, and those of our customers and counterparties; the timing and magnitude of cost reduction initiatives, including under our Transformational Cost Management Program (as defined below); the timing and severity of the cough, cold and flu season; fluctuations in variable costs; the impacts of looting, natural disasters, war, terrorism and other catastrophic events, and changes in general economic conditions in the markets in which the Company operates.
Healthcare segment; the influence of certain holidays; seasonality; foreign currency rates; changes in vendor, payor and customer relationships and terms and associated reimbursement pressure; strategic transactions and acquisitions, dispositions, joint ventures and other strategic collaborations; changes in laws, including the tax law changes in the United States (“U.S.”) and the United Kingdom (“UK”); changes in trade tariffs, including trade relations between the U.S. and China, and international relations, including the UK's withdrawal from the European Union and its impact on our operations and prospects, and those of our customers and counterparties; the timing and magnitude of cost reduction initiatives, including under our Transformational Cost Management Program (as defined herein); the timing and severity of the cough, cold and flu season; fluctuations in variable costs; adjustments to Centers for Medicare and Medicaid Services, Medicare Advantage and Medicare rates; the impacts of looting, natural disasters, war, terrorism and other catastrophic events, and changes to management, including turnover of our top executives and our ability to retract and retain qualified associates in the markets in which the Company operates.
Income taxes –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.
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.
The Company continues to monitor COVID-19 and its potential future impacts on the consumer, customer and healthcare utilization patterns, as well as the U.S. and global economies, including supply chains and the labor force.
As a result, these COVID-19 related items had a net unfavorable impact on our results for fiscal 2023 compared to fiscal 2022. The Company continues to monitor COVID-19 and its potential future impacts on the consumer, customer and healthcare utilization patterns, as well as the U.S. and global economies, including supply chains and the labor force.
In fiscal 2022, the Company recorded a $683 million charge related to a settlement agreement with the State of Florida to resolve all claims related to the distribution and dispensing of prescription opioid medications across the Company’s pharmacies in the State of Florida.
In fiscal 2022, the Company recorded charges related to a settlement agreement with the State of Florida to resolve all claims related to the distribution and dispensing of prescription opioid medications across the Company’s pharmacies in the State of Florida. 2 Transformational Cost Management Program charges are costs associated with a formal restructuring plan.
All percentages have been calculated using unrounded amounts for each of the periods presented. INTRODUCTION AND SEGMENTS Walgreens Boots Alliance, Inc. and its subsidiaries ( “ Walgreens Boots Alliance ” or the “ Company ” ) is a global leader in retail pharmacy and is positioning itself to become a leading provider of healthcare services.
All percentages have been calculated using unrounded amounts for each of the periods presented. INTRODUCTION AND SEGMENTS Walgreens Boots Alliance, Inc. and its subsidiaries ( “ Walgreens Boots Alliance ” or the “ Company ” ) is an integrated healthcare, pharmacy and retail leader with a 170-year heritage of caring for customers and patients.
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 herein.
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 herein. The Company also presents certain information related to current period operating results in “constant currency”, which is a non-GAAP financial measure.
Medical claims expense represents medical claims expenses related to fee-for-service and value-based arrangements and primarily includes costs for third-party healthcare service providers that provide medical care to patients. Cost of care represents the cost of our employed providers and certain affiliated providers, including base compensation, quality incentive bonuses and provider benefits.
Medical claims expense represents medical claims expenses related to fee-for-service and value-based arrangements and primarily includes costs for third-party healthcare service providers, including contracted providers, that provide medical care to patients.
The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Selling, general and administrative expenses. 7 The Company’s U.S. Retail Pharmacy segment inventory is accounted for using the last-in-first-out (“LIFO”) method.
The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Selling, general and administrative expenses within the Consolidated Statement of Earnings.
Debt, to the Consolidated Financial Statements included in Part II, Item 8 for further information on the Company’s debt instruments and its recent financing actions.
See Part II, Item 7A, Qualitative and quantitative disclosure about market risk, for a discussion of certain financing and market risks. See Note 8. Debt, to the Consolidated Financial Statements included in Part II, Item 8 for further information on the Company’s debt instruments and its recent financing actions.
Post-acquisition compensation expense recognized in excess of the original grant date fair value of acquiree awards are excluded from the related non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of normal operating activities. 3 Transformational Cost Management Program and Store Optimization Program charges are costs associated with a formal restructuring plan.
Post-acquisition compensation expense recognized in excess of the original grant date fair value of acquiree awards are excluded from the related non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of normal operating activities. 4 Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities recorded in operating income within the Consolidated Statement of Earnings.
The Company currently estimates that it will recognize aggregate pre-tax charges to its GAAP financial results related to the Transformational Cost Management Program as follows: Transformational Cost Program Activities Range of Charges Lease obligations and other real estate costs 1 1,250 to 1,350 million Asset impairments 2 750 to 800 million Employee severance and business transition costs 1,025 to 1,075 million Information technology transformation and other exit costs 300 to 350 million Total cumulative pre-tax exit and disposal charges 3.3 to 3.6 billion Other IT transformation costs 275 to 325 million Total estimated pre-tax charges 3.6 to 3.9 billion WBA Fiscal 2022 Form 10-K 38 Table of Contents 1 Includes impairments relating to operating lease right-of-use and finance lease assets. 2 Primarily related to store closures and other asset impairments.
The Company currently estimates that it will recognize aggregate pre-tax charges to its GAAP financial results related to the Transformational Cost Management Program as follows: Transformational Cost Program Activities Range of Charges Lease obligations and other real estate costs 1 $1.5 to $1.6 billion Asset impairments 2 $1.0 to $1.1 billion Employee severance and business transition costs $1.0 to $1.1 billion Information technology transformation and other exit costs $0.3 to $0.4 billion Total cumulative pre-tax exit and disposal charges $3.8 to $4.1 billion Other IT transformation costs $0.2 to $0.3 billion Total estimated pre-tax charges $4.1 to $4.4 billion 1.
See “--Non-GAAP Measures.” FINANCIAL PERFORMANCE (in millions, except location amounts) 2022 2021 2020 Sales $ 21,830 $ 20,505 $ 14,281 Gross profit 4,618 4,328 3,774 Selling, general and administrative expenses 4,964 4,101 5,863 Operating (loss) income (346) 227 (2,090) Adjusted operating income (Non-GAAP measure) 1 726 466 157 Number of locations at period end 3,989 4,031 4,192 Percentage increases (decreases) 2022 2021 2020 Sales 6.5 43.6 (8.1) Gross profit 6.7 14.7 (16.9) Selling, general and administrative expenses 21.0 (30.1) 43.3 Operating (loss) income NM 110.9 NM Adjusted operating income (Non-GAAP measure) 1 55.7 197.2 (79.4) Comparable sales in constant currency 2 11.3 3.9 (8.8) Pharmacy sales (2.1) 8.7 (4.1) Comparable pharmacy sales in constant currency 2 2.5 6.7 — Retail sales 11.2 5.5 (17.8) Comparable retail sales in constant currency 2 16.9 2.0 (13.9) WBA Fiscal 2022 Form 10-K 45 Table of Contents Percent to sales 2022 2021 2020 Gross margin 21.2 21.1 26.4 Selling, general and administrative expenses 22.7 20.0 41.1 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. 2 Comparable sales in constant currency are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales.
See “--Non-GAAP Measures.” FINANCIAL PERFORMANCE (in millions, except location amounts) 2023 2022 2021 Sales $ 22,198 $ 21,830 $ 20,505 Gross profit 4,704 4,618 4,328 Selling, general and administrative expenses 4,326 4,964 4,101 Operating income (loss) 379 (346) 227 Adjusted operating income 1 935 726 466 Number of locations at period end 3,960 3,989 4,031 Percentage increases (decreases) 2023 2022 2021 Sales 1.7 6.5 43.6 Gross profit 1.9 6.7 14.7 Selling, general and administrative expenses (12.9) 21.0 (30.1) Operating income (loss) (GAAP) NM NM 110.9 Adjusted operating income 1 28.8 55.7 197.2 Comparable sales in constant currency 2 9.5 11.3 3.9 Pharmacy sales (1.7) (2.1) 8.7 Comparable pharmacy sales in constant currency 2 4.7 2.5 6.7 Retail sales 5.8 11.2 5.5 Comparable retail sales in constant currency 2 12.1 16.9 2.0 Percent to sales 2023 2022 2021 Gross margin 21.2 21.2 21.1 Selling, general and administrative expenses 19.5 22.7 20.0 1 See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures. RESULTS OF OPERATIONS BY SEGMENT The following information summarizes our results of operations by segment for fiscal 2022 compared to fiscal 2021. U.S. Retail Pharmacy The Company's U.S.
Retail Pharmacy segment, partly offset by lower incentive accruals, improved retail contributions in the U.S., and International growth. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+1 added−3 removed5 unchanged
Biggest changeGenerally, under these swaps, the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount. In March 2021, the UK Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, announced that it will cease publication of LIBOR by June 2023.
Biggest changeGenerally, under these swaps, the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount. Information regarding the Company’s transactions and financial instruments are set forth in Note 9. Financial instruments, to the Consolidated Financial Statements included in Part II, Item 8.
A hypothetical 1% change in foreign currency exchange rates versus the U.S. dollar would change the fair value of the foreign currency derivatives held as of August 31, 2022, by approximately $45 million. The foreign currency derivatives are intended to partially hedge anticipated transactions, foreign currency trade payables and receivables and net investments in foreign subsidiaries.
A hypothetical 1% change in foreign currency exchange rates versus the U.S. dollar would change the fair value of the foreign currency derivatives held as of August 31, 2023, by approximately $42 million. The foreign currency derivatives are intended to partially hedge anticipated transactions, foreign currency trade payables and receivables and net investments in foreign subsidiaries.
WBA Fiscal 2022 Form 10-K 60 Table of Contents
WBA Fiscal 2023 Form 10-K 63 Table of Contents
Equity price risk Changes in AmerisourceBergen common stock price may have a significant impact on the fair value of the equity investment in AmerisourceBergen described in Note 6. Equity method investments, to the Consolidated Financial Statements included in Part II, Item 8. See Part I. Item 1. Business “Relationship with AmerisourceBergen” for further information.
Equity price risk Changes in Cencora common stock price may have a significant impact on the fair value of the equity investment in Cencora and the related variable prepaid forward derivative contracts described in Note 6. Equity method investments and Note 9. Financial instruments, to the Consolidated Financial Statements included in Part II, Item 8.
Removed
Certain of our credit facilities provide that, under certain circumstances set forth in such credit facilities, we and the administrative agent may amend the applicable credit facility to replace LIBOR with an alternate benchmark rate, giving due consideration to any evolving or then existing convention for similar syndicated credit facilities in the U.S. market for alternative benchmarks.
Added
These financial instruments are sensitive to changes in interest rates. As of August 31, 2023, the Company had $1.3 billion of debt obligations at floating interest rates. A 100 basis point increase in prevailing short-term interest rates would increase annual interest expense on floating rate debt, by approximately $13 million.
Removed
Such an alternative benchmark rate could include the Secured Overnight Financing Rate (“SOFR”), published by the Federal Reserve Bank of New York. Information regarding the Company’s transactions are set forth in Note 9. Financial instruments, to the Consolidated Financial Statements included in Part II, Item 8. These financial instruments are sensitive to changes in interest rates.
Removed
As of August 31, 2022, the Company had $4.0 billion of debt obligations at floating interest rates.

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