Walgreens Boots Alliance, Inc.
Walgreens Boots Alliance, Inc. (Form: 8-K, Received: 10/25/2017 07:07:30)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2017

 

 

WALGREENS BOOTS ALLIANCE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36759   47-1758322

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

108 Wilmot Road, Deerfield, Illinois   60015
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (847) 315-2500

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 . Results of Operations and Financial Condition .

On October 25, 2017, Walgreens Boots Alliance, Inc. (the “Company”) issued a press release announcing financial results for the fiscal quarter and fiscal year ended August 31, 2017 and related matters. A copy of this press release is furnished as Exhibit 99.1 hereto and is incorporated in this Item 2.02 by reference.

The information in this Item 2.02, including the exhibit attached hereto, and the information under Item 7.01 below, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference to such disclosure in this Form 8-K in such a filing.

 

Item 7.01 . Regulation FD Disclosure .

On October 25, 2017, the Company is conducting a conference call and webcast beginning at 8:30 a.m. Eastern time regarding its results for the fiscal quarter and fiscal year ended August 31, 2017 and related matters.

Slides prepared for the purposes of the conference call are available on the Company’s investor relations website at http://investor.walgreensbootsalliance.com. A link to the conference call will be available on the Company’s investor relations website at: http://investor.walgreensbootsalliance.com.

 

Item 9.01 . Financial Statements and Exhibits .

 

(d) Exhibits

 

Exhibit

  

Description

99.1    Press Release of Walgreens Boots Alliance, Inc. dated October 25, 2017


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    WALGREENS BOOTS ALLIANCE, INC.

Date: October 25, 2017

    By:  

/s/ George R. Fairweather

    Title:   Executive Vice President and Global Chief Financial Officer

Exhibit 99.1

 

LOGO

Walgreens Boots Alliance Reports Fourth Quarter and Fiscal 2017 Results

Fourth quarter highlights

 

    GAAP diluted net earnings per share were $0.76, down 20.0 percent from the year-ago quarter due to Rite Aid related costs, mainly merger termination fees; Adjusted diluted net earnings per share were $1.31, an increase of 22.4 percent on both an actual and constant currency basis

 

    GAAP net earnings attributable to Walgreens Boots Alliance decrease 22.1 percent, to $802 million; Adjusted net earnings attributable to Walgreens Boots Alliance increase 18.8 percent to $1.4 billion, up 19.1 percent on a constant currency basis

 

    Sales increase 5.3 percent to $30.1 billion, an increase of 6.4 percent on a constant currency basis

 

    GAAP operating income decreases 2.3 percent to $1.1 billion; Adjusted operating income increases 21.2 percent to $1.9 billion, up 22.3 percent on a constant currency basis

Fiscal 2017 highlights

 

    GAAP diluted net earnings per share decrease 1.0 percent from the prior year, to $3.78; Adjusted diluted net earnings per share increase 11.1 percent to $5.10, up 12.9 percent on a constant currency basis

 

    GAAP net earnings attributable to Walgreens Boots Alliance decrease 2.3 percent, to $4.1 billion; Adjusted net earnings attributable to Walgreens Boots Alliance increase 9.9 percent to $5.5 billion, up 11.6 percent on a constant currency basis

 

    Sales increase 0.7 percent to $118.2 billion, an increase of 3.3 percent on a constant currency basis

 

    GAAP operating income decreases 7.4 percent to $5.6 billion; Adjusted operating income increases 4.6 percent to $7.5 billion, up 6.5 percent on a constant currency basis

 

    GAAP net cash provided by operating activities was $7.3 billion; Free cash flow was $5.9 billion

Share repurchase program

 

    Company completes $5.0 billion share repurchase and adds $1.0 billion to program

Fiscal 2018 guidance

 

    Company introduces guidance of $5.40 to $5.70 for fiscal year 2018 adjusted diluted net earnings per share

DEERFIELD, Ill., 25 October 2017 - Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the fourth quarter and fiscal year 2017, which ended 31 August 2017.

Executive Vice Chairman and CEO Stefano Pessina said, “We are pleased to report the company has performed well, with our businesses delivering significant progress while managing against ongoing prescription reimbursement pressure and competing in fast-changing retail environments. We look forward to building on this solid underlying growth in the year to come, enhanced by the expansion of our U.S. retail pharmacy network through the upcoming purchases of Rite Aid stores.”

Overview of Fourth Quarter Results

Fiscal 2017 fourth quarter net earnings attributable to Walgreens Boots Alliance determined in accordance with GAAP decreased 22.1 percent to $802 million compared with the same quarter a year ago, while GAAP diluted net earnings per share decreased 20.0 percent to $0.76 compared with the same quarter a year ago. The decreases in GAAP net earnings and GAAP net earnings per share reflect Rite Aid related costs, mainly merger termination fees.

 

1


Adjusted fiscal 2017 fourth quarter net earnings attributable to Walgreens Boots Alliance 1 increased 18.8 percent to $1.4 billion, up 19.1 percent on a constant currency basis, compared with the same quarter a year ago. Adjusted diluted net earnings per share for the quarter were $1.31, up 22.4 percent on an actual and constant currency basis, compared with the same quarter a year ago.

Sales in the fourth quarter were $30.1 billion, an increase of 5.3 percent from the year-ago quarter, and an increase of 6.4 percent on a constant currency basis.

GAAP operating income in the fourth quarter was $1.1 billion, a decrease of 2.3 percent from the same quarter a year ago. Adjusted operating income in the fourth quarter was $1.9 billion, an increase of 21.2 percent from the same quarter a year ago, and an increase of 22.3 percent on a constant currency basis.

GAAP net cash provided by operating activities was $2.0 billion in the fourth quarter, and free cash flow was $1.6 billion.

Overview of Fiscal Year Results

Fiscal 2017 net earnings attributable to Walgreens Boots Alliance determined in accordance with GAAP decreased 2.3 percent to $4.1 billion, while GAAP diluted net earnings per share decreased 1.0 percent to $3.78, compared with the prior year. The decreases primarily reflect Rite Aid related costs.

Adjusted net earnings attributable to Walgreens Boots Alliance 1 in fiscal 2017 increased 9.9 percent to $5.5 billion, up 11.6 percent on a constant currency basis, compared with the prior year. Adjusted diluted net earnings per share in the fiscal year increased 11.1 percent to $5.10, up 12.9 percent on a constant currency basis, compared with the prior year.

Sales increased 0.7 percent to $118.2 billion in fiscal 2017 compared with the prior year. On a constant currency basis, sales increased 3.3 percent.

GAAP operating income in fiscal 2017 was $5.6 billion, a decrease of 7.4 percent from the prior year. Adjusted operating income in the fiscal year was $7.5 billion, an increase of 4.6 percent, and an increase of 6.5 percent on a constant currency basis.

GAAP net cash provided by operating activities was $7.3 billion in fiscal 2017, and free cash flow was $5.9 billion.

Rite Aid Transaction

On 19 September 2017 the company announced it had secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration. The first few Rite Aid stores have been acquired in the past week. Ownership of the remaining stores is expected to be transferred in phases, with the goal being to complete the store transfers in spring 2018. These transfers remain subject to closing conditions set forth in the agreement.

The company expects to complete integration of the acquired stores and related assets within the next three years, at an estimated cost of approximately $750 million, which will be reported as acquisition-related costs. In addition, the company plans to spend approximately $500 million of capital on store conversions and related activities.

In addition to the strategic benefits of the transaction - including extending the Walgreens brand into additional communities, greater access to more customers, U.S. store network expansion and broader coverage of both retail and pharmacy markets - as previously announced the company expects to realize $300 million in annual synergies. These are expected to be fully realized within four years of the initial closing of this transaction and derived primarily from procurement, cost savings and other operational matters.

 

2


Store Optimization Program

Following regulatory clearance for the Rite Aid transaction, the company has been able to carry out a complete review of its expected combined U.S. store portfolio to determine the scope of a program to optimize locations. This is expected to take place over an 18 month period beginning in spring 2018, resulting in estimated pre-tax charges to the company’s GAAP financial results of approximately $450 million. Cost savings from the program are anticipated to be approximately $300 million per year, and are expected to be fully delivered by the end of fiscal 2020.

Share Repurchase Program

In October 2017 the company completed its $5.0 billion share repurchase program announced in June 2017. On 24 October the company expanded the program by an additional $1.0 billion.

Company Outlook

The company today introduced guidance of $5.40 to $5.70 for fiscal year 2018 adjusted diluted net earnings per share. This guidance assumes current exchange rates for the rest of the fiscal year, and continuation of the company’s normal anti-dilutive share buyback program.

Fourth Quarter Business Division Highlights

Retail Pharmacy USA:

Retail Pharmacy USA had fourth quarter sales of $22.3 billion, an increase of 7.5 percent over the year-ago quarter. Sales in comparable stores increased 3.1 percent compared with the same quarter a year ago.

Pharmacy sales, which accounted for 72.1 percent of the division’s sales in the quarter, increased 12.6 percent compared with the year-ago quarter, primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 5.6 percent, primarily due to higher volume. Reimbursement pressure and generics had a negative impact on comparable pharmacy sales growth, which was partially offset by brand inflation. The division filled 250.2 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 9.0 percent over the year-ago quarter. Prescriptions filled in comparable stores increased 8.7 percent compared with the same quarter a year ago, primarily due to Medicare Part D growth and volume growth from previously announced strategic pharmacy partnerships. The division’s retail prescription market share on a 30-day adjusted basis in the fourth quarter increased approximately 120 basis points over the year-ago quarter to 20.5 percent, as reported by IMS Health. This was the division’s highest reported quarterly retail prescription market share in the U.S., for a second consecutive quarter.

Retail sales decreased 3.9 percent in the fourth quarter compared with the year-ago period, which includes the impact of the previously announced closure of certain e-commerce operations. Comparable retail sales were down 2.1 percent in the quarter, partly due to changes in promotional plans. Declines in the consumables and general merchandise category and in the personal care category were partially offset by growth in the beauty category and in the health and wellness category.

GAAP gross profit increased 4.6 percent compared with the same quarter a year ago and adjusted gross profit increased 4.3 percent.

GAAP fourth quarter selling, general and administrative expenses (SG&A) as a percentage of sales decreased 0.6 percentage points compared with the year-ago quarter, primarily due to sales mix and higher sales, partially offset by costs related to the Rite Aid transaction. On an adjusted basis, SG&A as a percentage of sales decreased 1.8 percentage points in the same period, due to sales mix and higher sales.

GAAP operating income in the fourth quarter increased 2.7 percent from the year-ago quarter to $800 million. Adjusted operating income in the fourth quarter increased 27.5 percent from the year-ago quarter to $1.4 billion.

 

3


Retail Pharmacy International:

Retail Pharmacy International had fourth quarter sales of $2.9 billion, a decrease of 3.2 percent from the year-ago quarter mainly due to currency translation. Sales decreased 0.4 percent on a constant currency basis.

On a constant currency basis, comparable store sales decreased 0.2 percent compared with the year-ago quarter. Comparable pharmacy sales increased 0.5 percent on a constant currency basis, primarily due to growth in the UK. Comparable retail sales decreased 0.5 percent on a constant currency basis, reflecting challenging conditions across a number of markets.

GAAP gross profit decreased 3.7 percent compared with the same quarter a year ago, mainly due to currency translation. On a constant currency basis, adjusted gross profit decreased 0.8 percent.

GAAP SG&A as a percentage of sales decreased by 1.0 percentage point. Adjusted SG&A as a percentage of sales, on a constant currency basis, decreased by 0.9 percentage point.

GAAP operating income in the fourth quarter increased 6.8 percent from the year-ago quarter to $219 million, while adjusted operating income increased 5.7 percent to $261 million, up 8.9 percent on a constant currency basis.

Pharmaceutical Wholesale:

Pharmaceutical Wholesale had fourth quarter sales of $5.4 billion, an increase of 0.8 percent from the year-ago quarter. Growth was adversely affected by currency translation. On a constant currency basis, comparable sales increased 5.4 percent, which was ahead of the company’s estimate of market growth, weighted on the basis of country wholesale sales, with growth in emerging markets and the UK partially offset by challenging market conditions in continental Europe.

GAAP operating income in the fourth quarter was $96 million, which included a loss of $8 million from the company’s equity earnings in AmerisourceBergen, compared with a gain of $34 million in the year-ago quarter. Adjusted operating income increased 6.3 percent to $221 million, up 11.5 percent on a constant currency basis. Excluding adjusted equity earnings from AmerisourceBergen, adjusted operating income was down 5.7 percent on a constant currency basis.

Conference Call

Walgreens Boots Alliance will hold a one-hour conference call to discuss the fourth quarter results beginning at 8:30 a.m. Eastern time today, 25 October 2017. The conference call will be simulcast through the Walgreens Boots Alliance investor relations website at: http://investor.walgreensbootsalliance.com . A replay of the conference call will be archived on the website for 12 months after the call.

The replay also will be available from 11:30 a.m. Eastern time, 25 October 2017 through 2 November 2017 by calling +1 855 859 2056 within the U.S. and Canada, or +1 404 537 3406 outside the U.S. and Canada, using replay code 81743092.

 

1   Please see the “Supplemental Information (Unaudited) Regarding Non-GAAP Financial Measures” at the end of this press release for more detailed information regarding non-GAAP financial measures.

Cautionary Note Regarding Forward-Looking Statements: All statements in this release that are not historical including, without limitation, those regarding estimates of and goals for future financial and operating performance (including those under “Company Outlook” above), the expected execution and effect of our business strategies, our cost-savings and growth initiatives and restructuring activities and the amounts and timing of their expected impact, and our amended and restated asset purchase agreement with Rite Aid and the transactions contemplated thereby and their possible timing and effects, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,”

 

4


“guidance,” “target,” “aim,” “continue,” “sustain,” “synergy,” “on track,” “on schedule,” “headwind,” “tailwind,” “believe,” “seek,” “estimate,” “anticipate,” “upcoming,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated, including, but not limited to, those relating to the impact of private and public third-party payers’ efforts to reduce prescription drug reimbursements, fluctuations in foreign currency exchange rates, the timing and magnitude of the impact of branded to generic drug conversions and changes in generic drug prices, our ability to realize synergies and achieve financial, tax and operating results in the amounts and at the times anticipated, supply arrangements including our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, the risks associated with the company’s equity method investment in AmerisourceBergen, the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of our contractual obligations, the amount of costs, fees, expenses and charges incurred in connection with strategic transactions, whether the costs associated with restructuring activities will exceed estimates, our ability to realize expected savings and benefits from cost-savings initiatives, restructuring activities and acquisitions and joint ventures in the amounts and at the times anticipated, the timing and amount of any impairment or other charges, the timing and severity of cough, cold and flu season, changes in management’s assumptions, the risks associated with governance and control matters, the ability to retain key personnel, changes in economic and business conditions generally or in particular markets in which we participate, changes in financial markets and interest rates, the risks associated with international business operations, including the risks associated with the proposed withdrawal of the United Kingdom from the European Union, the risk of unexpected costs, liabilities or delays, changes in vendor, customer and payer relationships and terms, including changes in network participation and reimbursement terms, risks of inflation in the cost of goods, risks associated with the operation and growth of our customer loyalty programs, risks related to competition, risks associated with new business areas and activities, risks associated with acquisitions, divestitures, joint ventures and strategic investments, including those relating to the ability of the parties to satisfy the closing conditions and consummate the pending acquisition of certain Rite Aid assets and related matters on a timely basis or at all, the risks associated with the integration of complex businesses, outcomes of legal and regulatory matters, and risks associated with changes in laws, regulations or interpretations thereof. These and other risks, assumptions and uncertainties are described in Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended 31 August 2016 and Quarterly Report on Form 10-Q for the fiscal quarter ended 31 May 2017, each of which is incorporated herein by reference, and in other documents that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

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

ENDS

Notes to Editors:

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is the first global pharmacy-led, health and wellbeing enterprise. The company’s heritage of trusted health care services through community pharmacy care and pharmaceutical wholesaling dates back more than 100 years.

 

5


Walgreens Boots Alliance is the largest retail pharmacy, health and daily living destination across the U.S. and Europe. Walgreens Boots Alliance and the companies in which it has equity method investments together have a presence in more than 25* countries and employ more than 385,000* people. The company is a global leader in pharmacy-led, health and wellbeing retail and, together with the companies in which it has equity method investments, has more than 13,200* stores in 11* countries as well as one of the largest global pharmaceutical wholesale and distribution networks, with more than 390* distribution centers delivering to more than 230,000** pharmacies, doctors, health centers and hospitals each year in more than 20* countries. In addition, Walgreens Boots Alliance is one of the world’s largest purchasers of prescription drugs and many other health and wellbeing products.

The company’s portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Soap & Glory, Liz Earle, Sleek MakeUP and Botanics.

The company ranks No. 1 in the Food and Drug Stores industry of Fortune magazine’s 2017 list of the World’s Most Admired Companies.

More company information is available at www.walgreensbootsalliance.com .

 

* As of 31 August 2017, using publicly available information for AmerisourceBergen.
** For 12 months ending 31 August 2017, using publicly available information for AmerisourceBergen

(WBA-ER)

 

Media Relations    Contact

U.S. / Michael Polzin

International / Laura Vergani

  

+1 847 315 2935

+44 (0)207 980 8585

Investor Relations    Contact
Gerald Gradwell and Ashish Kohli    +1 847 315 2922

 

6


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(in millions, except per share amounts)

 

     Three months ended      Twelve months ended  
     August 31,
2017
    August 31,
2016
     August 31,
2017
    August 31,
2016
 

Sales

   $ 30,149     $ 28,636      $ 118,214     $ 117,351  

Cost of sales

     22,809       21,481        89,052       87,477  
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     7,340       7,155        29,162       29,874  

Selling, general and administrative expenses

     6,218       6,049        23,740       23,910  

Equity earnings in AmerisourceBergen

     (8     34        135       37  
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

     1,114       1,140        5,557       6,001  

Other income (expense)

     11       264        (11     (261
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings before interest and income tax provision

     1,125       1,404        5,546       5,740  

Interest expense, net

     193       171        693       596  
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings before income tax provision

     932       1,233        4,853       5,144  

Income tax provision

     126       207        760       997  

Post tax earnings from other equity method investments

     1       9        8       44  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings

     807       1,035        4,101       4,191  

Net earnings attributable to noncontrolling interests

     5       5        23       18  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings attributable to Walgreens Boots Alliance, Inc.

   $ 802     $ 1,030      $ 4,078     $ 4,173  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings per common share:

         

Basic

   $ 0.76     $ 0.95      $ 3.80     $ 3.85  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ 0.76     $ 0.95      $ 3.78     $ 3.82  
  

 

 

   

 

 

    

 

 

   

 

 

 

Dividends declared per share

   $ 0.400     $ 0.375      $ 1.525     $ 1.455  

Weighted average common shares outstanding:

         

Basic

     1,055.1       1,082.5        1,073.5       1,083.1  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

     1,059.5       1,089.0        1,078.5       1,091.1  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

7


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions)

 

     August 31, 2017      August 31, 2016  

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 3,301      $ 9,807  

Accounts receivable, net

     6,528        6,260  

Inventories

     8,899        8,956  

Other current assets

     1,025        860  
  

 

 

    

 

 

 

Total current assets

     19,753        25,883  
  

 

 

    

 

 

 

Non-current assets:

     

Property, plant and equipment, net

     13,642        14,335  

Goodwill

     15,632        15,527  

Intangible assets, net

     10,156        10,302  

Equity method investments

     6,320        6,174  

Other non-current assets

     506        467  
  

 

 

    

 

 

 

Total non-current assets

     46,256        46,805  
  

 

 

    

 

 

 

Total assets

   $ 66,009      $ 72,688  
  

 

 

    

 

 

 

Liabilities and equity

     

Current liabilities:

     

Short-term borrowings

   $ 251      $ 323  

Trade accounts payable

     12,494        11,000  

Accrued expenses and other liabilities

     5,473        5,484  

Income taxes

     329        206  
  

 

 

    

 

 

 

Total current liabilities

     18,547        17,013  
  

 

 

    

 

 

 

Non-current liabilities:

     

Long-term debt

     12,684        18,705  

Deferred income taxes

     2,281        2,644  

Other non-current liabilities

     4,223        4,045  
  

 

 

    

 

 

 

Total non-current liabilities

     19,188        25,394  
  

 

 

    

 

 

 

Total equity

     28,274        30,281  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 66,009      $ 72,688  
  

 

 

    

 

 

 

 

8


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)

 

     Twelve months ended  
     August 31, 2017     August 31, 2016  

Cash flows from operating activities :

    

Net earnings

   $ 4,101     $ 4,191  

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

    

Depreciation and amortization

     1,654       1,718  

Change in fair value of warrants and related amortization

     —         516  

Deferred income taxes

     (434     (442

Stock compensation expense

     91       115  

Equity earnings from equity method investments

     (143     (81

Other

     364       148  

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (153     115  

Inventories

     98       (644

Other current assets

     —         66  

Trade accounts payable

     1,690       1,572  

Accrued expenses and other liabilities

     (128     313  

Income taxes

     44       202  

Other non-current assets and liabilities

     67       58  
  

 

 

   

 

 

 

Net cash provided by operating activities

     7,251       7,847  
  

 

 

   

 

 

 

Cash flows from investing activities :

    

Additions to property, plant and equipment

     (1,351     (1,325

Proceeds from sale leaseback transactions

     444       60  

Proceeds from sale of businesses

     —         74  

Proceeds from sale of other assets

     59       155  

Business and intangible asset acquisitions, net of cash acquired

     (88     (126

Investment in AmerisourceBergen

     —         (2,360

Other

     93       5  
  

 

 

   

 

 

 

Net cash used for investing activities

     (843     (3,517
  

 

 

   

 

 

 

Cash flows from financing activities :

    

Proceeds and payments from short-term borrowings, net

     33       29  

Proceeds from issuance of long-term debt

     —         5,991  

Payments of long-term debt

     (6,196     (791

Stock purchases

     (5,220     (1,152

Proceeds related to employee stock plans

     217       235  

Cash dividends paid

     (1,723     (1,563

Other

     (45     (143
  

 

 

   

 

 

 

Net cash (used for) provided by financing activities

     (12,934     2,606  

Effect of exchange rate changes on cash and cash equivalents

     20       (129

Changes in cash and cash equivalents :

    

Net (decrease) increase in cash and cash equivalents

     (6,506     6,807  

Cash and cash equivalents at beginning of period

     9,807       3,000  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 3,301     $ 9,807  
  

 

 

   

 

 

 

 

9


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

REGARDING NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)

The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under SEC rules, presented in this press release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). The Company has provided the non-GAAP financial measures in the press release, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures are presented because management has evaluated the Company’s financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company’s business from period to period and trends in the Company’s historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis (including the information under “Company Outlook” above) where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Constant currency

The Company also presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the United States reporting in currencies other than the U.S. dollar and this presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations.

Comparable sales

For our Retail Pharmacy divisions, comparable stores are defined as those that have been open for at least 12 consecutive months and that have not been closed for seven or more consecutive days, undergone a major remodel or been subject to a natural disaster during the past 12 months. Relocated and acquired stores are not included as comparable stores for the first 12 months after the relocation or acquisition. Comparable store sales, comparable pharmacy sales and comparable retail sales refer to total sales, pharmacy sales and retail sales, respectively, in such stores. For our Pharmaceutical Wholesale division, comparable sales are defined as sales excluding acquisitions and dispositions. The method of calculating comparable sales varies across the industries in which we operate. As a result, our method of calculating comparable sales may not be the same as other companies’ methods.

Comparable sales are presented on a constant currency basis for the Retail Pharmacy and Pharmaceutical Wholesale divisions. In the fourth quarter of fiscal 2017 compared to the year-ago quarter, the Retail Pharmacy International division’s comparable store sales on a reported currency basis decreased 3.0 percent, comparable pharmacy sales on a reported currency basis decreased 2.1 percent and comparable retail sales on a reported currency basis decreased 3.5 percent. The Pharmaceutical Wholesale division’s comparable sales excluding acquisitions and dispositions on a reported currency basis increased 0.8 percent.

 

10


NET EARNINGS AND DILUTED NET EARNINGS PER SHARE

 

     Three months ended     Twelve months ended  
     August 31, 2017     August 31, 2016     August 31, 2017     August 31, 2016  

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

   $ 802     $ 1,030     $ 4,078     $ 4,173  

Adjustments to operating income:

        

Cost transformation

     243       233       835       424  

Acquisition-related costs

     399       20       474       102  

Acquisition-related amortization

     85       91       332       369  

Adjustments to equity earnings in AmerisourceBergen

     92       16       187       21  

LIFO provision

     (38     8       166       214  

Legal settlement

     —         47       —         47  

Asset impairment (recovery)

     (11     —         (11     30  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to operating income

     770       415       1,983       1,207  

Adjustments to other income (expense):

        

Net investment hedging loss

     33       49       48       12  

Change in fair market value of AmerisourceBergen warrants

     —         (328     —         517  

Impact of change in accounting method for AmerisourceBergen equity investment

     —         —         —         (268
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to other income (expense)

     33       (279     48       261  

Adjustments to interest expense, net:

        

Prefunded acquisition financing costs

     80       42       203       46  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to interest expense, net

     80       42       203       46  

Adjustments to income tax provision:

        

United Kingdom tax rate change 1

     —         —         (77     (178

Equity method non-cash tax 1

     (11     10       23       10  

Tax impact of adjustments 2

     (289     (52     (755     (510
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to income tax provision

     (300     (42     (809     (678
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1,385     $ 1,166     $ 5,503     $ 5,009  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per common share (GAAP)

   $ 0.76     $ 0.95     $ 3.78     $ 3.82  

Adjustments to operating income

     0.73       0.38       1.84       1.11  

Adjustments to other income (expense)

     0.03       (0.26     0.04       0.24  

Adjustments to interest expense, net

     0.08       0.04       0.19       0.04  

Adjustments to income tax provision

     (0.29     (0.04     (0.75     (0.62
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted net earnings per common share (Non-GAAP measure)

   $ 1.31     $ 1.07     $ 5.10     $ 4.59  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding, diluted

     1,059.5       1,089.0       1,078.5       1,091.1  

 

1 Discrete tax-only items.
2 Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments.

 

11


OPERATING INCOME BY DIVISION

 

     Three months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale 1
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Operating income (GAAP)

   $ 800     $ 219     $ 96     $ (1   $ 1,114  

Cost transformation

     214       16       13       —         243  

Acquisition-related costs

     399       —         —         —         399  

Acquisition-related amortization

     39       26       20       —         85  

Adjustments to equity earnings in AmerisourceBergen

     —         —         92       —         92  

LIFO provision

     (38     —         —         —         (38

Asset impairment (recovery)

     (11     —         —         —         (11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income (Non-GAAP measure)

   $ 1,403     $ 261     $ 221     $ (1   $ 1,884  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 22,301     $ 2,941     $ 5,445     $ (538   $ 30,149  

Operating margin (GAAP) 2

     3.6     7.4     1.9       3.7

Adjusted operating margin (Non-GAAP measure) 2

     6.3     8.9     2.5       6.0

 

     Three months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale 1
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Operating income (GAAP)

   $ 779     $ 205     $ 156     $ —       $ 1,140  

Cost transformation

     204       15       14       —         233  

Acquisition-related costs

     20       —         —         —         20  

Acquisition-related amortization

     42       27       22       —         91  

Adjustments to equity earnings in AmerisourceBergen

     —         —         16       —         16  

LIFO provision

     8       —         —         —         8  

Legal settlement

     47       —         —         —         47  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income (Non-GAAP measure)

   $ 1,100     $ 247     $ 208     $ —       $ 1,555  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 20,747     $ 3,037     $ 5,400     $ (548   $ 28,636  

Operating margin (GAAP) 2

     3.8     6.8     2.3       3.9

Adjusted operating margin (Non-GAAP measure) 2

     5.3     8.1     2.9       5.3

 

     Twelve months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale 1
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Operating income (GAAP)

   $ 4,195     $ 741     $ 621     $ —       $ 5,557  

Cost transformation

     731       67       37       —         835  

Acquisition-related costs

     474       —         —         —         474  

Acquisition-related amortization

     152       101       79       —         332  

Adjustments to equity earnings in AmerisourceBergen

     —         —         187       —         187  

LIFO provision

     166       —         —         —         166  

Asset impairment (recovery)

     (11     —         —         —         (11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income (Non-GAAP measure)

   $ 5,707     $ 909     $ 924     $ —       $ 7,540  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 87,302     $ 11,813     $ 21,188     $ (2,089   $ 118,214  

Operating margin (GAAP) 2

     4.8     6.3     2.3       4.6

Adjusted operating margin (Non-GAAP measure) 2

     6.5     7.7     2.8       6.1

 

12


     Twelve months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale 1
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Operating income (GAAP)

   $ 4,405     $ 1,029     $ 579     $ (12   $ 6,001  

Cost transformation

     374       29       21       —         424  

Acquisition-related costs

     102       —         —         —         102  

Acquisition-related amortization

     185       97       87       —         369  

Adjustments to equity earnings in AmerisourceBergen

     —         —         21       —         21  

LIFO provision

     214       —         —         —         214  

Legal settlement

     47       —         —         —         47  

Asset impairment

     30       —         —         —         30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income (Non-GAAP measure)

   $ 5,357     $ 1,155     $ 708     $ (12   $ 7,208  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 83,802     $ 13,256     $ 22,571     $ (2,278   $ 117,351  

Operating margin (GAAP) 2

     5.3     7.8     2.4       5.1

Adjusted operating margin (Non-GAAP measure) 2

     6.4     8.7     2.9       6.1

 

1   Operating income for Pharmaceutical Wholesale includes equity earnings in AmerisourceBergen. As a result of the two month reporting lag, operating income for the three and twelve month periods ended August 31, 2017 includes AmerisourceBergen equity earnings for the periods of April 1, 2017 through June 30, 2017 and July 1, 2016 through June 30, 2017, respectively. Operating income for the three and twelve month periods ended August 31, 2016 includes AmerisourceBergen equity earnings for the period of April 1, 2016 through June 30, 2016 and March 18, 2016 through June 30, 2016, respectively.
2 Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen.

EQUITY EARNINGS IN AMERISOURCEBERGEN

 

     Three months ended      Twelve months ended  
     August 31, 2017      August 31, 2016      August 31, 2017      August 31, 2016  

Equity earnings in AmerisourceBergen (GAAP)

   $ (8    $ 34      $ 135      $ 37  

Acquisition-related amortization

     30        24        110        28  

Change in fair market value of AmerisourceBergen warrants

     —          (8      30        (8

LIFO provision

     (5      7        (26      8  

Litigation settlements

     71        —          75        —    

Other

     (4      (7      (2      (7
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted equity earnings in AmerisourceBergen (Non-GAAP measure)

   $ 84      $ 50      $ 322      $ 58  
  

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT BY DIVISION

 

     Three months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Gross profit (GAAP)

   $ 5,628     $ 1,226     $ 487     $ (1   $ 7,340  

Cost transformation

     28       —         —         —         28  

LIFO provision

     (38     —         —         —         (38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit (Non-GAAP measure)

   $ 5,618     $ 1,226     $ 487     $ (1   $ 7,330  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 22,301     $ 2,941     $ 5,445     $ (538   $ 30,149  

Gross margin (GAAP)

     25.2     41.7     8.9       24.3

Adjusted gross margin (Non-GAAP measure)

     25.2     41.7     8.9       24.3

 

13


     Three months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Gross profit (GAAP)

   $ 5,380     $ 1,273     $ 502     $ —       $ 7,155  

LIFO provision

     8       —         —         —         8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit (Non-GAAP measure)

   $ 5,388     $ 1,273     $ 502     $ —       $ 7,163  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 20,747     $ 3,037     $ 5,400     $ (548   $ 28,636  

Gross margin (GAAP)

     25.9     41.9     9.3       25.0

Adjusted gross margin (Non-GAAP measure)

     26.0     41.9     9.3       25.0

 

     Twelve months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Gross profit (GAAP)

   $ 22,450     $ 4,753     $ 1,965     $ (6   $ 29,162  

Cost transformation

     89       —         —         —         89  

LIFO provision

     166       —         —         —         166  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit (Non-GAAP measure)

   $ 22,705     $ 4,753     $ 1,965     $ (6   $ 29,417  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 87,302     $ 11,813     $ 21,188     $ (2,089   $ 118,214  

Gross margin (GAAP)

     25.7     40.2     9.3       24.7

Adjusted gross margin (Non-GAAP measure)

     26.0     40.2     9.3       24.9

 

     Twelve months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Gross profit (GAAP)

   $ 22,323     $ 5,432     $ 2,131     $ (12   $ 29,874  

LIFO provision

     214       —         —         —         214  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit (Non-GAAP measure)

   $ 22,537     $ 5,432     $ 2,131     $ (12   $ 30,088  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 83,802     $ 13,256     $ 22,571     $ (2,278   $ 117,351  

Gross margin (GAAP)

     26.6     41.0     9.4       25.5

Adjusted gross margin (Non-GAAP measure)

     26.9     41.0     9.4       25.6

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BY DIVISION

 

     Three months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Selling, general and administrative expenses (GAAP)

   $ 4,828     $ 1,007     $ 383     $ —       $ 6,218  

Cost transformation

     (186     (16     (13     —         (215

Acquisition-related costs

     (399     —         —         —         (399

Acquisition-related amortization

     (39     (26     (20     —         (85

Asset recovery

     11       —         —         —         11  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

   $ 4,215     $ 965     $ 350     $ —       $ 5,530  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 22,301     $ 2,941     $ 5,445     $ (538   $ 30,149  

Selling, general and administrative expenses percent to sales (GAAP)

     21.6     34.2     7.0       20.6

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

     18.9     32.8     6.4       18.3

 

14


     Three months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Selling, general and administrative expenses (GAAP)

   $ 4,601     $ 1,068     $ 380     $ —       $ 6,049  

Cost transformation

     (204     (15     (14     —         (233

Acquisition-related costs

     (20     —         —         —         (20

Acquisition-related amortization

     (42     (27     (22     —         (91

Legal settlement

     (47     —         —         —         (47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

   $ 4,288     $ 1,026     $ 344     $ —       $ 5,658  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 20,747     $ 3,037     $ 5,400     $ (548   $ 28,636  

Selling, general and administrative expenses percent to sales (GAAP)

     22.2     35.2     7.0       21.1

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

     20.7     33.8     6.4       19.8

 

     Twelve months ended August 31, 2017  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Selling, general and administrative expenses (GAAP)

   $ 18,255     $ 4,012     $ 1,479     $ (6   $ 23,740  

Cost transformation

     (642     (67     (37     —         (746

Acquisition-related costs

     (474     —         —         —         (474

Acquisition-related amortization

     (152     (101     (79     —         (332

Asset recovery

     11       —         —         —         11  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

   $ 16,998     $ 3,844     $ 1,363     $ (6   $ 22,199  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 87,302     $ 11,813     $ 21,188     $ (2,089   $ 118,214  

Selling, general and administrative expenses percent to sales (GAAP)

     20.9     34.0     7.0       20.1

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

     19.5     32.5     6.4       18.8

 

     Twelve months ended August 31, 2016  
     Retail Pharmacy
USA
    Retail Pharmacy
International
    Pharmaceutical
Wholesale
    Eliminations     Walgreens Boots
Alliance, Inc.
 

Selling, general and administrative expenses (GAAP)

   $ 17,918     $ 4,403     $ 1,589     $ —       $ 23,910  

Cost transformation

     (374     (29     (21     —         (424

Acquisition-related costs

     (102     —         —         —         (102

Acquisition-related amortization

     (185     (97     (87     —         (369

Legal settlement

     (47     —         —         —         (47

Asset impairment

     (30     —         —         —         (30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

   $ 17,180     $ 4,277     $ 1,481     $ —       $ 22,938  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sales

   $ 83,802     $ 13,256     $ 22,571     $ (2,278   $ 117,351  

Selling, general and administrative expenses percent to sales (GAAP)

     21.4     33.2     7.0       20.4

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

     20.5     32.3     6.6       19.5

 

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FREE CASH FLOW

 

     Three months ended      Twelve months ended  
     August 31, 2017      August 31, 2016      August 31, 2017      August 31, 2016  

Net cash provided by operating activities (GAAP)

   $ 2,014      $ 2,658      $ 7,251      $ 7,847  

Less: Additions to property, plant and equipment

     (439      (421      (1,351      (1,325
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow (Non-GAAP measure) 1

   $ 1,575      $ 2,237      $ 5,900      $ 6,522  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

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