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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _______to _______
Commission File Number
001-36759
WALGREENS BOOTS ALLIANCE, INC.
(Exact name of registrant as specified in its charter)
Delaware47-1758322
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
108 Wilmot Road, Deerfield, Illinois
60015
(Address of principal executive offices)(Zip Code)
(847) 315-3700
(Registrant’s telephone number, including area code)
__________________________________________
Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueWBAThe NASDAQ Stock Market LLC
3.600% Walgreens Boots Alliance, Inc. notes due 2025WBA25The NASDAQ Stock Market LLC
2.125% Walgreens Boots Alliance, Inc. notes due 2026WBA26The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes  þ      No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                              Yes þ     No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes       No þ
The number of shares outstanding of the registrant’s Common Stock, $0.01 par value, as of December 30, 2022 was 862,503,554.
WBA Q1 2023 Form 10-Q


WALGREENS BOOTS ALLIANCE, INC.

FORM 10-Q FOR THE THREE MONTHS ENDED NOVEMBER 30, 2022

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
 Item 1.
  a)
  b)
  c)
  d)
  e)
  f)
 Item 2.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
 Item 3.
 Item 4.




















PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements (Unaudited)

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(in millions, except shares and per share amounts)





 November 30, 2022August 31, 2022
Assets  
Current assets:  
Cash and cash equivalents$2,349 $1,358 
Marketable securities1,883 1,114 
Accounts receivable, net4,853 5,017 
Inventories9,322 8,353 
Other current assets1,115 1,059 
Total current assets19,523 16,902 
Non-current assets: 
Property, plant and equipment, net11,450 11,729 
Operating lease right-of-use assets21,240 21,259 
Goodwill22,582 22,280 
Intangible assets, net10,612 10,730 
Equity method investments (see Note 5)4,426 5,495 
Other non-current assets3,042 1,730 
Total non-current assets73,352 73,222 
Total assets$92,875 $90,124 
Liabilities, redeemable non-controlling interests and equity  
Current liabilities:  
Short-term debt$3,938 $1,059 
Trade accounts payable (see Note 16)12,184 11,255 
Operating lease obligations2,271 2,286 
Accrued expenses and other liabilities9,534 7,899 
Income taxes109 84 
Total current liabilities28,036 22,583 
Non-current liabilities:  
Long-term debt7,789 10,615 
Operating lease obligations21,514 21,517 
Deferred income taxes1,319 1,442 
Accrued litigation obligations6,427 551 
Other non-current liabilities3,052 3,009 
Total non-current liabilities40,101 37,134 
Commitments and contingencies (see Note 10)
Total liabilities68,137 59,717 
Redeemable non-controlling interests157 1,042 
Equity:
Preferred stock $.01 par value; authorized 32 million shares, none issued
  
Common stock $.01 par value; authorized 3.2 billion shares; issued 1,172,513,618 at November 30, 2022 and August 31, 2022
12 12 
Paid-in capital10,477 10,950 
Retained earnings33,664 37,801 
Accumulated other comprehensive loss(2,815)(2,805)
Treasury stock, at cost; 310,171,383 shares at November 30, 2022 and 307,874,161 shares at August 31, 2022
(20,762)(20,683)
Total Walgreens Boots Alliance, Inc. shareholders’ equity20,576 25,275 
Non-controlling interests4,006 4,091 
Total equity24,582 29,366 
Total liabilities, redeemable non-controlling interests and equity$92,875 $90,124 
The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.
WBA Q1 2023 Form 10-Q
1

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(UNAUDITED)
(in millions, except shares)




Three months ended November 30, 2022
Equity attributable to Walgreens Boots Alliance, Inc.
Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive lossRetained earningsNon-controlling interestsTotal equity
August 31, 2022864,639,457 $12 $(20,683)$10,950 $(2,805)$37,801 $4,091 $29,366 
Net loss— — — — — (3,721)(72)(3,793)
Other comprehensive loss, net of tax— — — — (11)—  (10)
Dividends declared and distributions— — — — — (415)(44)(459)
Treasury stock purchases(4,438,228)— (150)— — — — (150)
Employee stock purchase and option plans2,141,006 — 71 (64)— — — 6 
Stock-based compensation— — — 24 — — 31 55 
Redeemable non-controlling interests redemption price adjustments and other— — — (433)— — — (433)
November 30, 2022862,342,235 $12 $(20,762)$10,477 $(2,815)$33,664 $4,006 $24,582 


Three months ended November 30, 2021
 Equity attributable to Walgreens Boots Alliance, Inc.  
 Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive lossRetained earningsNon-controlling interestsTotal equity
August 31, 2021865,373,636 $12 $(20,593)$10,988 $(2,109)$35,121 $402 $23,822 
Net earnings (loss)— — — — — 3,580 (27)3,552 
Other comprehensive loss, net of tax— — — — (193)— (3)(196)
Dividends declared and distributions— — — — — (415)— (415)
Treasury stock purchases(3,179,750)— (154)— — — — (154)
Employee stock purchase and option plans1,648,490 — 47 (59)— — — (11)
Stock-based compensation— — — 35 — — — 35 
Business combination— — —  — — 3,944 3,944 
Non-controlling interests contribution and other— — — 2 — — — 2 
November 30, 2021863,842,376 $12 $(20,700)$10,966 $(2,301)$38,286 $4,316 $30,579 
    

The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.

WBA Q1 2023 Form 10-Q
2

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(in millions, except per share amounts)



 Three months ended November 30,
 20222021
Sales$33,382 $33,901 
Cost of sales26,429 26,326 
Gross profit6,953 7,574 
Selling, general and administrative expenses13,158 6,391 
Equity earnings in AmerisourceBergen53 100 
Operating (loss) income(6,151)1,283 
Other income, net992 2,617 
(Loss) earnings before interest and income tax (benefit) provision(5,159)3,900 
Interest expense, net110 86 
(Loss) earnings before income tax (benefit) provision(5,270)3,814 
Income tax (benefit) provision(1,447)275 
Post-tax earnings (loss) from other equity method investments7 (7)
Net (loss) earnings (3,816)3,531 
Net loss attributable to non-controlling interests(94)(48)
Net (loss) earnings attributable to Walgreens Boots Alliance, Inc.$(3,721)$3,580 
Net (loss) earnings per common share:
Basic$(4.31)$4.13 
Diluted$(4.31)$4.13 
Weighted average common shares outstanding:  
Basic863.6 865.8 
Diluted863.6 867.6 

The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.

WBA Q1 2023 Form 10-Q
3

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in millions)



 Three months ended November 30,
 20222021
Comprehensive income:  
Net (loss) earnings$(3,816)$3,531 
Other comprehensive loss, net of tax:  
Pension/post-retirement obligations(5)(5)
Unrealized (loss) gain on cash flow hedges(2)1 
Net investment hedges (loss) gain(29)44 
Movement on available for sale debt securities (96)
Share of other comprehensive income (loss) of equity method investments4 (46)
Currency translation adjustments23 (94)
Total other comprehensive loss(10)(196)
Total comprehensive (loss) income(3,826)3,336 
Comprehensive loss attributable to non-controlling interests(94)(51)
Comprehensive (loss) income attributable to Walgreens Boots Alliance, Inc.$(3,732)$3,387 

The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.

WBA Q1 2023 Form 10-Q
4

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 Three months ended November 30,
 20222021
Cash flows from operating activities:
  
Net (loss) earnings$(3,816)$3,531 
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:  
Depreciation and amortization495 500 
Deferred income taxes(1,602)164 
Stock compensation expense222 35 
Earnings from equity method investments(61)(93)
Gain on previously held investment interests (2,576)
Gain on sale of equity method investments(969) 
Other(129)95 
Changes in operating assets and liabilities:  
Accounts receivable, net151 (127)
Inventories(918)(1,352)
Other current assets(68)(58)
Trade accounts payable867 1,335 
Accrued expenses and other liabilities(269)(399)
Income taxes153 79 
Accrued litigation obligations6,494  
Other non-current assets and liabilities(58)(36)
Net cash provided by operating activities493 1,099 
Cash flows from investing activities:
  
Additions to property, plant and equipment(610)(454)
Proceeds from sale-leaseback transactions409 202 
Proceeds from sale of other assets2,068  
Business, investment and asset acquisitions, net of cash acquired(80)(1,800)
Other70 95 
Net cash provided by (used for) investing activities1,858 (1,958)
Cash flows from financing activities:
  
Net change in short-term debt with maturities of 3 months or less22 937 
Proceeds from debt17 7,940 
Payments of debt(11)(4,444)
Stock purchases(150)(154)
Proceeds related to employee stock plans, net6 19 
Cash dividends paid(415)(413)
Other(69)(7)
Net cash (used for) provided by financing activities(599)3,877 
Effect of exchange rate changes on cash, cash equivalents, marketable securities and restricted cash4 (20)
Changes in cash, cash equivalents, marketable securities and restricted cash:  
Net increase in cash, cash equivalents, marketable securities and restricted cash1,756 2,998 
Cash, cash equivalents, marketable securities and restricted cash at beginning of period2,558 1,270 
Cash, cash equivalents, marketable securities and restricted cash at end of period$4,314 $4,268 
The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.
WBA Q1 2023 Form 10-Q
5


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1. Accounting policies

Basis of presentation
The Consolidated Condensed Financial Statements of Walgreens Boots Alliance, Inc. (“Walgreens Boots Alliance” or the “Company”) included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The Consolidated Condensed Financial Statements include all subsidiaries in which the Company holds a controlling interest and certain variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company uses the equity method of accounting for equity investments in less than majority-owned companies if the investment provides the ability to exercise significant influence. All intercompany transactions have been eliminated.

The Consolidated Condensed Financial Statements included herein are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited Consolidated Condensed Financial Statements should be read in conjunction with the audited financial statements and the notes thereto included in the Walgreens Boots Alliance Annual Report on Form 10-K for the fiscal year ended August 31, 2022, as amended by Form 10-K/A for the fiscal year ended August 31, 2022 filed on November 23, 2022.

The preparation of financial statements in accordance with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company bases its estimates on the information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Actual results may differ.

In the opinion of management, the unaudited Consolidated Condensed Financial Statements for the interim periods presented include all adjustments necessary to present a fair statement of the results for such interim periods. The impact of COVID-19, the influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payor and customer relationships and terms, strategic transactions including acquisitions, dispositions, changes in laws and general economic conditions in the markets in which the Company operates and other factors on the Company’s operations and net earnings for any period may not be comparable to the same period in previous years.

Certain amounts in the Consolidated Condensed Financial Statements and associated notes may not add due to rounding. Percentages have been calculated using unrounded amounts for all periods presented.

Note 2. Acquisitions and other investments

VillageMD acquisition
On November 24, 2021, the Company completed the acquisition of Village Practice Management Company, LLC (“VillageMD”). Pursuant to the terms and subject to the conditions set forth in the Unit Purchase Agreement, the Company purchased additional outstanding equity interests of VillageMD, increasing the Company’s total beneficial ownership in VillageMD’s outstanding equity interests from approximately 30% to approximately 63%, on a fully diluted basis, for a purchase price of $5.2 billion. The total purchase price was comprised of cash consideration of $4.0 billion and a promissory note of $1.2 billion. The cash consideration of $4.0 billion consisted of $2.9 billion paid to existing shareholders, including $1.9 billion paid to existing shareholders as part of the fully subscribed tender offer concluded on December 28, 2021, and $1.1 billion paid in exchange for new preferred units issued by VillageMD. Subject to notice being served, the Company has an option to prepay, and VillageMD has an option to require redemption of, the promissory note at any time. The promissory note is eliminated in consolidation within the Consolidated Condensed Balance Sheets.

The Company accounted for this acquisition as a business combination resulting in consolidation of VillageMD within the U.S. Healthcare segment in its financial statements. A non-controlling interest was recognized at fair value.

WBA Q1 2023 Form 10-Q
6


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
As a result of this acquisition, in the three months ended November 30, 2021, the Company recognized a pre-tax gain in Other income, net in the Consolidated Condensed Statements of Earnings of $1,597 million related to the fair valuation of the Company’s previously held minority equity interest. The Company also recorded a pre-tax gain of $577 million in Other income, net in the Consolidated Condensed Statements of Earnings related to the conversion to equity of the Company’s previously held investment in convertible debt securities of VillageMD, reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets. A majority of the gains did not generate a tax expense.

In the three months ended November 30, 2022, the Company completed the purchase price allocation and recorded certain deferred income tax related measurement period adjustments based on additional information, resulting in an increase to goodwill of $125 million.

The following table summarizes the consideration for the acquisition and the amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):
Purchase price allocation:
Total purchase price$5,200 
Less: purchase price for issuance of new preferred units at fair value 1
(2,300)
Net consideration2,900 
Fair value of share-based compensation awards attributable to pre-combination services 2
683 
Fair value of previously held equity and debt3,211 
Fair value of non-controlling interest3,257 
Total$10,051 
Identifiable assets acquired and liabilities assumed:
Tangible assets 1
$634 
Intangible assets 3
1,621 
Liabilities(370)
Total identifiable net assets$1,885 
Goodwill$8,166 
1.Comprised of cash consideration of $1.1 billion and a promissory note of $1.2 billion. This consideration was provided in exchange for the issuance of new preferred units by VillageMD. VillageMD’s tangible assets acquired exclude this $1.1 billion of cash and $1.2 billion promissory note receivable.
2.Primarily related to vested share-based compensation awards.
3.Intangibles acquired include primary care provider network, trade names and developed technology, with a fair value of $1.2 billion, $295 million and $76 million, respectively. Estimated useful lives are 15, 13 and 5 years, respectively.

The goodwill represents anticipated future growth and expansion opportunities into new markets.

Shields acquisition
On October 29, 2021, the Company completed the acquisition of Shields Health Solutions Parent, LLC (“Shields”). Pursuant to the terms and subject to the conditions set forth in the Securities Purchase Agreement, the Company purchased additional outstanding equity interests of Shields, increasing the Company’s total beneficial ownership in Shields’ outstanding equity interests from 25% to approximately 70%, for cash consideration of $969 million.

The Company accounted for this acquisition as a business combination resulting in consolidation of Shields within the U.S. Healthcare segment in its financial statements. A non-controlling interest was recognized at fair value. Under the terms of the transaction agreements, the Company had an option to acquire the remaining equity interests of Shields in the future. Shields’ other equity holders also had an option to require the Company to purchase the remaining equity interests. Considering the contractual terms related to the non-controlling interests, it was classified as redeemable non-controlling interests in the Consolidated Condensed Balance Sheets upon acquisition.

WBA Q1 2023 Form 10-Q
7


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
As a result of this acquisition, in the three months ended November 30, 2021, the Company remeasured its previously held minority equity interest in Shields at fair value resulting in a pre-tax gain of $402 million recognized in Other income, net in the Consolidated Condensed Statements of Earnings. A majority of the gain did not generate a tax expense.

In the three months ended November 30, 2022, the Company completed the purchase price allocation and recorded certain deferred income tax related measurement period adjustments based on additional information, resulting in an increase to goodwill of $72 million.


The following table summarizes the consideration for the acquisition and the amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):
Purchase price allocation:
Cash consideration$969 
Fair value of share-based compensation awards attributable to pre-combination services13 
Fair value of previously held equity interests502 
Fair value of non-controlling interests589 
Total$2,074 
Identifiable assets acquired and liabilities assumed:
Tangible assets$84 
Intangible assets 1
1,060 
Liabilities(600)
Total identifiable net assets$544 
Goodwill$1,529 
1.Intangibles acquired include customer relationships, trade names and developed technology, with a fair value of $896 million, $47 million and $117 million, respectively. Estimated useful lives are 13, 13 and 5 years, respectively.

The goodwill represents anticipated future growth and expansion opportunities into new healthcare offerings.

On September 20, 2022, the Company announced the acceleration of its plans for full ownership of Shields. The Company entered into a definitive agreement to acquire the remaining 30% equity interest for approximately $1.4 billion of cash consideration. As a result, as of November 30, 2022, the redeemable non-controlling interest to be acquired was reclassified to Accrued expenses and other liabilities in the Consolidated Condensed Balance Sheets. On December 28, 2022, the Company completed the acquisition of the remaining 30% equity interest in Shields.

CareCentrix acquisition
On August 31, 2022, the Company completed the acquisition of CCX Next, LLC (“CareCentrix”). Pursuant to the terms and subject to the conditions set forth in the Membership Interest Purchase Agreement, the Company acquired approximately 55% controlling equity interest in CareCentrix, a leading player in the post-acute and home care management sectors, for cash consideration of $339 million. The cash consideration includes $12 million paid to employees, which was recognized as compensation expense by the Company.

The Company accounted for this acquisition as a business combination resulting in consolidation of CareCentrix within the U.S. Healthcare segment in its financial statements. A non-controlling interest was recognized at fair value. Under the terms of the transaction agreements, the Company had an option to acquire the remaining equity interests of CareCentrix in the future. CareCentrix’s other equity holders also had an option to require the Company to purchase the remaining equity interests. Considering the contractual terms related to the non-controlling interests, it was classified as redeemable non-controlling interests in the Consolidated Condensed Balance Sheets.

WBA Q1 2023 Form 10-Q
8


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In the three months ended November 30, 2022, the Company recorded certain measurement period adjustments based on additional information, primarily related to acquired intangible assets and certain liabilities assumed, resulting in an increase to goodwill of $62 million. As of November 30, 2022, the Company had not completed the analysis to assign fair values to all tangible and intangible assets acquired and liabilities assumed. As such, the preliminary purchase price allocation will be subject to further refinement and may change. These changes may relate to finalization of the fair value of the purchase consideration and the allocation of purchase consideration to all tangible and intangible assets acquired and identified and liabilities assumed.

The following table summarizes the consideration for the acquisition and the preliminary amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):

Purchase price allocation:
Cash consideration 1
$327 
Contingent consideration4 
Fair value of share-based compensation awards attributable to pre-combination services66 
Fair value of non-controlling interests217 
Total$614 
Identifiable assets acquired and liabilities assumed:
Tangible assets$358 
Intangible assets 2
426 
Liabilities(685)
Total identifiable net assets$98 
Goodwill$515 
1.Excludes $12 million of cash paid to employees, which was recognized as compensation expense by the Company.
2.Intangibles acquired include customer relationships, trade names and developed technology, with a fair value of $247 million, $93 million and $86 million, respectively. Estimated useful lives are 13, 13 and 5 years, respectively.

The goodwill represents anticipated future growth and expansion opportunities into new healthcare offerings.

On October 11, 2022, the Company announced the acceleration of its plans for full ownership of CareCentrix. The Company entered into a definitive agreement to acquire the remaining 45% equity interest for approximately $392 million of cash consideration, less transaction expenses. As a result, as of November 30, 2022, the redeemable non-controlling interest to be acquired was reclassified to Accrued expenses and other liabilities in the Consolidated Condensed Balance Sheets. The acquisition is expected to close in the third quarter of fiscal 2023.

Supplemental pro forma information
The following table represents unaudited supplemental pro forma consolidated sales for the three months ended November 30, 2021, as if the acquisitions of VillageMD, Shields and CareCentrix had occurred at the beginning of the period. The unaudited pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company's results would have been had the acquisitions occurred at the beginning of the period presented or results which may occur in the future.

Three months ended November 30,
(Unaudited, in millions)2021
Sales$34,564 

WBA Q1 2023 Form 10-Q
9


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Actual sales of the acquired companies for the three months ended November 30, 2021, included in the Consolidated Condensed Statements of Earnings are as follows:    
Three months ended November 30,
(in millions)2021
Sales$51 

Pro forma net earnings of the Company, assuming the acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported.

See Note 14. Segment reporting for further information.

Other acquisitions and investments
The Company acquired certain prescription files and related pharmacy inventory primarily in the United States (“U.S.”) for the aggregate purchase price of $55 million and $74 million during the three months ended November 30, 2022 and 2021, respectively.

Note 3. Exit and disposal activities

Transformational Cost Management Program
On December 20, 2018, the Company announced a transformational cost management program that was expected to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 (the “Transformational Cost Management Program”). The Company achieved this goal at the end of fiscal 2021.

On October 12, 2021, the Company expanded and extended the Transformational Cost Management Program through the end of fiscal 2024 and increased its annual cost savings target to $3.3 billion by the end of fiscal 2024. In fiscal 2022, the Company increased its annual cost savings target from $3.3 billion to $3.5 billion, by the end of fiscal 2024. 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. 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. Divisional optimization within the Company’s segments includes activities such as optimization of stores, including plans to close approximately 350 Boots stores in the UK and approximately 450 to 500 stores in the U.S. As of November 30, 2022, the Company has closed 244 and 363 stores in the UK and U.S., respectively.

The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its GAAP financial results of approximately $3.6 billion to $3.9 billion, of which $3.3 billion to $3.6 billion are expected to be recorded as exit and disposal activities. In addition to the impacts discussed above, as a result of the actions related to store closures taken under the Transformational Cost Management Program, the Company recorded $508 million of transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard (Topic 842) that became effective on September 1, 2019.

From the inception of the Transformational Cost Management Program to November 30, 2022, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $2.1 billion , which were primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These charges included $681 million related to lease obligations and other real estate costs, $461 million in asset impairments, $739 million in employee severance and business transition costs and $219 million of information technology transformation and other exit costs.
WBA Q1 2023 Form 10-Q
10


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three months ended November 30, 2022 and 2021, respectively, were as follows (in millions):

Three months ended November 30, 2022U.S. Retail PharmacyInternationalCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$79 $ $ $79 
Asset impairments18   18 
Employee severance and business transition costs11 1 4 16 
Information technology transformation and other exit costs11 5  17 
Total pre-tax exit and disposal charges$119 $6 $4 $130 

Three months ended November 30, 2021U.S. Retail PharmacyInternationalCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$87 $2 $ $89 
Asset impairments15 25  40 
Employee severance and business transition costs20 10 7 37 
Information technology transformation and other exit costs1 7 1 9 
Total pre-tax exit and disposal charges$123 $44 $9 $175 

The changes in liabilities and assets related to the exit and disposal activities under Transformational Cost Management Program include the following (in millions):
Lease obligations and other real estate costsAsset ImpairmentsEmployee severance and business transition costsInformation technology transformation and other exit costsTotal
Balance at August 31, 2022$10 $ $76 $27 $113 
Costs79 18 16 17 130 
Payments(19) (24)(10)(53)
Other(59)(18)  (78)
Balance at November 30, 2022$10 $ $68 $35 $113 


Note 4. Leases

The Company leases certain retail stores, clinics, warehouses, distribution centers, office space, land, and equipment. Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. Lease commencement is the date the Company has the right to control the property. The Company recognizes operating lease rent expense on a straight line basis over the lease term. In addition to minimum fixed rentals, some leases provide for contingent rentals based on sales volume.

WBA Q1 2023 Form 10-Q
11


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Supplemental balance sheet information related to leases were as follows (in millions):

Balance Sheet supplemental information:November 30, 2022August 31, 2022
Operating leases:
Operating lease right-of-use assets$21,240 $21,259 
Operating lease obligations - current2,271 2,286 
Operating lease obligations - non-current 21,514 21,517 
Total operating lease obligations$23,785 $23,803 
Finance leases:
Right-of-use assets included in:
Property, plant and equipment, net$641 $645 
Lease obligations included in:
Accrued expenses and other liabilities38 37 
Other non-current liabilities895 899 
Total finance lease obligations$933 $936 

Supplemental income statement information related to leases were as follows (in millions):
Three months ended November 30,
Statement of Earnings supplemental information:20222021
Operating lease cost
Fixed$813 $805 
Variable 1
192 205 
Finance lease cost
Amortization$11 $11 
Interest12 13 
Sublease income$29 $25 
Impairment of right-of-use assets67 68 
Gain on sale and leaseback 2
189 87 

1Includes real estate property taxes, common area maintenance, insurance and rental payments based on sales volume.
2Recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings.

WBA Q1 2023 Form 10-Q
12


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Other supplemental information was as follows (in millions):
Three months ended November 30,
Other supplemental information:20222021
Cash paid for amounts included in the measurement of lease obligations
Operating cash flows from operating leases$828 $846 
Operating cash flows from finance leases11 12 
Financing cash flows from finance leases10 11 
Total$849 $869 
Right-of-use assets obtained in exchange for new lease obligations
Operating leases$602 $544 
Finance leases1 5 
Total$603 $549