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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 February 29, 2024
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)

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 February 29, 2024 was 862,713,366.
WBA Q2 2024 Form 10-Q



WALGREENS BOOTS ALLIANCE, INC.

FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024

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)





 February 29, 2024August 31, 2023
Assets  
Current assets:  
Cash and cash equivalents$668 $739 
Accounts receivable, net6,200 5,381 
Inventories8,557 8,257 
Other current assets1,136 1,127 
Total current assets16,561 15,503 
Non-current assets: 
Property, plant and equipment, net10,121 11,587 
Operating lease right-of-use assets21,342 21,667 
Goodwill15,814 28,187 
Intangible assets, net12,984 13,635 
Equity method investments (see Note 5)3,256 3,497 
Other non-current assets4,128 2,550 
Total non-current assets67,646 81,125 
Total assets$84,207 $96,628 
Liabilities, redeemable non-controlling interests and equity  
Current liabilities:  
Short-term debt$1,937 $917 
Trade accounts payable (see Note 16)12,775 12,635 
Operating lease obligations2,339 2,347 
Accrued expenses and other liabilities7,522 8,426 
Income taxes342 209 
Total current liabilities24,915 24,535 
Non-current liabilities:  
Long-term debt7,535 8,145 
Operating lease obligations21,812 22,124 
Deferred income taxes1,238 1,318 
Accrued litigation obligations6,123 6,261 
Other non-current liabilities7,220 5,757 
Total non-current liabilities43,928 43,605 
Commitments and contingencies (see Note 10)
Total liabilities68,843 68,140 
Redeemable non-controlling interests172 167 
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 February 29, 2024 and August 31, 2023
12 12 
Paid-in capital10,627 10,661 
Retained earnings26,448 33,058 
Accumulated other comprehensive loss(2,897)(2,993)
Treasury stock, at cost; 309,800,252 shares at February 29, 2024 and 308,839,832 shares at August 31, 2023
(20,705)(20,717)
Total Walgreens Boots Alliance, Inc. shareholders’ equity13,484 20,020 
Non-controlling interests1,708 8,302 
Total equity15,192 28,322 
Total liabilities, redeemable non-controlling interests and equity$84,207 $96,628 

The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these Statements.
WBA Q2 2024 Form 10-Q
1

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




Three months ended February 29, 2024
Equity attributable to Walgreens Boots Alliance, Inc.
Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive lossRetained earningsNon-controlling interestsTotal equity
November 30, 2023862,166,970 $12 $(20,725)$10,617 $(2,995)$32,573 $8,107 $27,588 
Net loss— — — — — (5,908)(6,416)(12,324)
Other comprehensive income, net of tax— — — — 99 — 2 100 
Dividends declared and distributions— — — — — (218)(7)(225)
Employee stock purchase and option plans546,396 — 20 (10)— — — 9 
Stock-based compensation— — — 19 — — 24 43 
Other— — — 2 — — (2) 
February 29, 2024862,713,366 $12 $(20,705)$10,627 $(2,897)$26,448 $1,708 $15,192 



Six months ended February 29, 2024
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, 2023863,673,786 $12 $(20,717)$10,661 $(2,993)$33,058 $8,302 $28,322 
Net loss— — — — — (5,975)(6,627)(12,602)
Other comprehensive income (loss), net of tax— — — — 96 — (1)95 
Dividends declared and distributions— — — — — (636)(7)(643)
Treasury stock purchases(3,100,000)— (69)— — — — (69)
Employee stock purchase and option plans2,139,580 — 81 (74)— — — 7 
Stock-based compensation— — — 34 — — 54 88 
Other— — — 7 — — (13)(6)
February 29, 2024862,713,366 $12 $(20,705)$10,627 $(2,897)$26,448 $1,708 $15,192 


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











WBA Q2 2024 Form 10-Q
2

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



Three months ended February 28, 2023
 Equity attributable to Walgreens Boots Alliance, Inc.  
 Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive lossRetained earningsNon-controlling interestsTotal equity
November 30, 2022862,342,235 $12 $(20,762)$10,477 $(2,815)$33,664 $4,006 $24,582 
Net earnings (loss)— — — — — 703 (158)545 
Other comprehensive income, net of tax— — — — 161 — 2 164 
Dividends declared and distributions— — — — — (416)(6)(422)
Employee stock purchase and option plans453,485 — 15 — — — — 15 
Stock-based compensation— — — 23 — — 34 57 
Acquisition of non-controlling interests— — — 171 — — — 171 
Business combination— — — (43)— — 4,369 4,325 
Redeemable non-controlling interests redemption price adjustments and other— — — 1 — — — 1 
February 28, 2023862,795,720 $12 $(20,747)$10,629 $(2,654)$33,952 $8,247 $29,439 


Six months ended February 28, 2023
 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— — — — — (3,018)(230)(3,248)
Other comprehensive income, net of tax— — — — 151 — 3 153 
Dividends declared and distributions— — — — — (831)(50)(881)
Treasury stock purchases(4,438,228)— (150)— — — — (150)
Employee stock purchase and option plans2,594,491 — 86 (64)— — — 22 
Stock-based compensation— — — 48 — — 64 112 
Acquisition of non-controlling interests— — — 171 — — — 171 
Business combination— — — (43)— — 4,369 4,325 
Redeemable non-controlling interests redemption price adjustments and other— — — (432)— — — (432)
February 28, 2023862,795,720 $12 $(20,747)$10,629 $(2,654)$33,952 $8,247 $29,439 
    

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

WBA Q2 2024 Form 10-Q
3

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




 Three months endedSix months ended
 February 29, 2024February 28, 2023February 29, 2024February 28, 2023
Sales$37,052 $34,862 $73,760 $68,244 
Cost of sales30,012 27,807 59,948 54,236 
Gross profit7,041 7,055 13,811 14,008 
Selling, general and administrative expenses7,921 6,934 14,772 20,091 
Impairment of goodwill12,369  12,369  
Equity earnings in Cencora79 75 120 129 
Operating (loss) income(13,171)197 (13,209)(5,954)
Other income (expense), net195 552 (25)1,544 
(Loss) earnings before interest and income tax (benefit) provision(12,976)749 (13,235)(4,410)
Interest expense, net138 141 237 252 
(Loss) earnings before income tax (benefit) provision(13,114)607 (13,472)(4,662)
Income tax (benefit) provision(782)70 (856)(1,377)
Post-tax earnings from other equity method investments10 6 16 13 
Net (loss) earnings(12,322)544 (12,600)(3,272)
Net loss attributable to non-controlling interests(6,415)(159)(6,625)(253)
Net (loss) earnings attributable to Walgreens Boots Alliance, Inc.$(5,908)$703 $(5,975)$(3,018)
Net (loss) earnings per common share:
Basic$(6.85)$0.81 $(6.93)$(3.50)
Diluted$(6.85)$0.81 $(6.93)$(3.50)
Weighted average common shares outstanding:  
Basic862.5 862.6 862.8 863.1 
Diluted862.5 863.4 862.8 863.1 

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

WBA Q2 2024 Form 10-Q
4

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




 Three months endedSix months ended
 February 29, 2024February 28, 2023February 29, 2024February 28, 2023
Net (loss) earnings$(12,322)$544 $(12,600)$(3,272)
Other comprehensive income, net of tax:  
Pension/post-retirement obligations34 (5)90 (10)
Unrealized (loss) gain on cash flow hedges and other (1)5 (3)
Net investment hedges (loss) gain(1)(43)2 (73)
Share of other comprehensive income of equity method investments48 88 33 92 
Cumulative translation adjustments19 124 (35)147 
Total other comprehensive income100 164 95 153 
Total comprehensive (loss) income(12,222)707 (12,505)(3,118)
Comprehensive loss attributable to non-controlling interests(6,413)(157)(6,626)(251)
Comprehensive (loss) income attributable to Walgreens Boots Alliance, Inc.$(5,809)$864 $(5,879)$(2,868)

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

WBA Q2 2024 Form 10-Q
5

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 Six months ended
 February 29, 2024February 28, 2023
Cash flows from operating activities:
  
Net loss$(12,600)$(3,272)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:  
Depreciation and amortization1,230 1,055 
Deferred income taxes(1,331)(1,600)
Stock compensation expense99 293 
Earnings from equity method investments(137)(143)
Impairment of goodwill, intangibles and long-lived assets13,589 196 
Gain on sale of equity method investments(758)(1,512)
Gain on sale-leaseback transactions(258)(532)
Loss on variable prepaid forward contracts888  
Other(121)(39)
Changes in certain assets and liabilities:  
Accounts receivable, net(850)(221)
Inventories(279)(237)
Other current assets53 (107)
Trade accounts payable142 1,279 
Accrued expenses and other liabilities20 (684)
Income taxes256 92 
Accrued litigation obligations(391)6,795 
Other non-current assets and liabilities(471)(125)
Net cash (used for) provided by operating activities(918)1,239 
Cash flows from investing activities:
  
Additions to property, plant and equipment(858)(1,108)
Proceeds from sale-leaseback transactions727 942 
Proceeds from sale of other assets1,311 3,261 
Business, investment and asset acquisitions, net of cash acquired(228)(6,813)
Other(50)134 
Net cash provided by (used for) investing activities902 (3,583)
Cash flows from financing activities:
  
Net change in short-term debt with maturities of 3 months or less426 1,128 
Proceeds from debt15,001 1,716 
Payments of debt(14,948)(1,530)
Acquisition of non-controlling interests (1,039)
Proceeds from issuance of non-controlling interests 2,523 
Proceeds from variable prepaid forward contracts424  
Treasury stock purchases(69)(150)
Cash dividends paid(828)(829)
Other(132)(53)
Net cash (used for) provided by financing activities(127)1,766 
Effect of exchange rate changes on cash, cash equivalents and restricted cash2 13 
Changes in cash, cash equivalents and restricted cash:  
Net decrease in cash, cash equivalents and restricted cash(142)(566)
Cash, cash equivalents and restricted cash at beginning of period856 2,558 
Cash, cash equivalents and restricted cash at end of period$715 $1,993 
The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these Statements.
WBA Q2 2024 Form 10-Q
6


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. and its subsidiaries (“Walgreens Boots Alliance” or the “Company”) included herein have been prepared pursuant to the rules and regulations of the U.S. 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, 2023, as amended by Form 10-K/A for the fiscal year ended August 31, 2023 filed on November 22, 2023.

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. Adverse global macroeconomic conditions, the impact of opioid-related claims and litigation settlements, the influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payor and customer relationships and terms, strategic transactions including acquisitions and dispositions, asset impairments, changes in laws and regulations 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 accompanying notes may not add due to rounding. Percentages have been calculated using unrounded amounts for all periods presented. Certain prior period data has been reclassified in the Consolidated Condensed Financial Statements and accompanying notes to conform to the current period presentation.


Note 2. Acquisitions and other investments

Summit acquisition
On January 3, 2023, Village Practice Management Company, LLC (“VillageMD”), through its parent company, following an internal reorganization, completed the acquisition of WP CityMD TopCo (“Summit”), a provider of primary, specialty and urgent care, in exchange for $7.0 billion aggregate consideration, consisting of $4.85 billion of cash consideration paid, $2.05 billion in preferred units of VillageMD issued to Summit equity holders and $100 million of cash to be paid one year following closing. The cash consideration includes $87 million of cash paid to fund acquisition-related bonuses to Summit employees which was recognized as a compensation expense of the Company. In addition, VillageMD paid off approximately $1.9 billion in net debt of Summit. In connection with the amended Agreement and Plan of Merger, and in order to finance the acquisition, the Company and Cigna Health & Life Insurance Company acquired preferred units of VillageMD in exchange for $1.75 billion and $2.5 billion in aggregate consideration, respectively. Following the Summit acquisition, the Company remains the largest and consolidating equity holder of VillageMD with ownership of approximately 53% of the outstanding equity interests on a fully diluted basis.

WBA Q2 2024 Form 10-Q
7


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Further, the Company entered into a credit agreement with VillageMD pursuant to which the Company provided VillageMD senior secured credit facilities in the aggregate amount of $2.25 billion, consisting of (i) a senior secured term loan facility in an aggregate original principal amount of $1.75 billion to support the acquisition of Summit; and (ii) a senior secured revolving credit facility in an aggregate original committed amount of $500 million available for general corporate purposes. In connection with the issuance of the senior secured credit facilities, the Company received a $220 million credit for certain fees payable by VillageMD in the form of preferred units of VillageMD. The intercompany facilities eliminate in consolidation.

The Company accounted for this acquisition as a business combination resulting in consolidation of Summit within the U.S. Healthcare segment in its financial statements. In the three months ended February 29, 2024, the Company completed the purchase price allocation.

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 1
$4,778 
Deferred consideration100 
Summit debt paid at closing1,963 
Fair value of equity consideration 2
1,971 
Fair value of non-controlling interests13 
Total$8,825 
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents$69 
Accounts receivable, net381 
Property, plant and equipment607 
Intangible assets 3
3,359 
Operating lease right-of-use assets756 
Other assets174 
Operating lease obligations(773)
Deferred tax liability(735)
Other liabilities(466)
Total identifiable net assets$3,372 
Goodwill$5,454 

1.Cash consideration excludes $87 million of cash paid to fund acquisition-related bonuses to Summit employees which was recognized as compensation expense of the Company.
2.The fair value of the non-controlling interests was calculated based on the implied equity value of VillageMD, allocated to all units on an as-converted basis.
3.Intangibles acquired include provider networks and trade names with fair values of $1.9 billion and $1.5 billion, respectively. Estimated useful lives are 15 years and 11 to 15 years, respectively.

The goodwill represents anticipated future growth and expansion opportunities into new healthcare offerings and new markets. $416 million of the goodwill is expected to be tax deductible.

WBA Q2 2024 Form 10-Q
8


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Supplemental pro forma information - Summit
The following table represents unaudited supplemental pro forma consolidated sales for the three and six months ended February 28, 2023, as if the acquisition of Summit had occurred at the beginning of each period presented. 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 acquisition occurred at the beginning of each period presented or results which may occur in the future.

Three months endedSix months ended
(Unaudited, in millions)February 28, 2023February 28, 2023
Sales$35,119 $69,216 

Actual sales of Summit, from the acquisition date, for the three and six months ended February 28, 2023, included in the Consolidated Condensed Statements of Earnings are as follows:
Three and six months ended
(in millions)February 28, 2023
Sales$463 

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

Shields acquisition
On December 28, 2022 the Company acquired the non-controlling interests in Shields Health Solutions Parent, LLC (“Shields”) for $1.4 billion of cash consideration.

Other acquisitions
On March 3, 2023, the Company completed the acquisition of Starling MSO Holdings, LLC (“Starling”), a primary care and multi-specialty group, for total consideration of $284 million. Total consideration includes $222 million of cash consideration and $62 million of VillageMD equity issued to Starling equity holders, including employees. VillageMD equity issued to employees will be recognized as compensation expense in the future. As a result of the acquisition, the Company recognized goodwill and intangible assets of $107 million and $128 million, respectively. As of February 29, 2024, 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.

The Company acquired certain prescription files and related pharmacy inventory primarily in the United States (“U.S.”) for the aggregate purchase price of $69 million and $172 million during the three and six months ended February 29, 2024, respectively, and $35 million and $90 million during the three and six months ended February 28, 2023, 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. In fiscal 2023, the Company increased its annual cost savings target from $3.5 billion to $4.5 billion, by the end of fiscal 2024. We believe the Company is currently on track to achieve the savings target.

WBA Q2 2024 Form 10-Q
9


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 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. Through the Transformational Cost Management Program the Company plans to reduce its presence by up to 650 Boots stores in the United Kingdom (“UK”) and approximately 650 to 700 stores in the U.S. As of February 29, 2024, the Company has closed 484 and 625 stores in the UK and U.S., respectively.

The Company estimates cumulative pre-tax charges to its GAAP financial results for the Transformational Cost Management Program to be $4.1 billion to $4.4 billion, of which pre-tax charges for exit and disposal activities are estimated to be $3.8 billion to $4.1 billion. 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 February 29, 2024, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $3.4 billion, which were primarily recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These charges included $1.3 billion related to lease obligations and other real estate costs, $932 million in asset impairments, $934 million in employee severance and business transition costs and $260 million of IT transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three and six months ended February 29, 2024 and February 28, 2023, respectively, were as follows (in millions):

Three months ended February 29, 2024U.S. Retail PharmacyInternationalU.S. HealthcareCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$119 $1 $ $ $120 
Asset impairments25 14   39 
Employee severance and business transition costs29  3 1 33 
Information technology transformation and other exit costs3    3 
Total pre-tax exit and disposal charges$175 $16 $3 $1 $195 

Six months ended February 29, 2024U.S. Retail PharmacyInternationalU.S. HealthcareCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$155 $1 $ $ $156 
Asset impairments28 21   49 
Employee severance and business transition costs51  5 5 60 
Information technology transformation and other exit costs6 1   7 
Total pre-tax exit and disposal charges$240 $22 $5 $5 $272 

WBA Q2 2024 Form 10-Q
10


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Three months ended February 28, 2023U.S. Retail PharmacyInternationalU.S. HealthcareCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$20 $ $ $ $20 
Asset impairments96 (1)  95 
Employee severance and business transition costs11 1  3 15 
Information technology transformation and other exit costs4 5  (1)9 
Total pre-tax exit and disposal charges$131 $4 $ $2 $138 

Six months ended February 28, 2023U.S. Retail PharmacyInternationalU.S. HealthcareCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$98 $ $ $ $98 
Asset impairments115 (1)  113 
Employee severance and business transition costs22 2  7 31 
Information technology transformation and other exit costs16 10  (1)25 
Total pre-tax exit and disposal charges$250 $10 $ $6 $267 

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, 2023$10 $ $70 $22 $102 
Costs156 49 60 7 272 
Payments(75) (77)(16)(169)
Other(77)(49)  (126)
Balance at February 29, 2024$14 $ $52 $14 $80 

Other exit and disposal activities
During the three and six months ended February 29, 2024, VillageMD approved the closure of approximately 90 and 160 clinics, respectively. As a result, long-lived and intangible assets of $179 million and $303 million were impaired within the U.S. Healthcare segment, respectively. The impairment charges were recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings.

During the three months ended February 29, 2024, management ceased development of, and abandoned, a multi-year internal software development project within the U.S. Retail Pharmacy segment. As a result, previously capitalized internally-developed software of $455 million was impaired. The impairment charge was recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings.


WBA Q2 2024 Form 10-Q
11


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 10 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.

Supplemental balance sheet information related to leases was as follows (in millions):

Balance sheet supplemental information:February 29, 2024August 31, 2023
Operating leases:
Operating lease right-of-use assets$21,342 $21,667 
Operating lease obligations - current$2,339 $2,347 
Operating lease obligations - non-current 21,812 22,124 
Total operating lease obligations$24,151 $24,472 
Finance leases:
Right-of-use assets included in:
Property, plant and equipment, net$704 $678 
Lease obligations included in:
Accrued expenses and other liabilities$70 $57 
Other non-current liabilities934 919 
Total finance lease obligations$1,004 $976 

Supplemental income statement information related to leases was as follows (in millions):
Three months endedSix months ended
Statement of earnings supplemental information:February 29, 2024February 28, 2023February 29, 2024February 28, 2023
Operating lease cost
Fixed$871 $853 $1,739 $1,667 
Variable 1
210 203 424 395 
Finance lease cost
Amortization$13 $11 $32 $21 
Interest13 12 25 24 
Sublease income 2
$27 $28 $