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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, 2021
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 31, 2021 was 863,272,027.



WALGREENS BOOTS ALLIANCE, INC.

FORM 10-Q FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021

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.



















WBA Q1 2022 Form 10-Q
2

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, 2021August 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$4,135 $1,193 
Accounts receivable, net5,960 5,663 
Inventories9,475 8,159 
Other current assets745 800 
Total current assets20,314 15,814 
Non-current assets: 
Property, plant and equipment, net12,295 12,247 
Operating lease right-of-use assets21,826 21,893 
Goodwill21,520 12,421 
Intangible assets, net12,770 9,936 
Equity method investments (see Note 6)6,367 6,987 
Other non-current assets1,413 1,987 
Total non-current assets76,192 65,471 
Total assets$96,507 $81,285 
Liabilities, redeemable noncontrolling interest and equity  
Current liabilities:  
Short-term debt$2,647 $1,305 
Trade accounts payable (see Note 17)12,452 11,136 
Operating lease obligations2,266 2,259 
Accrued expenses and other liabilities6,973 7,260 
Income taxes110 94 
Total current liabilities24,447 22,054 
Non-current liabilities:  
Long-term debt11,199 7,675 
Operating lease obligations22,103 22,153 
Deferred income taxes1,970 1,850 
Other non-current liabilities3,422 3,413 
Total non-current liabilities38,694 35,091 
Commitments and contingencies (see Note 11)
Total liabilities63,141 57,145 
Redeemable noncontrolling interest2,787 319 
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, 2021 and August 31, 2021
12 12 
Paid-in capital10,966 10,988 
Retained earnings38,286 35,121 
Accumulated other comprehensive loss(2,301)(2,109)
Treasury stock, at cost; 308,671,242 shares at November 30, 2021 and 307,139,982 shares at August 31, 2021
(20,700)(20,593)
Total Walgreens Boots Alliance, Inc. shareholders’ equity26,263 23,419 
Noncontrolling interests4,316 402 
Total equity30,579 23,822 
Total liabilities, redeemable noncontrolling interest and equity$96,507 $81,285 
The accompanying notes to Consolidated Condensed Financial Statements are an integral part of these statements.

WBA Q1 2022 Form 10-Q
3


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



Three months ended November 30, 2021
Equity attributable to Walgreens Boots Alliance, Inc.
Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive income (loss)Retained earningsNoncontrolling interestsTotal equity
August 31, 2021865,373,636 $12 $(20,593)$10,988 $(2,109)$35,121 $402 $23,822 
Net earnings— — — — — 3,580 (27)3,552 
Other comprehensive income (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 
Noncontrolling interests contribution and other— — — 2 — — — 2 
November 30, 2021863,842,376 $12 $(20,700)$10,966 $(2,301)$38,286 $4,316 $30,579 

Three months ended November 30, 2020
 Equity attributable to Walgreens Boots Alliance, Inc.  
 Common stock sharesCommon stock amountTreasury stock amountPaid-in capitalAccumulated other comprehensive income (loss)Retained earningsNoncontrolling interestsTotal equity
August 31, 2020865,603,519 $12 $(20,575)$10,761 $(3,771)$34,210 $498 $21,136 
Net earnings (loss)— — — — — (308)9 (299)
Other comprehensive income (loss), net of tax— — — — 88 — 2 90 
Dividends declared and distributions— — — — — (405)— (405)
Treasury stock purchases(3,000,000)— (110)— — — — (110)
Employee stock purchase and option plans1,298,298 — 43 (39)— — — 4 
Stock-based compensation— — — 36 — — — 36 
Adoption of new accounting standards— — — — — (3)(3)(5)
Business combination— — — 117 — — — 117 
Noncontrolling interests contribution and other— — — 1 — — — 1 
November 30, 2020863,901,817 $12 $(20,642)$10,876 $(3,682)$33,495 $506 $20,563 

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


WBA Q1 2022 Form 10-Q
4


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



 Three months ended November 30,
 20212020
Sales$33,901 $31,438 
Cost of sales26,326 24,808 
Gross profit7,574 6,630 
Selling, general and administrative expenses6,391 5,792 
Equity earnings (loss) in AmerisourceBergen100 (1,373)
Operating income (loss)1,283 (535)
Other income2,617 63 
Earnings (loss) before interest and tax3,900 (472)
Interest expense, net86 136 
Earnings (loss) before tax3,814 (607)
Income tax provision (benefit)275 (207)
Post tax (loss) earnings from other equity method investments(7)15 
Net earnings (loss) from continuing operations3,531 (385)
Net earnings from discontinued operations 87 
Net earnings (loss)3,531 (299)
Net (loss) earnings attributable to noncontrolling interests - continuing operations(48)5 
Net earnings attributable to noncontrolling interests - discontinued operations 4 
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc.$3,580 $(308)
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc.:
Continuing operations$3,580 $(391)
Discontinued operations 83 
Total$3,580 $(308)
Basic net earnings (loss) per common share:  
Continuing operations$4.13 $(0.45)
Discontinued operations 0.10 
Total$4.13 $(0.36)
Diluted net earnings (loss) per common share:
Continuing operations$4.13 $(0.45)
Discontinued operations 0.10 
Total$4.13 $(0.36)
Weighted average common shares outstanding:  
Basic865.8 865.3 
Diluted867.6 865.3 

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


WBA Q1 2022 Form 10-Q
5


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



 Three months ended November 30,
 20212020
Comprehensive income:  
Net earnings (loss)$3,531 $(299)
Other comprehensive (loss) income, net of tax:  
Pension/postretirement obligations(5)11 
Unrealized gain on cash flow hedges1 4 
Net investment hedges 44 (7)
Movement on available for debt sale securities(96) 
Share of other comprehensive (loss) income of equity method investments(46)5 
Currency translation adjustments(94)80 
Total other comprehensive (loss) income(196)94 
Total comprehensive income (loss)3,336 (206)
Comprehensive (loss) income attributable to noncontrolling interests(51)14 
Comprehensive income (loss) attributable to Walgreens Boots Alliance, Inc.$3,387 $(220)

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


WBA Q1 2022 Form 10-Q
6

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 Three months ended November 30,
 20212020
Cash flows from operating activities:
  
Net earnings (loss)$3,531 $(299)
Adjustments to reconcile net earnings to net cash provided by operating activities:  
Depreciation and amortization500 475 
Deferred income taxes164 (348)
Stock compensation expense35 36 
Equity (earnings) loss from equity method investments(93)1,350 
Gain on previously held investment interests(2,576) 
Other95 (71)
Changes in operating assets and liabilities:  
Accounts receivable, net(127)(259)
Inventories(1,352)(1,225)
Other current assets(58)36 
Trade accounts payable1,335 1,398 
Accrued expenses and other liabilities(399)(105)
Income taxes79 132 
Other non-current assets and liabilities(36)74 
Net cash provided by operating activities1,099 1,195 
Cash flows from investing activities:
  
Additions to property, plant and equipment(454)(431)
Proceeds from sale-leaseback transactions202 231 
Business, investment and asset acquisitions, net of cash acquired(1,800)(77)
Other95 19 
Net cash (used for) investing activities(1,958)(259)
Cash flows from financing activities:
  
Net change in short-term debt with maturities of 3 months or less937 (347)
Proceeds from debt7,940 3,310 
Payments of debt(4,444)(2,807)
Stock purchases(154)(110)
Proceeds related to employee stock plans19 4 
Cash dividends paid(413)(405)
Other(7)4 
Net cash provided by (used for) financing activities3,877 (352)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(20)10 
Changes in cash, cash equivalents and restricted cash:
  
Net increase in cash, cash equivalents and restricted cash2,998 594 
Cash, cash equivalents and restricted cash at beginning of period1,270 746 
Cash, cash equivalents and restricted cash at end of period$4,268 $1,339 

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

WBA Q1 2022 Form 10-Q
7

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. 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, 2021, as amended by Form 10-K/A for the fiscal year ended August 31, 2021 filed on November 24, 2021.

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 including estimates of the impact of the COVID-19 pandemic (“COVID-19”). The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous factors discussed throughout this Quarterly Report on Form 10-Q including, but not limited to, the severity and duration of COVID-19, the extent to which it will impact our customers, team members, suppliers, vendors, business partners and distribution channels. The Company assessed certain accounting matters that require consideration of estimates and assumptions in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of November 30, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill, intangible and other long-lived assets including operating lease right-of-use assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods. 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, payer 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.

On June 1, 2021, the Company completed the sale of the majority of the Company's Alliance Healthcare business as well as a portion of the Company’s retail pharmacy international businesses in Europe (“Disposal Group”) to AmerisourceBergen Corporation (“AmerisourceBergen”). The Disposal Group met the criteria to be reported as discontinued operations. Therefore, the operating results of the Disposal Group are reported as discontinued operations for all prior periods.

Effective as of the first quarter of fiscal year 2022, the Company is aligned into three reportable segments: United States, International and Walgreens Health. Unless otherwise specified, disclosures in these Consolidated Condensed Financial Statements reflect continuing operations only. Certain prior period data, related to discontinued operations has been reclassified in the Consolidated Condensed Financial Statements and accompanying notes to conform to the current period presentation. See Note 2 Discontinued operations and Note 15 Segment reporting for further information.

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.



WBA Q1 2022 Form 10-Q
8

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Discontinued operations

On June 1, 2021, the Company completed the sale of Alliance Healthcare, for total consideration of $6.9 billion, which included cash consideration of $6.7 billion, subject to net working capital and net cash adjustments and 2 million shares of AmerisourceBergen common stock.

As of November 30, 2021, Other current assets include a $98 million receivable for purchase price consideration due from AmerisourceBergen that is subject to change upon the finalization of net working capital adjustments.

The operating results of the Disposal Group are reported as discontinued operations as the disposition reflected a strategic shift that has, or will have, a major effect on the Company’s operations and financial results.

Results of discontinued operations were as follows (in millions):
 Three months ended November 30, 2020
Sales$5,327 
Cost of sales4,818 
Gross profit509 
Selling, general and administrative expense415 
Operating income from discontinued operations94 
Other expense(2)
Interest expense, net(4)
Earnings before income tax – discontinued operations88 
Income tax provision8
Post tax earnings from other equity method investments7
Net earnings from discontinued operations$87 

Sales from the Disposal Group to the Company's continuing operations are not eliminated and aggregate to (in millions):
 Three months ended November 30, 2020
Sales$458 

Cash flows from operating and investing activities for discontinued operations are (in millions):
 Three months ended November 30, 2020
Cash used in operating activities - discontinued operations$(45)
Cash used for investing activities - discontinued operations(19)

See Note 17 Related parties, to the Consolidated Condensed Financial Statements for more information on the Company's transactions and continuing involvement with AmerisourceBergen.


WBA Q1 2022 Form 10-Q
9

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3. Acquisitions

VillageMD
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 comprises cash consideration of $4.0 billion and a promissory note of $1.2 billion. The cash consideration consisted of $2.9 billion to be paid to existing shareholders, after giving affect to the $1.9 billion tender offer described below, as well as $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 the promissory note at any time and VillageMD may require the Company to redeem the promissory note after February 1, 2022. The promissory note is eliminated in consolidation within the Consolidated Condensed Balance Sheets.

On November 24, 2021, VillageMD commenced a tender offer to purchase up to $1.9 billion of units in VillageMD for cash. As of November 30, 2021, the Company recorded the $1.9 billion as redeemable non-controlling interest. The tender offer was fully subscribed and settled on December 28, 2021. The tender offer was funded by cash proceeds provided to VillageMD pursuant to the Unit Purchase Agreement.

The Company accounted for this acquisition as a business combination resulting in consolidation of VillageMD within the Walgreens Health segment in its financial statements. A noncontrolling interest was recognized at fair value. As of November 30, 2021, the Company had not completed the analysis to assign fair values to all tangible and intangible assets acquired. 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.

As a result of this acquisition, the Company recognized a pre-tax gain in Other income 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 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 income.

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:
Total purchase price$5,200 
Less: purchase price for issuance of new preferred units at fair value 1
(2,300)
Net consideration$2,900 
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
$637 
Intangible assets1,982 
Liabilities(241)
Total identifiable net assets$2,378 
Goodwill$7,673 

WBA Q1 2022 Form 10-Q
10

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

1.Comprises 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.

The goodwill represents anticipated future growth and expansion opportunities into new markets. Pro forma sales and net earnings of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported.

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%, on a fully diluted basis, for cash consideration of $969 million, subject to certain purchase price adjustments.

The Company accounted for this acquisition as a business combination resulting in consolidation of Shields within the Walgreens Health segment in its financial statements. A noncontrolling interest was recognized at fair value. Under the terms of the transaction agreements, the Company has an option to acquire the remaining equity interests of Shields in the future. Shields’ other equity holders will also have an option to require the Company to purchase the remaining equity interests. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets.

As of November 30, 2021, the Company had not completed the analysis to assign fair values to all tangible and intangible assets acquired. As such, the preliminary purchase price allocation will be subject to further refinement and may result in changes. 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.

As a result of this acquisition, 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 in the Consolidated Condensed Statements of Earnings.

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$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 assets1,060 
Liabilities(528)
Total identifiable net assets$616 
Goodwill$1,457 

The goodwill represents anticipated future growth and expansion opportunities into new healthcare offerings. Pro forma sales and net earnings of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported.

WBA Q1 2022 Form 10-Q
11

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

See Note 15 Segment reporting and Note 16 Sales for further information.

Other acquisitions
The Company acquired certain prescription files and related pharmacy inventory primarily in the U.S. for the aggregate purchase price of $74 million and $38 million during the three months ended November 30, 2021 and 2020, respectively.

Note 4. 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’s Board of Directors approved an expansion and extension of the Transformational Cost Management Program through the end of fiscal 2024. As a result, the Company increased its annual cost savings target to $3.3 billion by the end of fiscal 2024.

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 United States 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. As a result of the expanded program, the Company plans to reduce its presence by up to 150 Boots stores in the UK and up to 150 stores in the United States over the next three years which are incremental to the previously planned reductions of approximately 200 Boots stores in the UK and approximately 250 stores in the United States.

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 these impacts, 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.

Since the inception of the Transformational Cost Management Program to November 30, 2021, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $1.5 billion, which were primarily recorded within selling, general and administrative expenses. These charges included $442 million related to lease obligations and other real estate costs, $292 million in asset impairments, $550 million in employee severance and business transition costs and $172 million of information technology transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three months ended November 30, 2021 and 2020, respectively, were as follows (in millions):
Three months ended November 30, 2021United StatesInternationalCorporate 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 


WBA Q1 2022 Form 10-Q
12

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Three months ended November 30, 2020United StatesInternationalCorporate and OtherWalgreens Boots Alliance, Inc.
Lease obligations and other real estate costs$22 $ $ $22 
Asset impairments4 (2) 1 
Employee severance and business transition costs12 28 12 52 
Information technology transformation and other exit costs10 (5) 5 
Total pre-tax exit and disposal charges$48 $21 $12 $81 

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, 2021$17 $ $77 $20 $114 
Costs89 40 37 9 175 
Payments(15) (51)(7)(74)
Other(72)(40)(3) (115)
Currency  (1) (1)
Balance at November 30, 2021$19 $ $59 $23 $101 

Note 5. Leases

The Company leases certain retail stores, clinics, warehouses, distribution centers, office space, land, and equipment. For the majority of leases in the U.S., the initial lease term is typically 15 to 25 years, followed by additional terms containing renewal options typically 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. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or 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 term of the lease. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales.

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

Balance Sheet supplemental information:November 30, 2021August 31, 2021
Operating Leases:
Operating lease right-of-use assets$21,826 $21,893 
Operating lease obligations - current2,266 2,259 
Operating lease obligations - non-current 22,103 22,153 
Total operating lease obligations$24,369 $24,412 
Finance Leases:
Right-of-use assets included in:
Property, plant and equipment, net$713 $725 
Lease obligations included in:
Accrued expenses and other liabilities37 37 
Other non-current liabilities963 974 
Total finance lease obligations$1,000 $1,010 

WBA Q1 2022 Form 10-Q
13

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Supplemental income statement information related to leases were as follows (in millions):
Three months ended November 30,
Statement of Earnings supplemental information:20212020
Operating lease cost
Fixed$805 $805 
Variable 1
205 158 
Finance lease cost
Amortization$11 $11 
Interest13 13 
Sublease income25 20 
Impairment of right-of-use assets68 10 
Gain on sale and leaseback 2
87 93 

1Includes real estate property taxes, common area maintenance, insurance and rental payments based on sales volume.
2Recorded within selling, general and administrative expenses.

Other supplemental information related to leases were as follows (in millions):
Three months ended November 30,
Other Supplemental Information:20212020
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from operating leases$846 $857 
Operating cash flows from finance leases12 12 
Financing cash flows from finance leases11 10 
Total$869 $879 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$544 $787 
Finance leases5  
Total$549 $787 

Average lease term and discount rate were as follows:
Weighted average terms and discount rates:November 30, 2021August 31, 2021
Weighted average remaining lease term in years:
Operating leases10.210.3
Finance leases20.120.2
Weighted average discount rate:
Operating leases4.75 %4.77 %
Finance leases5.18 %5.18 %


WBA Q1 2022 Form 10-Q
14

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The aggregate future lease payments for operating and finance leases as of November 30, 2021 were as follows (in millions):
Future lease payments:
Fiscal yearFinance leaseOperating lease