

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

(847) ~~315-2500~~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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	WBA	The NASDAQ Stock Market LLC

3.600% Walgreens Boots Alliance, Inc. notes due 2025	WBA25	The NASDAQ Stock Market LLC
2.125% Walgreens Boots Alliance, Inc. notes due 2026	WBA26	The 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).

Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐ ~~(Do not check if a smaller reporting company)~~			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 ~~the~~ 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 ~~Exchange~~ Act).

Yes ☐ No þ

The number of shares outstanding of the registrant’s Common Stock, ~~$.01~~$0.01 par value, as of ~~December 31, 2017~~February 28, 2023 was ~~990,668,837.~~862,795,720.

~~WALGREENS BOOTS ALLIANCE, INC.~~

~~FORM 10-Q FOR THE THREE MONTHS ENDED NOVEMBER 30, 2017~~

~~TABLE OF CONTENTS~~

~~PART I. FINANCIAL INFORMATION~~



WBA Q2 2023 Form 10-Q

Table of Contents

WALGREENS BOOTS ALLIANCE, INC.

FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2023

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

PART II. OTHER INFORMATION



Item 1.	Legal proceedings	4264
Item 1A.	Risk factors	4264
Item 2.	Unregistered sales of equity securities and use of proceeds	4264
Item 6.5.	~~Exhibits~~Other information	4464
Item 6.	Exhibits	65

~~Part~~


WBA Q2 2023 Form 10-Q

PART I. ~~Financial Information~~

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, 2017 August 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 1,830
$ 3,301
Accounts receivable, net 6,858
6,528
Inventories 10,010
8,899
Other current assets 983
1,025
Total current assets 19,681
19,753
Non-current assets:

Property, plant and equipment, net 13,693
13,642
Goodwill 15,931
15,632
Intangible assets, net 10,588
10,156
Equity method investments (see note 4) 6,028
6,320
Other non-current assets 697
506
Total non-current assets 46,937
46,256
Total assets $ 66,618
$ 66,009

Liabilities and equity

Current liabilities:

Short-term borrowings $ 1,268
$ 251
Trade accounts payable (see note 17) 13,570
12,494
Accrued expenses and other liabilities 5,183
5,473
Income taxes 496
329
Total current liabilities 20,517
18,547
Non-current liabilities:

Long-term debt 12,737
12,684
Deferred income taxes 2,319
2,281
Other non-current liabilities 4,289
4,223
Total non-current liabilities 19,345
19,188
Commitments and contingencies (see note 10)

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, 2017 and August 31, 2017 12
12
Paid-in capital 10,359
10,339
Retained earnings 30,560
30,137
Accumulated other comprehensive loss (2,543 ) (3,051 )
Treasury stock, at cost; 182,067,204 shares at November 30, 2017 and 148,664,548 at August 31, 2017 (12,459 ) (9,971 )
Total Walgreens Boots Alliance, Inc. shareholders’ equity 25,929
27,466
Noncontrolling interests 827
808
Total equity 26,756
28,274
Total liabilities and equity $ 66,618
$ 66,009


	February 28, 2023		August 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,088	$	1,358
Marketable securities	752		1,114
Accounts receivable, net	5,730		5,017
Inventories	8,757		8,353
Other current assets	1,362		1,059
Total current assets	17,689		16,902
Non-current assets:
Property, plant and equipment, net	11,576		11,729
Operating lease right-of-use assets	22,024		21,259
Goodwill	28,343		22,280
Intangible assets, net	13,864		10,730
Equity method investments (see Note 5)	4,069		5,495
Other non-current assets	2,913		1,730
Total non-current assets	82,790		73,222
Total assets	$	100,479	$	90,124

Liabilities, redeemable non-controlling interests and equity
Current liabilities:
Short-term debt	$	4,222	$	1,059
Trade accounts payable (see Note 16)	12,720		11,255
Operating lease obligations	2,340		2,286
Accrued expenses and other liabilities	8,822		7,899
Income taxes	124		84
Total current liabilities	28,228		22,583
Non-current liabilities:
Long-term debt	8,820		10,615
Operating lease obligations	22,195		21,517
Deferred income taxes	2,081		1,442
Accrued litigation obligations	6,365		551
Other non-current liabilities	3,193		3,009
Total non-current liabilities	42,654		37,134
Commitments and contingencies (see Note 10)
Total liabilities	70,882		59,717
Redeemable non-controlling interests	158		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 February 28, 2023 and August 31, 2022	12		12
Paid-in capital	10,629		10,950
Retained earnings	33,952		37,801
Accumulated other comprehensive loss	(2,654)		(2,805)
Treasury stock, at cost; 309,717,898 shares at February 28, 2023 and 307,874,161 shares at August 31, 2022	(20,747)		(20,683)
Total Walgreens Boots Alliance, Inc. shareholders’ equity	21,192		25,275
Non-controlling interests	8,247		4,091
Total equity	29,439		29,366
Total liabilities, redeemable non-controlling interests and equity	$	100,479	$	90,124

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


WBA Q2 2023 Form 10-Q			1

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(UNAUDITED)

~~For the three months ended November 30, 2017 and 2016~~(in millions, except shares)


Three months ended February 28, 2023
		Equity attributable to Walgreens Boots Alliance, Inc.
	Common stock shares	Common stock amount		Treasury stock amount		Paid-in capital		Accumulated other comprehensive loss		Retained earnings		Non-controlling interests		Total equity
November 30, 2022	862,342,235	$	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 plans	453,485	—		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, 2023	862,795,720	$	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 shares	Common stock amount		Treasury stock amount		Paid-in capital		Accumulated other comprehensive loss		Retained earnings		Non-controlling interests		Total equity
August 31, 2022	864,639,457	$	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 plans	2,594,491	—		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, 2023	862,795,720	$	12	$	(20,747)	$	10,629	$	(2,654)	$	33,952	$	8,247	$	29,439


WBA Q2 2023 Form 10-Q			2

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(UNAUDITED)

(in millions, except shares)

Equity attributable to Walgreens Boots Alliance, Inc.

Common stock
shares

Common
stock
amount

Treasury
stock
amount

Paid-in
capital

Employee
stock
loan
receivable

Accumulated
other
comprehensive
(loss) income

Retained
earnings

Noncontrolling
interests

Total
equity
August 31, 2017 1,023,849,070
$ 12
$ (9,971 ) $ 10,339
$ —
$ (3,051 ) $ 30,137
$ 808
$ 28,274
Net earnings —
—
—
—
—
—
821
1
822
Other comprehensive income, net of tax —
—
—
—
—
508
—
14
522
Dividends declared —
—
—
—
—
—
(398 ) —
(398 )
Treasury stock purchases (34,499,913 ) —
(2,525 ) —
—
—
—
—
(2,525 )
Employee stock purchase and option plans 1,097,257
—
37
(5 ) —
—
—
—
32
Stock-based compensation —
—
—
25
—
—
—
—
25
Noncontrolling interests contribution —
—
—
—
—
—
—
4
4
November 30, 2017 990,446,414
$ 12
$ (12,459 ) $ 10,359
$ —
$ (2,543 ) $ 30,560
$ 827
$ 26,756

Equity attributable to Walgreens Boots Alliance, Inc.

Common stock
shares

Common
stock
amount

Treasury
stock
amount

Paid-in
capital

Employee
stock
loan
receivable

Accumulated
other
comprehensive
(loss) income

Retained
earnings

Noncontrolling
interests

Total
equity
August 31, 2016 1,082,986,591
$ 12
$ (4,934 ) $ 10,111
$ (1 ) $ (2,992 ) $ 27,684
$ 401
$ 30,281
Net earnings —
—
—
—
—
—
1,054
13
1,067
Other comprehensive (loss), net of tax —
—
—
—
—
(818 ) —
(47 ) (865 )
Dividends declared —
—
—
—
—
—
(406 ) —
(406 )
Treasury stock purchases (5,600,000 ) —
(457 ) —
—
—
—
—
(457 )
Employee stock purchase and option plans 1,713,545
—
50
(5 ) 1
—
—
—
46
Stock-based compensation —
—
—
26
—
—
—
—
26
November 30, 2016 1,079,100,136
$ 12
$ (5,341 ) $ 10,132
$ —
$ (3,810 ) $ 28,332
$ 367
$ 29,692


Three months ended February 28, 2022
		Equity attributable to Walgreens Boots Alliance, Inc.
	Common stock shares	Common stock amount		Treasury stock amount		Paid-in capital		Accumulated other comprehensive loss		Retained earnings		Non-controlling interests		Total equity
November 30, 2021	863,842,376	$	12	$	(20,700)	$	10,966	$	(2,301)	$	38,286	$	4,316	$	30,579
Net earnings (loss)	—	—		—		—		—		883		(65)		818
Other comprehensive (loss) income, net of tax	—	—		—		—		(26)		—		3		(24)
Dividends declared and distributions	—	—		—		—		—		(413)		(6)		(419)
Treasury stock purchases	(730,250)	—		(33)		—		—		—		—		(33)
Employee stock purchase and option plans	661,338	—		21		(7)		—		—		—		14
Stock-based compensation	—	—		—		44		—		—		35		79
Acquisition of non-controlling interests	—	—		—		62		—		—		(116)		(55)
Redeemable non-controlling interests redemption price adjustments	—	—		—		(83)		—		—		—		(83)
Non-controlling interests contribution and other	—	—		—		(8)		—		—		—		(8)
February 28, 2022	863,773,464	$	12	$	(20,712)	$	10,973	$	(2,328)	$	38,757	$	4,166	$	30,867


Six months ended February 28, 2022
		Equity attributable to Walgreens Boots Alliance, Inc.
	Common stock shares	Common stock amount		Treasury stock amount		Paid-in capital		Accumulated other comprehensive loss		Retained earnings		Non-controlling interests		Total equity
August 31, 2021	865,373,636	$	12	$	(20,593)	$	10,988	$	(2,109)	$	35,121	$	402	$	23,822
Net earnings (loss)	—	—		—		—		—		4,463		(93)		4,370
Other comprehensive loss, net of tax	—	—		—		—		(220)		—		—		(220)
Dividends declared and distributions	—	—		—		—		—		(828)		(6)		(834)
Treasury stock purchases	(3,910,000)	—		(187)		—		—		—		—		(187)
Employee stock purchase and option plans	2,309,828	—		68		(66)		—		—		—		2
Stock-based compensation	—	—		—		80		—		—		35		115
Acquisition of non-controlling interests	—	—		—		62		—		—		(116)		(55)
Business combination	—	—		—		—		—		—		3,944		3,944
Redeemable non-controlling interests redemption price adjustments	—	—		—		(90)		—		—		—		(90)
February 28, 2022	863,773,464	$	12	$	(20,712)	$	10,973	$	(2,328)	$	38,757	$	4,166	$	30,867

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


WBA Q2 2023 Form 10-Q			3

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(UNAUDITED)

(in millions, except per share amounts)

Three months ended November 30,
2017 2016
Sales $ 30,740
$ 28,501
Cost of sales 23,399
21,385
Gross profit 7,341
7,116

Selling, general and administrative expenses 5,907
5,686
Equity earnings (loss) in AmerisourceBergen (112 ) 17
Operating income 1,322
1,447

Other income (expense) (137 ) 1
Earnings before interest and income tax provision 1,185
1,448

Interest expense, net 149
173
Earnings before income tax provision 1,036
1,275
Income tax provision 227
220
Post tax earnings from other equity method investments 13
12
Net earnings 822
1,067
Net earnings attributable to noncontrolling interests 1
13
Net earnings attributable to Walgreens Boots Alliance, Inc. $ 821
$ 1,054

Net earnings per common share:

Basic $ 0.82
$ 0.97
Diluted $ 0.81
$ 0.97

Dividends declared per share $ 0.400
$ 0.375

Weighted average common shares outstanding:

Basic 1,006.1
1,082.1
Diluted 1,011.1
1,088.3


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales	$	34,862	$	33,756	$	68,244	$	67,656
Cost of sales	27,807		26,047		54,236		52,374
Gross profit	7,055		7,708		14,008		15,283
Selling, general and administrative expenses	6,934		6,565		20,091		12,956
Equity earnings in AmerisourceBergen	75		103		129		202
Operating income (loss)	197		1,246		(5,954)		2,529
Other income (expense), net	552		(198)		1,544		2,418
Earnings (loss) before interest and income tax provision (benefit)	749		1,047		(4,410)		4,947
Interest expense, net	141		100		252		186
Earnings (loss) before income tax provision (benefit)	607		947		(4,662)		4,761
Income tax provision (benefit)	70		172		(1,377)		447
Post-tax earnings from other equity method investments	6		31		13		24
Net earnings (loss)	544		806		(3,272)		4,337
Net loss attributable to non-controlling interests	(159)		(78)		(253)		(126)
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc.	$	703	$	883	$	(3,018)	$	4,463

Net earnings (loss) per common share:
Basic	$	0.81	$	1.02	$	(3.50)	$	5.16
Diluted	$	0.81	$	1.02	$	(3.50)	$	5.15

Weighted average common shares outstanding:
Basic	862.6		863.5		863.1		864.6
Diluted	863.4		865.2		863.1		866.4

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


WBA Q2 2023 Form 10-Q			4

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in millions)

Three months ended November 30,
2017 2016
Comprehensive income:
Net earnings $ 822
$ 1,067

Other comprehensive income (loss), net of tax:

Pension/postretirement obligations —
(9 )
Unrealized gain on cash flow hedges —
1
Unrecognized loss on available-for-sale investments —
(1 )
Share of other comprehensive loss of equity method investments 2
(1 )
Currency translation adjustments 520
(855 )
Total other comprehensive income (loss) 522
(865 )
Total comprehensive income 1,344
202

Comprehensive income (loss) attributable to noncontrolling interests 15
(34 )
Comprehensive income attributable to Walgreens Boots Alliance, Inc. $ 1,329
$ 236


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Net earnings (loss)	$	544	$	806	$	(3,272)	$	4,337

Other comprehensive income (loss), net of tax:
Pension/post-retirement obligations	(5)		(8)		(10)		(13)
Unrealized (loss) gain on cash flow hedges	—		—		(2)		1
Net investment hedges (loss) gain	(43)		(20)		(73)		24
Movement on available for sale debt securities	(1)		—		(1)		(96)
Share of other comprehensive income (loss) of equity method investments	88		(80)		92		(125)
Currency translation adjustments	124		84		147		(10)
Total other comprehensive income (loss)	164		(24)		153		(220)

Total comprehensive income (loss)	707		782		(3,118)		4,117

Comprehensive loss attributable to non-controlling interests	(157)		(75)		(251)		(126)

Comprehensive income (loss) attributable to Walgreens Boots Alliance, Inc.	$	864	$	857	$	(2,868)	$	4,243

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


WBA Q2 2023 Form 10-Q			5

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)


	Three months ended November 30,							Six months ended February 28,
	2017			2016				2023		2022
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	822		$	1,067
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net (loss) earnings							Net (loss) earnings	$	(3,272)	$	4,337
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:							Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization	416			419			Depreciation and amortization	1,055		1,024
Deferred income taxes	(63		)	(61		)	Deferred income taxes	(1,600)		94
Stock compensation expense	25			26			Stock compensation expense	293		170
Equity (earnings) loss from equity method investments	99			(29		)
Earnings from equity method investments							Earnings from equity method investments	(143)		(226)
Gain on previously held investment interests							Gain on previously held investment interests	—		(2,576)
Gain on sale of equity method investments							Gain on sale of equity method investments	(1,512)		—
Impairment of equity method investments and investments in equity securities							Impairment of equity method investments and investments in equity securities	8		190
Other	152			81			Other	(383)		(60)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable, net	(362		)	(259		)	Accounts receivable, net	(221)		495
Inventories	(1,018		)	(1,330		)	Inventories	(237)		(803)
Other current assets	(154		)	(109		)	Other current assets	(107)		(37)
Trade accounts payable	1,011			884			Trade accounts payable	1,279		46
Accrued expenses and other liabilities	(222		)	(378		)	Accrued expenses and other liabilities	(684)		(476)
Income taxes	246			217			Income taxes	92		154
Accrued litigation obligations							Accrued litigation obligations	6,795		—
Other non-current assets and liabilities	9			(3		)	Other non-current assets and liabilities	(125)		(147)
Net cash provided by operating activities	961			525			Net cash provided by operating activities	1,239		2,184

Cash flows from investing activities:							Cash flows from investing activities:
Additions to property, plant and equipment	(378		)	(378		)	Additions to property, plant and equipment	(1,108)		(870)
Proceeds from sale leaseback transactions	—			436
Proceeds from sale-leaseback transactions							Proceeds from sale-leaseback transactions	942		475
Proceeds from sale of other assets	13			26			Proceeds from sale of other assets	3,261		33
Business and intangible asset acquisitions, net of cash acquired	(265		)	(15		)
Business, investment and asset acquisitions, net of cash acquired							Business, investment and asset acquisitions, net of cash acquired	(6,813)		(1,918)
Other	31			20			Other	134		99
Net cash (used for) provided by investing activities	(599		)	89

Net cash used for investing activities							Net cash used for investing activities	(3,583)		(2,181)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds and payments from short-term borrowings, net	1,026			49
Proceeds from issuance of debt	110			—
Net change in short-term debt with maturities of 3 months or less							Net change in short-term debt with maturities of 3 months or less	1,128		1,289
Proceeds from debt							Proceeds from debt	1,716		9,928
Payments of debt	(92		)	(4		)	Payments of debt	(1,530)		(7,331)
Acquisition of non-controlling interests							Acquisition of non-controlling interests	(1,039)		(2,108)
Proceeds from issuance of non-controlling interests							Proceeds from issuance of non-controlling interests	2,523		—
Stock purchases	(2,525		)	(457		)	Stock purchases	(150)		(187)
Proceeds related to employee stock plans	32			41
Proceeds related to employee stock plans, net							Proceeds related to employee stock plans, net	22		32
Cash dividends paid	(413		)	(406		)	Cash dividends paid	(829)		(833)
Other	5			(1		)	Other	(75)		(22)
Net cash used for financing activities	(1,857		)	(778		)

Effect of exchange rate changes on cash and cash equivalents	24			(45		)
Changes in cash and cash equivalents:
Net decrease in cash and cash equivalents	(1,471		)	(209		)
Cash and cash equivalents at beginning of period	3,301			9,807
Cash and cash equivalents at end of period	$	1,830		$	9,598
Net cash provided by financing activities							Net cash provided by financing activities	1,766		769
Effect of exchange rate changes on cash, cash equivalents, marketable securities and restricted cash							Effect of exchange rate changes on cash, cash equivalents, marketable securities and restricted cash	13		(16)
Changes in cash, cash equivalents, marketable securities and restricted cash:							Changes in cash, cash equivalents, marketable securities and restricted cash:
Net (decrease) increase in cash, cash equivalents, marketable securities and restricted cash							Net (decrease) increase in cash, cash equivalents, marketable securities and restricted cash	(566)		756
Cash, cash equivalents, marketable securities and restricted cash at beginning of period							Cash, cash equivalents, marketable securities and restricted cash at beginning of period	2,558		1,270
Cash, cash equivalents, marketable securities and restricted cash at end of period							Cash, cash equivalents, marketable securities and restricted cash at end of period	$	1,993	$	2,027

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


WBA Q2 2023 Form 10-Q			6

Table of Contents

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 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. Investments~~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 ~~subsidiaries in which~~companies if the ~~Company does not have a controlling interest, but does have~~investment provides the ability to exercise significant ~~influence, are accounted for as equity method investments.~~influence. All intercompany transactions have been eliminated.

The Consolidated Condensed ~~Balance Sheets as of November 30, 2017 and August 31, 2017, the Consolidated Condensed~~Financial Statements of Equity, the Consolidated Condensed Statements of Earnings, the Consolidated Condensed Statements of Comprehensive Income, and the Consolidated Condensed Statements of Cash Flows for the three months ended November 30, 2017 and 2016included 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 ~~of America~~ (“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, ~~2017.~~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 ~~has evaluated~~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 ~~events from the balance sheet date through the date the financial statements were issued~~periods to reflect more current estimates and ~~determined there were no subsequent events to disclose other than as disclosed in notes 5 and 19.~~assumptions about matters that are inherently uncertain. Actual results may differ.

In the opinion of ~~the Company,~~management, the unaudited Consolidated Condensed Financial Statements for the interim periods presented include all adjustments ~~(consisting only of normal recurring adjustments)~~ necessary to present a fair statement of the results for such interim periods. The impact of opioid-related claims and litigation settlements, COVID-19, the influence of certain holidays, seasonality, foreign currency rates, changes in vendor, ~~payer~~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. ~~With respect~~

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

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 leading 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 $86 million of cash paid to fund acquisition-related bonuses to Summit Health-CityMD employees which is recognized as 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 (“Cigna”) 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 2023 Form 10-Q			7

Table of Contents

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 senior secured credit facilities will 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. As of February 28, 2023, 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 amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):


Purchase price allocation:
Cash consideration 1	$	4,790
Deferred consideration	100
Summit debt paid at closing	1,963
Fair value of equity consideration	1,980
Total	$	8,833

Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	75
Accounts receivable, net	361

Property, plant and equipment	593
Intangible assets 2	3,359
Operating lease right-of-use assets	757
Other assets	192

Operating lease obligations	(773)
Deferred tax liability	(918)
Other liabilities	(507)
Total identifiable net assets	$	3,139

Goodwill	$	5,693

1.Cash considerations excludes $86 million of cash paid to fund acquisition-related bonuses to Summit employees which is recognized as compensation expense of the Company.

2.Intangibles acquired include provider networks and trade names with fair values of $1.9 billion and $1.5 billion, respectively. Estimated useful lives are 16 years and 11 to 15 years, respectively.

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


WBA Q2 2023 Form 10-Q			8

Table of Contents

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 and 2022, as if the acquisition of Summit had occurred at the beginning of each 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 acquisition occurred at the beginning of each period presented or results which may occur in the future.


	Three months ended February 28,				Six months ended February 28,
(Unaudited, in millions)	2023		2022		2023		2022
Sales	$	35,119	$	34,402	$	69,216	$	68,924

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 February 28,
(in millions)	2023
Sales	$	463

Pro forma 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.

VillageMD acquisition

On November 24, 2021, the Company completed the acquisition of VillageMD, national provider of value-based primary care services. 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 ~~Retail Pharmacy USA~~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 had an option to prepay, and VillageMD had an option to require redemption of, the promissory note at any time. The promissory note was eliminated in consolidation within the Consolidated Condensed Balance Sheet as of August 31, 2022. The promissory note was paid in January 2023 prior to the Summit acquisition.

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.

As a result of this acquisition, in the ~~positive impact~~three months ended November 30, 2021, the Company recognized a pre-tax gain in Other income (expense), 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 (expense), 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 ~~gross profit margins~~additional information, resulting in an increase to goodwill of $125 million.


WBA Q2 2023 Form 10-Q			9

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The following table summarizes the consideration for the acquisition and ~~gross profit dollars typically~~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 consideration	2,900
Fair value of share-based compensation awards attributable to pre-combination services 2	683
Fair value of previously held equity and debt	3,211
Fair value of non-controlling interests	3,257
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”), a specialty pharmacy integrator and accelerator for hospitals. 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.

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 (expense), 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.


WBA Q2 2023 Form 10-Q			10

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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 services	13
Fair value of previously held equity interests	502
Fair value of non-controlling interests	589
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 December 28, 2022 the Company acquired the remaining 30% equity interest in Shields for $1.4 billion of cash consideration.

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.

In the three and six months ended February 28, 2023, the Company recorded certain measurement period adjustments based on additional information, primarily related to acquired intangible assets and certain liabilities assumed, resulting in a decrease to goodwill of $6 million and an increase to goodwill of $56 million, respectively. As of February 28, 2023, 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.


WBA Q2 2023 Form 10-Q			11

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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 consideration	4
Fair value of share-based compensation awards attributable to pre-combination services	66
Fair value of non-controlling interests	217
Total	$	614

Identifiable assets acquired and liabilities assumed:
Tangible assets	$	358
Intangible assets 2	426
Liabilities	(680)
Total identifiable net assets	$	104

Goodwill	$	509

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 entered into a definitive agreement to acquire the remaining 45% equity interest of CareCentrix 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 - VillageMD, Shields and CareCentrix

The following table represents unaudited supplemental pro forma consolidated sales for the three and six months ended February 28, 2022, as if the acquisitions of VillageMD, Shields and CareCentrix had occurred at the beginning of each period. The unaudited pro forma information has been ~~significant~~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 each period presented or results which may occur in the ~~first several~~future.


	Three months ended February 28,		Six months ended February 28,
(Unaudited, in millions)	2022		2022
Sales	$	34,063	$	68,627

Actual sales of the acquired companies for the three and six months ~~after a generic version~~ended February 28, 2022, included in the Consolidated Condensed Statements of ~~a drug is first allowed to compete with the branded version, which is generally referred to~~Earnings are as ~~a “generic conversion”. In any given year, the number~~follows:


	Three months ended February 28,		Six months ended February 28,
(in millions)	2022		2022
Sales	$	527	$	577


WBA Q2 2023 Form 10-Q			12

Table of major brand name drugs that undergo a conversion from branded to generic status can increase or decrease, which can have a significant impact on the Company’s Retail Pharmacy USA segment’s sales, gross profit margins and gross profit dollars making the Company’s operations orContents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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.

Other acquisitions and investments

The Company acquired certain prescription files and related pharmacy inventory primarily in the United States (“U.S.”) for ~~any period incomparable.~~the aggregate purchase price of $35 million and $90 million during the three and six months ended February 28, 2023, respectively, and $42 million and $116 million during the three and six months ended February 28, 2022, respectively.

Note 2.3. 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 ~~24, 2017,~~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 ~~Board~~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 ~~Directors approved a plan to implement a program (the “Store Optimization Program”) as part of an initiative to optimize store locations~~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 ~~Retail Pharmacy USA segment upon completion~~segments includes activities such as optimization of ~~the acquisition of certain~~ stores, ~~and related assets from Rite Aid. The Store Optimization Program includes~~including plans to close approximately ~~600~~350 Boots stores in the United Kingdom (“UK”) and ~~related assets across~~approximately 450 to 500 stores in the U.S. ~~The actions under~~As of February 28, 2023, the ~~Store Optimization Program are expected to take place over an 18 month period beginning~~Company has closed 252 and 403 stores in ~~spring 2018.~~the UK and U.S., respectively.

The Company currently estimates that itthe Transformational Cost Management Program will ~~recognize~~result in cumulative pre-tax charges to its GAAP financial results of approximately ~~$450~~$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 ~~including costs associated~~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 28, 2023, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $2.2 billion, which were primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These charges included $700 million related to lease obligations and other real estate costs, $556 million in asset impairments, $754 million in employee severance and business transition costs and $228 million of information technology transformation and other exit costs. The Company expects to incur pre-tax charges of approximately $270 million for lease obligations and other real estate costs and approximately $180 million for employee severance and other exit costs. The Company estimates that substantially all of these cumulative pre-tax charges will result in future cash expenditures.

~~The Company did not incur any charges~~Costs related to exit and disposal activities under the ~~Store Optimization~~Transformational Cost Management Program for the three and six months ended ~~November 30, 2017.~~February 28, 2023 and 2022, respectively, were as follows (in millions):

~~On April 8, 2015, the Walgreens Boots Alliance Board~~


Three months ended February 28, 2023	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	20	$	—	$	—	$	20
Asset impairments	96		(1)		—		95
Employee severance and business transition costs	11		1		3		15
Information technology transformation and other exit costs	4		5		(1)		9
Total exit and disposal charges	$	131	$	4	$	2	$	138


WBA Q2 2023 Form 10-Q			13

Table of Directors approved a plan to implement a restructuring program (the “Cost Transformation Program”) as part of an initiative to reduce costs and increase operating efficiencies. The Cost Transformation Program implemented and built on the cost-reduction initiative previously announced by the Company on August 6, 2014 and included plans to close stores across the U.S.; reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions. The actions under the Cost Transformation Program focused primarily on the Retail Pharmacy USA segment, but included activities from all segments. The Company completed the Cost Transformation Program in the fourth quarter of fiscal 2017.Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


Six months ended February 28, 2023	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	98	$	—	$	—	$	98
Asset impairments	115		(1)		—		113
Employee severance and business transition costs	22		2		7		31
Information technology transformation and other exit costs	16		10		(1)		25
Total exit and disposal charges	$	250	$	10	$	6	$	267


Three months ended February 28, 2022	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	5	$	1	$	—	$	5
Asset impairments	1		3		—		4
Employee severance and business transition costs	36		—		5		41
Information technology transformation and other exit costs	1		4		—		5
Total exit and disposal charges	$	43	$	8	$	5	$	56


Six months ended February 28, 2022	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	91	$	3	$	—	$	95
Asset impairments	16		28		—		44
Employee severance and business transition costs	56		9		14		79
Information technology transformation and other exit costs	2		11		—		13
Total exit and disposal charges	$	166	$	51	$	14	$	231

The changes in ~~accrued expenses~~liabilities and ~~other liabilities~~assets related to the exit and disposal activities under Transformational Cost ~~Transformation~~Management Program ~~for the three months ended November 30, 2017~~ include the following (in millions):


	Lease obligations and other real estate costs		Asset Impairments		Employee severance and business transition costs		Information technology transformation and other exit costs		Total
Balance at August 31, 2022	$	10	$	—	$	76	$	27	$	113
Costs	98		113		31		25		267
Payments	(51)		—		(72)		(17)		(139)
Other	(57)		(113)		1		—		(170)
Balance at February 28, 2023	$	—	$	—	$	36	$	36	$	72

Real estate
costs

Severance and
other business
transition and
exit costs
Total
Balance at August 31, 2017 $ 521
$ 79
$ 600
Payments (42 ) (39 ) (81 )
Balance at November 30, 2017 $ 479
$ 40
$ 519

Note ~~3. Operating~~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. ~~The~~Lease 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~~straight line basis over the ~~term of the lease.~~lease term. In addition to minimum fixed rentals, some leases provide for contingent rentals based ~~upon a portion~~on sales volume.


WBA Q2 2023 Form 10-Q			14

Table of ~~sales.~~Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

~~The Company continuously evaluates its~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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


Balance Sheet supplemental information:	February 28, 2023		August 31, 2022
Operating leases:
Operating lease right-of-use assets	$	22,024	$	21,259

Operating lease obligations - current	2,340		2,286
Operating lease obligations - non-current	22,195		21,517
Total operating lease obligations	$	24,534	$	23,803

Finance leases:
Right-of-use assets included in:
Property, plant and equipment, net	$	694	$	645

Lease obligations included in:
Accrued expenses and other liabilities	53		37
Other non-current liabilities	931		899
Total finance lease obligations	$	984	$	936

Supplemental income statement information related to leases were as follows (in millions):


	Three months ended February 28,				Six months ended February 28,
Statement of Earnings supplemental information:	2023		2022		2023		2022
Operating lease cost
Fixed	$	853	$	815	$	1,667	$	1,619
Variable 1	203		197		395		402
Finance lease cost
Amortization	$	11	$	11	$	21	$	22
Interest	12		13		24		26

Sublease income	$	28	$	26	$	57	$	51
Impairment of right-of-use assets	4		3		71		71

Gain on sale and leaseback 2
U.S. Retail Pharmacy	$	211	$	148	$	384	$	235
International 3	132		—		148		—
Total gain on sale and leaseback 2	$	343	$	148	$	532	$	235

1Includes real estate portfolio in conjunction with its capital needs. Historically, the Company has entered into several sale-leaseback transactions. For the three months ended November 30, 2017, the Company did not record any proceeds from sale-leaseback transactions. For the three months ended November 30, 2016, the Company recorded proceeds from sale-leaseback transactions of $436 million.

~~The Company provides for future costs related to closed locations. The liability is~~property taxes, common area maintenance, insurance and rental payments based on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. During the three months ended November 30, 2017, the Company recorded charges of $39 million for facilities that were closed or relocated under long-term leases. This compares to $17 million for the three months ended November 30, 2016. These charges are reported in selling,sales volume.

2Recorded within Selling, general and administrative expenses inwithin the Consolidated Condensed Statements of Earnings.

3Includes gain on sale and leaseback related to Germany wholesale business of $132 million and $148 million for the three and six months ended February 2023, respectively, of which $24 million and $41 million related to the optimization of warehouse locations as part of acquisition integration activities.


WBA Q2 2023 Form 10-Q			15

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


	Six months ended February 28,
Other supplemental information:		2023		2022

Cash paid for amounts included in the measurement of lease obligations
Operating cash flows from operating leases		$	1,720	$	1,666
Operating cash flows from finance leases		22		23
Financing cash flows from finance leases		21		21
Total		$	1,763	$	1,710

Right-of-use assets obtained in exchange for new lease obligations
Operating leases		$	1,135	$	1,005
Finance leases		18		11
Total		$	1,154	$	1,016

Weighted average lease term and discount rate for real estate leases were as follows:


Weighted average lease terms and discount rates:	February 28, 2023		August 31, 2022
Weighted average remaining lease term in years
Operating leases	9.8		10.0
Finance leases	17.7		19.0

Weighted average discount rate
Operating leases	5.26	%	4.83	%
Finance leases	5.26	%	5.19	%

The ~~changes in reserve~~aggregate future lease payments for ~~facility closings~~operating and ~~related lease termination charges primarily in other non-current liabilities, include the following~~finance leases as of February 28, 2023 were as follows (in millions):

For the three months ended November 30, 2017 For the twelve months ended August 31, 2017
Balance at beginning of period $ 718
$ 466
Provision for present value of non-cancellable lease payments on closed facilities 29
344
Assumptions about future sublease income, terminations and changes in interest rates 1
13
Interest accretion 9
37
Cash payments, net of sublease income (61 ) (142 )
Balance at end of period $ 696
$ 718


Future lease payments (fiscal years):	Finance lease		Operating lease 1,2
2023 (Remaining period)	$	53	$	1,805
2024	105		3,555
2025	101		3,450
2026	98		3,361
2027	97		3,266
2028	88		3,108
Later	958		12,980
Total undiscounted minimum lease payments	$	1,501	$	31,524
Less: Present value discount	516		6,990
Lease liability	$	984	$	24,534

As1.Total undiscounted minimum lease payments include approximately $3.5 billion of ~~November 30, 2017,~~payments related to optional renewal periods that have not been contractually exercised, but are reasonably certain of being exercised.

2.Total undiscounted minimum lease payments exclude sublease rental income of approximately $600 million due to the Company ~~remains secondarily liable on 71 leases. The maximum potential undiscounted future payments are $318 million as~~under non-cancelable sublease terms.


WBA Q2 2023 Form 10-Q			16

Table of ~~November 30, 2017.~~Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4.5. Equity method investments

Equity method investments ~~as of November 30, 2017 and August 31, 2017,~~ were as follows (in millions, except percentages):


	February 28, 2023			August 31, 2022
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	2,563	17%	$	3,916	25%
Others	1,506		4% - 50%	1,579		8% - 50%
Total	$	4,069		$	5,495

November 30, 2017 August 31, 2017

Carrying
value

Ownership
percentage

Carrying
value

Ownership
percentage
AmerisourceBergen $ 4,895
26% $ 5,024
26%
Others 1,133
8% - 50% 1,296
8% - 50%
Total $ 6,028
$ 6,320

AmerisourceBergen investment

As of ~~November 30, 2017~~February 28, 2023 and August 31, ~~2017,~~2022, the Company owned ~~56,854,867~~33.7 million and 52.9 million shares of AmerisourceBergen Corporation (“AmerisourceBergen”) common ~~shares,~~stock, respectively, representing approximately ~~26%~~16.7% and 25.4% of its outstanding common stock based on the ~~outstanding~~share count publicly reported by AmerisourceBergen in its filings with the SEC.

On November 10, 2022, the Company sold 13.2 million shares of AmerisourceBergen common ~~stock.~~ stock through a registered public offering and a concurrent share repurchase by AmerisourceBergen for total consideration of approximately $2.0 billion. On December 13, 2022, the Company sold 6.0 million shares pursuant to Rule 144 and a concurrent share repurchase by AmerisourceBergen, for total consideration of approximately $984 million. These transactions resulted in the Company recording pre-tax gains of $969 million and $492 million, respectively, in Other income (expense), net in the Consolidated Condensed Statements of Earnings, including $110 million and $40 million, respectively, of losses reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings attributable to the Company’s investment being classified within the operating income of its ~~Pharmaceutical Wholesale~~U.S. Retail Pharmacy segment. Due to the timing and availability of financial information of AmerisourceBergen, the Company accounts for this equity method investment on a financial reporting lag of two months. ~~Equity earnings from AmerisourceBergen is reported as a separate line in the Consolidated Condensed Statements of Earnings.~~

The ~~level~~Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at ~~November 30, 2017 is $4.8 billion.~~

~~The~~February 28, 2023 and August 31, 2022 was $5.2 billion and $7.7 billion, respectively. As of February 28, 2023 the carrying value of the Company’s investment in AmerisourceBergen ~~carrying value~~ exceeded its proportionate share of the net assets of AmerisourceBergen by ~~$4.4~~$2.6 billion. This premium of ~~$4.4~~$2.6 billion was recognized as part of the carrying value in the Company’s equity investment in AmerisourceBergen. The difference was primarily related to goodwill and the fair value of AmerisourceBergen intangible assets.

Other investments

The Company’s other equity method investments primarily include its U.S. investments in Option Care Health, through its subsidiary HC Group Holdings I, LLC, and BrightSpring Health Services, and the Company’s investments in China in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd and Nanjing Pharmaceutical Company Limited. On December 15, 2022, the Company sold its ownership interest in Guangzhou Pharmaceuticals Corporation ~~(“Guangzhou Pharmaceuticals”) and Nanjing Pharmaceutical Corporation Limited,~~for total consideration of approximately $150 million. On March 3, 2023, the ~~Company’s pharmaceutical wholesale investments~~Company sold approximately 13.0 million shares of Option Care Health common stock in ~~China; and~~an underwritten secondary offering along with a concurrent share repurchase by Option Care Health of approximately 2.5 million shares for a total consideration of approximately $469 million, decreasing the ~~equity method investment retained through the sale of a majority~~Company's ownership interest in Option Care ~~Inc. in fiscal 2015.~~Health from approximately 14.4 percent to 6.0 percent.

~~The Company reported $13 million and $12 million of post-tax equity earnings from equity method investments other than AmerisourceBergen for~~During the three months ended November 30, ~~2017 and 2016, respectively. During the three months period ended November 30, 2017,~~2021, the Company ~~recorded an impairment~~acquired majority equity interests in VillageMD and Shields, both formerly accounted for as equity method investments. The Company accounted for these acquisitions as business combinations resulting in the remeasurement of ~~$170~~its previously held minority equity interests and convertible debt securities at fair value resulting in pre-tax gains of $2.2 billion and $402 million for VillageMD and Shields, respectively, recognized in ~~its equity interest in Guangzhou Pharmaceuticals, which was included in other~~Other income (expense), net in the Consolidated Condensed Statements of Earnings. ~~The fair value~~As a result of ~~the Company's equity interest in Guangzhou Pharmaceuticals was determined using the proposed sale price and thus represents Level 3 measurement.~~

~~Note 5. Acquisitions~~

~~Acquisition of certain Rite Aid Corporation (~~“~~Rite Aid~~”~~) assets~~

~~On September 19, 2017,~~these transactions, the Company ~~announced that it had secured regulatory clearance for an amended~~consolidated VillageMD and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid for $4.375 billion in cash and other consideration. During the quarter, the Company purchased 97 stores for total cash consideration of $241 million. Ownership of the remaining stores is expected to be transferred in phases in fiscal 2018. These transfers remain subject to closing conditions set forth in the amended and restated asset purchase agreement and will be accounted for as business combinations.

As of November 30, 2017, the Company had not completed the analysis to assign fair values to all tangible and intangible assets acquired and therefore the purchase price allocation has not been completed.

Pro forma net earnings and sales of the Company, assuming the acquired stores had occurred at the beginning of each period presented, would not be materially different from the results reported. The acquired stores did not have a material impact on net earnings or sales of the Company for the three months ended November 30, 2017.

~~From December 1, 2017 through the date of this report, the Company purchased 260 additional stores for total cash consideration of $474 million.~~

~~AllianceRx Walgreens Prime~~

On March 31, 2017, Walgreens Boots Alliance and pharmacy benefit manager Prime Therapeutics LLC (“Prime”) closed a transaction to form a combined central specialty pharmacy and mail services company AllianceRx Walgreens Prime, as part of a strategic alliance. AllianceRx Walgreens Prime is consolidated by Walgreens Boots Alliance and reportedShields within the ~~Retail Pharmacy USA~~U.S. Healthcare segment in its financial statements. ~~The~~During the three months ended February 28, 2022, the Company ~~accounted for this acquisition~~recognized an other-than-temporary impairment of ~~Prime’s specialty pharmacy and mail services business as a business combination involving non-cash purchase consideration of $720~~$124 million ~~consisting of the issuance of~~related to an equity ~~interest~~method investment in ~~AllianceRx Walgreens Prime.~~China. The impairment was derived using Level 3 inputs, including financial projections and market multiples of comparable companies.

As of November 30, 2017, the Company had not completed the analysis to determine the fair value of the consideration acquired or to assign fair values to all tangible and intangible assets acquired, and therefore the purchase price allocation has not been completed. The preliminary purchase price allocation will be subject to further refinement and may result in material

changes. These changes will primarily relate to the allocation of consideration and the fair value assigned to all tangible and intangible assets acquired and identified. 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).

Total consideration $ 720

Identifiable assets acquired and liabilities assumed
Accounts receivable $ 217
Inventories 149
Property, plant and equipment 11
Intangible assets 331
Trade accounts payable (90 )
Accrued expenses and other liabilities (1 )
Total identifiable net assets 617
Goodwill $ 103


WBA Q2 2023 Form 10-Q			17

~~The preliminary identified intangible assets primarily include payer contracts. These contracts are estimated to have a weighted average useful life~~

Table of 15 years. The preliminary goodwill of $103 million arising from the transaction consists of expected purchasing synergies, operating efficiencies by benchmarking performance and applying best practices across the combined company, consolidation of operations, reductions in selling, general and administrative expenses and combining workforces. Substantially all of the goodwill recognized is not expected to be deductible for income tax purposes.Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

In accordance with ASC Topic 810, Consolidation, the noncontrolling interest was recognized based on its proportionate interest in the identifiable net assets of AllianceRx Walgreens Prime. The difference between the carrying amount of the noncontrolling interest and the fair value recognized as consideration in the business combination is recognized as additional paid in capital.NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Goodwill and other intangible assets

Goodwill and indefinite-lived intangible assets are evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value.

Based on the analysis completed during fiscal 2022, as of the June 1, 2022 valuation date, the fair values of the Company’s reporting units exceeded their carrying amounts ranging from approximately 7% to approximately 198%. The Boots reporting unit's fair value was in excess of its carrying value by approximately 7%, compared to 18% as of June 1, 2021. As of February 28, 2023 and August 31, 2022, the carrying value of goodwill within the Boots reporting unit was $940 million and $906 million, respectively.

The fair values of indefinite-lived intangibles within the Boots reporting unit approximate their carrying values. As of February 28, 2023 and August 31, 2022, the carrying value of the indefinite-lived intangibles within the Boots reporting unit was $5.6 billion and $5.5 billion, respectively.

Indefinite-lived intangible assets fair values are estimated using the relief from royalty method and excess earnings method of the income approach. The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions with respect to the business and financial performance of the Company’s reporting units. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions, could have a significant impact on either the fair value of the reporting units and indefinite-lived intangibles, the amount of any goodwill and indefinite-lived intangible impairment charges, or both. These estimates can be affected by a number of factors including, but not limited to, the impact of COVID-19, its severity, duration and its impact on global economies, general economic conditions, as well as our profitability. The Company will continue to monitor these potential impacts and economic, industry and market trends, and the impact these may have on the reporting units.

Changes in the carrying amount of goodwill by reportable segment consist of the following (in millions):


Goodwill roll forward:	U.S. Retail Pharmacy		International		U.S. Healthcare		Walgreens Boots Alliance, Inc.
August 31, 2022	$	10,947	$	1,293	$	10,040	$	22,280
Acquisitions	—		—		5,735		5,735
Adjustments 1	—		—		252		252
Currency translation adjustments	—		76		—		76
February 28, 2023	$	10,947	$	1,369	$	16,027	$	28,343

1Includes measurement period adjustments related to acquisition of VillageMD, Shields and CareCentrix. See Note 2. Acquisitions and other investments for further information.

Retail
Pharmacy USA

Retail
Pharmacy
International

Pharmaceutical
Wholesale

Walgreens
Boots
Alliance, Inc.
August 31, 2017 $ 9,139
$ 3,392
$ 3,101
$ 15,632
Acquisitions 101
—
—
101
Currency translation adjustments —
103
95
198
November 30, 2017 $ 9,240
$ 3,495
$ 3,196
$ 15,931


WBA Q2 2023 Form 10-Q			18

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The carrying amount and accumulated amortization of intangible assets consist of the following (in millions):


Intangible assets:	February 28, 2023		August 31, 2022
Gross amortizable intangible assets
Customer relationships and loyalty card holders 1	$	4,466	$	4,619
Provider networks	3,099		1,247
Trade names and trademarks	2,271		760
Developed technology	442		436
Others	95		93
Total gross amortizable intangible assets	$	10,373	$	7,155

Accumulated amortization
Customer relationships and loyalty card holders 1	$	1,574	$	1,548
Provider networks	126		64
Trade names and trademarks	301		246
Developed technology	92		56
Others	43		39
Total accumulated amortization	2,136		1,953
Total amortizable intangible assets, net	$	8,237	$	5,202

Indefinite-lived intangible assets
Trade names and trademarks	$	4,397	$	4,319
Pharmacy licenses	1,231		1,209
Total indefinite-lived intangible assets	$	5,628	$	5,528

Total intangible assets, net	$	13,864	$	10,730

November 30, 2017 August 31, 2017
Gross amortizable intangible assets
Customer relationships and loyalty card holders $ 1,910
$ 1,851
Purchased prescription files 716
659
Favorable lease interests and non-compete agreements 499
523
Trade names and trademarks 513
504
Purchasing and payer contracts 390
391
Total gross amortizable intangible assets 4,028
3,928

Accumulated amortization

Customer relationships and loyalty card holders $ 397
$ 409
Purchased prescription files 420
371
Favorable lease interests and non-compete agreements 335
355
Trade names and trademarks 169
155
Purchasing and payer contracts 57
51
Total accumulated amortization 1,378
1,341
Total amortizable intangible assets, net $ 2,650
$ 2,587

Indefinite lived intangible assets

Trade names and trademarks $ 5,783
$ 5,514
Pharmacy licenses 2,155
2,055
Total indefinite lived intangible assets $ 7,938
$ 7,569

Total intangible assets, net $ 10,588
$ 10,156
1Includes purchased prescription files.

Amortization expense for intangible assets was ~~$96~~$199 million and ~~$95~~$357 million for the three and six months ended ~~November 30, 2017~~

February 28, 2023, respectively and ~~2016,~~$175 million and $340 million for the three and six months ended February 28, 2022, respectively.

Estimated future annual amortization expense for the next five fiscal years for intangible assets recorded at ~~November 30, 2017~~February 28, 2023 is as follows (in millions):


	2023 (Remaining period)		2024		2025		2026		2027		2028
Estimated annual amortization expense	$	431	$	846	$	814	$	796	$	733	$	674

2019 2020 2021 2022 2023
Estimated annual amortization expense $ 350
$ 295
$ 244
$ 218
$ 197


WBA Q2 2023 Form 10-Q			19

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. ~~Borrowings~~Debt

~~Borrowings consist~~

Debt carrying values are presented net of unamortized discount and debt issuance costs, where applicable, and foreign currency denominated debt is translated using the spot rates as of the balance sheet date. Debt consists of the following (all amounts are presented in millions of U.S. dollars and debt issuances are denominated in U.S. dollars, unless otherwise noted):


	February 28, 2023		August 31, 2022
Short-term debt
Commercial paper 1	$	1,296	$	—
Credit facilities 1
Unsecured 364-day credit facility due 2023	—		1,000
Unsecured two-year credit facility due 2023	1,999		—
$850 million note issuance 1
0.9500% unsecured notes due 2023	849		—
Other 2	79		59
Total short-term debt	$	4,222	$	1,059

Long-term debt
Credit facilities 1
Unsecured two-year credit facility due 2023	$	—	$	1,998
Unsecured three-year credit facility due 2024	999		999
Unsecured three-year credit facility due 2026	999		—
$850 million note issuance 1
0.9500% unsecured notes due 2023	—		848
$1.5 billion note issuance 1
3.200% unsecured notes due 2030	498		498
4.100% unsecured notes due 2050	792		792
$6 billion note issuance 1
3.450% unsecured notes due 2026	1,443		1,443
4.650% unsecured notes due 2046	318		318
$8 billion note issuance 1
3.800% unsecured notes due 2024	1,155		1,155
4.500% unsecured notes due 2034	301		301
4.800% unsecured notes due 2044	869		869
£700 million note issuance 1
3.600% unsecured pound sterling notes due 2025	361		354
€750 million note issuance 1
2.125% unsecured euro notes due 2026	799		752
$4 billion note issuance 3
4.400% unsecured notes due 2042	263		263
Other 2	23		26
Total long-term debt, less current portion	$	8,820	$	10,615

1Notes, borrowings under credit facilities and commercial paper are unsecured and unsubordinated debt obligations of the Company and rank equally in right of payment with all other unsecured and unsubordinated indebtedness of the Company from time to time outstanding.

2Other debt represents a mix of fixed and variable rate debt with various maturities and working capital facilities denominated in various currencies.

November 30, 2017 August 31, 2017
Short-term borrowings ¹

Commercial paper $ 990
$ —
Other ²
278
251
Total short-term borrowings $ 1,268
$ 251

Long-term debt ¹

$6 billion note issuance ^3,4

3.450% unsecured notes due 2026 $ 1,887
$ 1,887
4.650% unsecured notes due 2046 590
590
$8 billion note issuance ^3,4

2.700% unsecured notes due 2019 1,247
1,246
3.300% unsecured notes due 2021 1,244
1,244
3.800% unsecured notes due 2024 1,989
1,988
4.500% unsecured notes due 2034 495
495
4.800% unsecured notes due 2044 1,492
1,492
£700 million note issuance ^3,4

2.875% unsecured pound sterling notes due 2020 538
513
3.600% unsecured pound sterling notes due 2025 403
384
€750 million note issuance ^3,4

2.125% unsecured euro notes due 2026 888
884
$4 billion note issuance ^4,7

3.100% unsecured notes due 2022 1,195
1,195
4.400% unsecured notes due 2042 492
492
$1 billion note issuance ^4,7

5.250% unsecured notes due 2019 ⁵
249
250
Other ⁶
28
24
Total long-term debt, less current portion $ 12,737
$ 12,684


¹ WBA Q2 2023 Form 10-Q			Carry values are presented net of unamortized discount and debt issuance costs, where applicable, and foreign currency denominated borrowings have been translated using the spot rates at November 30, 2017 and August 31, 2017 respectively.

20
²	~~Other short-term borrowings represent a mix of fixed and variable rate borrowings with various maturities and working capital facilities denominated in various currencies.~~


³	Notes are unsubordinated debt obligations of Walgreens Boots Alliance and rank equally in right of payment with all other unsecured and unsubordinated indebtedness of Walgreens Boots Alliance from time to time outstanding.

⁴

The issuances of the $6 billion, $8 billion, £0.7 billion, €0.75 billion, $4 billion and $1 billion notes as of November 30, 2017 had fair values and carrying values of $2.5 billion and $2.5 billion, $6.7 billion and $6.5 billion, $1.0 billion and $0.9 billion, $0.9 billion and $0.9 billion, $1.7 billion and $1.7 billion, and $0.3 billion and $0.2 billion, respectively. The fair values of the notes outstanding are level 1 fair value measures and determined based on quoted market price and translated at the November 30, 2017 spot rate, as applicable. The fair values and carrying values of these issuances do not include notes that have been redeemed or repaid as of November 30, 2017.


⁵	~~Includes interest rate swap fair market value adjustments. See note 9, fair value measurements for additional fair value disclosures.~~


⁶	~~Other long-term debt represents a mix of fixed and variable rate borrowings in various currencies with various maturities.~~

⁷

~~Notes are senior debt obligations of Walgreen Co. and rank equally with all other unsecured and unsubordinated indebtedness of Walgreen Co. On December 31, 2014, Walgreens Boots Alliance~~

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

3Notes are senior debt obligations of Walgreen Co. and rank equally with all other unsecured and unsubordinated indebtedness of Walgreen Co. On December 31, 2014, the Company fully and unconditionally guaranteed the outstanding notes on an unsecured and unsubordinated basis. The guarantee, for so long as it is in place, is an unsecured, ~~and unsubordinated basis. The guarantee, for so long as it is in place, is an unsecured,~~

unsubordinated debt obligation of ~~Walgreens Boots Alliance~~the Company and will rank equally in right of payment with all other unsecured and unsubordinated indebtedness of ~~Walgreens Boots Alliance.~~the Company.

~~August 2017 Credit Agreements~~$850 million Note Issuance

On ~~August 24, 2017,~~November 17, 2021, the Company issued, in an underwritten public offering, $850 million of 0.95% Notes due 2023. The Notes contain a call option which allow for the Notes to be repaid, in full or in part, at 100% of the principal amount of the Notes to be redeemed, in each case plus accrued and unpaid interest.

Credit facilities

December 2022 Delayed Draw Term Loan

On December 19, 2022, the Company entered into a $1.0 billion senior unsecured delayed draw term loan credit agreement (the “December 2022 DDTL”). Borrowings under the December 2022 DDTL bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate, the term Secured Overnight Financing Rate (“SOFR”) or the daily SOFR, in each case, plus an applicable margin. The applicable margin is in each case based on the rating of the Company’s corporate debt obligations as determined by Moody’s or S&P. The December 2022 DDTL was drawn for the purpose of funding the consideration due for the purchase of Summit and paying fees and expenses related to it. The December 2022 DDTL matures on January 3, 2026. As of February 28, 2023, there were $1.0 billion in borrowings outstanding under the December 2022 DDTL. Amounts borrowed under the December 2022 DDTL and repaid or prepaid may not be reborrowed.

June 17, 2022, Revolving Credit Agreements

On June 17, 2022, the Company entered into a $3.5 billion unsecured five-year revolving credit ~~agreement~~facility and a $1.5 billion unsecured 18-month revolving credit facility, with ~~the~~designated borrowers from time to time party thereto and lenders from time to time party thereto (the ~~“August 2017~~“2022 Revolving Credit ~~Agreement”~~Agreements”). Interest on borrowings under the revolving credit facilities accrues at applicable margins based on the Company's Index Debt Rating and ~~a $1.0 billion term loan credit agreement with Sumitomo Mitsui Banking Corporation (the “2017 Term Loan Credit Agreement”~~ranges from 80 basis points to 150 basis points over specified benchmark rates for eurocurrency rate and ~~together with~~SOFR loans, as applicable. Additionally, the ~~August 2017 Revolving Credit Agreement,~~Company pays commitment fees to maintain the ~~“August 2017 Credit Agreements”).~~

~~The August 2017 Revolving Credit Agreement is an unsecured~~availability under the revolving credit facility ~~with a facility~~at applicable fee rates based upon certain criteria at an annual rate on the unutilized portion of the total credit commitment. The five-year facility’s termination date ~~of the~~is June 17, 2027, or earlier, ~~of (a) January 31, 2019,~~ subject to ~~any extension thereof pursuant~~the Company's discretion to terminate the agreement. The 18-month facility’s termination date is December 15, 2023, or earlier, subject to the ~~terms of~~Company's discretion to terminate the August 2017 Revolving Credit Agreement and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder. The 2017 Term Loan Credit Agreement is an unsecured “multi-draw” term loan facility maturing on March 30, 2019. The aggregate commitments of Sumitomo Mitsui Banking Corporation under the 2017 Term Loan Credit Agreement are initially equal to $1.0 billion, which shall be reduced on June 1, 2018 to the lesser of $500 million and the aggregate remaining undrawn commitments thereunder. Any remaining undrawn commitments thereunder and the ability of the Company to request loans under such commitments shall terminate on September 1, 2018.agreement. As of ~~November 30, 2017, Walgreens Boots Alliance had $30 million of borrowings outstanding under the 2017 Term Loan Credit Agreement and~~February 28, 2023, there were no borrowings outstanding under the ~~August 2017~~2022 Revolving Credit ~~Agreement.~~Agreements.

~~February 2017 Revolving Credit Agreement~~November 2021 Delayed Draw Term Loan

On ~~February 1, 2017,~~November 15, 2021, the Company entered into a $5.0 billion senior unsecured multi-tranche delayed draw term loan credit facility, (the “November 2021 DDTL”) consisting of (i) a 364-day senior unsecured delayed draw term loan facility in an aggregate principal amount of $2.0 billion (the “364-day loan”), (ii) a two-year senior unsecured delayed draw term loan facility in an aggregate principal amount of $2.0 billion (the “two-year loan”) and (iii) a three-year senior unsecured delayed draw term loan facility in an aggregate principal amount of $1.0 billion ~~revolving credit facility (as amended,~~(the “three-year loan”). An aggregate amount of $3.0 billion or more of the ~~“February 2017 Revolving Credit Agreement”) with~~November 2021 DDTL was drawn for the ~~lenders from time~~purpose of funding the consideration due for the purchase of the increased equity interest in VillageMD, and paying fees and expenses related to ~~time party thereto~~the foregoing, and the remainder can be used for general corporate purposes. The maturity dates on ~~August 1, 2017,~~the 364 days loan, the two-year loan and the three-year loan are February 15, 2023, November 24, 2023 and November 24, 2024, respectively. On February 14, 2023, the Company ~~entered into an amendment agreement thereto. The terms and conditions of~~repaid the February 2017 Revolving Credit Agreement were unchanged by the amendment other than the extension of the facility termination date to the earlier of (a) January 31, 2019 and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder.364 days loan. As of ~~November 30, 2017,~~February 28, 2023, there were no$3.0 billion in borrowings outstanding under the ~~February 2017 Revolving Credit Agreement.~~

~~$6.0 billion note issuance~~

On June 1, 2016, Walgreens Boots Alliance received net proceeds of $6.0 billion from a public offering of five series of U.S. dollar notes with varying maturities and interest rates. Because the merger with Rite Aid was not consummated on or prior to June 1, 2017, the 2018 notes, theNovember 2021 ~~notes and the 2023 notes were redeemed on June 5, 2017~~DDTL. Amounts borrowed under the ~~special mandatory redemption terms of~~November 2021 DDTL and repaid or prepaid may not be reborrowed.

Borrowings under the ~~indenture governing such notes. Walgreens Boots Alliance was required to redeem all of the 2018 notes, the~~November 2021 ~~notes and the 2023 notes then outstanding,~~DDTL bear interest at a ~~special mandatory redemption price~~fluctuating rate per annum equal to, ~~101% of~~at the ~~aggregate principal amount of such notes, plus accrued~~Company’s option, the alternate base rate, eurocurrency rate or, from and ~~unpaid interest of approximately $1 million to, but excluding,~~after the date that daily SOFR becomes available, the daily SOFR, plus an applicable margin. For the 364-day tranche, the applicable margin was approximately 0.75%. For the 2-year and 3-year tranche, the applicable margin is 0.85% and 1.00%, respectively.


WBA Q2 2023 Form 10-Q			21

Table of ~~redemption. The 2026 notes and 2046 notes remain outstanding in accordance with their respective terms and are subject to redemption in certain circumstances.~~Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Debt covenants

Each of the Company’s credit facilities described above contain a covenant to maintain, as of the last day of each fiscal quarter, a ratio of consolidated debt to total capitalization not to exceed 0.60:~~1.00.~~1.00, subject to increase in certain circumstances set forth in the applicable credit agreement. The credit facilities contain various other customary covenants. As of February 28, 2023, the Company was in compliance with all such applicable covenants.

Commercial paper

The Company periodically borrows under its commercial paper program and may borrow under it in future periods. The Company had average daily ~~short-term borrowings of $620 million of~~ commercial paper outstanding of $1.0 billion and $1.1 billion at a weighted average interest rate of ~~1.46%~~5.04% and 0.33% for the ~~three~~six months ended ~~November 30, 2017. The~~February 28, 2023 and 2022, respectively.

Interest

Interest paid by the Company ~~had no activity under its commercial paper program~~was $288 million and $211 million for the ~~twelve~~six months ended ~~August 31, 2017.~~February 28, 2023 and 2022, respectively.

Note 8. Financial instruments

The Company uses derivative instruments to ~~manage~~hedge its exposure to market risks, including interest rate and ~~foreign~~ currency ~~exchange~~risks, arising from operating and financing risks.

~~The notional amounts, fair value and balance sheet presentation of derivative instruments outstanding as of November 30, 2017 and August 31, 2017 are as follows (in millions):~~

November 30, 2017 August 31, 2017

Notional ¹
Fair value
Notional ¹
Fair value
Location in Consolidated
Condensed Balance Sheets
Derivatives designated as hedges:
Interest rate swaps $ —
$ —
$ 250
$ —
Other non-current assets
Interest rate swaps 250
1
—
—
Other non-current liabilities
Foreign currency forwards —
—
24
—
Other current assets
Derivatives not designated as hedges:
Foreign currency forwards 139
3
221
—
Other current assets
Foreign currency forwards 3,064
15
2,816
19
Other current liabilities


¹	~~Amounts are presented in U.S. dollar equivalents, as applicable.~~

The Company uses interest rate swaps to manage the interest rate exposure associated with some of its fixed-rate borrowings and designates them as fair value hedges. The Company uses forward starting interest rate swaps to hedge its interest rate exposure of some of its anticipated debt issuances.

The Company utilizes foreign currency forward contracts and other foreign currency derivatives to hedge significant committed and highly probable future transactions and cash flows denominated in currencies other than the functional currency of the Company or its subsidiaries. The Company has ~~significant non-U.S~~non-U.S. dollar denominated net investments and uses foreign currency denominated financial instruments, specifically foreign currency derivatives and foreign currency denominated debt, to hedge its foreign currency risk.

~~Fair~~The notional amounts and fair value of derivative instruments outstanding were as follows (in millions):


February 28, 2023	Notional		Fair Value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Foreign currency forwards	$	319	$	6	Other current assets
Cross currency interest rate swaps	100		3		Other current assets
Cross currency interest rate swaps	650		55		Other non-current assets
Foreign currency forwards	8		—		Other non-current assets
Foreign currency forwards	470		4		Other current liabilities
Foreign currency forwards	4		—		Other non-current liabilities
Derivatives not designated as hedges:
Foreign currency forwards	$	1,831	$	20	Other current assets
Foreign currency forwards	2,065		48		Other current liabilities
Total return swap	217		8		Other current liabilities


August 31, 2022	Notional		Fair Value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Foreign currency forwards	$	448	$	19	Other current assets
Cross currency interest rate swaps	150		12		Other current assets
Cross currency interest rate swaps	750		83		Other non-current assets
Foreign currency forwards	3		—		Other non-current assets
Foreign currency forwards	221		1		Other current liabilities
Derivatives not designated as hedges:
Foreign currency forwards	$	2,874	$	49	Other current assets
Foreign currency forwards	1,098		6		Other current liabilities
Total return swap	183		6		Other current liabilities


WBA Q2 2023 Form 10-Q			22

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Net investment hedges

The Company ~~holds~~uses cross currency interest rate swaps ~~converting $250 million of its 5.250% fixed rate notes~~and foreign currency forward contracts to ~~a floating interest rate based on the six-month LIBOR~~hedge net investments in ~~arrears plus a constant spread. All swap termination dates coincide~~subsidiaries with ~~the notes maturity date, January 15, 2019. These swaps were designated as fair value hedges.~~

~~The gains and losses due to~~non-U.S. dollar functional currencies. For qualifying net investment hedges, changes in ~~fair value on~~ the ~~swaps and on the hedged notes attributable to interest rate risk did not have a material impact on the Company’s Financial Statements. The changes in~~ fair value of the ~~Company’s debt that was swapped from fixed~~derivatives are recorded in Currency translation adjustments within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

Cash flow hedges

The Company may use foreign currency forwards and interest rate swaps to ~~variable rate~~hedge the variability in forecasted transactions and ~~designated as~~cash flows of certain floating-rate debt. For qualifying cash flow hedges, changes in the fair value of the derivatives are recorded in Unrealized gain (loss) on cash flow hedges ~~are included~~within Accumulated other comprehensive loss in ~~long-term debt on~~ the Consolidated Condensed Balance Sheets, ~~(see note 7, borrowings).~~

and released to the Consolidated Condensed Statements of Earnings when the hedged cash flows affect earnings.

Derivatives not designated as hedges

The Company enters into derivative transactions that are not designated as accounting hedges. These derivative instruments are economic hedges of foreign currency risks. The ~~gains and (losses)~~Company also utilizes total return swaps to economically hedge variability in compensation charges related to certain deferred compensation obligations.

The income (expenses) due to changes in fair value of ~~these~~the derivative instruments were recognized in ~~earnings~~Consolidated Condensed Statements of Earnings as follows (in millions):


		Three months ended February 28,				Six months ended February 28,
	Location in Consolidated Condensed Statements of Earnings	2023		2022		2023		2022
Foreign currency forwards	Selling, general and administrative expenses 1	$	—	$	(51)	$	—	$	4
Total return swap	Selling, general and administrative expenses	(3)		(8)		—		(10)
Foreign currency forwards	Other income (expense), net 1,2	(73)		—		(92)		(1)

Three months ended November 30,

Location in Consolidated Condensed
Statements of Earnings
2017 2016
Foreign currency forwards Selling, general and administrative expenses $ (19 ) $ 50
Foreign currency forwards Other income 34
1
1.In fiscal 2023, certain expenses related to derivative instruments used as economic hedges, were presented as Other income (expense), net within the Consolidated Condensed Statements of Earnings, whereas these expenses were recorded within Selling, general, and administrative expenses within the Consolidated Condensed Statements of Earnings in prior periods.

2.Excludes remeasurement gains and losses on economically hedged assets and liabilities.

Derivatives credit risk

Counterparties to derivative financial instruments expose the Company to credit-related losses in the event of counterparty nonperformance, and the Company regularly monitors the credit worthiness of each counterparty.

Derivatives offsetting

The Company does not offset the fair value amounts of derivative instruments subject to master netting agreements in the Consolidated Condensed Balance Sheets.

Note 9. Fair value measurements

The Company measures certain assets and liabilities in accordance with ~~ASC~~Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly

transaction between market participants on the measurement date. In addition, it establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to ~~level~~Level 1 inputs.

Level 2 - Observable inputs other than quoted prices in active markets.

Level 3 - Unobservable inputs for which there is little or no market data available. The fair value hierarchy gives the lowest priority to ~~level~~Level 3 inputs.


WBA Q2 2023 Form 10-Q			23

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Assets and liabilities measured at fair value on a recurring basis ~~are~~were as follows (in millions):


	February 28, 2023		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	752	$	752	$	—	$	—
Cross currency interest rate swaps 2	58		—		58		—
Foreign currency forwards 3	27		—		27		—





Liabilities:

Foreign currency forwards 3	$	52	$	—	$	52	$	—



Total return swap	8		—		8		—

November 30, 2017 Level 1 Level 2 Level 3
Assets:

Money market funds¹
$ 940
$ 940
$ —
$ —
Available-for-sale investments²
1
1
—
—
Foreign currency forwards³
3
—
3
—
Liabilities:

Foreign currency forwards³
15
—
15
—
Interest rate swaps⁴
1
—
1
—


	August 31, 2022		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	1,114	$	1,114	$	—	$	—
Investments in debt securities 4	130		—		130		—
Cross currency interest rate swaps 2	96		—		96		—
Foreign currency forwards 3	69		—		69		—
Investments in equity securities 5	1		1		—		—
Liabilities:
Foreign currency forwards 3	$	7	$	—	$	7	$	—
Total return swaps	6		—		6		—

August 31, 2017 Level 1 Level 2 Level 3
Assets:

Money market funds¹
$ 2,096
$ 2,096
$ —
$ —
Available-for-sale investments²
1
1
—
—
Liabilities:

Foreign currency forwards³
19
—
19
—

1Money market funds are valued at the closing price reported by the fund sponsor and classified as marketable securities on the Consolidated Condensed Balance Sheets.


¹	~~Money market funds are valued at the closing price reported by the fund sponsor.~~


²	~~Fair values of quoted investments are based on current bid prices as of the balance sheet dates.~~


³	The fair value of forward currency contracts are estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates.


⁴	The fair value of interest rate swaps is calculated by discounting the estimated future cash flows based on the applicable observable yield curves. See note 8, financial instruments for additional information.

2The fair value of cross currency interest rate swaps is calculated by discounting the estimated future cash flows based on the applicable observable yield curves. See Note 8. Financial instruments, for additional information.

3The fair value of forward currency contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates. See Note 8. Financial instruments, for additional information.

4Includes investments in Treasury debt securities.

5Fair values of quoted investments are based on current bid prices.

There were no transfers between ~~levels~~Levels for the ~~three~~six months ended ~~November 30, 2017.~~February 28, 2023.

The carrying value of the Company's commercial paper and credit facilities approximated their respective fair values due to their short-term nature.

The Company reports its debt instruments under the guidance of ASC Topic 825, Financial Instruments, which requires disclosure of the fair value of the Company’s debt in the footnotes to the ~~consolidated financial statements. Unless otherwise noted,~~Consolidated Condensed Financial Statements. As of February 28, 2023 the carrying amounts and estimated fair values of long term notes outstanding including the current portion were $7.6 billion and $6.8 billion, respectively.

The fair values of the notes outstanding are Level 1 fair value ~~for all notes was~~measures and determined based ~~upon~~on quoted market ~~prices~~price and ~~therefore categorized~~translated at the February 28, 2023 rate, as ~~level 1.~~applicable. The fair values and carrying values of these issuances do not include notes that have been redeemed or repaid as of February 28, 2023. See ~~note 7, borrowings~~Note 7. Debt, for further information. The carrying values of accounts receivable and trade accounts payable approximated their respective fair values due to their short-term nature.


WBA Q2 2023 Form 10-Q			24

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Commitments and contingencies

The Company is involved in legal proceedings arising in the normal course of its business, including litigation, arbitration and ~~is subject to~~other claims, and investigations, inspections, subpoenas, audits, claims, inquiries and similar actions by governmental authorities ~~arising~~ in ~~the normal course of the Company’s business, including the matters described below. Legal proceedings, in general,~~pharmacy, healthcare, tax and ~~securities and class action litigation, in particular, can be expensive and disruptive.~~other areas. Some of these ~~suits~~proceedings may ~~purport or may be determined to~~ be class actions, ~~and/or~~and some involve ~~parties seeking~~claims for large ~~and/~~or indeterminate amounts, including punitive or exemplary damages, and they may remain unresolved for several years. Legal proceedings in general, and securities, class action and multi-district litigation, in particular, can be expensive and disruptive.

From time to time, the Company is also involved in legal proceedings as a plaintiff involving antitrust, tax, contract, intellectual property and other matters. Gain contingencies, if any, are recognized when they are realized.

The Company is subject to extensive regulation by national, state and local government agencies in the U.S. and other countries in which it operates. The Company’s business, compliance and reporting practices are subject to intensive scrutiny under applicable regulation, including review or audit by regulatory authorities. As a result, the Company regularly is the subject of government actions of the types described herein. The Company also may be named from time to time in qui tam actions initiated by private parties. In such an action, a private party purports to act on behalf of federal or state governments, alleges that false claims have been submitted for payment by the government and may receive an award if its claims are successful. After a private party has filed a qui tam action, the government must investigate the private party's claim and determine whether to intervene in and take control over the litigation. These actions may remain under seal while the government makes this determination. If the government declines to intervene, the private party may nonetheless continue to pursue the litigation on its own purporting to act on behalf of the government.

The results of legal proceedings, including government investigations, are often uncertain and difficult to predict, and the costs incurred in ~~litigation~~these matters can be substantial, regardless of the outcome. The Company believes that its defenses and assertions in pending legal proceedings have merit, and does not believe that any of these pending matters, after consideration of applicable reserves and rights to indemnification, will have a material adverse effect on the Company’s consolidated financial position. However, substantial unanticipated verdicts, fines and rulings do sometimes occur. AsIn addition, as a result of governmental investigations or proceedings, the Company ~~could~~may be subject to damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and suspension or exclusion from ~~time to time incur judgments, enter into settlements or revise its expectations regarding~~participation in government programs.

We describe below certain proceedings against the ~~outcome~~

~~of certain matters, and such developments could have a material adverse effect on its results of operations in the period~~Company in which the ~~amounts are accrued and/or its cash flows in the period in which the amounts are paid.~~

~~On a quarterly basis, the Company assesses its liabilities and contingencies~~amount of loss could be material. We accrue for ~~outstanding legal proceedings and reserves are established on a case-by-case basis for those~~ legal claims ~~for which management concludes that it is probable that a loss will be incurred~~when, and to the extent that, the amount or range of ~~such~~probable loss can be reasonably estimated. ~~Substantially all~~We believe we have meritorious defenses in each of these ~~contingencies are subject~~proceedings, and we intend to ~~significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss~~defend each case vigorously, but there can be ~~complex.~~no assurance as to the ultimate outcome. With respect to litigation and other legal proceedings where the Company has determined ~~that~~ a material loss is reasonably possible, ~~the Company is unable~~except as otherwise disclosed, we are not able to make a reasonable estimate of the amount or range of loss that is reasonably possible ~~loss~~above any accrued amounts in these proceedings, due to ~~the inherent difficulty of predicting the outcome of and uncertainties regarding such litigation~~various reasons, including: we have factual and legal ~~proceedings. The Company’s assessments are based on estimates~~arguments that, if successful, will eliminate or sharply reduce the possibility of loss; we do not have sufficient information about the arguments and ~~assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause~~ the Company to change those estimates and assumptions. Therefore, it is possible that an unfavorable resolution of one or more pending litigation or other contingencies could have a material adverse effect on the Company’s consolidated financial statements in a future fiscal period. Management’s assessment of current litigation and other legal proceedings, including the corresponding accruals, could change because of the discovery of factsevidence plaintiffs will advance with respect to their damages; some of the cases have been stayed; certain proceedings present novel and complex questions of public policy; legal ~~actions or other proceedings pending against~~and factual determinations and judicial and governmental procedure; the ~~Company which are not presently known. Adverse rulings or determinations by judges, juries, governmental authorities or other~~large number of parties ~~could also result in changes~~involved; and the inherent uncertainties related to ~~management’s assessment of current liabilities and contingencies. Accordingly, the ultimate costs of resolving these claims may be substantially higher or lower than the amounts reserved.~~such litigations.

Litigation Relating to 2016 Goals

On December 29, 2014, a putative shareholder filed a derivative action in federal court in the Northern District of Illinois against certain current and former directors and officers of Walgreen Co., and Walgreen Co., as a nominal defendant, arising out of certain public statements the Company made regarding its former fiscal 2016 goals. (Cutler v. Wasson et al., No. 1:14-cv-10408 (N.D. Ill.)) The action asserts claims for breach of fiduciary duty, waste and unjust enrichment. ~~On April 10, 2015, the defendants filed a motion to dismiss.~~ On May 18, 2015, the case was stayed in light of a securities class action that was filed on April 10, ~~2015. After a ruling issued on September 30, 2016 in the securities class action, which is described below, on~~2015 (Washtenaw County Employees’ Retirement System v. Walgreen Co. et al., No. 1:15-cv-3187 (N.D. Ill.). On November 3, 2016, the Court entered a stipulation and order extending the stay until the resolution of the securities ~~case is fully resolved.~~class action. The securities class action was resolved and a final judgement order entered on October 13, 2022. On March 24, 2023, the plaintiff filed a motion for preliminary approval of a settlement resolving the litigation.


WBA Q2 2023 Form 10-Q			25

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

On April 10, 2015, a putative shareholder filed a securities class action in federal court in the Northern District of Illinois against Walgreen Co. and certain former officers of Walgreen Co. (Washtenaw County Employees’ Retirement System v. Walgreen Co. et al., No. 1:15-cv-3187 (N.D. Ill.)) The action asserts claims for violation of the federal securities laws arising out of certain public statements the Company made regarding its former fiscal 2016 goals. ~~On June 16, 2015,~~The Company’s motion to dismiss the ~~Court entered an order appointing a lead plaintiff. Pursuant to the Court’s order, lead plaintiff~~consolidated class action complaint filed ~~an amended complaint~~ on August 17, 2015 and defendants moved to dismiss the amended complaint on October 16, 2015. Lead plaintiff filed a response to the motion to dismiss on December 22, 2015, and defendants filed a reply in support of the motion on February 5, 2016. On September 30, 2016, the Court issued an order grantingwas granted in part and ~~denying~~denied in part ~~defendants’ motion to dismiss. Defendants filed their answer to the amended complaint~~ on ~~November 4, 2016 and filed an amended answer on January 16, 2017. Plaintiffs filed their~~September 30, 2016. The court granted plaintiff’s motion for class certification on ~~April 21, 2017.~~March 29, 2018, and plaintiff filed a first amended complaint on December 19, 2018. A motion to dismiss the first amended complaint was granted in part and denied in part on September 23, 2019. Fact discovery and expert discovery have concluded. On November 2, 2021, the Court denied plaintiffs’ motion for summary judgment and granted in part and denied in part defendants’ cross motion. On March 2, 2022 the Court granted the Company’s motion to reconsider a portion of that ruling. On June 29, 2022 the Court granted preliminary approval of a settlement in the amount of $105 million, which was paid in fiscal 2022. The Court issued a final judgment order approving the settlement on October 13, 2022.

~~As of August 31,~~Securities Claims Relating to Rite-Aid Merger

On December 11, 2017, ~~the Company was aware of two~~purported Rite Aid shareholders filed an amended complaint in a putative class action lawsuits filed by purported Rite Aid stockholders against Rite Aid and its board of directors, Walgreens Boots Alliance and Victoria Merger Sub, Inc. for claims arising out of the transactions contemplated by the original Merger Agreement (prior to its amendment on January 29, 2017) (such transactions, the “Rite Aid Transactions”). One Rite Aid action was filedlawsuit in the ~~State of Pennsylvania in the Court of Common Pleas of Cumberland County (the “Pennsylvania action”), and one action was filed in the United States~~U.S. District Court for the Middle District of Pennsylvania (the ~~“federal~~“M.D. Pa. class action”). arising out of transactions contemplated by the merger agreement between the Company and Rite Aid. The ~~Pennsylvania action primarily alleged~~amended complaint alleges that the ~~Rite Aid board~~Company and certain of ~~directors breached~~ its ~~fiduciary duties in connection with~~officers made false or misleading statements regarding the ~~Rite Aid Transactions by, among other things, agreeing~~transactions. The Court denied the Company’s motion to an unfair and inadequate price, agreeing to deal protection devices that preclude other bidders from making successful competing offers for Rite Aid, and failing to disclose all allegedly material information concerningdismiss the proposed merger, and also alleged that Walgreens Boots Alliance and Victoria Merger Sub, Inc. aided and abetted these alleged breaches of fiduciary duty. The federal action alleged, among other things, that Rite Aid and its board of directors disseminated an allegedly false and misleading proxy statement in connection with the Rite Aid Transactions. The plaintiffs in the federal action also filed a motion for preliminary injunction seeking to enjoin the Rite Aid shareholder vote relating to the Rite Aid Transactions. That motion was denied and plaintiffs agreed to stay the litigation until after the Rite Aid Transactions closed. On March 17, 2017, plaintiffs moved to lift the stay to allow plaintiffs to file an amended ~~complaint. On August 4, 2017, that motion was granted for the limited purpose of allowing plaintiffs to file a motion seeking leave to amend their~~ complaint ~~in light of the termination of the Merger Agreement. Plaintiffs filed such a motion~~ on ~~September 22, 2017.~~April 15, 2019. The Company filed ~~its response on October 6, 2017. The~~an answer and affirmative defenses, and the Court granted plaintiffs' motion for class certification. Fact and expert discovery have concluded and summary judgement briefing is complete. In October and December 2020, two separate purported Rite Aid Shareholders filed actions in the ~~motion~~same court opting out of the class in the M.D. Pa. class action and making nearly identical allegations as those in the M.D. Pa. class action (the “Opt-out Actions”). The Opt-out Actions have been stayed until the earlier of (a) 30 days after the entry of an order resolving any pre-trial dispositive motions in the M.D. Pa. class action, or (b) 30 days after the entry of an order of final approval of any settlement of the M.D. Pa. class action.

Claims Relating to Opioid Abuse

The Company is among an array of defendants in multiple actions in federal courts alleging claims generally concerning the impacts of widespread opioid abuse, which have been commenced by various plaintiffs such as counties, cities, hospitals, Indian tribes, and others. In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated many of these cases in a consolidated multidistrict litigation, captioned In re National Prescription Opiate Litigation (MDL No. 2804, Case No. 17-md-2804), which is pending in the U.S. District Court for the Northern District of Ohio (“N.D. Ohio”). The Company is a defendant in the following multidistrict litigation (MDL) bellwether cases:

•One case remanded to the U.S. District Court for the Northern District of California (City and Cnty. of San Francisco, et al. v. Purdue Pharma L.P., et al., Case No. 3:18-cv-07591-CRB). Following a bench trial, the court entered a liability finding against Walgreens in August 2022. The court scheduled a second trial regarding remedies for November ~~27, 2017, ordering~~2022 to determine how much is to be paid, but that proceeding has been continued indefinitely. The Company has the right to appeal any judgment but is unable to predict the outcome relative to remedies or apportionment as well as the outcome of any appeal as the trial is ongoing.

•Two cases in N.D. Ohio (Cnty. of Lake, Ohio v. Purdue Pharma L.P., et al., Case No. 18-op-45032; Cnty. of Trumbull, Ohio v. Purdue Pharma L.P., et al., Case No. 18-op-45079). In November 2021, the jury in that case returned a verdict after trial in favor of the plaintiffs as to ~~file their amended complaint within 10 business days. Plaintiffs filed their amended complaint~~liability, and a second trial regarding remedies took place in May 2022. In August 2022, the court entered orders providing for injunctive relief and requiring the defendants to pay $650.6 million over a 15-year period to fund abatement programs. The court found that the damages are subject to joint and several liability and as such made no determination as to apportionment. These decisions are currently on ~~December 11, 2017.~~ appeal.

•One case remanded to the U. S. District Court for the Eastern District of Oklahoma (The Cherokee Nation v. McKesson Corp., et al., Case No. 18-CV-00056-RAW-SPS), which was then remanded to the District Court ~~set a briefing schedule~~of Sequoyah County, Oklahoma. The matter is stayed pursuant to ~~which motions to dismiss will be filed by February 16, 2018, response briefs by~~a joint request from the parties.

•Five additional bellwether cases designated in April ~~17, 2018~~2021: (1) Cobb Cnty. v. Purdue Pharma L.P., et al., Case No. 18-op-45817 (N.D. Georgia); (2) Durham Cnty. v. AmerisourceBergen Drug Corp., et al., Case No. 19-op-45346 (M.D. North Carolina); (3) Montgomery Cnty. Bd. of Cnty. Commrs., et al. v. Cardinal Health, Inc., et al., Case No. 18-op-46326 (S.D. Ohio); (4) Board of Cnty. Commrs. of the Cnty. of Santa Fe v. Purdue Pharma L.P., et al., Case No. 18-op-45776 (D. New Mexico); and ~~reply briefs by May 17, 2018.~~(5) Cnty. of Tarrant v. Purdue Pharma L.P., et al., Case No. 18-op-45274 (N.D. Texas).


WBA Q2 2023 Form 10-Q			26

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

•Two consolidated cases in N.D. Ohio (Cnty. of Summit, Ohio, et al v. Purdue Pharma L.P., et al., Case No. 18-op-45090; Cnty. of Cuyahoga, Ohio, et al. v. Purdue Pharma L.P., Case No. 18-op-45004), previously scheduled for trial in November 2020 but postponed indefinitely.

The Company ~~was~~ also has been named as a defendant in ~~eight putative class action lawsuits filed~~numerous actions brought in state courts relating to opioid matters. Trial dates have been set in cases pending in state courts in the following states:

•Nevada (State of Nevada v. McKesson Corporation, et al., Case No. A-19-796755-B, Eighth Judicial District Court, Clark County, Nevada - July 2023).

•Missouri (Jefferson County, Missouri v. Dannie E. Williams, M.D., et al., Case No. 20JE-CC00029, Twenty-Third Judicial Circuit, Jefferson County, Missouri - July 2024).

•Florida (Florida Health Sciences Center, Inc.,et al. v. Richard Sackler, et al.,Case No. CACE 19-018882, Seventeenth Judicial Circuit Court, Broward County, Florida - May 2025).

The relief sought by various plaintiffs in these matters includes compensatory, abatement, restitution and punitive damages, as well as injunctive relief. Additionally, the Company has received from the U.S. Department of ~~Chancery~~Justice (“DOJ”) and the Attorneys General of numerous states subpoenas, civil investigative demands, and other requests concerning opioid-related matters. The Company continues to communicate with the DOJ regarding purported violations of the federal Controlled Substances Act and the federal False Claims Act in dispensing prescriptions for opioids and other controlled substances at its pharmacies nationwide.

On May 5, 2022, the Company announced that it had entered into a settlement agreement with the State of ~~Delaware (the “Delaware actions”). Those actions were consolidated, and plaintiffs filed a motion for preliminary injunction seeking~~Florida to ~~enjoin the Rite Aid shareholder vote relating~~resolve all claims related to the ~~Rite Aid Transactions. That motion~~distribution and dispensing of prescription opioid medications across the Company’s pharmacies in the State of Florida. This settlement agreement is not an admission of liability or wrong-doing and would resolve opioid lawsuits filed and future claims by the state and government subdivisions in the State of Florida. The estimated settlement amount of $683 million includes $620 million in remediation payments, which will be paid to the State of Florida in equal installments over 18 years, and will be applied as opioid remediation, as well as a one-time payment of $63 million for attorneys’ fees. In fiscal 2022, the Company recorded a $683 million liability associated with this settlement.

On November 2, 2022, the Company announced that it had agreed to financial amounts and payment terms as part of settlement frameworks (the “Settlement Frameworks”) that have the potential to resolve a substantial majority of opioid-related lawsuits filed against the Company by the attorneys general of participating states and political subdivisions (the “Settling States”) and litigation brought by counsel for tribes. Under the Settlement Frameworks with the Settling States and counsel for tribes, the Company announced that it expected to settle all opioid claims against it by such Settling States, their participating political subdivisions, and participating tribes for up to approximately $4.8 billion and $155 million, respectively in remediation payments to be paid out over 15 years. The Settlement Frameworks provide for the payment of up to approximately $754 million in attorneys’ fees and costs over 6 years beginning in year two of the Settlement Frameworks. The Settlement Frameworks include no admission of wrongdoing or liability by the Company.

As of November 30, 2022, the Company concluded that Settlement Framework discussions had advanced to a stage where a broad settlement of opioid claims by Settling States was ~~denied~~probable, and for which the related loss was reasonably estimable. As a result of those conclusions and the ~~plaintiffs~~Company’s ongoing assessment of other opioid-related claims, the Company recorded a $6.5 billion liability associated with the Settlement Frameworks and other opioid-related claims and litigation settlements during the three months ended November 30, 2022. The settlement accrual is reflected in the ~~Delaware~~Consolidated Condensed Statement of Earnings within Selling, general and administrative expenses as part of the U.S. Retail Pharmacy segment. Loss contingencies are highly subjective, the Company cannot predict if any agreement will become effective, and unpredictable or unfavorable developments can occur. The amount of the actual loss may differ materially from the accrual estimate. As of February 28, 2023, the Company has accrued a total $7.4 billion liability associated with the Settlement Frameworks and other opioid-related claims and litigation settlements, including $1.0 billion and $6.4 billion of the estimated settlement liability in Accrued expenses and other current liabilities, and Accrued litigation obligations, respectively, in the Consolidated Condensed Balance Sheet.

On December 9, 2022, the Company committed the Settlement Frameworks to a proposed settlement agreement (the “Proposed Settlement Agreement”) that is contingent on (1) a sufficient number of Settling States, including those that have not sued, agreeing to the Proposed Settlement Agreement following a sign-on period, and (2) following a notice period, a sufficient number of political subdivisions within Settling States, including those that have not sued, agreeing to the Proposed Settlement Agreement (or otherwise having their claims foreclosed).


WBA Q2 2023 Form 10-Q			27

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Should some states or their political subdivisions decline to participate in the Proposed Settlement Agreement, but the Company nonetheless concludes that sufficient participation exists to warrant going forward with the settlement, during both of the two sign-on periods, there will be a corresponding reduction in the amount due from the Company to account for the entities that do not participate. Those non-participating Settling States or political subdivisions would be entitled to pursue their claims against the Company.

The Company cannot predict if or when the Proposed Settlement Agreement will become effective. The Company will continue to vigorously defend against any litigation not covered by the Proposed Settlement Agreement, including private plaintiff litigation. The Company continues to believe it has strong legal defenses and appellate arguments in all of these cases.

Usual and Customary Pricing Litigation

The Company is defending a number of claims, lawsuits and investigations that allege that the Company’s retail pharmacies overcharged for prescription drugs by not submitting the correct usual and customary price during the claims adjudication process. These actions ~~agreed to settle this matter for an immaterial amount. The Delaware actions all~~ have been ~~dismissed.~~brought by different types of plaintiffs, including insurance companies, plan members, government and private payors, based on different legal theories. At least one of these cases was brought as a putative class action.

Note 11. Income taxes

The effective tax rate for the three months ended February 28, 2023 was 11.5%, compared to 18.2% for the three months ended February 28, 2022. The decrease in the effective tax rate was primarily due to the reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements. The Company recognized a tax benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized in the current period against capital gains recognized on the sale of shares in AmerisourceBergen. See Note 5. Equity method investments for further information. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the three months ended February 28, 2023.

The effective tax rate for the six months ended February 28, 2023 was a benefit of 29.5%, primarily due to a reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements.The Company recognized a tax benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized against capital gains recognized on the sale of shares in AmerisourceBergen and based on forecasted capital gains. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the six months ended February 28, 2023. The effective tax rate for the six months ended February 28, 2022 was 9.4%, primarily due to lower tax expense on gains from consolidation of the Company’s investment in VillageMD and Shields, as a portion of these gains were not subject to tax. See Note 2. Acquisitions and other investments for further information.

Income taxes paid for the six months ended February 28, 2023 and 2022 were $131 million and $201 million, respectively.

Note ~~11.~~12. Retirement benefits

The Company sponsors several retirement plans, including defined benefit plans, defined contribution plans and a postretirement health plan.

Defined benefit pension plans (non-U.S. plans)

The Company has various defined benefit pension plans outside the ~~United States.~~U.S. The principal defined benefit pension plan is the Boots Pension Plan (the “Boots Plan”), which covers certain employees in the ~~United Kingdom (the “Boots Plan”).~~UK. The Boots Plan is a funded final salary defined benefit plan providing pensions and death benefits to members. The Boots Plan was closed to future accrual effective July 1, 2010, with pensions calculated based on salaries up until that date. The Boots Plan is governed by a trustee board, which is independent of the Company. The plan is subject to a full funding actuarial valuation on a triennial basis.


WBA Q2 2023 Form 10-Q			28

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Components of net periodic pension (income) costs for the defined benefit pension plans (in millions):


		Three months ended February 28,				Six months ended February 28,
	Location in Consolidated Condensed Statements of Earnings	2023		2022		2023		2022
Service costs	Selling, general and administrative expenses	$	1	$	1	$	2	$	3
Interest costs	Other income (expense), net	63		38		122		78
Expected returns on plan assets/other	Other income (expense), net	(80)		(72)		(156)		(146)
Total net periodic pension income		$	(16)	$	(33)	$	(32)	$	(65)

Three months ended November 30,
2017 2016
Service costs $ 2
$ 2
Interest costs 47
43
Expected returns on plan assets (51 ) (37 )
Total net periodic pension costs $ (2 ) $ 8

The Company made cash contributions to its defined benefit pension plans of $9$11 million for the ~~three~~six months ended ~~November 30, 2017,~~February 28, 2023, which primarily related to committed ~~funded~~ payments. The Company plans to contribute an additional ~~$50~~$25 million to its defined benefit pension plans induring the remainder of fiscal ~~2018.~~2023.

Defined contribution plans

The principal retirement plan for U.S. employees is the Walgreen Profit-Sharing Retirement Trust, to which both the Company and participating employees contribute. The Company’s contribution is in the form of a guaranteed match which is made pursuant to the applicable plan document approved ~~annually~~ by the Walgreen Co. Board of ~~Directors and~~Directors. Plan activity is reviewed periodically by ~~the Compensation Committee and Finance Committee~~certain Committees of the Walgreens Boots Alliance Board of Directors. The profit-sharing provision ~~was~~is an expense of ~~$57~~$60 million and $125 million for the three and six months ended ~~November 30, 2017~~February 28, 2023, respectively, compared to an expense of $54 million and ~~November 30, 2016.~~$123 million for the three and six months ended February 28, 2022, respectively.

The Company also has certain contract based defined contribution arrangements. The principal one is ~~the Alliance Healthcare & Boots Retirement Savings Plan, which is United Kingdom~~UK based ~~and~~ to which both the Company and participating employees contribute. The cost recognized in the Consolidated Condensed ~~Statements~~Statement of Earnings ~~for the three months ended November 30, 2017~~ was ~~$30 million compared to a cost of $28 million in the three months ended November 30, 2016.~~

~~Note 12. Earnings per share~~

The dilutive effect of outstanding stock options on earnings per share is calculated using the treasury stock method. Stock options are anti-dilutive and excluded from the earnings per share calculation if the exercise price exceeds the average market price of the common shares. There were 7.6 million outstanding options to purchase common shares that were anti-dilutive and excluded from the first quarter earnings per share calculation as of November 30, 2017 compared to 4.0 million as of November 30, 2016.

~~Note 13. Depreciation and amortization~~

~~The Company has recorded the following depreciation and amortization expense in the Consolidated Condensed Statements of Earnings (in millions):~~

Three months ended November 30,
2017 2016
Depreciation expense $ 335
$ 335
Intangible asset and other amortization 81
84
Total depreciation and amortization expense $ 416
$ 419

~~Note 14. Supplemental financial information~~

The effective tax rate for the three months ended November 30, 2017 was 21.9% compared to 17.3% for the prior year period. The increase in effective tax rate was primarily attributable to reduced discrete tax benefits in the current period. During the three months ended November 30, 2016, we recognized a discrete tax benefit of $77 million related to reducing our deferred tax liabilities, following enactment of a U.K. tax rate reduction. This benefit did not recur during the three months ended November 30, 2017. The impact of this non-recurrence was partly offset by additional net discrete tax benefits for the three months ended November 30, 2017, primarily related to our equity method investment in AmerisourceBergen. Cash paid for income taxes was $45$21 million and ~~$63 million in the three months ended November 30, 2017 and 2016, respectively.~~

~~Interest paid was $217 million and $246~~$41 million for the three and six months ended ~~November 30, 2017~~February 28, 2023, respectively, compared to an expense of $23 million and ~~2016,~~$48 million for the three and six months ended February 28, 2022, respectively.

Note ~~15.~~13. Accumulated other comprehensive income (loss)

The following is a summary of net changes in accumulated other comprehensive income (loss) (“AOCI”) by component and net of tax for the three and six months ended ~~November 30, 2017~~February 28, 2023 and ~~2016~~2022 (in millions):

Pension/ post-
retirement
obligations

Unrecognized
gain (loss) on
available-for-
sale
investments

Unrealized
gain (loss) on
cash flow
hedges

Share of
OCI of
equity
method
investments

Currency
translation
adjustment
Total
Balance at August 31, 2017 $ (139 ) $ —
$ (33 ) $ (2 ) $ (2,877 ) $ (3,051 )
Other comprehensive income (loss) before reclassification adjustments (1 ) —
—
3
506
508
Amounts reclassified from accumulated OCI —
—
1
—
—
1
Tax benefit (provision) 1
—
(1 ) (1 ) —
(1 )
Net other comprehensive income —
—
—
2
506
508
Balance at November 30, 2017 $ (139 ) $ —
$ (33 ) $ —
$ (2,371 ) $ (2,543 )


	Pension/ post- retirement obligations		Unrealized loss on cash flow hedges		Net investment hedges		Unrealized gain (loss) on available for sale securities		Share of OCI of equity method investments		Cumulative translation adjustments		Total
Balance at November 30, 2022	$	(162)	$	(5)	$	183	$	1	$	(250)	$	(2,583)	$	(2,815)
Other comprehensive (loss) income before reclassification adjustments	—		(1)		(57)		(1)		78		133		153
Amounts reclassified from AOCI	(7)		1		—		—		40		(11)		22
Tax benefit (provision)	2		—		14		—		(30)		—		(15)
Net change in other comprehensive (loss) income	(5)		—		(43)		(1)		88		122		161
Balance at February 28, 2023	$	(167)	$	(5)	$	140	$	—	$	(162)	$	(2,461)	$	(2,654)

Pension/ post-
retirement
obligations

Unrecognized
gain (loss) on
available-for-
sale
investments

Unrealized
gain (loss) on
cash flow
hedges

Share of
OCI of
equity
method
investments

Currency
translation
adjustment
Total
Balance at August 31, 2016 $ (212 ) $ 2
$ (37 ) $ (1 ) $ (2,744 ) $ (2,992 )
Other comprehensive income (loss) before reclassification adjustments (11 ) (1 ) 1
(1 ) (808 ) (820 )
Tax benefit 2
—
—
—
—
2
Net other comprehensive income (loss) (9 ) (1 ) 1
(1 ) (808 ) (818 )
Balance at November 30, 2016 $ (221 ) $ 1
$ (36 ) $ (2 ) $ (3,552 ) $ (3,810 )


WBA Q2 2023 Form 10-Q			29

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


	Pension/ post- retirement obligations		Unrealized (loss) income on cash flow hedges		Net investment hedges		Unrealized gain (loss) on available for sale securities		Share of OCI of equity method investments		Cumulative translation adjustments		Total
Balance at August 31, 2022	$	(157)	$	(3)	$	213	$	1	$	(254)	$	(2,605)	$	(2,805)
Other comprehensive (loss) income before reclassification adjustments	—		(3)		(96)		(1)		(25)		158		33
Amounts reclassified from AOCI	(13)		—		—		—		150		(14)		123
Tax benefit (provision)	3		—		23		—		(33)		—		(6)
Net change in other comprehensive (loss) income	(10)		(2)		(73)		(1)		92		144		151
Balance at February 28, 2023	$	(167)	$	(5)	$	140	$	—	$	(162)	$	(2,461)	$	(2,654)


	Pension/ post- retirement obligations		Unrealized (loss) income on cash flow hedges		Net investment hedges		Share of OCI of equity method investments		Cumulative translation adjustments		Total
Balance at November 30, 2021	$	(364)	$	(9)	$	9	$	(74)	$	(1,863)	$	(2,301)
Other comprehensive income (loss) before reclassification adjustments	1		—		(22)		(105)		78		(48)
Amounts reclassified from AOCI	(5)		1		—		—		3		(1)
Other	(6)		—		—		—		—		(6)
Tax benefit	2		—		2		26		—		29
Net change in other comprehensive (loss) income	(8)		—		(20)		(80)		81		(26)
Balance at February 28, 2022	$	(372)	$	(9)	$	(11)	$	(154)	$	(1,782)	$	(2,328)


WBA Q2 2023 Form 10-Q			30

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


	Pension/ post- retirement obligations		Unrealized (loss) income on cash flow hedges		Net investment hedges		Unrealized gain (loss) on available for sale securities		Share of OCI of equity method investments		Cumulative translation adjustments		Total
Balance at August 31, 2021	$	(359)	$	(10)	$	(35)	$	96	$	(29)	$	(1,772)	$	(2,109)
Other comprehensive income (loss) before reclassification adjustments	—		—		31		450		(165)		(9)		307
Amounts reclassified from AOCI	(11)		1		—		(577)		—		(1)		(587)
Other	(6)		—		—		—		—		—		(6)
Tax benefit (provision)	3		(1)		(8)		31		40		—		66
Net change in other comprehensive (loss) income	(13)		1		24		(96)		(125)		(10)		(220)
Balance at February 28, 2022	$	(372)	$	(9)	$	(11)	$	—	$	(154)	$	(1,782)	$	(2,328)

Note ~~16.~~14. Segment reporting

The Company ~~has~~is aligned ~~its operations~~ into three reportable segments: ~~Retail Pharmacy USA,~~U.S. Retail Pharmacy, International and ~~Pharmaceutical Wholesale.~~ U.S. Healthcare.

The operating segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker) to assess segment performance and allocate resources among the Company’s operating ~~segments, which have been aggregated as described below.~~segments. The chief operating decision maker uses adjusted operating income to assess segment profitability. The chief operating decision maker does not use total assets by segment to make decisions regarding ~~resources,~~resources; therefore, the total asset disclosure by segment has not been included.

U.S. Retail Pharmacy

The Company's U.S. Retail Pharmacy ~~USA~~ segment ~~consists of~~includes the Walgreens business which ~~includes~~is comprised of the ~~operation~~operations of retail drugstores, health and ~~convenient care clinics;~~wellness services, specialty and ~~operation of mail~~home delivery pharmacy services, and ~~central specialty pharmacy services.~~its equity method investment in AmerisourceBergen. Sales for the segment are principally derived from the sale of prescription drugs and a wide assortment of retail products, including health and wellness, beauty, personal care and consumables and general merchandise.

International

The ~~Retail Pharmacy~~Company's International segment consists of pharmacy-led health and beauty retail businesses outside the U.S. and ~~optical practices. These~~a pharmaceutical wholesaling and distribution business in Germany. Pharmacy-led health and beauty retail businesses include Boots branded stores in the ~~United Kingdom, Thailand, Norway,~~UK, the Republic of Ireland and Thailand, the ~~Netherlands;~~ Benavides brand in Mexico and the Ahumada brand in Chile. Sales for ~~the segment~~these businesses are principally derived from the sale of prescription drugs and health and wellness, beauty, personal care and other consumer products.

U.S. Healthcare

The ~~Pharmaceutical Wholesale~~Company’s U.S. Healthcare segment is a consumer-centric, technology-enabled healthcare business that engages consumers through a personalized, omni-channel experience across the care journey. The U.S. Healthcare segment delivers improved health outcomes and lower costs for payors and providers by delivering care through owned and partnered assets.

The U.S. Healthcare segment currently consists of ~~the Alliance Healthcare pharmaceutical wholesaling~~a majority position in VillageMD, a leading national provider of value-based primary, urgent and ~~distribution businesses~~multi-specialty care services; Shields, a specialty pharmacy integrator and ~~an equity method investment~~accelerator for hospitals; a majority position in ~~AmerisourceBergen. Wholesale operations are located~~CareCentrix, a leading player in the ~~United Kingdom, Germany, France, Turkey, Spain,~~post-acute and home care management sectors, and the ~~Netherlands, Egypt, Norway, Romania, Czech Republic~~Walgreens Health organic business that contracts with payors and Lithuania. Sales for the segment are principally derived from wholesaling and distribution of a comprehensive offering of brand-name pharmaceuticals (including specialty pharmaceutical products) and generic pharmaceuticals, health and beauty products, homeproviders to deliver clinical healthcare ~~supplies and equipment, and related~~ services to ~~pharmacies~~their members and ~~other healthcare providers.~~members’ caregivers through both digital and physical channels.


WBA Q2 2023 Form 10-Q			31

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The results of operations for ~~each~~ reportable ~~segment~~segments include procurement ~~benefits and an allocation of corporate-related~~benefits. Corporate-related overhead ~~costs. The “Eliminations” column contains items~~costs are not ~~allocable~~allocated to ~~the~~ reportable segments ~~as the information is not utilized by the chief operating decision maker to assess segment performance~~ and ~~allocate resources.~~are reported in “Corporate and Other”.

The following table reflects results of operations of the Company’s reportable segments (in millions):

Retail
Pharmacy
USA

Retail
Pharmacy
International

Pharmaceutical
Wholesale
Eliminations
Walgreens
Boots
Alliance, Inc.
Three months ended November 30, 2017
Sales to external customers $ 22,489
$ 3,083
$ 5,168
$ —
$ 30,740
Intersegment sales —
—
550
(550 ) —
Sales $ 22,489
$ 3,083
$ 5,718
$ (550 ) $ 30,740

Adjusted operating income $ 1,377
$ 210
$ 224
$ (2 ) $ 1,809

Three months ended November 30, 2016

Sales to external customers $ 20,659
$ 2,962
$ 4,880
$ —
$ 28,501
Intersegment sales —
—
537
(537 ) —
Sales $ 20,659
$ 2,962
$ 5,417
$ (537 ) $ 28,501

Adjusted operating income $ 1,289
$ 213
$ 224
$ —
$ 1,726


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales:
U.S. Retail Pharmacy	$	27,577	$	27,667	$	54,781	$	55,699
International	5,651		5,563		10,840		11,381
U.S. Healthcare	1,634		527		2,622		577
Corporate and Other	—		(1)		—		(1)
Walgreens Boots Alliance, Inc.	$	34,862	$	33,756	$	68,244	$	67,656

Adjusted operating income (Non-GAAP measure):
U.S. Retail Pharmacy	$	1,067	$	1,588	$	2,172	$	3,277
International	352		226		468		389
U.S. Healthcare	(159)		(77)		(311)		(90)
Corporate and Other	(44)		(79)		(100)		(143)
Walgreens Boots Alliance, Inc.	$	1,215	$	1,657	$	2,229	$	3,434

The following table reconciles adjusted operating income to operating income (loss) (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Adjusted operating income (Non-GAAP measure)	$	1,215	$	1,657	$	2,229	$	3,434
Certain legal and regulatory accruals and settlements	(427)		—		(6,981)		—
Acquisition-related amortization	(247)		(250)		(577)		(415)
Acquisition-related costs	(148)		(44)		(187)		(115)
Transformational cost management	(145)		(70)		(283)		(273)
Adjustments to equity earnings in AmerisourceBergen	(31)		(51)		(117)		(94)
LIFO provision	(20)		5		(38)		(9)
Operating income (loss) (GAAP measure)	$	197	$	1,246	$	(5,954)	$	2,529

Retail
Pharmacy
USA

Retail
Pharmacy
International

Pharmaceutical
Wholesale
Eliminations
Walgreens
Boots
Alliance, Inc.
Three months ended November 30, 2017
Adjusted operating income $ 1,377
$ 210
$ 224
$ (2 ) $ 1,809
Adjustments to equity earnings in AmerisourceBergen (189 )
Acquisition-related amortization

(85 )
Hurricane-related costs

(83 )
LIFO provision

(54 )
Acquisition-related costs

(51 )
Legal settlement

(25 )
Operating income

$ 1,322

Three months ended November 30, 2016

Adjusted operating income $ 1,289
$ 213
$ 224
$ —
$ 1,726
Adjustments to equity earnings in AmerisourceBergen

(41 )
Acquisition-related amortization

(82 )
LIFO provision

(58 )
Acquisition-related costs (17 )
Cost transformation (81 )
Operating income

1,447

WBA Q2 2023 Form 10-Q

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note ~~17.~~15. Sales

The following table summarizes the Company’s sales by segment and by major source (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
U.S. Retail Pharmacy
Pharmacy	$	19,874	$	19,820	$	40,092	$	40,925
Retail	7,703		7,847		14,689		14,774
Total	27,577		27,667		54,781		55,699

International
Pharmacy	898		958		1,766		1,975
Retail	1,994		1,880		3,643		3,676
Wholesale	2,759		2,725		5,431		5,730
Total	5,651		5,563		10,840		11,381

U.S. Healthcare	1,634		527		2,622		577

Corporate and Other 1	—		(1)		—		(1)

Walgreens Boots Alliance, Inc.	$	34,862	$	33,756	$	68,244	$	67,656

1.Includes certain eliminations.

See Note 18. Supplemental information for further information on receivables from contracts with customers.

Note 16. Related parties

The Company has a long-term pharmaceutical distribution agreement with AmerisourceBergen pursuant to which the Company sources branded and generic pharmaceutical products from ~~AmerisourceBergen principally for its U.S. operations.~~

~~Related party transactions (in millions):~~

Three months ended
November 30, 2017 November 30, 2016
Purchases, net $ 11,604
$ 10,636

November 30, 2017 August 31, 2017
Trade accounts payable, net $ 4,818
$ 4,384

AmerisourceBergen. Additionally, AmerisourceBergen receives sourcing services for generic pharmaceutical products.

Related party transactions with AmerisourceBergen (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Purchases, net	$	15,759	$	15,063	$	31,199	$	30,854


	February 28, 2023		August 31, 2022
Trade accounts payable, net of Trade accounts receivable	$	7,839	$	6,915


WBA Q2 2023 Form 10-Q			33

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note ~~18.~~17. New accounting pronouncements

Adoption of new accounting pronouncements

~~Measurement of inventory~~

Disclosures by business entities about government assistance

In ~~July 2015,~~November 2021, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) 2015-11, Inventory~~ASU 2021-10, Government Assistance (Topic ~~330): Simplifying the Measurement of Inventory.~~832) – Disclosures by Business Entities about Government Assistance. This ASU ~~simplifies current~~requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting ~~treatments~~model by ~~requiring entities~~analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company adopted the new standard effective September 1, 2022, and the adoption did not impact the Company's disclosures within these consolidated condensed financial statements.

New accounting pronouncements not yet adopted

Acquired contract assets and contract liabilities in a business combination

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires an entity to recognize and measure ~~most inventories~~contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 (Revenue from Contracts with Customers). This ASU is expected to reduce diversity in practice and increase comparability for both the recognition and measurement of acquired revenue contracts with customers at ~~“the lower~~the date of ~~cost~~ and ~~net realizable value” rather than using lower of cost or market. This guidance does not apply to inventories measured using last-in, first-out method or the retail inventory method.~~after a business combination. This ASU is effective for fiscal years beginning after December 15, ~~2016~~2022 (fiscal ~~2018), and interim periods within those fiscal years.~~2024). The Company adopted this guidance on a prospective basis during the quarter ended November 30, 2017. The adoption did not have a material impact on the Company’s results of operations, cash flows or financial position.

~~New accounting pronouncements not yet adopted~~

~~Accounting for hedging activities~~

In August 2017, the FASB issued ASU 2017-12, Derivative and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU expands an entity’s ability to hedge nonfinancial and financial risk components and reduces complexity in fair value hedges of interest rate risk. It eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. It also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. This ASU is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interims periods within those fiscal years, with early adoption permitted. The new guidance with respect to cash flow and net investment hedge relationships existing on the date of adoption must be applied on a modified retrospective basis, and the new presentation and disclosure requirements must be applied on a prospective basis. The adoption of this ASU is not expected to have a significant impact on Company’s results of operations, cash flows or financial position.

~~Presentation of net periodic pension cost and net periodic postretirement benefit cost~~

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension cost and net periodic postretirement cost in the same line item in the statement of earnings as other compensation costs arising from services rendered by the related employees during the period. The other net cost components are required to be presented in the statement of earnings separately from the service cost component and outside a subtotal of income from operations. Additionally, the line item used in the statement of earnings to present the other net cost components must be disclosed in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interims periods within those fiscal years, and must be applied on a retrospective basis. The Company has evaluatedevaluating the effect of adopting this new accounting guidance and determined that adoption will not have a material impact on the Company’s results of operations. The Company will adopt this new accounting guidance as of September 1, 2018 (fiscal 2019).guidance.

~~Restricted cash~~Liabilities—Supplier Finance Programs

In ~~November 2016,~~September 2022, the FASB issued ASU ~~2016-18, Statement~~2022-04, Liabilities—Supplier Finance Programs (Topic 405-50) - Disclosure of ~~Cash Flows (Topic 230): Restricted Cash.~~Supplier Finance Program Obligations. This ASU requires that a ~~statement~~buyer in a supplier finance program disclose sufficient information about the program to allow a user of ~~cash flows explain~~financial statements to understand the ~~change~~program’s nature, activity during the period, inchanges from period to period, and potential magnitude. This ASU is expected to improve financial reporting by requiring new disclosures about the ~~total~~programs, thereby allowing financial statement users to better consider the effect of ~~cash, cash equivalents,~~the programs on an entity’s working capital, liquidity, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, ~~2017~~2022 (fiscal ~~2019)~~2024), and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a retrospective basis. The adoption of this ASU is not expected to have a significant impact on Company’s consolidated statement of cash flows.

~~Tax accounting for intra-entity asset transfers~~

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Topic 740, Income Taxes, prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this ASU require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU do not change GAAPexcept for the ~~pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. This ASU~~amendment on roll forward information which is effective for fiscal years beginning after December 15, ~~2017~~2023 (fiscal 2019), including interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied on a modified retrospective basis through a cumulative effect adjustment recognized directly to retained earnings as of the date of adoption.2025). The Company is evaluating the effect of adopting this new accounting guidance.

~~Classification~~

Note 18. Supplemental information

Accounts receivable

Accounts receivable are stated net of allowances for doubtful accounts. Accounts receivable balances primarily consist of trade receivables due from customers, including amounts due from third party payors (e.g., pharmacy benefit managers, insurance companies and governmental agencies). Trade receivables were $4.3 billion and $4.0 billion at February 28, 2023 and August 31, 2022, respectively. Other accounts receivable balances, which consist primarily of receivables from vendors and manufacturers, including receivables from AmerisourceBergen, were $1.4 billion and $1.1 billion at February 28, 2023 and August 31, 2022, respectively. See Note 16. Related parties for further information.

Depreciation and amortization

The Company has recorded the following depreciation and amortization expense in the Consolidated Condensed Statements of Earnings (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Depreciation expense	$	361	$	348	$	697	$	683
Intangible assets amortization	199		175		357		340
Total depreciation and amortization expense	$	559	$	524	$	1,055	$	1,024


WBA Q2 2023 Form 10-Q			34

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Accumulated depreciation and amortization on property, plant and equipment was $12.8 billion at February 28, 2023 and $12.8 billion at August 31, 2022.

Restricted cash

The Company is required to maintain cash deposits with certain ~~cash receipts~~banks which consist of deposits restricted under contractual agency agreements and cash ~~payments~~

~~In August 2016,~~restricted by law and other obligations. The following represents a reconciliation of Cash and cash equivalents in the ~~FASB issued ASU 2016-15, Statement~~Consolidated Condensed Balance Sheets to total Cash, cash equivalents, marketable securities and restricted cash in the Consolidated Condensed Statements of Cash Flows ~~(Topic 230): Classification~~as of ~~Certain Cash Receipts~~February 28, 2023 and ~~Cash Payments. This ASU addresses~~August 31, 2022, respectively (in millions):


	February 28, 2023		August 31, 2022
Cash and cash equivalents	$	1,088	$	1,358
Marketable securities	752		1,114
Restricted cash (included in other current and non-current assets)	153		86
Cash, cash equivalents, marketable securities and restricted cash	$	1,993	$	2,558

Redeemable non-controlling interest

The following represents a roll forward of the ~~classification~~redeemable non-controlling interest in the Consolidated Condensed Balance Sheets (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Opening balance	$	157	$	2,787	$	1,042	$	319
Recognition upon acquisition of subsidiary 1	—		—		—		2,489
Acquisition of non-controlling interests 2	—		(2,047)		—		(2,047)
Net loss attributable to Redeemable non-controlling interests	(1)		(12)		(24)		(33)
Redemption price adjustments 3	—		83		440		90
Reclassifications to Accrued expenses and other liabilities 4	—		—		(1,314)		—
Other	3		2		14		(6)
Ending balance	$	158	$	812	$	158	$	812

1.The six months ended February 28, 2022, includes $1.9 billion of ~~certain specific~~redeemable non-controlling interest, representing the maximum purchase price to redeem non-controlling units in VillageMD for cash, ~~flow issues including debt prepayment or extinguishment costs, settlement~~and redeemable non-controlling interest in Shields. On November 24, 2021, VillageMD commenced a tender offer to purchase up to $1.9 billion of ~~certain debt instruments, contingent consideration payments made after a~~units in VillageMD for cash. 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.

2.The three and six months ended February 28, 2022 includes, $1.9 billion paid to existing shareholders of VillageMD as part of the fully subscribed tender offer and the acquisition of the remaining 30% non-controlling equity interests in the pharmaceutical wholesale business ~~combination, proceeds~~in Germany.

3.Remeasurement of non-controlling interests, probable of redemption but not currently redeemable, to their redemption value, is recorded to Paid in capital in the Consolidated Condensed Balance Sheets. During the three months ended November 30, 2022, the Company announced the acceleration of its plans for full ownership of Shields and CareCentrix. The Shields and CareCentrix redeemable non-controlling interests were recorded to redemption value.

4.Represents the reclassification of the Shields and CareCentrix redeemable non-controlling interests to Accrued expenses and other liabilities, resulting from acceleration of the Company's plans for full ownership of Shields and CareCentrix.

See Note 2. Acquisitions and other investments for further information.


WBA Q2 2023 Form 10-Q			35

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Earnings per share

The dilutive effect of outstanding stock options on earnings per share is calculated using the treasury stock method. Stock options are anti-dilutive and excluded from the settlement of certain insurance claims and distributions received from equity method investees. This ASU is effective for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt allearnings per share calculation if the exercise price exceeds the average market price of the ~~amendments in~~common shares. There were 16.0 million and 16.8 million weighted outstanding options to purchase common shares that were anti-dilutive and excluded from the ~~same period~~earnings per share calculation for the three and six months ended February 28, 2023, compared to 17.9 million and 16.9 million for the ~~new guidance must be applied on a retrospective basis. The Company is evaluating~~three and six months ended February 28, 2022, respectively.

Due to the anti-dilutive effect ~~this ASU will have on its consolidated statement of cash flows.~~

~~Leases~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. This ASU increases the transparency and comparability of organizations by requiring the capitalization of substantially all leases on the balance sheet and disclosures of key information about leasing arrangements. Under this new guidance, at the lease commencement date, a lessee recognizes a right-of-use asset and lease liability, which is initially measured at the present value of the future lease payments. For income statement purposes, a dual model was retained for lessees, requiring leases to be classified as either operating or finance leases. Under the operating lease model, lease expense is recognized on a straight-line basis over the lease term. Under the finance lease model, interest on the lease liability is recognized separately from amortization of the right-of-use asset. The new guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020), and interim periods within those fiscal years. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented (fiscal 2018) using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply.

The Company will adopt this ASU on September 1, 2019 (fiscal 2020). The Company has begun evaluating and planning for adoption and implementation of this ASU, including selecting a new lease accounting system, evaluating practical expedient and accounting policy elections, and assessing the overall financial statement impact. This ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is being evaluated. The impact of this ASU is non-cash in nature and will not affect the Company’s cash flows.

~~Classification and measurement of financial instruments~~

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires equity investments (except those under the equity method of accounting or those that result in the consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from ~~observable price changes in orderly transactions~~the reported net loss, an incremental 4.8 million of potentially dilutive securities were omitted from the calculation of weighted-average common shares outstanding for the identical or a similar investment of the same issuer. This simplifies the impairment assessment of equity investments previous held at cost. Separate presentation of financial assets and liabilities by measurement category is required. This ASU is effective prospectively for fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. Early application is permitted, for fiscal years or interim periods that have not yet been issuedsix months ended February 28, 2023.

Cash dividends declared per common share

Cash dividends per common share declared were as of the beginning of the fiscal year of adoption. The new guidance must be applied on a modified retrospective basis, with the exception of the amendments related to equity investments without readily determinable fair values, which must be applied on a prospective basis. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption to have a material impact on the Company’s results of operations.follows:

~~Revenue recognition on contracts with customers~~


Quarter ended	2023		2022
November	$	0.4800	$	0.4775
February	$	0.4800	$	0.4775
Total	$	0.9600	$	0.9550

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides a single principles-based revenue recognition model with a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued additional ASUs which further clarify this guidance and also defer the effective date by one year to fiscal years beginning after December 15, 2017 (fiscal 2019), and interim periods within those fiscal years. The Company continues to evaluate the impact this ASU, the related amendments and the interpretive guidance will have on the Company’s Consolidated Financial Statements. The Company continues to evaluate the method of adoption. Based on preliminary assessment, the Company believes the impact of adopting the new guidance will not be material to its consolidated financial statements, and that the impact will be limited to immaterial changes to the timing of recognition of revenues related to loyalty programs and gift cards, in addition to disaggregated revenue disclosures. The Company will adopt this ASU on September 1, 2018 (fiscal 2019).

Note 19. Subsequent ~~event~~events

2023 Revolving Credit Agreement

On ~~December 22, 2017, U.S. tax legislation was enacted that made significant changes to many elements~~March 2, 2023, the Company entered into a $900 million unsecured 364-day revolving credit facility (the “2023 Revolving Credit Agreement”) with a termination date of the U.S. federal Internal Revenue Code. Due to the recent enactment of this tax legislation and expected further rulemaking and future regulatory guidance, a comprehensive estimate of the overall tax impactFebruary 29, 2024, or earlier, subject to the Company's ~~financial position, results of operations and cash flows cannot be made~~discretion. Borrowings under the 2023 Revolving Credit Agreement bear interest at ~~this time. However,~~fluctuating rate per annum equal to, at this time, the Company does anticipate this tax legislation will result in a discrete tax impact related to revaluing the Company's U.S. federal deferred tax assets and liabilities, a discrete tax impact associated with including incremental earnings from the Company's non-U.S. entities in its U.S. federal income tax base and a change to the Company’s ~~fiscal 2018 estimated annual tax~~option, the alternate base rate, ~~due to~~ the ~~statutory~~term SOFR or the daily SOFR, in each case, plus an applicable margin. The applicable margin is in each case based on the rating of the Company’s corporate ~~tax rate reduction. These changes will impact Deferred income tax and Other non-current liabilities in the Consolidated Condensed Balance Sheet.~~ debt obligations as determined by Moody’s or S&P.


WBA Q2 2023 Form 10-Q			36

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Item 2. Management’s discussion and analysis of financial condition and results of operations

The following discussion and analysis of ~~our~~the Company's financial condition and results of operations should be read together with the financial statements and the related notes included elsewhere herein and the ~~consolidated financial statements,~~Consolidated Financial Statements, accompanying notes and ~~Management’s~~management’s discussion and analysis of financial condition and results of operations and other disclosures contained in the Walgreens Boots Alliance, Inc. Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017.~~2022 as amended by Form 10-K/A for the fiscal year ended August 31, 2022 filed on November 23, 2022 (the “2022 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in forward-looking ~~statements.~~statements that involve risks and uncertainties. Factors that might cause a difference include, but are not limited to, those discussed under “Cautionary note regarding forward-looking statements” below and in Item 1A, ~~“Risk factors”~~Risk factors, in our ~~Form 10-K for the fiscal year ended August 31, 2017 and in Item 1A“Risk factors” in this report.~~2022 10-K. References herein to the ~~“Company”, “we”, “us”,~~“Company,” “we,” “us,” or “our” refer to Walgreens Boots Alliance, Inc. and its subsidiaries, and in each case do not include unconsolidated partially-owned entities, except as otherwise indicated or the context otherwise requires.

Certain amounts in the management's discussion and analysis of financial condition and results of operations may not add due to rounding. All percentages have been calculated using unrounded amounts for each of the periods presented.

INTRODUCTION AND SEGMENTS

Walgreens Boots Alliance, Inc. and its subsidiaries (“Walgreens Boots Alliance” or the “Company”), is an integrated healthcare, pharmacy and ~~its subsidiaries are~~retail leader serving millions of customers and patients every day, with a ~~global pharmacy-led health and wellbeing enterprise.~~170-year heritage of caring for communities. Its operations are conducted through three reportable segments:

•U.S. Retail Pharmacy,

•International, and

•U.S. Healthcare.

FACTORS, TRENDS AND UNCERTAINTIES AFFECTING OUR RESULTS AND COMPARABILITY

The Company has been, and we expect it to continue to be, affected by a number of factors that may cause actual results to differ from our historical results or current expectations. These factors include: impact of opioid litigation settlements, the impact of COVID-19 on our operations and financial results; the financial performance of our equity method investees, including AmerisourceBergen; the influence of certain holidays; seasonality; foreign currency rates; changes in vendor, payor and customer relationships and terms and associated reimbursement pressure; strategic transactions and acquisitions, dispositions, joint ventures and other strategic collaborations; changes in laws, including United States (“U.S.”) and the United Kingdom (“UK”) tax law changes; changes in trade tariffs, including trade relations between the U.S. and China, and international relations, including the UK's withdrawal from the European Union and its impact on our operations and prospects, and those of our customers and counterparties; the timing and magnitude of cost reduction initiatives, including under our Transformational Cost Management Program (as defined below); the timing and severity of the cough, cold and flu season; fluctuations in variable costs; adjustments to Centers for Medicare and Medicaid Services, Medicare Advantage and Medicare rates; the impacts of looting, natural disasters, war, terrorism and other catastrophic events, and changes in general economic conditions in the markets in which the Company operates, including changes that would negatively impact our access to capital markets.

Specialty pharmacy represents a significant and growing proportion of prescription drug spending in the U.S., a significant portion of which is dispensed outside of traditional retail pharmacies. To better serve the evolving specialty pharmacy market, in March 2017, the Company and Prime Therapeutics LLC (“Prime”), a PBM, closed a transaction to form a combined central specialty pharmacy and mail services company, AllianceRx Walgreens Prime, using an innovative model that sought to align pharmacy, PBM, and health plans to coordinate patient care, improve health outcomes and deliver cost of care opportunities. On December 31, 2021, the Company purchased Prime's portion of the joint venture and now wholly owns the joint venture, which was renamed AllianceRx Walgreens. Certain clients of AllianceRx Walgreens are not obligated to contract through AllianceRx Walgreens, and have in the past, and may in the future, enter into specialty pharmacy and other agreements without involving AllianceRx Walgreens. Certain clients have chosen not to renew their contracts through AllianceRx Walgreens which impacts gross sales. However, considering the relatively low margin nature of this business, the Company does not anticipate this will have a material impact on operating income.


WBA Q2 2023 Form 10-Q			37

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Opioid litigation settlements

On November 2, 2022, the Company announced that it had agreed to financial amounts and payment terms as part of settlement frameworks (the “Settlement Frameworks”) that have the potential to resolve a substantial majority of opioid-related lawsuits filed against the Company by the attorneys general of participating states and political subdivisions (the “Settling States”) and litigation brought by counsel for tribes. The Company recorded a $6.5 billion liability associated with the Settlement Frameworks and other opioid-related claims and litigation during the three months ended November 30, 2022. The settlement accrual is reflected in the Consolidated Condensed Statement of Earnings within Selling, general and administrative expenses as part of the U.S. Retail Pharmacy ~~USA;~~segment. As of February 28, 2023, the Company has accrued a total $7.4 billion liability associated with the Settlement Frameworks and other opioid-related claims and litigation settlements, including $1.0 billion and $6.4 billion of the estimated settlement liability in Accrued expenses and other current liabilities, and Accrued litigation obligations, respectively, in the Consolidated Condensed Balance Sheet.

~~Retail Pharmacy International; and~~

~~Pharmaceutical Wholesale~~

See ~~note 16, segment reporting~~Note 10. Commitments and contingencies to the Consolidated Condensed Financial Statements for further information.

~~Acquisition of certain Rite Aid Corporation (~~“~~Rite Aid~~”~~) assets~~

~~On September 19, 2017,~~U.S. Healthcare

In fiscal 2022, the Company announced ~~it had secured regulatory clearance~~the launch of its new healthcare strategy. The Company plans to become a leading provider of local clinical care services by leveraging its consumer-centric technology and retail pharmacy network to deliver value-based care. The Company’s goal is to provide better consumer experiences, improve health outcomes and lower costs.

The Company’s U.S. Healthcare segment, created at the beginning of fiscal 2022, is a consumer-centric, technology-enabled healthcare business that engages consumers through a personalized, omni-channel experience across the care journey. The U.S. Healthcare segment delivers improved health outcomes and lower costs for payors and providers by delivering care through owned and partnered assets.

The U.S. Healthcare segment currently consists of a majority position in Village Practice Management Company, LLC (“VillageMD”), a leading national provider of value-based primary, urgent and multi-specialty care services; Shields Health Solutions Parent, LLC (“Shields”), a specialty pharmacy integrator and accelerator for hospitals, a majority position in CCX Next, LLC (“CareCentrix”), a leading player in the post-acute and home care management sectors; and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services to their members and members’ caregivers through both digital and physical channels.

See Note 14. Segment reporting to the Consolidated Condensed Financial Statements for further information.

These and other factors can affect the Company’s operations and net earnings for any period and may cause such results not to be comparable to the same period in previous years. The results presented in this report are not necessarily indicative of future operating results.

RECENT TRANSACTIONS

CareCentrix acquisition

On October 11, 2022, the Company announced the acceleration of its plans to acquire the remaining 45% equity interest of CareCentrix for approximately $392 million of cash consideration. The transaction is expected to close by the third quarter of fiscal 2023.

See Note 2. Acquisitions and other investments to the Consolidated Condensed Financial Statements for further information.

Sale of AmerisourceBergen common stock

On November 10, 2022, the Company sold 13.2 million shares of AmerisourceBergen common stock for total consideration of approximately $2.0 billion.

On December 13, 2022, the Company sold 6.0 million shares of AmerisourceBergen common stock for total consideration of approximately $984 million.

See Note 5. Equity method investments to the Consolidated Condensed Financial Statements for further information.


WBA Q2 2023 Form 10-Q			38

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Shields acquisition

On December 28, 2022 the Company acquired the remaining 30% equity interest in Shields for approximately $1.4 billion of cash consideration.

See Note 2. Acquisitions and other investments to the Consolidated Condensed Financial Statements for further information.

Summit acquisition

On January 3, 2023, Village Practice Management Company, LLC (“VillageMD”), through its parent company, following an ~~amended~~internal reorganization, completed the acquisition of WP CityMD TopCo (“Summit”), a leading provider of primary, specialty and ~~restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid~~urgent care in exchange, for ~~$4.375~~$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 $86 million of cash paid to fund acquisition-related bonuses to Summit Health-CityMD employees which is recognized as 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 (“Cigna”) 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.

See Note 2. Acquisitions and other ~~consideration. As~~investments to the Consolidated Condensed Financial Statements for further information.

Sale of ~~December 31, 2017,~~Option Care Health common stock

On March 3, 2023, the Company ~~had acquired 357 Rite Aid stores.~~sold approximately 15.5 million shares of Option Care Health for a total consideration of approximately $469 million.

See Note 5. Equity method investments to the Consolidated Condensed Financial Statements for further information.

TRANSFORMATIONAL COST MANAGEMENT PROGRAM

On October 12, 2021, the ~~remaining stores~~Company expanded and extended the Transformational Cost Management Program through the end of fiscal 2024 and increased its annual cost savings target to be transferred in phases, with the goal being to complete the store transfers in spring 2018. These transfers remain subject to closing conditions set forth in the amended and restated asset purchase agreement.

~~The Company expects to complete integration of the acquired stores and related assets~~$3.3 billion by the end of fiscal ~~2020, at an estimated total~~2024. In fiscal 2022, the Company increased its annual cost savings target from $3.3 billion to $3.5 billion by the end of ~~approximately $750 million,~~fiscal 2024. The Company is currently on track to achieve the savings target.

The Transformational Cost Management Program, which is ~~reported as acquisition-related costs. In addition,~~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 ~~spend~~close approximately ~~$500 million~~350 Boots stores in the UK and approximately 450 to 500 stores in the U.S. As of ~~capital on store conversions~~February 28, 2023, the Company has closed 252 and ~~related activities.~~403 stores in the UK and U.S., respectively.

The Company ~~expects~~currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to ~~realize annual synergies from the transaction~~its GAAP financial results of ~~more than $300 million,~~approximately $3.6 billion to $3.9 billion, of which $3.3 billion to $3.6 billion are expected to be ~~fully realized within four years~~recorded as exit and disposal activities. The Company estimates that approximately 80% of the ~~initial closing of this transaction~~cumulative pre-tax charges relating to the Transformational Cost Management Program represent current or future cash expenditures, primarily related to employee severance and ~~derived primarily from procurement, cost savings~~business transition costs, IT transformation and lease and other ~~operational matters.~~real estate payments.


WBA Q2 2023 Form 10-Q			39

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS


Transformational Cost Management Program Activities			Range of Charges
Lease obligations and other real estate costs 1			$1,250 to $1,350 million
Asset impairments 2			$750 to $800 million
Employee severance and business transition costs			$1,025 to $1,075 million
Information technology transformation and other exit costs			$300 to $350 million
Total cumulative pre-tax exit and disposal charges			$3.3 to $3.6 billion
Other IT transformation costs			$275 to $325 million
Total estimated pre-tax charges			$3.6 to $3.9 billion

1.Includes impairments relating to operating lease right-of-use and finance lease assets.

2.Primarily related to store closures and other asset impairments.

The amounts and timing of all estimates are subject to change until finalized. The actual amounts and timing may vary materially based on various factors. See ~~“cautionary~~“Cautionary note regarding forward-looking statements” below.

The total pre-tax charges under the Transformational Cost Management Program, which were primarily recorded in Selling, general and administrative expenses were as follows (in millions):

~~RECENT DEVELOPMENTS~~


Three months ended February 28, 2023	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Total exit and disposal charges	$	131	$	4	$	2	$	138
Other IT transformation costs	6		—		—		7
Total pre-tax charges	$	138	$	5	$	2	$	145

~~Investment in Chinese Pharmacy Chain GuoDa~~

On December 6, 2017 the Company announced that it had reached an agreement with China National Accord Medicines Corporation Ltd. to become an investor in its subsidiary Sinopharm Holding Guoda Drugstores Co., Ltd. (“GuoDa”), a leading retail pharmacy chain in China.


Six months ended February 28, 2023	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Total exit and disposal charges	$	250	$	10	$	6	$	267
Other IT transformation costs	15		1		—		16
Total pre-tax charges	$	265	$	11	$	6	$	283

Following a public tender process, the Company's bid met all the requirements set by the seller to acquire a 40 percent equity interest in GuoDa through a capital increase worth approximately $416 million. The transaction is subject to regulatory review and approval, and other customary closing conditions. Upon completion, the Company will account for this equity investment using the equity method of accounting.


Three months ended February 28, 2022	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Total exit and disposal charges	$	43	$	8	$	5	$	56
Other IT transformation costs	9		5		—		14
Total pre-tax charges	$	52	$	13	$	5	$	70

~~Recent U.S. tax legislation~~


Six months ended February 28, 2022	U.S. Retail Pharmacy		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Total exit and disposal charges	$	166	$	51	$	14	$	231
Other IT transformation costs	27		15		—		42
Total pre-tax charges	$	193	$	66	$	14	$	273

On December 22, 2017, U.S. tax legislation was enacted that made significant changes to many elements of the U.S. federal Internal Revenue Code. Due to the recent enactment of this tax legislation and expected further rulemaking and future regulatory guidance, a comprehensive estimate of the overall tax impact to the Company's financial position, results of operations and cash flows cannot be made at this time. However, at this time, the Company does anticipate this tax legislation will result in a discrete tax impact related to revaluing the Company's U.S. federal deferred tax assets and liabilities, a discrete tax impact associated with including incremental earnings from the Company's non-U.S. entities in its U.S. federal income tax base and a change to the Company’s fiscal 2018 estimated annual tax rate due to the statutory corporate tax rate reduction. These changes will impact Deferred income tax and Other non-current liabilities in the Consolidated Condensed Balance Sheet.

See ~~note 19, “subsequent event” above~~Note 3. Exit and ~~“cautionary note regarding forward-looking statements” and Item 1A “Risk factors” below.~~

~~EXIT AND DISPOSAL ACTIVITIES~~

~~Store Optimization Program~~

On October 24, 2017, the Company’s Board of Directors approved a plan to implement a program (the “Store Optimization Program”) as part of an initiative to optimize store locations within the Company’s Retail Pharmacy USA segment upon completion of the acquisition of certain stores and related assets from Rite Aid. The Store Optimization Program includes plans to close approximately 600 stores and related assets across the U.S. and is expected to result in cost savings of $300 million per year to be delivered by the end of fiscal 2020. The actions under the Store Optimization Program are expected to take place over an 18 month period beginning in spring 2018.

The Company currently estimates that it will recognize cumulative pre-tax charges to its GAAP financial results of approximately $450 million, including costs associated with lease obligations and other real estate costs, employee severance and other exit costs. The Company expects to incur pre-tax charges of approximately $270 million for lease obligations and other real estate costs and approximately $180 million for employee severance and other exit costs. The Company estimates that substantially all of these cumulative pre-tax charges will result in future cash expenditures.

As the Store Optimization Program is implemented, charges will be recognized as the costs are incurred over time in accordance with GAAP. The Company intends to treat charges related to the Store Optimization Program as special items impacting comparability of results in its quarterly earnings disclosures.

The amounts and timing of all estimates are subject to change until finalized. The actual amounts and timing may vary materially based on various factors. See “cautionary note regarding forward-looking statements” below.

~~AMERISOURCEBERGEN CORPORATION RELATIONSHIP~~

As of November 30, 2017, the Company owned 56,854,867 AmerisourceBergen common shares representing approximately 26% of the outstanding AmerisourceBergen common stock, and had designated one member of AmerisourceBergen’s board of directors. As of November 30, 2017, the Company can acquire up to an additional 8,398,752 AmerisourceBergen shares in the open market and thereafter designate another member of AmerisourceBergen’s board of directors, subject in each case to applicable legal and contractual requirements. The amount of permitted open market purchases is subject to increase or decrease in certain circumstances.

Effective March 18, 2016, the Company began accounting for the investment in AmerisourceBergen using the equity method of accounting, subject to a two-month reporting lag, with the net earnings attributable to the investment being classified within the operating income of the Pharmaceutical Wholesale segment. See note 4, equity method investments,disposal activities, to the Consolidated Condensed Financial Statements for ~~further~~additional information.


WBA Q2 2023 Form 10-Q			40

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

The following table presents certain key financial ~~statistics for the Company for the three months ended November 30, 2017 and 2016, respectively.~~statistics.


	(in millions, except per share amounts)
	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales	$	34,862	$	33,756	$	68,244	$	67,656
Gross profit	7,055		7,708		14,008		15,283
Selling, general and administrative expenses	6,934		6,565		20,091		12,956
Equity earnings in AmerisourceBergen	75		103		129		202
Operating income (loss) (GAAP)	197		1,246		(5,954)		2,529
Adjusted operating income (Non-GAAP measure) 1	1,215		1,657		2,229		3,434
Earnings (loss) before interest and income tax provision (benefit)	749		1,047		(4,410)		4,947
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP)	703		883		(3,018)		4,463
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) 1	1,000		1,377		2,004		2,833
Diluted net earnings (loss) per common share (GAAP)	0.81		1.02		(3.50)		5.15
Adjusted diluted net earnings per common share (Non-GAAP measure) 1	1.16		1.59		2.32		3.27


	Percentage increases (decreases)
	Three months ended February 28,		Six months ended February 28,
	2023	2022	2023	2022
Sales	3.3	3.0	0.9	5.4
Gross profit	(8.5)	13.7	(8.3)	14.0
Selling, general and administrative expenses	5.6	8.9	55.1	9.6
Operating income (loss) (GAAP)	(84.2)	49.7	NM	NM
Adjusted operating income (Non-GAAP measure) 1	(26.7)	35.3	(35.1)	41.8
Earnings (loss) before interest and income tax provision (benefit)	(28.5)	(3.3)	(189.2)	NM
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP)	(20.4)	(4.1)	(167.6)	NM
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) 1	(27.4)	25.8	(29.2)	38.7
Diluted net earnings (loss) per common share (GAAP)	(20.3)	(4.1)	(167.9)	NM
Adjusted diluted net earnings per common share (Non-GAAP measure) 1	(27.2)	25.9	(29.0)	38.6


	Percent to sales
	Three months ended February 28,		Six months ended February 28, 2023
	2023	2022	2023	2022
Gross margin	20.2	22.8	20.5	22.6
Selling, general and administrative expenses	19.9	19.4	29.4	19.1

(in millions, except per share amounts)
Three months ended November 30,
2017 2016
Sales $ 30,740
$ 28,501
Gross profit 7,341
7,116
Selling, general and administrative expenses 5,907
5,686
Equity earnings (loss) in AmerisourceBergen (112 ) 17
Operating income 1,322
1,447
Adjusted operating income (Non-GAAP measure)¹
1,809
1,726
Earnings before interest and income tax provision 1,185
1,448
Net earnings attributable to Walgreens Boots Alliance, Inc. 821
1,054
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)¹
1,295
1,201
Net earnings per common share – diluted 0.81
0.97
Adjusted net earnings per common share – diluted (Non-GAAP measure)¹
1.28
1.10

Percentage increases (decreases)
Three months ended November 30,
2017 2016
Sales 7.9
(1.8 )
Gross profit 3.2
(4.1 )
Selling, general and administrative expenses 3.9
(4.5 )
Operating income (8.6 ) (1.4 )
Adjusted operating income (Non-GAAP measure)¹
4.8
0.4
Earnings before interest and income tax provision (18.2 ) 2.6
Net earnings attributable to Walgreens Boots Alliance, Inc. (22.1 ) (5.0 )
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)¹
7.8
6.1
Net earnings per common share – diluted (16.5 ) (4.0 )
Adjusted net earnings per common share – diluted (Non-GAAP measure)¹
16.4
6.8

Percent to sales
Three months ended November 30,
2017 2016
Gross margin 23.9 25.0
Selling, general and administrative expenses 19.2 20.0


¹ WBA Q2 2023 Form 10-Q			See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”).41

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.

WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS

Net earnings ~~attributable to Walgreens Boots Alliance~~(GAAP) for the three months ended ~~November 30, 2017 decreased 22.1%~~February 28, 2023 compared to ~~$821~~three months ended February 28, 2022

Net earnings attributable to the Company for the three months ended February 28, 2023 was $703 million ~~while~~compared to $883 million for the year-ago quarter. Diluted net earnings per share was $0.81 compared to $1.02 for the year-ago quarter. The decreases in net earnings and diluted net earnings per share ~~decreased 16.5% to $0.81 compared with~~reflect lower operating income partially offset by a $454 million after-tax gain from the ~~prior year period. The decreases were mainly due to impairment~~partial sale of the Company's equity method investment in ~~Guangzhou Pharmaceuticals Corporation (“Guangzhou Pharmaceuticals”). In addition, the decreases in net earnings reflect a loss from the Company's equity earnings in AmerisourceBergen~~AmerisourceBergen.

Operating income (loss) in the ~~current period~~quarter reflects significantly lower volumes of COVID-19 vaccinations and ~~benefits from~~testing lapping the ~~U.K. tax rate reduction recorded~~year-ago quarter's Omicron surge, a $306 million pre-tax charge for opioid-related claims and litigation settlements, Summit Health acquisition costs, planned payroll investments in U.S. Retail Pharmacy segment, investments in U.S. Healthcare segment, and higher costs related to the Transformational Cost Management Program partly offset by improved retail contributions in the ~~comparable prior year period.~~U.S. Retail Pharmacy segment and the growth in International segment.

Other income (expense), net for the three months ended ~~November 30, 2017~~February 28, 2023 was an$552 million compared to other expense of ~~$137~~$198 million ~~as compared~~for the year-ago quarter. The increase was primarily due to ~~an income of $1~~the $492 million inpre-tax gain from the ~~comparable prior year period, which primarily reflects impairment~~partial sale of the Company's equity method investment in ~~Guangzhou Pharmaceuticals.~~AmerisourceBergen during the three months ended February 28, 2023 and the impairment loss of $190 million for certain equity investments recorded for the three months ended February 28, 2022.

Interest expense, net was ~~a net expense of $149 million and $173~~$141 million for the three months ended ~~November 30, 2017~~February 28, 2023 compared to $100 million for the three months ended February 28, 2022. The increase in interest expense was primarily the result of higher short-term benchmark interest rates and ~~2016, respectively. The decrease mainly reflects lower borrowings.~~incremental facility borrowings associated with the Summit Health transaction in the current period.

The Company's effective tax rate for the three months ended ~~November 30, 2017~~February 28, 2023 was ~~21.9%~~11.5 percent, compared to ~~17.3%~~18.2 percent for ~~the prior year period.~~

three months ended February 28, 2022. The ~~increase~~decrease in the effective tax rate was primarily ~~attributable~~due to ~~reduced discrete~~the reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements. The Company recognized a tax ~~benefits~~benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized in the current ~~period. During~~period against capital gains recognized on the sale of shares in AmerisourceBergen. See Note 5. Equity method investments for further information. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the three months ended November 30, 2016, we recognized a discrete tax benefit of $77 million related to reducing our deferred tax liabilities, following enactment of a U.K. tax rate reduction. This benefit did not recur during the three months ended November 30, 2017. The impact of this non-recurrence was partly offset by additionalFebruary 28, 2023.

Adjusted net ~~discrete tax benefits~~earnings (Non-GAAP measure) for the three months ended ~~November 30, 2017, primarily related~~February 28, 2023 compared to ~~our equity method investment in AmerisourceBergen.~~three months ended February 28, 2022

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

Adjusted net earnings attributable to ~~Walgreens Boots Alliance~~the Company for the three months ended ~~November 30, 2017 increased 7.8%~~February 28, 2023 decreased 27.4 percent to ~~$1.3~~$1.0 billion compared with the year-ago quarter. Adjusted diluted net earnings per share ~~increased 16.4%~~for the three months ended February 28, 2023 decreased 27.2 percent to ~~$1.28,~~$1.16 compared with the year-ago quarter. ~~Adjusted net earnings and adjusted diluted net earnings per share were positively impacted by 0.6 percentage points and 0.9 percentage points, respectively, due to currency translation.~~

Excluding the impact of currency translation, the ~~increase~~decrease in adjusted net earnings ~~and adjusted diluted net earnings per share~~ for the three months ended ~~November 30, 2017~~February 28, 2023 primarily reflects significantly lower volumes of COVID-19 vaccinations and testing compared with the Omicron surge in the year-ago quarter, planned payroll investments in U.S. Retail Pharmacy, and investments in U.S. Healthcare. This was ~~primarily due to an increase in sales and a reduction in selling, general and administrative expenses as a percentage of sales partially~~partly offset by ~~lower gross margin.~~improved retail contributions in the U.S. and International growth.

Adjusted diluted net earnings per share for the three months ended November 30, 2017 also benefited from a lower number of shares in issue as a result of the stock repurchase programs described below. See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP ~~measure.~~and related disclosures.


WBA Q2 2023 Form 10-Q			42

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Net earnings (GAAP) for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Net loss attributable to the Company for the six months ended February 28, 2023 was $3.0 billion compared to net earnings of $4.5 billion for the year-ago period. Diluted net loss per share was $3.50 compared to diluted net earnings per share of $5.15 for the year-ago period. The decreases in net earnings and diluted net earnings per share is driven by $5.4 billion after-tax charge for opioid-related claims and litigation settlements partly offset by the $1.4 billion after-tax gain from the partial sale of the Company's equity method investment in AmerisourceBergen in the six months ended February 28, 2023, lapping $2.5 billion after-tax gain on the Company's investments in VillageMD and Shields in the year-ago period, and lower operating income reflecting a COVID-19 headwind, planned payroll and IT investments in U.S. Retail Pharmacy segment and investments in U.S. Healthcare segment, partly offset by improved retail contributions in the U.S. Retail Pharmacy segment and growth in the International segment.

Operating income (loss) in the period reflects a $6.8 billion pre-tax charge for opioid-related claims and litigation settlements, significantly lower volumes of COVID-19 vaccinations and testing, planned payroll and IT investments in U.S. Retail Pharmacy, and growth investments in U.S. Healthcare, partly offset by improved retail contributions in the U.S. Retail Pharmacy segment and growth in the International segment.

Other income (expense), net for the six months ended February 28, 2023 was $1.5 billion compared to $2.4 billion for the year-ago period. The decrease in other income is mainly due to the gains on the Company's investments in VillageMD and Shields in the year-ago period, partly offset by the $1.5 billion pre-tax gain from the partial sale of the Company's equity method investment in AmerisourceBergen.

Interest expense, net was $252 million for the six months ended February 28, 2023, compared to $186 million for the six months ended February 28, 2022. The increase in interest expense was primarily the result of higher short-term benchmark interest rates and incremental facility borrowings associated with the Summit Health transaction in the current period.

The effective tax rate for the six months ended February 28, 2023 was a benefit of 29.5 percent primarily due to a reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements. The Company recognized a tax benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized against capital gains recognized on the sale of shares in AmerisourceBergen and based on forecasted capital gains. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the six months ended February 28, 2023. The effective tax rate for the six months ended February 28, 2022 was 9.4 percent, primarily due to lower tax expense on gains from consolidation of the Company's investment in VillageMD and Shields, as a portion of these gains were not subject to tax. See Note 2. Acquisitions and other investments for further information.

Adjusted net earnings (Non-GAAP measure) for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Adjusted net earnings attributable to the Company for the six months ended February 28, 2023 decreased 29.2 percent to $2.0 billion compared with the year-ago period. Adjusted diluted net earnings per share for the six months ended February 28, 2023 decreased 29.0 percent to $2.32 compared with the year-ago period.

Excluding the impact of currency translation, the decrease in adjusted net earnings for the six months ended February 28, 2023 primarily reflects lower adjusted operating income due to a COVID-19 headwind of approximately 23.7 percent, planned payroll and IT investments in U.S. Retail Pharmacy segment, and investments in U.S Healthcare segment, partly offset by improved retail contributions in the U.S. Retail Pharmacy segment, and growth in the International segment.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.


WBA Q2 2023 Form 10-Q			43

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS BY SEGMENT

U.S. Retail Pharmacy

The Company's U.S. Retail Pharmacy ~~USA~~segment includes the Walgreens business which is comprised of the operations of retail drugstores, health and wellness services, specialty and home delivery pharmacy services, and its equity method investment in AmerisourceBergen. Sales for the segment are principally derived from the sale of prescription drugs and a wide assortment of retail products, including health and wellness, beauty, personal care and consumables and general merchandise.


FINANCIAL PERFORMANCE	(in millions, except location amounts)
	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales	$	27,577	$	27,667	$	54,781	$	55,699
Gross profit	5,825		6,487		11,711		12,834
Selling, general and administrative expenses	5,527		5,199		17,225		10,290
Equity earnings in AmerisourceBergen	75		103		129		202
Operating income (loss) (GAAP)	373		1,390		(5,385)		2,746
Adjusted operating income (Non-GAAP measure) 1	1,067		1,588		2,172		3,277

Number of prescriptions 2	197.3		203.3		408.6		421.3
30-day equivalent prescriptions 2,3	298.0		300.0		609.6		613.8
Number of locations at period end	8,779		8,906		8,779		8,906


	Percentage increases (decreases)
	Three months ended February 28,		Six months ended February 28,
	2023	2022	2023	2022
Sales	(0.3)	1.2	(1.6)	2.2
Gross profit	(10.2)	13.8	(8.7)	13.2
Selling, general and administrative expenses	6.3	4.9	67.4	5.8
Operating income (loss) (GAAP)	(73.2)	67.9	NM	NM
Adjusted operating income (Non-GAAP measure) 1	(32.8)	36.5	(33.7)	41.4

Comparable sales 4	3.1	9.5	3.5	8.7
Pharmacy sales	0.3	(3.3)	(2.0)	(1.1)
Comparable pharmacy sales 4	4.9	7.3	4.9	7.1
Retail sales	(1.8)	14.5	(0.6)	12.4
Comparable retail sales 4	(1.0)	14.7	0.1	12.8
Comparable number of prescription 2,4	(2.2)	4.6	(2.3)	5.9
Comparable 30-day equivalent prescriptions 2,3,4	0.2	4.7	0.1	5.4


	Percent to sales
	Three months ended February 28,		Six months ended February 28,
	2023	2022	2023	2022
Gross margin	21.1	23.4	21.4	23.0
Selling, general and administrative expenses	20.0	18.8	31.4	18.5

(in millions, except location amounts)
Three months ended November 30,
2017 2016
Sales $ 22,489
$ 20,659
Gross profit 5,602
5,439
Selling, general and administrative expenses 4,476
4,334
Operating income 1,126
1,105
Adjusted operating income (Non-GAAP measure)¹
1,377
1,289
Number of prescriptions²
196.4
187.2
30-day equivalent prescriptions^2,3
260.2
237.6
Number of locations at period end 8,201
8,185

Percentage increases (decreases)
Three months ended November 30,
2017 2016
Sales 8.9
1.4
Gross profit 3.0
(0.1 )
Selling, general and administrative expenses 3.3
(1.9 )
Operating income 1.9
7.5
Adjusted operating income (Non-GAAP measure)¹
6.8
3.7
Comparable store sales⁴
4.7
1.1
Pharmacy sales 14.1
2.5
Comparable pharmacy sales⁴
7.4
2.0
Retail sales (2.8 ) (0.9 )
Comparable retail sales⁴
(0.9 ) (0.5 )
Comparable number of prescriptions^2,4
5.3
1.0
Comparable 30-day equivalent prescriptions^2,3,4
8.9
3.4

Percent to sales
Three months ended November 30,
2017 2016
Gross margin 24.9 26.3
Selling, general and administrative expenses 19.9 21.0


¹ WBA Q2 2023 Form 10-Q			~~See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable GAAP measure and related disclosures.~~

44
²	~~Includes immunizations.~~


³	Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

⁴

Comparable stores are defined as those that have been open for at least twelve consecutive months without closure for seven or more consecutive days and without a major remodel or subject to a natural disaster in the past twelve months. Relocated and acquired stores are not included as comparable stores for the first twelve months after the relocation or acquisition. The method of calculating comparable sales varies across the industries in which we operate. As a result, our method of calculating comparable sales may not be the same as other companies’ methods.

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

2Includes vaccinations, including COVID-19.

3Includes the adjustment to convert prescriptions greater than 84 days to the equivalent of three 30-day prescriptions. This adjustment reflects that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

4Comparable sales are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales. E-commerce sales include digitally initiated sales online or through mobile applications. Relocated stores are not included as comparable sales for the first twelve months after the relocation. Acquired stores are not included as comparable sales for the first twelve months after acquisition or conversion, when applicable, whichever is later. Comparable sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions and comparable number of 30-day equivalent prescriptions refer to total sales, pharmacy sales, retail sales, number of prescriptions and number of 30-day equivalent prescriptions, respectively. Comparable retail sales for previous periods have been restated to include e-commerce sales. The method of calculating comparable sales varies across the retail industry and our method of calculating comparable sales may not be the same as other retailers’ methods.

NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.

Sales for the three months ended ~~November 30, 2017 and 2016~~February 28, 2023 compared to three months ended February 28, 2022

~~Retail Pharmacy USA division’s sales~~Sales for the three months ended ~~November 30, 2017~~February 28, 2023 decreased by 0.3 percent to $27.6 billion. Comparable sales increased by ~~8.9% to $22.5 billion. Sales in comparable stores increased 4.7% compared with~~3.1 percent for the ~~year-ago quarter.~~three months ended February 28, 2023.

Pharmacy sales increased by ~~14.1%~~0.3 percent for the three months ended ~~November 30, 2017~~February 28, 2023 and represented ~~72.4%~~72.1 percent of the ~~division’s~~segment’s sales. ~~The increase in~~Pharmacy sales were negatively impacted by a 3.5 percentage point headwind from AllianceRx Walgreens. For the ~~current quarter is mainly due to higher prescription volumes including mail and central specialty following the formation of AllianceRx Walgreens Prime. In the year-ago quarter,~~three months ended February 28, 2022, pharmacy sales ~~increased 2.5%~~decreased 3.3 percent and represented ~~69.1%~~71.6 percent of the ~~division’s~~segment’s sales. Comparable pharmacy sales increased ~~7.4%~~4.9 percent for the three months ended ~~November 30, 2017,~~February 28, 2023, benefiting from branded drug inflation, compared to an increase of ~~2.0%~~7.3 percent in the year-ago ~~quarter, primarily due to strong volume growth from Medicare Part D and volume growth from previously announced strategic pharmacy partnerships.~~quarter. The effect of generic drugs, which have a lower retail price, replacing brand name drugs, reduced ~~prescription~~pharmacy sales by ~~2.0%~~0.6 percent for the three months ended February 28, 2023 compared to a reduction of 0.2 percent in the year-ago quarter. The effect of generics on segment sales was a reduction of 0.4 percent for the three months ended February 28, 2023 compared to a reduction of 0.1 percent in the year-ago quarter. Within comparable pharmacy sales, 30-day equivalent prescriptions filled during the three months ended February 28, 2023 increased by 0.2% compared to the year-ago quarter.

Retail sales decreased by 1.8 percent for the three months ended February 28, 2023 and were 27.9 percent of the segment’s sales. In comparison, in the year-ago quarter, retail sales increased by 14.5 percent and comprised 28.4 percent of the segment’s sales. Comparable retail sales decreased 1.0 percent in the three months ended ~~November 30, 2017~~February 28, 2023 compared to ~~a reduction~~an increase of 2.2% in the year-ago quarter. On division sales, this effect was a reduction of 1.2% for the three months ended November 30, 2017 compared to a reduction of 1.3% for the year-ago quarter. The total number of prescriptions (including immunizations) filled for the three months ended November 30, 2017 was 196.4 million compared to 187.2 million in the year-ago quarter. Prescriptions (including immunizations) filled adjusted to 30-day equivalents were 260.2 million in the three months ended November 30, 2017 compared to 237.6 million in the year-ago quarter.

Retail sales decreased 2.8% for the three months ended November 30, 2017 and were 27.6% of the division’s sales. In the year-ago quarter, retail sales decreased 0.9% and represented 30.9% of the division’s sales. The decrease in the current quarter reflects the impact of recent store closures, the impact of the previously announced closure of certain e-commerce operations and loss of sales as a result of the hurricanes in the U.S. and Puerto Rico. Comparable retail sales decreased 0.9% in the three months ended November 30, 2017 compared to a decrease of 0.5%14.7 percent in the year-ago quarter. The decrease in comparable retail sales ~~growth~~ in the current ~~period~~quarter was ~~due to declines in~~primarily driven by a 500 basis points headwind from lower sales of over the ~~consumables and general merchandise category and in the personal care category, partially~~counter test kits, partly offset by strong core growth ~~in the health and wellness category and in the beauty category.~~across all categories.

Operating income for the three months ended ~~November 30, 2017 and 2016~~

~~Retail Pharmacy USA division’s~~February 28, 2023 compared to operating income for the three months ended ~~November 30, 2017 increased 1.9%~~February 28, 2022

Gross profit was $5.8 billion for the three months ended February 28, 2023 compared to ~~$1.1 billion. The increase was~~$6.5 billion in the year-ago quarter. Gross profit decreased 10.2 percent, primarily ~~due to higher pharmacy sales,~~driven by lower COVID-19 vaccine and ~~a reduction in selling,~~testing volumes, reimbursement pressure, net of procurement savings, partially offset by improved retail gross profit driven by gross margin expansion and strong underlying performance across categories.

Selling, general and administrative expenses as a percentage of sales ~~partially offset by lower gross margin.~~

~~Gross margin was 24.9%~~were 20.0 percent for the three months ended ~~November 30, 2017~~February 28, 2023 and 18.8 percent for the three months ended February 28, 2022. The increase is primarily driven by a $306 million pre-tax charge for opioid-related claims and litigation settlements and planned labor investments, partly offset by cost savings from reduced labor for lower volumes of COVID-19 vaccinations and testing and savings from the Transformational Cost Management Program.


WBA Q2 2023 Form 10-Q			45

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Operating income for the three months ended February 28, 2023 was $373 million, including $75 million from the Company's share of equity earnings in AmerisourceBergen. This compared to ~~26.3%~~$1.4 billion of operating income in the year-ago ~~quarter.~~ quarter, including $103 million from Company's share of equity earnings in AmerisourceBergen. The decrease was primarily driven by significant COVID-19 headwinds from lower vaccine and testing volumes, an approximately $306 million pre-tax charge for opioid-related claims and litigation settlements, continued reimbursement pressure, net of procurement, and planned labor investments.

Adjusted operating income (Non-GAAP measure) for the three months ended February 28, 2023 and 2022

Adjusted operating income for the three months ended February 28, 2023 decreased by 32.8 percent to $1.1 billion. The decrease was primarily due lower COVID-19 vaccine and testing volumes, continued reimbursement pressure net of procurement, and planned labor investments, partly offset by improved retail gross profit driven by gross margin expansion and strong underlying performance across categories.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

Sales for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Sales for the six months ended February 28, 2023 decreased by 1.6 percent to $54.8 billion. Comparable sales increased by 3.5 percent for the six months ended February 28, 2023.

Pharmacy ~~margins~~sales decreased by 2.0 percent for the six months ended February 28, 2023 and represented 73.2 percent of the segment’s sales. Pharmacy sales were negatively impacted by a 5.7 percentage point headwind from AllianceRx Walgreens. For the six months ended February 28, 2022, pharmacy sales decreased by 1.1 percent and represented 73.5 percent of the segment’s sales. Comparable pharmacy sales increased 4.9 percent for the six months ended February 28, 2023, benefiting from branded drug inflation, compared to an increase of 7.1 percent in the year-ago period. The effect of generic drugs, which have a lower retail price, replacing brand name drugs, reduced pharmacy sales by 0.6% for the six months ended February 28, 2023 compared to a reduction of 0.2 percent in the year-ago period. The effect of generics on segment sales was a reduction of 0.4% for the six months ended February 28, 2023 compared to a reduction of 0.1 percent in the year-ago period. Within comparable pharmacy sales, 30-day equivalent prescriptions filled during the six months ended February 28, 2023 increased by 0.1% compared to the year-ago period.

Retail sales decreased by 0.6 percent for the six months ended February 28, 2023 and were 26.8 percent of the segment’s sales. In comparison, in the year-ago period, retail sales increased by 12.4 percent and represented 26.5 percent of the segment’s sales. Comparable retail sales increased 0.1 percent in the six months ended February 28, 2023 and 12.8 percent in the year-ago period. The increase in comparable retail sales in the current period ~~were negatively impacted~~was primarily driven by ~~lower third-party reimbursements~~strong cough, cold, and ~~a higher mix of specialty sales. The decrease~~flu sales, and strength in ~~pharmacy margins were~~the beauty and personal care categories, benefiting from owned brand offerings, partially offset by lower sales of COVID-19 over the ~~favorable impact~~counter test kits.

Operating loss for the six months ended February 28, 2023 compared to operating income for the six months ended February 28, 2022

Gross profit was $11.7 billion for the six months ended February 28, 2023 compared to $12.8 billion in the year-ago period. Gross profit decreased 8.7 percent, primarily driven by lower COVID-19 vaccine and testing volumes and pharmacy reimbursement pressure, net of procurement, ~~efficiencies. Retail margins were positively impacted in the current period primarily due to~~offset by improved retail gross profit driven by gross margin expansion, strong underlying ~~margin improvement from changes to promotions~~performance across categories and improved ~~mix.~~shrink.

Selling, general and administrative expenses as a percentage of sales were ~~19.9% in~~31.4 percent for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2023 and 18.5 percent for the six months ended February 28, 2022. The increase is primarily driven by the $6.8 billion charge for opioid-related claims and litigation settlements, increased labor investments, and incremental IT and digital investments, partly offset by cost savings from the Transformational Cost Management Program.

Operating loss for the six months ended February 28, 2023 was $5.4 billion, including $129 million of operating income from the Company's share of equity earnings in AmerisourceBergen. This compared to ~~21.0%~~$2.7 billion of operating income in the year-ago ~~quarter. Expenses as~~period, including $202 million from Company's share of equity earnings in AmerisourceBergen. The decrease was primarily driven by a ~~percentage of sales were~~$6.8 billion pre-tax charge for opioid-related claims and litigation settlements, lower ~~in the current period primarily due to sales mix~~COVID-19 vaccination volumes, continued reimbursement pressure, and planned labor investments, partially offset by improved retail gross profit driven by gross margin expansion and higher core sales.


WBA Q2 2023 Form 10-Q			46

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Adjusted operating income (Non-GAAP measure) for the ~~three~~six months ended ~~November 30, 2017 and 2016~~February 28, 2023 compared to six months ended February 28, 2022

~~Retail Pharmacy USA division’s adjusted~~Adjusted operating income for the ~~three~~six months ended ~~November 30, 2017 increased 6.8%~~February 28, 2023 decreased by 33.7 percent to ~~$1.4~~$2.2 billion. The ~~increase~~decrease was primarily due to ~~higher pharmacy sales,~~lower COVID-19 vaccination volumes, continued reimbursement pressure and ~~a reduction in selling, general and administrative expenses as a percentage of sales, partially~~planned labor investments, partly offset by ~~lower~~improved retail gross ~~margin.~~ profit driven by gross margin expansion.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP ~~measure.~~and related disclosures.

~~Retail Pharmacy~~ International

~~This division comprises~~The Company's International segment consists of pharmacy-led health and beauty retail ~~pharmacy~~ businesses ~~operating~~outside the U.S. and the Company's pharmaceutical wholesale and distribution business in Germany. Pharmacy-led health and beauty retail businesses include Boots branded stores in the UK, the Republic of Ireland and Thailand, the Benavides brand in Mexico and the Ahumada brand in Chile. Sales for these businesses are principally derived from the sale of prescription drugs and health and wellness, beauty, personal care and other consumer products.

The International segment operates in currencies other than the U.S. dollar, including the British ~~Pound, Euro,~~pound sterling, euro, Chilean ~~Peso~~peso and Mexican ~~Peso,~~peso and therefore the ~~division’s~~segment’s results are impacted by movements in foreign currency exchange rates. See Item 3.3, Quantitative and qualitative disclosure about market risk, ~~foreign currency exchange rate risk~~ for further information on currency risk.

(in millions, except location amounts)
Three months ended November 30,
2017 2016
Sales $ 3,083
$ 2,962
Gross profit 1,224
1,175
Selling, general and administrative expenses 1,040
993
Operating income 184
182
Adjusted operating income (Non-GAAP measure)¹
210
213
Number of locations at period end 4,716
4,686

Percentage increases (decreases)
Three months ended November 30,
2017 2016
Sales 4.1
(14.4 )
Gross profit 4.2
(17.4 )
Selling, general and administrative expenses 4.7
(11.3 )
Operating income 1.1
(39.7 )
Adjusted operating income (Non-GAAP measure)¹
(1.4 ) (32.4 )
Comparable store sales²
4.2
(14.8 )
Comparable store sales in constant currency^2,3
(0.7 ) (0.1 )
Pharmacy sales 4.4
(15.8 )
Comparable pharmacy sales²
4.7
(14.6 )
Comparable pharmacy sales in constant currency^2,3
(0.1 ) (0.5 )
Retail sales 3.9
(13.6 )
Comparable retail sales²
4.0
(15.0 )
Comparable retail sales in constant currency^2,3
(1.0 ) 0.2

Percent to sales
Three months ended November 30,
2017 2016
Gross margin 39.7 39.7
Selling, general and administrative expenses 33.7 33.5


¹	~~See “--Non-GAAP Measures” below for reconciliations to the most directly comparable GAAP measure and related disclosures.~~

Comparable stores are defined as those that have been open for at least twelve consecutive months without closure for seven or more consecutive days and without a major remodel or a natural disaster in the past twelve months. Relocated and acquired stores are not included as comparable stores for the first twelve months after the relocation or acquisition. The method of calculating comparable sales varies across the industries in which we operate. As a result, our method of calculating comparable sales may not be the same as other companies’ methods.

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

~~Sales for the three months ended November 30, 2017 and 2016~~

~~Retail Pharmacy International division’s sales for the three months ended November 30, 2017 increased 4.1%~~ to ~~$3.1 billion. Sales~~operating results in ~~comparable stores increased 4.2% from the year-ago quarter. The positive impact of~~“constant currency, ~~translation on both sales and comparable sales was 4.9 percentage points.~~” which is a non-GAAP financial measure. Comparable ~~store~~ sales in constant currency, ~~decreased 0.7% from the year-ago quarter.~~

Pharmacy sales increased 4.4% in the three months ended November 30, 2017 and represented 35.8% of the division’s sales. Comparable pharmacy sales increased 4.7% from the year-ago quarter. The positive impact of currency translation on pharmacy sales and comparable ~~pharmacy sales was 4.7 percentage points and 4.8 percentage points, respectively. Comparable~~ pharmacy sales in constant currency ~~decreased 0.1% from the year-ago quarter.~~

Retail sales increased 3.9% for the three months ended November 30, 2017 and were 64.2% of the division’s sales. Comparable retail sales increased 4.0% from the year-ago quarter. The positive impact of currency translation on both retail sales and comparable ~~retail sales was 5.0 percentage points. Comparable~~ retail sales in constant currency ~~decreased 1.0% from~~exclude the ~~year-ago quarter reflecting lower Boots UK retail sales.~~effects of fluctuations in foreign currency exchange rates. See “--Non-GAAP Measures.”

~~Operating income for the three months ended November 30, 2017 and 2016~~


WBA Q2 2023 Form 10-Q			47

Table of Contents

Retail Pharmacy International division’s operating income for the three months ended November 30, 2017 increased 1.1% to $184 million. Currency translation positively impacted operating income by 4.4 percentage points ($8 million).WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

~~Gross profit increased 4.2% from the year-ago quarter. Currency translation positively impacted gross profit by 5.0 percentage points ($58 million).~~


FINANCIAL PERFORMANCE	(in millions, except location amounts)
	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales	$	5,651	$	5,563	$	10,840	$	11,381
Gross profit	1,198		1,206		2,248		2,413
Selling, general and administrative expenses	846		1,033		1,789		2,186
Operating income (GAAP)	353		173		459		227
Adjusted operating income (Non-GAAP measure) 1	352		226		468		389

Number of locations at period end	3,975		4,017		3,975		4,017


	Percentage increases (decreases)
	Three months ended February 28,		Six months ended February 28,
	2023	2022	2023	2022
Sales	1.6	2.6	(4.7)	17.2
Gross profit	(0.7)	11.8	(6.8)	16.6
Selling, general and administrative expenses	(18.2)	6.2	(18.2)	13.6
Operating income (GAAP)	104.0	62.8	102.2	56.6
Adjusted operating income (Non-GAAP measure) 1	55.8	55.0	20.2	67.7

Comparable sales in constant currency 2	10.8	13.5	8.4	12.8
Pharmacy sales	(6.2)	2.1	(10.6)	7.7
Comparable pharmacy sales in constant currency 2	3.1	4.4	2.1	6.8
Retail sales	6.1	15.2	(0.9)	16.6
Comparable retail sales in constant currency 2	14.7	19.0	11.8	16.4

~~Selling, general and administrative expenses increased 4.7% from the year-ago quarter. Currency translation negatively impacted expenses by~~ 5.0 percentage points ($50 million). As a percentage of sales, selling, general and administrative expenses were 33.7% in the three months ended November 30, 2017 compared to 33.5% in the year-ago quarter.


	Percent to sales
	Three months ended February 28,		Six months ended February 28,
	2023	2022	2023	2022
Gross margin	21.2	21.7	20.7	21.2
Selling, general and administrative expenses	15.0	18.6	16.5	19.2

~~Adjusted operating income (Non-GAAP measure) for the three months ended November 30, 2017 and 2016~~

Retail Pharmacy International division’s adjusted operating income for the three months ended November 30, 2017 decreased 1.4% to $210 million. Currency translation positively impacted adjusted operating income by 4.2 percentage points ($9 million). Adjusted operating income in constant currency decreased 5.6% primarily due to lower sales. 1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP ~~measure.~~and related disclosures.

2Comparable sales in constant currency are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales. Comparable sales in constant currency exclude wholesale sales in Germany. E-commerce sales include digitally initiated sales online or through mobile applications. Relocated stores are not included as comparable sales for the first twelve months after the relocation. Acquired stores are not included as comparable sales for the first twelve months after acquisition or conversion, when applicable, whichever is later. Comparable sales in constant currency, comparable pharmacy sales in constant currency and comparable retail sales in constant currency refer to total sales, pharmacy sales and retail sales, respectively. The method of calculating comparable sales in constant currency varies across the retail industry and our method of calculating comparable sales in constant currency may not be the same as other retailers’ methods.

~~Pharmaceutical Wholesale~~NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.

This division includes pharmaceutical wholesale businesses operating in currencies other than the U.S. dollar including the British Pound, Euro, and Turkish Lira, and thus the division’s results are impacted by movements in foreign currency exchange rates. See Item 3. Quantitative and qualitative disclosure about market risk, Foreign currency exchange rate risk for further information on currency risk.

(in millions, except location amounts)
Three months ended November 30,
2017 2016
Sales $ 5,718
$ 5,417
Gross profit 522
502
Selling, general and administrative expenses 396
359
Equity earnings in AmerisourceBergen (112 ) 17
Operating income 14
160
Adjusted operating income (Non-GAAP measure)¹
224
224

Percentage increases (decreases)
Three months ended November 30,
2017 2016
Sales 5.6
(6.5 )
Gross profit 4.0
(9.9 )
Selling, general and administrative expenses 10.3
(13.3 )
Operating income (91.3 ) 11.9
Adjusted operating income (Non-GAAP measure)¹
—
34.9
Comparable sales²
5.6
(2.7 )
Comparable sales in constant currency^2,3
4.5
4.7

Percent to sales
Three months ended November 30,
2017 2016
Gross margin 9.1 9.3
Selling, general and administrative expenses 6.9 6.6


¹ WBA Q2 2023 Form 10-Q			~~See “--Non-GAAP Measures” below for reconciliations to the most directly comparable GAAP measure and related disclosures.~~

48
²	~~Comparable sales are defined as sales excluding acquisitions and dispositions.~~

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Sales for the three months ended ~~November 30, 2017 and 2016~~February 28, 2023 compared to three months ended February 28, 2022

~~Pharmaceutical Wholesale division’s sales~~Sales for the three months ended ~~November 30, 2017~~February 28, 2023 increased ~~5.6%~~1.6 percent to $5.7 billion.

~~Sales were positively impacted by 1.1 percentage points as a result~~ The adverse impact of currency ~~translation.~~translation on sales was 7.5 percentage points. Comparable sales in constant currency, increased ~~4.5%~~by 10.8 percent, mainly due to higher sales ~~growth~~ in ~~emerging markets~~Boots UK.

Pharmacy sales decreased 6.2 percent in the three months ended February 28, 2023 and represented 15.9 percent of the segment’s sales. The adverse impact of currency translation on pharmacy sales was 6.9 percentage points. Comparable pharmacy sales in constant currency increased 3.1 percent compared to the year-ago quarter, reflecting prescription drug inflation in the UK and Mexico, partially offset by ~~challenging market conditions~~lower demand for COVID-19 services in ~~certain continental European countries.~~the UK, compared to the year-ago quarter.

Retail sales increased 6.1 percent for the three months ended February 28, 2023 and represented 35.3 percent of the segment’s sales. The adverse impact of currency translation on retail sales was 9.5 percentage points. Comparable retail sales in constant currency increased 14.7 percent reflecting higher retail sales in the UK, including a recovery in store footfall, following the trading headwind created by the Omicron variant, in the year-ago quarter.

Pharmaceutical wholesale sales increased 1.2 percent for the three months ended February 28, 2023 and represented 48.8 percent of the segment’s sales. The adverse impact of currency translation on pharmaceutical wholesale sales was 6.3 percentage points. Excluding the impact of currency translation, the increase in pharmaceutical wholesale sales reflects solid execution in a growing market.

Operating income for the three months ended ~~November 30, 2017~~February 28, 2023 compared to three months ended February 28, 2022

Gross profit decreased 0.7 percent for the three months ended February 28, 2023. Gross profit was adversely impacted by 8.2 percentage points, or $99 million, as a result of currency translation. Excluding the impact of currency translation, the increase was primarily due to higher UK retail sales, and ~~2016~~solid execution in our Germany wholesale business, partially offset by lower demand for COVID-19 related services in the UK, and the adverse gross margin impact of National Health Service (“NHS”) pharmacy funding.

~~Pharmaceutical Wholesale division’s operating~~

Selling, general and administrative expenses in the quarter decreased 18.2 percent from the year-ago quarter to $846 million, reflecting a favorable currency impact of 7.6 percentage points. The decrease reflects real estate gains and effective cost management in Germany and lower acquisition related costs. These decreases were partially offset in the UK, by increased in-store and marketing activities, higher inflation, and lapping of temporary COVID-19 related benefits received in the UK, in the year-ago quarter.

Operating income for the three months ended ~~November 30, 2017, which included a loss of $112 million from the Company’s share of equity earnings in AmerisourceBergen, decreased 91.3%~~February 28, 2023 increased 104.0 percent to ~~$14~~$353 million. The decrease in net earnings from AmerisourceBergen was due to the Company's share of the litigation accrual included in AmerisourceBergen's fourth quarter results for the fiscal year ended September 30, 2017. Operating income was ~~negatively~~adversely impacted by ~~1.3~~11.9 percentage points, ~~($2 million)~~or $21 million as a result of currency translation.

~~Gross profit increased 4.0% from~~ Excluding the ~~year-ago quarter. Gross profit was positively impacted by 1.6 percentage points ($8 million) as a result~~impact of currency ~~translation. The remaining~~translation, the increase ~~was primarily due to sales~~in operating income reflects execution in Germany, including real estate gains and strong growth ~~partially offset by lower gross margin, including some generic procurement pressure.~~in UK retail.

Selling, general and administrative expenses increased 10.3% from the year-ago quarter. Expenses were negatively impacted by 2.8 percentage points ($10 million) as a result of currency translation. As a percentage of sales, selling, general and administrative expenses were 6.9% in the current quarter, compared to 6.6% in the year-ago quarter.

Adjusted operating income (Non-GAAP measure) for the three months ended ~~November 30, 2017 and 2016~~February 28, 2023 compared to three months ended February 28, 2022

~~Pharmaceutical Wholesale division’s adjusted~~Adjusted operating income for the three months ended ~~November 30, 2017, which included $77 million from the Company’s share of adjusted equity earnings in AmerisourceBergen, was unchanged at $224~~February 28, 2023 increased 55.8 percent to $352 million. Adjusted operating income in the quarter was ~~negatively~~adversely impacted by ~~0.4~~9.9 percentage points, ~~($1 million) as a result~~or $22 million, of currency translation.

Excluding the ~~contribution from the Company’s share of adjusted equity earnings in AmerisourceBergen and the negative~~ impact of currency translation, the increase in adjusted operating income ~~decreased 10.8% over the year-ago quarter, primarily due to higher selling, general~~reflects execution in Germany, including real estate gains and ~~administrative expenses as a percentage of sales and lower gross margin, partially offset by sales growth.~~ strong growth in UK retail.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP ~~measure.~~and related disclosures.

Sales for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Sales for the six months ended February 28, 2023 decreased 4.7 percent to $10.8 billion. The adverse impact of currency translation on sales was 11.5 percentage points. Comparable sales in constant currency, increased 8.4 percent, mainly due to higher sales in Boots UK.


WBA Q2 2023 Form 10-Q			49

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Pharmacy sales decreased 10.6 percent in the six months ended February 28, 2023 and represented 16.3 percent of the segment’s sales. The adverse impact of currency translation on pharmacy sales was 10.5 percentage points. Comparable pharmacy sales in constant currency increased 2.1 percent compared to the year-ago quarter, reflecting strong growth in Mexico and Chile, and higher comparable pharmacy sales in the UK, despite lower demand for COVID-19 services compared to the year-ago period.

Retail sales decreased 0.9 percent for the six months ended February 28, 2023 and represented 33.6 percent of the segment’s sales. The adverse impact of currency translation on retail sales was 12.9 percentage points. Comparable retail sales in constant currency increased 11.8 percent reflecting higher retail sales in the UK, including the impact of the ongoing recovery in store footfall, especially in flagship, destination stores and travel locations, compared to pre-COVID-19 levels.

Pharmaceutical wholesale sales decreased 5.2 percent for the six months ended February 28, 2023 and represented 50.1 percent of the segment’s sales. The adverse impact of currency translation on pharmaceutical wholesale sales was 11.0 percentage points. Excluding the impact of currency translation, the increase in pharmaceutical wholesale sales reflects solid execution in a growing market.

Operating income for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Gross profit decreased 6.8 percent for the six months ended February 28, 2023. Gross profit was adversely impacted by 11.6 percentage points, or $281 million, as a result of currency translation. Excluding the impact of currency translation, the increase was primarily due to higher retail sales in the UK, and solid execution in our Germany wholesale business. This was partially offset by lower demand for COVID-19 pharmacy services and the adverse gross margin impact of NHS pharmacy funding in the UK.

Selling, general and administrative expenses for six months ended decreased 18.2 percent from the year-ago period to $1.8 billion, reflecting a favorable currency impact of 11.4 percentage points reflecting real estate gains and effective cost management in Germany and lower acquisition related costs, as well as lower costs related to the Transformational Cost Management Program. These decreases were partially offset by increased UK in-store and marketing activity, higher inflation, and lapping of temporary COVID-19 related benefits received in the UK, in the year-ago period.

Operating income for the six months ended February 28, 2023 increased 102.2 percent to $459 million. Operating income was adversely impacted by 13.5 percentage points, or $31 million, as a result of currency translation. Excluding the impact of currency translation, the increase in operating income reflects a strong performance in UK retail sales, execution in Germany, including real estate gains, and lower costs related to the Transformational Cost Management Program compared to the year-ago period. This was partially offset by lower demand for COVID-19 pharmacy services, the adverse gross margin impact of NHS pharmacy funding, and increased selling, general and administrative expenses, reflecting increased in-store and marketing activity, higher inflation, and lapping of temporary COVID-19 related benefits received in the UK, in the year-ago period.

Adjusted operating income (Non-GAAP measure) for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Adjusted operating income for the six months ended February 28, 2023 increased 20.2 percent to $468 million. Adjusted operating income in the quarter was adversely impacted by 9.4 percentage points, or $36 million, of currency translation. Excluding the impact of currency translation, the increase in adjusted operating income reflects strong growth in UK retail sales and execution in Germany, including real estate gains, partially offset by lower demand for COVID-19 related services in the UK, the adverse gross margin impact of NHS pharmacy funding, and increased selling, general and administrative expenses, reflecting increased in-store and marketing activity, higher inflation, and lapping of temporary COVID-19 related benefits received in the UK, in the year-ago period.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

U.S. Healthcare


WBA Q2 2023 Form 10-Q			50

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

The U.S. Healthcare segment currently consists of a majority position in VillageMD, a leading national provider of value-based primary, urgent and multi-specialty care services; Shields, a specialty pharmacy integrator and accelerator for hospitals; a majority position in CareCentrix, a leading player in the post-acute and home care management sectors, and the Walgreens Health organic business that contracts with payors and providers to deliver clinical healthcare services and care management programs to their members and members’ caregivers through both digital and physical channels.


FINANCIAL PERFORMANCE	(in millions, except location amounts)
	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Sales	$	1,634	$	527	$	2,622	$	577
Gross profit	32		15		49		36
Selling, general and administrative expenses	504		227		958		292
Operating loss (GAAP)	(472)		(212)		(909)		(257)
Adjusted operating loss (Non-GAAP measure) 1	(159)		(77)		(311)		(90)
Adjusted EBITDA (Non-GAAP measure) 1	(109)		(62)		(233)		(72)

Number of payor/provider partnerships at period end	3		2		3		2
Number of locations with Walgreens Health Corners at period end	117		47		117		47
Number of VillageMD co-located clinics at period end	210		94		210		94
Number of VillageMD2/Summit/CityMD locations at period end	729		270		729		270

1See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

2Locations are defined as the primary care locations where the Company or the Company’s affiliates lease or license space and the providers are employed by either the Company or one of the Company’s affiliates. These locations are primarily branded as Village Medical where the Company employs the providers but, in some instances, may operate under their own brands.

Sales for the three months ended February 28, 2023 compared to three months ended February 28, 2022

Sales for the three months ended February 28, 2023 were $1.6 billion. This is reflective of VillageMD sales of $1.1 billion inclusive of Summit which closed January 3, 2023, Shields sales of $125 million, and CareCentrix sales of $399 million. Sales for the three months ended February 28, 2022 were $527 million reflecting VillageMD sales of $446 million and Shields sales of $81 million.

Operating loss for the three months ended February 28, 2023 compared to three months ended February 28, 2022

Gross profit for the three months ended February 28, 2023 was $32 million. Shields and CareCentrix gross profit was offset by the VillageMD expansion as VillageMD added 133 VillageMD clinics compared to the year-ago quarter.

Selling, general and administrative expenses were $504 million for the three months ended February 28, 2023 compared to $227 million for the three months ended February 28, 2022. The increase is driven by the impact of acquisitions, including Summit and higher investments in the organic business.

Operating loss for the three months ended February 28, 2023 was $472 million, compared to $212 million in the year-ago quarter. The increase was driven by the VillageMD clinic expansion inclusive of the Summit acquisition and higher organic business investments.


WBA Q2 2023 Form 10-Q			51

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Adjusted operating loss (Non-GAAP measure) for the three months ended February 28, 2023 compared to three months ended February 28, 2022

Adjusted operating loss was $159 million for the three months ended February 28, 2023 compared to a loss of $77 million in the year-ago quarter, reflecting VillageMD expansion and growth in organic business investments, partially offset by positive contributions from Shields and CareCentrix.

Adjusted EBITDA for the three months ended February 28, 2023 compared to three months ended February 28, 2022

Adjusted EBITDA loss was $109 million, for three months ended February 28, 2023 compared to a loss of $62 million in the year-ago quarter, reflecting VillageMD expansion and higher investments in the organic business, partially offset by positive contributions from Shields and CareCentrix.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

Sales for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Sales for the six months ended February 28, 2023 were $2.6 billion. This is reflective of VillageMD sales of $1.7 billion inclusive of Summit which closed January 3, 2023, Shields sales of $229 million, and CareCentrix sales of $732 million. Sales for the six months ended February 28, 2022 were $577 million reflecting a partial period for both VillageMD and Shields.

Operating loss for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Gross profit for the six months ended February 28, 2023 was $49 million, reflecting results from Shields, VillageMD inclusive of approximately two months of Summit results, and CareCentrix. Shields and CareCentrix gross profit was offset by the VillageMD expansion as VillageMD added 133 VillageMD clinics compared to the year-ago quarter.

Selling, general and administrative expenses were $958 million for the six months ended February 28, 2023 compared to $292 million for the six months ended months ended February 28, 2022. The increase is driven by the impact of acquisitions, including Summit and higher investments in the organic business.

Operating loss for the six months ended February 28, 2023 was $909 million, compared to a loss of $257 million in the year-ago period. The increase was driven by the VillageMD clinic expansion inclusive of the Summit acquisition and higher organic business investments.

Adjusted operating loss (Non-GAAP measure) for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Adjusted operating loss was $311 million for the six months ended February 28, 2023 compared to a loss of $90 million in the year-ago period. The current period represents a full six months of VillageMD, Shields, and CareCentrix results compared to a partial period of VillageMD and Shields in the year-ago period. The increase is mainly driven by VillageMD clinic expansion inclusive of the recent Summit acquisition and higher investments in the organic business, partly offset by positive contributions from Shields and CareCentrix.

Adjusted EBITDA for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Adjusted EBITDA loss was $233 million, for six months ended February 28, 2023 compared to a loss of $72 million in the year-ago period representing a partial period of VillageMD and Shields. The increase is mainly driven by VillageMD clinic expansion inclusive of the recent Summit acquisition and higher investments in the organic business, partly offset by positive contributions from Shields and CareCentrix.

See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.


WBA Q2 2023 Form 10-Q			52

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

NON-GAAP MEASURES

The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under the SEC rules, ~~of the Securities and Exchange Commission,~~ presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures herein, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. See notes to the “Net (loss) earnings” to “Adjusted net earnings & Net (loss) earnings per share to Adjusted earnings per share” and "Operating (loss) income" to "Adjusted EBITDA for U.S. Healthcare segment" reconciliation tables for definitions of non-GAAP financial measures and related adjustments presented below.

These supplemental non-GAAP financial measures are presented because ~~our~~ management has evaluated ~~our~~the Company's financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and ~~believe~~believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of ~~our business~~the Company from period to period and trends in ~~our~~the Company's historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures ~~presented.~~presented herein.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the Company’s control or cannot be reasonably predicted, and that would impact the most directly comparable forward-looking GAAP financial measure. These items may include but are not limited to merger integration expenses, restructuring charges, acquisition-related costs, asset impairments and other significant items that currently cannot be predicted without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures may vary materially from the corresponding GAAP financial measures.

The Company also presents certain information related to current period operating results in “constant ~~currency,”~~currency”, which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the ~~United States~~U.S. reporting in currencies other than the U.S. dollar

and such presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations.

(in millions)
Three months ended November 30, 2017
Retail
Pharmacy
USA Retail
Pharmacy
International Pharmaceutical
Wholesale Eliminations Walgreens
Boots
Alliance, Inc.
Operating income (GAAP) $ 1,126
$ 184
$ 14
$ (2 ) $ 1,322
Adjustments to equity earnings in AmerisourceBergen —
—
189
—
189
Acquisition-related amortization 38
26
21
—
85
Hurricane-related costs 83
—
—
—
83
LIFO provision 54
—
—
—
54
Acquisition-related costs 51
—
—
—
51
Legal settlement 25
—
—
—
25
Adjusted operating income (Non-GAAP measure) $ 1,377
$ 210
$ 224
$ (2 ) $ 1,809
Operating income (loss) to Adjusted operating income (loss) by segments (in millions):


	Three months ended February 28, 2023
	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Operating income (loss) (GAAP)	$	373	$	353	$	(472)	$	(56)	$	197
Certain legal and regulatory accruals and settlements	427		—		—		—		427
Transformational cost management	138		4		—		2		145
Acquisition-related amortization	78		15		154		—		247
Acquisition-related costs	—		(20)		158		10		148
Adjustments to equity earnings in AmerisourceBergen	31		—		—		—		31
LIFO provision	20		—		—		—		20




Adjusted operating income (loss) (Non-GAAP measure)	$	1,067	$	352	$	(159)	$	(44)	$	1,215

(in millions)
Three months ended November 30, 2016
Retail
Pharmacy
USA Retail
Pharmacy
International Pharmaceutical
Wholesale Eliminations Walgreens
Boots
Alliance, Inc.
Operating income (GAAP) $ 1,105
$ 182
$ 160
$ —
$ 1,447
Adjustments to equity earnings in AmerisourceBergen —
—
41
—
41
Acquisition-related amortization 37
25
20
—
82
LIFO provision 58
—
—
—
58
Acquisition-related costs 17
—
—
—
17
Cost transformation 72
6
3
—
81
Adjusted operating income (Non-GAAP measure) $ 1,289
$ 213
$ 224
$ —
$ 1,726

WBA Q2 2023 Form 10-Q

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS


	Three months ended February 28, 2022
	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Operating income (loss) (GAAP)	$	1,390	$	173	$	(212)	$	(106)	$	1,246
Transformational cost management	52		13		—		5		70
Acquisition-related amortization	99		17		135		—		250
Acquisition-related costs	—		23		—		21		44
Adjustments to equity earnings in AmerisourceBergen	51		—		—		—		51
LIFO provision	(5)		—		—		—		(5)




Adjusted operating income (loss) (Non-GAAP measure)	$	1,588	$	226	$	(77)	$	(79)	$	1,657


	Six months ended February 28, 2023
	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Operating (loss) income (GAAP)	$	(5,385)	$	459	$	(909)	$	(119)	$	(5,954)
Certain legal and regulatory accruals and settlements	6,981		—		—		—		6,981
Transformational cost management	265		11		—		7		283
Acquisition-related amortization	155		29		392		—		577
Acquisition-related costs	1		(32)		206		12		187
Adjustments to equity earnings in AmerisourceBergen	117		—		—		—		117
LIFO provision	38		—		—		—		38




Adjusted operating income (loss) (Non-GAAP measure)	$	2,172	$	468	$	(311)	$	(100)	$	2,229


	Six months ended February 28, 2022
	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Operating income (loss) (GAAP)	$	2,746	$	227	$	(257)	$	(188)	$	2,529
Transformational cost management	193		66		—		14		273
Acquisition-related amortization	238		34		143		—		415
Acquisition-related costs	(3)		62		24		32		115
Adjustments to equity earnings in AmerisourceBergen	94		—		—		—		94
LIFO provision	9		—		—		—		9




Adjusted operating income (loss) (Non-GAAP measure)	$	3,277	$	389	$	(90)	$	(143)	$	3,434

WBA Q2 2023 Form 10-Q

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Net earnings (loss) to Adjusted net earnings & Net earnings (loss) per share to Adjusted earnings per share (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP)	$	703	$	883	$	(3,018)	$	4,463

Adjustments to operating income (loss):
Certain legal and regulatory accruals and settlements 1	427		—		6,981		—
Acquisition-related amortization 2	247		250		577		415
Transformational cost management 3	145		70		283		273
Acquisition-related costs 4	148		44		187		115
Adjustments to equity earnings in AmerisourceBergen 5	31		51		117		94
LIFO provision 6	20		(5)		38		9




Total adjustments to operating income (loss)	1,018		411		8,183		906

Adjustments to other income (expense), net:
Gain on sale of equity method investments 7	(544)		—		(1,513)		—
Net investment hedging loss 8	—		—		—		1
Impairment of equity method investment and investment in equity securities 9	—		190		—		190
Gain on previously held investments 10	—		—		—		(2,576)
Adjustment to gain on disposal of discontinued operations 11	—		38		—		38
Total adjustments to other income (expense), net	(544)		228		(1,513)		(2,347)





Adjustments to income tax provision (benefit):

Equity method non-cash tax 12	14		12		23		30
Tax impact of adjustments 12	(122)		(109)		(1,560)		(135)
Total adjustments to income tax provision (benefit)	(108)		(97)		(1,537)		(105)

Adjustments to post-tax earnings from other equity method investments:
Adjustments to earnings from other equity method investments 13	13		10		22		24
Total adjustments to post-tax earnings from other equity method investments	13		10		22		24

Adjustments to net loss attributable to non-controlling interests:
Transformational cost management 3	—		—		—		(1)
Acquisition-related costs 4	(40)		(3)		(54)		(20)
Acquisition-related amortization 2	(42)		(56)		(78)		(88)


Total adjustments to net loss attributable to non-controlling interests	(82)		(59)		(133)		(109)

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)	$	1,000	$	1,377	$	2,004	$	2,833

Diluted net earnings (loss) per common share (GAAP) 14	$	0.81	$	1.02	$	(3.50)	$	5.15
Adjustments to operating income (loss)	1.18		0.48		9.47		1.05
Adjustments to other income (expense), net	(0.63)		0.26		(1.75)		(2.71)

(in millions, except per share amounts)
Three months ended November 30,
2017 2016
Net earnings attributable to Walgreens Boots Alliance, Inc. (GAAP) $ 821
$ 1,054

Adjustments to operating income:
Adjustments to equity earnings in AmerisourceBergen 189
41
Acquisition-related amortization 85
82
Hurricane-related costs 83
—
LIFO provision 54
58
Acquisition-related costs 51
17
Legal settlement 25
—
Cost transformation —
81
Total adjustments to operating income 487
279

Adjustments to other income (expense):
Impairment of equity method investment 170
—
Net investment hedging gain (34 ) (1 )
Total adjustments to other income (expense) 136
(1 )

Adjustments to interest expense, net:
Prefunded acquisition financing costs 24
41
Total adjustments to interest expense, net 24
41

Adjustments to income tax provision:
United Kingdom tax rate change¹
—
(77 )
Equity method non-cash tax (50 ) 2
Tax impact of adjustments²
(123 ) (97 )
Total adjustments to income tax provision (173 ) (172 )

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) $ 1,295
$ 1,201

Diluted net earnings per common share (GAAP) $ 0.81
$ 0.97
Adjustments to operating income 0.48
0.25
Adjustments to other income (expense) 0.13
—
Adjustments to interest expense, net 0.02
0.04
Adjustments to income tax provision (0.16 ) (0.16 )
Adjusted diluted net earnings per common share (Non-GAAP measure) $ 1.28
$ 1.10

Weighted average common shares outstanding, diluted 1,011.1
1,088.3


¹ WBA Q2 2023 Form 10-Q			~~Discrete tax-only items.~~55

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS


Adjustments to income tax provision (benefit)	(0.12)		(0.11)		(1.78)		(0.12)
Adjustments to post-tax earnings from other equity method investments	0.02		0.01		0.03		0.03
Adjustments to net loss attributable to non-controlling interests	(0.09)		(0.07)		(0.15)		(0.13)
Adjusted diluted net earnings per common share (Non-GAAP measure) 15	$	1.16	$	1.59	$	2.32	$	3.27

Weighted average common shares outstanding, diluted (in millions) 15	863.4		865.2		863.8		866.4

Operating loss Adjusted EBITDA for the U.S. Healthcare segment (in millions):


	Three months ended February 28,				Six months ended February 28,
	2023		2022		2023		2022
Operating loss (GAAP) 16	$	(472)	$	(212)	$	(909)	$	(257)
Acquisition-related amortization 2	154		135		392		143
Acquisition-related costs 3	158		—		206		24
Adjusted operating loss (Non-GAAP measure)	(159)		(77)		(311)		(90)
Depreciation expense	34		11		49		13
Stock-based compensation expense 17	16		5		29		5
Adjusted EBITDA (Non-GAAP measure)	$	(109)	$	(62)	$	(233)	$	(72)


² 1			~~Represents~~Certain legal and regulatory accruals and settlements relate to significant charges associated with certain legal proceedings, including legal defense costs. The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Selling, general and administrative expenses. During the three and six months ended February 28, 2023, the Company recorded charges related to the previously announced opioid litigation settlement frameworks and certain other opioid-related matters.
2			Acquisition-related amortization includes amortization of acquisition-related intangible assets, inventory valuation adjustments and stock-based compensation fair valuation adjustments. Amortization of acquisition-related intangible assets includes amortization of intangible assets such as customer relationships, trade names, trademarks, developed technology and contract intangibles. Intangible asset amortization excluded from the related non-GAAP measure represents the entire amount recorded within the Company’s GAAP financial statements. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP measures. Amortization expense, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. These charges are primarily recorded within Selling, general and administrative expenses. The stock-based compensation fair valuation adjustment reflects the difference between the fair value based remeasurement of awards under purchase accounting and the grant date fair valuation. Post-acquisition compensation expense recognized in excess of the original grant date fair value of acquiree awards are excluded from the related non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of normal operating activities.
3			Transformational Cost Management Program charges are costs associated with a formal restructuring plan. These charges are primarily recorded within Selling, general and administrative expenses. These costs do not reflect current operating performance and are impacted by the timing of restructuring activity.
4			Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities. These costs include charges incurred related to certain mergers, acquisition and divestitures related activities recorded in operating income, for example, costs related to integration efforts for merger, acquisition and divestitures activities. Examples of such costs include deal costs, severance, stock compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses. These costs are significantly impacted by the timing and complexity of the underlying merger, acquisition and divestitures related activities and do not reflect the Company’s current operating performance.
5			Adjustments to equity earnings in AmerisourceBergen consist of the Company’s proportionate share of non-GAAP adjustments reported by AmerisourceBergen consistent with the Company’s non-GAAP measures.


WBA Q2 2023 Form 10-Q			56

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS


6			The Company’s U.S. Retail Pharmacy segment inventory is accounted for using the last-in-first-out (“LIFO”) method. This adjustment represents the impact on cost of sales as if the U.S. Retail Pharmacy segment inventory is accounted for using first-in first-out (“FIFO”) method. The LIFO provision is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other external influences. Therefore, the Company cannot control the amounts recognized or timing of these items.
7			Includes significant gains on the sale of equity method investments. During the three and six months ended February 28, 2023, the Company recorded a gain of $492 million and $1.5 billion, respectively, in Other income (expense), net, due to a partial sale of its equity method investment in AmerisourceBergen.
8			Gain or loss on certain derivative instruments used as economic hedges of the Company’s net investments in foreign subsidiaries. These charges are recorded within Other income (expense), net. We do not believe this volatility related to mark-to-market adjustment on the underlying derivative instruments reflects the Company’s operational performance.
9			Impairment of equity method investment and investment in equity securities includes impairment of certain investments. The Company excludes these charges when evaluating operating performance because these do not relate to the ordinary course of the Company’s business and it does not incur such charges on a predictable basis. Exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Other income (expense), net.
10			Includes significant gains on business combinations due to the remeasurement of previously held minority equity interests and debt securities to fair value. During the three months ended November 30, 2021, the Company recorded such pre-tax gains of $2.2 billion and $402 million for VillageMD and Shields, respectively.
11			During the three months ended February 28, 2022, the Company finalized the working capital adjustments with AmerisourceBergen related to the sale of the Alliance Healthcare business, resulting in a $38 million charge recorded to Other income (expense), net in the Consolidated Condensed Statement of Earnings.
12			Adjustments to income tax provision (benefit) include adjustments to the GAAP basis tax (benefit) provision commensurate with non-GAAP adjustments and certain discrete tax items including U.S. and UK tax law changes and equity method non-cash tax. These charges are recorded within income tax provision (benefit).
13			Adjustments to post-tax earnings from other equity method investments consist of the proportionate share of certain equity method investees’ non-cash items or unusual or infrequent items consistent with the Company’s non-GAAP adjustments. These charges are recorded within post-tax earnings from other equity method investments. Although the Company may have shareholder rights and board representation commensurate with its ownership interests in these equity method investees, adjustments relating to equity method investments are not intended to imply that the Company has direct control over their operations and resulting revenue and expenses. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all revenue and expenses of these equity method investees.
14			Due to the anti-dilutive effect resulting from the reported net loss, the impact of potentially dilutive securities on the per share amounts has been omitted from the calculation of weighted-average common shares outstanding for diluted EPS for the six months ended February 28, 2023.
15			Includes impact of potentially dilutive securities in the calculation of weighted-average common shares, diluted for adjusted diluted net earnings per common share calculation purposes.
16			The Company reconciles Adjusted EBITDA for the U.S. Healthcare segment to Operating loss as the closest GAAP measure for the segment profitability. The Company does not measure Net earnings attributable to Walgreens Boots Alliance, Inc. for its segments.
17			Includes GAAP stock-based compensation expense excluding expenses related to acquisition-related amortization and acquisition-related costs.

The Company considers certain metrics presented in this report, such as comparable sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions, and comparable 30-day equivalent prescriptions, number of payor/ provider partnerships, number of locations of Walgreens Health Corners, number of co-located VillageMD clinics and number of total VillageMD/Summit/CityMD locations, at period end, to be key performance indicators because the Company’s management has evaluated its results of operations using these metrics and believes that these key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in its historical operating results. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein. These measures, which are described in more detail in this report, may not be comparable to similarly-titled performance indicators used by other companies.


WBA Q2 2023 Form 10-Q			57

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $1.8 billion (including $1.1 billion in non-U.S. jurisdictions) as of November 30, 2017, compared to $9.6 billion (including $1.8 billion in non-U.S. jurisdictions) at November 30, 2016. Short-term investment objectives are primarily to minimize risk and maintain liquidity. To attain these objectives, investment limits are placed on the

~~amount, type and issuer of securities. Investments are principally in U.S. Treasury money market funds and AAA-rated money market funds.~~

~~Our~~The Company's long-term capital policy is toto: maintain a strong balance sheet and financial flexibility; reinvest in ~~our~~its core strategies; invest in strategic opportunities that reinforce ~~our~~its core strategies and meet return requirements; and return surplus cash flow to stockholders in the form of dividends and share repurchases over the long term. In June 2018, the Company’s Board of Directors reviewed and refined the Company’s dividend policy to set forth the Company’s current intention to increase its dividend each year.

The Company’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements. Additionally, the Company's cash requirements, and its ability to generate cash flow, have been and may continue to be adversely affected by COVID-19 and the resulting market volatility and instability. For further information regarding the impact of COVID-19 on the Company, including on its liquidity and capital resources, please see Item 1A, Risk factors in the 2022 10-K.

The Company expects to fund its working capital needs, capital expenditures, pending acquisitions, continuing obligations for recently completed acquisitions, dividend payments and debt service obligations from liquidity sources including cash flow from operations, availability under existing credit facilities, commercial paper programs, working capital financing arrangements, debt offerings, sale of marketable securities and current cash and investment balances. The Company believes that these sources, and the ability to obtain other financing will provide adequate cash funds to meet the Company's needs for at least the next 12 months. See Item 3. Quantitative and qualitative disclosure about market risk, below for a discussion of certain financing and market risks.

Cash, cash equivalents, marketable securities and restricted cash were $2.0 billion (including $197 million in non-U.S. jurisdictions) and $2.6 billion (including $188 million in non-U.S. jurisdictions) as of February 28, 2023 and August 31, 2022, respectively. Short-term investment objectives are primarily to minimize risk and maintain liquidity. To attain these objectives, investment limits are placed on the amount, type and issuer of securities. Investments are principally in U.S. Treasury money market funds.

On October 11, 2022, the Company entered into a definitive agreement to acquire the remaining 45% equity interest of CareCentrix for approximately $392 million of cash consideration, less transaction expenses. The transaction is expected to close in the third quarter of fiscal 2023. See Note 2. Acquisitions and other investments to the Consolidated Condensed Financial Statements for further information.

As of February 28, 2023, the Company has recorded a $7.4 billion liability to resolve a substantial majority of opioid-related claims and litigation settlements and is expected to make payments for remediation and legal fees over the next 15 years. See Note 10. Commitments and contingencies to the Consolidated Condensed Financial Statements for further information.

On March 2, 2023, the Company entered into a $900 million unsecured 364-day revolving credit facility. Borrowings under the 2023 Revolving Credit Agreement bear interest at a fluctuating rate per annum. See Note 19. Subsequent events to the Consolidated Condensed Financial Statements for further information.

On March 3, 2023, the Company sold approximately 15.5 million shares of Option Care Health for a total consideration of approximately $469 million. See Note 5. Equity method investments to the Consolidated Condensed Financial Statements for further information.

At February 28, 2023, the Company had no guarantees outstanding and letters of credit issued were not material. See Note 7. Debt, to the Consolidated Condensed Financial Statements for further information on the Company’s debt instruments and its recent financing actions.

Cash provided by operations, ~~and the issuance~~incurrence of debt and our investments are the principal sources of funds for expansion, investments, acquisitions, remodeling programs, dividends to ~~shareholders~~stockholders and stock repurchases.

Cash flows from operating activities

Net cash provided by operating activities for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2023 was ~~$961 million,~~$1.2 billion, compared to ~~$525 million~~$2.2 billion for the year-ago period.


WBA Q2 2023 Form 10-Q			58

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

The ~~increase~~decrease in cash provided by operating activities ~~was~~is primarily driven by lower earnings due to ~~lower cash outflows from changes~~lapping COVID 19 vaccine and testing volumes partially offset by net working capital. Improvements in ~~inventories,~~net working capital are primarily driven by higher cash inflows from trade accounts ~~payables,~~payable and lower cash outflows from ~~accrued expenses and other liabilities~~inventory, partially offset by ~~higher~~lower cash ~~outflows~~inflows from accounts receivable. Decreases in cash outflows on inventories resulted primarily from Retail Pharmacy USA inventory management initiatives related to simplified retail product offering, promotional efficiencies and lower brand name drug inflation. Changes in ~~trade~~ accounts payable, ~~accrued expenses and other liabilities,~~inventories, and accounts ~~receivables is~~receivable are mainly driven by ~~timing of payments~~ongoing working capital optimization efforts and ~~collections.~~timing.

Cash flows from investing activities

Net cash used for investing activities was ~~$599 million~~$3.6 billion for the ~~three~~six months ended ~~November 30, 2017,~~February 28, 2023 compared to ~~$89 million provided by in the year-ago period. Business acquisitions in the three months ended November 30, 2017 were $265 million compared to $15 million~~$2.2 billion for the year-ago period.

~~For~~Net cash used for investing activities for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2023 includes the Summit business acquisition, net of cash acquired of $6.7 billion partially offset by sale proceeds of $3.0 billion related to the Company's sale of 19.2 million shares of AmerisourceBergen common stock, and proceeds from sale and leaseback transactions of $942 million.

Net cash used for investing activities for the ~~year-ago period, additions~~six months ended February 28, 2022 includes business acquisitions, net of cash acquired of VillageMD and Shields for $0.8 billion and $0.9 billion, respectively, and proceeds from the sale and leaseback transactions of $475 million.

See Note 2. Acquisitions and other investments and Note 5. Equity method investments, to the Consolidated Condensed Financial Statement for further information.

Capital Expenditure

Capital expenditure includes information technology projects and other growth initiatives. Additions to property, plant and equipment were ~~$378 million. Capital expenditures~~as follows (in millions):


	Six months ended February 28,
	2023		2022
U.S. Retail Pharmacy	$	756	$	632
International	143		155
U.S. Healthcare	208		83
Total additions to property, plant and equipment	$	1,108	$	870

The increase in capital expenditure represents investment in growth initiatives, including the VillageMD footprint expansion, the rollout of micro-fulfillment centers, and digital transformation initiatives.

Cash flows from financing activities

Net cash provided by ~~reporting segment were as follows:~~

Three months ended November 30,
2017 2016
Retail Pharmacy USA $ 281
$ 230
Retail Pharmacy International 71
119
Pharmaceutical Wholesale 26
29
Total $ 378
$ 378

~~Significant capital expenditures primarily relate to investments in our stores and information technology projects.~~

~~Additionally, investing~~financing activities for the ~~three~~six months ended ~~November 30, 2017 did not include any proceeds related to sale-leaseback transactions,~~February 28, 2023 was $1.8 billion compared to ~~$436~~net cash provided by financing activities of $769 million ~~of proceeds~~ in the year-ago period.

~~Net cash used for financing activities for~~In the ~~three~~six months ended ~~November 30, 2017 was $1.9~~February 28, 2023, the Company received $2.5 billion in proceeds from the issuance of preferred units in VillageMD to Cigna as part of the Summit acquisition.

In the six months ended February 28, 2023, there were $2.8 billion in proceeds from debt, primarily from issuance of commercial paper and credit facilities, compared to ~~net cash used~~$11.2 billion in proceeds from debt, primarily from revolving credit facilities, commercial paper and the issuance of ~~$778 million~~notes, in the year-ago period. ~~For~~In the ~~three~~six months ended ~~November 30, 2017 we completed $2.5~~February 28, 2023 there were $1.5 billion in payments of credit facilities, compared to $7.3 billion, primarily for revolving credit facilities and commercial paper, in the year-ago period. See Note 7. Debt, to the Consolidated Condensed Financial Statements for further information.

The Company acquired $1.0 billion of ~~share repurchases comprised of $2.2~~Shields non-controlling interests in the six months ended February 28, 2023. The Company acquired $2.1 billion of ~~repurchases under~~non-controlling interests, primarily related to VillageMD, in the ~~June 2017 stock repurchase program described below~~year-ago period. See Note 2. Acquisitions and ~~$289~~other investments to the Consolidated Condensed Financial Statements for further information.

The Company repurchased shares to offset dilution from equity incentive plans totaling $150 million ~~of repurchases to support~~and $187 million in the ~~needs of employee stock plans. We completed $457 million of share repurchases during the three~~six months ended ~~November 30, 2016. Proceeds related to employee stock plans were $32~~February 28, 2023 and 2022, respectively.


WBA Q2 2023 Form 10-Q			59

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

The Company paid cash dividends of $829 million ~~during~~and $833 million in the ~~three~~six months ended November 30, 2017, compared to $41 million for the three months ended November 30, 2016. Cash dividends paid were $413 million during the three months ended November 30, 2017, compared to $406 million for the same period a year ago. We currently intend to continue to maintain a long-term dividend payout ratio target of approximately 30 to 35 percent of adjusted net earnings attributable to Walgreens Boots Alliance.February 28, 2023 and 2022, respectively,

Stock repurchase ~~programs~~program

In ~~April 2017, Walgreens Boots Alliance authorized~~June 2018, the Company's Board of Director's approved a stock repurchase program (the ~~“April 2017~~“June 2018 stock repurchase program”), which authorized the repurchase of up to ~~$1.0~~$10.0 billion of ~~Walgreens Boots Alliance~~the Company's common stock ~~prior to the program’s expiration on December 31, 2017. In May 2017,~~of which the Company ~~completed the April 2017~~had repurchased $8.0 billion as of February 28, 2023. The June 2018 stock repurchase program ~~purchasing 11.8 million shares.~~has no specified expiration date. In June 2017, Walgreens Boots Alliance authorized a new stock repurchase program, which authorized the repurchase of up to $5.0 billion of Walgreens Boots Alliance common stock prior to the program’s expiration on August 31, 2018, which authorization was increased by an additional $1.0 billion in October 2017 (as expanded, the “June 2017 stock repurchase program”). During fiscal 2017,July 2020, the Company ~~purchased 47.2 million shares at a total cost of $3.8 billion~~suspended repurchases under ~~the June 2017~~this program. The Company may continue to repurchase stock ~~repurchase program. During the three months ended November 30, 2017, the~~to offset anticipated dilution from equity incentive plans.

The Company ~~purchased 30.3 million shares at a total cost of $2.2 billion, which completed the June 2017 stock repurchase program. We determine~~determines the timing and amount of repurchases, including repurchases to offset anticipated dilution from equity incentive plans, based on ~~our~~its assessment of various factors, including prevailing market conditions, alternate uses of capital, liquidity and the economic

environment. ~~We have~~The Company has repurchased, and may from time to time in the future repurchase, shares on the open market through Rule 10b5-1 plans, which enable usthe Company to repurchase shares at times when we otherwise might be precluded from doing so under ~~insider trading~~federal securities laws.

~~Commercial paper~~

The Company periodically borrows under its commercial paper program and may continue to borrow under it in future periods. The Company had $990 million commercial paper borrowings outstanding as of November 30, 2017 and there were no commercial paper borrowings outstanding as of November 30, 2016. The Company had average daily short-term borrowings of $620 million of commercial paper outstanding at a weighted average interest rate of 1.46% for the three months ended November 30, 2017 and no activity under its commercial paper program for the three months ended November 30, 2016.

~~Financing actions~~

On November 10, 2014, Walgreens Boots Alliance and Walgreens entered into a term loan credit agreement with the lenders party thereto (the “2014 Term Loan Agreement”), which provided Walgreens Boots Alliance and Walgreens with the ability to borrow up to £1.45 billion on an unsecured basis. As of August 31, 2016, Walgreens Boots Alliance had borrowed £1.45 billion ($1.9 billion at the August 31, 2016 spot rate of $1.31 to £1) under the 2014 Term Loan Agreement. On August 30, 2017, Walgreens Boots Alliance used available cash to repay in full all outstanding loans and obligations under the 2014 Term Loan Agreement, which, as of such date, consisted of the remaining unamortized amount of £1.41 billion ($1.83 billion at the August 31, 2017 spot rate of $1.295 to £1) aggregate principal amount of outstanding loans together with accrued interest thereon through, but excluding, the payment date, and such other amounts required to be paid by Walgreens Boots Alliance thereunder and the 2014 Term Loan Agreement terminated in accordance with its terms.

On November 10, 2014, Walgreens Boots Alliance and Walgreens entered into a five-year unsecured, multicurrency revolving credit agreement with the lenders party thereto (the “2014 Revolving Credit Agreement”), which has available credit of $3.0 billion, of which $500 million is available for the issuance of letters of credit. Borrowings under the 2014 Revolving Credit Agreement bear interest at a fluctuating rate per annum equal to, at Walgreens Boots Alliance’s option, the alternate base rate or the reserve adjusted LIBOR, in each case, plus an applicable margin calculated based on Walgreens Boots Alliance’s credit ratings. As of November 30, 2017 and 2016, there were no borrowings or letters of credit issued pursuant to the 2014 Revolving Credit Agreement.

~~We pay, or paid in the case of the 2014 Term Loan Agreement, certain customary fees in connection with these facilities.~~

On November 18, 2014, Walgreens Boots Alliance issued several series of unsecured, unsubordinated notes totaling $8.0 billion, with maturities ranging from 2016 to 2044. All such notes have fixed interest rates, with the exception of the $750 million floating rate notes due 2016, which were repaid in full in May 2016 and which had a floating rate based on the three month LIBOR plus a fixed spread of 45 basis points. On August 28, 2017, Walgreens Boots Alliance redeemed in full its $750 million 1.750% notes due 2017 at a make-whole redemption price.

On November 20, 2014, Walgreens Boots Alliance issued series of unsecured, unsubordinated notes that included total Pound Sterling denominated debt of £700 million ($1.1 billion based on the November 20, 2014 exchange rate) with maturities due 2020 and 2025 and Euro denominated debt of €750 million ($940 million based on the November 20, 2014 exchange rate) due 2026. All notes issued on November 20, 2014 have fixed interest rates.

On June 1, 2016, Walgreens Boots Alliance issued in an underwritten public offering $1.2 billion of 1.750% notes due 2018 (the “2018 notes”), $1.5 billion of 2.600% notes due 2021 (the “2021 notes”), $0.8 billion of 3.100% notes due 2023 (the “2023 notes”), $1.9 billion of 3.450% notes due 2026 (the “2026 notes”) and $0.6 billion of 4.650% notes due 2046 (the “2046 notes”). Because the merger with Rite Aid was not consummated on or prior to June 1, 2017, the 2018 notes, the 2021 notes and the 2023 notes were redeemed on June 5, 2017 under the special mandatory redemption terms of the indenture governing such notes. The 2026 notes and 2046 notes remain outstanding in accordance with their respective terms and are subject to redemption in certain circumstances.

On February 1, 2017, Walgreens Boots Alliance entered into a $1.0 billion revolving credit facility (as amended, the “February 2017 Revolving Credit Agreement”) with the lenders from time to time party thereto and, on August 1, 2017, Walgreens Boots Alliance entered into an amendment agreement thereto. The terms and conditions of the February 2017 Revolving Credit Agreement were unchanged by the amendment other than the extension of the facility termination date to the earlier of (a) January 31, 2019 and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder. Borrowings under the February 2017 Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to, at Walgreens Boots Alliance’s option, the alternate base rate or the reserve adjusted Eurocurrency rate, in each case, plus an applicable margin calculated based on Walgreens Boots Alliance’s credit ratings. In connection with the February 2017

Revolving Credit Agreement, Walgreens Boots Alliance paid upfront fees of $0.5 million and additional extension fees of $0.5 million in respect of the amendment to the February 2017 Revolving Credit Agreement. In addition, Walgreens Boots Alliance has agreed to pay to the lenders under the February 2017 Revolving Credit Agreement certain customary fees. As of November 30, 2017, there were no borrowings under the February 2017 Revolving Credit Agreement.

On August 24, 2017, Walgreens Boots Alliance entered into a $1.0 billion revolving credit agreement with the lenders from time to time party thereto (the “August 2017 Revolving Credit Agreement”) and a $1.0 billion term loan credit agreement with Sumitomo Mitsui Banking Corporation (the “2017 Term Loan Credit Agreement” and together with the August 2017 Revolving Credit Agreement, the “August 2017 Credit Agreements”). The August 2017 Revolving Credit Agreement is an unsecured revolving credit facility with a facility termination date of the earlier of (a) January 31, 2019, subject to any extension thereof pursuant to the terms of the August 2017 Revolving Credit Agreement and (b) the date of termination in whole of the aggregate commitments provided by the lenders thereunder. The 2017 Term Loan Credit Agreement is an unsecured “multi-draw” term loan facility maturing on March 30, 2019. The aggregate commitments of Sumitomo Mitsui Banking Corporation under the 2017 Term Loan Credit Agreement are initially equal to $1.0 billion, which shall be reduced on June 1, 2018 to the lesser of $500 million and the aggregate remaining undrawn commitments thereunder. Any remaining undrawn commitments thereunder and the ability of Walgreens Boots Alliance to request loans under such commitments shall terminate on September 1, 2018.

Borrowings under the August 2017 Credit Agreements will bear interest at a fluctuating rate per annum equal to, at Walgreens Boots Alliance’s option, the alternate base rate or the Eurocurrency rate, in each case, plus an applicable margin calculated based on Walgreens Boots Alliance’s credit ratings. Upfront fees paid to date in connection with the August 2017 Credit Agreements totaled $1.25 million. In addition, Walgreens Boots Alliance has agreed to pay to the lenders under the August 2017 Credit Agreements certain customary fees. As of November 30, 2017, Walgreens Boots Alliance had $30 million of borrowings outstanding under the 2017 Term Loan Credit Agreement and there were no borrowings outstanding under the August 2017 Revolving Credit Agreement.

Debt covenants

Each of the Company’s credit facilities described ~~above~~in Note 7. Debt, to the Consolidated Condensed Financial Statements, contain a covenant to maintain, as of the last day of each fiscal quarter, a ratio of consolidated debt to total capitalization not to exceed 0.60:~~1.00. The~~1.00, subject to increase in certain circumstances set forth in the applicable credit ~~facilities contain various other customary covenants.~~agreement. As of ~~November 30, 2017,~~February 28, 2023, the Company was in compliance with all such applicable covenants.

Credit ratings

As of ~~January 3, 2018,~~March 27, 2023, the credit ratings of Walgreens Boots Alliance were:


Rating agency			Long-term debt rating			Commercial paper rating		Outlook

~~Rating agency~~Moody’s			~~Long-term debt rating~~Baa3			~~Commercial paper rating~~P-3		~~Outlook~~Negative
~~Fitch~~			~~BBB~~	F2	~~Stable~~
~~Moody’s~~	~~Baa2~~	~~P-2~~	~~Stable~~
Standard & Poor’s	BBB			A-2			Stable

In assessing ~~our~~the Company’s credit strength, each rating agency considers various factors including ~~our~~the Company’s business model, capital structure, financial policies and financial performance. There can be no assurance that any particular rating will be assigned or maintained. ~~Our~~The Company’s credit ratings impact ~~our~~its borrowing costs, access to capital markets and operating lease costs. The rating agency ratings are not recommendations to buy, sell or hold ~~our~~the Company’s debt securities or commercial paper. Each rating may be subject to revision or withdrawal at any time by the assigning rating agency and should be evaluated independently of any other rating.

~~AmerisourceBergen relationship~~

Pursuant to our arrangements with AmerisourceBergen, we have the right, but not the obligation, to purchase a minority equity position in AmerisourceBergen over time as described under “--AmerisourceBergen Corporation relationship” above. Subject to applicable legal and contractual requirements, share purchases may be made from time to time in open market transactions or pursuant to instruments and plans complying with Rule 10b5-1.

~~OFF-BALANCE SHEET ARRANGEMENTS~~

We do not have any unconsolidated special purpose entities and, except as described herein, we do not have significant exposure to any off-balance sheet arrangements. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

As of November 30, 2017, we have issued $252 million in letters of credit, primarily related to insurance obligations. We also had $46 million of guarantees to various suppliers outstanding as of November 30, 2017. We remain secondarily liable on 71 leases. The maximum potential undiscounted future payments related to these leases was $318 million as of November 30, 2017.

~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~

Other than our obligations under the amended and restated asset purchase agreement with Rite Aid and the transactions contemplated thereby, there have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations disclosed in the Walgreens Boots Alliance Annual Report on Form 10-K for the year ended August 31, 2017.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

The ~~consolidated financial statements~~Consolidated Condensed Financial Statements are prepared in accordance with GAAP and include amounts based on management’s prudent judgments and estimates. Actual results may differ from these estimates. Management believes that any reasonable deviation from those judgments and estimates would not have a material impact on our consolidated financial position or results of operations. To the extent that the estimates used differ from actual results, however, adjustments to the ~~statement~~Consolidated Condensed Statements of ~~earnings~~Earnings and corresponding ~~balance sheet~~Consolidated Condensed Balance Sheets accounts would be necessary. These adjustments would be made in future periods. For a discussion of our significant accounting policies, please see the ~~Walgreens Boots Alliance Annual Report on Form 10-K for the~~Company's fiscal ~~year ended August 31, 2017.~~2022 10-K. Some of the more significant estimates include business combinations, leases, goodwill and indefinite-lived intangible asset ~~impairment, vendor allowances, liability for closed locations,~~impairments, cost of sales and inventory, equity method investments, pension and postretirement benefits, legal contingencies, and income taxes. ~~There have been no significant changes in those accounting policies.~~

NEW ACCOUNTING PRONOUNCEMENTS

A discussion of new accounting pronouncements is described in ~~note 18, new~~Note 17. New accounting pronouncements, ~~in Item 1.~~to the Consolidated Condensed Financial Statements ~~(Unaudited)~~ of this ~~Current~~Quarterly Report on Form 10-Q and is incorporated herein by reference.


WBA Q2 2023 Form 10-Q			60

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and other documents that we file or furnish with the SEC contain forward-looking statements ~~that are based on current expectations, estimates, forecasts~~made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, any statements regarding the Company's future operations, financial or operating results, capital allocation, anticipated debt levels and ~~projections about our~~ratios, future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, on the Company’s website or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, conference callsearnings, planned activities, anticipated growth, market opportunities, strategies, competition, and other ~~communications. Some of such forward-looking statements may be based on certain data~~expectations and forecasts relating to our business and industry that we have obtained from internal surveys, market research, publicly available information and industry publications. Industry publications, surveys and market research generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Statements that are not historical facts are forward-looking statements, including, without limitation, those regarding estimates of and goalstargets for future financial and operating performance as well as forward-looking statements concerning the expected execution and effect of our business strategies, our cost-savings and growth initiatives and restructuring activities and the amounts and timing of their expected impact, our amended and restated asset purchase agreement with Rite Aid and the transactions contemplated thereby and their possible timing and effects, our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, estimates of the impact of developments on our earnings, earnings per share and other financial and operating metrics, cough, cold and flu season, prescription volume, pharmacy sales trends, prescription margins, changes in generic prescription drug prices, retail margins, number and location of new store openings, network participation, vendor, payer and customer relationships and terms, possible new contracts or contract extensions, the proposed withdrawal of the United Kingdom from the European Union and its possible effects, competition, economic and business conditions, outcomes of litigation and regulatory matters, the level of capital expenditures, industry trends, demographic trends, growth strategies, financial results, cost reduction initiatives, impairment or other charges, acquisition and joint venture synergies, competitive strengths and changes in legislation or regulations.periods. Words such as “expect,” ~~“likely,”~~ “outlook,” “forecast,~~” “preliminary,~~” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” ~~“sustain,~~“transform,” ~~“synergy,~~“accelerate,” ~~“on track,~~“model,” ~~“on schedule,” “headwind,” “tailwind,~~“long-term,” “believe,” “seek,” “estimate,” “anticipate,~~” “upcoming,” “to come,~~” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking ~~statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.~~statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or ~~anticipated,~~

including, but not limited to, those relating to the impact of private and public third-party payers’ efforts to reduce prescription drug reimbursements, fluctuations in foreign currency exchange rates, the timing and magnitude of the impact of branded to generic drug conversions and changes in generic drug prices, our ability to realize synergies and achieve financial, tax and operating results in the amounts and at the times anticipated, supply arrangements including our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects, the risks associated with our equity method investment in AmerisourceBergen, the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of our contractual obligations, the amount of costs, fees, expenses and charges incurred in connection with strategic transactions, whether the costs and charges associated with our store optimization program will exceed estimates, our ability to realize expected savings and benefits from cost-savings initiatives, restructuring activities and acquisitions and joint ventures in the amounts and at the times anticipated, the timing and amount of any impairment or other charges, the timing and severity of cough, cold and flu season, changes in management’s assumptions, the risks associated with governance and control matters, the ability to retain key personnel, changes in economic and business conditions generally or in particular markets in which we participate, changes in financial markets and interest rates, the risks associated with international business operations, including the risks associated with the proposed withdrawal of the United Kingdom from the European Union, the risk of unexpected costs, liabilities or delays, changes in vendor, customer and payer relationships and terms, including changes in network participation and reimbursement terms, risks of inflation in the cost of goods, risks associated with the operation and growth of our customer loyalty programs, competition, risks associated with new business areas and activities, risks associated with acquisitions, divestitures, joint ventures and strategic investments, including those relating to the ability of the parties to satisfy the closing conditions and consummate the phased acquisition of certain assets pursuant to our amended and restated asset purchase agreement with Rite Aid on a timely basis or at all, the risks associated with the integration of complex businesses, outcomes of legal and regulatory matters, and risks associated with changes in laws, including those relating to the recent U.S. tax legislation, regulations or interpretations thereof.anticipated. These ~~and other~~ risks, assumptions and uncertainties ~~are~~include those described in the 2022 10-K, Item ~~1A. “Risk factors” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017, in Item 1A. “Risk factors” in this report~~1A, Risk factors which are incorporated herein by reference, and in other documents that we file or furnish with the SEC. ~~Should~~If one or more of these risks or uncertainties ~~materialize,~~materializes, or ~~should~~if underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements we make or that are made on our behalf are qualified by these cautionary statements. Accordingly, you ~~are cautioned~~should not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. ~~Except to the extent required by law, we~~

We do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this report, whether as a result of new information, future events, changes in assumptions or otherwise.


WBA Q2 2023 Form 10-Q			61

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

~~Item~~ITEM 3. ~~Quantitative and qualitative disclosure about market risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Interest rate risk~~

We are exposed to interest rate volatility with regard to existing debt issuances. Primary exposures include U.S. Treasury rates, LIBOR and commercial paper rates. From time to time, we use interest rate swaps and forward-starting interest rate swaps to hedge our exposure to the impact of interest rate changes on existing debt and future debt issuances respectively, to reduce the volatility of our financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed versus floating-rate debt. Generally under these swaps, we agree with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount.

Information regarding our transactions are set forth in note 8, financial instruments to our Consolidated Condensed Financial Statements. These financial instruments are sensitive to changes in interest rates. On November 30, 2017, we had no material long-term debt obligations that had floating interest rates. The amounts exclude the impact of any associated derivative contracts.

~~Foreign currency exchange rate risk~~

~~We are exposed to fluctuations in foreign currency exchange rates, primarily with respect to the British Pound Sterling and Euro,~~and certain other foreign currencies, which may affect our net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. We enter into foreign currency forward contracts to hedge against the effect of exchange rate fluctuations on non-functional currency cash flows of certain entities denominated in foreign currencies. These transactions are almost exclusively less than 12 months in maturity. In addition, we enter into foreign currency forward contracts that are not designated in hedging relationships to offset, in part, the impacts of certain intercompany activities (primarily associated with intercompany financing transactions). As circumstances warrant, we also use basis swaps as hedging instruments to hedge portions of our net investments in foreign operations. The foreign currency derivative instruments held as of November 30, 2017 are sensitive to changes in exchange rates. A 1% increase or decrease in foreign currency exchange rates versus the U.S. dollar would increase or decrease our pre-tax income by approximately $11 million due to changes in the value of foreign currency derivative instruments. Excluded from the computation were anticipated transactions, foreign currency trade payables and receivables, and net investments in foreign subsidiaries, which the abovementioned instruments are intended to partially hedge.

Item 3. Quantitative and qualitative disclosure about market risk

Interest rate risk

The Company is exposed to interest rate volatility with regard to existing variable-rate debt instruments and future incurrences of fixed or variable-rate debt, which exposure primarily relates to movements in various interest rates, such as U.S. treasury rates and commercial paper rates. From time to time, the Company uses interest rate swaps and forward-starting interest rate swaps to hedge its exposure to the impact of interest rate changes on existing debt and future debt issuances respectively, to reduce the volatility of financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed-rate versus floating-rate debt. Generally, under these swaps, the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on an agreed upon notional principal amount.

In March 2021, the UK Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, announced that it will cease publication of LIBOR by June 2023. Certain of our credit facilities provide that, under certain circumstances set forth in such credit facilities, we and the administrative agent may amend the applicable credit facility to replace LIBOR with an alternate benchmark rate, giving due consideration to any evolving or then existing convention for similar syndicated credit facilities in the U.S. market for alternative benchmarks. Such an alternative benchmark rate could include the Secured Overnight Financing Rate (“SOFR”), published by the Federal Reserve Bank of New York.

Information regarding the Company's transactions and financial instruments are set forth in Note 8. Financial instruments, to the Consolidated Condensed Financial Statements. These financial instruments are sensitive to changes in interest rates. As of February 28, 2023, the Company had $4.0 billion of debt obligations at floating interest rates.

Foreign currency exchange rate risk

The Company is exposed to fluctuations in foreign currency exchange rates, primarily with respect to the British pound sterling and certain other foreign currencies, which may affect its net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. The Company is also exposed to the translation of foreign currency earnings to the U.S. dollar. The Company enters into foreign currency forward contracts to hedge against the effect of exchange rate fluctuations on non-functional currency cash flows. These transactions are almost exclusively less than 12 months in maturity. In addition, the Company enters into foreign currency forward contracts that are not designated in hedging relationships to offset, in part, the impacts of certain intercompany activities (primarily associated with intercompany financing transactions).

The Company’s foreign currency derivative instruments are sensitive to changes in exchange rates. A hypothetical 1% change in foreign currency exchange rates versus the U.S. dollar would change the fair value of the foreign currency derivatives held as of February 28, 2023, by approximately $49 million. The foreign currency derivatives are intended to partially hedge anticipated transactions, foreign currency trade payables and receivables and net investments in foreign subsidiaries.

Equity price risk

Changes in AmerisourceBergen common stock price may have a significant impact on the fair value of the equity investment in AmerisourceBergen described in Note 5. Equity method investments, to the Consolidated Condensed Financial Statements and “Investment in AmerisourceBergen” within Item 2 above.


WBA Q2 2023 Form 10-Q			62

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

ITEM 4. CONTROLS AND PROCEDURES

Item 4.Controls and procedures

Evaluation of disclosure controls and procedures

Management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). As of the end of the period covered by this report, the Company had completed the acquisition of a majority equity interest in Summit. The Company accounted for this acquisition as a business combination resulting in consolidation within the U.S. Healthcare segment. The scope of management's assessment of the effectiveness of the Company's disclosure controls and procedures did not include the internal controls over financial reporting of the acquired businesses. This exclusion is in accordance with the SEC staff's general guidance that an assessment of a recently acquired business may be omitted from the scope of management's assessment for one year following the acquisition. The recognition of goodwill and intangible assets, however, is covered by our internal controls over mergers and acquisitions, which were included in management's assessment of the effectiveness of the Company's internal control over financial reporting as of February 28, 2023.

Based upon the controls evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

In the ordinary course of business, the Company reviews its internal control over financial reporting and makes changes to its systems and processes that are intended to enhance such controls and increase efficiency while maintaining an effective internal control environment. Changes may include such activities as updating existing systems, automating manual processes, standardizing controls and modifying monitoring controls.

As we transform our business processes, we continue to make strategic changes in how we perform certain key business functions. These changes include the continued leveraging of extended workforces via third-party outsource arrangements as well as our continued implementation of new information systems. These initiatives are not being implemented in response to any identified internal control deficiency or weakness. As these changes occur, we will evaluate quarterly whether such changes materially affect, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

In connection with the evaluation pursuant to Exchange Act Rule 13a-15(d) of the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) by the Company’s management, including its CEO and CFO, no changes during the ~~three months~~quarter ended ~~November 30, 2017~~February 28, 2023 were identified that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent limitations on effectiveness of controls

Our management, including the CEO and CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls

effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

~~Part~~


WBA Q2 2023 Form 10-Q			63

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. ~~Other Information~~OTHER INFORMATION

Item 1. Legal proceedings

The information in response to this item is incorporated herein by reference to ~~note 10, commitments~~Note 10. Commitments and contingencies, ofto the Consolidated Condensed Financial Statements of this Quarterly Report.

Item 1A. Risk factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. “Risk factors” in the ~~Walgreens Boots Alliance Annual Report on Form~~2022 10-K, ~~for the year ended August 31, 2017 and the amended and restated risk factor set forth below,~~ which could materially affect our business, financial condition, or future results.

~~We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions.~~

We are a large corporation with operations in the U.S. and numerous other jurisdictions around the world. As such, we are subject to tax laws and regulations of the U.S. federal, state and local governments as well as various foreign jurisdictions. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. As the tax rates vary among jurisdictions, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision.

From time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability. For example, the recent U.S. tax legislation enacted on December 22, 2017 represents a significant overhaul of the U.S. federal tax code. This tax legislation significantly reduced the U.S. statutory corporate tax rate and made other changes that could have a favorable impact on our overall U.S. federal tax liability in a given period. However, the tax legislation also included a number of provisions, including, but not limited to, the limitation or elimination of various deductions or credits (including for interest expense and for performance-based compensation under Section 162(m)), the imposition of taxes on certain cross-border payments or transfers, the changing of the timing of the recognition of certain income and deductions or their character, and the limitation of asset basis under certain circumstances, that could significant and adversely affect our U.S. federal income tax position. The legislation also made significant changes to the tax rules applicable to insurance companies and other entities with which we do business. We are continuing to evaluate the overall impact of this tax legislation on our operations and U.S. federal income tax position. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in which we operate, will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. Similarly, changes in tax laws and regulations that impact our customers and counterparties or the economy generally may also impact our financial condition and results of operations.

In addition, tax laws and regulations are complex and subject to varying interpretations, and any significant failure to comply with applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial penalties and liabilities. Any changes in enacted tax laws (such as the recent U.S. tax legislation), rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations.

Item 2. Unregistered sales of equity securities and use of proceeds

The following table provides information about purchases by the Company during the quarter ended February 28, 2023 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act. Subject to applicable law, share purchases may be made from time to time in open market transactions, privately negotiated transactions including accelerated share repurchase agreements, or pursuant to instruments and plans complying with Rule 10b5-1, among other types of transactions and arrangements.


~~(c)~~	~~The following table provides information about~~	Issuer purchases ~~by the Company during the quarter ended November 30, 2017~~ of equity securities
Period		Total number of shares purchased by month	Average price paid per share		Total number of shares purchased by month as part of publicly announced repurchase programs 1	Approximate dollar value of shares that ~~are registered by~~may yet be purchased under the Company pursuant to Section 12 of the Exchange Act. Subject to applicable law, share purchases may be made from time to time in open market transactions, privately negotiated transactions including accelerated share repurchase agreements,plans or ~~pursuant to instruments and plans complying with Rule 10b5-1.~~program 1
12/01/22 - 12/31/22		—	$	—	—	$	2,003,419,960
01/01/23 - 01/31/23		—	—		—	2,003,419,960
02/01/23 - 02/28/23		—	—		—	2,003,419,960
		—			—	$	2,003,419,960

1In June 2018, Walgreens Boots Alliance authorized a stock repurchase program, which authorized the repurchase of up to $10.0 billion of Walgreens Boots Alliance common stock. This program has no specified expiration date. In July 2020, the Company announced that it had suspended activities under this program.

Item 5. Other information

None.

Issuer purchases of equity securities
Period Total number of shares purchased Average price paid per share
Total number of shares purchased as part of publicly announced repurchase programs¹

Approximate dollar value of shares that may yet be purchased under the plans or program¹
09/01/17 – 09/30/17 14,544,366
$ 81.10
14,544,366
$ 57,093,011
10/01/17 – 10/31/17 4,038,853
68.90
4,038,853
778,767,494
11/01/17 – 11/30/17²
15,916,694
67.06
11,686,694
—
Total 34,499,913
$ 73.19
30,269,913
$ —


¹ WBA Q2 2023 Form 10-Q			In June 2017, Walgreens Boots Alliance authorized a new stock repurchase program (the “June 2017 stock repurchase program”), which authorizes the repurchase of up to $5.0 billion of Walgreens Boots Alliance common stock prior to the program’s expiration on August 31, 2018. The Company purchased 47.2 million shares in fiscal 2017 at a total cost of $3.8 billion under the June 2017 stock repurchase program. The Company completed the authorized $5.0 billion of stock repurchases in October 2017. On October 24, 2017, the Company expanded the June 2017 stock repurchase program by an additional $1.0 billion and completed the additionally authorized $1.0 billion of stock repurchases in November 2017.

64
²	~~The Company purchased 4.2 million shares of its common stock in open-market transactions to support the needs of its employee stock plans.~~

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 6. Exhibits

The agreements included as exhibits to this report are included to provide information regarding their terms and not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement that were made solely for the benefit of the other parties to the applicable agreement, and:

~~should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;~~

may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

~~may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and~~

~~were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.~~

~~Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.~~

Exhibit

No.

Description

SEC Document Reference

2.1**

Second Amendment to Agreement and Plan of Merger, dated as of January 3, 2023, by and among WP CityMD Topco LLC, Village Practice Management Company Holdings, LLC, Village Practice Management Company, LLC and Project Teton Merger Sub LLC.

Incorporated by reference to Exhibit 2.2 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on January 5, 2023.

2.2**

Amended and Restated Class E Preferred Unit and Class F Preferred Unit Purchase Agreement, dated as of January 3, 2023, by and among WBA Acquisition 5, LLC, Walgreens Boots Alliance, Inc., Cigna Health & Life Insurance Company, Evernorth Health, Inc., Village Practice Management Company, LLC and certain members of Village Practice Management Company, LLC.

Incorporated by reference to Exhibit 2.3 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on January 5, 2023.

3.1

Amended and Restated Certificate of Incorporation of Walgreens Boots Alliance, Inc.

Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K12B (File No. 1-36759) filed with the SEC on December 31, 2014.

3.2

Amended and Restated Bylaws of Walgreens Boots Alliance, Inc.

Incorporated by reference to Exhibit 3.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on ~~June 10, 2016.~~

January 31, 2023.

10.1*

Nomination Rights Agreement, dated as of December 7, 2022, by and among Walgreens Boots Alliance, Inc., Village Practice Management Company, LLC and Village Practice Management Company Holdings, LLC.

Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form ~~of Performance Share Award agreement for CEO (effective October 2017).~~

~~Filed herewith.~~

8-K (File No. 1-36759) filed with the SEC on December 7, 2022.

10.2*

Delayed Draw Term Loan Credit Agreement, dated as of December 19, 2022, by and among Walgreens Boots Alliance, Inc., the Designated Borrowers from time to time party thereto, the Lenders from time to time party thereto and Toronto Dominion (Texas) LLC, as Administrative Agent.

Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form ~~of Stock Option Award agreement for CEO (effective October 2017).~~

~~Filed herewith.~~

8-K (File No. 1-36759) filed with the SEC on December 20, 2022.

10.3**

Amended and Restated Limited Liability Company Agreement of Village Practice Management Company Holdings, LLC, dated as of January 3, 2023, by and among Village Practice Management Company Holdings, LLC and its members.

Incorporated by reference to Exhibit 10.1 to Walgreens Boots Alliance, Inc.’s Current Report on Form ~~of Restricted Stock Unit Award agreement for Executive Chairman (effective October 2017).~~

~~Filed herewith.~~

8-K (File No. 1-36759) filed with the SEC on January 5, 2023.

1231.1

~~Computation of Ratio of Earnings to Fixed Charges.~~

~~Filed herewith.~~

~~31.1~~

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

32.1

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

~~Furnished herewith.~~

Furnished herewith.

32.2

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

Furnished herewith.


WBA Q2 2023 Form 10-Q			65

Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

101.INS

Inline XBRL Instance Document (The following financial information from this Quarterly Report on Form 10-Q for the quarter ended February 28, 2023 formatted in Inline XBRL (Extensive Business Reporting Language) includes: (i) the Consolidated Condensed Balance Sheets; (ii) the Consolidated Condensed Statements of Equity; (iii) the Consolidated Condensed Statements of Earnings; (iv) the Consolidated Condensed Statements of Comprehensive Income; (v) the Consolidated Condensed Statements of Cash Flows; and (vi) Notes Financial Statements).

Filed herewith.

101.SCH

~~101.SCH~~

Inline XBRL Taxonomy Extension Schema Document

Filed herewith.

101.CAL

~~101.CAL~~

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith.

101.DEF

~~101.DEF~~

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.

101.LAB

~~101.LAB~~

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith.

101.PRE

~~101.PRE~~

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

104

Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101)

Filed herewith.

___________________________

* Management contract or compensatory plan or arrangement.

** Certain schedules and exhibits to this agreement have been omitted pursuant to Items 601(a)(5) of Regulation S-K, and Walgreens Boots Alliance, Inc. agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request.


WBA Q2 2023 Form 10-Q			66

SIGNATURES

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


		Walgreens Boots Alliance, Inc.
		(Registrant)


Dated: March 28, 2023		~~Walgreens Boots Alliance, Inc.~~/s/ James Kehoe
		~~(Registrant)~~James Kehoe

~~Dated: January 4, 2018~~	~~/s/ George R. Fairweather~~
	~~George R. Fairweather~~
	Executive Vice President and Global Chief Financial Officer
		Principal Financial Officer

~~Dated: January 4, 2018~~		~~/s/ Kimberly R. Scardino~~
Dated: March 28, 2023		~~Kimberly R. Scardino~~/s/ Manmohan Mahajan
		Manmohan Mahajan
		Senior Vice President, Global Controller and Chief Accounting Officer
		(Principal Accounting ~~Officer)~~Officer

~~- 46 -~~


WBA Q2 2023 Form 10-Q			67



Delaware			47-1758322
(State or Other Jurisdiction of ~~Incorporation)~~Incorporation or Organization)			(I.R.S. Employer Identification No.)



☑	þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	November 30, 2017			August 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	1,830		$	3,301
Accounts receivable, net	6,858			6,528
Inventories	10,010			8,899
Other current assets	983			1,025
Total current assets	19,681			19,753
Non-current assets:
Property, plant and equipment, net	13,693			13,642
Goodwill	15,931			15,632
Intangible assets, net	10,588			10,156
Equity method investments (see note 4)	6,028			6,320
Other non-current assets	697			506
Total non-current assets	46,937			46,256
Total assets	$	66,618		$	66,009

Liabilities and equity
Current liabilities:
Short-term borrowings	$	1,268		$	251
Trade accounts payable (see note 17)	13,570			12,494
Accrued expenses and other liabilities	5,183			5,473
Income taxes	496			329
Total current liabilities	20,517			18,547
Non-current liabilities:
Long-term debt	12,737			12,684
Deferred income taxes	2,319			2,281
Other non-current liabilities	4,289			4,223
Total non-current liabilities	19,345			19,188
Commitments and contingencies (see note 10)
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, 2017 and August 31, 2017	12			12
Paid-in capital	10,359			10,339
Retained earnings	30,560			30,137
Accumulated other comprehensive loss	(2,543		)	(3,051		)
Treasury stock, at cost; 182,067,204 shares at November 30, 2017 and 148,664,548 at August 31, 2017	(12,459		)	(9,971		)
Total Walgreens Boots Alliance, Inc. shareholders’ equity	25,929			27,466
Noncontrolling interests	827			808
Total equity	26,756			28,274
Total liabilities and equity	$	66,618		$	66,009



	Equity attributable to Walgreens Boots Alliance, Inc.
	Common stock shares		Common stock amount		Treasury stock amount			Paid-in capital			Employee stock loan receivable		Accumulated other comprehensive (loss) income			Retained earnings			Noncontrolling interests		Total equity
August 31, 2017	1,023,849,070		$	12	$	(9,971	)	$	10,339		$	—	$	(3,051	)	$	30,137		$	808	$	28,274
Net earnings	—		—		—			—			—		—			821			1		822
Other comprehensive income, net of tax	—		—		—			—			—		508			—			14		522
Dividends declared	—		—		—			—			—		—			(398		)	—		(398		)
Treasury stock purchases	(34,499,913	)	—		(2,525		)	—			—		—			—			—		(2,525		)
Employee stock purchase and option plans	1,097,257		—		37			(5		)	—		—			—			—		32
Stock-based compensation	—		—		—			25			—		—			—			—		25
Noncontrolling interests contribution	—		—		—			—			—		—			—			4		4
November 30, 2017	990,446,414		$	12	$	(12,459	)	$	10,359		$	—	$	(2,543	)	$	30,560		$	827	$	26,756



	Real estate costs			Severance and other business transition and exit costs			Total
Balance at August 31, 2017	$	521		$	79		$	600
Payments	(42		)	(39		)	(81		)
Balance at November 30, 2017	$	479		$	40		$	519



	For the three months ended November 30, 2017			For the twelve months ended August 31, 2017
Balance at beginning of period	$	718		$	466
Provision for present value of non-cancellable lease payments on closed facilities	29			344
Assumptions about future sublease income, terminations and changes in interest rates	1			13
Interest accretion	9			37
Cash payments, net of sublease income	(61		)	(142		)
Balance at end of period	$	696		$	718



	November 30, 2017			August 31, 2017
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	4,895	26%	$	5,024	26%
Others	1,133		8% - 50%	1,296		8% - 50%
Total	$	6,028		$	6,320



Total consideration	$	720

Identifiable assets acquired and liabilities assumed
Accounts receivable	$	217
Inventories	149
Property, plant and equipment	11
Intangible assets	331
Trade accounts payable	(90		)
Accrued expenses and other liabilities	(1		)
Total identifiable net assets	617
Goodwill	$	103



	Retail Pharmacy USA		Retail Pharmacy International		Pharmaceutical Wholesale		Walgreens Boots Alliance, Inc.
August 31, 2017	$	9,139	$	3,392	$	3,101	$	15,632
Acquisitions	101		—		—		101
Currency translation adjustments	—		103		95		198
November 30, 2017	$	9,240	$	3,495	$	3,196	$	15,931



	2019		2020		2021		2022		2023
Estimated annual amortization expense	$	350	$	295	$	244	$	218	$	197



	November 30, 2017		August 31, 2017
Short-term borrowings ¹
Commercial paper	$	990	$	—
Other ²	278		251
Total short-term borrowings	$	1,268	$	251

Long-term debt ¹
$6 billion note issuance ^3,4
3.450% unsecured notes due 2026	$	1,887	$	1,887
4.650% unsecured notes due 2046	590		590
$8 billion note issuance ^3,4
2.700% unsecured notes due 2019	1,247		1,246
3.300% unsecured notes due 2021	1,244		1,244
3.800% unsecured notes due 2024	1,989		1,988
4.500% unsecured notes due 2034	495		495
4.800% unsecured notes due 2044	1,492		1,492
£700 million note issuance ^3,4
2.875% unsecured pound sterling notes due 2020	538		513
3.600% unsecured pound sterling notes due 2025	403		384
€750 million note issuance ^3,4
2.125% unsecured euro notes due 2026	888		884
$4 billion note issuance ^4,7
3.100% unsecured notes due 2022	1,195		1,195
4.400% unsecured notes due 2042	492		492
$1 billion note issuance ^4,7
5.250% unsecured notes due 2019 ⁵	249		250
Other ⁶	28		24
Total long-term debt, less current portion	$	12,737	$	12,684



	November 30, 2017				August 31, 2017
	Notional ¹		Fair value		Notional ¹		Fair value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Interest rate swaps	$	—	$	—	$	250	$	—	Other non-current assets
Interest rate swaps	250		1		—		—		Other non-current liabilities
Foreign currency forwards	—		—		24		—		Other current assets
Derivatives not designated as hedges:
Foreign currency forwards	139		3		221		—		Other current assets
Foreign currency forwards	3,064		15		2,816		19		Other current liabilities



		Three months ended November 30,
	Location in Consolidated Condensed Statements of Earnings	2017			2016
Foreign currency forwards	Selling, general and administrative expenses	$	(19	)	$	50
Foreign currency forwards	Other income	34			1



	Pension/ post- retirement obligations			Unrecognized gain (loss) on available-for- sale investments		Unrealized gain (loss) on cash flow hedges			Share of OCI of equity method investments			Currency translation adjustment			Total
Balance at August 31, 2017	$	(139	)	$	—	$	(33	)	$	(2	)	$	(2,877	)	$	(3,051	)
Other comprehensive income (loss) before reclassification adjustments	(1		)	—		—			3			506			508
Amounts reclassified from accumulated OCI	—			—		1			—			—			1
Tax benefit (provision)	1			—		(1		)	(1		)	—			(1		)
Net other comprehensive income	—			—		—			2			506			508
Balance at November 30, 2017	$	(139	)	$	—	$	(33	)	$	—		$	(2,371	)	$	(2,543	)



	Retail Pharmacy USA		Retail Pharmacy International		Pharmaceutical Wholesale		Eliminations			Walgreens Boots Alliance, Inc.
Three months ended November 30, 2017
Sales to external customers	$	22,489	$	3,083	$	5,168	$	—		$	30,740
Intersegment sales	—		—		550		(550		)	—
Sales	$	22,489	$	3,083	$	5,718	$	(550	)	$	30,740

Adjusted operating income	$	1,377	$	210	$	224	$	(2	)	$	1,809

Three months ended November 30, 2016
Sales to external customers	$	20,659	$	2,962	$	4,880	$	—		$	28,501
Intersegment sales	—		—		537		(537		)	—
Sales	$	20,659	$	2,962	$	5,417	$	(537	)	$	28,501

Adjusted operating income	$	1,289	$	213	$	224	$	—		$	1,726



	Three months ended
	November 30, 2017		November 30, 2016
Purchases, net	$	11,604	$	10,636



	November 30, 2017		August 31, 2017
Trade accounts payable, net	$	4,818	$	4,384



	Issuer purchases of equity securities
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced repurchase programs¹	Approximate dollar value of shares that may yet be purchased under the plans or program¹
09/01/17 – 09/30/17	14,544,366	$	81.10	14,544,366	$	57,093,011
10/01/17 – 10/31/17	4,038,853	68.90		4,038,853	778,767,494
11/01/17 – 11/30/17²	15,916,694	67.06		11,686,694	—
Total	34,499,913	$	73.19	30,269,913	$	—