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Walgreens Boots Alliance Reports Fiscal 2015 Year-End And Fourth Quarter Results

The following excerpt is from the company's SEC filing.

Adjusted fiscal year 2015 net earnings attributable to Walgreens Boots Alliance per diluted share increase 18.3 percent to $3.88 compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance per diluted share increase 100 percent to $4.00

Adjusted fiscal year 2015 net earnings attributable to Walgreens Boots Alliance increase 28.9 percent to $4.1 billion compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance increase 118.4 percent to $4.2 billion

Adjusted fourth quarter net earnings attributable to Walgreens Boots Alliance per d iluted share increase 14.3 percent to $0.88 compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance per diluted share were $0.02 compared with a loss of $0.23 in last years fourth quarter

Adjusted fourth quarter net earnings attributable to Walgreens Boots Alliance increase 30.1 percent to $969 million compared with the year-ago period; GAAP net earnings attributable to Walgreens Boots Alliance were $26 million compared with a loss of $221 million in last years fourth quarter

Free cash flow totals $4.4 billion in fiscal year 2015, $1.1 billion in the quarter; GAAP operating cash flow totals $5.7 billion in fiscal year 2015, $1.5 billion in the quarter

DEERFIELD, Ill., 28 October 2015 Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for fiscal year and fourth quarter 2015 that ended 31 August 2015.

Executive Vice Chairman and CEO Stefano Pessina said, We are pleased with our progress and performance in the fourth quarter and in our first fiscal year since launching Walgreens Boots Alliance. While we have much work to do and operate in some challenging markets, we are excited and energized by the outlook and opportunities ahead as we put in place our strategies for long-term, sustainable growth. We believe we can shape the future of health care around the world through our ability to bring global solutions to local communities, benefiting all participants, populations and stakeholders.

Overview of Fiscal Year and Fourth Quarter Results

In fiscal 2015, GAAP net earnings attributable to Walgreens Boots Alliance increased 118.4 percent to $4.2 billion compared with the same period a year ago, while GAAP net earnings attributable to Walgreens Boots Alliance per diluted share increased 100 percent to $4.00 compared with the same period a year ago.

Adjusted net earnings attributable to Walgreens Boots Alliance for fiscal year 2015 increased 28.9 percent to $4.1 billion compared with the same period a year ago. Adjusted net earnings attributable to Walgreens Boots Alliance per diluted share for fiscal year 2015 increased 18.3 percent to $3.88 compared with the same period a year ago. Earnings adjustments in fiscal year 2015 were a net reduction of GAAP net earnings attributable to Walgreens Boots Alliance of $135 million or $0.12 per

diluted share. (Please see the Reconciliation of Non-GAAP Financial Measures table and accompanying disclosures at the end of this press release for more detailed information regarding non-GAAP financial measures herein, including the items reflected in adjusted net earnings calculations.)

Net sales in fiscal year 2015 increased 35.4 percent to $103.4 billion compared with the same period a year ago.

Fiscal 2015 fourth quarter net earnings attributable to Walgreens Boots Alliance determined in accordance with GAAP were $26 million compared with a loss of $221 million in the same quarter a year ago, while GAAP net earnings attributable to Walgreens Boots Alliance per diluted share were $0.02 compared with a loss of $0.23 in the same quarter a year ago.

Adjusted fiscal 2015 fourth quarter net earnings attributable to Walgreens Boots Alliance increased 30.1 percent to $969 million compared with the same quarter a year ago. Adjusted net earnings attributable to Walgreens Boots Alliance per diluted share for the quarter increased 14.3 percent to $0.88 compared with the same quarter a year ago. Fiscal 2015 fourth quarter earnings adjustments were a net increase of GAAP net earnings attributable to Walgreens Boots Alliance of $943 million or 86 cents per diluted share.

Net sales in the fourth quarter increased 49.7 percent to $28.5 billion compared with the same quarter a year ago, largely due to the inclusion of Alliance Boots consolidated results.

Combined net synergies for fiscal 2015 were $799 million. This includes $81 million classified as synergies in the fourth quarter which related to activities commencing in prior fiscal years. The company continues to expect to reach at least $1.0 billion in combined net synergies in fiscal 2016. This excludes the synergy benefits related to the companys strategic, long-term relationship with AmerisourceBergen and the benefits of refinancing the legacy Alliance Boots indebtedness at a lower cost.

Walgreens Boots Alliance generated free cash flow of $4.4 billion in the fiscal year and $1.1 billion in the quarter. GAAP operating cash flow totaled $5.7 billion in the fiscal year and $1.5 billion in the quarter.

Company Outlook

The company today introduced guidance for fiscal year 2016 with anticipated adjusted net earnings per share attributable to Walgreens Boots Alliance of $4.25 to $4.55 on a diluted basis. This guidance assumes no material accretion from the agreement to acquire Rite Aid (as covered separately yesterday), which is expected to close in the second half of calendar 2016, but reflects an adverse impact on adjusted earnings per share due to the suspension of the balance of the companys $3 billion share repurchase program to partly fund the transaction.

Restructuring Program

The company previously announced a $1.5 billion cost transformation program through the end of fiscal year 2017, primarily in its Retail Pharmacy USA division, to restructure and invest in the companys future in a way that is better for customers and simpler for employees, resulting in a faster and more agile company. During the fourth quarter of fiscal 2015, the company continued to make good progress

with the program and has achieved more than half of the programs expected savings as of the end of the fiscal year. In the Retail Pharmacy USA division, this effort included: closing 75 stores in the quarter for a total of 84 store closings in fiscal year 2015 as part of a plan to close approximately 200 stores; reorganizing divisional and field operations; driving operating efficiencies; and streamlining information technology and other functions. Actions taken in the quarter resulted in pre-tax charges to the companys GAAP financial results in the quarter of $382 million ($179 million in real estate costs, $120 million in asset impairments and $83 million in severance and other business transition and exit costs, with $372 million recorded in the Retail Pharmacy USA division and $10 million recorded in the Retail Pharmacy International division) and for the program to date of $542 million ($223 million in asset impairments, $202 million in real estate costs and $117 million in severance and other business transition costs and exit costs, with $523 million recorded in the Retail Pharmacy USA division and $19 million recorded in the Retail Pharmacy International division).

Business Segment Highlights

Retail Pharmacy USA:

The Retail Pharmacy USA division, whose principal retail pharmacy brands are Walgreens and Duane Reade, had fiscal year 2015 total sales of $81.0 billion, an increase of 6.0 percent over the previous fiscal year. Total sales in comparable drugstores (those open at least a year) increased 6.4 percent compared with the previous year. Comparable retail sales increased 1.5 percent in the fiscal year, with an increase in basket size partially offset by lower customer traffic compared with the previous fiscal year.

Pharmacy sales, which represented 66.1 percent of division total sales in fiscal year 2015, increased 8.2 percent compared with the previous year, while comparable pharmacy sales increased 9.3 percent. The division filled 894 million prescriptions (including immunizations) on a 30-day adjusted basis in the fiscal year, an increase of 4.4 percent over the previous year. Prescriptions filled in comparable stores increased 4.6 percent compared with the previous year. For the year ending 31 August 2015, the divisions retail prescription market share in the USA on a 30-day adjusted basis increased approximately 20 basis points over the year-ago period to 19.1 percent, as reported by IMS Health.

GAAP operating income in fiscal year 2015 decreased 7.2 percent over the year-ago period to $3.9 billion. Adjusted operating income in fiscal year 2015 increased 4.8 percent over the year-ago period to $5.1 billion.

Fourth quarter total sales for the Retail Pharmacy USA division were $19.9 billion, an increase of 4.7 percent over the year-ago quarter. Total sales in comparable drugstores increased 6.5 percent compared with the same quarter a year ago. Comparable retail sales increased 0.4 percent in the fourth quarter with an increase in basket size partially offset by lower customer traffic...


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