WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)


	Three months ended November 30,							Nine months ended May 31,
	2017			2016				2021		2020
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	822		$	1,067		Net earnings	$	1,899	$	68
Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	416			419			Depreciation and amortization	1,455		1,447
Deferred income taxes	(63		)	(61		)	Deferred income taxes	(210)		(102)
Stock compensation expense	25			26			Stock compensation expense	120		101
Equity (earnings) loss from equity method investments	99			(29		)	Equity (earnings) loss from equity method investments	577		(297)
Goodwill and intangible impairments							Goodwill and intangible impairments	0		2,001
Loss on early extinguishment of debt							Loss on early extinguishment of debt	419		0
Gain on sale of equity method investment							Gain on sale of equity method investment	(290)		0
Other	152			81			Other	(141)		305
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable, net	(362		)	(259		)	Accounts receivable, net	(897)		141
Inventories	(1,018		)	(1,330		)	Inventories	71		(227)
Other current assets	(154		)	(109		)	Other current assets	18		59
Trade accounts payable	1,011			884			Trade accounts payable	927		(210)
Accrued expenses and other liabilities	(222		)	(378		)	Accrued expenses and other liabilities	428		569
Income taxes	246			217			Income taxes	54		(353)
Other non-current assets and liabilities	9			(3		)	Other non-current assets and liabilities	(120)		(102)
Net cash provided by operating activities	961			525			Net cash provided by operating activities	4,310		3,398

Cash flows from investing activities:							Cash flows from investing activities:
Additions to property, plant and equipment	(378		)	(378		)	Additions to property, plant and equipment	(1,001)		(962)
Proceeds from sale leaseback transactions	—			436
Proceeds from sale-leaseback transactions							Proceeds from sale-leaseback transactions	662		557
Proceeds from sale of other assets	13			26			Proceeds from sale of other assets	406		52
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	(1,394)		(345)
Other	31			20			Other	(14)		37
Net cash (used for) provided by investing activities	(599		)	89

Net cash used for investing activities							Net cash used for investing activities	(1,341)		(660)
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	1,556		196
Proceeds from debt							Proceeds from debt	12,720		16,336
Payments of debt	(92		)	(4		)	Payments of debt	(11,050)		(16,871)
Stock purchases	(2,525		)	(457		)	Stock purchases	(110)		(1,374)
Proceeds related to employee stock plans	32			41			Proceeds related to employee stock plans	41		40
Cash dividends paid	(413		)	(406		)	Cash dividends paid	(1,212)		(1,260)
Early debt extinguishment							Early debt extinguishment	(3,687)		0
Other	5			(1		)	Other	(114)		(66)
Net cash used for financing activities	(1,857		)	(778		)	Net cash used for financing activities	(1,856)		(2,998)

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
Effect of exchange rate changes on cash, cash equivalents and restricted cash							Effect of exchange rate changes on cash, cash equivalents and restricted cash	(55)		(3)
Changes in cash, cash equivalents and restricted cash:							Changes in cash, cash equivalents and restricted cash:
Net increase (decrease) in cash, cash equivalents and restricted cash							Net increase (decrease) in cash, cash equivalents and restricted cash	1,058		(263)
Cash, cash equivalents and restricted cash at beginning of period							Cash, cash equivalents and restricted cash at beginning of period	746		1,207
Cash, cash equivalents and restricted cash at end of period							Cash, cash equivalents and restricted cash at end of period	$	1,803	$	943

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


WBA Q3 2021 Form 10-Q			9

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Accounting policies

Basis of presentation

The Consolidated Condensed Financial Statements of Walgreens Boots Alliance, Inc. (“Walgreens Boots Alliance” or the “Company”) included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. The Consolidated Condensed Financial Statements include all subsidiaries in which the Company holds a controlling interest. ~~Investments~~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.~~2020.

The coronavirus COVID-19 pandemic (“COVID-19”) has severely impacted the economies of the United States (“U.S.”), the United Kingdom (“UK”) and other countries around the world. The impact of COVID-19 on the Company’s businesses, financial position, results of operations and cash flows for the three months ended May 31, 2021, as well as information regarding certain expected or potential impacts of COVID-19 on the Company, is discussed throughout this Quarterly Report on Form 10-Q.

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 subsequent events from~~bases its estimates on the ~~balance sheet date~~information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances including estimates of the impact of COVID-19. The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors discussed throughout this Quarterly Report on Form 10-Q including, but not limited to, the severity and duration of COVID-19, the extent to which it will impact our customers, team members, suppliers, vendors, business partners and distribution channels. The Company assessed certain accounting matters that require consideration of estimates and assumptions in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of May 31, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill, intangible and other long-lived assets including operating lease right-of-use assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements ~~were issued~~in future reporting periods. Adjustments may be made in subsequent 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 COVID-19, the influence of certain holidays, seasonality, foreign currency rates, changes in vendor, payer and customer relationships and terms, strategic transactions including acquisitions, dispositions, changes in laws and general economic conditions in the markets in which the Company operates and other factors on the Company’s operations and net earnings for any period may not be comparable to the same period in previous years. ~~With respect~~

On January 6, 2021, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with AmerisourceBergen Corporation (the “Transaction”). Pursuant to the ~~Company’s Retail Pharmacy USA segment,~~terms and subject to the ~~positive impact on gross profit margins and gross profit dollars typically has been significant~~conditions set forth in the ~~first several months after a generic version~~Share Purchase Agreement, AmerisourceBergen Corporation (“AmerisourceBergen”) agreed to purchase the majority of ~~a drug is first allowed to compete with~~ the ~~branded version, which is generally referred to~~Company's Alliance Healthcare business as well as a ~~“generic conversion”~~portion of the Company’s retail pharmacy international businesses in Europe (“Disposal Group”). ~~In any given~~The Disposal Group met the criteria to be reported as held for sale and discontinued operations. Therefore, effective as of the second quarter of fiscal 2021, the related assets, liabilities and operating results of the Disposal Group have been reported as discontinued operations for all periods. The majority of the Disposal Group was previously included in the Pharmaceutical Wholesale segment. Effective as of the second quarter of fiscal year 2021, the ~~number~~Company eliminated the Pharmaceutical Wholesale segment and aligned into 2 reportable segments: United States and International. See Note 15 Segment reporting for additional information on the segments. On June 1, 2021 the Company completed the Transaction. See Note 20 Subsequent events.


WBA Q3 2021 Form 10-Q			10

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Unless otherwise specified, disclosures in these Consolidated Condensed Financial Statements reflect continuing operations only. Certain prior period data, primarily related to discontinued operations, have been reclassified in the Consolidated Condensed Financial Statements and accompanying notes to conform to the current period presentation. See Note 2 Discontinued operations for further information.

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

Note 2. Discontinued operations

On January 6, 2021, the Company entered into the Share Purchase Agreement with AmerisourceBergen. Pursuant to the terms and subject to the conditions set forth in the Share Purchase Agreement, AmerisourceBergen agreed to purchase the Disposal Group for approximately $6.5 billion, comprised of ~~major brand name drugs~~$6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of AmerisourceBergen common stock. Alliance Healthcare’s investments in China and Italy and its operations in Germany are not included in the Disposal Group. The Company's retail pharmacy international operations in the Netherlands, Norway and Lithuania are included in the Disposal Group. On June 1, 2021 the Company completed the Transaction. See Note 20 Subsequent events.

The Company classified assets and liabilities of the Disposal Group as held for sale in the Consolidated Condensed Balance Sheets at the lower of cost or fair value. Depreciation and amortization ceased on assets classified as held for sale. The Company allocated goodwill to the Disposal Group using relative fair value of the Disposal Group and businesses retained within the respective reporting units. The assets and liabilities and operating results of the Disposal Group are reported as discontinued operations, for all periods presented, as the disposition reflects a strategic shift that ~~undergo a conversion from branded to generic status can increase~~has, or ~~decrease, which can~~will have, a ~~significant impact~~major effect on the Company’s ~~Retail Pharmacy USA segment’s sales, gross profit margins~~operations and ~~gross profit dollars making~~financial results.

Results of discontinued operations were as follows (in millions):


	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	5,500	$	4,714	$	16,070	$	14,550
Cost of sales	4,956		4,235		14,486		13,089
Gross profit	544		479		1,584		1,461
Selling, general and administrative expense	394		381		1,211		1,173
Operating income from discontinued operations	150		98		373		288
Other expense	(2)		(2)		(7)		(6)
Interest expense, net	(13)		(7)		(23)		(20)
Earnings before income tax – discontinued operations	135		89		342		262
Income tax provision	44		3		68		24
Post tax earnings from other equity method investments	4		2		15		9
Net earnings from discontinued operations	$	95	$	88	$	289	$	248

Sales from the ~~Company’s~~Disposal Group to the Company's continuing operations are not eliminated and aggregate to (in millions):


	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	471	$	448	$	1,385	$	1,370


WBA Q3 2021 Form 10-Q			11

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The following table presents cash flows from operating and investing activities for discontinued operations (in millions):


	Nine months ended May 31,
	2021		2020
Cash used in operating activities - discontinued operations	$	(132)	$	(157)
Cash used for investing activities - discontinued operations	(58)		(42)

Asset and liabilities of discontinued operations were as follows (in millions):


	May 31, 2021		August 31, 2020
Cash and cash equivalents	$	239	$	47
Accounts receivable, net	3,524		3,022
Inventories	1,669		1,534
Other current assets	410		376
Property, plant and equipment, net 1	943		0
Goodwill and intangibles	4,110		0
Other assets	202		0
Assets of discontinued operations - current	$	11,097	$	4,979
Property, plant and equipment, net 1	$	0	$	816
Goodwill and intangibles	0		3,936
Other non-current assets	0		230
Assets of discontinued operations - non-current 2	$	0	$	4,983
Short term debt	$	366	$	273
Trade accounts payables	4,608		4,313
Accrued expenses and other liabilities	759		746
Income taxes	11		14
Deferred income taxes	139		0
Other liabilities	308		0
Liabilities of discontinued operations - current	$	6,191	$	5,347
Deferred income taxes	$	0	$	131
Other non-current liabilities	0		280
Liabilities of discontinued operations - non-current 2	$	0	$	412

1 Includes Operating lease right-of-use assets

2 Assets and liabilities of Disposal Group are presented as current, in the current period, as the Company completed the Transaction on June 1, 2021.

See Note 6 Equity method investments and Note 17 Related parties for more information on the Company's equity method investment in AmerisourceBergen and the Company's continuing involvement.


WBA Q3 2021 Form 10-Q			12

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 3. Acquisitions

iA acquisition

On December 29, 2020, the Company acquired a majority equity interest in Innovation Associates, Inc. for a cash consideration of $451 million. Innovation Associates, Inc. is a leading-edge provider of software enabled automation solutions for retail, hospital and federal healthcare and mail-order pharmacy markets. The Company accounted for this acquisition as a business combination and consolidates Innovation Associates, Inc. within the United States segment in its financial statements. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets. See Note 19 Supplemental information for more details on redeemable noncontrolling interest. The goodwill arising from this acquisition reflects the expected operational synergies and cost savings to be derived as a result of this acquisition.

As of May 31, 2021, the Company had not completed the analysis to determine the fair value of the consideration paid 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 changes. These changes may relate to finalization of the fair value of the purchase consideration and the allocation of purchase consideration to all tangible and intangible assets acquired and identified.

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


Purchase Price Allocation:


Total Consideration	$	477
Identifiable assets acquired and liabilities assumed
Tangible assets	$	58
Developed technology and other intangibles	202
Liabilities	(74)
Total identifiable net assets	$	186
Non-controlling interest	$	103
Goodwill	$	394

Pro forma net earnings and sales of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported. The acquisition did not have a material impact on net earnings or sales of the Company for ~~any~~the three and nine months ended May 31, 2021.

Pharmaceutical Wholesale business in Germany

On November 1, 2020, the Company and McKesson Corporation closed a transaction to form a combined pharmaceutical wholesale business in Germany, as part of a strategic alliance. The Company owns a 70% controlling equity interest in the combined business which is consolidated by the Company and reported within the International segment in its financial statements. The Company accounted for this acquisition as a business combination involving noncash purchase consideration of $296 million consisting of the issuance of an equity interest in the combined business.

As of May 31, 2021, the Company had not completed the analysis to determine the fair value of the consideration paid 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 changes. These changes may relate to finalization of the fair value of the purchase consideration consisting of the issuance of an equity interest in the combined business and the allocation of purchase 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):


WBA Q3 2021 Form 10-Q			13

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


Purchase Price Allocation:
Total Consideration	$	331
Identifiable assets acquired and liabilities assumed
Accounts receivable, cash and other assets	$	582
Inventories	470
Property, plant and equipment	125
Short term debt	(296)
Trade accounts payable, accrued expenses and other liabilities	(374)
Other noncurrent liabilities	(197)
Total identifiable net assets	$	311
Goodwill	$	21

A noncontrolling interest was recognized based on the Company's proportionate interest in the identifiable net assets of the combined business. The difference between the carrying amount of the non-controlling interest and the fair value of the consideration in the business combination is recognized as additional paid in capital. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets. See Note 19 Supplemental information for more details on redeemable noncontrolling interest.

The following table represents supplemental unaudited condensed pro forma consolidated sales for the three and nine months ended May 31, 2021 and May 31, 2020, respectively as if the acquisition had occurred at the beginning of each period. The unaudited condensed 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 the periods presented or results which may occur in the future.


	Three months ended May 31,				Nine months ended May 31,
(in millions)	2021		2020		2021		2020
Sales	$	34,030	$	31,827	$	99,921	$	95,999

Actual sales for the three and nine months ended May 31, 2021 included in the Consolidated Statement of Earnings are as follows:


(in millions)	Three months ended May 31, 2021		Nine months ended May 31, 2021
Sales	$	1,532	$	3,571

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

Other acquisitions

The Company acquired certain prescription files and related pharmacy inventory primarily in the U.S. for the aggregate purchase price of $19 million and $85 million during the three and nine months ended May 31, 2021, respectively and $27 million and $166 million during the three and nine months ended May 31, 2020, respectively.

Note 2.4. Exit and disposal activities

Transformational Cost Management Program

On December 20, 2018, the Company announced a transformational cost management program that was expected to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 (the “Transformational Cost Management Program”). The Company continues to expect to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 from continuing operations, after excluding amounts related to the Disposal Group.


WBA Q3 2021 Form 10-Q			14

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies. To date, the Company has taken actions across all aspects of the Transformational Cost Management Program. The actions under the Transformational Cost Management Program focus on the 2 reportable segments and the Company’s Corporate and global functions. Divisional optimization within each of the Company’s segments includes activities such as optimization of stores, including current plans to exit approximately 200 Boots stores in the UK and approximately 250 stores in the U.S.

The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its GAAP financial results in continuing operations of approximately $2.1 billion to $2.3 billion, subject to approval of which $1.8 billion to $2.0 billion are expected to be recorded as exit and disposal activities. In addition to these impacts, as a result of the actions related to store closures taken under the Transformational Cost Management Program, the Company recorded $508 million of non-cash transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard that became effective on September 1, 2019.

Since the inception of the Transformational Cost Management Program to May 31, 2021, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $1.2 billion, which were primarily recorded within selling, general and administrative expenses. These charges included $293 million related to lease obligations and other real estate costs, $245 million in asset impairments, $517 million in employee severance and business transition costs and $153 million of information technology transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three and nine months ended May 31, 2021 and May 31, 2020 were as follows (in millions):


Three months ended May 31, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	15	$	6	$	0	$	21
Asset impairments	5		9		0		14
Employee severance and business transition costs	(19)		2		14		(2)
Information technology transformation and other exit costs	1		10		0		11
Total pre-tax exit and disposal charges	$	2	$	27	$	14	$	44


Nine months ended May 31, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	56	$	6	$	0	$	62
Asset impairments	9		10		0		19
Employee severance and business transition costs	92		36		44		172
Information technology transformation and other exit costs	14		11		1		26
Total pre-tax exit and disposal costs	$	172	$	63	$	44	$	279


Three months ended May 31, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	170	$	3	$	0	$	173
Asset impairments	19		10		0		29
Employee severance and business transition costs	47		(2)		11		56
Information technology transformation and other exit costs	17		16		0		33
Total pre-tax exit and disposal charges	$	253	$	27	$	11	$	290


WBA Q3 2021 Form 10-Q			15

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)


Nine months ended May 31, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	179	$	5	$	0	$	184
Asset impairments	31		13		0		44
Employee severance and business transition costs	111		33		18		162
Information technology transformation and other exit costs	27		26		12		65
Total pre-tax exit and disposal costs	$	348	$	76	$	31	$	455

The changes in liabilities and assets related to the exit and disposal activities under Transformational Cost Management Program include the following (in millions):


	Lease obligations and other real estate costs		Asset Impairments		Employee severance and business transition costs		Information technology transformation and other exit costs		Total
Balance at August 31, 2020	$	19	$	0	$	166	$	14	$	199
Costs	62		19		172		26		279
Payments	(47)		0		(183)		(18)		(249)
Other	(9)		(19)		(4)		(12)		(43)
Currency	1		(1)		4		(2)		3
Balance at May 31, 2021	$	26	$	0	$	155	$	9	$	190

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 through the planned closure of approximately 600 stores and related assets within the Company’s ~~Retail Pharmacy USA~~United States 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~~Company closed 769 stores and related ~~assets across the U.S.~~assets. The actions under the Store Optimization Program ~~are expected to take place over an 18 month period beginning~~commenced in ~~spring 2018.~~March 2018 and were completed in the fourth quarter of fiscal 2020.

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.

~~The Company did not incur any charges~~Costs related to the Store Optimization Program for the three and nine months ended ~~November 30, 2017.~~

~~On April 8, 2015, the Walgreens Boots Alliance Board of Directors approved a plan to implement a restructuring program (the “Cost Transformation Program”) as part of an initiative to reduce~~May 31, 2020 were $3 million and $24 million for lease obligation and other real estate costs and ~~increase operating efficiencies. The Cost Transformation Program implemented~~$7 million 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$25 million for employee severance and other ~~functions.~~exit costs, respectively. 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.

~~The changes in accrued expenses and other~~ liabilities related to the ~~Cost Transformation~~Store Optimization Program ~~for the three months ended November 30, 2017 include the following (in millions):~~as of May 31, 2021 and May 31, 2020 were not material.

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~~5. Leases

The Company leases

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

~~The Company continuously evaluates its~~


WBA Q3 2021 Form 10-Q			16

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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


Balance Sheet supplemental information:	May 31, 2021		August 31, 2020
Operating Leases:
Operating lease right-of-use assets	$	21,874	$	21,453

Operating lease obligations - current	2,327		2,358
Operating lease obligations - non-current	22,088		21,765
Total operating lease obligations	$	24,416	$	24,123
Finance Leases:
Right-of-use assets included in:
Property, plant and equipment, net	$	741	$	766
Lease obligations included in:
Accrued expenses and other liabilities	37		31
Other non-current liabilities	989		1,013
Total finance lease obligations	$	1,025	$	1,044

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


	Three months ended May 31,				Nine months ended May 31,
Statement of Earnings supplemental information:	2021		2020		2021		2020
Operating lease cost
Fixed	$	807	$	806	$	2,406	$	2,436
Variable 1	157		163		477		587
Finance lease cost
Amortization	$	11	$	11	$	33	$	29
Interest	13		14		39		40
Sublease income	21		24		62		56
Impairment of right-of-use assets	8		170		23		182
Impairment of finance lease assets	0		21		0		24
Gains on sale-leaseback transactions2	85		84		273		224

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 insales volume.

2Recorded within selling, general and administrative ~~expenses in the Consolidated Condensed Statements of Earnings.~~expenses.

~~The changes in reserve for facility closings and~~


WBA Q3 2021 Form 10-Q			17

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Other supplemental information related ~~lease termination charges primarily in other non-current liabilities, include the following~~to leases 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


	Nine months ended May 31,
Other Supplemental Information:		2021		2020

Cash paid for amounts included in the measurement of lease obligations
Operating cash flows from operating leases		$	2,562	$	2,487
Operating cash flows from finance leases		36		36
Financing cash flows from finance leases		31		36
Total		$	2,629	$	2,559
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases		$	2,011	$	1,917
Finance leases		0		65
Total		$	2,011	$	1,982

~~As of November 30, 2017, the Company remains secondarily liable on 71 leases. The maximum potential undiscounted future payments are $318 million~~Average lease term and discount rate as of ~~November 30, 2017.~~May 31, 2021 and August 31, 2020 were as follows:


Weighted average terms and discount rates:	May 31, 2021		August 31, 2020
Weighted average remaining lease term in years:
Operating leases	10.4		10.7
Finance leases	20.4		20.6

Weighted average discount rate:
Operating leases	4.93	%	4.97	%
Finance leases	5.18	%	5.14	%

The aggregate future lease payments for operating and finance leases as of May 31, 2021 were as follows (in millions):


Future lease payments:
Fiscal year	Finance lease		Operating lease
2021 (Remaining period)	$	23	$	867
2022	92		3,403
2023	91		3,296
2024	92		3,169
2025	90		3,039
2026	90		2,911
Later	1,194		14,569
Total undiscounted minimum lease payments	$	1,672	$	31,254
Less: Present value discount	(647)		(6,838)
Lease liability	$	1,025	$	24,416


WBA Q3 2021 Form 10-Q			18

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4.6. Equity method investments

Equity method investments as of ~~November 30, 2017~~May 31, 2021 and August 31, ~~2017,~~2020, were as follows (in millions, except percentages):


	May 31, 2021			August 31, 2020
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	4,193	28%	$	5,446	28%
Others	2,584		8% - 50%	1,758		8% - 50%
Total	$	6,778		$	7,204

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~~May 31, 2021 and August 31, ~~2017,~~2020, the Company owned 56,854,867 AmerisourceBergen ~~Corporation (“AmerisourceBergen”)~~ common shares, representing approximately ~~26%~~27.7% of its outstanding common stock based on the ~~outstanding~~share count publicly reported by AmerisourceBergen ~~common stock.~~in its most recent Quarterly Report on Form 10-Q. The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings (loss) attributable to the Company’s investment being classified within the operating income of its ~~Pharmaceutical Wholesale~~United States 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 (loss) from AmerisourceBergen isare reported as a separate line in the Consolidated Condensed Statements of Earnings. During the nine months ended May 31, 2021, the Company recognized equity losses in AmerisourceBergen of $1,196 million, which included a loss of $1,373 million recognized during the three months ended November 30, 2020. These equity losses were primarily due to AmerisourceBergen's recognition of $5.6 billion, net of tax, and charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.

The ~~level~~Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at ~~November 30, 2017 is $4.8~~May 31, 2021 was $6.5 billion.

~~The~~ As of May 31, 2021, 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~~$4.2 billion. This premium of ~~$4.4~~$4.2 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.

On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen agreed to purchase the majority of the Company's Alliance Healthcare business. See Note 2 Discontinued operations for additional information. On June 1, 2021, the Company completed the sale and received $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of AmerisourceBergen common stock. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See Note 20 Subsequent events.

Other investments

The Company’s other equity method investments include its investments in ~~Guangzhou Pharmaceuticals Corporation (“Guangzhou Pharmaceuticals”) and Nanjing Pharmaceutical Corporation Limited,~~ the ~~Company’s pharmaceutical wholesale investments in China;~~U.S. which include VillageMD, BrightSpring Health Services (previously PharMerica Corporation), Shields Health Solutions and the ~~equity method~~Company's investment ~~retained through the sale of a majority~~in HC Group Holdings I, LLC (“HC Group Holdings”) which owns equity interest in Option Care ~~Inc.~~Health and the Company's China investments in ~~fiscal 2015.~~Sinopharm Medicine Holding Guoda Drugstores Co., Ltd, Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited.

The Company reported ~~$13~~$575 million of post-tax equity earnings and ~~$12~~$6 million of post-tax equity earnings from other equity method investments ~~other than AmerisourceBergen~~ for the three months ended ~~November 30, 2017~~May 31, 2021 and ~~2016,~~May 31, 2020, respectively. The Company reported $604 million of post-tax equity earnings and $5 million of post-tax equity earnings from other equity method investments for the nine months ended May 31, 2021 and May 31, 2020, respectively.

During the three and nine months ended May 31, 2021, the Company recorded a gain of $98 million and $290 million, respectively, in Other income due to partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings. During the three months ~~period~~ ended ~~November 30, 2017,~~May 31, 2021, as a result of these sales, our equity method investee HC Group Holdings lost the ability to control Option Care Health and, therefore, deconsolidated Option Care Health in its financial statements. As a result of this deconsolidation, HC Group Holdings recognized a gain of $1.2 billion and the Company recorded ~~an impairment~~its share of ~~$170~~equity earnings in HC Group Holdings of $576 million in its equity interest in Guangzhou Pharmaceuticals, which was included in other income (expense) in the Consolidated Condensed Statements of Earnings. The fair value 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, the Company announced that it had secured regulatory clearance for an amended 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 forduring the three months ended ~~November 30, 2017.~~May 31, 2021, in Post tax earnings from other equity method investments.

~~From December 1, 2017 through~~


WBA Q3 2021 Form 10-Q			19

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

During the ~~date of this report,~~nine months ended May 31, 2021, the Company ~~purchased 260~~made an additional ~~stores for total cash consideration~~investment 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,$750 million in VillageMD of which $250 million is recorded as part of a strategic alliance. AllianceRx Walgreens Prime is consolidated by Walgreens Boots Alliance and reported within the Retail Pharmacy USA segment in its financial statements. The Company accounted for this acquisition of Prime’s specialty pharmacy and mail services business as a business combination involving non-cash purchase consideration of $720 million consisting of the issuance of an equity ~~interest~~method investment and $500 million is recorded as an investment in ~~AllianceRx Walgreens Prime.~~convertible debt securities within Other non-current assets.

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 considerationSummarized financial information

Summarized financial information for the ~~acquisition and the preliminary amounts~~Company’s equity method investments in aggregate is as follows:

Statements of ~~identified assets acquired and liabilities assumed at the date of the transaction~~earnings (loss) (in millions).


	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	55,890	$	52,772	$	171,417	$	157,382
Gross profit	2,558		2,253		7,647		6,476
Net earnings (loss)	489		912		(3,841)		1,268
Share of earnings (loss) from equity method investments	672		249		(591)		289

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

The preliminary identified intangible assets primarily include payer contracts. These contracts are estimated to have a weighted average useful life of 15 years. The preliminary goodwill of $103 million arising fromsummarized financial information for equity method investments has been included on an aggregated basis for all investments as reported for the ~~transaction consists of expected purchasing synergies, operating efficiencies by benchmarking performance~~three and ~~applying best practices across the combined company, consolidation of operations, reductions in selling, general~~nine months ended May 31, 2021 and ~~administrative expenses and combining workforces. Substantially all of the goodwill recognized is not expected to be deductible for income tax purposes.~~May 31, 2020, respectively.

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.

Note 6.7. 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 2020, as of the June 1, 2020 valuation date, the fair values of the Company’s reporting units exceeded their carrying amounts ranging from approximately 4% to approximately 239% excluding Boots reporting unit for which the excess of fair value over carrying amount was nominal due to an impairment charge recognized during the three months ended May 31, 2020. Other international reporting unit's fair value was in excess of its carrying value by approximately 4%. The fair values of the indefinite-lived trade name intangibles within the Boots reporting unit exceeded their carrying value amounts ranging from approximately 4% to approximately 31%, except for certain Boots trade name assets impaired during the three months ended May 31, 2020 and pharmacy licenses impairment during the year end August 31, 2019. As of May 31, 2021, the carrying values of goodwill were $1.1 billion and $0.4 billion for the Boots reporting unit and Other international reporting unit, respectively. As of May 31, 2021, the carrying value of the indefinite-lived intangibles within the Boots reporting unit was $7.7 billion.

The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions including with respect to the business and financial performance of the Company’s reporting units, as well as how such performance may be impacted by COVID-19.

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, including the impact of COVID-19, 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, including the impact of COVID-19 and economic, industry and market trends and the impact these may have on the Boots and Other international reporting units.


WBA Q3 2021 Form 10-Q			20

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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


Goodwill rollforward:									Goodwill rollforward:	United States		International		Walgreens Boots Alliance, Inc.
August 31, 2020									August 31, 2020	$	10,553	$	1,460	$	12,013
Acquisitions									Acquisitions	394		21		416

	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		Currency translation adjustments	0		65		65
November 30, 2017	$	9,240	$	3,495	$	3,196	$	15,931
May 31, 2021									May 31, 2021	$	10,947	$	1,547	$	12,493

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


Intangible assets	May 31, 2021		August 31, 2020
Gross amortizable intangible assets
Customer relationships and loyalty card holders 1	$	3,581	$	3,502
Trade names and trademarks	373		348
Purchasing and payer contracts	337		337
Others2	218		60
Total gross amortizable intangible assets	$	4,510	$	4,247

Accumulated amortization
Customer relationships and loyalty card holders 1	$	1,306	$	1,089
Trade names and trademarks	226		196
Purchasing and payer contracts	185		95
Others2	32		26
Total accumulated amortization	1,749		1,406
Total amortizable intangible assets, net	$	2,761	$	2,841

Indefinite-lived intangible assets
Trade names and trademarks	$	5,526	$	5,203
Pharmacy licenses	2,148		2,028
Total indefinite-lived intangible assets	$	7,675	$	7,231

Total intangible assets, net	$	10,435	$	10,072

1Includes purchased prescription files.

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
2Includes acquired developed technology and non-compete agreements.

Amortization expense for intangible assets was ~~$96~~$156 million and ~~$95~~$363 million for the three and nine months ended ~~November 30, 2017~~

May 31, 2021, respectively, and ~~2016,~~$94 million and $290 million for the three and nine months ended May 31, 2020, respectively.

Estimated future annual amortization expense for the next five fiscal years for intangible assets recorded at ~~November 30, 2017~~May 31, 2021 is as follows (in millions):


	2022		2023		2024		2025		2026
Estimated annual amortization expense	$	439	$	336	$	317	$	289	$	262


WBA Q3 2021 Form 10-Q			21

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

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note ~~7. Borrowings~~8. 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):


	May 31, 2021		August 31, 2020
Short-term debt
Commercial paper	$	2,390	$	1,517
Credit facilities 5	4,198		1,071
£700 million note issuance 1
2.875% unsecured Pound sterling notes due 2020	0		533
$8 billion note issuance 1
3.300% unsecured notes due 2021	1,249		0
Other 2	126		144
Total short-term debt	$	7,963	$	3,265

Long-term debt
$1.5 billion note issuance 1
3.200% unsecured notes due 2030	$	497	$	497
4.100% unsecured notes due 2050 5	792		990
$6 billion note issuance 1
3.450% unsecured notes due 2026 5	1,442		1,891
4.650% unsecured notes due 2046 5	318		591
$8 billion note issuance 1
3.300% unsecured notes due 2021	0		1,248
3.800% unsecured notes due 2024 5	1,154		1,993
4.500% unsecured notes due 2034 5	301		496
4.800% unsecured notes due 2044 5	868		1,493
£700 million note issuance 1
3.600% unsecured Pound sterling notes due 2025	423		398
€750 million note issuance 1
2.125% unsecured Euro notes due 2026	913		891
$4 billion note issuance 3
3.100% unsecured notes due 2022 5	731		1,198
4.400% unsecured notes due 2042 5	263		493
Other 4	31		24
Total long-term debt, less current portion	$	7,732	$	12,203

1Notes are 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. On October 20, 2020, the Company redeemed in full the £400 million aggregate principal amount outstanding of its 2.875% unsecured Pound sterling notes due 2020 issued by the Company on November 20, 2014.

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

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,

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 Q3 2021 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.

22
²

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

~~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 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,

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.

4Other long-term debt represents a mix of fixed and variable rate debt in various currencies with various maturities.

~~August 2017 Credit Agreements~~

5On ~~August 24, 2017,~~April 26, 2021, the Company entered into a cash tender offer to partially purchase and retire $3.3 billion of long term U.S. dollar denominated notes with a weighted average interest rate of 4.02%, using funds drawn down from the $3.8 billion April 2021 Credit Agreement (as defined below). The Company recognized a loss of $419 million related to the early extinguishment of debt, within Interest expense, which includes $386 million of redemption premium paid in cash. The cash payments related to the early extinguishment of debt are classified as cash outflows from financing activities in the consolidated statement of cash flows. On June 1, 2021, the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all of the outstanding amount owed on the April 2021 Credit Agreement that funded the bond tender completed by the Company on April 26, 2021.

$1.5 Billion Note Issuance

On April 15, 2020, the Company issued, in an underwritten public offering, $0.5 billion of 3.20% notes due 2030 and $1.0 billion ~~revolving~~of 4.10% notes due 2050. Total issuance costs relating to the notes, including underwriting discounts and offering expenses were $13 million. The Company partially purchased and retired $0.2 billion of its outstanding $1.0 billion, 4.10% notes due 2050 pursuant to the debt tender offer completed on April 26, 2021.

Credit facilities

April 9, 2021 Delayed Draw Term Loan Credit Agreement

On April 9, 2021, the Company entered into a delayed draw term loan credit agreement (the “April 2021 Credit Agreement”) with the lenders from time to time party thereto. The purpose of the loan was to fund the Company's April 26, 2021 cash tender offer to partially purchase and retire $3.30 billion of long term U.S. dollar denominated notes. The April 2021 Credit Agreement was initially a $2.75 billion senior unsecured delayed draw term loan facility, with an original facility termination date (the “Initial Maturity Date”) of the earliest of (x) October 9, 2021, (y) the date of acceleration of all term loans and termination of all commitments pursuant to the April 2021 Credit Agreement and (z) the date of prepayment of all loans and the termination of all commitments pursuant to the April 2021 Credit Agreement. On April 23, 2021, the April 2021 Credit Agreement term loan facility amount was increased to $3.8 billion. As of May 31, 2021, there were $3.8 billion of borrowings outstanding under the April 2021 Credit Agreement. On June 1, 2021 the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all borrowings outstanding under the April 2021 Credit Agreement.

December 23, 2020 Revolving Credit Agreement

On December 23, 2020, the Company entered into a $1.25 billion senior unsecured 364-day revolving credit agreement and a $2.25 billion senior unsecured 18-month revolving credit facility, with a swing line subfacility commitment amount of $350 million, with designated borrowers from time to time party thereto and lenders from time to time party thereto. The 364-Day Facility’s termination date is the earlier of (i) 364 days from December 23, 2020,the effective date (subject to the extension thereof pursuant to the 2020 Revolving Credit Agreement) and (ii) the date of termination in whole of the aggregate amount of the revolving commitments under the 364-Day Facility pursuant to the 2020 Revolving Credit Agreement. The 18-Month Facility’s termination date is the earlier of (i) 18 months from the effective date (subject to the extension thereof pursuant to the 2020 Revolving Credit Agreement) and (ii) the date of termination in whole of the aggregate amount of the revolving commitments under the 18-Month Facility pursuant to the 2020 Revolving Credit Agreement. As of May 31, 2021, there were $400 million borrowings outstanding under the 2020 Revolving Credit Agreement.

April 7, 2020 Revolving Credit Agreement

~~The August 2017 Revolving Credit Agreement~~ is ana senior unsecured revolving credit facility, with a facility termination date of the earlier of (a) ~~January~~364-days from April 7, 2020 and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the April 7, 2020 Revolving Credit Agreement. The Company and WBAFSL are co-borrowers under the April 7, 2020 Revolving Credit Agreement. Pursuant to the terms of the April 7, 2020 Revolving Credit Agreement, the Company provides a guarantee of any obligations of WBAFSL under the April 7, 2020 Revolving Credit Agreement. This revolving credit agreement was terminated in full on December 23, 2020.


WBA Q3 2021 Form 10-Q			23

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

April 2020 Revolving Bilateral and Club Credit Agreements

The Company entered into a $750 million revolving credit agreement on April 1, 2020 (the “April 2020 Revolving Bilateral Credit Agreement”) and a $1.325 billion revolving credit agreement on April 2, 2020 (the “April 2020 Revolving Club Credit Agreement” and together with the April 2020 Revolving Bilateral Credit Agreement, the “Other April 2020 Revolving Credit Agreements”) with the lenders from time to time party thereto. Each of the Other April 2020 Revolving Credit Agreements is a senior unsecured revolving credit facility, with a facility termination date of the earlier of (a) March 31, ~~2019, subject to any extension thereof~~2021 (which date shall be shortened pursuant to the terms of the applicable Other April 2020 Revolving Credit Agreement if the Company does not extend the maturity date of certain of its existing credit agreements or enter into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the applicable Other April 2020 Revolving Credit Agreement) and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the applicable Other April 2020 Revolving Credit Agreement. This revolving credit agreement was terminated in full on December 23, 2020.

August ~~2017~~2019 Revolving Credit Agreements

On August 30, 2019, the Company entered into 3 $500 million revolving credit agreements (together, the “August 2019 Revolving Credit Agreements” and each individually, an “August 2019 Revolving Credit Agreement”) with the lenders from time to time party thereto. Each of the August 2019 Revolving Credit Agreements are senior unsecured revolving credit facilities, with facility termination dates of the earlier of (a) 18 months following August 30, 2019, subject to extension thereof pursuant to the applicable August 2019 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the 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, 2018pursuant 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. 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 theapplicable August ~~2017~~2019 Revolving Credit Agreement. This revolving credit agreement was terminated in full on December 23, 2020.

~~February 2017~~January 2019 364-Day Revolving Credit Agreement

On ~~February 1, 2017,~~January 18, 2019, the Company entered into a ~~$1.0~~$2.0 billion 364-day revolving credit ~~facility~~agreement (as ~~amended,~~extended, the ~~“February 2017~~“January 2019 364-Day Revolving Credit Agreement”) with the lenders from time to time party thereto. The January 2019 364-Day Revolving Credit Agreement is a senior unsecured 364-day revolving credit facility, with an original facility termination date of 364 days following January 31, 2019, subject to extension. On December 18, 2019, the Company entered into an Extension Agreement (the “Extension Agreement”) relating to the January 2019 364-Day Revolving Credit Agreement with the lenders party thereto and Mizuho, as administrative agent. The Extension Agreement extended the Maturity Date (as defined in the January 2019 364-Day Revolving Credit Agreement) for an additional period of 364 days to January 28, 2021. Such extension became effective on January 30, 2020. The January 2019 364 Day Revolving Credit Agreement was partially terminated on December 23, 2020. The January 2019 364-Day Revolving Credit Agreement was partially terminated in accordance with its terms and conditions, reducing the amount available to $0.5 billion as of December 23, 2020. The outstanding facility amount of $1.5 billion was terminated on January 28, 2021.

A&R December 2018 Credit Agreement

On December 5, 2018, the Company entered into a $1.0 billion term loan credit agreement with the lenders from time to time party thereto and, on August ~~1, 2017,~~9, 2019, the Company entered into an amendment to such credit agreement ~~thereto.~~ (such credit agreement as so amended, the “December 2018 Credit Agreement”) to permit the Company to borrow, repay and reborrow amounts borrowed thereunder prior to the maturity date. On April 2, 2020, the Company amended and restated the December 2018 Credit Agreement (such credit agreement as so amended and restated, the “A&R December 2018 Credit Agreement”). The ~~terms and conditions~~A&R December 2018 Credit Agreement governs a $2.0 billion senior unsecured revolving credit facility, consisting of the ~~February 2017 Revolving~~initial $1.0 billion senior unsecured revolving facility previously governed by the December 2018 Credit Agreement ~~were unchanged by the amendment other than the extension of the~~and a new $1.0 billion senior unsecured revolving credit facility. The facility termination date tois the earlier of (a) January 29, 2021 (which date shall be extended to February 26, 2021 or July 31, ~~2019~~2021 pursuant to the terms of the A&R December 2018 Credit Agreement if the Company extends the maturity date of certain of its existing credit agreements or enters into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the A&R December 2018 Credit Agreement ) and (b) the date of termination in whole of the aggregate amount of the commitments ~~provided by~~pursuant to the A&R December 2018 Credit Agreement. The A&R December 2018 Credit Agreement was further amended on December 23, 2020 whereby the new facility was terminated in full and the existing facility matured in January 2021.

Amended November 2018 Credit Agreement


WBA Q3 2021 Form 10-Q			24

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

converted into a term loan facility, such that the Amended November 2018 Credit Agreement consists of a $1.0 billion senior unsecured term loan facility. The facility termination date is the earlier of (a) May 29, 2021 and (b) the date of acceleration of all loans under the Amended November 2018 Credit Agreement pursuant to its terms. The November 2018 Credit Agreement was repaid in full on April 23, 2021.

August 2018 Revolving Credit Agreement

On August 29, 2018, the Company entered into a revolving credit agreement (the “August 2018 Revolving Credit Agreement”) with the lenders and letter of credit issuers from time to time party thereto. The August 2018 Revolving Credit Agreement is an unsecured revolving credit facility with aggregate commitment in the amount of $3.5 billion, with a letter of credit subfacility commitment amount of $500 million. The facility termination date is the earlier of (a) August 29, 2023, subject to extension thereof pursuant to the August 2018 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the revolving commitments pursuant to the August 2018 Revolving Credit Agreement. As of May 31, 2021, there were no borrowings outstanding under the ~~February 2017~~August 2018 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, 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. Walgreens Boots Alliance was required to redeem all of the 2018 notes, the 2021 notes and the 2023 notes then outstanding, at a special mandatory redemption price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest of approximately $1 million to, but excluding, the date of redemption. The 2026 notes and 2046 notes remain outstanding in accordance with their respective terms and are subject to redemption in certain circumstances.

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 also contain various other customary 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~~U.S. commercial paper outstanding of $2.3 billion and $2.6 billion at a weighted average interest rate of ~~1.46%~~0.47% and 2.33% for the ~~three~~nine months ended ~~November 30, 2017. The~~May 31, 2021 and May 31, 2020, respectively. A subsidiary of the Company had ~~no activity~~average daily commercial paper outstanding, which was issued under ~~its~~the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program, of £300 million or approximately $424 million at a weighted average interest rate of 0.43% for the ~~twelve~~nine months ended ~~August~~May 31, ~~2017.~~2021. The subsidiary of the Company repaid the commercial paper issued under the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program on May 14, 2021.

Interest

Interest paid by the Company was $889 million and $510 million for the nine months ended May 31, 2021 and May 31, 2020, respectively. Interest paid in the nine months ended May 31, 2021 of $889 million includes charges on early extinguishment of debt of $387 million.

Note 8.9. Financial instruments

The Company uses derivative instruments to manage its exposure to interest rate and foreign currency exchange 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~~


WBA Q3 2021 Form 10-Q			25

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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


May 31, 2021	Notional		Fair value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:

Interest rate swaps	$	1,000	$	5	Other non-current assets
Cross currency interest rate swaps	992		58		Other non-current liabilities
Foreign currency forwards	39		2		Other non-current liabilities
Foreign currency forwards	1		0		Other current assets

Foreign currency forwards	635		14		Other current liabilities





Cross currency interest rate swaps	113		13		Other current liabilities
Derivatives not designated as hedges:
Foreign currency forwards	$	1,368	$	3	Other current assets
Total return swap	244		9		Other current assets
Foreign currency forwards	2,613		30		Other current liabilities


August 31, 2020	Notional		Fair value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Cross currency interest rate swaps	$	722	$	16	Other non-current assets
Foreign currency forwards	49		1		Other non-current liabilities
Cross currency interest rate swaps	318		13		Other non-current liabilities
Interest rate swaps	1,000		10		Other non-current liabilities
Foreign currency forwards	100		1		Other current assets
Cross currency interest rate swaps	50		0		Other current assets
Foreign currency forwards	671		23		Other current liabilities
Cross currency interest rate swaps	103		3		Other current liabilities
Derivatives not designated as hedges:
Foreign currency forwards	$	1,930	$	19	Other current assets
Foreign currency forwards	2,934		56		Other current liabilities
Total return swap	205		1		Other current liabilities

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 the currency translation adjustment within accumulated other comprehensive income (loss).

Cash flow hedges

The Company uses interest rate swaps to ~~variable rate and designated as~~hedge the variability in forecasted cash flows of certain floating-rate debt. For qualifying cash flow hedges, changes in the fair value ~~hedges~~of the derivatives are ~~included~~recorded in ~~long-term debt on~~accumulated other comprehensive income (loss) and released to the Consolidated ~~Condensed Balance Sheets (see note 7, borrowings).~~

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 derivative instruments were recognized in earnings as follows (in millions):


WBA Q3 2021 Form 10-Q			26

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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


		Three months ended May 31,				Nine months ended May 31,
	Location in Consolidated Condensed Statements of Earnings	2021		2020		2021		2020
Foreign currency forwards	Selling, general and administrative expenses	$	(53)	$	72	$	(177)	$	11
Total return swaps	Selling, general and administrative expenses	20		5		48		5
Foreign currency forwards	Other income (expense)	(5)		2		(6)		6

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 9.10. 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.

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

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
—


	May 31, 2021		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	447	$	447	$	0	$	0
Investments in equity securities 2	10		10		0		0
Investments in debt securities 3	535		0		0		535
Foreign currency forwards 4	3		0		3		0

Interest rate swaps 5	5		0		5		0
Total return swaps	9		0		9		0
Warrants	2		0		2		0
Liabilities:
Foreign currency forwards 4	$	46	$	0	$	46	$	0
Cross currency interest rate swaps 5	71		0		71		0

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
—


¹ WBA Q3 2021 Form 10-Q			~~Money market funds are valued at the closing price reported by the fund sponsor.~~

27
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.


1			Adjustments to equity earnings (loss) in AmerisourceBergen consist of the Company’s proportionate share of non-GAAP adjustments reported by AmerisourceBergen consistent with the Company’s non-GAAP measures. The Company recognized equity losses in AmerisourceBergen of $1,373 million during the three months ended November 30, 2020. These equity losses are primarily due to AmerisourceBergen's recognition of $5.6 billion, net of tax, charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.
2			Acquisition-related amortization includes amortization of acquisition-related intangible assets and inventory valuation adjustments. Amortization of acquisition-related intangible assets includes amortization of intangibles assets such as customer relationships, trade names, trademarks 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. Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of the inventory reflects cost of acquired inventory and a portion of the expected profit margin. The acquisition-related inventory valuation adjustments excludes the expected profit margin component from cost of sales recorded under the business combination accounting principles.
3			Transformational Cost Management Program and Store Optimization 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			Certain legal and regulatory accruals and settlements relate to significant charges associated with certain legal proceedings. 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.
5			The Company’s United States 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 United States 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.
6			Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities. These costs include all charges incurred on certain mergers, acquisition and divestitures related activities, for example, including costs related to integration efforts for successful merger, acquisition and divestitures activities. 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.
7			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). We do not believe this volatility related to mark-to-market adjustment on the underlying derivative instruments reflects the Company’s operational performance.
8			Includes significant gain on sale of equity method investment. During the three and nine months ended May 31, 2021, the Company recorded a gain of $98 million and $290 million respectively, in Other income due to a partial sale of ownership interests in Option Care Health by the Company's equity method investee HC Group Holdings.
9			Adjustments to income tax provision include adjustments to the GAAP basis tax provision commensurate with non-GAAP adjustments and certain discrete tax items including U.S. tax law changes and equity method non-cash tax. These charges are recorded within income tax provision (benefit).
10			Adjustments to post tax equity 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 (loss) 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. In the three months ended May 31, 2021 due to partial sales of ownership interests in Option Care Health, our equity method investee HC Group Holdings lost the ability to control Option Care Health and, therefore, deconsolidated Option Care Health in its financial statements. As a result of this deconsolidation, HC Group Holdings recognized a gain of $1.2 billion and the Company recorded its share of equity earnings in HC Group Holdings of $576 million during the three months ended May 31, 2021.
11			Loss on early extinguishment of debt related to the Company's cash tender offers to partially purchase and retire $3.3 billion of long term U.S. denominated notes. The Company excludes these charges to enable a more consistent evaluation of the Company's financial performance.
12			Goodwill and intangible assets arising from acquisition related activities are recorded by the Company following the analysis to determine the fair value of consideration paid and the assignment of fair values to all tangible and intangible assets acquired. Impairment of goodwill and intangible assets do not relate to the ordinary course of the Company’s business. 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.
13			Store damage and inventory losses as a result of looting in the U.S., net of insurance recoveries.
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 quarterly calculation of weighted-average common shares outstanding for diluted EPS for the three and nine months ended May 31, 2020.
15			Includes impact of potentially dilutive securities in the quarterly calculation of weighted-average common shares, diluted for adjusted diluted net earnings per common share calculation purposes for the three and nine months ended May 31, 2020.


WBA Q3 2021 Form 10-Q			58

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

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, 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.

LIQUIDITY AND CAPITAL RESOURCES

Cash, ~~and~~ cash equivalents and restricted cash were $1.8 billion (including ~~$1.1~~$0.7 billion in non-U.S. jurisdictions) as of ~~November 30, 2017,~~May 31, 2021, compared to ~~$9.6~~$0.9 billion (including ~~$1.8~~$0.4 billion in non-U.S. jurisdictions) ~~at November 30, 2016.~~as of May 31, 2020. 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.

Cash provided by operations and the ~~issuance~~incurrence of debt are the principal sources of funds for expansion, investments, acquisitions, remodeling programs, dividends to ~~shareholders~~stockholders and stock repurchases. Net cash provided by operating activities for the ~~three~~nine months ended ~~November 30, 2017~~May 31, 2021 was ~~$961 million,~~$4.3 billion, compared to ~~$525 million~~$3.4 billion for the ~~year-ago~~prior year period. The $0.9 billion increase in cash provided by operating activities ~~was primarily due to lower cash outflows from changes~~reflects increase in ~~inventories,~~operating performance and higher cash inflows from trade accounts ~~payables, lower cash outflows from accrued expenses and other liabilities~~payable, partially offset by higher cash outflows 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.receivables. Changes in trade accounts ~~payable, accrued expenses and other liabilities,~~payables and accounts receivables isare mainly driven by timing of payments and ~~collections.~~receipts.

Net cash used for investing activities was ~~$599 million~~$1.3 billion for the ~~three~~nine months ended ~~November 30, 2017,~~May 31, 2021 compared to ~~$89 million provided~~$0.7 billion for the prior year period. The $0.7 billion increase in cash used by investing activities is primarily driven by higher cash outflows from business, investment and asset acquisitions partially offset by higher cash inflows from proceeds from sale of assets. Changes in ~~the year-ago period. Business~~business, investment and asset acquisitions in the ~~three~~period was primarily driven by acquisition in Innovation Associates and increased investment in VillageMD. Changes in proceeds from sale of assets was primarily driven by partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings. Proceeds from sale-leaseback transactions was $0.7 billion for the nine months ended ~~November 30, 2017 were $265 million~~May 31, 2021 compared to ~~$15 million~~$0.6 billion for the ~~year-ago~~prior year period.

For the ~~three~~nine months ended ~~November 30, 2017 and for the year-ago period,~~May 31, 2021, additions to property, plant and equipment were ~~$378 million.~~$1.0 billion compared to $1.0 billion in the prior year period. Capital expenditures ~~by reporting segment~~ were as ~~follows:~~follows (in millions):


	Nine months ended May 31,
	2021		2020
United States	$	745	$	743
International	162		169
Corporate	28		5
Discontinued operations	67		45
Total	$	1,001	$	962

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~~growth initiatives and information technology projects.

Additionally, investing activities for the three months ended November 30, 2017 did not include any proceeds related to sale-leaseback transactions, compared to $436 million of proceeds in the year-ago period.

Net cash used for financing activities for the ~~three~~nine months ended ~~November 30, 2017~~May 31, 2021 was $1.9 billion, compared to ~~net cash used of $778 million~~$3.0 billion in the ~~year-ago~~prior year period. ~~For~~In the nine months ended May 31, 2021 there were $14.3 billion in net debt proceeds primarily from revolving credit facilities described below and commercial paper debt compared to $16.5 billion in net proceeds in the prior year period. In the nine months ended May 31, 2021 there were $11.1 billion in payments of debt made primarily for revolving credit facilities and commercial paper debt compared to $16.9 billion in nine months ended May 31, 2020. Financing activities during the three months ended ~~November 30, 2017 we completed $2.5~~May 31, 2021 include partial purchase and retirement of $3.3 billion of ~~share repurchases comprised of $2.2~~long term debt using


WBA Q3 2021 Form 10-Q			59

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

proceeds from the $3.8 billion ~~of repurchases under~~delayed draw term loan. The Company repurchased shares totaling $110 million in the ~~June 2017 stock repurchase program described below and $289 million of repurchases~~nine months ended May 31, 2021 to support the needs of ~~employee stock plans. We completed $457 million of share repurchases during the three months ended November 30, 2016. Proceeds related to~~its employee stock plans ~~were $32 million during the three months ended November 30, 2017,~~ compared to ~~$41 million for~~$1.4 billion in the ~~three months ended November 30, 2016.~~prior year period which also included stock repurchase program described below. Cash dividends paid were ~~$413 million~~$1.2 billion during the ~~three~~nine months ended ~~November 30, 2017,~~May 31, 2021, compared to ~~$406 million~~$1.3 billion for the ~~same period a~~prior year ~~ago. We currently intend~~period.

The Company expects to fund its working capital needs, capital expenditures, future 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 and current cash and investment balances. The Company believes that these sources, and the ability to obtain other financing will provide adequate cash funds for the Company’s foreseeable working capital needs, capital expenditures, future acquisitions, dividend payments and debt service obligations for at least the next 12 months. 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 ~~maintain~~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 Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020.

See Item 3, Qualitative and quantitative disclosures about market risk, below for a ~~long-term dividend payout ratio target~~discussion of ~~approximately 30 to 35 percent of adjusted net earnings attributable to Walgreens Boots Alliance.~~certain financing and market risks.

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 May 31, 2021. 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~~announced that it was suspending activities 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~~average daily U.S. commercial paper ~~borrowings~~ outstanding as of ~~November 30, 2017~~$2.3 billion 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~~$2.6 billion at a weighted average interest rate of ~~1.46%~~0.47% and 2.33% for the ~~three~~nine months ended ~~November 30, 2017~~May 31, 2021 and ~~no activity~~May 31, 2020, respectively. A subsidiary of the Company had average daily commercial paper outstanding, which was issued under ~~its~~the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program, of £300 million or approximately $424 million at a weighted average interest rate of 0.43% for the ~~three~~nine months ended ~~November 30, 2016.~~May 31, 2021. The subsidiary of the Company repaid the commercial paper issued under the Joint HM Treasury and Bank of England's COVID Corporate Financing Facility commercial paper program on May 14, 2021.

Financing actions

On ~~November 10, 2014, Walgreens Boots Alliance and Walgreens~~August 29, 2018, the Company 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~~“August 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 and letter of credit issuers 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~~August 2018 Revolving Credit Agreement ~~were unchanged by~~is an unsecured revolving credit facility with aggregate commitment in the ~~amendment other than the extension~~amount of ~~the~~$3.5 billion, with a letter of credit subfacility commitment amount of $500 million. The facility termination date tois the earlier of (a) ~~January 31, 2019~~August 29, 2023, subject to extension thereof pursuant to the August 2018 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the revolving commitments ~~provided by~~pursuant to the ~~lenders thereunder.~~August 2018 Revolving Credit Agreement. Borrowings under the ~~February 2017~~August 2018 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~~Company's option, the alternate base rate or the Eurocurrency rate, in each case, plus an applicable margin calculated based on ~~Walgreens Boots Alliance’s~~the Company'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~~May 31, 2021, there were no borrowings outstanding under the August ~~2017~~2018 Revolving Credit Agreement.


WBA Q3 2021 Form 10-Q			60

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

On November 30, 2018, the Company entered into a $1.0 billion credit agreement, consisting of a $500 million senior unsecured revolving credit facility and a $500 million senior unsecured term loan facility, with the lenders from time to time party thereto, on March 25, 2019, the Company entered into an amendment to such credit agreement (such credit agreement as so amended, the “November 2018 Credit Agreement”) reflecting certain changes to the borrowing notice provisions thereto. On April 2, 2020, the Company entered into a second amendment to the November 2018 Credit Agreement (such credit agreement as so further amended, the “Amended November 2018 Credit Agreement”), which amendment became effective as of May 29, 2020. As of May 29, 2020, the $500 million revolving credit facility portion of the November 2018 Credit Agreement was converted into a term loan facility, such that the Amended November 2018 Credit Agreement consists of a $1.0 billion senior unsecured term loan facility. The facility termination date is the earlier of (a) May 29, 2021 and (b) the date of acceleration of all loans under the Amended November 2018 Credit Agreement pursuant to its terms. Borrowings under the Amended November 2018 Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of 1.25% in the case of Eurocurrency rate loans and 0.125% in the case of alternative base rate loans. The November 2018 Credit Agreement was repaid in full on April 23, 2021.

On December 5, 2018, the Company entered into a $1.0 billion term loan credit agreement with the lenders from time to time party thereto and, on August 9, 2019, the Company entered into an amendment to such credit agreement (such credit agreement as so amended, the “December 2018 Credit Agreement”) to permit the Company to borrow, repay and reborrow amounts borrowed thereunder prior to the maturity date. On April 2, 2020, the Company amended and restated the December 2018 Credit Agreement (such credit agreement as so amended and restated, the “A&R December 2018 Credit Agreement”).

The A&R December 2018 Credit Agreement governs a $2.0 billion senior unsecured revolving credit facility, consisting of the initial $1.0 billion senior unsecured revolving facility (the “Initial Facility”) previously governed by the December 2018 Credit Agreement and a new $1.0 billion senior unsecured revolving credit facility (the “New Facility”). The facility termination date is the earlier of (a) January 29, 2021 (the “Initial Maturity Date”) (which date shall be extended to February 26, 2021 or July 31, 2021 pursuant to the terms of the A&R December 2018 Credit Agreement if the Company extends the maturity date of certain of its existing credit agreements or enters into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the A&R December 2018 Credit Agreement) and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the A&R December 2018 Credit Agreement. Borrowings under the A&R December 2018 Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of (i) in the case of the Initial Facility from April 2, 2020 through and including the Initial Maturity Date, 0.75% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans and (ii) in the case of the New Facility and the Initial Facility after the Initial Maturity Date, 1.50% in the case of Eurocurrency rate loans and 0.50% in the case of alternate base rate loans. The A&R December 2018 Credit Agreement was further amended on December 23, 2020 whereby the new facility was terminated in full and the existing facility matured in January 2021.

On January 18, 2019, the Company entered into a $2.0 billion 364-day revolving credit agreement (as extended, the “January 2019 364-Day Revolving Credit Agreement”) with the lenders from time to time party thereto. The January 2019 364-Day Revolving Credit Agreement is a senior unsecured 364-day revolving credit facility, with an original facility termination date of 364 days following January 31, 2019, subject to extension. On December 18, 2019, the Company entered into an Extension Agreement (the “Extension Agreement”) relating to the January 2019 364-Day Revolving Credit Agreement with the lenders party thereto and Mizuho, as administrative agent. The Extension Agreement extended the Maturity Date (as defined in the January 2019 364-Day Revolving Credit Agreement) for an additional period of 364 days to January 28, 2021. Such extension became effective on January 30, 2020. Borrowings under the January 2019 364-Day Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company's option, the alternate base rate or the Eurocurrency rate, in each case, plus an applicable margin calculated based on the Company’s credit ratings. The January 2019 364-Day Revolving Credit Agreement was partially terminated in accordance with its terms and conditions, reducing the amount available to $0.5 billion as of December 23, 2020, concurrently with the execution of the 2020 Revolving Credit Agreement described below. The outstanding facility amount of $1.5 billion was terminated on January 28, 2021.

On August 30, 2019, the Company entered into three $500 million revolving credit agreements (together, the “August 2019 Revolving Credit Agreements” and each individually, an “August 2019 Revolving Credit Agreement”) with the lenders from time to time party thereto. Each of the August 2019 Revolving Credit Agreements are senior unsecured revolving credit facilities, with facility termination dates of the earlier of (a) 18 months following August 30, 2019, subject to extension thereof pursuant to the applicable August 2019 Revolving Credit Agreement, and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the applicable August 2019 Revolving Credit Agreement. Borrowings under each of the August 2019 Revolving Credit Agreements will bear interest at a fluctuating rate per annum equal to, at the Company's option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of 0.95% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.


WBA Q3 2021 Form 10-Q			61

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

The Company entered into a $750 million revolving credit agreement on April 1, 2020 (the “April 2020 Revolving Bilateral Credit Agreement”) and a $1.325 billion revolving credit agreement on April 2, 2020 (the “April 2020 Revolving Club Credit Agreement” and together with the April 2020 Revolving Bilateral Credit Agreement, the “Other April 2020 Revolving Credit Agreements”) with the lenders from time to time party thereto. Each of the Other April 2020 Revolving Credit Agreements is a senior unsecured revolving credit facility, with a facility termination dates of the earlier of (a) March 31, 2021 (which date shall be shortened pursuant to the terms of the applicable Other April 2020 Revolving Credit Agreement if the Company does not extend the maturity date of certain of its existing credit agreements or enter into new bank or bond financings with a certain maturity date and above an aggregate principal amount as described in the applicable April 2020 Revolving Credit Agreement) and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the applicable Other April 2020 Revolving Credit Agreement. Borrowings under the Other April 2020 Revolving Credit Agreements bear interest at a fluctuating rate per annum equal to, at the Company’s option, the Eurocurrency rate or the alternate base rate, plus an applicable margin of 1.25% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.

On April 7, 2020, the Company and with WBA Financial Services Limited, a private limited company incorporated under the laws of England and Wales (“WBAFSL”), as co-borrowers, entered into a $500 million revolving credit agreement (the “April 7, 2020 Revolving Credit Agreement”) with the lenders from time to time party thereto. The April 7, 2020 Revolving Credit Agreement is a senior unsecured revolving credit facility, with a facility termination date of the earlier of (a) 364-days from April 7, 2020 and (b) the date of termination in whole of the aggregate amount of the commitments pursuant to the April 7, 2020 Revolving Credit Agreement. The Company and WBAFSL are co-borrowers under the April 7, 2020 Revolving Credit Agreement. Pursuant to the terms of the April 7, 2020 Revolving Credit Agreement, the Company provides a guarantee of any obligations of WBAFSL under the April 7, 2020 Revolving Credit Agreement. Borrowings under the April 7, 2020 Revolving Credit Agreement bear interest at a fluctuating rate per annum equal to, at the Company’s option, the Eurocurrency rate or the alternate base rate, plus an applicable margin of 1.50% in the case of Eurocurrency rate loans. This revolving credit agreement was terminated in full on December 23, 2020.

On April 15, 2020, the Company issued in an underwritten public offering $0.5 billion of 3.20% notes due 2030 and $1.0 billion of 4.10% notes due 2050. Total issuance costs relating to the notes, including underwriting discounts and estimated offering expenses were $13 million. The Company partially purchased and retired $0.2 billion of its outstanding $1.0 billion, 4.10% notes due 2050 pursuant to the debt tender offer completed on April 26, 2021.

On October 20, 2020, the Company redeemed in full the £400 million aggregate principal amount outstanding of its 2.875% notes due 2020 issued by the Company on November 20, 2014.

After the entry into the 2020 Revolving Credit Agreement and the full or partial termination of the Company’s other credit agreements as discussed herein, as of May 31, 2021, the Company had an aggregate borrowing capacity of $10.8 billion including funds already drawn.

On April 9, 2021 the Company entered into a delayed draw term loan credit agreement (the “April 2021 Credit Agreement”) with the lenders from time to time party thereto. The purpose of the loan was to fund the Company's April 26, 2021 cash tender offer to partially purchase and retire $3.30 billion of long term U.S. dollar denominated notes. The April 2021 Credit Agreement was initially a $2.75 billion senior unsecured delayed draw term loan facility, with an original facility termination date (the "Initial Maturity Date") of the earliest of (x) October 9, 2021, (y) the date of acceleration of all term loans and termination of all commitments pursuant to the April 2021 Credit Agreement and (z) the date of prepayment of all loans and the termination of all commitments pursuant to the April 2021 Credit Agreement. Borrowings under the April 2021 Credit


WBA Q3 2021 Form 10-Q			62

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Agreement bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the Eurocurrency rate, plus an applicable margin of (i) on and prior to the Initial Maturity Date, 0.70% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans and (ii) after the Initial Maturity Date, 0.75% in the case of Eurocurrency rate loans and 0.00% in the case of alternate base rate loans. On April 23, 2021 the April 2021 Credit Agreement term loan facility amount was increased to $3.8 billion. As of May 31, 2021, there were $3.8 billion of borrowings outstanding under the April 2021 Credit Agreement. On June 1, 2021 the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all borrowings outstanding under the April 9, 2021 Credit Agreement.

Tender offer to purchase debt

On April 26, 2021, the Company entered into a cash tender offer to partially purchase and retire $3.3 billion of long term U.S. dollar denominated notes with a weighted average interest rate of 4.02%, using funds drawn down from the $3.8 billion April 2021 Credit Agreement. The Company recognized a loss of $419 million related to the early extinguishment of debt, within Interest expense, which includes $386 million of redemption premium paid in cash. The cash payments related to the early extinguishment of debt are classified as cash outflows from financing activities in the consolidated statement of cash flows. On June 1, 2021, the Company completed the previously announced sale of the Company’s Alliance Healthcare business and used a portion of the Transaction proceeds to repay all of the outstanding amount owed on the April 2021 Credit Agreement that funded the bond tender completed by the Company on April 26, 2021.

Debt covenants

Credit ratings

As of ~~January 3, 2018,~~June 30, 2021, the credit ratings of Walgreens Boots Alliance were:



Rating agency	Long-term debt rating	Commercial paper rating	Outlook
Fitch	~~BBB~~BBB-	F2F3	~~Stable~~Negative
Moody’s	Baa2	P-2	~~Stable~~Negative
Standard & Poor’s	BBB	A-2	~~Stable~~Negative

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~~As of May 31, 2021, the Company owned 56,854,867 AmerisourceBergen common shares representing approximately 27.7% of its outstanding common stock based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q and had designated one member of AmerisourceBergen’s board of directors. As of May 31, 2021, the Company can acquire up to ~~our arrangements with~~an additional 8,398,752 AmerisourceBergen ~~we have~~shares in the ~~right, but not the obligation,~~open market and thereafter designate another member of AmerisourceBergen’s board of directors, subject in each case to ~~purchase a minority equity position~~applicable legal and contractual requirements. The amount of permitted open market purchases is subject to increase or decrease in ~~AmerisourceBergen over time as described under “--AmerisourceBergen Corporation relationship” above.~~certain circumstances. 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. See Note 6 Equity method investments, to the Consolidated Condensed Financial Statements for further information.


WBA Q3 2021 Form 10-Q			63

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen agreed to purchase the majority of the Company's pharmaceutical wholesale operations, as well as a portion of the Company’s retail pharmacy international businesses in Europe, for $6.275 billion in cash (subject to customary purchase price adjustments) and 2 million shares of common stock of AmerisourceBergen. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See “Recent Developments” above and Note 2 Discontinued operations to the Consolidated Condensed Financial Statements for additional information.

OFF-BALANCE SHEET ARRANGEMENTS

~~We do~~The Company does not have any unconsolidated special purpose entities and, except as described herein, ~~we do~~the Company does 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~~not consolidated by the Company 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~~There have been no material changes, outside of the ordinary course of business, in ~~our~~the Company's outstanding contractual obligations disclosed in the ~~Walgreens Boots Alliance~~Company's Annual Report on Form 10-K for the year ended August 31, ~~2017.~~2020.

CRITICAL ACCOUNTING POLICIES

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 of earnings and corresponding balance sheet 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~~Company's Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017.~~2020. Some of the more significant estimates include business combinations, leases, goodwill and indefinite-lived intangible asset impairment, ~~vendor allowances, liability for closed locations,~~ cost of sales and inventory, equity method investments, pension and postretirement benefits 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~~Note 18 ~~new~~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.

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 and projections about our 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 calls and other communications. Some of such forward-looking statements may be based on certain data 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 goals for future financial and operating performance as well as forward-looking statements concerning the potential impacts on our business of the spread and impact of COVID-19, the expected execution and effect of our business strategies, our cost-savings and growth initiatives, pilot programs, strategic partnerships and 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,~~delivery of estimated cost savings, 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 and reimbursement rates, changes in generic prescription drug prices, retail margins, number and location of new store openings, network participation, vendor, payer and


WBA Q3 2021 Form 10-Q			64

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS

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. ~~Words~~All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “pilot,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” “sustain,” “synergy,” “transform,” “accelerate,” “model,” “long-term,” “on track,” “on schedule,” “headwind,” “tailwind,” “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.

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 Item ~~1A. “Risk factors”~~1A, Risk factors, in ~~our~~the Walgreens Boots Alliance Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017, in Item 1A. “Risk factors” in this report~~2020 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 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 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 Q3 2021 Form 10-Q			65

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.

On March 5, 2021, the UK Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, issued an announcement on the future cessation or loss of representativeness of LIBOR benchmark settings currently published by ICE Benchmark Administration. That announcement confirmed that LIBOR will either cease to be provided by any administrator or will no longer be representative after December 31, 2021 for all non-USD LIBOR reference rates, and for 1W and 2M USD LIBOR and after June 30, 2023 for other USD LIBOR reference rates. 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 alternative benchmark rate could include the secured overnight financing rate, also known as SOFR, published by the Federal Reserve Bank of New York

Information regarding the Company's transactions are set forth in Note 9 Financial instruments, to the Consolidated Condensed Financial Statements. These financial instruments are sensitive to changes in interest rates. On May 31, 2021, the Company 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

The Company is 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 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 May 31, 2021, by approximately $43 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 6 Equity method investments, to the Consolidated Condensed Financial Statements. See “--Investment in AmerisourceBergen” above.


WBA Q3 2021 Form 10-Q			66

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”). 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. Specifically, the Company is currently implementing a new enterprise resource planning (ERP) system. This project is a multi-year initiative and is intended to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. 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~~May 31, 2021 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.


WBA Q3 2021 Form 10-Q			67

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Part II. Other Information

Item 1. Legal proceedings

The information in response to this item is incorporated herein by reference to ~~note 10, commitments~~Note 11 Commitments and contingencies, ofto the Consolidated Condensed Financial Statements of this Quarterly Report.

As previously disclosed, the Company has been under investigation by certain counties within the State of California for alleged noncompliance with state hazardous waste regulations. The Company has worked with state and local officials in an effort to resolve this matter. The Company executed a settlement agreement in October 2020 which includes a monetary payment and injunctive provisions, including funding of supplemental environmental projects. The total settlement value is $3.5 million. On November 16, 2020, a number of California District Attorneys submitted thesigned settlement agreement and a complaint to a California state court in Alameda County (People of the State of California v. Walgreen Co., Case No. RG20081172) for review and approval. The settlement was approved by the court on December 17, 2020 and shall be in effect for three years.

Item 1A. Risk factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in ~~Item~~item 1A. “Risk factors” in the Walgreens Boots Alliance Annual Report on Form 10-K for the year ended August 31, ~~2017 and the amended and restated risk factor set forth below,~~2020, 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 May 31, 2021 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.


~~(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 programs1	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.~~program1
03/01/21 - 03/31/21		—	$	—	—	$	2,003,419,960
04/01/21 - 04/30/21		—	—		—	2,003,419,960
05/01/21 - 05/31/21		—	—		—	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.

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 Q3 2021 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.

68
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.~~

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 5. Other information

None

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

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.

10.1*

Amended and Restated AmerisourceBergen Shareholders Agreement, dated as of June 1, 2021, between AmerisourceBergen Corporation and Walgreens Boots Alliance, Inc.

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).~~8-K (File No. 1-36759) filed with the SEC on June 4, 2021.

10.2*

Agreement between Walgreens Boots Alliance Services Limited and Alexander W. Gourlay, dated June 30, 2021.

Filed herewith.

~~10.2~~10.3**

~~Form of Stock Option Award agreement for CEO (effective October 2017).~~

~~Filed herewith.~~

~~10.3~~*

Form of Restricted Stock Unit Award ~~agreement for Executive Chairman (effective October 2017).~~agreement.

~~Filed herewith.~~

Incorporated by reference to Exhibit 10.3 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 26, 2021.

1210.4

~~Computation~~Delayed Draw Term Loan Credit Agreement, dated as of ~~Ratio of Earnings~~April 9, 2021, by and among Walgreens Boots Alliance, Inc., the Lenders from time to ~~Fixed Charges.~~time party thereto and Wells Fargo Bank, National Association, as Administrative Agent.

~~Filed herewith.~~

Incorporated by reference to Exhibit 10.4 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 9, 2021.

10.5

Increase Amendment, dated April 23, 2021, to the Delayed Draw Term Loan Credit Agreement.

Incorporated by reference to Exhibit 10.5 to Walgreens Boots Alliance, Inc.’s Current Report on Form 8-K (File No. 1-36759) filed with the SEC on April 23, 2021.

31.1

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

Filed herewith.


WBA Q3 2021 Form 10-Q			69

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

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.

101.INS

~~101.INS~~

Inline XBRL Instance Document (The following financial information from this Quarterly Report on Form 10-Q for the quarter ended May 31, 2021 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 Statement 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.~~arrangement


WBA Q3 2021 Form 10-Q			70

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: ~~January 4, 2018~~July 1, 2021		/s/ ~~George R. Fairweather~~James Kehoe
		~~George R. Fairweather~~James Kehoe
		Executive Vice President, ~~and~~ Global Chief Financial Officer


~~Dated: January 4, 2018~~	~~/s/ Kimberly R. Scardino~~
	~~Kimberly R. Scardino~~
	~~Senior Vice President, Global Controller~~ and Acting Chief Accounting Officer
		(Principal Financial Officer & Principal Accounting Officer)

~~- 46 -~~


WBA Q3 2021 Form 10-Q			71



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



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


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



Large accelerated filer þ			Accelerated filer ☐
Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~			Smaller reporting company ☐
			Emerging growth company ☐


	November 30, 2017			August 31, 2017				May 31, 2021		August 31, 2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	1,830		$	3,301		Cash and cash equivalents	$	1,345	$	469
Accounts receivable, net	6,858			6,528			Accounts receivable, net	5,153		4,110
Inventories	10,010			8,899			Inventories	8,333		7,917
Other current assets	983			1,025			Other current assets	680		598
Assets of discontinued operations - current (see note 2)							Assets of discontinued operations - current (see note 2)	11,097		4,979
Total current assets	19,681			19,753			Total current assets	26,607		18,073
Non-current assets:							Non-current assets:
Property, plant and equipment, net	13,693			13,642			Property, plant and equipment, net	12,450		12,796
Operating lease right-of-use assets							Operating lease right-of-use assets	21,874		21,453
Goodwill	15,931			15,632			Goodwill	12,493		12,013
Intangible assets, net	10,588			10,156			Intangible assets, net	10,435		10,072
Equity method investments (see note 4)	6,028			6,320
Equity method investments (see note 6)							Equity method investments (see note 6)	6,778		7,204
Other non-current assets	697			506			Other non-current assets	1,282		581
Assets of discontinued operations - non-current (see note 2)							Assets of discontinued operations - non-current (see note 2)	0		4,983
Total non-current assets	46,937			46,256			Total non-current assets	65,313		69,101
Total assets	$	66,618		$	66,009		Total assets	$	91,920	$	87,174

Liabilities and equity
Liabilities, redeemable noncontrolling interest and equity							Liabilities, redeemable noncontrolling interest and equity
Current liabilities:							Current liabilities:
Short-term borrowings	$	1,268		$	251
Short-term debt							Short-term debt	$	7,963	$	3,265
Trade accounts payable (see note 17)	13,570			12,494			Trade accounts payable (see note 17)	11,290		10,145
Operating lease obligations							Operating lease obligations	2,327		2,358
Accrued expenses and other liabilities	5,183			5,473			Accrued expenses and other liabilities	6,632		5,861
Income taxes	496			329			Income taxes	71		95
Liabilities of discontinued operations - current (see note 2)							Liabilities of discontinued operations - current (see note 2)	6,191		5,347
Total current liabilities	20,517			18,547			Total current liabilities	34,475		27,070
Non-current liabilities:							Non-current liabilities:
Long-term debt	12,737			12,684			Long-term debt	7,732		12,203
Operating lease obligations							Operating lease obligations	22,088		21,765
Deferred income taxes	2,319			2,281			Deferred income taxes	1,309		1,367
Other non-current liabilities	4,289			4,223			Other non-current liabilities	3,410		3,222
Liabilities of discontinued operations - non-current (see note 2)							Liabilities of discontinued operations - non-current (see note 2)	0		412
Total non-current liabilities	19,345			19,188			Total non-current liabilities	34,539		38,968
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
Commitments and contingencies (see note 11)							Commitments and contingencies (see note 11)	0		0
Total liabilities							Total liabilities	69,014		66,038
Redeemable noncontrolling interest							Redeemable noncontrolling interest	310		0



☑	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



Item 1.	Legal proceedings	4268
Item 1A.	Risk factors	4268
Item 2.	Unregistered sales of equity securities and use of proceeds	4268
Item 6.5.	~~Exhibits~~Other information	4469
Item 6.	Exhibits	69


Three months ended May 31, 2021
		Equity attributable to Walgreens Boots Alliance, Inc.
	Common stock shares	Common stock amount		Treasury stock amount		Paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Noncontrolling interests		Total equity
February 28, 2021	864,394,418	$	12	$	(20,626)	$	10,916	$	(3,306)	$	34,116	$	514	$	21,625
Net earnings (loss)	—	—		—		—		—		1,197		(24)		1,173
Other comprehensive income (loss), net of tax	—	—		—		—		127		—		4		131
Dividends declared	—	—		—		—		—		(405)		—		(405)
Treasury stock purchases	—	—		—		—		—		—		—		—
Employee stock purchase and option plans	487,981	—		16		3		—		—		—		20
Stock-based compensation	—	—		—		50		—		—		—		50


Business combination	—	—		—		—		—		—		—		—
Other	—	—		—		2		—		—		—		2
May 31, 2021	864,882,399	$	12	$	(20,610)	$	10,971	$	(3,180)	$	34,908	$	495	$	22,596



	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



	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		Unrealized gain (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 February 28, 2021	$	(739)	$	(18)	$	(90)	$	0	$	10	$	(2,469)	$	(3,306)
Other comprehensive income (loss) before reclassification adjustments	0		(3)		(30)		5		2		141		115
Amounts reclassified from AOCI	(2)		14		0		0		0		1		13
Tax benefit (provision)	0		(3)		7		0		(6)		0		(1)
Net change in other comprehensive income (loss)	(1)		8		(23)		5		(4)		142		127
Balance at May 31, 2021	$	(740)	$	(10)	$	(113)	$	5	$	6	$	(2,327)	$	(3,180)



	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


	May 31, 2021		August 31, 2020
Cash and cash equivalents - continuing operations	$	1,345	$	469
Cash and cash equivalents - discontinued operations	239		47
Restricted cash - continuing operations (included in other current assets)	76		62
Restricted cash - discontinued operations	143		168
Cash, cash equivalents and restricted cash	$	1,803	$	746


Quarter ended	2021		2020
November	$	0.4675	$	0.4575
February	$	0.4675	$	0.4575
May	$	0.4675	$	0.4575
	$	1.4025	$	1.3725


Transformational Cost Management Program Activities			Range of Charges
Lease obligations and other real estate costs1			$450 to 500 million
Asset impairments2			$275 to 300 million
Employee severance and business transition costs			$800 to 850 million
Information technology transformation and other exit costs			$275 to 300 million
Total cumulative pre-tax exit and disposal costs			$1.8 to 2.0 billion
Other IT transformation costs			$300 to 350 million
Total estimated pre-tax costs			$2.1 to 2.3 billion


	(in millions, except per share amounts)
	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	34,030	$	30,364	$	98,247	$	91,612
Gross profit	7,153		5,959		20,564		19,753
Selling, general and administrative expenses	6,116		7,884		17,936		19,663
Equity earnings (loss) in AmerisourceBergen	97		243		(1,196)		284
Operating income (loss)	1,134		(1,683)		1,432		374
Adjusted operating income (Non-GAAP measure)1	1,459		798		3,881		3,724
Earnings (loss) before interest and income tax provision	1,294		(1,715)		1,905		407
Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP)	1,105		(1,794)		1,636		(157)
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure)1	1,194		618		3,237		2,985
Diluted net earnings (loss) per common share - continuing operations (GAAP)	1.27		(2.05)		1.89		(0.18)
Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure)1	1.38		0.71		3.74		3.37


	Percentage increases (decreases)
	Three months ended May 31,		Nine months ended May 31,
	2021	2020	2021	2020
Sales	12.1	0.1	7.2	1.4
Gross profit	20.0	(14.4)	4.1	(7.7)
Selling, general and administrative expenses	(22.4)	35.4	(8.8)	12.0
Operating income	NM	NM	282.6	(90.5)
Adjusted operating income (Non-GAAP measure)1	82.9	(50.0)	4.2	(26.2)
Earnings before interest and income tax provision	NM	NM	368.3	(90.3)
Net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP)	NM	NM	NM	NM
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (Non-GAAP measure)1	93.1	(50.4)	8.4	(25.0)
Diluted net earnings per common share - continuing operations (GAAP)	NM	NM	NM	NM
Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure)1	95.1	(48.4)	10.7	(21.1)


	Percent to sales
	Three months ended May 31,		Nine months ended May 31,
	2021	2020	2021	2020
Gross margin	21.0	19.6	20.9	21.6
Selling, general and administrative expenses	18.0	26.0	18.3	21.5


¹ WBA Q3 2021 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”).46


FINANCIAL PERFORMANCE	(in millions, except location amounts)
	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	28,743	$	27,357	$	83,250	$	80,734
Gross profit	6,093		5,275		17,434		16,816
Selling, general and administrative expenses	4,971		4,990		14,695		14,595
Equity earnings (loss) in AmerisourceBergen	97		243		(1,196)		284
Operating income	1,219		528		1,543		2,505
Adjusted operating income (Non-GAAP measure)1	1,471		979		3,789		3,704
Number of prescriptions2	214.1		196.9		613.9		623.2
30-day equivalent prescriptions2,3	312.1		287.0		898.1		877.7
Number of locations at period end	8,992		9,095		8,992		9,095


¹ WBA Q3 2021 Form 10-Q			~~See “--Non-GAAP Measures” below for a reconciliation to the most directly comparable GAAP measure and related disclosures.~~


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.


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


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