Walgreens Boots Alliance, Inc.

and Subsidiaries
Consolidated Statement of Earnings
For the Year Ended August 31, 2018
(Dollars in millions)

Capitalize Stmt of Op (Adjusted)

2018 Lease Reclass 2018
Sales 131,537 131,537
Cost of sales 100,745 100,745
Gross profit 30,792 0 0 30,792
Selling, general and administrative expenses 24,569 (1,039) 23,530
Equity earnings in AmerisourceBergen 191 191
Operating income 6,414 0 1,039 7,453
Other income (expense) 177 177
Earnings before interest and income tax provision 6,591 0 1,039 7,630
Interest expense, net 616 1,039 1,655
Earnings before income tax provision 5,975 0 0 5,975
Income tax provision 998 998
Post tax earnings from other equity method investments 54 54
Net earnings 5,031 0 0 5,031
Net earnings attributable to noncontrolling interests 7 7

Net earnings attributable to Walgreens Boots Alliance 5,024 0 0 5,024

Walgreens Boots Alliance, Inc. and Subsidiaries
Consolidated Balance Sheets
August 31, 2018
(Dollars in millions)
Capitalize Stmt of Op (Adjusted)
2018 Lease Reclass 2018
Assets
Current assets:
Cash and cash equivalents 785 785
Accounts receivable, net 6,573 6,573
Inventories 9,565 9,565
Other current assets 923 923
Total current assets 17,846 0 0 17,846
Non-current assets:
Property, plant and equipment, net 13,911 25,976 39,887
Goodwill 16,914 16,914
Intangible assets, net 11,783 11,783
Equity method investments (see note 5) 6,610 6,610
Other non-current assets 1,060 1,060
Total non-current assets 50,278 25,976 0 76,254

Total assets 68,124 25,976 0 94,100

Liabilities and equity

Current liabilities:
Short-term debt 1,966 2,489 4,455
Trade accounts payable (see note 17) 13,566 13,566
Accrued expenses and other liabilities 5,862 5,862
Income taxes 273 273
Total current liabilities 21,667 2,489 0 24,156
Non-current liabilities:
Long-term debt 12,431 23,487 35,918
Deferred income taxes 1,815 1,815
Other non-current liabilities 5,522 5,522
Total non-current liabilities 19,768 23,487 0 43,255
Equity:
Common stock 12 12
Paid-in capital 10,493 10,493
Retained earnings 33,551 0 33,551
Accumulated other comprehensive loss (3,002) (3,002)
Treasury stock, at cost (15,047) (15,047)
Total Walgreens Boots Alliance, Inc. shareholders’ equity 26,007 0 0 26,007
Noncontrolling interests 682 682
Total equity 26,689 0 0 26,689

Total liabilities and equity 68,124 25,976 0 94,100

Note 4 (page 77 of the pdf) Present Lease Lease
Year Payment Value Interest Obligation Balance
2018 25,976
2019 1 3,528 3,392 1,039 2,489 23,487
2020 2 3,304 3,055 939 2,365 21,122
2021 3 3,028 2,692 845 2,183 18,939
2022 4 2,762 2,361 758 2,004 16,935
2023 5 2,522 2,073 677 1,845 15,090
2024 6 2,522 1,993 604 1,918 13,172
2025 7 2,522 1,917 527 1,995 11,177
2026 8 2,522 1,843 447 2,075 9,102
2027 9 2,522 1,772 364 2,158 6,944
2028 10 2,522 1,704 278 2,244 4,699
2029 11 2,522 1,638 188 2,334 2,365
2030 12 2,460 1,537 95 2,365 0
32,736 25,976

Discount rate 4.00%

Effective income tax rate 16.7%

Note 7 (page 82 of the pdf)) Op Leases Total

Five years of debt 2019 1,969 2,489 4,458
maturities: 2020 1,277 2,365 3,642
2021 519 2,183 2,702
2022 1,250 2,004 3,254
2023 1,200 1,845 3,045
6,215 10,886 17,101

Balance Sheet Adjustment DR CR

Property, plant and equipment, net 25,976
Short-term debt 2,489
Long-term debt 23,487

Statement of Earnings Reclass

Depreciation Expense (difference between payment and int expense) 2,489
Interest Expense 1,039
Operating Lease Expense 3,528
Additional Information 2018 Adjustment Adj 2018

Cash flow from operations 8,265 2,489 10,754

Capital expenditures (from Stmt of Cash Flows) 5,505 5,505

Dividends 1,739 1,739

Dividend payout rate 34.6% 34.6%

Current portion of financing debt 1,966 2,489 4,455
Effective tax rate 16.7% 0
NOPAT (see below) 5,486 866 6,352
Purchases (End inv + COGS - beg inv) 100,745 100,745
Current portion of financing debt + dividends 3,705 2,489 6,194

Net Operating Assets

Total assets 68,124 25,976 94,100
Less:
Trade accounts payable (13,566) (13,566)
Accrued expenses and other liabilities (as adjusted) (5,834) (5,834)
Income taxes (273) (273)
Deferred income taxes (1,815) (1,815)
Other non-current liabilities (as adjusted) (5,025) (5,025)
Net operating assets 41,611 67,587

NOPAT Calculation
Sales 131,537
Cost of sales 100,745
Gross profit 30,792
Selling, general and administrative expenses 24,569
Equity earnings in AmerisourceBergen (operating - see page 6 of the pdf) 191
Operating income 6,414
Effective tax rate (taken from a prior project) 15.2%
Tax on operating profit 975
Net operating profit after tax before equity method investments 5,439
Post tax earnings from equity investments (operating per Note 5) 54
Net operating profit after tax including noncontrolling interests 5,493
Net earnings attribuatable to noncontrolling interests* 7
Net operating profit after tax 5,486
RATIOS 2018 % Change Adj 2018
Profitability

Asset turnover Sales 131,537 131,537

Average Net Operating Assets 41,611 67,587

3.16 -38.4% 1.95

Net operating profit (Sales - Operating Exp) *

after tax (NOPAT) (1 - (tax exp / Pretax Profit)) 5,486 6,352
margin Sales 131,537 131,537

4.17% 15.8% 4.83%

Return on Net Operating Asset Turnover *

Assets NOPAT Margin 13.18% -28.7% 9.40%

Common Earnings Ratio Net Income –

Preferred Dividends 5,024 5,024
NOPAT 5,486 6,352

0.92 -13.6% 0.79

Capital Structure Average Net Operating Assets 41,611 67,587

Leverage Average Common Equity 26,007 26,007

1.60 62.4% 2.60

Return on Common Return on Net Operating Assets *

Equity (ROCE) Common Earnings Ratio * 19.32% 0.0% 19.32%
Capital Structure Leverage

Sustainable Growth ROCE x (1- dividend payout rate) 12.63% 0.0% 12.63%
Rate (Note: Div payout rate is
proportion of earnings distributed)
Operating Cycle

Accounts Receivable Average A/R, Net * 365 2,399,145 2,399,145

Turnover (days) Sales 131,537 131,537

18.2 0.0% 18.2

Inventory Turnover Average Inventory * 365 3,491,225 3,491,225

(days) Cost of Goods Sold 100,745 100,745

34.7 0.0% 34.7

Gross Operating AR Turnover + Inv Turnover 52.9 0.0% 52.9

Cycle

Accounts Payable Average A/P * 365 4,951,590 4,951,590

Turnover Purchases 100,745 100,745
(End inv + COGS - Beg inv)
49.1 0.0% 49.1

Deferred Revenue Average Deferred Revenues * 365 N/A N/A

Turnover Revenues *

Net Operating Cycle Gross Operating Cycle -

Accounts Payable Turnover - 4.9 0.0% 4.9
Deferred Revenue Turnover
Liquidity and Solvency

Ability of Cash Flow Cash Flow from Operations 8,265 10,754

from Operations to Current Portion of Financing 3,705 6,194
Cover Current Debt Debt + Dividends
and Dividends 2.23 -22.2% 1.74

Free Cash Flow Cash Flow from Operations -

Capital Expenditures 2,760 90.2% 5,249

Current Ratio Current Assets 17,846 17,846

Current Liabilities 21,667 24,156

0.82 -10.3% 0.74

Quick Ratio Current Monetary Assets 7,358 7,358

Current Monetary Liabilities 21,667 24,156

0.34 -10.3% 0.30

Total Debt to Equity Total Liabilities 41,435 67,411

Shareholder's Equity 26,007 26,007

1.59 62.7% 2.59

Financing Debt to Financing Liabilities 14,397 40,373

Equity Shareholder's Equity 26,007 26,007

0.55 180.4% 1.55

Long Term Ability of Five Years of Financing Debt

Cash Flow from Maturities + Five Years of
Operations to Cover Dividends (cur div paid * 5) 14,910 25,796
Debt and Dividends Cash Flow from Operations 8,265 10,754

1.80 33.0% 2.40