Walgreens completes acquisition funding, ends fiscal Q1 with record revenue; CEO to retire

By Lisa Kerner

Charlotte, N.C., Dec. 23 – Walgreen Co. ended its first quarter of fiscal year 2015 on Nov. 30 with cash and cash equivalents of $12.9 billion and long-term debt of $13.8 billion.

This compares to $969 million and $4.5 billion, respectively, for the year-ago period, according to the company’s earnings news release.

Alliance Boots merger

During the quarter, Walgreens completed the financing for its previously announced merger with Alliance Boots GmbH. On Dec. 29, Walgreens shareholders will vote on the transaction, which is expected to close at year-end, said president and chief executive officer Greg Wasson during the company’s earnings conference call on Tuesday.

In November, company subsidiary Walgreens Boots Alliance, Inc. priced an underwritten public offering of unsecured, unsubordinated notes consisting of £400 million of 2.875% notes due 2020, £300 million of 3.6% notes due 2025 and €750 million of 2.125% notes due 2026.

Additionally in November, Walgreens Boots Alliance priced an underwritten public offering of unsecured, unsubordinated notes consisting of $750 million of floating-rate notes due 2016, $750 million of 1.75% notes due 2017, $1.25 billion of 2.7% notes due 2019, $1.25 billion of 3.3% notes due 2021, $2 billion of 3.8% notes due 2024, $500 million of 4.5% notes due 2034and $1.5 billion of 4.8% notes due 2044.

The company intends to use the net proceeds from both offerings to fund a portion of the cash consideration payable in connection with the acquisition of the 55% equity interest in Alliance Boots that Walgreens does not currently own, to refinance substantially all of Alliance Boots’ existing borrowings and/or to pay related fees and expenses, according to a pair of news releases.

Quarterly results

Chief financial officer Tim McLevish said first-quarter results were “largely in line” with expectations.

Total revenue was up 6.7% year over year to a record $19.6 billion.

Adjusted net earnings for the fiscal first quarter were up 12.4% from the prior year at $773 million, while adjusted net earnings per diluted share were up 12.5% at $0.81.

Walgreens generated $696 million of free cash flow and $1 billion of operating cash flow during the quarter, according to McLevish.

CEO to retire

Wasson is retiring from Walgreens as president and CEO after 35 years of service shortly after the after the merger with Alliance Boots is completed.

According to a Dec. 10 announcement, Walgreens chairman James Skinner will become Walgreens Boots Alliance’s executive chairman, and Stefano Pessina, executive chairman of Alliance Boots and a member of the Walgreens board of directors, will serve as its acting CEO, pending a board search for a successor.

Walgreens is a Deerfield, Ill.-based drugstore chain.

© 2015 Prospect News.
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