Walgreens Boots Alliance Inc Annual Shareholders Meeting on January 30, 2020 / 1:30PM

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EVENT DATE/TIME: JANUARY 30, 2020 / 1:30PM GMT

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CORPORATE PARTICIPANTS Alexander W. Gourlay Walgreens Boots Alliance, Inc. - Co-COO Charles V. Greener Walgreens Boots Alliance, Inc. - SVP of global communications & corporate affairs James A. Skinner Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Joseph B. Amsbary Walgreens Boots Alliance, Inc. - VP & Corporate Secretary Kathleen Wilson-Thompson Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Marco Patrick Anthony Pagni Walgreens Boots Alliance, Inc. - Executive VP, Global Chief Administrative Officer & General Counsel Stefano Pessina Walgreens Boots Alliance, Inc. - Executive Vice Chairman & CEO

CONFERENCE CALL PARTICIPANTS Jim White Tom McCaney Allen Mayne;RWDSU International Union;Director of Collective Bargaining Bill Summers James Patterson Michael Pasquaretta;Local 338;Director of Collective Bargaining Nora M. Nash Ralph Gonzalez Scott Shepard Tony Pacino

PRESENTATION Operator Certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on current market, competitive and regulatory expectations that involve risk and uncertainties which may cause the actual results to vary materially. Except to the extent required by the law, we undertake no obligation to update publicly any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions or otherwise. Please see Walgreens Boots Alliance's latest annual report on Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission for a discussion of risk factors as they relate to forward-looking statements.

Today's presentation may include certain non-GAAP financial measures, and we refer you to the materials available on our Investor Relations website for reconciliations to the most directly comparable U.S. GAAP financial measures and related information.

(presentation)

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Good morning, everyone. It's 8:30 a.m. on January 30, 2020. Let me welcome you to the Annual Meeting of Stockholders of Walgreens Boots Alliance. On behalf of the Board of Directors and the entire Walgreens Boots Alliance family, thank you for joining us here in Delaware today and for your

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Here with me today on stage are Executive Vice Chairman and Chief Executive Officer, Stefano Pessina; and Vice President and Corporate Secretary, Jake Amsbary. Representatives of Deloitte & Touche LLP are also present and available to answer appropriate questions that you may have of them as auditors of the company's fiscal 2019 financial statements.

Each of you have received a copy of the agenda and the rules of conduct. The meeting will be conducted in accordance with that agenda and those rules. As stated in the rules of conduct, we ask that you do not address the meeting until recognized, and we ask you to restrict your remarks to the item of the agenda that is before us. If you have a question that is not specific to the item on the agenda that's before us, please hold your question until the Q&A period after the business of the meeting is concluded. If you have not received a copy, please raise your hand and a copy will be brought to you.

Everybody have the agenda, the rules. Very good. Thank you.

Now let me begin by offering my heartfelt thanks to each of you, our stockholders, for making it possible for us to help millions of customers and patients lead healthier and happier lives as one of the world's largest health care companies and a global leader in retail, wholesale pharmacy. We are proud to be a force for good in the many communities where we live and work. We're also appreciative that our efforts are being recognized, including our ranking as #13 on Fortune magazine's Change the World list, and that Boots in the U.K. was selected as a responsible business by the business in the community organization, which was founded by none other than Prince Charles.

Our strategy for corporate social responsibility focuses 4 main pillars, which support healthy communities, a healthy planet, an inclusive workplace and a sustainable workplace. This work addresses many critical issues such as fighting disease, decreasing drug addiction, alleviating childhood poverty and providing lifesaving immunizations to remote areas of the globe. Our work also helps address pollution and unnecessary consumption of valuable resources. A few of our recent CSR milestones include providing more than 50 million vaccines to vulnerable populations in some of the poorest countries in the world, reaching more than 200 million women and children in underserved communities with vitamins and minerals and raising more than $100 million of program to provide vital health services to children in need.

At the same time, as you know, the industries in which we operate continue to face unprecedented pressure and change. The market around us is rapidly changing. New and existing players are disrupting the market, customer and patient needs are constantly evolving. And since we met last year, we've been accelerating our transformation to respond to all of these challenges. Our transformation centers on the inherent strengths of our business, while meeting the demand for effective, efficient and convenient ways to help people manage their health. It's based on our leading position as a community pharmacy at the heart of the growing health care sector and the unique benefits and resources that come from our size and scale.

We made considerable progress this past fiscal year against all 4 of our core strategic priorities, accelerating the digitalization of our company, transforming our restructuring and restructuring our retail offering, creating neighborhood health destinations around a more modern pharmacy and accelerating and increasing our transformational cost management program. We also made progress on a number of strategic partnerships, both established and new, enhancing our offerings, identifying efficiencies in order to grow our business. Our Executive Vice Chairman and CEO, Stefano Pessina will tell you more about this progress later after the conclusion of the business portion of today's meeting.

With that, I will now call the meeting to order. Mr. Amsbary will report on the giving of notice for the meeting and the presence of a quorum. Jake?

Joseph B. Amsbary - Walgreens Boots Alliance, Inc. - VP & Corporate Secretary Thank you, Mr. Chairman, and welcome, everybody. Today's meeting was called by the Board of Directors. Proxy materials were mailed on or about December 10, 2019, and I have a complete list of record of the company's common stock at the close of business on December 2, 2019. The list was prepared and certified by the company's transfer agent and is available for inspection. A tabulation of the proxies received from stockholders

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, Jake. A copy of the affidavit will be filed with the records of this meeting. The polls are now open. The proposals to be considered today are listed on the agenda and in the proxy materials previously distributed. I keep losing this panel over here. I don't know why. Thank you for your help. So if you notice, I'm not just talking to you, I just can't. Here we go. If you have already submitted your proxy, your shares will be voted accordingly. If you have previously voted by proxy, please do not fill out a ballot unless you wish to change your proxy vote. If there is any shareholder present who has not yet voted and wishes to do so or wishes to change your proxy vote, please hold up your hand and we will distribute a ballot. Anybody need a ballot? Very good.

The first matter before us is the election of directors for which there are 10 nominees. I am pleased to introduce each of the following nominees for election and would ask each director to stand as I introduce him or her.

First, Joe Almeda has been a Director since 2017 and is the Chairman and CEO of Baxter International.

Jan Babiak has been a Director since 2012 is a former managing partner at Ernst & Young.

Dr. David J. Brailer has been a Director since 2010 and is the Chairman of Health Evolution Partners.

William C. Foote serves as our eighth Independent Director and has served on the board since 1997. He is the former Chairman and CEO of USG Corporation.

Ginger L. Graham has been a Director since 2010 and is the former President and CEO of Amylin Pharmaceuticals.

John A. Letter has been a Director since 2015. And is a senior adviser to Sagamore Partners and the Executive Chairman of Staples.

Dominic P. Murphy has been a Director since 2012 and is co-Head of U.K. investment to CVC Capital Partners.

And of course, Stefano Pessina, who I introduced earlier, has been a Director since 2012, is the current CEO of Walgreens Boots Alliance.

Nancy M. Schlichting has been a Director since 2006 as the former CEO of Henry Ford Health Systems.

And finally, myself, I'm the former Vice Chairman and CEO of McDonald's. I've served on the Board since 2005 and as Executive Chairman since 2015.

Our bylaws require that stockholders provide advance notice of their intent to nominate anyone as a Director. We have not received any such notices, so I declare the nominations for directors closed.

Our Board unanimously recommends a vote for each of the Director nominees. The second item of the business is a ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2020. Our Board unanimously recommends a vote for this proposal. The third item of business is to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the proxy statement. Also known as say-on-pay. Our Board unanimously recommends a vote for this proposal.

The final 2 items are stockholder proposals. First stockholder proposal was submitted by Mr. Kenneth Steiner. Mr. Jesse Alba will present this proposal on behalf of the proponent. Jesse, please, 2 minutes to make your statement. Thank you.

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Unidentified Participant Thank you, and good morning.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Good morning.

Unidentified Participant Proposal 4, Independent Board Chairman sponsored by Kenneth Steiner of Great Neck, New York. Shareholders request the Board of Directors to adopt as policy and amend our governing documents as necessary to require that the Chairman of the Board of Directors be an independent member of the board, whenever possible. The Board would have the discretion to phase in this policy for the 2021 Annual Meeting or for the next Chief Executive Officer transition. Caterpillar is an example of a company changing course and naming an independent Board Chairman soon after opposing a shareholder proposal asking it to do so. Boeing also changed course and named an independent Board Chairman. Now is an ideal time to transition to an Independent Board Chairman. The stock price dropped $15 in a year, plus the lead Director, William Foote, had more than 22 years long tenure at Walgreens. Long tenure can impair the independence of a Director and Mr. Foote received the highest number of against votes at the 2019 annual meeting. Mr. Foote against votes were 4x higher than each of several other directors. Plus Mr. Foote had added influence on Walgreens by chairing the Nomination Committee and having a seat on the Executive Pay Committee. Please vote yes, Independent Board Chairman, proposal 4.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, Jesse. Our Board of Directors has unanimously recommended that our stockholders vote against this proposal for the reasons described in our proxy statement. As disclosed in the supplemental proxy materials we filed with the SEC on January 3, 2020, the International Brotherhood of Teamsters General Fund has withdrawn its proposal, which was listed as proposal 5 in our proxy statement from the consideration at this meeting, and this proposal will not be presented or voted. The final stockholder proposal was submitted by Mr. John Chevedden, a friend of Mr. Steiner's, and I suppose Mr. Alba's. Mr. Alba will also present this proposal on behalf of the proponent, please again, Jesse, 2 minutes.

Unidentified Participant Thank you. Proposal 5, special shareholder meeting enhancement sponsored by John Chevedden of Redondo Beach, California. Share owners ask the Board of Directors to take the steps necessary to amend the appropriate company-governing documents to give the owners of a combined 10% of the outstanding common stock, the power to call a special share owner meeting. Special meetings allow shareholders to vote on important matters such as electing new directors that can arise between annual meetings. This proposal topic won more than 70% support at Edwards Lifesciences and Sunedison in 2013. This proposal topic, sponsored by William Steiner also won 78% support at a Sprint annual meeting with 1.7 billion yes votes. This 78% support might have been even higher if more shareholders had access to independent proxy voting advice. Shareholders need to have the power to play a greater role in Walgreens due to the dismal performance of the Walgreens stock price. Walgreens stock has fallen from $84 in November 2018. An April 2019 article in Crain's Chicago Business said that Walgreens U.S. business is under siege with worse results than even pessimistic investors had imagined. Walgreens CEO, Stefano Pessina, called it "the most difficult quarter we have had since the formation of Walgreens Boots Alliance." Walgreens stock was down 13% in one afternoon. Walgreens is also one of the store chains named in what will be a major trial regarding the corporate complicity in the opioid epidemic. Plaintiffs are seeking billions of dollars in restitution. A 10% stock ownership threshold is important because the current 20% stock ownership threshold for shareholders to call a special meeting may be unreachable due to time constraints and the detailed technical requirements, that can trip up half of shareholders who want a special shareholder meeting. Thus, the 20% stock ownership threshold to call a special meeting can be a 40% stock ownership threshold to call a special meeting for all practical purposes. Please vote yes, a special shareholder meeting enhancement, proposal 5. Thank you.

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, Mr. Alba. Our Board of Directors has unanimously recommended that our stockholders vote cancers proposal for the reasons described in our proxy statement. If there any discussion of the 5 proposals under consideration. If you have questions regarding this matter, please ask them now. Thank you. If there are no further questions or comments regarding the proposal, that concludes the presentation of the formal agenda items for the meeting, and you must be a record owner of stock to vote at this meeting. If you hold your stock through a bank or broker, you cannot vote at this meeting unless you have a valid proxy from such bank or broker.

Now let me pause for a moment so that any remaining ballots can be collected. I don't think we have any outstanding ballots, do we? No. So thank you, ladies and gentlemen, the business portion of the meeting, the polls are now closed. I would like Mr. Amsbary to announce the preliminary voting results.

Joseph B. Amsbary - Walgreens Boots Alliance, Inc. - VP & Corporate Secretary Thank you, Jim. I'm pleased to report the preliminary results of the voting. With respect to nominees for Director, all director nominees have been duly elected. The ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm has been approved, and the advisory vote on named executive compensation has been approved. Neither of the stockholder proposals passed. I remind you that these are preliminary results and that the final results will be available after the votes have been certified by our Inspector of Election. Those final results will be publicly disclosed on a Form 8-K that will be filed with the SEC.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, Jake. Congratulations to each of our Directors. Please all stand in group, once again, so you can be recognized, and thank you for your service. I will now ask for a motion of adjournment, so that we can proceed to the remarks from management.

Unidentified Participant Mr. Chairman, I move this meeting to be adjourned.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you. Is there a second?

Unidentified Participant I second the motion.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you. The meeting stands adjourned. Let me now continue by introducing our Executive Vice Chairman and CEO, Stefano Pessina, who will share a summary of our key advancements and progress on our strategic priorities as well as more about the coming year and future. Stefano?

Stefano Pessina - Walgreens Boots Alliance, Inc. - Executive Vice Chairman & CEO Thank you, Jim, and hello, everyone. The fiscal year ended August 31, 2019 was a difficult year for our company. After last year's shareholder meeting, we experienced a very poor quarterly performance in the second quarter of the fiscal year. There was nothing entirely new in what we saw impacting our business at that time. Let's say, a number of the trends that we had been expecting and preparing for impacted us significantly more quickly

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Sales increased 4.1% to $136.9 billion, up 5.8% on a constant currency basis. With adjusted operating income decreasing 9.6% to $6.9 billion, down 8.6% on a constant currency basis. Adjusted earning per share decreased 0.5% to $5.99, up 0.5% on a constant currency basis. At the same time, we continue to deliver a strong cash flow, enabling us to invest for future growth, while meeting the financial needs of the day-to-day operations of our businesses. To recover from a very difficult industry shift has not been an easy task for us. And there has been a lot of our work done by our team to deliver this fiscal year results. Earlier this month, we released the results for the first quarter of the current fiscal year, with continued sales growth and the early indication that the swift transformational actions that we are taking are helping to position the company to return to growth over the longer term. Additionally, we delivered very strong cash flow to start the year. And to position our company for the future, we continue to make progress against our 4 strategic priorities: accelerating the digitalization of our company in terms of the way we use technology to help us run our businesses more efficiently and effectively. And more importantly, to enhance and transform the products and services we offer our patients and customers. And in the way we deliver those services. Transforming and restructuring our retail offering, making sure we provide our customers what they want in the way they want. And using the strength of our extraordinary local presence as an asset to support and reach a modern multichannel tailored and far more focused, responsive and interactive retail experience. And creating within our stores, a network of health care destinations around the more modern pharmacy, backed by our digital investments, providing both services and support. This will enhance our role as a core provider of health care to the communities we serve and a highly effective and efficient results for patients and payers alike. And of course, to support all of these and to deliver the changes we need to structure our company in a market that constantly demands evermore responsiveness and efficiency. We are delivering on our transformational cost management program. It is important to make that point. This is about transformation for us, both driving our cost and reinvesting in the business to help fund the investments we need to make to deliver our strategic priorities. This program is truly about saving to invest for growth.

Our teams have worked hard on the development of these strategies. And are working just as hard on their delivery. We have also identified an excellent group of partners that bring us skills, experience and resources to deliver our goal better, more effectively and more efficiently than we could do alone. We remain very pleased about our strategic partnership with Kroger. We have expanded the store pilot to new test location in Knoxville, Tennessee. The pilot will see the Kroger Express concept to be available in 50 Walgreens stores and our own health and beauty brands will be available to customers in 17 Kroger stores. Hence, we have developed -- deploying this pilot store locations. We are also building on our excellent relationship with Kroger to develop additional areas of collaboration. And have recently formed a group purchasing organization with them, which aims to optimize buying of own vendor retail products for the U.S. market. We are extending our nationwide offering with FedEx. A new customer return system was introduced to Walgreens stores before the holiday season. Giving customers an easier returning service for unwanted goods for Walgreens and other selected retailers. We continue to look for a solution for the last mile. Building on our presence in the community. We have announced a first of a kind partnership with Wing to test on demand home delivery. Joining up with our previously announced trial with FedEx for outbound delivery. We continue to make progress on health and beauty. We have seen a strong progress in the U.S. with #7 skincare. And we are expanding the distribution on #7 skincare in Walgreens. And we launched a stand-alone #7 with Westside, #7beauty.com, alongside a national U.S. TV campaign. We made significant steps during the year to develop our primary care business. Our model is based around physicians and clinical pharmacists and have -- all have planned for primary care location in 4 markets across the U.S., working in partnership with partners in primary care, VillageMD and south test -- Southwest Medical and Optum Company. While we continue to refine this offering, we are confident that there is the real potential to have a strong primary care offering become a significant proportion of our U.S. network. We also have been developing a new wellness partnership in our stores. And have entered an agreement with Jenny Craig, the health and weight loss management company to open centers in around 100 Walgreens location.

We have been reviewing our new sub practitioner clinic model. And we have taken the decision to exit our wholly owned loss-making clinics. But we will continue to work with our local health system partner while running successful clinics in 217 Walgreens locations operated by a network of 15 partners. Our collaboration with LabCorp is well on track. As we work to open at least 600 LabCorp patient centers across the U.S., providing diagnostic lab testing in the community. We have expanded our reach in specialties, making an equity investment in specialty provider field health solution. We are an important partner for payers anchored by our national network of local community pharmacies. We continue to drive better

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©2020 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JANUARY 30, 2020 / 1:30PM, WBA - Walgreens Boots Alliance Inc Annual Shareholders Meeting clinical outcomes to patient medication adherence programs such as Save a Trip Refills, which already has 3 million patients signed up as we aim to lower the cost of care. We also have a strategic partnership with Centene, a leading Medicaid insurer to RxAdvance, the cloud-based pharmacy benefit manager. And we have entered a multiyear Medicare agreement with United Healthcare, including a new co-branded Medicare Advantage plan with Walgreens being the only preferred retail pharmacy. In our sales division, Alliance health care, we have entered a joint venture with McKesson to bring together our wholesale businesses in Germany, giving us scale and efficiencies neither of us could achieve on our own in that market. Our partnership with Microsoft is central to driving our technology strategy. And the cloud migration program is on plan and our fine care platform available on walgreens.com to include the new strategic partners and offerings. It is now 32 health care providers offering over 46 services. Further, the modernizing and upgrading our core operational systems is progressing well. Work on both our foundational pharmacy systems and the implementation of SAP in the U.S. to announce our retail operations is well underway. As you can see, we are transforming not just our businesses, but our business model to deliver future growth. And looking forward, we see a clear line to sustainable, profitable growth in future years, driven by the work we are doing and the investments that we are making. The key element of funding these investments while continuing our growth is our transformational cost management program, under which we are now targeting in excess of $1.8 billion in annual cost savings by fiscal 2022. In the current fiscal year, we will naturally continue to work on optimizing our corporate efficiency and deployment of our capital. We anticipate continuing our share repurchase term and plan full year share repurchases of $1.75 billion, as a continuation of a $10 billion share repurchase program we announced in 2018. Further, this year, we expect to invest $800 million to $850 million in digitalization and development investments, an increase of $250 million to $300 million over the prior year. It is a testament to the financial end of our company that we have been able to make all of these progress and invest so much for the future, and still have raised the dividend for 44 consecutive years. And it is a testament to the dedication and hard work of our people across the world that we continue to offer the excellent service to our customers that have allowed us to deliver these results over so many years.

I would like to take this opportunity on behalf of the Board to thank them all for another year of extremely hard work.

In summary, as I have highlighted, we are investing strategically to modernize and transform our capabilities to drive future growth. I want to assure you that, as I said prior, I strongly believe in an expanded role for pharmacy and in our company's ability to play a significant part in shaping how health care is delivered in the community going forward. I remain convinced that we have in our company and through our partnerships an extraordinary foundation on which to build. The work currently underway on innovation and transformation across all our businesses will mean we can and will continue to deliver real value for our customers and you, our owners, for many years to come. Thank you.

I will now hand back to the Chairman.

QUESTIONS AND ANSWERS James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Okay. Thank you, Stefano. That's a lot of work in 1 year. Isn't it? And into the future.

We will now open the floor to your questions, and I'd ask that you please make your way to one of the microphones. And thank you kindly for identifying yourself before asking your question, please refer to the rules of conduct included in today's agenda question-and-answer session. In consideration of other stockholders who would like the opportunity to speak, please limit your remarks to no more than 2 questions, each of which must be no more than 2 minutes in length. Now the rules talk about the fact that we really don't want to spend our time on repetitive issues. So I'm saying this to those people who are queued up to say the same thing. Please try to pick a spokesman for your group, if you can to relay your message or your question, we'll answer it the best we can. In other words, I don't want to spend the whole morning on the same topic. There are other people here with respect to them that would like to ask a question that I think we would like to answer. Actually, I promised Tom McCaney, sir, you're #1 that he could be first this morning. He didn't travel this far this time, only from Philadelphia, but he's been at every meeting and we've talked in advance of the meeting, and I promised that he could be #1. We will rotate from 1 to 2. Tom, good morning.

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Tom McCaney Thank you, Mr. Chairman. My name is Tom McCaney. I represent the sisters of St. Francis of Philadelphia. For several years, a group of investors from the interfaith center on corporate responsibility have engaged with Walgreens representatives on the apparent inconsistency of a health care retailer selling tobacco products. We have held numerous conference calls with company representatives, of which we are grateful. We've written letters, spoke at annual shareholder meetings and attempted to file shareholder resolutions with the purpose of better understanding the true rationale behind your decisions. We reject the notion put forth by Walgreens representatives that you are somehow in a better position to help people quit smoking by selling the very products you claim to abhor. As everyone knows, quitting smoking is difficult and often requires multiple attempts. It is a life-changing decision that requires dedication, patience and fortitude. It's definitely not an impulse and offering a coupon to preferred customers on their birthday to save a little money on a cessation product is an insult to the gravity of this addiction. Meanwhile, CVS Health -- noticed they added the word health to their brand when they stopped selling tobacco, conducted 2 studies during the time frame they stopped the tobacco sales at their stores that found that overall smoking rates were reduced in areas where CVS presence -- with a CVS presence after that company stopped stocking tobacco. What they found was that their decision not only affected CVS customers, but it had a public health impact. My question is, has Walgreens Chief Medical Officer, Dr. Ban or another employee or possibly 1 of the 4 board members with backgrounds in the health field, ever reached out to Dr. Troyen Brennan, Chief Medical Officer of CVS or one of the other officers of the studies to learn more about their methods and the results. If you have not, should we question the company's claims that you are truly interested in helping people quit or do we chalk this up to the greed of profiting from both the disease and the cure? Thank you.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, Tom. Thank you for your question and your comment. First, let me just say, we've communicated this before, but our system and our footprint in the store is a bifurcated system. What do I mean by that? Pharmacy in the back end selling over-the-counter pharmacy products as well as a pharmacy itself through prescription drugs. The front of the store is a convenience store. Not every consumer or customers are patients, not every patient's a customer. Some people treat the convenience store as exactly that -- a convenience store where they stop in and buy what they want to buy when they want it, and they choose, in this particular case, to buy tobacco. And we respect that choice. We're not condoning smoking. We're not supporting smoking. We're not advertising for smoking. And we've reduced the footprint. We've done a lot of number of things to reduce the impact of the smoking and the tobacco. Tobacco sales are down 13% again this year on 13% a year ago. And we're doing a lot of things to, as we say, help people stop smoking if they're willing to stop smoking. And that's the way we treat it. This is the way we respect the choice and that we provide what people want to buy when they want to buy it, including other items that are in the convenience store that I would argue that most health oriented people would say that we shouldn't be selling either. But that's the way life is in terms of the overall convenience environment. And so Alex, do you want to talk any more -- or Richard, what we're doing on the mitigation of the smoking?

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO Thanks, Jim. Thanks, Tom, again, for the question. I think as we continue with the same position, as Jim has explained, we also continue to de-emphasize tobacco in our stores. Jim has said already, 13% decrease in sales in our first fiscal 2020 -- quarter 1. We've also made, I think, some significant decisions along the way last year. For example, we have stopped selling e-cigarettes and vaping products in our stores. That was a significant decision we made with the Board as one of the ones we made this year. Also importantly, we've announced that we will card everyone who is buying tobacco products in our stores and no matter what age you are to ensure that we sell products only to 21-year-old and above. And importantly, we've stated that ahead of the state's and the federal regulation. We think these are 2 significant steps we've made going forward. We continue to sell more smoking cessation products than any other retailer in our channel in America. We continue to be very proud of the work of our pharmacists, our pharmacy technicians who are fully trained on these products. And we continue also to provide a lot of aids within pharmacies and online to make sure people have the support when and how they want it, when they make the decision to stop smoking. I think the suggestion that our CMO works more closely with other CMOs in the industry to understand the effects of tobacco was a good one, Tom, and we'll pick that up. Then so far, we continue to work hard on this issue, and we are making progress, which we're pleased to do.

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Right. That would include validating the CVS survey that -- which is self conducted survey by CVS, which we don't know about validation, which we certainly could have Ken communicate with their Chief Medical Officer in discussions about this over time. So thank you very much for your comments. #2?

Michael Pasquaretta;Local 338;Director of Collective Bargaining Good morning. My name is Michael Pasquaretta. I'm the Director of Collective Bargaining Local 338 in New York. And I'd like to bring to the shareholders and to the Board, something of concern. Over the last 3 years, there has been a disappearance of approximately 100 of the Duane Reade stores in New York City. Duane Reade is an iconic New York name. Many New Yorkers in the company go there. Since our most recent negotiations, we were told that the company was committed to keeping this iconic Duane Reade brand. But since August, okay, we've had 13 store closures, and we were just notified of another 8 that will be closed in March. My question is, is the board prepared for a large outcry from New Yorkers as more Duane Reade stores close, especially in the progressive city like New York, where people tend to shop their values.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Well, thank you very much for your question. We are actually changing the profile of our stores around the world with closings in terms of -- and we do this every year. Can someone speak to the Duane Reade process and where we are with this?

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO Thanks, Jim. Yes, Alex again, and thank you for the question, sir. Again, we have, as you know, integrated Rite Aid stores into the whole -- the Walgreens network, including in New York City and Manhattan, where we have many Duane Reades. And as a result of that, we've closed a number of Rite Aid stores and closes some Walgreens and Duane Reades, including the 200 we announced as part of the cost program some time ago. We have increased the number of pharmas across America. And we continue to be very, very committed to New York City and Manhattan and to the Duane Reade brand. What we're doing is consolidating some of the businesses we bought, particularly Rite Aid, and we continue to review the situation going forward. As we said already, we're working hard to make sure that the inflationary pressures that the business is facing means that we do not close access to health care in any city, including New York City. So this is not a situation about Duane Reade, it is a situation of how do we make sure that we can access across a network of pharmacies across the U.S.A. under the Walgreens, under Duane Reade brand as appropriate. It's not a direct impact on how we see Duane Reade.

Michael Pasquaretta;Local 338;Director of Collective Bargaining Is there a commitment from the company to maintain this brand and expand on it because as Duane Reades are closing more Walgreens stores are opening.

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO 100%, absolutely. We're committed to Duane Reade brand in New York, sir.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you, sir. Number one.

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Allen Mayne;RWDSU International Union;Director of Collective Bargaining Yes. My name is Allen Mayne, and I'm actually the director of the collective bargaining for the entire retail wholesale department store Union. And I'm here to talk about the West Virginia market. So I have a question about...

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board One of my old markets at McDonald's, interesting, West Virginia.

Allen Mayne;RWDSU International Union;Director of Collective Bargaining Yes. Thank you, West Virginia. So in the last round of negotiations for the West Virginia Walgreens stores in 2018, the company had insisted that because of market conditions and uncertainty in West Virginia market that they needed some very low entry-level rates for the clerks and for the pharmacy techs. But as part of the negotiation, the company's made a commitment, and the contract was constructed to allow the companies to do a mid-contract review. In other words, they wanted to do a full review of the market and see where they need to be based on market conditions. Okay? So this market review was actually done in the West Virginia market. But the problem is the wage increases and the adjustments were made only to nonunion stores.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Non what?

Allen Mayne;RWDSU International Union;Director of Collective Bargaining Nonunion stores. So the union stores were denied these market increases, even though the contract was specifically written to allow the company the flexibility to put these in place so that they maintain the employees' happiness and welfare to address the customer, right? It's -- the sense of community that you have in West Virginia, where you have your senior employees that have been in the store for many, many years, and the customers will come to the store, not because of the brand of the store. But because of that relationship, in the community, the sense of family, the sense of concerning for their relatives. And it's a very tight net community in West Virginia, right? So my question to the company is, are they prepared for the lack of morale in the stores? And then how can the company succeed with great customer service that we need to draw the customers into the store, if we have low morale and the employees feel that they've been unfairly treated.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Right. Well, thank you, Allen. We are never prepared for low morale, okay? Stacy, what's going on with this? Microphone, can you get a microphone. We only got 1 over there. Who's in charge of microphones?

Unidentified Participant Thank you. Good morning, and thank you for your question. It's my understanding that in the coming months, we will be reentering contract negotiations with the local that represents the unions in West Virginia, and that we are already prepared to address any wage discrepancies that may exist there in. We are -- as the speaker has indicated, we are never prepared for low morale and we have maintained close relationship with our store team members and with our leadership there. We do have a good relationship with your union local and with the leadership, and we're continuing to maintain the same.

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board And when is that happening?

Unidentified Participant I believe contract negotiations open up this spring, and we are already preparing for collective bargaining at this time.

Allen Mayne;RWDSU International Union;Director of Collective Bargaining I respect that contract negotiation will continue to go forward. But the problem is, when this was brought forward during the term of the contract. The problem wasn't addressed. And basically, we were told that while because we negotiated these lows rates, even though we can adjust it, we simply want to have the benefit of the deal. And we didn't want to make adjustments, even though we're entitled to. And that's our concern because we can adjust things and we're committed to fix things with you because we want Walgreens to be successful. We want them to have an excellent brand and an excellent image in that market with our members with the community. But the problem is when these things timely -- do you have contract...

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Perhaps you and Stacy can talk offline a little bit here to make sure you get connected in the right way and try to solve this problem?

Allen Mayne;RWDSU International Union;Director of Collective Bargaining Absolutely.

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO Thank you for your time today.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Number two.

Ralph Gonzalez Good morning. My name is Ralph Gonzalez. I'm the Chief Medical Officer at Saint Francis Healthcare just down the road. And not to belabor Tom's earlier point, I don't have a specific question, but rather a statement from the position of the physician regarding tobacco sales. So thank you very much for the opportunity to address the Board this morning as a local physician, health care administrator and the grandson of one of your former patients who with chronic lung disease, who ultimately succumb to the avoidable complications of tobacco abuse. I'm very passionate about the topic of tobacco sales. I won't waste this time by rehashing the obvious negative role of tobacco and the suffering and death of those in our community because, statistically speaking, every one of us in this room has likely been personally affected by tobacco abuse. Rather, I would prefer to engage the Board in dialogue regarding Walgreens position to sell tobacco products in their pharmacies. On behalf of the medical community in Trinity, we take very seriously our obligation to advocate for the health of our communities. Trinity Health as a national organization has formally committed to ensuring the health and well-being of those we serve. We realize that providing excellent acute care when needed is not enough. And thus, over the past decade, our mission and vision has evolved to capture our goal of lifelong health partnership with the people of our communities. It's from this perspective that I personally struggle with viewing Walgreens as a legitimate health care partner. Rather than merely another local retailer. As a prescriber, I like to believe that I have the ability to influence my patients' decisions regarding their choices, like which

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Very good. Thank you, Doctor. Thank you very much for your comments. We talked earlier this morning with a couple of people around this tobacco issue and the question was asked whether with all of the reduction in the space provided for tobacco and all the other kinds of things. Removal of vaping products, e-cigarettes, et cetera, and the reduction in tobacco sales, is it a pathway to ultimately get out of tobacco. It might be. Over time, keeps reducing to the point to where it is now, it will be an easy decision for us because the convenience factor wouldn't necessarily be an issue. But for a small percentage of people who choose to buy tobacco. And so it won't be today, but I think over time, we'll end up in that position. Number one.

Jim White Good morning, Mr. Skinner. My name is Jim White, shareholder, back to 2012 when we had our meeting out on Navy Pier. Thank you and the Board for great work. I see your company is supporting pride and different events relating to the homosexual employees. Do we also, given the high rate of suicide and depression in the homosexual community offer counseling for alternative lifestyles?

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Who can answer that question. Well, Kathleen Wilson-Thompson, our Chief People Officer. We've got to get this microphone thing fixed, okay?

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Good morning, and thank you for your question. Yes, we do offer complete benefits for suicide prevention. We also have EAP services for all of our team members. We have on-site clinics, and we have suicide prevention posters throughout the company, and we have a hotline that all of our team members can call as well. And I thank you for your concern.

Jim White The conversion back to heterosexuality, is that a part of the counseling as well?

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Absolutely, with complete confidentiality.

Jim White Great. Thank you very much.

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Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Thank you.

Tony Pacino Hello. My name is Tony Pacino, and I am here with Truth Initiative. As a former smoker of 10 years.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board I didn't understand that question. We offer conversion back to heterosexuality?

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer If whatever issues team members have, if they want to speak to counselors in confidentiality, they can do so.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board If someone wants to be consulted on this, but we don't have a process for conversion.

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer No. But I'm indicating we have counseling for whatever issues related to suicide prevention. That was the root of his nature. I'm not saying we advertise anything of that nature.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board All right. Thank you. Thank you very much.

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Does that clarify?

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Didn't quite understand that.

Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Okay.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Okay. Thank you.

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Kathleen Wilson-Thompson - Walgreens Boots Alliance, Inc. - Executive VP & Global Chief HR Officer Sure. Thank you.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board #2, please.

Tony Pacino Hi. My name is Tony Pacino, and I'm here on behalf of Truth Initiative. As a former smoker of 10 years, I understand how hard it can be to quit. The first time I walked into a CVS after they pulled tobacco from their shelves. I thought to myself, that's pretty cool. They have a whole wall for quitting. A couple of weeks later, I walked into a Walgreens, as I was checking out, I thought to myself, those cigarettes look good. I should buy them. So I did. My question is, you don't condone smoking or you say you don't condone smoking. But how can you help someone quit cigarettes by selling them cigarettes?

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Well, that's a good question. I answered the question earlier, relative to convenience and the choice that people make, choosing to stop spoken, it's also a personal decision. And choosing to smoke is a personal decision. We respect that decision relative to convenience in our stores, as I mentioned earlier. Number one, please?

Unidentified Participant Hi. My name is Sherona. I'm here also on behalf of Truth Initiative. We know that cigarettes is kill around 1,300 people every day. Based on your recent decision to remove e-cigarettes from your stores over your concern about saving lives, why not remove the cigarettes as well.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Well, as I said, this could be a pathway over time to take in to back a lot of the stores, but it's not going to be today. Thank you. #2, please.

James Patterson Thank you, Mr. Chairman, for such an excellent location to share in your comments. I'm James Patterson, individual investor from Washington, DC.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board All right, good.

James Patterson Does Walgreens -- do you feel that Walgreens endorsement and support of Theranos, the fraudulent blood testing outfit contributed to our poor corporate performance last year? Secondly, how many fraudulent blood tests did Walgreens allow Theranos to perform in its stores? And finally, is Walgreens contributing to the legal defense of Elizabeth Holmes, the Theranos Founder who's on trial for criminal fraud?

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board No. Who wants to answer this blood testing question. Alex?

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO Yes, I'll take it, Jim. Yes. So the answer to did it affect the performance? They didn't, sir. Not at all. Secondly, we can't comment on these matters of litigation. And thirdly, the third question, should it be the third question? So your -- the third question about contributing, absolutely not. We're not contributing to that situation. If you check, we have a case ourselves. I don't know, Marc, if you want to comment on the case that we have against Theranos.

Marco Patrick Anthony Pagni - Walgreens Boots Alliance, Inc. - Executive VP, Global Chief Administrative Officer & General Counsel We're actually trying to recover substantial amount of money from Theranos. We're in no way, shape or form assisting Elizabeth Holmes' defense or the defense of anybody in the Theranos company, sir.

James Patterson How many stores was Theranos in? How many of our stores was Theranos in?

Marco Patrick Anthony Pagni - Walgreens Boots Alliance, Inc. - Executive VP, Global Chief Administrative Officer & General Counsel About 40-ish.

James Patterson 40?

Marco Patrick Anthony Pagni - Walgreens Boots Alliance, Inc. - Executive VP, Global Chief Administrative Officer & General Counsel Yes.

James Patterson And could you explain how your decision-making when the model was presented to CV -- or to Walgreens -- that Walgreens is a healthcare destination and a health care business, how could it be suckered like this?

Marco Patrick Anthony Pagni - Walgreens Boots Alliance, Inc. - Executive VP, Global Chief Administrative Officer & General Counsel Well, I don't think Walgreens was suckered, but I'd be happy to talk to about it off-line.

James Patterson She's on trial for fraud. Has...

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James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board No, again -- so Walgreens wasn't suckered. We are very innovative company, we look for new solutions. And this is a very interesting concept and technology would tell you that this will happen in the future, but we were not suckered. We walked to the point then we realized there was a problem then we (inaudible).

James Patterson Thank you, sir.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Okay.

Alexander W. Gourlay - Walgreens Boots Alliance, Inc. - Co-COO Yes, sir.

Scott Shepard Good morning. I'm Scott Shepard with the National Center for Public Policy Research. First, I'd like to thank the company for engaging my organization regarding a shareholder proposal that we submitted concerning the Board's nominating processes. The company agreed to consider candidates with diverse viewpoints and perspectives. And in our partisan climate, I think that's a real win for Walgreens shareholders. Second, I want to follow-up with you with an exchange that your representatives had with my organization at the 2018 shareholder meeting. At that meeting, a colleague of mine pointed out, Walgreens was then contributing to organizations such as Unidos U.S., formerly La Raza and League of United Latin American citizens or Lulac, which spent significant amounts of money, lobbying for sanctuary city policies to push state and municipal jurisdictions to flout federal immigration law in favor of illegal immigrants who have committed crimes. We noted then that the evidence suggests that an overwhelming majority of Americans opposed these policies. Your response, I believe, by Community Affairs VP, Chuck Greener, was that Walgreens would review its donations with these concerns in mind. Since then concerns about illegal immigration policy have not abated while a use of sanctuary jurisdiction strategy has expanded beyond just the illegal immigration realm. With all of that in consideration has Walgreens as promised, reviewed its donations and its donation policy? If so, what was the result of that review? Does Walgreens still support organizations that lobby for cities to violate federal law in order to prevent deportation of illegal aliens who've committed crimes. If not, then please accept our congratulations and kudos on making a wise policy choice. But if so, what is the company's justification for continuing to run reputational risk in order to support violation to federal law while taking a deeply partisan and highly unpopular political stance?

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Well, thank you very much for your question. And Chuck Greener is actually here today. Chuck? This -- our donations certainly viewed on a very regular basis. We understand this issue. It was communicated in '18 and now Chuck, what's up?

Charles V. Greener - Walgreens Boots Alliance, Inc. - SVP of global communications & corporate affairs I'd be more than happy to talk. And afterwards, spend some time going through our review. I think at that meeting, I mentioned to you, our sponsorship of those 2 organizations was with respect to health fairs, specifically related to those things that reflect Walgreens and our interest. And those are the types of things we're going to continue to do. Those organizations that support our purpose to help people live healthier and better lives, we're going to continue to look for opportunities like that. We'll also go back through and review those organizations, other policies

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Scott Shepard Given the fungibility of assets, though, doesn't your contribution, create the opportunity then for a shift -- nonspecified assets to be shifted into these political activities?

Charles V. Greener - Walgreens Boots Alliance, Inc. - SVP of global communications & corporate affairs My point just a second ago, we specifically state that they cannot be used.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Maybe you guys can take this off-line or spend some time together. I have time for one more question. But I'm going to ask Sister Nora to give her an opportunity to speak. One more question, are you going to take it?

Bill Summers Well, thank you. My name is Bill Summers.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Or comment whichever.

Bill Summers I'm retired. I'm a private investor. I am in the ninth inning of my ball game, but I hope I can take it into extra innings.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Then just welcome to the club.

Bill Summers Well, thank you. My question is very simple.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board You're in the fourth quarter, we like to say.

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Bill Summers We're playing baseball not football. My question is with respect to retail pharmacy U.S.A. and the retail pharmacy international in terms of the sales and income and the growth thereof for both of those. When you're running your annual meeting in 2025 or 2030? Do you hope to see a greater percentage come from the international sector? And if so, how do you propose to implement that in the next 5 to 10 years. Being a long-term investor, I'm interested in that. I've been an investor in Walgreens for 25 or 30 years. Thank you very much.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Well, I would say, that's a very good question. I would say, in the next 5 or 10 years, I don't think you're going to see a huge change in the contribution from the international -- retail and international pharmacy and wholesale because of Walgreens contribution today, which is so huge and, more importantly, continues to grow and we know that in the structure of our business, Walgreens Boots Alliances. As I like to say, Walgreens is the big dog in the pound. And I think that the growth is going to be consistent over these number of years. It's not because international contribution is not important, it will be diminished. But I think the ratio will probably remain about the same. That would be my view. Stefano, would you like to say something about this?

Stefano Pessina - Walgreens Boots Alliance, Inc. - Executive Vice Chairman & CEO Well, I would say that in the last 2 or 3 years, we have not seen the true potential of international because many things happened, particularly in U.K., which is the second largest market for WBA. The weakness of the pound sterling, the Brexit. All these impacted very negatively in a market that normally is very active, very remunerative. So for sure, this will go too sooner or later. And we will -- the contribution of U.K. will come back quite strongly. But I would like to draw your attention on the fact that we are in many emerging markets. And emerging markets are really growing very strongly even today. And we have also a good investment in China, particularly in retail, people don't see this materiality, today, we have almost 5,000 pharmacies in China. And not in 2030, but let's say, in 2 or 3 years, probably, we will have 10,000 pharmacies in China. And we are -- we have 40% of this company. And so the contribution, which is already real today, will be very significant.

Bill Summers Thank you very much for your detailed answer.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you. Sister Nora, this is the last comment today. I'm going to let you take me to task right now as a courtesy to you.

Nora M. Nash Yes, sir. Thank you very much, Mr. Skinner. I really appreciate the opportunity to make just one final remark. I do believe that Walgreens has, to some degree, taken some steps to move out of cigarettes, but I think as a member of the interfaith center on corporate responsibility. And also as a member of the tremendous national health systems that are part of our community throughout the United States. We have begged Walgreens to take this step. And all I want to do now is to appeal to you and to the Board to stop dragging your feet and get to the chase. Walgreens is a health store and enough was said today to speak to that. We would really, really appreciate it your taking that as a prime action over the next several months. God bless you.

James A. Skinner - Walgreens Boots Alliance, Inc. - Executive Chairman of the Board Thank you. So that concludes our Q&A. Thank you for being here today, and thank you for your continued trust in Walgreens Boots Alliance. That concludes our session. Thank you.

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