Walgreens 2006 Annual Report Download

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We’re Growing
with the Sanchez family
in New Mexico
2006 Annual Report

Table of contents

  • Page 1
    2006 Annual Report We're Growing with the Sanchez family in New Mexico

  • Page 2
    ... opened 476 net new stores for a total of 5,461 Walgreens in 47 states and Puerto Rico. We filled 529 million prescriptions - 15.4 percent of the U.S. retail market. Pharmacy is more than 64 percent of our business. Our drugstores serve 4.7 million customers daily and average $8.5 million in annual...

  • Page 3
    ...- prescription Drugs (3) General Merchandise (3) (1) Includes mail service facilities, home care facilities, clinic pharmacies and specialty pharmacies. (2) In thousands of square feet. (3) Based on store scanning information. Walgreens Fiscal Year Stock Performance Fiscal year-end closing price...

  • Page 4
    ... recently. We agree. Since we opened our 3,000th store in the year 2000, we've almost doubled our chain - to nearly 5,500 stores at the end of fiscal 2006. Both new stores and increased productivity in existing stores have steadily fed our sales and profit lines, giving us a distinction enjoyed by...

  • Page 5
    ... 19.2 percent. • Inventories increased just 8.2 percent versus 2005 on a sales gain of 12.3 percent. • We opened our first in-store health clinics in the Kansas City and St. Louis markets. Sales In billions of dollars Earnings In millions of dollars 2006 Walgreens Annual Report Page 3

  • Page 6
    ...after day. We plan $1.7 billion in capital expenditures this fiscal year to do just that. What's been the impact of the new Medicare Part D prescription program? Bernauer: It's boosted prescription volume, but tigh ten ed gross profit margins due to lower reimbursement rates. Our ph armacists' work...

  • Page 7
    ... office. We're taking the time to listen - really listen - to folks from the stores to headquarters about what's working and what's not. David W. Bernauer Chairman Number of Prescriptions Filled In millions Jeffrey A. Rein President and Chief Executive Officer 2006 Walgreens Annual Report...

  • Page 8
    Growing with you at every stage of your life Gen eration s of Cu stomers Four generations of the Sanchez family get together in the kitchen of Loraine Sanchez (second from left) in Los Lunas, New Mexico.

  • Page 9
    ..., the family represents four generations of Walgreen customers growing with us and using our services and products at every stage along the way. We offer them what we offer the 4.7 million people who shop our stores each day - healthcare service in a convenient and timesaving setting. Loraine...

  • Page 10
    ... ages, th e European Beauty Collection is featured in approximately 1,000 stores wh ere we've given advisors special training and incentives to promote products. This offers women a department store experience without the hassle or expense of a trip to the mall. Page 8 2006 Walgreens Annual Report

  • Page 11
    ...disease. Social R espon sibility Growing to meet your community's needs Walgreens announced a partnership with the National Urban League in July. Throughout 2007, the Urban League/Walgreens Wellness Tour will bring free health screenings to underserved communities across America. At left are Lynn...

  • Page 12

  • Page 13
    ... Savings Based on 2005 total consumption In percent of kilowatt-hours We're savin g energy In January 2006, Walgreens launched an initiative to install solar electric systems in approximately 100 stores in several states, including California, Colorado and New Jersey. Utility and tax incentives...

  • Page 14
    ... Illinois (left) - This Chicago store on the upscale corner of State and Walton streets opened in 2004. To fit the neighborhood, the architect designed this new construction using elements originally introduced in prominent Chicago buildings over a century ago. Page 12 2006 Walgreens Annual Report

  • Page 15
    ...personal care products, increase the shopper's connection to brands he can buy only at Walgreens. Serving her customer in Waukegan, Illinois, is beauty advisor Sabrina Pomales. Expansion in 2007 will continue in both new and existing markets. States gaining th e largest n umbers of n ew stores will...

  • Page 16
    ... add stores in existing markets. We currently have footholds in every major market in the United States, and have No. 1 share in 122 markets. This number underlies the success we garner when we enter new trade areas. And once we win that No. 1 ranking, we stay there. Page 14 2006 Walgreens Annual...

  • Page 17
    .... Last fiscal year, we also opened our first 16 in-store Health Corner Clinics in Kansas City and St. Louis. The next markets for clinics are Chicago, Atlanta and Las Vegas. Meanwhile, our WHS pharmacy benefits manager, Walgreens Health Initiatives, provided prescription services to more than...

  • Page 18
    ... is to employ a workforce where up to one-third of our people are challenged by disabilities. A new website, Walgreensoutreach.com, is accessible to people with disabilities and provides information to help potential employees understand what work will be like at these distribution centers. Wonda...

  • Page 19
    ... earliest pickup time by location and confirms by e-mail when the order is ready. We also have agreements with online photo services, including AOL Pictures, Fuji and Snapfish, to offer their customers an option of picking up prints at local Walgreen stores. Cartridge refills for printers (top) are...

  • Page 20
    ... of accounting change for system development costs. (4) Per share amounts have been adjusted for two-for-one stock splits in 1999 and 1997. (5) Units include stores, mail service facilities, home care facilities, clinic pharmacies and specialty pharmacies. Page 18 2006 Walgreens Annual Report

  • Page 21
    ....3 5,151.0 18.7% $ 7,103.7 4,188.6 20.1% $ 5,906.7 3,449.8 19.6% $ 4,901.6 2,823.4 19.5% $ 4,207.1 2,353.7 19.7% $ 3,633.6 2,027.9 19.3% 4,252 3,899 3,536 3,181 2,830 2,556 2,366 2,199 2006 Walgreens Annual Report Page 19

  • Page 22
    ... stores (including three mail service facilities, 38 home care facilities, 18 clinic pharmacies and five specialty pharmacies) located in 47 states and Puerto Rico. The drugstore industry is highly competitive. In addition to other drugstore chains, independent drugstores and mail order prescription...

  • Page 23
    ...Solutions, which provide home care services; and selected assets from the 23-store Medic drugstore chain in the Cleveland market. A merger with Delawarebased Happy Harry's pharmacy chain included all 76 Happy Harry's stores in Delaware, Pennsylvania, Maryland and New Jersey, along with the corporate...

  • Page 24
    ... table lists our contractual obligations and commitments at August 31, 2006 (In Millions) : Payments Due by Period Total Operating leases (1) Purchase obligations (2): Open inventory purchase orders Real estate development Other corporate obligations Insurance* Retiree health & life* Closed location...

  • Page 25
    ... Employee stock purchase and option plans Employee stock loan receivable Balance, August 31, 2005 Net earnings Cash dividends declared ($.2725 per share) Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Employee stock loan receivable Balance, August 31, 2006...

  • Page 26
    ... 31, 2006 and 2005 (In Millions, except shares and per share amounts) Assets Current Assets Cash and cash equivalents Short-term investments - available for sale Accounts receivable, net Inventories Other current assets Total Current Assets Non-Current Assets Property and equipment, at cost, less...

  • Page 27
    ... sale Additions to property and equipment Disposition of property and equipment Net proceeds from corporate-owned life insurance Business acquisitions, net of cash received Net cash used for investing activities Cash Flows from Financing Activities Stock purchases Proceeds from employee stock plans...

  • Page 28
    Summary of Major Accounting Policies Description of Business The company is principally in the retail drugstore business and its operations are within one reportable segment. At August 31, 2006, there were 5,461 stores, located in 47 states and Puerto Rico. Prescription sales were 64.3% of total ...

  • Page 29
    ... takes possession of the merchandise. Customer returns are immaterial. Impaired Assets and Liabilities for Store Closings The company tests long-lived assets for impairment whenever events or circumstances indicate. Store locations that have been open at least five years are reviewed for impairment...

  • Page 30
    ...for purchasing and payor contracts and trade names was ten years in fiscal 2006. The weighted-average amortization period for other intangible assets was nine years for fiscal 2006 and eleven years for fiscal 2005. Goodwill is evaluated annually during the fourth quarter of the company's fiscal year...

  • Page 31
    ... award to all nonexecutive employees who were employed on May 11, 2000. Each eligible employee, in conjunction with opening the company's 3,000th store, received a stock option award to purchase from 75 to 500 shares, based on years of service. The option award, issued at fair market value on May 11...

  • Page 32
    .... The company provides certain health insurance benefits for retired employees who meet eligibility requirements, including age, years of service and date of hire. The costs of these benefits are accrued over the period earned. The company's postretirement health benefit plans are not funded. The...

  • Page 33
    ... August 31, 2005, includes $54.7 million ($.033 per share, diluted) of pre-tax expenses related to Hurricane Katrina. Common Stock Prices Below is the Consolidated Transaction Reporting System high and low sales price for each quarter of fiscal 2006 and 2005. November $48.25 40.98 $39.51 35.05...

  • Page 34
    ...2005, the Company changed its method of accounting for share-based payments to adopt Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness...

  • Page 35
    ...unqualified opinion on those financial statements and included an explanatory paragraph relating to the Company's change effective September 1, 2005, in its method of accounting for share-based payments. DELOITTE & TOUCHE LLP Chicago, Illinois October 31, 2006 2006 Walgreens Annual Report Page 33

  • Page 36
    ... Chair Corporate Officers Chairman David W. Bernauer President and Chief Executive Officer Jeffrey A. Rein Executive Vice Presidents George J. Riedl Marketing Trent E. Taylor Chief Information Officer Mark A. Wagner Store Operations Gregory D. Wasson President Walgreens Health Services Senior...

  • Page 37
    ...respect to our compliance with NYSE corporate governance listing standards in January 2006. Direct Stock Purchase Plan Computershare Investor Services sponsors and administers a direct stock purchase plan as a convenient method of acquiring Walgreen stock by cash payments, reinvestment of dividends...

  • Page 38
    ... Georgia Idaho Illinois Indiana 56 229 36 438 113 59 59 697 111 17 511 167 *The total number of stores includes mail service facilities, home care facilities, clinic pharmacies and specialty pharmacies. Total* 5,461 4,985 Walgreen Co. 200 Wilmot Road • Deerfield, Illinois 60015 Walgreens.com...