Walgreens 2007 Annual Report Download

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2007 Annual Report
National needs
Neighborhood answers

Table of contents

  • Page 1
    2007 Annual Report National needs Neighborhood answers

  • Page 2
    ...and profits last year. We opened 536 net new stores for a total of 5,997 Walgreens in 48 states and Puerto Rico. We filled 583 million prescriptions - 16.7 percent of the U.S. retail market. Pharmacy is nearly two-thirds of the company's sales revenues. Our drugstores serve 5 million customers daily...

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

  • Page 4
    ... cutting investments in store growth, front-end sales momentum, customer service or expanded offerings such as in-store health clinics, immunizations and printer cartridge refills. Why were generic drugs cited as a problem in the fourth quarter? Aren't generics more profitable than name brand drugs...

  • Page 5
    ... business. How does this affect you? Jeff Rein: The good news is that through programs like Medicare Part D, the government provides prescription coverage to millions of senior citizens. This brings more Sales In billions of dollars Earnings In millions of dollars 2007 Walgreens Annual Report...

  • Page 6
    ...and hope to have 400 by the end of calendar 2008. Take Care Health Systems, a wholly owned subsidiary of Walgreens, manages the clinics. They'll open nine new markets this fall, including Cincinnati, Cleveland, Houston, Las Vegas, Miami, Nashville, Orlando, Tampa and Tucson. The clinics open patient...

  • Page 7
    ... to our customers, patients and clients. Happy to help Halden Chen, a pharmacist in Lincolnshire, Illinois, thinks he has one of the best jobs in America. "I go to work with one thought," he says. "If I can make my patients happy, then I'm happy." Walgreens acquired a company called Option Care in...

  • Page 8
    ... for 106 years, and is nearly two-thirds of the company's sales revenue. Walgreen pharmacy professionals in neighborhoods across America provide quality care to patients, whether they're at our counters and drive-thrus,or using our mail service or Walgreens.com. Quality of life in retirement As...

  • Page 9
    ... Chain drugstores (w/o Walgreens) Mass merchants Supermarkets Mail order Walgreens (retail & mail) 600 500 400 300 200 100 0 Compound Annual Growth Rate Sources: National Association of Chain Drug Stores, IMS Health and Walgreens Category 03 04 05 06 07 2007 Walgreens Annual Report Page 7

  • Page 10
    ...'s, a New Jersey-based fertility specialty pharmacy acquired by Walgreens in 2005. Schraft's pharmacists and support staff specialize in counseling patients about fertility medications and shipping time-critical prescriptions overnight. Celebrating second youth AARP is working with Walgreens to...

  • Page 11
    ... campaigns to help the 21 million Americans diagnosed with diabetes and the 54 million at risk for this disease. Answering a national need Take Care Health Clinics - planned for more than 400 Walgreen stores by the end of calendar 2008 - are providing convenient healthcare access to thousands...

  • Page 12
    ... business. When customers need an emergency prescription or a soft drink, they flock to stores like this one (left) at the Empire State Building in New York City. We're accelerating expansion in dense Northeastern cities, which includes opening a store next summer in Manhattan's Times Square. 106...

  • Page 13
    ... opened in 2007. In October, we celebrated our 6,000th store opening in New Orleans and, in November, said "aloha" to our 49th state - Hawaii - with a store opening in Honolulu. A store every 16 hours Walgreens opens a new store every 16 hours. But each one is the product of approximately two years...

  • Page 14
    ... here in front of their new library, have more career opportunities thanks to our $1-million grant to their new College of Pharmacy. Over the next five years, the money will fund recruitment programs designed to encourage students to choose a pharmacy career. Page 12 2007 Walgreens Annual Report

  • Page 15
    ... In 2007, sales of these bulbs increased 200 percent over the previous year. Wellness road trip Walgreen Wellness Tour buses, like the one pictured below in Puerto Rico, provide free health screenings and build community relations across America. At one event (right), Nixza Rodriguez, service clerk...

  • Page 16
    ... offer the very best national brands, such as Hallmark cards.We also bring customers variety and value through Walgreen brands, including our new Café W beverage stations in 200 stores as of November 2007. Europe comes to Walgreens Walgreens exclusive European Beauty Collection (below), now in its...

  • Page 17
    ... out of 10 Walgreen digital photo orders are now uploaded on Walgreens.com for store pickup. Our new "W" Photo Studio brand software, launched in September, makes uploading easier. It also offers creative options for those who organize and edit photos online or purchase items such as photo books and...

  • Page 18
    ... technology helped us fill 583 million prescriptions efficiently in 2007, the key to patient service and safety is a pharmacist. We are developing new systems that will allow these professionals to spend more one-on-one time helping patients manage their health. Page 16 2007 Walgreens Annual Report

  • Page 19
    .... We're currently testing Redbox DVD rental machines (left) in two markets, and hope to roll this out to hundreds of stores in 2008. Customers can save money and help the environment by using our printer cartridge refill service - now in more than 3,000 stores. 2007 Walgreens Annual Report Page 17

  • Page 20
    ...the cumulative effect 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) Locations include stores, mail service facilities, home care facilities and specialty pharmacies. Page 18 2007 Walgreens Annual Report

  • Page 21
    ....2 6,162.9 17.8% $ 9,042.3 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% 4,613 4,252 3,899 3,536 3,181 2,830 2,556 2,366 2007 Walgreens Annual Report Page 19

  • Page 22
    ... and strategic fit for our business. Fiscal 2007 acquisitions included Option Care, Inc. and affiliated companies, a specialty pharmacy and home infusion services provider; Take Care Health Systems, Inc. and LLC, a convenient care clinic operator; selected assets from Familymeds Group, Inc...

  • Page 23
    ... generic drug sales. Some of that benefit was offset by growth in Medicare Part D and third party pharmacy sales, which typically have lower margins than cash prescriptions, and a continued sales shift toward the pharmacy business, which carries lower margins than front-end merchandise. Margins for...

  • Page 24
    .... Acquisitions in fiscal 2007 included the purchase of Option Care, Inc. and affiliated companies, a specialty pharmacy and home infusion services provider; Take Care Health Systems, Inc. and LLC, a convenient care clinic operator; selected assets from Familymeds Group, Inc., a pharmacy chain; the...

  • Page 25
    ... 31, 2007 (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* Closed location obligations* Capital lease obligations* Other long-term liabilities...

  • Page 26
    ...31, 2006 Net earnings Cash dividends declared ($.3275 per share) Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Employee stock loan receivable Adjustment to initially apply SFAS No.158, net of tax Balance, August 31, 2007 Common Stock Shares 1,023,292,737...

  • Page 27
    ... 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 accumulated depreciation and amortization Goodwill Other non-current assets Total Assets $ 2007 254...

  • Page 28
    ... intangible asset acquisitions, net of cash received Net proceeds from corporate-owned life insurance policies Net cash used for investing activities Cash Flows from Financing Activities Net proceeds from short-term borrowings Payments of debt Stock purchases Proceeds related to employee stock plans...

  • Page 29
    ... 1. 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, 2007, there were 5,997 locations in 48 states and Puerto Rico. Prescription sales were 65.0% of total sales...

  • Page 30
    ... time the customer takes possession of the merchandise. Customer returns are immaterial. Sales taxes are not included in revenue. Gift Cards The company sells Walgreens gift cards to our customers in our retail stores and through our website. We do not charge administrative fees on unused gift cards...

  • Page 31
    ... for $19.50 per share. The company's operating statements include Option Care, Inc.'s and affiliated companies' results since acquiring the controlling interest on August 14, 2007. This acquisition will increase national access to specialty pharmacy and home infusion services for patients and payors...

  • Page 32
    ... dates. The aggregate purchase price of all business and intangible asset acquisitions, excluding Option Care, Inc. and affiliated companies, was $370.7 million. These acquisitions added $93.8 million to prescription files, $44.8 million to other amortizable intangibles, $9.5 million to trade name...

  • Page 33
    ... company pays a facility fee to the financing bank to keep this line of credit facility active. The Walgreen Co. Executive Stock Option Plan provides for the granting of options to eligible key employees to purchase common stock over a ten-year period, at a price not less than the fair market value...

  • Page 34
    ...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. Options...

  • Page 35
    ... salaries Taxes other than income taxes Profit sharing Insurance Other The measurement date used to determine postretirement benefits is August 31. The discount rate assumption used to compute the postretirement benefit obligation at year-end was 6.50% for 2007 and 6.25% for 2006. The discount...

  • Page 36
    ...91 $50.00 39.55 Fiscal 2007 Fiscal 2006 High Low High Low Comparison of Five-Year Cumulative Total Return The following graph compares the five-year cumulative total return of the company's common stock with the S &P 500 Index and the Value Line Pharmacy Services Industry Index. The graph assumes...

  • Page 37
    ..., and 132(R), and effective September 1, 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. DELOITTE & TOUCHE LLP Chicago, Illinois October 26, 2007 2007 Walgreens Annual Report Page 35

  • Page 38
    ... Resources Vice Presidents Stanley B. Blaylock Specialty Pharmacy Walgreens Health Services Mia M. Scholz Chief Accounting Officer Controller Denise K. Wong Chief Information Officer Robert G. Zimmerman Corporate Development Operational Vice Presidents Store Operations W. Michael Arnoult Jr. Howard...

  • Page 39
    ...Exchange ("the NYSE") with respect to our compliance with NYSE corporate governance listing standards in January 2007. 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...

  • Page 40
    ... Wilmot Road • Deerfield, Illinois 60015 Walgreens.com WalgreensEspañol.com Diversity.Walgreens.com Inclusive workforce + new efficiencies Technology yields opportunity Tucked away in the hills of Anderson, South Carolina, is the first of our newest generation of distribution centers. But...