Walgreens 2008 Annual Report Download

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2008 Annual Report
Chicago Cubs broadcaster Ron Santo
Care
&
Convenience
…in Communities across America

Table of contents

  • Page 1
    Care & Convenience ...in Communities across America Chicago Cubs broadcaster Ron Santo 2008 Annual Report

  • Page 2
    ...value. • The company prices a $1.3 billion, five-year bond offering to be used for repayment of short-term debt incurred under its commercial paper program and general corporate purposes. • Walgreens fills 617 million prescriptions - 17.6 percent of the U.S. retail market. Pharmacy is 65 percent...

  • Page 3
    ..., in-store and worksite health centers, home care facilities, specialty pharmacies and mail service facilities. (2) In thousands of square feet. (3) Based on store scanning information. Walgreens Fiscal Year Stock Performance Fiscal year-end closing price per share in dollars Prices are adjusted...

  • Page 4
    ... retailers. Members receive savings on more than 5,000 name brand and generic medications, including 400 generics that are available for less than a dollar a week. They also receive a 10 percent rebate on all Walgreens branded products that can be used for future store purchases. We're also working...

  • Page 5
    ... health and wellness clinics in our stores and on employer worksites. Since acquiring two worksite health center companies last spring, we've integrated these services into our new Health & Wellness division, which plans to expand to 800 sites by the end of fiscal 2009. Sales In billions of dollars...

  • Page 6
    ... of high-cost emergency rooms. Our Health & Wellness division is also the largest operator of worksite health centers and pharmacies in the country. At fiscal year-end, we had 364 clinics on or near employer campuses, offering diverse services including primary and acute care; wellness, pharmacy and...

  • Page 7
    .... Meanwhile, we thank retired CEO Jeff Rein for his outstanding contributions to the company over the past 26 years. From his days as an assistant manager to his years in top management, Jeff worked tirelessly to make Walgreens better for shareholders, customers and employees. His respect for...

  • Page 8
    ... (seated) and her study group in Asheville, North Carolina, are mastering French. Wolf, 85, also studies Spanish, acts in a theater group and handles publicity for a community organization. She and her husband are two of millions of Walgreen pharmacy patients. Page 6 2008 Walgreens Annual Report

  • Page 9
    ... Savings Club, which offers discounts on more than 5,000 medications. Retail Prescription Market Share In percent In-store clinics expand health services As of fiscal year-end, Take Care Clinics were located in 217 Walgreens drugstores across 29 markets. Nurse practitioners and physician assistants...

  • Page 10
    ...is the closest retail store to Boston Latin Academy, a public magnet school in Dorchester, Massachusetts, that enrolls students with top grades from the entire Boston area. These varsity soccer team members put together a summer group to hone their skills before the regular fall season. Walgreens is...

  • Page 11
    ... cards drive sales Newly designed Walgreen gift cards for seasonal merchandise and toys have been added to a line of private brand cards for birthdays, photo gifts and the "perfect gift" for women. These offer gift-giving options targeted toward different customer groups. Within the first five weeks...

  • Page 12
    ...years. Her employer houses one of Walgreens worksite pharmacy locations where Porter can pick up prescriptions. "It's the best of both worlds," says Porter. "I can use the pharmacy at the factory for emergency prescriptions, but have the convenience of a Walgreens open seven days a week near my home...

  • Page 13
    ... Ohio, benefit from Walgreens on-site fitness, nutrition, primary care, urgent care, occupational health and physical therapy services. Here, trainer Chris Slagle helps the spouse of an employee stay in shape in conjunction with his physical therapy treatments. At fiscal year-end, Walgreens operated...

  • Page 14
    ...& CON V E N I E NC E ...to enhance pharmacy services J oe MacDonald and his sons Julian (12) and Caeleb (2) enjoy a family trip to Red Rock State Park in Denver. Both boys have severe hemophilia and use Walgreens Home Care services for infusions about three times a week. "We want our sons to live...

  • Page 15
    ... products, services and health information. The company provides infusion medications and services and respiratory care. Walgreens also sells home medical equipment, including walkers, canes and sleep apnea products. Sources: National Association of Chain Drug Stores and Walgreens 2008 Walgreens...

  • Page 16
    ... D isaster struck the lives of many Walgreen employees in eastern Iowa when heavy rains flooded their homes in June. Julia Harris, senior beauty advisor in Cedar Rapids, was one of many people who received assistance from the Walgreen Benefit Fund for emergency expenses such as food, hotel...

  • Page 17
    ... fund granted $1.5 million to employees or retirees in distress. Committed to schools and scholars Viridiana Fajardo, a junior at St. Martin de Porres High School in Waukegan, Illinois, works in the Marketing Services department at Walgreens corporate headquarters in Deerfield, Illinois, five days...

  • Page 18
    ... Elected 2005 (1) (2 *) (3) Alejandro Silva Chairman and Chief Executive Officer - Evans Food Group, Inc. Elected 2008 (1) (4) (Front row - left to right) Alan G. McNally Chairman of the Board - Walgreen Co. Special Advisor - Harris Financial Corporation Elected 1999 Cordell Reed Former Senior Vice...

  • Page 19
    Five-Year Summary of Selected Consolidated Financial Data Walgreen Co. and Subsidiaries (Dollars in millions, except per share amounts) Fiscal Year Net Sales Costs and Deductions Cost of sales Selling, general and administrative (1) Other income (expense) Total Costs and Deductions Earnings ...

  • Page 20
    ...General merchandise includes, among other things, beauty care, personal care, household items, candy, photofinishing, greeting cards, convenience foods and seasonal items. Customers can have prescriptions filled in retail pharmacies, as well as through the mail, by telephone and via the Internet. As...

  • Page 21
    ... significant estimates include goodwill and other intangible asset impairment, allowance for doubtful accounts, vendor allowances, liability for closed locations, liability for insurance claims, cost of sales and income taxes. We use the following methods to determine our estimates: Goodwill and...

  • Page 22
    ...and selected other assets (primarily prescription files). 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., a convenient care clinic operator; selected assets from...

  • Page 23
    ... Due by Period Total Operating leases (1) Purchase obligations (2) : Open inventory purchase orders Real estate development Other corporate obligations Long-term debt* Interest payment on long-term debt Insurance* Retiree health* Closed location obligations* Capital lease obligations* Other long...

  • Page 24
    ...consensus on Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on ShareBased Payment Awards." EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on certain nonvested equity shares and options as an increase in additional paid-in capital...

  • Page 25
    ... Walgreen Co. and Subsidiaries for the years ended August 31, 2008, 2007 and 2006 (In millions, except shares and per share amounts) Earnings Net sales Cost of sales Gross Profit Selling, general and administrative expenses Operating Income Interest (expense) income, net Earnings Before Income...

  • Page 26
    ... Walgreen Co. and Subsidiaries for the years ended August 31, 2008, 2007 and 2006 (In millions, except shares and per share amounts) Common Stock Shares Balance, August 31, 2005 Net earnings Cash dividends declared ($.2725 per share) Treasury stock purchases Employee stock purchase and option plans...

  • Page 27
    ...2008 and 2007 (In millions, except shares and per share amounts) Assets Current Assets Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total Current Assets Non-Current Assets Property and equipment, at cost, less accumulated depreciation and amortization Goodwill...

  • Page 28
    ...-owned life insurance policies Net cash used for investing activities Cash Flows from Financing Activities Net (payment) proceeds from short-term borrowings Net proceeds from issuance of long-term debt Payments of long-term debt Stock purchases Proceeds related to employee stock plans Cash dividends...

  • Page 29
    ... costs, and direct store related expenses. Other administrative costs include headquarters expenses, advertising costs (net of advertising revenue) and insurance. Vendor Allowances Vendor allowances are principally received as a result of purchase levels, sales or promotion of vendors' products...

  • 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
    ... health services through worksite health centers; 20 drugstores from Farmacias El Amal; CuraScript Infusion Pharmacy, Inc., a home infusion services provider; and selected other assets (primarily prescription files). The aggregate purchase price of all business and intangible asset acquisitions...

  • Page 32
    ... Health Management was accounted for under the purchase method of accounting with the company as the acquirer in accordance with SFAS No. 141, "Business Combinations." Any adjustments to the preliminary purchase price allocation are not expected to be material. Goodwill and other intangible assets...

  • Page 33
    ..., the Plumbers and Steamfitters Local No. 7 Pension Fund filed a putative class action suit against the company and its Chief Executive Officer and Chief Operating Officer in the United States District Court for the Northern 50 1,345 (8) $1,337 28 28 (6) $ 22 2008 Walgreens Annual Report Page 31

  • Page 34
    ...-executive 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 Plan authorized the grant of options, issued at fair market value...

  • Page 35
    ... 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. Components of net periodic benefit...

  • Page 36
    ... receivable Allowance for doubtful accounts $2,623 (96) $2,527 2009 Prior service cost (credit) Net actuarial loss 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 7.30% for...

  • Page 37
    ....60 39.91 Fiscal 2008 Fiscal 2007 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 a $100...

  • Page 38
    ... Chief Financial Officer Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Walgreen Co.: We have audited the accompanying consolidated balance sheets of Walgreen Co. and Subsidiaries (the "Company") as of August 31, 2008 and 2007, and the related...

  • Page 39
    ... York Stock Exchange ("the NYSE") with respect to our compliance with NYSE corporate governance listing standards in January 2008. Direct Stock Purchase Plan Computershare Investor Services sponsors and administers a direct stock purchase plan as a convenient method of acquiring Walgreen stock by...

  • Page 40
    ...In-Store and Worksite Health Centers Home Care Facilities Specialty Pharmacies Mail Service Facilities * Number includes 217 in-store clinics located within drugstores. 6,443 581* 115 10 2 25 6 1 13 117 206 204 96 536 189 231 4 79 131 78 85 160 84 153 135 23 76 109 62 1 (DC) 42 Puerto Rico - 95...