Walgreens 2009 Annual Report Download

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in your communities
Inspiring a healthy life
2009 Annual Report

Table of contents

  • Page 1
    Inspiring a healthy life in your communities 2009 Annual Report

  • Page 2
    ... on how to take her medications. Kelvin, who speaks fluent Cantonese, is a valuable and accessible health care resource for non-English speaking patients in the Chinese community near his pharmacy. Walgreens Fiscal Year Stock Performance Fiscal year-end closing price per share in dollars

  • Page 3
    ... has worked diligently to identify new and better ways to connect with our customers and the communities we serve, and drive revenue growth, cost reduction and improved profitability. We achieved a number of important milestones in the year, and this fall opened our 7,000th drugstore, a long...

  • Page 4
    ... drug offering. • Walgreens fills 651 million prescriptions - 18.3 percent of the U.S. retail market. Pharmacy is 65 percent of our business. • The Company acquires 39 drugstores, including 29 Drug Fair stores in central and western New Jersey and eight Rite Aid locations in San Francisco...

  • Page 5
    .... Our annual organic store growth beginning in 2011 of between 2.5 and 3 percent is greater than the current pace of new store openings of all other U.S. drugstore chains. 2009 Walgreens Annual Report Page 3 House calls at the plant Dr. Steve Goldman (right), Corporate Medical Director for...

  • Page 6
    ... and we believe we are well-positioned to emerge from the current period of uncertainty and change as a leader in pharmacy and health care services. Alan G. McNally Chairman of the Board November 16, 2009 Gregory D. Wasson President and Chief Executive Officer Page 4 2009 Walgreens Annual Report

  • Page 7
    ... Walgreen III, grandson of the Company's founder, will retire from the Walgreens Board of Directors in January 2010, after serving on the Board since 1963. Mr. Walgreen started with the Company as a stock boy and worked his way up to Chairman of the Board and CEO. Along the way, he earned a pharmacy...

  • Page 8
    ... community pharmacy Walgreens is transforming our community pharmacies and providing patients increased access to local pharmacists. In 1,000 Florida and Arizona stores, the Company has a new system that takes most administrative work out of the pharmacies and transfers it to central locations...

  • Page 9
    ... opening a downtown store in Orlando in 1935, Walgreens has grown to 100 retail stores, nine Take Care Clinics, a central pharmacy operation, a call center and a distribution center in the city. The Company also runs a worksite health center for Walt Disney Co. employees, three on-site pharmacies...

  • Page 10
    ... technology at the University of Illinois in Champaign, stops at Walgreens for snacks and cold drinks on his way to class. When I m in a hurry, it s easy to find what I need in the store, says Chris. And if I have questions, there s always someone who can help. Page 8 2009 Walgreens Annual Report

  • Page 11
    ...can easily see across the store to locate other departments. $ average chainwide retail sales per square foot 776 775 Necessities at low prices Photo albums fast At Walgreens, there s a way to help customers like Wendy Finley create photo albums - fast. My photo book was assembled while I waited...

  • Page 12
    ...offer the Company's entire suite of health care services. Building on its foundation of 183 drugstores in this market, Walgreens also offers services in this area through Take Care Clinics, worksite health centers, infusion pharmacies and respiratory therapy operations, on-site pharmacies in medical...

  • Page 13
    ... stores in the area. In addition to being the capital of Arizona, Phoenix is the seat of Maricopa County. To provide pharmacy, health and wellness services to county workers, Walgreens now operates a pharmacy and clinic at the Maricopa County building. Abigail Plumley, Walgreens Home Infusion Nurse...

  • Page 14
    ...for healthier living Customer Steven Hulsey runs his own trucking business in Anchorage and uses Walgreens.com to research product and health information. He appreciates the choice the Company offers of either using its online services or shopping at the store. Page 12 2009 Walgreens Annual Report

  • Page 15
    .... Walgreens goes mobile Customers Sonia Delgado (left) and Jenny Trest are fans of Walgreens on Facebook and follow the Company s information and special offers on the site. They can also use their cell phones to view our mobile site or find daily deals on Twitter. 2009 Walgreens Annual Report...

  • Page 16
    Windsor, Connecticut for neighbors Walgreens cares about our neighbors, our people and our planet. The Company's community outreach programs focus on access to health services. Its Wellness Tour bus initiatives with AARP and the National Urban League are good examples. In 2009, 10 tour buses ...

  • Page 17
    ...this year. Employees with disabilities at this and other Walgreen distribution centers work side-by-side with other team members - achieving the same productivity goals and pay. The 700,000-square-foot facility in Windsor serves hundreds of Walgreens stores throughout the Northeast. Recycling saves...

  • Page 18
    ... Scholz Chief Accounting Officer Controller John W. Spina Retail Integration David A. Van Howe New Business Development Denise K. Wong Information Technology Robert G. Zimmerman Corporate Development General Auditor Chester G. Young Treasurer Jason M. Dubinsky Page 16 2009 Walgreens Annual Report

  • Page 19
    ... adjustment of $79 million ($.05 per share, diluted), which corrected for historically over-accruing the Company's vacation liability. (3) Locations include drugstores, worksite facilities, home care facilities, specialty pharmacies and mail service facilities. 2009 Walgreens Annual Report Page 17

  • Page 20
    ... of operations. Front-end sales have continued to grow due to new store openings and strengthening core categories, such as over-the-counter non-prescription drugs, household items, convenience foods and personal care products. Walgreens strong name recognition continues to drive private brand sales...

  • Page 21
    ... in part to new store openings and improved sales dollars related to non-prescription drugs, household items, convenience foods, and personal care products. Comparable drugstore front-end sales decreased 0.5% in 2009 compared to increases of 4.2% and 5.8% in fiscal years 2008 and 2007, respectively...

  • Page 22
    Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) Selling, general and administrative expenses were 22.7% of sales in fiscal 2009, 22.4% in fiscal 2008 and 22.5% in fiscal 2007. As a percentage of sales, the increase in the current year was due to ...

  • Page 23
    ... select locations of Drug Fair to our retail drugstore operations; McKesson Specialty and IVPCARE to our specialty pharmacy operations; and selected other assets (primarily prescription files). Business acquisitions in 2008 included the purchase of I-trax, Inc. and Whole Health Management, operators...

  • Page 24
    ... 31, 2009 (In millions) : Payments 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...

  • Page 25
    ... this report constitute forward-looking information that is based on current market, competitive and regulatory expectations that involve risks and uncertainties. Please see Walgreen Co.'s Form 10-K for the period ended August 31, 2009, for a discussion of important factors as they relate to forward...

  • Page 26
    Consolidated Statements of Earnings Walgreen Co. and Subsidiaries for the years ended August 31, 2009, 2008 and 2007 (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) ...

  • Page 27
    ... the years ended August 31, 2009, 2008 and 2007 (In millions, except shares and per share amounts) Common Stock Shares Balance, August 31, 2006 Net earnings Cash dividends declared ($.3275 per share) Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Employee...

  • Page 28
    Consolidated Balance Sheets Walgreen Co. and Subsidiaries at August 31, 2009 and 2008 (In millions, except shares and per share amounts) Assets Current Assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other current assets Total Current Assets Non-Current ...

  • Page 29
    ... - Depreciation and amortization Deferred income taxes Stock compensation expense Income tax savings from employee stock plans Other Changes in operating assets and liabilities - Accounts receivable, net Inventories Other assets Trade accounts payable Accrued expenses and other liabilities Income...

  • Page 30
    Notes to Consolidated Financial Statements 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, 2009, there were 7,496 drugstore and other locations in 50 states...

  • Page 31
    ... fees for claims adjudication. Those service fees are recognized as 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 and our gift cards do not have an expiration date...

  • Page 32
    ...; we plan to enhance approximately 2,600 stores in fiscal 2010 and the Page 30 2009 Walgreens Annual Report 4. Acquisitions Business acquisitions in 2009 included McKesson Specialty and IVPCARE, which were added to our specialty pharmacy operations; select locations of Drug Fair into our retail...

  • Page 33
    ... allocation of the purchase price of McKesson Specialty and IVPCARE and Drug Fair 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...

  • Page 34
    ... Company issued commercial paper to support working capital needs. The short-term borrowings under the commercial paper program had the following characteristics (In millions) : 2009 2008 Balance outstanding at fiscal year-end Maximum outstanding at any month-end Average daily short-term borrowings...

  • Page 35
    ... and current Chief Executive Officers with violations of Section 10(b) of the Securities Exchange Act of 1934, claiming that the Company misled investors by failing to disclose declining rates of growth in generic drug sales and a contract dispute with a pharmacy benefits manager that allegedly...

  • Page 36
    ...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 on...

  • Page 37
    ... compensation account. Each nonemployee director received a grant of 4,713 shares in fiscal 2009, 3,075 shares in fiscal 2008 and 2,375 shares in fiscal 2007. New directors in any of the fiscal years were given a prorated amount. A summary of information relative to the Company's stock option plans...

  • Page 38
    ... year 2010 (In millions) : Prior service credit Net actuarial loss 2010 $ (10) 7 Accrued expenses and other liabilities - Accrued salaries Taxes other than income taxes Profit sharing Insurance Other The measurement date used to determine postretirement benefits is August 31. The discount rate...

  • Page 39
    ....03 $47.93 31.39 Fiscal 2009 Fiscal 2008 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 40
    ... 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, 2009 and 2008, and the related...

  • Page 41
    ...Market Listings New York Stock Exchange The NASDAQ Stock Market LLC Chicago Stock Exchange Symbol: WAG Quarterly Reporting Dates Quarterly earnings release dates for fiscal 2010 are December 21, March 23, June 22 and September 28. Results are released to the press and posted on the Walgreen website...

  • Page 42
    ... San Francisco, California - Melissa May, Store Manager in San Francisco, is one of 1,300 Walgreen Community Leaders responsible for overseeing at least six community events a year. She and other employees (left) helped raise more than $5,000 for the American Cancer Society's (ACS) Relay for Life...