Walgreens 2010 Annual Report Download

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2010 Annual Report
My Walgreens
There’s a way to live well

Table of contents

  • Page 1
    My Walgreens There's a way to live well 2010 Annual Report

  • Page 2
    ... Company acquired 258 Duane Reade stores across the New York City metropolitan area. Other acquisitions included 12 Eaton Apothecary pharmacies in the Boston area; 25 Snyder's Drug Stores in Minnesota; and 17 Ike's and Super-D drugstores in the Memphis area. • Walgreens 2009-10 seasonal flu shot...

  • Page 3
    ...% Product Class Sales (1) Includes drugstores, 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...

  • Page 4
    ... flu shots through the nation's largest retail network of certified pharmacists and clinicians • acquiring Duane Reade, the largest acquisition in Walgreens history - establishing Walgreens as a leader in the New York City metropolitan area, the nation's largest drugstore market, and • opening...

  • Page 5
    ... of health care. Through our pharmacy and expanding health and wellness services - including acute and chronic care, screenings, flu shots and other immunization and infusion services - we are helping millions of patients to get well, stay well and live well. Preventing and managing chronic medical...

  • Page 6
    ... its 258 stores in the New York City metropolitan market. Working together, our two "brands" are developing best-in-class services in urban retailing, private brand, beauty and fresh food products as provided in our recently opened Duane Reade stores in Union Square and other Manhattan locations. In...

  • Page 7
    ... growth opportunities and return cash to shareholders in the form of dividends and share repurchases over the long term. Summary Walgreens is committed to delivering value to our shareholders. Consistent with this commitment, our Board of Directors announced in October 2010 a new $1 billion share...

  • Page 8
    ... 2010-11 flu season. Through immunization programs, screenings, support for chronic care patients and expanded specialty pharmacy services, the Company is expanding the role of pharmacists to provide quality, accessible care. Studies show that in-person interaction with a pharmacist reduces health...

  • Page 9
    ... year to complement a doctor's prescribed treatment for type 2 diabetes. "Managing diabetes encompasses many parts of a patient's life," says Tiffany. "I help lessen that burden, and patients tell me we're providing a missing piece in helping them manage the disease." 2010 Walgreens Annual Report...

  • Page 10
    ... Lyme disease, depends on Walgreens for intravenous medication and weekly visits from Mercy to change dressings on his arm. "Mercy and her team are knowledgeable and thorough," says Rick. "They take the time to answer my questions and make my life easier." Page 8 2010 Walgreens Annual Report

  • Page 11
    ... Health Care Solutions Walgreens is well-positioned to meet our customers' pharmacy, health and wellness needs, with a range of quality, affordable and accessible solutions unmatched in the industry. Our service offerings include retail, mail and online pharmacy; in-store Take Care Clinics; employer...

  • Page 12
    ... 15 million visits a month during fiscal 2010. Customers can also use Walgreens mobile website or smart phone applications to receive text messages when prescriptions are ready for pickup, use the new Pharmacy Chat service, check in-store product availability and shop for items not offered in our...

  • Page 13
    A newly refreshed Walgreens store in Brooklyn, New York, helps customer Eugene Adeleye find the personal care items he needs - all in the same aisle. "Because I'm busy with work and school, shopping here is convenient and saves me time," says Eugene.

  • Page 14
    ...to help Duc develop his retail skills and career potential. "As a Community Leader," says Fuentes, "I share what I've learned over my 15 years at Walgreens - my successes and my mistakes." Says Duc, "Eric is a safety net - always available to answer questions." Page 12 2010 Walgreens Annual Report

  • Page 15
    ...opportunities; job skills training for in-store and supervisory positions; management development programs; and classroom and online development for corporate employees. Walgreens also holds regularly scheduled "Lunch and Learn" meetings at which external thought leaders speak on key business issues...

  • Page 16
    ... stores in the Dallas and Fort Worth area launched the Retail Employees with Disabilities Initiative (REDI) with a goal of hiring people with disabilities for 10 percent of their service clerk openings. Walgreens plans to expand the REDI program to communities in other parts of the country next year...

  • Page 17
    ... Grudem, Service Clerk in Bolingbrook, Illinois, uses his iPod Touch to communicate with customers and employees. Jason was diagnosed with autism when he was 3 years old, and is now one of hundreds of employees with disabilities who work in our stores, distribution centers and other locations. "It...

  • Page 18
    ... L. Graham President and Chief Executive Officer - Two Trees Consulting, Inc. Elected 2010 (2) (3) Alan G. McNally Chairman of the Board - Walgreen Co. Special Advisor - Harris Financial Corporation Elected 1999 (1) (2) (3) (4) * Audit Committee Compensation Committee Finance Committee Nominating...

  • Page 19
    ...2010 included a deferred tax charge of $43 million related to the repeal of a tax benefit for the Medicare Part D subsidy for retiree benefits. (5) Locations include drugstores, worksite facilities, home care facilities, specialty pharmacies and mail service facilities. 2010 Walgreens Annual Report...

  • Page 20
    ...business objectives, such as our recent acquisition of Duane Reade Holdings, Inc., and Duane Reade Shareholders, LLC (Duane Reade), which consisted of 258 Duane Reade stores located in the New York City metropolitan area, as well as the corporate office and two distribution centers. This acquisition...

  • Page 21
    ... the Duane Reade acquisition increased total sales by 1.1% in the current fiscal year. Drugstore sales increases resulted from sales gains in existing stores and added sales from new stores, each of which include an indeterminate amount of market-driven price changes. Sales in comparable drugstores...

  • Page 22
    ...in 2010, 6.3% in 2009 and 10.0% in 2008. The impact of the Duane Reade acquisition increased front-end sales by 1.9% in the current year. Additionally, the increase over the prior year is due, in part, to new store openings and improved sales related to non-prescription drugs, personal care products...

  • Page 23
    ...on the present value of future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. We have not made any material changes to the method of estimating our liability for closed locations during the last three years. Based on current knowledge, we do...

  • Page 24
    ... 2009. Business acquisitions in the current year primarily include the purchase of all 258 Duane Reade stores located in the New York City metropolitan area, as well as the corporate office and two distribution centers for $558 million net of assumed cash of $6 million; and selected other assets...

  • Page 25
    ... information concerning pharmacy sales trends, prescription margins, number and location of new store openings, outcomes of litigation, the level of capital expenditures, industry trends, demographic trends, growth strategies, financial results, cost reduction initiatives, acquisition synergies...

  • Page 26
    ... Statements of Earnings Walgreen Co. and Subsidiaries for the years ended August 31, 2010, 2009 and 2008 (In millions, except per share amounts) Earnings Net sales Cost of sales Gross Profit Selling, general and administrative expenses Operating Income Interest expense, net Earnings Before...

  • Page 27
    ... Walgreen Co. and Subsidiaries for the years ended August 31, 2010, 2009 and 2008 (In millions, except shares and per share amounts) Common Stock Shares Balance, August 31, 2007 Net earnings Cash dividends declared ($.3975 per share) Treasury stock purchases Employee stock purchase and option plans...

  • Page 28
    ... Balance Sheets Walgreen Co. and Subsidiaries at August 31, 2010 and 2009 (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 Assets...

  • Page 29
    ... 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 taxes Other non-current liabilities Net...

  • Page 30
    ... 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, 2010, there were 8,046 drugstore and other locations in 50 states, the District...

  • Page 31
    ... owed to the network pharmacy. We act as an agent to our clients with respect to administrative fees for claims adjudication. Those service fees are recognized as revenue. Gift Cards The Company sells Walgreens gift cards to retail store customers and through its website. The Company does not charge...

  • Page 32
    ... Growth have been recorded in the Consolidated Statements of Earnings (In millions) : Twelve Months Ended August 31, 2010 2009 Severance and other benefits Project cancellation settlements Inventory charges Restructuring expense Consulting Restructuring and restructuring related costs Cost of sales...

  • Page 33
    ...the Company completed the stock acquisition of Duane Reade Holdings, Inc., and Duane Reade Shareholders, LLC (Duane Reade), which consisted of 258 Duane Reade stores located in the New York City metropolitan area, as well as the corporate office and two distribution centers. Total purchase price was...

  • Page 34
    ...The aggregate purchase price of all business and intangible asset acquisitions, excluding Duane Reade, was $221 million in fiscal 2010. These acquisitions added $34 million to goodwill and $156 million to intangible assets, primarily prescription files. The remaining fair value relates to immaterial...

  • Page 35
    ...is as follows (In millions) : 2011 2012 2013 2014 2015 $204 $185 $159 $124 $64 The following table provides a reconciliation of the total amounts of unrecognized tax benefits for fiscal 2010 (In millions) : 2010 Balance at beginning of year Gross increases related to tax positions in a prior period...

  • Page 36
    ...fiscal 2010. In fiscal 2009, the Company issued commercial paper to support working capital needs. Short-term borrowings under the commercial paper program had the following characteristics (In millions) : 2010 Balance outstanding at fiscal year-end Maximum outstanding at any month-end Average daily...

  • Page 37
    ... opportunities that reinforce its core strategies and meet return requirements; and return surplus cash flow to shareholders in the form of dividends and share repurchases over the long term. In connection with the Company's capital policy, its Board of Directors 2010 Walgreens Annual Report...

  • Page 38
    ... annual restricted stock units and straight line over a three-year vesting schedule for the performance shares. The Company recognized $18 million and $12 million of expense related to these plans in fiscal years 2010 and 2009, respectively. The Walgreen Co. Nonemployee Director Stock Plan provides...

  • Page 39
    ... 2009, the Company recognized a special retirement benefit expense of $4 million related to accelerating eligibility for certain employees who elected special early retirement as a part of its Rewiring for Growth program. Components of net periodic benefit costs (In millions) : 2010 Service cost...

  • Page 40
    ... fiscal years ending 2010, 2009 and 2008, respectively. Future benefit costs were estimated assuming medical costs would increase at a 7.50% annual rate, gradually decreasing to 5.25% over the next nine years and then remaining at a 5.25% annual growth rate thereafter. A one percentage point change...

  • Page 41
    ...36 $ 36.04 21.03 Fiscal 2010 Fiscal 2009 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 42
    ... 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, 2010 and 2009, and the related...

  • Page 43
    ...available at http://investor.walgreens.com. This includes corporate governance guidelines, charters of all committees of the Board of Directors, quarterly reports, press releases, proxy statements, the Company's Code of Ethics for Financial Executives and Ethics Policy Statement, and the 2010 Annual...

  • Page 44
    ...the largest acquisition in its history, purchasing 258 Duane Reade stores in the New York City metropolitan area in April. Beyond establishing Walgreens as a leader in the nation's largest drugstore market, the acquisition has allowed both companies to benefit from the other's expertise. Duane Reade...