Walgreens 2011 Annual Report Download

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2011 Annual Report
Well at Walgreens

Table of contents

  • Page 1
    Well at Walgreens 2011 Annual Report

  • Page 2
    ... communities across the country, building on its successful 12-store pilot in Chicago. The Company exceeded its "Rewiring for Growth" cost reduction goal of $1 billion in annual savings, concluding its three-year restructuring and cost-saving initiative launched in 2008. Walgreens was named...

  • Page 3
    ...drugstores, worksite health and wellness centers, infusion and respiratory services 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
    ..."center of gravity" - the best store was reflected in the purchase of drugstore.com and our decision to sell network in America; enhancing the customer experience; and achieving our pharmacy benefit management business. major cost reduction and productivity gain. Our goals were to become Our Company...

  • Page 5
    ...,000 drug, health, beauty and skincare products - expanding our already strong online offering. As well, we introduced our new "Web Pickup" services at many Chicago-area and San Jose, California, locations, enabling customers to shop online and pick up their orders at a store in as little as an hour...

  • Page 6
    ... Express Scripts set forth terms, including reimbursement rates that were below the industry average cost to provide a prescription, that were not in the best interests of our Company, our customers, our employees or our shareholders. Walgreens began informing health plans and patients that we plan...

  • Page 7
    ... for new ideas to improve processes and reduce cost structures. Summary Walgreens strong performance and substantial progress in fiscal 2011 puts the Company in an excellent position to execute the next phase in our transformation, play a bigger role in people's lives and in their communities, and...

  • Page 8
    ... health solutions Walgreens provides every day at its on-site pharmacies in hospitals and medical centers, Take Care Clinics and employer worksite health and wellness centers. These locations, staffed by physicians, physician assistants, nurse practitioners, registered nurses, pharmacists, pharmacy...

  • Page 9
    ... her family returned home to San Antonio, Texas, where they again relied on Walgreens for Delilah's medications. Tunisha Che (left), pharmacy manager in San Antonio, continued the care begun in Miami. This soft transfer from hospital to local Walgreens demonstrates how the Company's pharmacists are...

  • Page 10
    ... to retire in Burr Oak, Michigan, a rural community where he and his wife, Sandy, live with their horses. The Hoopingarners represent the growing number of people 65 years of age or older who live an active lifestyle with help from their Walgreen pharmacist. Page 8 2011 Walgreens Annual Report

  • Page 11
    ... to work closely with their physician, Dr. Yazdi Amaria - all with the goal of improving their health and keeping down their overall cost of care. With this new approach to community pharmacy, the Company is filling the gaps in care that are a simple reality in today's health care system. Sandy...

  • Page 12
    ... marketing" programs, 1 cent of every purchase of a Walgreens brand health and wellness product, like the vitamins for women shown here, goes to support preventive wellness services in local communities through the Walgreens "Way to Well" Fund. For more information, visit Walgreens.com/WaytoWell...

  • Page 13
    ...nutrition. "Walk with Walgreens is a great way to get people motivated," he says. "I've read a lot of the testimonials on the website and I like the way the Company ties in walking as a way to prevent diseases and motivates people to eat right and keep moving." 2011 Walgreens Annual Report Page 11

  • Page 14
    Every day Enhancing daily living Page 12 2011 Walgreens Annual Report

  • Page 15
    ... communities. Besides running a coffee shop in Redwood City, California, Raymond Huang is an accountant in San Francisco. To stay healthy while holding two jobs, Raymond eats well, exercises and watches his blood pressure. Walgreens supports his health and daily living needs by selling healthy...

  • Page 16
    ... Bowman in Brandon, Mississippi, is very particular about the quality of skincare and makeup products she buys because she has sensitive skin. "I'm glad that Beauty.com and Walgreens.com carry a good selection of hypoallergenic and natural products," she says. Page 14 2011 Walgreens Annual Report

  • Page 17
    ..., order photos, browse the weekly ads and more. With smartphones comprising the majority of new mobile phones sold in 2011, consumers can access Walgreens in the palm of their hand. They can also access Walgreens through the Company's on-site pharmacies in hospitals, worksite clinics, call centers...

  • Page 18
    ... President, Pharmacy, Health and Wellness Services and Solutions Joseph C. Magnacca President, Daily Living Products and Solutions Mark A. Wagner President, Community Management Wade D. Miquelon Executive Vice President and Chief Financial Officer Thomas J. Sabatino, Jr. Executive Vice President...

  • Page 19
    ... million related to the repeal of a tax benefit for the Medicare Part D subsidy for retiree benefits. (6) Locations include drugstores, worksite health and wellness centers, infusion and respiratory services facilities, specialty pharmacies and mail service facilities. 2011 Walgreens Annual Report...

  • Page 20
    ... consisted of 258 Duane Reade stores located in the New York City metropolitan area, as well as the corporate office and two distribution centers. Restructuring On October 30, 2008, we announced a series of strategic initiatives, approved by the Board of Directors, to enhance shareholder value. One...

  • Page 21
    ...01 per diluted share in fiscal 2011. In fiscal 2010, Duane Reade recorded a pre-tax loss of $88 million, $56 million after tax, or $.06 per diluted share, including costs associated with the acquisition. Drugstore.com, inc., which was acquired in the fourth quarter of fiscal 2011, reported a pre-tax...

  • Page 22
    ... 2011, 6.8% in 2010 and 6.3% in 2009. The acquisition of Duane Reade increased front-end sales by 2.8% in the current year versus an increase of 1.9% last year. Additionally, the increase over the prior year is due, in part, to new store openings and improved sales related to non-prescription drugs...

  • Page 23
    ... $398 million net of assumed cash, $29 million of infusion and respiratory services assets and selected other assets (primarily prescription files). Business acquisitions in 2010 included the purchase of all 258 Duane Reade stores located in the New York City 2011 Walgreens Annual Report Page 21

  • Page 24
    ...) : Total Operating leases (1) Purchase obligations (2) : Open inventory purchase orders Real estate development Other corporate obligations Long-term debt* (3) Interest payment on long-term debt Insurance* Retiree health* Closed location obligations* Capital lease obligations* (1) Other long-term...

  • Page 25
    ..., including forward-looking information concerning pharmacy sales trends, prescription margins, number and location of new store openings, vendor, payer and customer relationships and terms, possible new contracts or contract extensions, competition, economic and business conditions, outcomes of...

  • Page 26
    ...Statements of Earnings Walgreen Co. and Subsidiaries for the years ended August 31, 2011, 2010, and 2009 (In millions, except per share amounts) Earnings Net sales Cost of sales Gross Profit Selling, general and administrative expenses Gain on sale of business Operating Income Interest expense, net...

  • Page 27
    ...' Equity Walgreen Co. and Subsidiaries for the years ended August 31, 2011, 2010 and 2009 (In millions, except shares and per share amounts) Common Stock Shares Balance, August 31, 2008 989,176,218 Net earnings - Dividends declared ($.4750 per share) - Treasury stock purchases (10,270,000) Employee...

  • Page 28
    ... billion shares; issued 1,025,400,000 shares in 2011 and 2010 Paid-in capital Employee stock loan receivable Retained earnings Accumulated other comprehensive income (loss) Treasury stock at cost, 136,105,870 shares in 2011 and 86,794,947 shares in 2010 Total Shareholders' Equity Total Liabilities...

  • Page 29
    ... Payments of long-term debt Stock purchases Proceeds related to employee stock plans Cash dividends paid Other Net cash (used for) provided by financing activities Changes in Cash and Cash Equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year...

  • 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, 2011, there were 8,210 drugstore and other locations in 50 states...

  • Page 31
    ... in fiscal 2011, 2010 or 2009. Impaired Assets and Liabilities for Store Closings The Company tests long-lived assets for impairment whenever events or circumstances indicate that a certain asset may be impaired. Store locations that have been open at least five years are reviewed for impairment...

  • Page 32
    ... the Board of Directors, to enhance shareholder value. One of these initiatives was a program known as "Rewiring for Growth," which was designed to reduce cost and improve productivity through strategic sourcing of indirect spend, reducing corporate overhead and work throughout the Company's stores...

  • 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
    ...expenses. Actual results from Duane Reade operations included in the Consolidated Statements of Earnings since the date of acquisition are as follows (In millions, except per share amounts): Twelve Months Ended August, 2011 2010 Net sales Net loss Net earnings per common share: Basic Diluted $ 1,868...

  • Page 35
    ... as long-term liabilities on the Consolidated Balance Sheets. The following table provides a reconciliation of the total amounts of unrecognized tax benefits for fiscal 2011 (In millions) : 2011 2010 2009 Balance at beginning of year $ 93 $128 $ 64 Gross increases related to tax positions in...

  • Page 36
    ... Long-Term Debt Short-term borrowings and long-term debt consists of the following at August 31 (In millions) : 2011 2010 Short-Term Borrowings - Current maturities of loans assumed through the purchase of land and buildings; various interest rates from 5.00% to 8.75%; various maturities from 2012...

  • Page 37
    ... 3 Assets: Goodwill $3 - - $3 Goodwill for the Company's Long-Term Care Pharmacy with a carrying value of $19 million was written down to its implied fair value of $3 million in fiscal year 2010. The impairment resulted in a $16 million charge and added a $6 million The changes in fair value of the...

  • Page 38
    ...the performance shares. The Company recognized $45 million, $18 million and $12 million of expense related to these plans in fiscal years 2011, 2010 and 2009, respectively. 11. Capital Stock On October 14, 2009, the Board of Directors approved a long-term capital policy to maintain a strong balance...

  • Page 39
    ...1, 2009, the payment of the annual retainer was changed to be paid only in the form of cash, which may still be deferred. Previously, the annual retainer was paid one-half in cash and one-half in Walgreen Co. common stock. A summary of information relative to the Company's stock option plans follows...

  • Page 40
    ...50% for fiscal years ending 2011, 2010 and 2009, respectively. The consumer price index assumption used to compute the postretirement benefit obligation was 2.00% for 2011 and 3.50% for 2010. Future benefit costs were estimated assuming medical costs would increase at a 7.50% annual rate, gradually...

  • Page 41
    ...17 $ 40.37 26.36 Fiscal 2011 Fiscal 2010 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, 2011 and 2010, and the related...

  • Page 43
    ... in January 2011. Quarterly Reporting Dates Quarterly earnings release dates for fiscal 2012 are December 21, March 27, June 26 and September 28. Results are released to the press and posted on the Walgreen website at http://investor.walgreens.com. Stock Market Listings New York Stock Exchange The...

  • Page 44
    ... Via, the store manager who hired him. As the Company created 3,000 new jobs in 2011, it also began its "Well Cared For" initiative to strengthen employee engagement by setting new performance standards, providing training and developing leadership skills. Every day Building for sustainability...