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Confidential




                   Second Quarter 2008 Conference Call
                                March 24, 2008



...
Confidential

Second Quarter 2008 Agenda

• Introduction/ Safe Harbor                Rick Hans
                           ...
Confidential

Safe Harbor

• Certain statements and projections of future
  results made in this presentation constitute
 ...
Confidential

Prime Therapeutics Contract

• Exclusive multi-year specialty pharmacy contract
  with a PBM owned by 10 Blu...
Confidential

Second Quarter Highlights

• Record sales and earnings
• Disciplined and sustainable SG&A expense controls
•...
Confidential

Second Quarter Financials
                                                     Percentage Change
           ...
Confidential

  Slowing Growth of SG&A
      Year-Over-Year % Increase
  25.0%



  20.0%
                                ...
Confidential

Additional Financial Information

• LIFO rate remained the same as Q1; Q2 2007
  provision was $13.4 million...
Confidential

Looking Forward

• Option Care on track
• Continue to target at least 15% ROIC
• Planning store growth of ab...
Confidential

Walgreens Health & Wellness



   • Natural extension of Walgreens health care strategy
   • Includes more t...
Confidential

Platform of Services Will Expand Sales

•     Pharmacy services
•     Specialty pharmacy products and servic...
Confidential

 Growth on Track: 6,237 Retail Locations

                       #1 in Market Share in 121 Major Markets
   ...
Confidential




                                Questions & Answers




                                                 ...
Confidential




                                               14
© Copyright 2007 Walgreen Co.
Confidential




                                Appendix


                                                          15
©...
Confidential

Acquisitions Helping Drive Growth

2008:
• I-Trax (CHD Meridian and ProFitness Solutions) – worksite health ...
Confidential

Worksite Market Opportunity

                                Service                       No service
      ...
Confidential

Calculation of Adjusted SG&A

                                           4Q04           4Q05           4Q06
...
Confidential




                                               19
© Copyright 2007 Walgreen Co.
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Walgreen Co. Second Quarter 2008 Earnings

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Transcript of "Walgreen Co. Second Quarter 2008 Earnings "

  1. 1. Confidential Second Quarter 2008 Conference Call March 24, 2008 © Copyright 2008 Walgreen Co.
  2. 2. Confidential Second Quarter 2008 Agenda • Introduction/ Safe Harbor Rick Hans Director, Finance • Prime Therapeutics and Q2 Highlights Jeff Rein Chairman, CEO • Financial Results Bill Rudolphsen CFO • Health & Wellness, Retail Strategy Greg Wasson President, COO • Questions & Answers All 2 © Copyright 2007 Walgreen Co.
  3. 3. Confidential Safe Harbor • Certain statements and projections of future results made in this presentation constitute forward-looking information that is based on current market, competitive and regulatory expectations that involve risk and uncertainty. • Please see our Form 10-K for a discussion of factors as they relate to forward-looking statements dated August 31, 2007. 3 © Copyright 2007 Walgreen Co.
  4. 4. Confidential Prime Therapeutics Contract • Exclusive multi-year specialty pharmacy contract with a PBM owned by 10 Blue Cross Blue Shield plans • Provides access to any of the 20 million members who have specialty pharmacy needs • Independence offers Walgreens an advantage 4 © Copyright 2007 Walgreen Co.
  5. 5. Confidential Second Quarter Highlights • Record sales and earnings • Disciplined and sustainable SG&A expense controls • Continued organic growth • Sales improved as the quarter progressed • Core product sales insulate us from slowing economy • Late/weak flu season generates fewer prescriptions • Balance short-term results with long-term investments 5 © Copyright 2007 Walgreen Co.
  6. 6. Confidential Second Quarter Financials Percentage Change Three Months Ended Feb 29, 2008 Feb 28, 2007 Feb 28, 2006 Net Sales 10.5% 14.6% 10.7% Net Earnings 5.2% 24.5% 6.6% Comparable Drugstore Sales 4.7% 8.9% 6.5% Comparable Front-End Sales 4.0% 5.7% 5.0% Prescription Sales 11.1% 16.4% 11.1% Comparable Prescription Sales 5.2% 10.9% 7.4% Comparable Prescriptions (Units) 3.6% 6.3% 3.5% Percent to Sales Three Months Ended Feb 29, 2008 Feb 28, 2007 Feb 28, 2006 Gross Margin 28.82% 28.96% 28.44% Selling, General and Administrative 21.75% 21.64% 21.69% Expenses 6 © Copyright 2007 Walgreen Co.
  7. 7. Confidential Slowing Growth of SG&A Year-Over-Year % Increase 25.0% 20.0% Gross Profit 15.0% SG&A 10.0% 5.0% 0.0% 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 Note: SG&A data adjusted for Hurricane Katrina in the fourth quarter 2005 7 © Copyright 2007 Walgreen Co. Source: Company Data
  8. 8. Confidential Additional Financial Information • LIFO rate remained the same as Q1; Q2 2007 provision was $13.4 million versus $30.6 million this year • Sustained and disciplined management of payroll and discretionary spending slowed growth in SG&A expense • Tax rate of 36.8% for Q2; 37.0% anticipated for fiscal year • Total short-term debt $728 million, new acquisitions to be funded with commercial paper and short-term debt 8 © Copyright 2007 Walgreen Co.
  9. 9. Confidential Looking Forward • Option Care on track • Continue to target at least 15% ROIC • Planning store growth of about 8% per year in square footage • Strong financial position gives us flexibility 9 © Copyright 2007 Walgreen Co.
  10. 10. Confidential Walgreens Health & Wellness • Natural extension of Walgreens health care strategy • Includes more than 500 health centers and in-store Take Care Health Clinics • With retail pharmacies, Walgreens will have nearly 7,000 points of care • The market: 7,600 corporate campuses of 1,000 employees or more + families and retirees 10 © Copyright 2007 Walgreen Co.
  11. 11. Confidential Platform of Services Will Expand Sales • Pharmacy services • Specialty pharmacy products and services • Home care services • Wellness programs, disease management and occupational health services Walgreens will help employers reduce costs and improve the quality of health care for their employees, dependents and retirees 11 © Copyright 2007 Walgreen Co.
  12. 12. Confidential Growth on Track: 6,237 Retail Locations #1 in Market Share in 121 Major Markets 23 110 2 10 1 115 2 206 13 52 24 ID 136 8 197 134 61 89 52 21 536 185 64 228 73 132 30 3 105 170 58 62 79 74 494 Number of 218 121 42 stores 90 54 47 235 71 200+ 75 54 143 Puerto Rico 150-200 599 73 118 100-150 746 50-100 Hawaii 1 1-50 • Opened 290 new stores in the first six months • Acquired pharmacy files of 70 pharmacies, including 27 Rite Aid stores, in Q2 12 © Copyright 2007 Walgreen Co.
  13. 13. Confidential Questions & Answers 13 © Copyright 2007 Walgreen Co.
  14. 14. Confidential 14 © Copyright 2007 Walgreen Co.
  15. 15. Confidential Appendix 15 © Copyright 2007 Walgreen Co.
  16. 16. Confidential Acquisitions Helping Drive Growth 2008: • I-Trax (CHD Meridian and ProFitness Solutions) – worksite health centers • Whole Health Management – worksite health centers 2007: • Option Care, specialty pharmacy and home infusion services provider • Take Care Health Systems, a convenient care clinic provider • Familymeds Group (selected assets) • Senior Med (primarily prescription files) 2006: • Medmark Specialty Pharmacy • Canadian Valley Medical Solutions (home care services) • Happy Harry’s 2005: • Schraft’s Specialty Pharmacy • Home Pharmacy of CA • Selected assets from the 23-store Medic drugstore chain 16 © Copyright 2007 Walgreen Co.
  17. 17. Confidential Worksite Market Opportunity Service No service provided by 3rd • Walgreens Health & provided in the party vendor workplace Wellness: more than 500 worksite health centers 17% and in-store clinics, growing to 750 by year 37% end • Potential Market: 7,600 45% corporate campuses of 1,000 employees or more Service provided by in-house clinicians Market: 7,600 corporate campuses 17 © Copyright 2007 Walgreen Co.
  18. 18. Confidential Calculation of Adjusted SG&A 4Q04 4Q05 4Q06 ($s in millions) SGA$ under GAAP $ 2,102.1 $ 2,434.9 $ 2,732.4 Less: Katrina Expense $ - $ 54.7 $ - Adjusted SGA$ $ 2,102.1 $ 2,380.2 $ 2,732.4 Adjusted YOY % Increase 13.2% 14.8% 18 © Copyright 2007 Walgreen Co.
  19. 19. Confidential 19 © Copyright 2007 Walgreen Co.
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