Walgreen Co.Third Quarter 2008 Earnings Conference

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Walgreen Co.Third Quarter 2008 Earnings Conference

  1. 1. Third Quarter 2008 Conference Call June 23, 2008 © Copyright 2008 Walgreen Co.
  2. 2. Third Quarter 2008 Agenda • Introduction / Safe Harbor Rick Hans Divisional VP - IR & Finance • Q3 Highlights Jeff Rein Chairman & CEO • Senior Management Additions Wade Miquelon Senior VP & CFO • Q3 Financials Bill Rudolphsen Senior VP & CRO • Current Environment Greg Wasson President & COO • Summary Jeff Rein • Questions & Answers All 2 © Copyright 2008 Walgreen Co.
  3. 3. 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 2008 Walgreen Co.
  4. 4. Third Quarter Highlights • Record sales and earnings • Strong front-of-store sales • Outpacing industry prescription growth • Continued organic growth – best locations, strong brand • Disciplined and sustainable SGA expense control 4 © Copyright 2008 Walgreen Co.
  5. 5. Controlling SG&A Year-Over-Year % Increase 25.0% 20.0% 16.0% 15.0% 14.7% SG&A 10.0% 10.0% 9.3% Gross Profit 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 3Q08 Note: SG&A data adjusted for Hurricane Katrina in the fourth quarter 2005 5 © Copyright 2008 Walgreen Co. Source: Company Data
  6. 6. Senior Management Additions Wade Miquelon Chief Financial Officer Bill Rudolphsen Chief Risk Officer Sona Chawla Senior VP of E-commerce 6 6 © Copyright 2008 Walgreen Co.
  7. 7. Senior Management Additions Wade Miquelon Chief Financial Officer Bill Rudolphsen Chief Risk Officer Sona Chawla Senior VP of E-commerce 7 6 © Copyright 2008 Walgreen Co.
  8. 8. Senior Management Additions Wade Miquelon Chief Financial Officer Bill Rudolphsen Chief Risk Officer Sona Chawla Senior VP of E-commerce 8 6 © Copyright 2008 Walgreen Co.
  9. 9. Senior Management Additions Wade Miquelon Chief Financial Officer Bill Rudolphsen Chief Risk Officer Sona Chawla Senior VP of E-commerce 9 6 © Copyright 2008 Walgreen Co.
  10. 10. Third Quarter Financials Percentage Change Three Months Ended May 31, 2008 May 31, 2007 May 31, 2006 Net Sales 9.6% 12.5% 12.4% Net Earnings 2.0% 19.6% 14.2% Comparable Drugstore Sales 3.4% 7.8% 7.6% Comparable Front-End Sales 4.6% 5.6% 4.6% Prescription Sales 8.9% 13.8% 13.5% Comparable Prescription Sales 2.7% 9.0% 9.3% Comparable Prescriptions (Units) 1.1% 5.4% 4.0% Percent to Sales Three Months Ended May 31, 2008 May 31, 2007 May 31, 2006 Gross Margin 28.2% 28.3% 27.5% Selling, General and Administrative 22.1% 22.1% 21.6% Expenses 10 7 *Fiscal 2008 third quarter includes a LIFO provision of $16.1 million © Copyright 2008 Walgreen Co. versus a $3.5 million credit in the previous year.
  11. 11. Additional Financial Information • Q3 tax rate of 37.3% in 2008 vs. 35.2% in 2007 • Anticipated tax rate of 37.1% for FY2008 • Accounts receivable increased 19.5%, driven primarily by the inclusion of OptionCare • Inventories increased 9.4%, slower than sales • Total short-term debt of $1.1 billion • Cash flow from operations totaled $2.5 billion YTD 11 8 © Copyright 2008 Walgreen Co.
  12. 12. Current Environment • Excellent sales efforts and expense management • Increased promotional activity • Our competitors have a pharmacy department, Walgreens is a pharmacy • Low-cost pharmacy provider • Strong momentum toward e-prescribing 12 9 © Copyright 2008 Walgreen Co.
  13. 13. Prescription Savings Club • Walgreens offers discounts on more than 5,000 drugs, including a 90-day supply of more than 400 generics for only $12.99 • Encourages patients to have all of their prescriptions filled at Walgreens • Allows our pharmacists to screen more completely for dangerous drug interactions 13 10 © Copyright 2008 Walgreen Co.
  14. 14. Specialty Pharmacy is a Natural Extension 14 11 © Copyright 2008 Walgreen Co.
  15. 15. Prime Doubled Our Access to the Blues Existing BCBS Clients Prime Therapeutics BCBS Clients Questions and Answers 15 12 © Copyright 2008 Walgreen Co.
  16. 16. Health and Wellness Division: Adding New Points of Care Worksite Clinics Take Care Health Clinics 16 13 © Copyright 2008 Walgreen Co.
  17. 17. Integrated, Cost-effective Solutions Take CareSM Health Clinics Medical Campuses Worksite Clinics Mail Service Retail Stores Home Care 17 Specialty Pharmacy 14 © Copyright 2008 Walgreen Co.
  18. 18. The Right Strategies for Growth • Customers turn to Walgreens for value and convenience • As the market leader in retail pharmacy we have tremendous assets to: • Broaden access through expanded footprints • Leverage the box to drive top and bottom line productivity • Expand into adjacent health care services to strengthen the core • Right growth initiatives to enhance shareholder value 18 15 © Copyright 2008 Walgreen Co.
  19. 19. Questions and Answers 19 16 © Copyright 2008 Walgreen Co.
  20. 20. 20 17 © Copyright 2008 Walgreen Co.
  21. 21. Appendix 21 18 © Copyright 2008 Walgreen Co.
  22. 22. Calculation of Adjusted SG&A 4Q04 4Q05 4Q06 ($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% 22 19 © Copyright 2008 Walgreen Co.
  23. 23. 23 20 © Copyright 2008 Walgreen Co.

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