Walgreens Boots Alliance, Inc.
28 September 2010

Walgreen Co. Reports 11.4 Percent Increase in Diluted Earnings Per Share to 49 Cents for the Fourth Quarter 2010; Results Include 5 Cents Per Diluted Share of Acquisition and Restructuring Related Costs

DEERFIELD, Ill., Sept. 28, 2010 - Walgreen Co. (NYSE, NASDAQ: WAG) today announced earnings and sales results for the fourth quarter and fiscal year 2010.

For the quarter ended Aug. 31, 2010, net earnings per diluted share increased 11.4 percent. Net earnings were $470 million or 49 cents per diluted share, including the impact of 4 cents per diluted share from costs associated with the Duane Reade acquisition and 1 cent per diluted share in restructuring and restructuring-related costs associated with the company's Rewiring for Growth initiative. In the year-ago quarter, net earnings per diluted share were 44 cents per diluted share, which included 3 cents per diluted share in restructuring and restructuring-related costs.

"The double-digit increase in fourth quarter earnings per share was driven by strong operating performance across our 7,500-store network and expense control companywide," said Walgreens President and CEO Greg Wasson. "We were able to once again generate increased cash flow from operations for the quarter, and for the year we returned a record amount of cash to shareholders in the form of share repurchases and an increase in our dividend for the 35th consecutive year."

In September, the company completed its $2 billion share repurchase program announced in October 2009, well ahead of the program's expiration date of Dec. 31, 2013.



Sales increased 7.4 percent to a record $16.9 billion for the fourth quarter and 6.4 percent to a record $67.4 billion for the year. Total sales in comparable stores (those open more than a year) were up 1.5 percent in the quarter, while front-end comparable drugstore sales increased 1.2 percent in the quarter. (Please note that Duane Reade stores are not included in any comparable store sales results.)

Prescription sales, which accounted for 65.9 percent of sales in the quarter, climbed 6.5 percent, while prescription sales in comparable stores increased 1.6 percent. The company's number of comparable prescriptions filled increased 3.3 percent over last year's fourth quarter, including 1.2 percentage points due to more patients filling 90-day prescriptions, which are counted as three 30-day prescriptions. The company exceeded by 3.0 percentage points the industry-wide prescription growth rate, excluding Walgreens, during the same period as reported by IMS Health.


In fiscal 2010, net earnings per diluted share increased 5.0 percent. Net earnings were $2.1 billion or $2.12 per diluted share, including impacts of 7 cents per diluted share in costs associated with Rewiring for Growth, 6 cents per diluted share in Duane Reade acquisition costs and 4 cents per diluted share from the elimination of the tax benefit for the Medicare Part D subsidy for retiree benefits that was the result of the enactment of the Patient Protection and Affordable Care Act. In the previous fiscal year, net earnings per diluted share were $2.02, which included 16 cents per diluted share in restructuring and restructuring-related costs.

Gross Profit Margins and SG&A

Gross profit margins increased 70 basis points to 28.4 percent versus the year-ago quarter of 27.7 percent. Front-end margins benefited from pricing, promotion and other improved efficiencies, as well as lower Rewiring for Growth expenses. Pharmacy margins benefited from new generic introductions, partially offset by reimbursement.

Selling, general and administrative expense dollars in the fourth quarter grew 11.0 percent over the year-ago period. Duane Reade's acquisition-related costs and operating SG&A, slightly offset by the impact in the quarter of Rewire costs, contributed 5.0 percentage points of the company's total SG&A dollar growth. In addition, new store openings contributed 3.8 percentage points to SG&A dollar growth. The remaining SG&A dollar growth was a combination of inflation, acquisitions and business mix including strategic investments, and CCR conversions. SG&A costs related to Rewiring for Growth were $17 million in the quarter and $32 million in the year-ago period.

In the fourth quarter, the company opened or acquired 65 new drugstores compared with 155 in the year-ago quarter. Walgreens expects new store openings of between 2.5 and 3.0 percent in fiscal 2011. In fiscal 2010, Walgreens added a net gain of 564 new drugstores, including 281 acquisitions. As of Aug. 31, the company operated 7,561 stores in 50 states, the District of Columbia and Puerto Rico versus 6,997 a year ago.

Fiscal Year 2010 Core Strategies and Milestones

Progress continued during the quarter on Walgreens strategies to leverage the best store network in America, enhance the customer experience and drive cost reduction and productivity gains.

Looking Ahead

"Fiscal 2010 was highlighted by accelerating execution on our core strategies and an ability to leverage our financial flexibility to capture growth opportunities including our acquisition of Duane Reade," said Wasson. "We remain confident in our ability to drive earnings growth, increase our return on invested capital and generate strong cash flow. Our use of cash has been, and will continue to be, guided by a capital policy that commits us to maintaining a strong balance sheet and financial flexibility; reinvesting in core strategies and related strategic activities; and returning surplus cash to shareholders in the form of dividends and share repurchases."

As of Aug. 31, 2010, Walgreens operated 8,046 locations in all 50 states, the District of Columbia, Puerto Rico and Guam. The company has 7,561 drugstores nationally, including 116 hospital on-site pharmacies. Walgreens also operates worksite health centers, home care facilities and specialty and mail service pharmacies. Its Take Care Health Systems subsidiary manages more than 700 in-store convenient care clinics and worksite health and wellness centers.

Walgreens will hold a one-hour conference call to discuss the fourth quarter and fiscal year results beginning at 8:30 a.m. eastern time today, Sept. 28. The conference call will be simulcast through Walgreens investor relations website at: http://investor.walgreens.com. A replay of the conference call will be archived on the website for 12 months after the call. A podcast also will be available on the investor relations website.

The replay also will be available from 11:30 a.m. Eastern time, Sept. 28, through Oct. 5, by calling 888-203-1112 within the U.S. and Canada, or 719-457-0820 outside the U.S. and Canada, using replay code 6505648.

Statements in this release that are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "expect," "outlook," "would," "could," "should," "project," "intend," "plan," "continue," "believe," "seek," "estimate," "anticipate," "may," "assume," variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, changes in economic and market conditions, competition, risks associated with new business areas and activities, the availability and cost of real estate and construction, risks associated with acquisitions, the ability to realize anticipated results from capital expenditures and cost reduction initiatives, outcomes of legal and regulatory matters, and changes in legislation or regulations. These and other risks, assumptions and uncertainties are described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K which is incorporated herein by reference and in other documents that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, Walgreens undertakes no obligation to update publicly any forward-looking statement after the distribution of this release, whether as a result of new information, future events, changes in assumptions or otherwise.