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| 8-K - WALGREEN CO. 8-K - WALGREEN CO | a6654907.htm |
Exhibit 99.1
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News
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Walgreen Co. Corporate Communications l 200 Wilmot Road l Deerfield, Ill. 60015 l (847) 315-2500
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Media Contact:
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Tiffani Washington, 847-315-2925
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Investor Contact:
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Rick Hans, CFA, 847-315-2385
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Lisa Meers, CFA, 847-315-2361
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FOR IMMEDIATE RELEASE
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http://news.walgreens.com
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Walgreen Co. Reports 17.6 Percent Increase in Diluted Earnings Per Share to 80 Cents for the Second Quarter of Fiscal 2011
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Second quarter sales increase 8.9 percent to a record $18.5 billion
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Company now fills one in every five U.S. retail prescriptions with industry-leading 20.1 percent market share
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Cash flow from operations reach $886 million for the quarter and a record $2.1 billion for the first half of fiscal 2011
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DEERFIELD, Ill., March 22, 2011 – Walgreen Co. (NYSE, NASDAQ: WAG) today announced record earnings and sales for the second quarter and first half of fiscal year 2011.
Net earnings per diluted share for the quarter ended Feb. 28 increased 17.6 percent to 80 cents, compared with 68 cents per diluted share in the year-ago quarter. This year’s results include the impact of 1 cent per diluted share in restructuring and restructuring-related costs associated with the company’s Rewiring for Growth initiative. This year’s quarter also includes the impact of 1 cent per diluted share in integration costs associated with the company’s Duane Reade acquisition, which closed in April 2010. Last year’s second quarter results include the impact of 2 cents per diluted share in restructuring and restructuring-related costs associated with Rewiring for Growth. Net earnings were $739 million, a 10.4 percent increase from $669 million in the same quarter a year ago.
“We had another very solid quarter with record sales and strong cash flow as we turn our business strategies into results,” said Walgreens President and CEO Greg Wasson. “Posting our third consecutive quarter of double-digit earnings per share growth, we're extremely focused on enhancing our full scope of services to become America's first choice for health and daily living needs.”
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During the second quarter, the company bought back $300 million in company stock as part of its share repurchase program.
First half 2011 net earnings per diluted share increased 21.4 percent to $1.42 per diluted share from $1.17 per diluted share in the same period last year. This year’s results include the impact of 1 cent per diluted share in restructuring and restructuring-related costs associated with Rewiring for Growth and 1 cent per diluted share in Duane Reade integration costs. Last year’s first half results included the impact of 5 cents per diluted share in restructuring and restructuring-related costs associated with Rewiring for Growth. Net earnings for the first half of fiscal 2011 were $1.32 billion versus last year’s $1.16 billion, a 13.9 percent increase.
FINANCIAL HIGHLIGHTS
Sales
Second quarter sales increased 8.9 percent from the prior-year quarter to a record $18.5 billion, while first half sales grew 7.5 percent to a record $35.8 billion. Total sales in comparable stores (those open more than a year) increased 4.1 percent in the quarter, while front-end comparable drugstore sales increased 4.3 percent in the quarter. (Please note that Duane Reade stores are not included in any comparable store sales results.)
The company filled 205 million prescriptions, an increase of 6.9 percent over last year’s second quarter. Prescription sales, which accounted for 62.6 percent of sales in the quarter, climbed 7.7 percent, while prescription sales in comparable stores increased 3.9 percent. The company exceeded by 3.1 percentage points the industry-wide prescription growth rate, excluding Walgreens, during the same period as reported by IMS Health. For the second quarter, Walgreens increased its retail prescription market share to 20.1 percent.
“We achieved a milestone during the quarter by filling one of every five retail prescriptions for the first time in company history,” said Wasson. “Our front-end sales were led by great execution from our merchandising, marketing and operations teams, resulting in a strong holiday season in December and a strong Valentine’s Day performance in February. A later onset to the cough/cold and flu season compared with a year ago also helped front-end comparable store sales show solid increases for the quarter as both customer traffic and basket size increased.”
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Gross Profit
Gross profit margins held steady versus the year-ago quarter at 28.8 percent despite an environment of increasing prices for many commodities. Front-end margins benefited from the cough/cold and flu season as well as holiday season performance, offset by a higher LIFO provision. The LIFO provision for the quarter was $56 million this year versus $27 million last year. Pharmacy margins remained constant as the positive impact of generic drug sales was offset by market reimbursements. Total gross profit dollars increased $427 million, or 8.7 percent, in the quarter, of which 3.1 percentage points was attributable to Duane Reade.
SG&A
Selling, general and administrative expenses in the second quarter grew $306 million, or 8.0 percent, over the year-ago period. Duane Reade costs accounted for 4.3 percentage points of the increase, while new store openings resulted in 2.9 percentage points of the growth. All other expenses, including comparable store and headquarter expense, accounted for 1.3 percentage points of the increase. Lower Rewiring for Growth expenses decreased the percentage change by 0.5 percentage point.
The company opened or acquired 48 new drugstores (a net gain of 39 after relocations and closings) in the second quarter compared with 41 (or a net gain of 33) in the year-ago quarter. Walgreens expects organic store growth of between 2.5 and 3 percent in fiscal 2011.
Other second quarter highlights
In January, Walgreens launched an initiative to educate eligible prescription customers about their options to get a 90-day supply of medication at their local Walgreens pharmacy. A study by the company found that nearly half of mail order pharmacy users believe that mail is their only option for 90-day prescriptions. In addition, two-thirds of 30-day chronic medication users would be extremely or very likely to switch to 90-day supplies at their community pharmacy if given the option.
Also during January, Walgreens Take Care Health Systems expanded its health care relationship with Intel opening an on-site medical center offering full service primary care at the company’s Jones Farm Campus in Hillsboro, Ore. Intel’s Health for Life Center, designed to provide greater convenience and cost savings for employees and the company, will serve approximately 5,700 people. The center will provide routine primary care, urgent care, pharmacy services, lab testing, allergy and flu shots, travel medicine and vaccinations and physical therapy.
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In February, Walgreens acquired five medical facility pharmacies on the campuses of Yale New Haven Health System, Connecticut’s leading health care system and the primary teaching hospital for Yale School of Medicine. These new locations will provide convenient access to high quality pharmacy services for the more than 56,000 inpatients and 600,000 outpatients Yale New Haven serves each year.
Walgreens also saw continued strong adoption of its mobile applications during the second quarter, with more than half of all prescription refills ordered through its mobile app being sent via its Refill by Scan feature. The feature, launched in November, enables iPhone® or Android smart phone users to scan the barcode printed on a prescription label to seamlessly order a refill in seconds.
Looking Ahead
“We’re confident we have the right strategies in place for our company to deliver sustainable growth,” said Wasson. “Our center of gravity remains our nearly 7,700 drugstores, which are complemented by our specialty, infusion and mail pharmacy services, retail clinics, worksite health centers and medical facility pharmacies. We are also growing our multichannel offerings that provide customers what they want, when and where they want it. And we’re doing this while keeping a sharp eye on costs, as we remain on track to deliver $1 billion in savings this fiscal year compared with our base year of fiscal 2008.”
As of Feb. 28, Walgreens operated 8,161 locations in all 50 states, the District of Columbia, Puerto Rico and Guam. The company has 7,690 drugstores nationally, including 127 medical facility 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 second quarter and first half results beginning at 8:30 a.m. Eastern time today, March 22. 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.
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The replay also will be available from 11:30 a.m. Eastern time, March 22, through March 29, by calling 888-203-1112 within the U.S. and Canada, or 719-457-0820 outside the U.S. and Canada, using replay code 7525641.
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,” “sustain,” “on track,” “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.
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WALGREEN CO. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
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(UNAUDITED)
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(In Millions, Except Per Share Amounts)
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Three Months Ended
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Six Months Ended
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February 28,
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February 28,
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February 28,
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February 28,
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2011
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2010
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2011
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2010
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Net sales
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$ | 18,502 | $ | 16,987 | $ | 35,846 | $ | 33,351 | ||||||||
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Cost of sales (1)
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13,178 | 12,090 | 25,577 | 23,916 | ||||||||||||
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Gross Profit
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5,324 | 4,897 | 10,269 | 9,435 | ||||||||||||
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Selling, general and administrative expenses
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4,117 | 3,811 | 8,121 | 7,553 | ||||||||||||
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Operating Income
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1,207 | 1,086 | 2,148 | 1,882 | ||||||||||||
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Interest expense, net
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18 | 22 | 38 | 43 | ||||||||||||
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Earnings Before Income Tax Provision
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1,189 | 1,064 | 2,110 | 1,839 | ||||||||||||
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Income tax provision
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450 | 395 | 791 | 681 | ||||||||||||
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Net Earnings
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$ | 739 | $ | 669 | $ | 1,319 | $ | 1,158 | ||||||||
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Net earnings per common share:
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Basic
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$ | .80 | $ | .68 | $ | 1.43 | $ | 1.17 | ||||||||
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Diluted
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$ | .80 | $ | .68 | $ | 1.42 | $ | 1.17 | ||||||||
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Dividends declared
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$ | .1750 | $ | .1375 | $ | .3500 | $ | .2750 | ||||||||
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Average shares outstanding
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919.1 | 982.9 | 925.3 | 986.6 | ||||||||||||
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Dilutive effect of stock options
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8.9 | 6.9 | 6.1 | 5.8 | ||||||||||||
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Average Shares Outstanding Assuming Dilution
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928.0 | 989.8 | 931.4 | 992.4 | ||||||||||||
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Percent of Sales
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Percent of Sales
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Net sales
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100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
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Cost of sales
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71.2 | 71.2 | 71.4 | 71.7 | ||||||||||||
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Gross Margin
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28.8 | 28.8 | 28.6 | 28.3 | ||||||||||||
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Selling, general and administrative expenses
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22.3 | 22.4 | 22.6 | 22.7 | ||||||||||||
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Interest expense, net
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0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
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Earnings Before Income Tax Provision
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6.4 | 6.3 | 5.9 | 5.5 | ||||||||||||
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Income tax provision
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2.4 | 2.4 | 2.2 | 2.0 | ||||||||||||
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Net Earnings
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4.0 | % | 3.9 | % | 3.7 | % | 3.5 | % | ||||||||
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Fiscal 2011 second quarter includes a LIFO provision of $56 million versus $27 million in the previous year.
Fiscal 2011 six months includes a LIFO provision of $98 million versus $61 million in the previous year.
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WALGREEN CO. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED BALANCE SHEETS
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(UNAUDITED AND SUBJECT TO RECLASSIFICATION)
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(In Millions)
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February 28,
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February 28,
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2011
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2010
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Assets
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Current Assets:
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Cash and cash equivalents
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$ | 2,243 | $ | 2,501 | ||||
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Short-term investments
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- | 600 | ||||||
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Accounts receivable, net
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2,497 | 2,694 | ||||||
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Inventories
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7,607 | 7,200 | ||||||
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Other current assets
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190 | 164 | ||||||
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Total Current Assets
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12,537 | 13,159 | ||||||
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Non-Current Assets:
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Property and Equipment, at cost, less
accumulated depreciation and amortization
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11,148 | 10,891 | ||||||
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Goodwill
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1,898 | 1,480 | ||||||
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Other non-current assets
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1,295 | 804 | ||||||
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Total Non-Current Assets
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14,341 | 13,175 | ||||||
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Total Assets
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$ | 26,878 | $ | 26,334 | ||||
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Liabilities and Shareholders' Equity
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Current Liabilities:
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Short-term borrowings
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$ | 13 | $ | 8 | ||||
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Trade accounts payable
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4,890 | 4,611 | ||||||
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Accrued expenses and other liabilities
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2,492 | 2,415 | ||||||
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Income taxes
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149 | 263 | ||||||
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Total Current Liabilities
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7,544 | 7,297 | ||||||
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Non-Current Liabilities:
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Long-term debt
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2,380 | 2,347 | ||||||
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Deferred income taxes
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423 | 253 | ||||||
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Other non-current liabilities
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1,850 | 1,489 | ||||||
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Total Non-Current Liabilities
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4,653 | 4,089 | ||||||
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Shareholders' Equity
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14,681 | 14,948 | ||||||
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Total Liabilities and Shareholders' Equity
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$ | 26,878 | $ | 26,334 | ||||
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WALGREEN CO. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
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(UNAUDITED AND SUBJECT TO RECLASSIFICATION)
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(In Millions)
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Six Months Ended February 28,
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2011
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2010
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Cash flows from operating activities:
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Net earnings
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$ | 1,319 | $ | 1,158 | ||||
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Adjustments to reconcile net earnings to net cash provided by operating activities -
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Depreciation and amortization
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529 | 505 | ||||||
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Deferred income taxes
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68 | (26 | ) | |||||
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Stock compensation expense
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46 | 45 | ||||||
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Income tax savings from employee stock plans
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3 | 2 | ||||||
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Other
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13 | 6 | ||||||
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Changes in operating assets and liabilities -
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Accounts receivable, net
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(57 | ) | (144 | ) | ||||
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Inventories
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(211 | ) | (382 | ) | ||||
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Other assets
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29 | 31 | ||||||
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Trade accounts payable
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305 | 302 | ||||||
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Accrued expenses and other liabilities
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(194 | ) | 14 | |||||
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Income taxes
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80 | 174 | ||||||
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Other non-current liabilities
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121 | 78 | ||||||
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Net cash provided by operating activities
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2,051 | 1,763 | ||||||
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Cash flows from investing activities:
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Purchases of short-term investments – held to maturity
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- | (1,200 | ) | |||||
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Proceeds from short-term investments – held to maturity
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- | 1,100 | ||||||
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Additions to property and equipment
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(469 | ) | (524 | ) | ||||
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Proceeds from sale of assets
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24 | 19 | ||||||
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Business and intangible asset acquisitions, net of cash received
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(141 | ) | (116 | ) | ||||
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Other
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(27 | ) | - | |||||
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Net cash used for investing activities
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(613 | ) | (721 | ) | ||||
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Cash flows from financing activities:
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Stock purchases
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(890 | ) | (447 | ) | ||||
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Proceeds related to employee stock plans
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123 | 102 | ||||||
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Cash dividends paid
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(328 | ) | (272 | ) | ||||
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Other
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20 | (11 | ) | |||||
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Net cash used for financing activities
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(1,075 | ) | (628 | ) | ||||
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Changes in cash and cash equivalents:
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Net increase in cash and cash equivalents
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363 | 414 | ||||||
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Cash and cash equivalents at beginning of year
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1,880 | 2,087 | ||||||
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Cash and cash equivalents at February 28
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$ | 2,243 | $ | 2,501 | ||||
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