1. 4th Quarter and Fiscal Year 2009
Conference Call
September 29, 2009
© Copyright 2009 Walgreen Co. 1

2. Fourth Quarter and Fiscal Year 2009
Agenda
 Introduction Rick Hans
& Safe Harbor Divisional VP - IR & Finance
 4Q and FY Highlights Greg Wasson
& Strategies Update President & CEO
 4Q and FY Financials Wade Miquelon
Executive Vice President & CFO
 Questions & Answers All
© Copyright 2009 Walgreen Co. 2

3. Safe Harbor
 Certain statements and projections of
future results made in this presentation
f t lt d i thi t ti
constitute forward-looking information that
is based on current market, competitive
and regulatory expectations that involve
risk and uncertainty.
 Please see our latest Forms 10-K and 10-Q
for a discussion of factors as they relate to
forward-looking statements.
© Copyright 2009 Walgreen Co. 3

4. 4Q and FY09 Highlights &
Strategies Update
Greg Wasson
President & CEO
© Copyright 2009 Walgreen Co. 4

5. Fourth Quarter Highlights
In $ Millions except EPS
4Q08 4Q09 Change
Net Sales $14,597 $15,703 7.6%
Net Earnings $443 $436* (1.5%)
EPS, diluted $0.45 $0.44* (2.2%)
Cash From Operations $548 $852 55.5%
* Includes $33 million after-tax, or $.03 per diluted share, restructuring and restructuring-related costs.
© Copyright 2009 Walgreen Co. 5

6. Fiscal 2009 Highlights
In $ Millions except EPS
FY08 FY09 Change
Net Sales $59,034 $63,335 7.3%
Net Earnings $2,157 $2,006* (7.0%)
EPS, diluted $2.17 $2.02* (6.9%)
Cash From Operations $3,039 $4,111 35.3%
* Includes $163 million after-tax, or $.16 per diluted share, restructuring and restructuring-related costs.
© Copyright 2009 Walgreen Co. 6

7. On the Frontlines of Healthcare
 Healthcare Reform
 Support need for healthcare reform
 Focus on prevention and wellness
 Employer funded medical coverage critical
Employer-funded
 Provider of quality, affordable, accessible
healthcare with 68,000 health professionals
 Update on flu season
 16 000
16,000 certified immunizers
 Significant growth in seasonal flu shots
 Positioned for H1N1 pandemic
© Copyright 2009 Walgreen Co. 7

8. Taking Walgreen Co. to the Market
Co
 Platforms in place
 7,000 drugstores
 Specialty pharmacy and infusion
 700 worksite health centers and retail clinics
 Direct-to-employer/government/MCO/PBM
 Caterpillar – Proprietary, transparent price list
 Direct-to-consumer
 Prescription Savings Club – nearly 2M members
© Copyright 2009 Walgreen Co. 8

9. Consumers Respond to 90-Day at Retail
% of 90-Day Prescriptions
 Promotes choice 5.0%
4.5%
 Drives adherence
4.0%
 Increases compliance 3.5%
 Improves outcomes 3.0%
2.5%
 Lowers costs
2.0%
2005 2006 2007 2008 2009
% = (# of 90-day Rx/(# of 30-day + 90-day Rx))x100
© Copyright 2009 Walgreen Co. 9

10. Leveraging & Enhancing
Our Core Business
Slowing store openings
Re-inventing the
customer experience
Transforming community pharmacy
Expanding health & wellness
Expanding specialty pharmacy
Broadening & deepening
g p g
payor relationships
Rewiring for growth
© Copyright 2009 Walgreen Co. 10

11. Projected Net New Store Openings
12%
10% Estimated
8%
6%
3% Growth
4%
2%
0%
2007 2008 2009 2010 2011
New store openings include
new and relocated stores
© Copyright 2009 Walgreen Co. 11

12. SG&A Growth Declining
Ahead of Slowing Store Growth
Store Added (including On-Site and
700 25%
e
Walgreen Rx Only stores)
600
20%
500 SG&A
Growth Rate
y
400 15%
300
10%
ns
200
5%
100
es
0 0%
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Organic
g Acquired
q
Adjusted for restructuring and restructuring-related costs
© Copyright 2009 Walgreen Co. 12

13. Reinventing the Customer Experience
 4Q09 Milestones
– Rolling out CCR in 400 Texas stores
– Rolling out convenience offering of beer and wine
– Re launched walgreens com
Re-launched walgreens.com
2008 2009 2010
3Q09 – Apr/May Fall ’09 – Sep/Oct
09 Calendar 2010
 35-store CCR pilot  CCR rollout in TX markets  CCR rollout nationwide
 Category optimization  Begin beer and wine rollout  Loyalty initiative pilot
 Inventory improvements  Re-launched Walgreens.com
© Copyright 2009 Walgreen Co. 13

14. the new walgreens com
walgreens.com
© Copyright 2009 Walgreen Co. 14

15. Cost Reductions & Productivity Gains
Year-over-Year Percent Increase
20%
Gross Profit
15%
SG&A
10%
5%
0%
2004 2005 2006 2007 2008 2009
SG&A adjusted for restructuring and restructuring-related costs in 1Q, 2Q, 3Q and 4Q 2009
Gross Profit adjusted for restructuring and restructuring-related costs in 2Q, 3Q, and 4Q 2009
© Copyright 2009 Walgreen Co. 15

16. © Copyright 2009 Walgreen Co. 16

17. 4Q and FY09
Financial Review
Wade Miquelon
Executive VP and CFO
© Copyright 2009 Walgreen Co. 17

18. Fourth Quarter Highlights
4Q08 4Q09
Net Sales 8.8% 7.6%
Net Earnings 11.7% (1.5%)
EPS (Diluted) $0.45 $0.44*
Prescriptions Sales ($) 7.9% 9.0%
Total Prescriptions (#) 4.9%** 9.1%**
p
Comparable
Prescription Sales 2.0% 4.5%
Front-end Sales 3.7% (1.4%)
Total Sales 2.6%
2 6% 2.4%
2 4%
Rx Scripts 1.1%*** 5.9%***
*Includes $.03 per share, diluted, of restructuring and restructuring-related costs.
**Includes
**I l d 111 b i 4Q08 and 136 b i 4Q09 positive i
bp in d bp in iti impact d t more patients filli 90 d prescriptions
t due to ti t filling 90-day i ti
***Includes 118 bp in 4Q08 and 179 bp in 4Q09 positive impact due to more patients filling 90-day prescriptions
© Copyright 2009 Walgreen Co. 18

19. Fiscal Year 2009 Highlights
FY08 FY09
Net Sales 9.8% 7.3%
Net Earnings 5.7% (7.0%)
EPS (Diluted) $2.17 $2.02*
Prescriptions Sales ($) 9.7% 7.8%
Total Prescriptions (#) 6.4%** 6.9%**
p
Comparable
Prescription Sales 3.9% 3.5%
Front-end Sales 4.2% (0.5%)
Total Sales 4.0%
4 0% 2.0%
2 0%
Rx Scripts 2.8%*** 3.6%***
*Includes $.16 per diluted share, of restructuring and restructuring-related costs.
**Includes
**I l d 64 b i FY08 and 137 b i FY09 positive i
bp in d bp in iti impact d t more patients filli 90 d prescriptions
t due to ti t filling 90-day i ti
***Includes 75 bp in FY08 and 173 bp in FY09 positive impact due to more patients filling 90-day prescriptions
© Copyright 2009 Walgreen Co. 19

20. Gross Profit Margin
4Q08 4Q09 Change
Gross Profit Margin 27.6% 27.7% +10 bps
 Margin impacts
+ Positively impacted by retail pharmacy margins due
to generics
g
- Partially offset by non-retail businesses, and lower
FE margins d e to prod ct mi LIFO and
due product mix,
restructuring and restructuring-related costs
© Copyright 2009 Walgreen Co. 20

21. Percent Increase in SG&A Dollars
Two-year Stacked
30% 28.0%
25.5%
% 24.9%
25% 23.4%
10.0%
20% 11.2% 10.2% 8.0% 18.6%
16.9%
16 9% 17.6%
17 6%
15% 8.6% 14.1%
5.7% 7.4%
10% 6.1%
18.0%
18 0%
14.3% 14.7% 15.4%
5% 10.0% 11.2% 10.2%
8.0%
0%
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
+1Q08 +2Q08 +3Q08 +4Q08 +1Q09 +2Q09 +3Q09 +4Q09
Note: SG&A data adjusted for vacation accrual in 4Q08 and restructuring and restructuring-related costs in 1Q, 2Q, 3Q and 4Q 2009.
© Copyright 2009 Walgreen Co. 21

22. Rewire for Growth on Target
 $500 million pre-tax savings in FY10
 $1 billion pre-tax savings in FY11
1Q09 2Q09 3Q09 4Q09
Savings $.01 $.02 $.06 $.07
Costs* ($.01) ($.06) ($.06) ($.03)
Net
$.00 ($.04) $.00 $.04
Savings
*Restructuring and restructuring-related charges include impact of CCR markdown activity on gross profit margin
Restructuring
© Copyright 2009 Walgreen Co. 22

23. Income Statement Details
4Q08 4Q09
LIFO Provision $24M $48M
g
Restructuring $51M
 SKU discontinuation $19M
 Consultants and other $23M
 Reduction in force $9M
Net Interest Expense $7M $23M
Tax Rate 37.1% 35.8%
© Copyright 2009 Walgreen Co. 23

24. Balance Sheet Highlights
4Q08 4Q09 Change
Accounts Receivable $2.5B $2.5B (1.2%)
Inventories $7.2B $6.8B (
(6.3%)
)
Accounts Payable ($4.3B) ($4.3B) 0.4%
Total $5.4B
$5 4B $5.0B
$5 0B (7.4%)
(7 4%)
Total as a % of Sales 37.0% 31.8% 14.1%
© Copyright 2009 Walgreen Co. 24

25. FIFO Inventory Trends
4Q08 1Q09 2Q09 3Q09 4Q09
Percent
Change Total 7.2% 10.0% 4.6% (0.3%) (3.5%)
Inventory
I t
Percent
C
Change Total
g
(2.2%)
(2 2%) 0.1%
0 1% (4.0%)
(4 0%) (9.1%)
(9 1%) (11.1%)
(11 1%)
Inventory per
Store*
*Total FIFO inventory/total drugstore locations
Total
© Copyright 2009 Walgreen Co. 25

26. Net Cash
1Q09 2Q09 3Q09 4Q09
Cash $886 $909 $2,300 $2,087
Short Term
– $650 $100 $500
Investments
Short Term Debt $1,081 $12 $10 $15
Long Term Debt $1,337 $2,332 $2,338 $2,336
Net Cash* ($1,532M) ($785M) $52M $236M
*Net cash = cash and cash-equivalents plus short-term investments less short-term and long-term debt
© Copyright 2009 Walgreen Co. 26

27. Capital Expenditures
Dollars in Billions
FY08 FY09 FY10E
New Stores $1.6 $1.4 lower
Existing Stores $0.3 $0.2 higher
DCs $0.1
$0 1 $0.1
$0 1 lower
IT & Other $0.2 $0.2 higher
Total
T t l $2.2
$2 2 $1.9
$1 9 ~$1.6
$1 6
© Copyright 2009 Walgreen Co. 27

28. Cash Flow ($ in Millions)
Cash Flow
from Operations Free Cash Flow
(From St t
(F Statements of Cash Flows)
t f C h Fl ) (FCF=Cash Flow from Operations – C E )
(FCF C h Fl f O ti CapEx)
1,500 1,500
2009
1,000 1,000
2009
2008
500 500
2008
0 0
-500 -500
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
© Copyright 2009 Walgreen Co. 28

29. The Road Ahead
 Opportunities
– Executing our 3 core strategies
– Significant growth and share gain
– Aggressively investing in business model
 Challenges... Our Next Opportunities
– Reimbursement pressure continues
– Economic uncertainty
© Copyright 2009 Walgreen Co. 29

30. Questions & Answers
Q ti A
© Copyright 2009 Walgreen Co. 30

31. © Copyright 2009 Walgreen Co. 31

32. Appendix
© Copyright 2009 Walgreen Co. 32

33. Calculation of Adjusted SG&A:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
1Q08 1Q09
SGA under GAAP $ 3,193 $ 3,482
Less: Restructuring and
g
Restructuring-related Costs $ - $ 14
Adjusted SGA $ 3,193 $ 3,468
Adjusted YOY % Increase 8.6%
© Copyright 2009 Walgreen Co. 33

34. Calculation of Adjusted Gross Profit:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
2Q08 2Q09
Gross Profit under GAAP $ 4,442 $ 4,657
Plus: Restructuring and
g
Restructuring-related Costs $ - $ 11
Adjusted Gross Profit $ 4,442 $ 4,668
Adjusted YOY % Increase 5.1%
© Copyright 2009 Walgreen Co. 34

35. Calculation of Adjusted SG&A:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
2Q08 2Q09
SGA under GAAP $ 3,354 $ 3,627
Less: Restructuring and
g
Restructuring-related Costs $ - $ 82
Adjusted SGA $ 3,354 $ 3,545
Adjusted YOY % Increase 5.7%
© Copyright 2009 Walgreen Co. 35

36. Calculation of Adjusted Gross Profit:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
3Q08 3Q09
Gross Profit under GAAP $ 4,245 $ 4,459
Plus: Restructuring and
g
Restructuring-related Costs $ - $ 65
Adjusted Gross Profit $ 4,245 $ 4,524
Adjusted YOY % Increase 6.6%
© Copyright 2009 Walgreen Co. 36

37. Calculation of Adjusted SG&A:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
3Q08 3Q09
SGA under GAAP $ 3,331 $ 3,613
Less: Restructuring and
g
Restructuring-related Costs $ - $ 34
Adjusted SGA $ 3,331 $ 3,579
Adjusted YOY % Increase 7.4%
© Copyright 2009 Walgreen Co. 37

38. Calculation of Adjusted Gross Profit:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
4Q08 4Q09
Gross Profit under GAAP $ 4,035 $ 4,346
Plus: Restructuring and
g
Restructuring-related Costs $ - $ 19
Adjusted Gross Profit $ 4,035 $ 4,365
Adjusted YOY % Increase 8.2%
© Copyright 2009 Walgreen Co. 38

39. Calculation of Adjusted SG&A:
Restructuring
Restr ct ring and Restructuring-Related Costs
Restr ct ring Related
Dollars in Millions
4Q08 4Q09
SGA under GAAP $ 3,324 $ 3,644
Less: Restructuring and
g
Restructuring-related Costs $ - $ 32
Adjusted SGA $ 3,324 $ 3,612
Adjusted YOY % Increase 8.7%
© Copyright 2009 Walgreen Co. 39

40. Reconciliation of FIFO Inventory:
4Q08 1Q09 2Q09 3Q09 4Q09
Total FIFO
$8,316.3 $9,408.4 $8,742.2 $8,082.4 $8,028.7
Inventory
LIFO Provision $1,067.3 $1,110.5 $1,158.7 $1,191.4 $1,239.4
O
Total LIFO
$7,249.0
$7 249 0 $8,297.9
$8 297 9 $7,583.5
$7 583 5 $6,891.0
$6 891 0 $6,789.3
$6 789 3
Inventory
© Copyright 2009 Walgreen Co. 40

41. Calculation of Free Cash Flow:
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
Cash Flow from
Operations $390 $1,116 $985 $548 $312 $1,428 $1,519 $852
under GAAP
Capital
Expenditures ($490) ($553) ($610) ($572) ($638) ($454) ($442) ($393)
under GAAP
Free Cash Flow
non-GAAP ($100) $563 $375 ($24) ($326) $974 $1,077 $459
measure
© Copyright 2009 Walgreen Co. 41