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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended August 31, 2001.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Transition Period From ____________ to ___________

Commission file number 1-604.

WALGREEN CO.
(Exact name of registrant as specified in its charter)

Illinois

(State of incorporation)

36-1924025

(I.R.S. Employer Identification No.)

200 Wilmot Road, Deerfield, Illinois

60015

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (847) 940-2500

Securities registered pursuant to Section 12(b) of the Act:

 

Name of each exchange

Title of each class

on which registered

Common Stock ($.078125 Par Value)

New York Stock Exchange

 

Chicago Stock Exchange

Preferred Share Purchase Rights

New York Stock Exchange

 

Chicago Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None____

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

Yes X No _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ ]

As of October 31, 2001, there were 1,020,077,621 shares of Walgreen Co. common stock, par value $.078125 per share, issued and outstanding and the aggregate market value of such common stock held by non-affiliates (based upon the closing transaction price on the New York Stock Exchange) was approximately $32,703,438,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the year ended August 31, 2001, only to the extent expressly so stated herein, are incorporated by reference into parts I, II and IV of Form 10-K. Portions of the registrant's proxy statement for its 2001 annual meeting of shareholders to be held January 9, 2002, are incorporated by reference into part III of Form 10-K.

PART I

Item 1. Business

(a) General development of business.

Walgreen Co. (The "company" or "Walgreens"), the nation's largest drugstore chain, recorded its 27th year of consecutive sales and earnings growth. During the year, the company opened 474 stores while 119 were closed, which brought the total to 3,520 stores, including 3 mail service facilities. Most of the closings involved relocations to more convenient and profitable freestanding locations. At August 31, 2001 stores were located in 43 states and Puerto Rico. The company has announced plans to operate 6,000 stores by 2010.

Prescription sales continue to become a larger portion of the company's business. This year prescriptions accounted for 57.5% of sales compared to 55.2% last year. Within prescription sales, third party sales were 88.4% of sales compared to 86.1% a year ago. The company expects these trends to continue due to the aging of the population, availability of new drugs and the shift to managed care.

To support store expansion, distribution centers are under construction in West Palm Beach, the Dallas Metro area, and Northern Ohio. Plans also include opening a Southern California center in 2004.

During the past year the company spent approximately $1.2 billion on capital expenditures, which includes approximately $928 million related to stores and approximately $235 million for distribution centers.

In July the company announced that President David W. Bernauer will become Chief Executive Officer, effective January 9, 2002. He will retain his title as President. Current CEO and Chairman L. Daniel Jorndt will continue as Chairman and remain active in day-to-day business operations.

(b) Financial information about industry segments.

The company's primary business is the operation of retail drugstores.

(c) Narrative description of business.

 

(i) Principal products produced and services rendered.

The drugstores are engaged in the retail sale of prescription and nonprescription drugs and carry additional product lines such as general merchandise, cosmetics, toiletries, household items, food and beverages. Customer prescription purchases can be made at the drugstores as well as through the mail, by telephone and on the internet.

The estimated contributions of various product classes to

Sales for each of the last three fiscal years are as follows:

Product Class

Percentage

2001

2000

1999

Prescription Drugs

58%

55%

52%

Nonprescription Drugs *

12

11

12

Cosmetics, Toiletries *

7

8

8

General Merchandise *

23

26

28

Total Sales

100%

100%

100%

* Estimates based, in part, on store scanning information.

1

(ii) Status of a product or segment.

Not applicable.

(iii) Sources and availability of raw materials.

Inventories are purchased from numerous domestic and foreign suppliers. The loss of any one supplier or group of suppliers under common control would not have a material effect on the business.

Fuel and other sources of energy are relied upon for the distribution of merchandise and in the general operations of the retail stores. The company has not experienced significant energy shortages nor have energy costs during the past year materially affected the cost of operations. Energy savings programs continue to further control these costs.

(iv) Patents, trademarks, licenses, franchises and concessions held.

Walgreens markets products under various trademarks and trade names and holds assorted business licenses (pharmacy, occupational, liquor, etc.) having various lives, which are necessary for the normal operation of business.

(v) Seasonal variations in business.

The non-pharmacy business is seasonal in nature, with Christmas generating a higher proportion of sales and earnings than other periods. See the note "Summary of Quarterly Results (Unaudited)" on Page 29 of the Annual Report to Shareholders for the year ended August 31, 2001 ("Annual Report"), which isincorporated herein by reference.

(vi) Working capital practices.

The company generally finances its inventory and expansion needs with internally generated funds. During fiscal 2001 the company obtained funds through the placement of commercial paper. See the note "Short-Term Borrowings" on page 27 and "Management's Discussion and Analysis of Financial Condition" on page 21 of the Annual Report. Short-term borrowings are also anticipated in fiscal 2002 to support working capital needs.

Due to the nature of the retail drugstore business, sales are principally for cash. However, 88% of prescription sales are now covered by third party payers. Customer returns are immaterial.

(vii) Dependence upon limited number of customers.
 

Sales are to numerous customers which include various managed care organizations; therefore, the loss of any one customer or a group of customers under common control would not have a material effect on the business. No customer accounts for ten percent or more of the company's consolidated sales.

(viii)Backlog Orders.

Not applicable.

2

(ix) Government contracts.

The company fills prescriptions for many state welfare plans. Revenues from all such plans are 6% of total sales.

(x) Competitive conditions.

The drug store industry is highly competitive. As one of the volume leaders in the retail drug industry, Walgreens competes with various retailers, including chain and independent drugstores, mail order prescription providers, internet pharmacies, grocery, variety and discount department stores. Competition remained keen during the fiscal year with the company competing on the basis of price, convenience, service and variety. The company's geographic dispersion tends to offset the impact of temporary economic and competitive conditions in individual markets.

Sales by geographic area for fiscal 2001 were as follows:

Percent
Of Sales

State

Florida

18%

Illinois

12

Texas

10

Arizona

6

California

7

Wisconsin

4

37 other states and Puerto Rico

43

100%

(xi) Research and development activities.

The company does not engage in any material research activities.

(xii) Environmental disclosures.

 

Federal, state and local environmental protection requirements have no material effect upon capital expenditures, earnings or competitive position of the company.

(xiii)Number of employees.

The company employs approximately 129,000 persons, about 46,000 of whom are part-time employees working less than 30 hours per week.

(d) Financial information about foreign and domestic operations and export sales.

All the company sales occur within the continental United States and Puerto Rico. There are no export sales.

3

Cautionary Note Regarding Forward Looking Statements

Certain information in this annual report, as well as in other public filings, our web site, press releases and oral statements made by our representatives, is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes statements concerning pharmacy sales trends, prescription margins, number of new store openings, and the level of capital expenditures; as well as those that include or are preceded by the words "expects,""estimates,""believes" or similar language. For such statements, we claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The following factors, in addition to those discussed elsewhere in this annual report for the fiscal year ended August 31, 2001, could cause results to differ materially from management expectations as projected in such forward-looking statements: the impact of events related to the September 11 terrorist attacks, changes in economic conditions generally or in the markets served by the company; consumer preferences and spending patterns; competition from other drugstore chains, supermarkets, on-line retailers, other retailers and mail order companies; changes in state or federal legislation or regulations; the efforts of third party payers to reduce prescription drug costs; the success of planned advertising and merchandising strategies; the availability and cost of real estate and construction; accounting policies and practices; the company’s ability to hire and retain pharmacists and other store and management personnel; the company’s relationships with its suppliers; the company’s ability to successfully implement new computer systems and technology; and adverse determinations with respect to litigation or other claims. Unless otherwise required by applicable securities laws, the company assumes no obligation to update its forward-looking statements to reflect subsequent events or circumstances.

Item 2. Properties

The number and location of the company's drugstores is incorporated by reference to the table under the caption "On 3,520 Corners" on page 32 of the Annual Report. Most of the company's drugstores are leased. The leases are for various terms and periods. See the caption, "Leases" on page 26 of the Annual Report, which section is incorporated herein by reference. The company owns approximately 20% of the retail stores open at August 31, 2001. The company has an aggressive expansion program of adding new stores and remodeling and relocating existing stores. Net selling space of drugstores was increased from 33.7 million square feet at August 31, 2000, to 38.2 million square feet at August 31, 2001. Approximately 60% of company stores have been opened or remodeled during the past five years.

The company's retail drugstore operations are supported by nine distribution centers with a total of approximately 4.9 million square feet of space, of which 3.6 million square feet is owned. The remaining space is leased. All warehouses are served by modern distribution systems for order processing control, operating efficiencies and rapid merchandise delivery to stores. In addition, the company uses public warehouses to handle certain distribution needs. Three new distribution centers are under construction in West Palm Beach, Florida, Ohio and the Dallas metropolitan area. Another is planned in southern California. An existing center in Woodland, California is being expanded.

There are five principal office facilities containing approximately 700,000 square feet of which 500,000 square feet is owned and the remainder is leased. The company owns one mail service facility with a ground lease and leases two other facilities. The combined square footage of the facilities is approximately 187,000 square feet. The mail order and office facilities are adequate for current needs.

4

Item 3. Legal Proceedings

The information in response to this item is incorporated herein by reference to the caption "Contingencies" on page 27 of the Annual Report.

 

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year.

5

EXECUTIVE OFFICERS OF THE REGISTRANT

The following information is furnished with respect to each executive officer

of the company as of August 31, 2001:

NAME AND BUSINESS EXPERIENCE

AGE

OFFICE HELD

L. Daniel Jorndt

60

Chairman and Chief Executive Officer
 

Chairman of the Board since

    
   

January 1999

    
 

Chief Executive Officer since

    
   

January 1998

    
 

President and Chief Operating Officer

    
   

February 1990 to January 1999

    
 

Director since January 1990

    
         

David W. Bernauer

57

President and Chief Operating Officer
 

President and Chief Operating Officer

    
   

Since January 1999

    
 

Senior Vice President July 1996 to

   
   

January 1999

    
 

Chief Information Officer

    
   

February 1995 to January 1999

    
 

Director since January 1999

    
         

Jerome B. Karlin

59

Executive Vice President
 

Executive Vice President since

   
   

February 1999

    
 

Vice President

    
   

September 1987 to February 1999

    
         

Jeffrey A. Rein

49

Executive Vice President
 

Executive Vice President since

    
   

February 2001

    
 

Vice President

    
   

July 1999 to February 2001

    
 

Treasurer March 1996 to January 2000

    
         

R. Bruce Bryant

51

Senior Vice President
 

Senior Vice President since

    
   

September 2000

    
 

Vice President, Drug Store Division,

    
   

September 1997 to September 2000

    
 

District Manager,

    
   

April 1981 to September 1997

    
         

W. Lynn Earnest

58

Senior Vice President
 

Senior Vice President since

    
   

February 1999

    
 

Vice President

    
   

July 1992 to February 1999

    
         

George C. Eilers

61

Senior Vice President
 

Senior Vice President since

    
   

February 1999

    
 

Regional Vice President,

    
   

Drug Store Division, July 1992 to February 1999

    
         
     

6

  
         

EXECUTIVE OFFICERS OF THE REGISTRANT - continued:
         

NAME AND BUSINESS EXPERIENCE

AGE

OFFICE HELD
         

J. Randolph Lewis

51

Senior Vice President
 

Senior Vice President since January 2000

  
 

Vice President March 1996 to January 2000

  
         

Julian A. Oettinger

62

Senior Vice President,

 

Senior Vice President, Secretary and

  

Secretary and General Counsel
   

General Counsel since January 2000

  
 

Vice President, Secretary and General

    
   

Counsel January 1989 to January

    
   

2000

    
         

Roger L. Polark

53

Senior Vice President and
 

Senior Vice President and

 

Chief Financial Officer
   

Chief Financial Officer since

    
   

February 1995

    
         

William A. Shiel

50

Senior Vice President

 

Senior Vice President since July 1993

    
         

John W. Gleeson

54

Vice President

 

Vice President since February 2000

    
 

Divisional Vice President, Marketing

    
   

Systems and Services

    
   

July 1992 to January 2000

    
         

Dana I. Green

51

Vice President

 

Vice President since May 2000

    
 

Divisional Vice President

   
   

July 1998 to January 2000

    
 

Director, Employee Relations

    
   

May 1989 to July 1998

    
         

Robert H. Halaska

60

Vice President

 

Vice President since April 1995

    
 

President, WHP Health Initiatives,

   
   

Inc. since October 1995

    
 

President, Walgreens Healthcare Plus,

    
   

Inc. since September 1991

    
         

Dennis R. O'Dell

54

Vice President

 

Vice President since January 2000

    
 

Divisional Vice President

   
   

January 1997 to January 2000

    
 

Divisional Merchandise Manager

    
   

May 1993 to January 1997

    
         
     

7

  
         

EXECUTIVE OFFICERS OF THE REGISTRANT - continued:
         

NAME AND BUSINESS EXPERIENCE

AGE

OFFICE HELD
         

Robert E. Sgarlata *

51

Vice President

 

Vice President Retail Marketing

    
   

Since November 2000

    
 

Vice President Purchasing and Merchandising

  
   

January 2000 to November 2000

    
 

Divisional Vice President Purchasing

    
   

November 1998 to January 2000

    
         

Trent E. Taylor

44

Vice President

 

Vice President since January 2000

    
 

Chief Information Officer

   
   

Since January 1999

    
 

Director, Infrastructure

    
   

August 1995 to January 1999

    
         

Mark A. Wagner

40

Treasurer
 

Treasurer since January 2000

    
 

Vice President, Drug Store Division

    
   

February 1999 to January 2000

    
 

District Manager

    
   

September 1993 to February 1999

    
         

William M. Rudolphsen

46

Controller
 

Controller since January 1998

    
 

Director of Accounting

    
   

September 1995 to December 1997

    

 

*Mr. Sgarlata has resigned from the company, effective November 21, 2001

There is no family relationship between any of the aforementioned officers of the company.
 

 

8

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder

Matters

The company's common stock is traded on the New York and Chicago Stock Exchanges under the symbol WAG. As of October 31, 2001 there were 94,407 recordholders of company common stock according to the records maintained by the company's transfer agent.

The range of the sales prices of the company's common stock by quarters during the two years ended August 31 2001 are incorporated herein by reference to the note "Common Stock Prices" on page 29 of the Annual Report.

The range of the company’s cash dividends per common share during the two years ended August 31 2001 are as follows:

 

Quarter Ended

2001

2000
 

November

$.035

$.03375
 

February

.035

.03375
 

May

.035

.03375
 

August

.035

.03375
 

Fiscal Year

$.14

$.135

Item 6. Selected Financial Data

The information in response to this item is incorporated herein by reference to the caption "Eleven Year Summary of Selected Consolidated Financial Data" on pages 18 and 19 of the Annual Report.

Item 7. Management's Discussion and Analysis of Financial Condition and

Results of Operations

The information in response to this item is incorporated herein by

Reference to the caption "Management's Discussion and Analysis of Results of

Operations and Financial Condition" on pages 20 and 21 of the Annual Report.

Item 7a. Qualitative and Quantitative Disclosure about Market Risk

Management does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item.

Item 8. Financial Statements and Supplementary Data

See Item 14.

Item 9. Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

None.

9

PART III

The information required for Items 10,11,12 and 13,with the exception of the information relating to the executive officers of the Registrant, which is presented in Part I under the heading "Executive Officers of the Registrant"is incorporated herein by reference to the following sections of the Registrant's Proxy Statement:

Captions in Proxy

Names and ages of Director nominees,

their principal occupations and

other information

Securities Ownership of Directors and Executive

Officers

Executive Compensation

10

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

 

(a) Documents filed as part of this report

 

(1)

The following financial statements, supplementary data, and report of independent public accountants appearing in the Annual Report are incorporated herein by reference.

Annual Report
Page Number

Consolidated Statements of Earnings and Shareholders’ Equity for the years ended August 31, 2001, 2000 and 1999

22
 

Consolidated Balance Sheets at August 31, 2001 and 2000

23
 
 

Consolidated Statements of Cash Flows for the years ended August 31, 2001, 2000 and 1999

24
 

Statement of Major Accounting Policies

25 - 26

 

Notes to Consolidated Financial Statements

26 - 29
     
 

Report of Independent Public Accountants

30
     
 

On 3,520 corners (Table of number of stores by state)

32
     
 

(2)

The following financial statement schedule and related report of independent public accountants are included herein.
   

10-K
   

Page Number
 

Schedule II Valuation and Qualifying Accounts

16
     
 

Supplemental Report of Independent Public Accountants

17
     
 

Schedules I, III, IV and V are not submitted because they are not applicable or not required or because the required information is included in the Financial Statements in (1) above or notes thereto.
     
 

Other Financial Statements -

  
     
 

Separate financial statements of the registrant have been omitted because it is primarily an operating company, and all of its subsidiaries are included in the consolidated financial statements.
     
 

(3)

Exhibits 10(a) through 10(o) constitute management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of this Form 10-K.
     

(b) Reports on Form 8-K

  
     
 

No reports were filed on Form 8-K during the quarter that ended August 31, 2001.
     

(c) Exhibits

  
     
 

3.

(a)

Articles of Incorporation of the company, as amended, filed with the Securities and Exchange Commission as Exhibit 3(a) to the company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated by reference herein.
     
 

(b)

By-Laws of the company, as amended and restated effective as of January 13, 1999, filed with the Securities and Exchange Commission as Exhibit 3(b) to the company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 1999, and incorporated by reference herein.
     
 

4.

(a)

(i)

Walgreen Co. Debt Securities Indenture dated as of May 1, 1986, between the company and Harris Trust and Savings Bank, Trustee, filed with the Securities and Exchange Commission as Exhibit 4(c) to the company's Form S-3 Registration Statement on May 22, 1986 (Registration No. 33-5903), and incorporated by reference herein.
       
   

(ii)

Walgreen Co. Resolutions of Pricing Committee Relating to Debt Securities, filed with the Securities and Exchange Commission as Exhibit 4(a) to the company’s Current Report on Form 8-K dated June 17, 1986 (File No. 1-604), and incorporated by reference herein.
     
 

(b)

Rights Agreement dated as of July 10, 1996, between the company and Harris Trust and Savings Bank, filed with the Securities and Exchange Commission as Exhibit 1. to Registration Statement on Form 8-A on July 11, 1996 (File No. 1-604), and incorporated by reference herein.
     
 

10.

(a)

Top Management Long-Term Disability Plan. (Note 3)
     
 

(b)

Executive short-term Disability Plan Description. (Note 3)
     
 

(c)

(i)

Walgreen Management Incentive Plan (as restated effective October 12, 1994), filed with the Securities and Exchange Commission as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994 (File No. 1-604), and incorporated by reference herein.
     
   

(ii)

Walgreen Co. Management Incentive Plan Amendment No. 1 (effective April 9, 1997), filed with the Securities and Exchange Commission as Exhibit 10 to the company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 1997, and incorporated by reference herein.
     
 

(d)

(i)

Walgreen Co. Restricted Performance Share Plan, as amended, filed with the Securities and Exchange Commission as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated by reference herein.
       

See Notes on page 15.
     

12
     
   

(ii)

Walgreen Co. Restricted Performance Share Plan Amendment (effective October 9, 1996) filed with the Securities and Exchange Commission as Exhibit 10 (d) (ii) to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001.
     
 

(e)

Walgreen Co. Executive Stock Option Plan, as amended, filed with the Securities and Exchange Commission as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated by reference herein.
     
 

(f)

(i)

Walgreen Co. 1986 Director's Deferred Fee/Capital Accumulation Plan. (Note 1)
       
   

(ii)

Walgreen Co. 1987 Director's Deferred Fee/Capital Accumulation Plan. (Note 2)
       
   

(iii)

Walgreen Co. 1988 Director's Deferred Fee/Capital Accumulation Plan. (Note 4)
       
   

(iv)

Walgreen Co. 1992 Director's Deferred Retainer Fee/Capital Accumulation Plan. (Note 8)
       
 

(g)

(i)

Walgreen Co. 1986 Executive Deferred Compensation/Capital Accumulation Plan. (Note 1)
       
   

(ii)

Walgreen Co. 1988 Executive Deferred Compensation/Capital Accumulation Plan. (Note 4)
       
   

(iii)

Amendments to Walgreen Co. 1986 and 1988 Executive Deferred Compensation/Capital Accumulation Plans. (Note 6)
       
   

(iv)

Walgreen Co. 1992 Executive Deferred Compensation/
     

Capital Accumulation Plan Series 1. (Note 8)
       
   

(v)

Walgreen Co. 1992 Executive Deferred Compensation/
     

Capital Accumulation Plan Series 2. (Note 8)
       
   

(vi)

Walgreen Co. 1997 Executive Deferred Compensation/Capital Accumulation Plan Series I, filed with the Securities and Exchange Commission as Exhibit 10(c) to the company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated by reference herein.
       
   

(vii)

Walgreen Co. 1997 Executive Deferred Compensation/Capital Accumulation Plan Series 2, filed with the Securities and Exchange Commission as Exhibit 10(d) to the company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1997, and incorporated by reference herein.
       
   

(viii)

Walgreen Co. 2001 Executive Deferred Compensation/Capital Accumulation Plan filed with the Securities and Exchange Commission as Exhibit 10(g) to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 2001.
     

See Notes on page 15.
     

13
     
 

(h)

Walgreen Co. Executive Deferred Profit-Sharing Plan (as restated effective April 13, 1994), filed with the Securities and Exchange Commission as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1994 (File No. 1-604), and incorporated by reference herein.
       
 

(i)

(i)

Form of Change of Control Employment Agreements. (Note 5)
       
   

(ii)

Amendment to Employment Agreements adopted July 12, 1989. (Note 7)
       
 

(j)

Walgreen Select Senior Executive Retiree Medical Expense Plan, filed with the Securities and Exchange Commission as Exhibit 10(j) to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996 (File No. 1-604), and incorporated by reference herein.
       
 

(k)

(i)

Walgreen Co. Profit-Sharing Restoration Plan (restated effective January 1, 1993), filed with the Securities and Exchange Commission as Exhibit 10(k) to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1993 (File No. 1-604), and incorporated by reference herein.
       
   

(ii)

Walgreen Profit Sharing Restoration Plan Amendment No. 1 (effective October 12, 1994), filed as Exhibit 10(c) to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994 (File No. 1-604), and incorporated by reference herein.
       
 

(l)

Walgreen Co. Retirement Plan for Outside Directors. (Note 7)
       
 

(m)

Walgreen Section 162(m) Deferred Compensation Plan (effective October 12, 1994), filed with the Securities and Exchange Commission as Exhibit 10(d) to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994 (File No. 1-604), and incorporated by reference herein.
       
 

(n)

Walgreen Co. Nonemployee Director Stock Plan Amendment No. 2 (effective September 1, 1998), filed with the Securities and Exchange Commission as Exhibit 10(o)(iii) to the company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998, and incorporated by reference herein.
       
 

(o)

Agreement dated February 3, 1998, by and between Walgreen Co. And Charles R. Walgreen III (for consulting services), filed With the Securities and Exchange Commission as Exhibit 10(a) to the company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 1998, and incorporated by reference herein.
       

See Notes on page 15.
       

14
       
 

11.

The required information for this Exhibit is contained in the Consolidated Statements of Earnings and Shareholders Equity for the years ended August 31, 2001, 2000 and 1999 and also in the Statement of Major Accounting Policies, each appearing in the Annual Report and previously referenced in Part IV, Item 14, Section (a)(1).
       
 

13.

Annual Report to shareholders for the fiscal year ended August 31, 2001. This report, except for those portions thereof which are expressly incorporated by reference in this Form 10-K, is being furnished for the information of the Securities and Exchange Commission and is not deemed to be "filed" as a part of the filing of this Form 10-K.
       
 

21.

Subsidiaries of the Registrant.
       
 

23.

Consent of Independent Public Accountants.
       
       
       

Notes

      
 

(Note 1)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1986 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 2)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1986 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 3)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1990 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 4)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1987 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 5)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Current Report on Form 8-K dated October 18, 1988 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 6)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1988 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 7)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989 (File No. 1-604), and incorporated by reference herein.
       
 

(Note 8)

Filed with the Securities and Exchange Commission as Exhibit 10 to the company's Annual Report on Form 10-K for the fiscal year ended August 31, 1992 (File No. 1-604), and incorporated by reference herein.
       

15

WALGREEN CO. AND SUBSIDIARIES
 

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 

FOR THE YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
 

(Dollars in Millions)
 

Additions

Balance at

Charged to

Balance at

Beginning

Costs and

End

Classification

Of Period

Expenses

Deductions

Of Period

Allowances deducted from receivables

For doubtful accounts -

Year Ended August 31, 2001

$16.9

$28.6

$(24.6)

$20.9

Year Ended August 31, 2000

$ 9.0

$24.3

$(16.4)

$16.9

Year Ended August 31, 1999

$11.2

$27.0

$(29.2)

$ 9.0

16

 

ARTHUR ANDERSEN LLP

SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

 

To the Board of Directors and Shareholders of Walgreen Co.:

We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Walgreen Co. and Subsidiaries' annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated September 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II included in this Form 10-K is the responsibility of the company's management, is presented for purposes of complying with the Securities and Exchange Commission's rules, and is not part of the basic financial statements. Schedule II has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

 

/s/ Arthur Andersen LLP

 

Chicago, Illinois

September 28, 2001

 

 

17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WALGREEN CO.

(Registrant)

By /s/

Roger L. Polark

Date: November 26, 2001
 

Roger L. Polark

  
 

Senior Vice President

  
 

Chief Financial Officer

  

 

Pursuant to the requirements of the Securities and Exchange Act of 1934 this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name

Title

Date

/s/

L. Daniel Jorndt

Chairman of the Board,

November 26, 2001
 

L. Daniel Jorndt

Chief Executive Officer

  
   

and Director

  
       

/s/

David W. Bernauer

President, Chief Operating

November 26, 2001
 

David W. Bernauer

Officer and Director

  
       

/s/

William M. Rudolphsen

Controller

November 26, 2001
 

William M. Rudolphsen

    
       

/s/

William C. Foote

Director

November 26, 2001
 

William C. Foote

    
       

/s/

James J. Howard

Director

November 26, 2001
 

James J. Howard

    
       

/s/

Alan G. McNally

Director

November 26, 2001
 

Alan G. McNally

    
       

/s/

Cordell Reed

Director

November 26, 2001
 

Cordell Reed

    
       

/s/

David Y. Schwartz

Director

November 26, 2001
 

David Y. Schwartz

    
       

/s/

John B. Schwemm

Director

November 26, 2001
 

John B. Schwemm

    
       

/s/

Marilou M. von Ferstel

Director

November 26, 2001
 

Marilou M. von Ferstel

    
       

/s/

C.R. Walgreen III

Director

November 26, 2001
 

C.R. Walgreen III

    
       

 

18