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S E C U R I T I E S A N D E X C H A N G E C O M M I S S I O N
WASHINGTON, D.C. 20549
______________________
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994.
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the Transition Period From _________________ to _______________
Commission file number 1-604.
WALGREEN CO.__________________________________
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1924025_____________
(State of incorporation) (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: (708) 940-2500___
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered______
NEW YORK STOCK EXCHANGE
__COMMON STOCK ($.625 PAR VALUE)____________ ___CHICAGO STOCK EXCHANGE_____
NEW YORK STOCK EXCHANGE
__PREFERRED SHARE PURCHASE RIGHTS___________ ___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, 1994, THERE WERE 123,070,536 SHARES OF WALGREEN CO.
COMMON STOCK, PAR VALUE $.625 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
$4,531,488,000.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED AUGUST 31,
1994, 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 1994 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY
11, 1995, ARE INCORPORATED BY REFERENCE INTO PART III OF FORM 10-K.
PART I
Item 1. Description of Business
(a) General development of business.
Walgreen Co. (the "company" or "Walgreens") was incorporated in 1909 as a
successor to a business founded in 1901 as a single retail drugstore in Chicago,
Illinois, by Charles R. Walgreen, Sr. At August 31, 1994, the company operated
1,966 retail drugstores and 2 mail order facilities in 30 states and Puerto
Rico.
In fiscal 1994, the company opened 194 new drugstores, acquired 2 stores,
completed remodelings of 70 units, and closed 64 drugstores. Net selling space
of drugstores was increased from 18.0 million to 19.3 million square feet. In
the last five fiscal years, the company has opened 663 new drugstores, 1 new
mail service facility, acquired 21 stores, completed remodelings of 624 units
and closed 201 drugstores. In addition, 2 major distribution centers were added
during the five-year period and 1 was closed.
The company expects to open 200 or more new stores annually for the next
five years, with the goal of operating 3,000 stores by the year 2000. The
company recently entered the Cleveland/Akron/Canton market with plans to have 15
stores open by Thanksgiving and expects to open four to five stores in Buffalo
by Christmas. In the next three years, 25 to 30 stores are expected to open in
Philadelphia, the first of which will open in the fall of 1995. The company
intends to enter the Seattle/Tacoma market in fiscal 1996. An eighth major
distribution center is planned to open in fiscal 1995 near Sacramento,
California, to serve the growing store base in the western United States.
Walgreens Healthcare Plus is the company's three-year old pharmacy mail
service subsidiary. The Orlando, Florida, state-of-the-art facility, opened
September 1992. The company also plans to open a new and larger mail service
facility in Tempe, Arizona, which is scheduled to be open in November 1994.
This unit, with an initial capacity of 5,000 prescriptions per day, is designed
to service future growth.
Technological advances include the continued implementation of the
"Strategic Inventory Management System" designed to lower inventory investment
and improve marketing capabilities. All major distribution centers are totally
on this new system while store implementation continues. Store scanning is now
providing marketing information that was not available a few years ago. Direct
links between the company's pharmacy computer network and third party
administrators represent over 80% of the company's third party business. These
"links" cause faster reimbursement and lower rejection rates. A multi-million
dollar project called Intercom Plus has begun. This system, which is a
re-engineering of the prescription filling process, is designed to improve
productivity and patient service. Store implementation is scheduled to begin in
Spring 1995.
(b) Financial information about industry segments.
The company's primary business is the operation of retail drugstores.
1
(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, liquor and
beverages, cosmetics, toiletries and tobacco.
The estimated contributions of various product classes
to sales for each of the last three fiscal years are as
follows:
Percentage_________
Product Class 1994 1993 1992_
Prescription Drugs 41% 38% 37%
General Merchandise * 24 25 25
Nonprescription Drugs * 13 14 14
Liquor, Beverages 9 10 11
Cosmetics, Toiletries * 9 9 9
Tobacco Products * 4 4 4__
Total Sales 100% 100% 100%
====== ====== ======
* Estimated based, in part, on periodic sampling of
about 1% of retail units.
(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. Increased energy costs over the years
have not materially increased the costs of operations.
2
(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 business is seasonal in nature, with Christmas
generating a higher proportion of sales and earnings than
other periods. See the caption "The Walgreen Year...A Review
by Quarters" on Page 30 of the Annual Report to Shareholders
for the year ended August 31, 1994 ("Annual Report"), which
is incorporated herein by reference.
(vi) Working capital practices.
During fiscal 1994 the company did obtain funds through
the placement of commercial paper. The company generally
finances its inventory and expansion needs with internally
generated funds. However, short-term borrowings will be
necessary to finance the growth in inventory prior to the
1994 Christmas season.
Due to the nature of the retail drugstore business,
sales are principally for cash. Customer returns are
immaterial.
(vii) Dependence upon limited number of customers.
Sales are to numerous customers which include health
maintenance organizations (HMOs); 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 revenue.
(viii) Backlog Orders.
Not applicable.
(ix) Government contracts.
The company is not a party to any significant government
contracts.
(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, grocery, variety and discount
department stores. Competition remained keen during the
fiscal year with the company competing on the basis of price,
convenience and variety. The company's geographic dispersion
tends to offset the impact of temporary economic and
competitive conditions in individual markets.
3
Sales by geographic area for fiscal 1994 were as
follows:
South and Southeast 28%
Midwest Locations other
than Chicago and Suburbs 21
Southwest 18
Chicago and Suburbs 14
West 10
East 9
(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 61,900 persons, about
19,900 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.
Item 2. Properties
The following are the principal facilities utilized by the company.
Office Facilities
Description Location Interest in Property_____
Office building 200 Wilmot Road Owned in fee by the
(Corporate Headquarters) Deerfield, Illinois company.
3 buildings
255,000 square feet
Office building 300 Wilmot Road Owned in fee by the
2 buildings Deerfield, Illinois company.
148,000 square feet
Office building 1517 N. Bowman Ave. Leased, expiration date
42,000 square feet Danville, Illinois 10/31/2022, option to
cancel with 12 months
notice 10/31/02,
10/31/07, 10/31/12
and 10/31/17 with no
penalty, option to cancel
any time after 10/31/87,
with 6 months notice
provided the company
offers to purchase upon
the terms and conditions
of the lease.
4
Office Facilities - continued:
Description Location Interest in Property_____
Data Processing facility 1084 Mt. Prospect Plaza Leased, expiration date
and office building Mt. Prospect, Illinois 11/30/2005, 2 options to
72,000 square feet extend for 10 years
each, and 6 options
to extend for 5 years
each thereafter.
Distribution Facilities
Description Location Interest in Property_____
Warehouse 5300 St. Charles Road Owned in fee by the
267,000 square feet Berkeley, Illinois company.
Warehouse addition 5300 St. Charles Road Leased from the Village
192,000 square feet Berkeley, Illinois of Berkeley, Illinois in
connection with an
Industrial Revenue Bond
Issue, expiration
date 12/1/98, with option
to buy.
Warehouse 4400 State Highway 19 Leased, expiration date
357,000 square feet Windsor Township 2/28/2007, 5 options to
Dane County, Wisconsin extend for 5 years, with
option to buy.
Warehouse addition 4400 State Highway 19 Owned in fee by the
109,000 square feet Windsor Township company.
Dane County, Wisconsin
Warehouse 2400 North Walgreen St. Leased, expiration date
200,000 square feet Flagstaff, Arizona 5/31/2003, 6 options to
extend for 5 years each,
with option to buy.
Warehouse addition 2400 North Walgreen St. Owned in fee by the
124,000 square feet Flagstaff, Arizona company.
Warehouse 8110 Kempwood Drive Owned in fee by the
404,000 square feet Houston, Texas company.
Warehouse 2455 Premier Row Leased, expiration date
206,000 square feet Orlando, Florida 3/31/2006, 5 options to
extend for 5 years each,
with option to buy.
Warehouse addition 2455 Premier Row Owned in fee by the
146,000 square feet Orlando, Florida company.
Warehouse 730 W. U.S. Highway 30 Owned in fee by the
91,000 square feet Valparaiso, Indiana company.
Warehouse 5100 Lake Terrace N.E. Owned in fee by the
431,000 square feet Mt. Vernon, Illinois company.
5
Distribution Facilities - continued:
Description Location Interest in Property_____
Warehouse 125 N. Commerce Way Owned in fee by the
324,000 square feet Bethlehem, Pennsylvania company.
Other Facilities
Description Location Interest in Property_____
Mail Order Pharmacy 519 W. Lone Cactus Drive Leased, expiration date
7,000 square feet Phoenix, Arizona 5/31/95.
Mail Order Pharmacy 7357 Greenbriar Parkway Leased, expiration date
37,000 square feet Orlando, Florida 8/31/2003, option to
cancel with 6 months
notice 8/13/97 and
8/31/2000.
Mail Order Pharmacy Price Elliot Research Pk. Facility owned in fee by
(to open November 1994) Tempe, Arizona company; ground
80,000 square feet subleased, expiration
date 12/31/2082, options
to cancel 12/31/13 and
every 5 years thereafter
with 6 months notice.
All warehouses listed above are fully utilized and are served by electronic
data processing systems for order processing control, operating efficiencies and
rapid merchandise delivery to stores. All stores receive merchandise within two
days of ordering. In addition, the company uses public warehouses to handle
distribution needs. Distribution capacity is adequate now, but as the company
continues to expand, additional space will be needed to maintain service levels.
A major distribution center is planned to open in fiscal 1995 near Sacramento,
California, to serve the growing store base in the western United States. This
335,000-square-foot facility, currently under construction, is owned in fee by
the company. Studies are currently being performed to determine where and when
distribution space will be added.
Most of the company's retail stores located in 30 states and Puerto Rico
are leased and fully utilized. The leases are for various terms and periods.
See the caption, "Leases" on page 26 of the Annual Report, which is incorporated
herein by reference. However, the company owns approximately 4% of the retail
stores open at August 31, 1994. The company has an aggressive expansion program
of adding new stores and remodeling and repositioning existing stores. Over the
past five years, approximately 70% of the Walgreen stores have been opened or
remodeled.
The company's four principal office facilities are adequate for current
needs and no plans are currently being made for additional space.
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.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished with respect to each executive
officer of the company as of August 31, 1994:
NAME AND BUSINESS EXPERIENCE AGE OFFICE HELD_____________
Charles R. Walgreen III 58 Chairman of the Board,
Chairman of the Board since April Chief Executive Officer
1976 and Director
Chief Executive Officer since 1971
Director since 1963
L. Daniel Jorndt 53 President, Chief
President and Chief Operating Operating Officer and
Officer since February 1990 Director
Director since January 1990
Senior Vice President and
Treasurer May 1985 to
January 1990
Charles D. Hunter 64 Vice Chairman,
Vice Chairman since February 1990 Chief Financial Officer
Chief Financial Officer since 1976 and Director
Director since 1974
Executive Vice President
October 1978 to January 1990
Vernon A. Brunner 54 Executive Vice President
Executive Vice President since
February 1990
Senior Vice President
January 1982 to January 1990
Glenn S. Kraiss 61 Executive Vice President
Executive Vice President since
February 1990
Senior Vice President
January 1982 to January 1990
John R. Brown 58 Senior Vice President
Senior Vice President since
May 1985
John A. Rubino 53 Senior Vice President
Senior Vice President since July 1991
Vice President
October 1984 to July 1991
William A. Shiel 43 Senior Vice President
Senior Vice President since July 1993
Vice President
May 1985 to July 1993
7
EXECUTIVE OFFICERS OF THE REGISTRANT - continued:
NAME AND BUSINESS EXPERIENCE AGE OFFICE HELD_____________
Robert C. Atlas 59 Vice President
Vice President since September 1987
David W. Bernauer 50 Vice President
Vice President since February 1990
Treasurer
February 1990 to June 1992
Regional Vice President
September 1987 to January 1990
W. Lynn Earnest 51 Vice President and
Vice President and Treasurer Treasurer
since July 1992
Regional Vice President
July 1980 to June 1992
Jerome B. Karlin 52 Vice President
Vice President since September 1987
Julian A. Oettinger 55 Vice President,
Vice President, Secretary and Secretary and
General Counsel since January 1989 General Counsel
Roger L. Polark 46 Vice President
Vice President since June 1988
Roger H. Clausen 52 Controller
Controller since June 1988
There is no family relationship between any of the aforementioned officers
of the company.
8
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The company's common stock is traded on the New York and Chicago
Stock Exchanges under the symbol WAG. As of October 31, 1994 there were
29,910 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 and the cash dividends declared per common share during the two
years ended August 31, 1994 are as follows:
Dividends Common Stock Prices
Declared 1994 1993________
Quarter Ended 1994 1993 High Low High Low__
November $.17 $.15 $43 3/8 $36 7/8 $44 1/8 $37 1/4
February .17 .15 42 1/4 37 3/4 44 1/2 36 1/8
May .17 .15 42 3/4 39 7/8 42 3/4 36 5/8
August .17 .15 40 5/8 34 1/8 43 1/2 36 3/4
Fiscal Year $.68 $.60 $43 3/8 $34 1/8 $44 1/2 $36 1/8
========================================================================
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 8. Financial Statements and Supplementary Data
See Item 14.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
9
PART III
The information required for Items 10, 11 and 12, 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 Proxy Page Numbers
Names and ages of Director nominees,
their principal occupations and
other information 2
Securities Ownership of Directors and Officers 4 - 5
Executive Compensation 6 - 12
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 auditors'
report appearing in the Annual Report are incorporated herein by
reference.
Annual Report
Page Number_
Consolidated Statements of Earnings and Retained Earnings 22
for the years ended August 31, 1994, 1993 and 1992
Consolidated Balance Sheets at August 31, 1994 and 1993 23
Consolidated Statements of Cash Flows 24
for the years ended August 31, 1994, 1993 and 1992
Statement of Major Accounting Policies 25 - 26
Notes to Consolidated Financial Statements 26 - 28
Report of Independent Public Accountants 29
Summary of Quarterly Results for the years ended 30
August 31, 1994 and 1993 (Unaudited)
(2) The following financial statement schedules and related auditors'
report are included herein.
10-K
Page Number
Schedule II Amounts Receivable from Related Parties, 16
Underwriters, Promoters and Employees Other
Than Related Parties
Schedule V Property, Plant and Equipment 17
Schedule VI Accumulated Depreciation, Depletion and 18
Amortization of Property, Plant and
Equipment
Schedule VIII Valuation and Qualifying Accounts 19
Report of Independent Public Accountants on Supplemental 20
Schedules
Schedules I, III, IV, VII, IX, X, XI, XII, XIII and XIV 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 subsidiaries
included in the consolidated financial statements are deemed to be
totally held.
11
(3) Exhibits 10(a) through 10(l) 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 on Form 8-K were filed by the Registrant during the quarter
ending August 31, 1994.
(c) Exhibits
3. (a) Articles of Incorporation of the company, as amended.
(b) By-Laws of the company, as amended and restated effective as
of February 1, 1990, filed as Exhibit 4.03 to the company's
Form S-8 Registration Statement on July 15, 1992
(Registration No. 33-49676), 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) (i) Rights Agreement dated as of July 9, 1986, between the
company and Harris Bank and Trust Company, filed with
the Securities and Exchange Commission as Exhibit (1) to
Registration Statement on Form 8-A on August 15, 1986
(File No. 1-604), and incorporated by reference herein.
(ii) Amendment to Rights Agreement dated as of October 18,
1988, between the company and Harris Bank and Trust
Company. (Note 5)
10. (a) Top Management Long-Term Disability Plan. (Note 3)
(b) Executive Short-Term Disability Plan Description. (Note 3)
________________________________________________________________________________
See Notes on page 15.
12
(c) Walgreen Management Incentive 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 May 31, 1994, and incorporated by reference herein.
(d) Walgreen Co. Restricted Performance Share Plan and amendments
thereto effective October 18, 1988 and July 8, 1992, filed
with the Securities and Exchange Commission as Exhibit 10(d)
to the company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1992, and incorporated by reference
herein.
(e) Walgreen Co. Executive Stock Option Plan (as amended
effective October 13, 1992) filed with the Securities and
Exchange Commission as Exhibit 19 to the company's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1993,
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)
(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, 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)
________________________________________________________________________________
See Notes on page 15.
13
(j) Walgreen Select Senior Executive Retiree Medical Expense
Plan. (Note 6)
(k) 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, and incorporated by reference herein.
(l) Walgreen Co. Retirement Plan for Outside Directors. (Note 7)
11. The required information for this Exhibit is contained in the
Consolidated Statements of Earnings and Retained Earnings for the
years ended August 31, 1994, 1993 and 1992 and also in the Notes
to Consolidated Financial Statements, 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,
1994. 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.
27. Financial Data Schedule.
________________________________________________________________________________
See Notes on page 15.
14
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, 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, 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, and incorporated by
reference herein.
15
WALGREEN CO. AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
(Dollars in Thousands)
Balance at Balance at
Year Ended Beginning Amounts End
August 31, Name of Debtor of Period Additions Collected of Period
1994 James Joustra (1) $ 153 $ 0 $ 153 $ 0
1993 Bruce Hyatte (1) 0 108 108 0
James Joustra (1) 0 153 0 153
Harry Zamminer (1) 0 105 105 0
1992 None (2)
(1) Represent unsecured interest-free relocation loans.
(2) Amounts receivable from related parties, underwriters, promoters and employees
other than related parties were $100,000 or less.
16
WALGREEN CO. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
(Dollars in Thousands)
Balance at Retirements Balance at
Beginning Additions and Sales End
Classification of Period at Cost at Cost of Period
1994
Land $ 38,994 $ 25,490 $ 0 $ 64,484
Land improvements 8,545 5,386 (297) 13,634
Buildings (on owned and leased land) 145,285 49,232 (2,444) 192,073
Equipment 821,532 144,330 (56,675) 909,187
Capitalized systems development costs 63,429 24,456 0 87,885
Leasehold improvements 278,374 41,082 (12,856) 306,600
Leased properties under capital leases 24,329 0 (951) 23,378
$1,380,488 $ 289,976 $ (73,223) $1,597,241
========== ========== =========== ===========
1993
Land $ 25,864 $ 13,130 $ 0 $ 38,994
Land improvements 8,503 42 0 8,545
Buildings (on owned & leased land) 124,499 20,786 0 145,285
Equipment 763,775 102,904 (45,147) 821,532
Capitalized systems development costs 53,775 9,654 0 63,429
Leasehold improvements 254,458 38,158 (14,242) 278,374
Leased properties under capital leases 27,426 0 (3,097) 24,329
$1,258,300 $ 184,674 $ (62,486) $1,380,488
========== ========== =========== ===========
1992
Land $ 20,580 $ 5,284 $ 0 $ 25,864
Land improvements 3,116 5,387 0 8,503
Buildings (on owned and leased land) 114,638 9,861 0 124,499
Equipment 711,369 83,891 (31,485) 763,775
Capitalized systems development costs 41,971 11,804 0 53,775
Leasehold improvements 235,482 28,716 (9,740) 254,458
Leased properties under capital leases 27,426 0 0 27,426
$1,154,582 $ 144,943 $ (41,225) $1,258,300
========== ========= ========== ==========
Depreciation and amortization are generally provided using the following annual rates:
Data processing equipment 12%
Store, warehouse, and office equipment 8%
Capitalized systems development costs 20%
Buildings (including buildings on leased land based
on lesser of lease terms or useful lives) 2-1/2% to 8%
Land improvements 5%
Leasehold improvements (amortized over the lease term
if shorter than estimated physical life) 8%
Leased properties under capital leases are amortized over the firm term of the respective leases.
17
WALGREEN CO. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992
(Dollars in Thousands)
Additions
Balance at Charged to Retirements, Balance at
Beginning Costs and Renewals and End
Classification of Period Expenses Replacements of Period
1994
Land improvements $ 1,456 $ 570 $ (297) $ 1,729
Buildings (on owned and leased land) 27,961 5,916 (265) 33,612
Equipment 277,838 78,336 (47,553) 308,621
Capitalized systems development costs 12,681 8,901 0 21,582
Leasehold improvements 116,079 23,271 (10,453) 128,897
Leased properties under capital leases 17,140 1,124 (951) 17,313
$ 453,155 $ 118,118 $ (59,519) $ 511,754
========= ========= ========== =========
1993
Land improvements $ 1,004 $ 452 $ 0 $ 1,456
Buildings (on owned & leased land) 23,474 4,487 0 27,961
Equipment 245,135 71,235 (38,532) 277,838
Capitalized systems development costs 6,969 5,712 0 12,681
Leasehold improvements 106,404 21,559 (11,884) 116,079
Leased properties under capital leases 19,022 1,215 (3,097) 17,140
$ 402,008 $ 104,660 $ (53,513) $ 453,155
========= ========= ========== =========
1992
Land improvements $ 710 $ 294 $ 0 $ 1,004
Buildings (on owned and leased land) 19,644 3,830 0 23,474
Equipment 208,414 63,588 (26,867) 245,135
Capitalized systems development costs 3,880 3,089 0 6,969
Leasehold improvements 94,946 19,979 (8,521) 106,404
Leased properties under capital leases 17,693 1,329 0 19,022
$ 345,287 $ 92,109 $ (35,388) $ 402,008
========= ========= ========== =========
18
WALGREEN CO. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
(Dollars in Thousands)
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, 1994 $ 23,050 $ 4,018 $ (5,467) $ 21,601
======== ======== ========= ========
Year ended August 31, 1993 $ 19,059 $ 12,287 $ (8,296) $ 23,050
======== ======== ========= ========
Year ended August 31, 1992 $ 11,783 $ 19,794 $(12,518) $ 19,059
======== ======== ========= ========
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES
To the Board of Directors and Shareholders of Walgreen Co.:
We have audited in accordance with generally accepted auditing standards,
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 October 20,
1994. Our report on the financial statements includes an explanatory
paragraph with respect to the changes in the methods of accounting for
postretirement benefits other than pensions and income taxes as discussed
in the Statement of Major Accounting Policies, under "Accounting
Changes". Our audits were made for the purpose of forming an opinion on
those statements taken as a whole. The supplemental schedules II, V, VI,
and VIII included in this Form 10-K are the responsibility of the
company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois,
October 20, 1994
20
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______C. D. Hunter_______ Date: November 16, 1994
C. D. Hunter
Vice Chairman
Chief Financial Officer
Director
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
____C. R. Walgreen III____ Chairman of the Board, Chief November 16, 1994
C. R. Walgreen III Executive Officer and Director
____L. D. Jorndt__________ President, Chief Operating November 16, 1994
L. D. Jorndt Officer and Director
____C. D. Hunter__________ Vice Chairman, Chief Financial November 16, 1994
C. D. Hunter Officer and Director
____Roger H. Clausen______ Controller November 16, 1994
Roger H. Clausen
____F. F. Canning_________ Director November 16, 1994
F. F. Canning
____Theodore Dimitriou____ Director November 16, 1994
Theodore Dimitriou
____James J. Howard_______ Director November 16, 1994
James J. Howard
____Cordell Reed__________ Director November 16, 1994
Cordell Reed
____John B. Schwemm_______ Director November 16, 1994
John B. Schwemm
__________________________ Director
William H. Springer
_________________________ Director
Marilou M. von Ferstel
21
INDEX TO EXHIBITS
A. DOCUMENTS FILED WITH THIS REPORT
Exhibit 3 (a) Articles of Incorporation of the company,
as amended and restated.
Exhibit 13 Annual Report to Shareholders for the Fiscal
Year Ended August 31, 1994.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Consent of Independent Public Accountants.
Exhibit 27 Financial Data Schedule.
B. DOCUMENTS INCORPORATED BY REFERENCE
Exhibit 3(b) By-Laws of the company, as amended and restated.
Exhibit 4(a)(i) Walgreen Co. Debt Securities Indenture dated
as of May 1, 1986, between the company and
Harris Trust and Savings Bank, Trustee.
Exhibit 4(a)(ii) Walgreen Co. Resolutions of Pricing Committee
Relating to Debt Securities.
Exhibit 4(b)(i) Rights Agreement dated as of July 9, 1986,
between the company and Harris Bank and Trust
Company.
Exhibit 4(b)(ii) Amendment to Rights Agreement dated as of
October 18, 1988, between the company and Harris
Bank and Trust Company.
Exhibit 10 Material contracts
(a) Top Management Long-Term Disability Plan.
(b) Executive Short-Term Disability Plan
Description.
(c) Walgreen Management Incentive Plan, as
amended.
(d) Walgreen Co. Restricted Performance Share
Plan, as amended.
(e) Walgreen Co. Executive Stock Option Plan,
Plan, as amended.
INDEX TO EXHIBITS
(continued)
(f) (i) Walgreen Co. 1986 Director's Deferred
Fee/Capital Accumulation Plan.
(ii) Walgreen Co. 1987 Director's Deferred
Fee/Capital Accumulation Plan.
(iii) Walgreen Co. 1988 Director's Deferred
Fee/Capital Accumulation Plan.
(iv) Walgreen Co. 1992 Director's Deferred
Retainer Fee/Capital Accumulation Plan.
(g) (i) Walgreen Co. 1986 Executive Deferred
Compensation/Capital Accumulation
Plan.
(ii) Walgreen Co. 1988 Executive Deferred
Compensation/Capital Accumulation
Plan.
(iii) Amendments to Walgreen Co. 1986 and
1988 Executive Deferred Compensation/
Capital Accumulation Plans.
(iv) Walgreen Co. 1992 Executive Deferred
Compensation/Capital Accumulation Plan
Series 1.
(v) Walgreen Co. 1992 Executive Deferred
Compensation/Capital Accumulation Plan
Series 2.
(h) Walgreen Co. Executive Deferred
Profit-Sharing Plan, as restated.
(i) (i) Form of Change of Control Employment
Agreements.
(ii) Amendment to Employment Agreements.
(j) Walgreen Select Senior Executive
Retiree Medical Expense Plan.
(k) Walgreen Co. Profit-Sharing Restoration
Plan, as restated.
(l) Walgreen Co. Retirement Plan for
Outside Directors.