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-Q
(Mark One)
____X____ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED NOVEMBER 30, 1996
or
__________ 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 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: (847) 940-2500
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only to
corporate issuers).
COMMON STOCK, $.3125 PAR VALUE; ISSUED AND OUTSTANDING 246,141,072 AT
DECEMBER 31, 1996.
Page 1 of 10
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have
been prepared by the company pursuant to the rules and regulations of the
Securities and Exchange Commission. The Consolidated Condensed Balance
Sheet as of November 30, 1996 and the Consolidated Condensed Statements of
Earnings for the three months ended November 30, 1996 and 1995, and the
Consolidated Condensed Statements of Cash Flows for the three months ended
November 30, 1996 and 1995, have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the company believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that
these consolidated condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
company's latest annual report on Form 10-K.
In the opinion of the company the condensed statements for the
unaudited interim periods presented include all adjustments, consisting
only of normal recurring adjustments, necessary to present a fair statement
of the results for such interim periods. Because of the influence of
certain holidays, seasonal and other factors on the company's operations,
net earnings for any interim period may not be comparable to the same
interim period in previous years, nor necessarily indicative of earnings for
the full year.
2
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
November 30, August 31,
1996 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 30,077 $ 8,819
Accounts receivable 326,432 288,538
Inventories 1,845,490 1,631,974
Other current assets 78,237 89,707
Total Current Assets 2,280,236 2,019,038
Property and Equipment, at cost, less
accumulated depreciation and amortization
of $693,718,000 at November 30 and
$659,169,000 at August 31 1,502,029 1,448,368
Other Non-Current Assets 167,096 166,240
TOTAL ASSETS $3,949,361 $3,633,646
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 42,000 $ -
Trade accounts payable 902,283 691,836
Other current liabilities 506,827 490,119
Total Current Liabilities 1,451,110 1,181,955
Non-Current Liabilities:
Deferred income taxes 146,413 145,218
Other non-current liabilities 269,610 263,368
Total Non-Current Liabilities 416,023 408,586
Shareholders' Equity:
Preferred stock $.25 par value; authorized
8,000,000 shares; none issued - -
Common stock $.3125 par value; authorized
800,000,000 shares; issued and outstanding
246,141,072 at November 30 and August 31 76,919 76,919
Retained earnings 2,005,309 1,966,186
Total Shareholders' Equity 2,082,228 2,043,105
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,949,361 $3,633,646
========== ==========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
3
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended
November 30,
1996 1995
(Dollars in Thousands
Except Per Share Data)
Net Sales $3,053,979 $2,692,767
Costs and Deductions:
Cost of sales 2,223,963 1,953,785
Selling, occupancy and
administration 707,667 635,208
2,931,630 2,588,993
Other (Income) Expense:
Interest income (791) (1,043)
Interest expense 660 890
(131) (153)
Earnings before income tax
provision 122,480 103,927
Income tax provision 47,461 40,272
Net Earnings $ 75,019 $ 63,655
=========== ===========
Per Share:
Net Earnings $ .30 $ .26
=========== ===========
Dividends Declared $ .12 $ .11
=========== ===========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
4
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
November 30,
1996 1995
(In Thousands)
Net cash provided by operating activities $ 104,232 $ 14,024
Cash Flows from Investing Activities:
Additions to property and equipment (94,512) (76,329)
Other 4,186 (313)
Net cash used for investing activities (90,326) (76,642)
Cash Flows from Financing Activities:
Cash dividends paid (27,076) (23,999)
Net proceeds from notes payable 42,000 77,289
Other (7,572) (5,282)
Net cash provided by financing activities 7,352 48,008
Changes in Cash and Cash Equivalents:
Net increase (decrease) in cash and
cash equivalents 21,258 (14,610)
Cash and cash equivalents at beginning
of year 8,819 22,245
Cash and Cash Equivalents at end of period $ 30,007 $ 7,635
========== ==========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
5
WALGREEN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Inventories are valued on a lower of last-in, first-out (LIFO) cost or
market basis. At November 30, 1996 and August 31, 1996, inventories would have
been greater by $433,692,000 and $427,767,000 respectively, if they had been
valued on a lower of first-in, first-out (FIFO) cost or market basis. LIFO
inventory costs can only be determined annually when inflation rates and
inventory levels are finalized; therefore, LIFO inventory costs for interim
financial statements are estimated. Cost of sales is primarily computed on an
estimated basis and adjusted based on periodic inventories.
(2) The weighted average number of common shares and equivalents used for
calculating primary net earnings per share was 248,755,000 and 248,109,000 for
the three months ended November 30, 1996 and 1995, respectively. Fully diluted
net earnings per share are the same as primary net earnings per share.
(3) The company is involved in various legal proceedings incidental to the
normal course of business. Company management is of the opinion, based upon the
advice of General Counsel, that although the outcome of such litigation cannot
be forecast with certainty, the final disposition should not have a material
adverse effect on the company's consolidated financial position or results of
operations.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net earnings for the first quarter of fiscal 1997 were $75,019,000 or $.30
per share. This was a 17.9% increase over last year. Earnings increases
resulted from improved sales and lower expense ratios, which were partially
offset by lower gross margins.
Sales for the quarter ended November 30, 1996 increased by 13.4% to $3.1
billion. Drugstore sales increases resulted from sales gains in existing
stores and added sales from new stores, each of which include an
indeterminate amount of market-driven price changes. Comparable drugstore
(those open at least one year) sales were up 8.0% for the quarter. New store
openings accounted for 8.5% of the quarterly sales increase. The company
operated 2,228 drugstores as of November 30, 1996, compared to 2,110 a year
earlier.
Pharmacy sales increased 17.5% for the first quarter and were 47.2% of total
sales compared to 45.9% a year ago. Prescription sales in comparable stores
increased 11.5%. Pharmacy sales trends are expected to continue primarily
because of expansion into new markets, increased penetration in existing
markets and demographic changes such as the aging population.
Gross margins as a percent of sales decreased to 27.2% of sales from 27.4%
last year. Prescription margins continue to decrease as third party
retail and mail order sales become a larger portion of pharmacy sales.
The company is responding to gross margin pressures by emphasizing minimum
third party profitability standards.
The company uses the LIFO method of inventory valuation, which can only be
determined at the end of the fiscal year when inflation rates and inventory
levels are finalized; therefore, LIFO inventory costs for interim financial
statements are estimated. Cost of sales for the November quarter includes a
LIFO provision of $5.9 million ($.02 per share) versus $8.6 million ($.02
per share) for the same period a year ago.
Selling, occupancy and administration expenses were 23.2% of sales in the
quarter compared to 23.6% a year ago. The decrease, as a percent to sales,
was caused by lower advertising expenses and the growth in mail order
pharmacy which has a lower expense ratio.
The effective tax rates were 38.75% in both periods.
Financial Condition
Cash and cash equivalents and marketable securities were $30.1 million at
November 30, 1996, compared to $12.6 million at November 30, 1995.
Short-term investment objectives are to maximize yields while minimizing
risk and maintaining liquidity. To attain these objectives, investment
limits are placed on the amount, type and issuer of securities.
7
Net cash provided by operating activities for the first quarter was $104.2
million compared to $14.0 million a year ago. The change between periods
was principally due to better inventory control and improved trade accounts
payable dating. The company's ongoing profitability is expected to continue
as the principal source for providing expansion and remodeling programs,
dividends to shareholders and funding for various technological
improvements.
Net cash used for investing activities was $90.3 million versus $76.6
million last year. Additions to property and equipment were $94.5 million
compared to $76.3 million last year. During the first quarter, 58 new or
relocated drugstores were opened. This compares to 48 new or relocated
drugstores opened in the same period last year. New stores are owned or
leased. There were 37 owned locations opened during the quarter or under
construction at November 30, 1996 versus 14 for the same period last year.
Capital expenditures for fiscal 1997 are expected to exceed $400 million.
The company expects to open at least 230 new stores in fiscal 1997,
including units in the new markets of Detroit and Kansas City. Plans are to
escalate new store openings to 280 per year beginning in 1998 and to be
operating 3,000 stores across the country by the year 2000. This may
necessitate future long-term borrowings. Intercom Plus, an advanced
pharmacy computer and workflow system, is expected to be completed in fiscal
1997.
Net cash provided by financing activities was $7.4 million compared to $48.0
million provided a year ago. During both quarters, the company obtained
funds through the placement of short-term notes payable. At November 30,
1996, the company had $240 million in unused bank lines of credit and $100
million of unissued authorized debt securities, previously filed with the
Securities and Exchange Commission.
In fiscal 1995, the company received an unfavorable Tax Court ruling
concerning the depreciable lives of certain assets. The company appealed,
and on October 17, 1995, the United States Court of Appeals rendered an
opinion which reversed the ruling. The case, which involves approximately
$50 million of tax, including after-tax interest, was remanded back to the
Tax Court for further findings which are in the process of being finalized.
As of November 30, 1996, the company has adequately provided for the tax and
related interest.
Financial Accounting Board Statement No. 123 "Accounting for Stock-Based
Compensation" was issued in October 1995. This pronouncement, which must be
implemented by fiscal year end, will require the company to disclose the
effect on income of stock options based on a formula outlined in the
bulletin. This pronouncement is not expected to materially impact the
company's consolidated financial position or results of operations.
8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
10. Walgreen Co. Nonemployee Director Stock Plan
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
which ended November 30, 1996.
9
SIGNATURES
Pursuant to the requirements 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)
Date January 10, 1997 R. L. Polark_________
Senior Vice President
(Chief Financial Officer)
Date January 10, 1997 R. H. Clausen________
Controller
(Chief Accounting Officer)
10
EXHIBIT 10
NONEMPLOYEE DIRECTOR STOCK PLAN
Walgreen Co.
CONTENTS PAGE
Article 1. Establishment, Purpose, and Duration 1
Article 2. Definitions 1
Article 3. Administration 3
Article 4. Participation 4
Article 5. Annual Equity Grants 4
Article 6. Retainer Share Payments 4
Article 7. Annual Deferral Opportunity 4
Article 8. Deferred Stock Units 5
Article 9. Amendment, Modification, and Termination 6
Article 10. Miscellaneous 6
WALGREEN CO.
NONEMPLOYEE DIRECTOR STOCK PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Walgreen Co. hereby
establishes an incentive compensation plan to be known as the
"Walgreen Co. Nonemployee Director Stock Plan" (the "Plan"), as
set forth in this document. The Plan provides for the grant of
Shares to Nonemployee Directors and for the acquisition of
Deferred Stock Units by Nonemployee Directors, subject to the
terms and provisions set forth herein.
Upon approval by the Board of Directors of the Company, the
Plan shall become effective as of November 1, 1996 (the
"Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.
This plan is intended as a replacement for certain
compensation arrangements for Nonemployee Directors in effect
prior to the Effective Date, including the Walgreen Co.
Retirement Plan for Outside Directors (the "Prior Program"). The
Prior Program will continue to apply in the future only with
respect to compensation earned by Nonemployee Directors for
periods of service prior to November 1, 1996.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to
promote the achievement of long-term objectives of the Company by
linking the personal interests of Nonemployee Directors to those
of the Company's shareholders and to attract and retain
Nonemployee Directors of outstanding competence.
1.3 DURATION OF THE PLAN. The Plan shall commence on
November 1, 1996 and shall remain in effect, subject to the right
of the Board of Directors to terminate the Plan at any time
pursuant to Article 9.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the defined meaning is
intended, the initial letter of the word is capitalized:
(a) "Annual Retainer" means the annual base compensation
received by a Nonemployee Director for service on the
Board.
(b) "Award" means, individually or collectively, an award
under this Plan of Shares or Deferred Stock Units.
(c) "Board" or "Board of Directors" means the Board of
Directors of the Company.
-1-
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means the Compensation Committee of the
Board of Directors of the Company.
(f) "Committee Fees" means compensation received by a
Nonemployee Director for service on one or more Board
committees.
(g) "Company" means Walgreen Co., an Illinois
corporation, together with any and all Subsidiaries, and
any successor thereto as provided in Section 10.6.
(h) "Decreased Value" means the depreciation in the worth
of a Deferred Stock Unit from the date of award up to and
including the Valuation Date, as determined by the
Committee pursuant to a Valuation.
(i) "Deferred Stock Unit" or "Unit" means an Award
acquired by a Participant as a measure of participation
under the Plan, and having a value which changes in
direct relation to changes in the value of Shares, as
determined pursuant to a Valuation.
(j) "Director" means any individual who is a member of
the Board of Directors of the Company.
(k) "Employee" means any common law employee of the
Company or of the Company's Subsidiaries. For purposes
of the Plan, an individual whose only employment
relationship with the Company is as a Director, shall not
be deemed to be an Employee.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor Act
thereto.
(m) "Fair Market Value" shall mean the closing price on
the New York Stock Exchange on the relevant date, or ( if
there were no sales on such date) on the last trading
date preceding the relevant date.
(n) "Increased Value" means the appreciation in the worth
of a Deferred Stock Unit from the date of award up to and
including the Valuation Date, as determined by the
Committee pursuant to a Valuation.
(o) "Initial Value" means the value of a Deferred Stock
Unit on the date of award, as determined in accordance
with the provisions of the Plan.
(p) "Meeting Fees" means compensation received by a
Nonemployee Director for meetings attended in relation to
Board service.
-2-
(q) "Nonemployee Director" means any individual who is a
member of the Board of Directors of the Company, but who
is not otherwise an Employee of the Company.
(r) "Participant" means a Nonemployee Director of the
Company who has an outstanding Award granted under the
Plan.
(s) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d).
(t) "Shares" means the shares of Common Stock of the
Company, par value $.3125.
(u) "Subsidiary" means any corporation in which the
Company owns directly, or indirectly through
subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any
other entity (including, but not limited to, partnerships
and joint ventures) in which the Company owns at least
fifty percent (50%) of the combined equity thereof.
(v) "Valuation" means an evaluation of the worth of a
Deferred Stock Unit based on changes in the Fair Market
Value of the Shares, as determined by the Committee
pursuant to the Plan.
(w) "Valuation Date" means the date on which Deferred
Stock Units are valued pursuant to the Plan.
ARTICLE 3. ADMINISTRATION
3.1 THE COMPENSATION COMMITTEE. The Plan shall be
administered by the Compensation Committee of the Board of
Directors of the Company, subject to the restrictions set forth
in the Plan.
3.2 ADMINISTRATION BY THE COMMITTEE. The Committee shall
have the full power, discretion, and authority to interpret and
administer the Plan in a manner which is consistent with the
Plan's provisions. However, in no event shall the Committee have
the power to determine Plan eligibility, or to determine the
number, the value, the vesting period, or the timing of Awards to
be made under the Plan (all such determinations being automatic
pursuant to the provisions of the Plan).
3.3 DECISIONS BINDING. All determinations and decisions made
by the Committee pursuant to the Plan, and all related orders or
resolutions of the Committee shall be final, conclusive, and
binding on all persons, including the Company, its shareholders,
Employees, Nonemployee Directors, Participants, and their estates
and beneficiaries.
-3-
ARTICLE 4. PARTICIPATION
4.1 PARTICIPATION. Persons eligible to participate in the
Plan are limited to Nonemployee Directors who are serving on the
Board on the date of each scheduled Award under the Plan.
ARTICLE 5. ANNUAL EQUITY GRANTS FOR NONEMPLOYEE DIRECTORS
5.1 ANNUAL EQUITY GRANTS. Commencing November 1, 1997, each
Nonemployee Director shall receive an annual equity grant of
seven hundred (700) Shares on November 1 each year, or a
proportionate share of such grant based on full months of service
as a Nonemployee Director since the prior November 1. In lieu of
issuing fractional shares, the Company shall round to the nearest
full share.
5.2 TIMING OF PAYOUT. The certificates for the Shares shall
be issued as soon as administratively possible following
November 1 each year.
5.3 BIENNIAL REVIEW. The Committee shall conduct a biennial
review of the appropriateness of the annual equity Awards granted
pursuant to this Article 5. In the event the Committee
determines that an adjustment in the amount of equity Awards
pursuant to this Article 5 is appropriate, the Committee shall
make a recommendation to the Board for an appropriate amendment.
ARTICLE 6. RETAINER SHARE PAYMENTS
6.1 PORTION OF RETAINERS PAID IN SHARES. During the term of
this Plan, Nonemployee Directors shall receive fifty percent
(50%) of their Annual Retainer in the form of Shares.
6.2 NUMBER OF SHARES PAID. The number of Shares to be issued
pursuant to Section 6.1 will be determined on a quarterly basis
and shall equal the portion of the Annual Retainer being paid in
the form of Shares, divided by the Fair Market Value of a Share
on the first trading day of the fiscal quarter. In lieu of
issuing fractional Shares, the Company shall round to the nearest
full share.
6.3 TIMING OF PAYOUT. The certificates for the Shares shall
be issued as soon as administratively possible following the
beginning of the calendar quarter that begins within each fiscal
quarter.
ARTICLE 7. ANNUAL DEFERRAL OPPORTUNITY
7.1 DEFERRAL OF RETAINERS, COMMITTEE FEES, AND MEETING FEES.
During the term of this Plan, any Nonemployee Directors may elect
to receive all or a portion of the cash component
-4-
of his or her Annual Retainer, Committee Fees, or Meeting Fees
in the form of Deferred Stock Units. Such election to receive
Deferred Stock Units shall be subject to the provisions of this
Article 7.
7.2 ELECTION. Any election to receive all or a portion of
the cash component of a Nonemployee Director's Annual Retainer,
Committee Fees, or Meeting Fees in the form of Deferred Stock
Units shall be made by December 1 for all payments to be made in
the succeeding calendar year. New Nonemployee Directors shall
make their election with respect to their initial retainer upon
their original election to the Board. Each such election may
pertain to more than one (1) calendar year of scheduled payments.
Deferral elections may only be made in ten percent (10%)
increments.
7.3 NUMBER OF DEFERRED STOCK UNITS. The number of Deferred
Stock Units to be granted in connection with an election pursuant
to Section 7.2 shall equal the portion of the Annual Retainer,
Committee Fees, and Meeting Fees being deferred into Deferred
Stock Units, divided by the Fair Market Value of a Share on the
date of the scheduled payment of the amount deferred.
7.4 VESTING OF DEFERRED STOCK UNITS. Subject to the terms of
this Plan, all Deferred Stock Units acquired under this Article 7
shall vest one hundred percent (100%) upon the acquisition of
such Deferred Stock Units.
ARTICLE 8. DEFERRED STOCK UNITS
8.1 VALUE OF DEFERRED STOCK UNITS. Each Deferred Stock Unit
shall have an Initial Value that is equal to the Fair Market
Value determined for purposes of Section 7.3. Subsequent to such
date of award or acquisition, the value of each Deferred Stock
Unit shall change in direct relationship to changes in the value
of a Share as determined pursuant to a Valuation.
8.2 DIVIDEND EQUIVALENTS. Dividend equivalents shall be
earned on Deferred Stock Units provided under this Plan. Such
dividend equivalents shall be converted into an equivalent amount
of Deferred Stock Units based upon the Valuation of a Deferred
Stock Unit on the date the dividend equivalents are converted
into Deferred Stock Units. The converted Deferred Stock Units
will be fully vested upon conversion.
8.3 AMOUNT OF PAYOUT. Except as provided otherwise in this
plan, the payout of the Initial Value combined with the Increased
Value or the Decreased Value of the vested Deferred Stock Units
shall be made in two cash payments. The first payment shall be
made within thirty (30) days following the Participant's
termination of service on the Board. The second installment
shall be made one year after the Participant's first payment.
-5-
8.4 TIMING OF PAYOUT. Except as provided otherwise in this
plan, the amount payable to a participant shall be the aggregate
Initial Value combined with the Increased Value or Decreased
Value of the Participant's vested Deferred Stock Units, if any,
on the date that the Participant terminates his/her service on
the Board. Fifty percent of this amount shall be paid as the
first cash payment pursuant to Section 8.3. The remainder of
this amount including accrued interest shall be paid as the
second payment. Interest shall accrue on a monthly basis at a
monthly compounding rate equal to the prime lending rate of
interest in effect as of the first business day of that month (as
quoted by the Company's then current lending bank financing
source for commercial borrowings).
8.5 DEFERRED STOCK UNIT ACCOUNT. A Deferred Stock Unit
Account (the "Account") shall be established and maintained by
the Company for each Participant that receives Deferred Stock
Units under the Plan. As the value of each Deferred Stock Unit
changes pursuant to Section 8.1, the Account established on
behalf of each Participant shall be adjusted accordingly. Each
Account shall be the record of the Deferred Stock Units granted
to the Participant under Article 7 of the Plan on each applicable
grant date, is maintained solely for accounting purposes, and
shall not require a segregation of any Company assets.
8.6 QUARTERLY REPORTS. Participants with Deferred Stock
Units shall receive quarterly reports providing detailed
information about their Accounts and changes in their Accounts
during the preceding quarter.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may
terminate, amend, or modify the Plan at any time and from time to
time.
9.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no
termination, amendment, or modification of the Plan shall in any
material manner adversely affect any Award previously provided
under the Plan, without the written consent of the Participant
holding the Award.
ARTICLE 10. MISCELLANEOUS
10.1 GENDER AND NUMBER. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
10.2 SEVERABILITY. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
-6-
10.3 BENEFIT TRANSFERS. The interests of any Participant or
beneficiary entitled to payments hereunder shall not be subject
to attachment or garnishment or other legal process by any
creditor of any such Participant or beneficiary nor shall any
such Participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber, or assign any of the
benefits or rights which he or she may expect to receive,
contingently or otherwise under this Plan except as may be
required by the tax withholding provisions of the Code or of a
state's income tax act. Notwithstanding the foregoing, amounts
payable with respect to a Participant hereunder may be paid as
follows:
(a) Payments with respect to a disabled or incapacitated
person may be paid to such person's legal representative
for such person's benefit, to a custodian under the
Uniform Gifts or Transfers to Minors Act of any state,
or to a relative or friend of such person for such
person's benefit; and
(b) Transfers by the Participant to a grantor trust
established pursuant to Sections 674, 675, 676, and 677
of the Internal Revenue Code of 1986 for the benefit of
the participant or a person or persons who are members
of his or her immediate family (or for the benefit of
their descendants) shall be recognized and given effect,
provided that any such transfer has not been disclaimed
prior to the payment, and the trustee of such trust
certifies to the Committee that such transfer occurred
without any payment of consideration for such transfer.
10.4 BENEFICIARY DESIGNATION. Each Participant under the Plan
may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in the event of his or her
death. Each designation will revoke all prior designations by
the same Participant, shall be in a form as provided in
Appendix A hereto, and will be effective only when filed by the
Participant in writing with the Board during his or her lifetime.
In the absence of any such designation, benefits remaining unpaid
at the Participant's death shall be paid to the Participant's
estate.
10.5 NO RIGHT OF NOMINATION. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to
nominate any Director for reelection by the Company's
shareholders.
10.6 SHARES AVAILABLE. The Shares delivered under the Plan
shall be either treasury shares or Shares which have been
reacquired by the Company, including shares purchased in the open
market.
10.7 STOCK SPLITS/STOCK DIVIDENDS. In the event of any change
in the outstanding Shares of the Company by reason of a stock
dividend, recapitalization, merger, consolidation, split-up,
combination, exchange of Shares, or the like, the aggregate
number of and class of Shares and Deferred Stock Units awarded
hereunder may be appropriately adjusted by the Committee, whose
determination shall be conclusive.
-7-
10.8 SUCCESSORS. All obligations of the Company under the
Plan with respect to Awards granted hereunder shall be binding on
any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
10.9 REQUIREMENTS OF LAW. The granting of Awards under the
Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
10.10 GOVERNING LAW. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the
internal, substantive laws of the State of Illinois.
-8-
APPENDIX A
WALGREEN CO. NONEMPLOYEE DIRECTOR STOCK PLAN BENEFICIARY
Name (Please Print)
In the event of my death, the following person is to receive any
benefits payable under the Walgreen Co. Nonemployee Director
Stock Plan.
NOTE: The primary beneficiary(ies) will receive your Plan
benefits. If more than one primary beneficiary is indicated, the
benefits will be split among them equally. If you desire to
provide for distribution of benefits among primary beneficiaries
on other than an equal basis, please attach a sheet explaining
the desired distribution in full detail. If the primary
beneficiary(ies) is no longer living, the secondary
beneficiary(ies) will receive the benefits, in a similar manner
as described above for the primary beneficiary(ies).
Primary Beneficiary Secondary Beneficiary
Last Name First M.I. Relationship
Street Address City, State, Zip Code
Beneficiary Social Security or Tax ID Number
Primary Beneficiary Secondary Beneficiary
Last Name First M.I. Relationship
Street Address City, State, Zip Code
Beneficiary Social Security or Tax ID Number
If a trust or other arrangement is listed above, include name,
address, and date of arrangement below:
Name Address Date
For additional beneficiary, check here and attach an additional
sheet of paper.
This supersedes any beneficiary designation previously made by me
under this Plan. I reserve the right to change the beneficiary
at any time.
Date Sign Your Full Name Here
Your Social Security Number
Date received by Walgreen Co.:
By:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q QUARTERLY REPORT FOR THE QUARTER ENDED NOVEMBER 30, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 30,077
<SECURITIES> 0
<RECEIVABLES> 342,827
<ALLOWANCES> 16,395
<INVENTORY> 1,845,490
<CURRENT-ASSETS> 2,280,236
<PP&E> 1,502,029
<DEPRECIATION> 693,718
<TOTAL-ASSETS> 3,949,361
<CURRENT-LIABILITIES> 1,451,110
<BONDS> 9,369
0
0
<COMMON> 76,919
<OTHER-SE> 2,005,309
<TOTAL-LIABILITY-AND-EQUITY> 3,949,361
<SALES> 3,053,979
<TOTAL-REVENUES> 3,053,979
<CGS> 2,223,963
<TOTAL-COSTS> 2,223,963
<OTHER-EXPENSES> 707,667
<LOSS-PROVISION> 2,981
<INTEREST-EXPENSE> 660
<INCOME-PRETAX> 122,480
<INCOME-TAX> 47,461
<INCOME-CONTINUING> 75,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,019
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
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