WAG

Walgreen Co.

Walgreen Co. (the "company" or "Walgreens") was incorporated as an Illinois corporation in 1909 as a successor to a business founded in 1901. As of August 31, 2009, we operated 7,496 locations in 50 states, the District of Columbia, Puerto Rico and Guam. In 2009 the company opened or acquired 691 locations for a net increase of 562 locations after relocations and closings. Total locations do not include 337 convenient care clinics operated by Take Care Health Systems, Inc. within our drugstores.

Walgreens corporate strategy is to provide the most convenient access to healthcare services and consumer goods in America through our 6,997 community based drugstores, as well as through our specialty pharmacy, home infusion, worksite health center and retail clinic businesses.Today, over 70% of the population lives within five miles of a Walgreens and 5.6 million shoppers walk into a Walgreens store daily. In addition to store shoppers, Walgreens.com receives over 12 million visits per month.

We intend to grow pharmacy market share through new store growth, comparable store sales increases, pharmacy prescription file purchases and strategic acquisitions. As an example, in fiscal 2009 we supplemented organic growth by acquiring select locations of Drug Fair to add to our retail drugstore operations and McKesson Specialty and IVPCARE to supplement our specialty pharmacy operations.

We will also utilize our extensive retail network as a channel to provide affordable, quality, health and wellness services to our customers and patients, as illustrated by our ability to play a significant role in providing flu vaccinations. Finally, we will continue to market Walgreen Co. to employers, governments, managed care operators and pharmacy benefit managers, expanding beyond our traditional retail consumer model, to contract directly with our payors. With more than 70,000 of the nation’s most trusted and accessible health professionals, Walgreens expects to continue to play a growing role in government and employer efforts to control escalating health care costs.

Prescription sales continue to be a large portion of the company's business. This year prescriptions accounted for 65.3% of sales compared to 64.9% last year. Third party sales, where reimbursement is received from managed care organizations, government and private insurance, were 95.4% of prescription sales compared to 95.3% a year ago. Overall, Walgreens filled approximately 651 million prescriptions in 2009, an increase of 5.5% from the previous year. Adjusted to 30 day equivalents, prescriptions filled were 723 million in 2009, 677 million in 2008 and 636 million in 2007. Walgreens continues to gain market share accounting for 18.3% of the U.S. retail prescription drug market in fiscal 2009 compared to 17.6% and 16.8% in fiscal 2008 and 2007, respectively. Walgreens expects to continue to grow pharmacy sales due, in part, to the aging population and the continued development of innovative drugs that improve quality of life and control health care costs.

During fiscal year 2009 the company added $1.9 billion to property and equipment, which included approximately $1.6 billion related to stores, $133 million for distribution centers, and $231 million related to other locations. Capital expenditures for fiscal 2010 are expected to be approximately $1.6 billion, excluding acquisitions and prescription file purchases.

In fiscal 2007, the company opened a distribution center in Anderson, South Carolina. This was the first of a new-generation of distribution centers that will increase the company’s productivity. A second new-generation center in Windsor, Connecticut opened in fiscal 2009.

(A) Financial information about industry segments.

The company is principally in the retail drugstore business and its operations are within one reportable segment.

(B) Principal products produced and services rendered.

The company’s drugstores are engaged in the retail sale of prescription and non-prescription drugs and general merchandise. General merchandise includes, among other things, household items, personal care, convenience foods, beauty care, photofinishing, candy, and seasonal items. Walgreens offers customers the choice to have prescriptions filled at the drugstore counter, as well as through the mail, by telephone and via the Internet.