C O N T E N T S
January/February 2006 Volume 74 Number 1
Walgreen World is published six times a year by Corporate
Communications for Walgreen employees, retirees and their families.
Editor
Liz Muhler
Managing Editor
Brodie Bertrand
Writers
Marilyn Abbey
Angela Dahman
Iris Iglarsh
Assistant Editor
Julia Ayala
Design
Bob Zeni & Associates, Inc.
Write to Walgreen World
Mail Stop #2166, 200 Wilmot
Road, Deerfield, IL 60015, or e-mail walgreen.world@walgreens.com.
Still want to know more about
Walgreens? Check out our Web site at Walgreens.com.
Selected questions from “Hardball with Walgreen World ” are available in
Spanish on the intranet. On StoreNet, store users click News>En Español
(under Publications). In the pharmacy, click Non Rx first. On WalNet, corporate users select News>En Español
(under Publications).
Preguntas y respuestas seleccionadas de “Hardball with Walgreen
World ” están disponibles StoreNet/
WalNet. Usuarios en tiendas favor entrar en News>En Español (bajo
Publications) en StoreNet. Usuarios en farmacia favor entrar en Non Rx.
Usuarios en oficinas corporativas favor entrar en News>En Español
(bajo Publications) en WalNet.
1 To our Walgreen colleagues
CEO Dave Bernauer and President Jeff Rein talk about our company’s success and where we’re headed.
2 Conquering Katrina
We recount Walgreens biggest operational challenge to date – Hurricane
Katrina – and highlight experiences from employee volunteers.
4 Hardball with Walgreen World
We answered 12 pages of hard-hitting questions to give you insight into our company.
16 A day in the life of Walgreens
Oct. 3, 2005, was a busy day for many of you. Just look and see.
20 Good to grow
Our 5,000th store opening in October 2005 was a top-notch accomplishment. Here’s what growth like this means for you.
21 Walgreens all-star front office
A list of our board of directors, corporate officers and operational and divisional vice presidents.
W A L G R E E N C O . M I S S I O N S T A T E M E N T
O n t h e c o v e r
Chris Caldwell, SIMS coordinator at 2500 E. Franklin Blvd. in Gastonia, N.C., is like many employees who are full of questions about the way Walgreens works.
Photograph by Jim Schmid

W e’re often asked how we achieve the consistent success reflected in the results for fiscal 2005, our 31st consecutive year of record sales and earnings. Our answer never wavers: It’s the talent, hard work and determination of our people, something that passes from generation to generation of Walgreen employees and something not easily replicated by competitors.
At no time is such an advantage more harshly tested – nor solidly proven – than in crisis situations. Since “crisis” was practically our middle name last fall – from Hurricane Ophelia to Katrina to Rita to Wilma – we’d say you passed the test with flying colors. One more time, we’d like to say thank you to everyone involved.
We also offer special wishes to our employees who suffered personal losses due to the hurricanes. Our hearts are with you as you continue to pull your lives together and, in some cases, adjust to new surroundings.
What accomplishments stand out for fiscal 2005?
• We increased net earnings 15.5 percent, outpacing our 12.5 percent sales increase for this year.
• We opened a record 371 net new stores after closings and relocations.
Our net new target for 2006 is 390.
• We now fill more than 15 percent of all retail prescriptions in the nation.
That’s more than all our grocery store competitors combined .
• Nearly one-third of all non-prescription products sold in U.S. drugstores are rung up at Walgreen cash registers.
• Walgreens Health Initiatives (WHI), our pharmacy benefits manager
(PBM), controlled client drug costs better than other leading PBMs.
• We created 15,700 jobs and promoted 744 employees to store manager.
Dave Bernauer (left) and Jeff Rein cut the ribbon
Where should we focus for continued success?
to open our 5,000th store in Richmond, Va.
Competitors can copy many of the services we offer, but it’s tough to replicate
Walgreens solid execution. From the time of our first stores more than a century ago, that’s been our biggest advantage. It’s why we attract good employees. It’s why people build amazingly long careers here. It’s why we’ve appeared on Fortune magazine’s “Most Admired Companies” list for
12 consecutive years. And it’s why our stock is valued so high – higher even than strong retailers like Costco, CVS, Target and Wal-Mart.
So our future will be driven by what’s built our past – fast and friendly service, pleasant and clean stores, and good in-stock conditions. We also need to be very diligent about expense and inventory control. Profit margins are painfully slim in retail. We’re one of the best, and even we earn only about 3½ pennies on every dollar paid at our registers.
To understand how missteps spell disaster, think of once powerful retailers who’ve disappeared from the face of America. Let’s just say we want to keep Walgreens at the opposite end of that fate.
Thank you again for your hard work, particularly during the busy holiday season. We wish you and your families a healthy and successful 2006.
Sincerely,
Dave Bernauer
Chairman & CEO
Jeff Rein
President & COO
Walgreen World January/February 2006
1

Nearly 130 people from our Detroit; Memphis, Tenn.; and Minneapolis markets drove a caravan of 50 RVs from Canada to New
Orleans in less than three days to help house more than 700 employees brought in from other markets to keep our stores open.
H urricane Katrina destroyed highways, downed power lines and cut off communication across much of
Louisiana and Mississippi. When the dark clouds cleared, dozens of our stores were inaccessible and hundreds of employees were missing. Reaching out to displaced employees and reopening stores would require months of hard work and coordination among all areas of the company.
And that’s exactly what happened.
Along the Mississippi coast, Katrina swept away restaurants and casinos and replaced them with sand. But amazingly, none of our stores suffered structural damage. And even more incredible – leaky roofs and a lack of electricity couldn’t keep our employees away.
In our Jackson (Miss.) district, only four out of 25 stores had electricity, yet all but one store was open the day after
Katrina. In Biloxi, Miss., store manager
Michael Daley opened his store with two employees, calculators and flashlights. And in Pascagoula, Miss., store manager David
Pasquini served customers alongside three employees who came to work even though they’d lost their own homes.
Meanwhile, maintenance crews were putting in 16-hour days to jump-start stores.
First, they focused on installing generators at stores without electricity. Then, they turned their attention to cleaning up and remodeling damaged stores – a job that will take months to complete.
“It’s pretty intense,” says Frank
Newman, facilities maintenance superintendent in New Orleans.
“But maintenance technicians from all over the country have come to help.”
Thanks to combined efforts across the company, we succeeded in reopening stores long before our competitors got back on their feet. But we were still missing hundreds of employees. To help, we set up a toll-free hotline that received almost 5,000 calls in one month.
“Calls came in from people who just didn’t know what to do – their stores were closed, and they couldn’t contact their managers,” says Betty Harman, manager of relocation and employee services.
The nearly 50 employees who took turns fielding calls helped hundreds of our people apply for Walgreen
Benefit Fund assistance. At press time,
1,126 employees had received a total of
$552,850 in hurricane-related help.
2 Walgreen World January/February 2006

We took care of customers, too. In Louisiana, police tracked down Gretna store manager Eddie Mitts and asked him to reopen his store at 89 Westbank Expressway under police escort. “People were dying without their medicine – even the rescue workers with high blood pressure needed prescriptions,” he says.
We were there for customers and fellow employees because so many of you stayed – or returned – to hard-hit areas despite personal losses. For Newman and three of his crew members whose homes were destroyed, coming to work was an effort to return to a normal life. “Honestly, work is the best therapy for everyone,” he says. “Faith, hope and hard work . . . that’ll really get you through.”
– Angela Dahman
Hurricane Katrina totaled maintenance superintendent Frank Newman’s home in New Orleans’ St. Bernard Parish. Despite the loss, Newman was back to work installing generators two days after the storm.
“I was a member of one of the teams that traveled to Biloxi and Gulfport, Miss. It was far from a normal day at Walgreens, with no phones and many area doctors’ offices closed or destroyed. Four weeks after the hurricane, we were filling close to
300 prescriptions per day, yet employee morale was high.
“I’ve traveled to more than 10 different countries and used my pharmacy experience to help people in Third-World conditions. But in my 29 years with Walgreens,
I’ve never seen anything like the dedication, encouragement and determination I saw in our Mississippi staff.”
– Ron Allen, pharmacist at our Mail Service facility in Tempe, Ariz.
“I was assigned to work at our store at 4421 Airline Drive in Metairie, La., which was the only store open for eight miles in any direction. Because of housing shortages, we were staying in Baton Rouge, La. When Rick Bremer, the store manager at the time, learned we were driving 70 miles to his store, he invited us into his own home.
“Now, I’ve heard of Walgreen folks sticking together and helping out any way they can, but I never expected someone would open his home to five out-of-state strangers for 10 days without any questions – especially after going through one of the worst natural disasters in American history. Rick Bremer, now EXA at 19203 Stone Oak Parkway in San Antonio, is what Walgreens is all about: being there for people in need. He was a port in the storm, and I’ll never forget his generosity and kindness.”
– Paul Fenwick, store manager at 2345 N. Classen Blvd. in Oklahoma City, Okla.

Walgreen World
H
B E N E F I T S
Q.
When will vision insurance be offered with our
Walgreen Medical Plan?
Lisa Schneekloth, EXA at 2204 University Ave. in Green Bay, Wis.
A.
We have no plans to offer stand-alone vision insurance, but our Walgreen Medical Plan does include a discount on vision products and services. It’s an easy program to use – no deductibles, claim forms or referrals, and no limit on how often you can use the discount. To take advantage of this benefit, visit the Blue Cross/Blue Shield Web site at www. bcbsil.com and click on Members>
Products>PPO>Vision Services. You can also call (866) 273-0813 for more information. But before you visit your eye care professionals, ask if they participate in this vision discount program.
Q.
We go out of our way to help diabetes research, but we don’t cover diabetes supplies for employees. I have to pay full price for diabetes products – can you explain?
Griselda Garcia, pharmacy technician in Security, Colo.
A.
First of all, you should never have to pay full price for diabetes products
From left to right are pharmacy technician Julie
Ragan, EXA Luke Nguyen and SIMS coordinator
Chris Caldwell from our Charlotte, N.C., market.
4 Walgreen World January/February 2006

Walgreen World

because you can always use your employee discount. But we do cover test strips and monitors through our Walgreen Medical Plan, and syringes and insulin are included in our Prescription
Drug Plan. If you’re currently enrolled in an HMO that doesn’t cover one of your supplies, you may want to switch to an insurance plan with more coverage.
Q.
We have excellent benefits, but many people have even better coverage under a spouse’s insurance plan. So why don’t we offer a cafeteria plan that lets employees pick and choose the benefits they need? Since I have to enroll in the Walgreen Medical
Plan to receive dental coverage, it actually costs the company and me more money than necessary. A cafeteria plan could save us both some cash.
Victoria Sample, beauty advisor at 6701 N.W. Cache Road in Lawton, Okla.
A.
Unfortunately, a cafeteria insurance plan is too risky for a retail company like Walgreens.
In this industry, we have high turnover with new employees. Walgreens turnover is lower than some retailers, but it’s still high compared to other industries – that’s just the nature of our business. Because of this, we design our benefits with special requirements, such as joining the
Walgreen Medical Plan to receive dental and prescription insurance. This minimizes the impact turnover has on our healthcare costs and keeps our plans more affordable.
We realize this means we can’t serve everyone’s needs completely, but the plans do work well for the majority of employees. However, we continue to review our insurance benefits every year and evaluate how effective and competitive they are in the marketplace.
Q.
Are there any plans to give employee discounts on Walgreens.com purchases?
Scott Braun, EXA at 2043 Kensington Ave. in Amherst, N.Y.
A.
Since we can’t distinguish employees from other customers online, we don’t plan to allow employee discounts on purchases made directly on Walgreens.com. However, we recently added a new application that lets stores directly order online merchandise.
That way, you can offer customers more than 4,000 additional products from our Web site, have them pay for these items in the store, and choose to ship it to Walgreens or their home.
Employees who order self-service products through our
Web site receive a 10 percent discount on their purchase when they pay for it at the register. This discount amount is less than the normal 15 percent because we have to cover the costs incurred to ship the product. To order merchandise for customers or yourself, visit
StoreNet and click Order>Walgreens.com (under E-commerce). To read detailed procedures on StoreNet, click Policy
& Procedure>Walgreens.com Orders (Under Sales & Inventory). In the pharmacy, click Non Rx first.
Q.
What is the exact policy on sick days? Can I use them for doctor’s appointments? And what happens if we don’t use all our sick time – are we reimbursed for unused days?
A.
If you’re an hourly employee, sick days can be used in hour increments for your own illness, injury or doctors’ appointments. If you’re a salaried employee, partial sick days aren’t deducted, only full days. Either way, unused sick time is banked—up to a maximum of 30 days—at the end of the year. And we do not reimburse employees for unused days because we have a generous banking policy that allows you to use these days for future illnesses.
Now customers and employees like Sue Erens, beauty advisor at 1199 W. Dundee Road in
Wheeling, Ill., can buy thousands of products from Walgreens.com through in-store ordering.
Employess will receive a 10 percent discount.
6 Walgreen World January/February 2006

Q.
If we work for a drugstore company, why do we have such a large prescription co-pay?
Barbara Champion, SIMS coordinator at 215 Beach St. in Malden, Mass.
A.
Even though we’re a pharmacy retailer, we don’t receive big price breaks from pharmaceutical companies on prescription drugs.
But our prescription benefits and co-pay amounts are very competitive with other retailers. If you’re concerned about your co-pay amount, try talking to your pharmacist about a less costly generic.
Q.
What type of benefits are being discussed for the 6,000 and 7,000 store milestones? For example, our 5,000th store opening gave us an extra day off and previous celebrations have included stock options.
Michael Rau, auditor in Audit
A.
It’s too early to plan for our future milestone grand openings. Typically, we evaluate these as our store count draws closer to the next big thousandth mark. And although we’ve offered benefits in the past, there’s no guarantee that we’ll continue to do so when we open our 6,000th and 7,000th stores.
Q.
Besides profit sharing, what benefits does Walgreens offer retirees with many years of service?
Dorothy Hagen, service clerk at 2690 Golf Road in
Glenview, Ill.
Michael Bunce, pharmacist at 3990 24th Ave. in Port Huron, Mich.
A.
Employees who are 55 years or older and retire with 25 years or more of service receive a lifetime employee discount, and are eligible for the Walgreen Medical Plan and Prescription Drug Plan if their hire date was on or before Dec. 31, 2001. We also offer a life insurance benefit until the age of 65, membership in the Walgreen Alumni Association and a home subscription to Walgreen World.
S T O R E O P E R A T I O N S
Q.
Why do we stay open on Christmas for pharmacy patients who need emergency prescriptions, but close the majority of non-24-hour pharmacies? I know we still make money that day, but why should the pharmacy staff be exempt from working when it’s the heart of our business? Isn’t it unfair to the front-end employees who have to work?
A.
Yes, pharmacy is the core of our business, but Walgreens is also a convenient drugstore.
Our customers and patients need us to be there 365 days a year so they can dash in for a package of diapers, batteries or milk.
And since close to one-third of our stores operate round the clock, we believe we can adequately serve pharmacy patients with more than 1,500 24-hour locations. In areas where we don’t have a nearby 24-hour store, we may keep a non-24-hour pharmacy open as long as there’s enough prescription business.
Q.
When will Walgreens catch up with the uniform style of every other major retailer?
Shirts and ties are no longer feasible for managers who do so much physical labor.
A.
We currently have a committee working on a new uniform program, but there’s a lot of research and testing to finish before any decisions are made or a timeline is finalized.
However, ties will continue to be required for men who are part of management or who work in the pharmacy. We believe this attire reflects our professionalism and respect for patients and customers. We also believe our dress code helps us stand apart from the competition.
Walgreen World January/February 2006 7

Q.
When will store management receive cordless phones? It seems like every other retailer has them, and it is such a simple customer service tool.
Mike Adams, assistant manager in Saukville, Wis.
A.
You’re right – a lot of retailers use cordless phones in stores, but many don’t have the technology that lets their phones communicate with their computer systems. We wish it were as easy as plugging a cordless phone into the wall, but our enhanced systems, such as Intercom Plus, create more challenges in finding the right equipment.
In the near future, we want to install new phones and a phone system that’s easy for employees to use and automatically routes customer calls to the appropriate person. That way, the person at the front register doesn’t carry the responsibility of answering all the store’s calls.
Q.
Before a district or corporate manager arrives for a surprise store visit, there’s a storm of activity to clean up the store. Why can’t these visits be more like an “aunt” or
“uncle” coming over instead of your mother inspecting your room? Also, how are visits determined? Some stores feel left out when they don’t see management.
A.
We realize there’s often a rush when management visits, but much of the increased activity comes from the staff’s pride. People want to put their best foot forward and make their store or district manager proud – we don’t ask staffs to scrub the floors right before management arrives. And when people do come to visit, they’re not trying to act like an overbearing mother.
However, they’re very interested in your employees’ development and staff morale.
Selecting stores is really up to the individual coming in. He or she may visit based on a store’s sales trends, new location or to meet the staff and understand the marketplace.
Q.
Why doesn’t Walgreens have shopping cart corrals, which keep carts from hitting people’s cars? Customers have asked for them.
A.
Chainwide, we have very few problems with shopping carts hitting cars. We don’t include corrals in the parking lots because we’d have to give up a parking spot. Our lots aren’t that big, so taking away a space could leave customers waiting to park. Plus, since the distance to our front doors is shorter than the average walk to a grocery store’s cart corral, if people don’t return carts now, they’re unlikely to do so with corrals.
Q.
How does a store make a profit on gift cards and phone cards, especially the non-Walgreen cards?
Greg Risley, store manager at 9030 U.S. Highway 24 W. in Fort Wayne, Ind.
A.
We make a profit on gift and phone cards much like the rest of our merchandise. The accounting behind the transaction may differ slightly, but the process is the same. When we sell a company’s gift card, they give us a percentage of the sale as profit.
Marisol Merino, senior beauty advisor at 280
S.W. Port St. Lucie Blvd. in Port St. Lucie, Fla.
8 Walgreen World January/February 2006

Q.
Why are new items put into a reset when they’re not available for weeks or sometimes months? Why not wait to include these items once they’re in the distribution centers?
Cheryl Hilton, SIMS coordinator at 5815 Gull Road in Kalamazoo, Mich.
A.
We understand it’s not easy to set a department when some of the product isn’t available.
Usually, we include a new item in a reset before it’s launched in the marketplace because we want the stores to be ready to place the product as soon as it arrives. It’s much easier for stores to work around missing product than to redo a reset every time a new item is launched.
The words on the warehouse totes may seem strange to stores, but they help distribution center team members like Virginia Joe, who works in the Flagstaff DC split-case department, easily identify the totes.
Q.
Why don’t beauty advisors receive PMs on every item in cosmetics? And will you ever expand PMs to other positions in the store?
A.
PMs – promotional monies – are paid by our vendors.
Nearly 75 percent of the products in cosmetics have PMs and, although we’d love to include more, some vendors choose not to. However, we do have plans to offer “richer” PMs this year on more items in the cosmetics department. We’ll continue to add additional items to the PM list, especially new private label or exclusive private brand products, such as Skin Essentials, which tend to offer higher-than-average PMs.
Currently, only beauty advisors receive PMs because we expect them to use their communication skills to sell these products. For doing so, they get paid the extra promotional money. Other positions, such as photo specialists, may receive money for suggestive selling promotions, but we don’t have plans to expand the entire cosmetic PM program to all positions.
Q.
What do the letters above the barcodes inside the warehouse totes mean?
They seem random, but every so often they spell something – like my name.
Shad Youngblood, MGT at 6730 U.S. Highway 98 N. in Lakeland, Fla.
A.
We believe you’re referring to the three- or four-letter words on every split-case tote that comes from our distribution centers (DC). Split-case pickers at our DCs use these short words to help them get the right product in the right tote quickly. Since they fill several stores’ totes at one time, each tote is assigned a short name to avoid confusion.
In 1996, our split-case picking system – called pick-to-lights – was developed, and we needed an easy way for pickers to identify the totes. We searched for all the three- and fourletter words we could find in a Scrabble dictionary. The result is a list of more than 4,100 unique words our DCs still use to make picking faster and more accurate.
Q.
Why did Walgreens convert its photo labs to Fuji machines, then discontinue the
Fuji line of film products?
Joe Gottlieb, head photo specialist at 97 Long Road in Chesterfield, Mo.
A.
Although the Fuji Photo System and Fuji film are made by the same company, these were two very different business decisions. We prefer Fuji equipment because it’s the most efficient, most profitable and most versatile in the market. In May 2005, we decided to limit the wall space for film and only stock one brand next to our private label. That’s because film sales in general are declining due to the boom in digital photofinishing. Since Kodak is the market leader in this category, we chose that brand over Fuji.
Walgreen World January/February 2006 9

Q.
I wonder about the direction we’re heading by unofficially requiring more MGTs to have college degrees. Will EXAs and MGTs with degrees be promoted over those without? What about promoting from within?
A.
First of all, we don’t require college degrees for MGTs. Although education is strongly preferred, we don’t demand a college diploma for any store position except pharmacists. However, we do want district managers to have college degrees or be well on their way to completing one. Since the assistant managers we hire today will run our districts in the future, we do like to see store management with higher education. But that’s not the reason we promote people.
Promotions are based on merit and good management skills.
Q.
Who manages the EasySaver rebate program? How are rebate items determined?
And how do we solve customers’ complaints when a rebate is rejected?
Anthony Hoopingarner, store manager at 4996 Country Club Road in Winston-Salem, N.C.
A.
Our EasySaver Catalog is managed by our Advertising department. However, our category managers in Purchasing determine the product and rebate amount. Typically, vendors ask us to include new items in the EasySaver Catalog, but the category managers ultimately determine what items to promote to customers.
An outside company handles the millions of submissions and the majority of customer questions about the EasySaver program. Customers can track their rebates and view their entire rebate history on Walgreens.com, and questions about rejects can be answered by calling (888) 324-3028.
Q.
Not a week goes by that I don’t have to calm a customer because an ad price doesn’t scan correctly. The Mega Saver items seem to be the biggest culprits, but sometimes even the weekly circular ads are a mess. I waste a lot of time doing price modifies – can this ever be fixed?
Michael Quinn, EXA at 7711 Colony Road in Charlotte, N.C.
A.
There are a lot of reasons why a product on sale might not ring up at the register correctly. Many times, the item being rung up is an older UPC of the sale product, and our Advertising system doesn’t always include every
UPC. A bonus size or discontinued shade are common examples that cause problems at the register. When we release an ad batch to the stores, our system updates the prices on all of a product’s shades and fl avors. But if the old UPC isn’t associated with that advertised item, the ad price may not ring up correctly.
We’re developing an application to fi x many of these glitches, but in the meantime, the best way to correct an ad item that doesn’t ring up with the right price is to open a ticket with the Help Center. That way, we can investigate and correct the problem chainwide.
P H A R M A C Y O P E R A T I O N S
Q.
Why do we change generic drug manufacturing companies so often? Patients complain when the shape, size and color of their pills
Anthony Ross, store manager in
Woodway, Texas change. Surely the price difference can’t be more than the cost of the labor and equipment needed to continually replace cell hoppers and robotic cassettes.
A.
As third-party pressures grow and prescription reimbursements decrease, we need to fi nd better ways to stay competitive and lower costs. Finding different manufacturers for generics helps us do that, and about 15 percent of the drugs we stock have been switched in the past two years.
10 Walgreen World January/February 2006

To make life easier, our prescription drug category managers try to limit the frequency of generic changes. But as new opportunities arise, we’ll continue to pursue switches that save patients and Walgreens money. The time and effort our pharmacies put into these switches are always evaluated, and we make sure that the economic advantages of switching far outweigh both the direct and indirect costs.
Q.
Are all pharmacy technicians – including senior techs – supposed to alternate work schedules for morning, evening and weekend shifts? If so, that’s not happening at my pharmacy. What can be done?
A.
All pharmacy personnel should follow fair scheduling. Besides being fair to everyone, this policy gives us more hiring flexibility because it’s difficult to find people who will only work nights and weekends. We’ve also learned that fair scheduling helps us maintain a consistent level of high-quality customer service whenever a patient visits the pharmacy – day or night.
If fair scheduling isn’t happening in your pharmacy, use our Open Door policy to talk to your pharmacy or store manager. If they can’t resolve the situation, contact your district pharmacy supervisor or district manager.
Q.
Why don’t we announce “IC3” in the pharmacy when we have long lines and need help? All the other departments do this.
Suresh Patel, pharmacist at 1000 N. Roselle Road in Hoffman Estates, Ill.
A.
We do want to hear “IC3” whenever pharmacy employees need help at the register. And it’s becoming more important now that pseudoephedrine (PSE) products are behind our counters nationwide and patients need more assistance.
Because we can’t always predict peak times when extra staff is needed, pharmacists and pharmacy technicians should never hesitate to call “IC3” during busy spurts.
Tim Lavery, pharmacy manager in
Deerfield, Ill., is one of an army of
Walgreen employees who are educating seniors about the Medicare prescription insurance program.
Q.
What increase in prescription volume per store do we anticipate when
Medicare Part D kicks in?
Charles Siminski, store manager at 1860 E. Fowler Ave. in Tampa. Fla.
A.
We expect a healthy share of new patients in our pharmacies when the Medicare prescription insurance plan takes off, but we can’t predict how many people will sign up … or how fast they’ll do it. We believe enrollment will gather steam as people realize they can save significant dollars. That’s why good marketing and good education in our stores are so important.
Q.
I’ve noticed that we roll out new versions of Intercom Plus, even when we know there are still some bugs that need to be worked out. Wouldn’t it be better to fix them before sending it to the stores?
A.
We’d never purposely send out a new Intercom Plus release if we knew it had a major bug. Each release goes through a strenuous eight-week systems test before it’s rolled out to stores. And when we do find bugs in production, we try to fix them as fast as possible. Yes, sometimes minor bugs get by us undetected, but that’s not the norm.
Q.
With the advances in VISION and Pharmacy Plus technology, have we considered opening pharmacies in major airports?
Kevin Kwok, EXA at 1899 Fillmore St. in San Francisco
A.
As we upgrade technology, we continue to explore these opportunities. One possibility is setting up kiosks where a patient can scan in a prescription and select a store where the order is routed for filling. Another option would be a kiosk prescription service for patients working at large airports. We’re evaluating these options to ensure there is a return on investment for the company and a benefit to our patients.
Walgreen World January/February 2006 11

Q.
Will the robotic counting machines be improved? Currently, our machine is like a hungry infant demanding attention when a cell is empty, and it will do nothing else until that cell is filled. Can we do something to skip that cell and fill it later?
Cynthia Hall, pharmacist in Security, Colo.
A.
You’re right – the Yuyama robot stops dispensing entirely when it finds an empty cell.
Because this can interrupt workflow, we’re asking the manufacturer to change the robot so it bypasses the empty cell and moves on to the next prescription. Until this happens, please follow the recommended filling procedures on StoreNet to keep cells stocked daily and minimize delays. In the pharmacy, click Rx Admin>Yuyama Filling Machine Users Guide (under
Equipment)>Yuyama Maintenance Schedule. In the store office, click Rx first.
Q.
What’s our annual percent of pharmacists hired from other companies, as opposed to pharmacy school graduates?
Matt Wilkie, EXA at 10180 Hennepin Town Road in Eden Prairie, Minn.
A.
For the last few years, about 60 percent of our new recruits have been pharmacists from other companies, and about 40 percent have been pharmacy graduates. But we’re guessing the percentage of pharmacy graduates will increase in the future for two reasons. First, graduating classes are getting larger. Second, we’ve been so successful at hiring pharmacists from the competition that the number of good candidates who work outside our company is dwindling.
Q.
Patients complain that we don’t take some BlueCross/BlueShield prescription cards, even though it’s the other way around — they don’t carry us. I'd like to know how these coverage decisions are made.
Doug Neudeck, MGT at 1100 E. 63rd St. in Kansas City, Mo.
A.
Walgreens is a retail pharmacy provider for all BlueCross/BlueShield plans nationwide except in Kansas City, Mo., where we have limited participation. The decision to be or not to be a provider for any plan depends on several factors, which include restricted pharmacy networks, financial considerations, client relationships, market age and area competition.
E X P A N S I O N
Q.
Will the major hit we took in sales from closed stores and expenses for Hurricane Katrina relief efforts affect our expansion plans? Also, how many stores were actually destroyed?
Jimmy England, pharmacy manager at 1334 N. Highland Ave. in Jackson, Tenn.
A.
We have no plans to slow or delay our expansion. In August 2005,
Hurricane Katrina forced the closing of 74 stores in the Gulf Coast, and more than 20 remain closed because of extensive damage. More will reopen, but a few will likely be closed permanently.
Q.
After Anderson, S.C., where will we build the next DC?
Tammy Bartow, human resources generalist at the Windsor DC
A.
The Anderson distribution center (DC) will open in 2007; the next in Hartford, Conn., in 2008. A third new facility is slated for 2009 or 2010. Anderson and Hartford will be the first two DCs built as a new prototype. Their design will allow us to hire more people with disabilities and potentially achieve a 20 percent improvement in productivity, with streamlined workflow and technology.
Charlene Chen-Chin, a third-year pharmacy student at Howard University in
Washington, D.C., has spent two summers with us as a Walgreen intern.
12 Walgreen World January/February 2006

Q.
Why doesn’t Walgreens spend more money to renovate older stores?
Lyla Patino, pharmacy technician at 40 Chester Ave. in Bakersfield, Calif.
A.
We do remodel. Since 2000, we’ve spent more than $100 million to remodel
126 stores, and more funds are budgeted for 2006. We learned long ago that our customers want clean, bright stores, so we’ll keep renovating as necessary.
Sometimes we may be close to relocating an older store, and therefore don’t invest in a major remodel. There are no hard and fast rules. Store Operations makes the renovation decisions, and each case is decided individually.
Pioneering one of our newest small-town markets are, from left to right, beauty advisor Bridget Hallock, store manager Deborah Dawson and pharmacy tech
Cynthia Angle in Bad Axe, Mich.
Q.
Why don’t we expand into more small towns? Many people live in these communities and commute to
Dallas, Houston and other markets.
Christopher Makowski, senior pharmacy technician at 1902 N. Jupiter
Road in Garland, Texas
A.
We’ve recently started an aggressive small-town expansion program, especially near major markets – such as Dallas/Fort Worth – where Walgreens has strong market share. In 2005, we opened nearly 100 stores in towns smaller than what we once considered an optimal size: Bad
Axe, for example, in the thumb of Michigan, and Marble Falls in the Texas Hill Country. But we don’t plunk stores down just anywhere; we still need to be visible on convenient corners. In rural areas, “convenient” might mean 15 miles down the road, but close to the grocery store where people shop every week.
In urban areas, it’s often just one or two blocks from home.
P R O F I T S H A R I N G / S T O C K
Q.
Can we receive updates on our investment performance more than once a year?
A.
Sure. To hear your account balances daily, call (888) WAG-PROFITS. To see weekly investment returns, visit StoreNet or WalNet and click Policy & Procedure>Profit Sharing Plan (under
Benefits)>Investment Returns. In the pharmacy, click Non Rx first.
Q.
I understand you have to be at least 21 years old and have one year of service to qualify for profit sharing. Currently, I am 20, married, have a child and want to begin investing for retirement. I’ll celebrate my one-year anniversary soon. Is there any way to get around the age 21 limit?
Joe Confer, photo specialist in Owensboro, Ky.
A.
Good news – as of Jan. 1, 2006, the age to join our Profit Sharing Plan will drop from 21 years to 18. You still need to have one year of service and have worked 1,000 hours over the year to be eligible, but now employees between 18 and 21 can also take advantage of this benefit.
We changed the age limit because we feel it’s important for people to save for retirement as soon as possible. If you’re between 18 and 21, work more than 1,000 hours in the year and have one year of service or more, you should have received an eligibility packet. If not, you can request one by calling MediClaim at (800) TALK-INS. Otherwise, you’ll receive the packet a month before you become eligible.
Walgreen World January/February 2006 13

Q.
Due to Hurricanes Katrina and Rita, several stores will be closed for an extended period of time. How will this influence the company’s overall profits?
Larry Courtney, assistant manager at 200 E. Roosevelt Road in Villa Park, Ill.
A.
We already reported an initial hit from Hurricane Katrina in our fiscal 2005 fourth quarter results. That was a $54.7 million charge for lost inventory and leases we’re required to pay on closed stores. We don’t expect further earnings impact due to Katrina. While we still have more than 20 stores closed in our New Orleans market, many of these will reopen in coming months. A few will likely be permanently closed. And with 5,000 stores, even 20 represent less than one-half of a percent of our chain, so the financial impact of lost sales going forward will be negligible.
Q.
Should we be concerned about the stagnation of our stock price? The only time it’s jumped recently was when we announced the stock buyback, but other than that, it’s remained relatively stable within five points.
A.
As we write this in November 2005, our stock is up about 20 percent for the past 12 months. That’s hardly “stagnation.” The stock buyback was announced well over a year ago. It was viewed positively, but it’s not the driving force behind a higher share price.
When it comes to our stock, we don’t concentrate on short-term ups and downs.
The reason most investors respect WAG is our potential for long-term return on investment. That’s due to our aggressive growth, strong operations and solid financial condition. What makes the stock go up is our success in operating efficient, profitable stores. Good earnings drive stock price … and you drive good earnings.
Our logo was displayed on the NASDAQ MarketSite
Tower in New York City after our 5,000th store opening.
M I S C E L L A N E O U S
Q.
When watching a Boston Red Sox game, I couldn’t help but notice a competitor’s large billboard ad. Do you ever see us doing this? I could see the Walgreen logo carved into the (Chicago Cubs’) Wrigley Field ivy — ha ha!
Matt Conner, store manager at 173 S. Main St. in Alpharetta, Ga.
A.
In our hometown Chicago market, we do have promotions that involve ballpark signage. The large number of stores in Chicago helps offset the cost. Our signs, which may just be our name flashing on the scoreboard, are usually “thank yous” from the teams for other things we do. For instance, we have a celebrity bat kid promotion with the Cubs, a similar one for adults with the White Sox and several promotions with the Bears.
Q.
Who holds the record for the longest length of service – actively employed or retired?
John Walschon, store manager at 33760 Center Ridge Road in North Ridgeville, Ohio
A.
Aside from Charles R. Walgreen Jr., whose working years included virtually every decade of the 20th century, that appears to be
John Rice, deceased, who was hired in 1920 by our founder Charles
Walgreen Sr. and worked for 58 years, retiring from the Berkeley, Ill., warehouse as a claims adjuster.
The longest-serving current employee is Willie Singleton, who joined the company as a soda fountain clerk in 1952 and still works as a porter at 200 W.
Adams St. in Chicago. Despite Singleton’s 53 years with Walgreens, he says he has no plans to retire and tries to get better at his job every year.
Willie Singleton joined Walgreens when Charles R. Walgreen Jr. was
CEO and the stores still served
Double-Rich Chocolate Malts.
14 Walgreen World January/February 2006

Q.
Why doesn’t StoreNet allow us to input names or types of products frequently requested by customers? That way Walgreens can consider carrying them if demand is large enough across the country.
Rebecca Ellis, assistant manager at 541 Trophy Lake Drive in Trophy Club, Texas
A.
You’ll be happy to know there is such a Web site. Just visit StoreNet and click Sell>
New Items (under Basic Merchandising & Sales). The suggestions are sent to the appropriate department in Purchasing for follow up.
Q.
Did the first Walgreen store have a photo lab? If so, what was the cost of prints?
Samantha Dismore, head photo specialist at 521 Lone Oak Road in Paducah, Ky.
A.
Walgreens opened its first photofinishing studio in 1919, and there’s no record of the cost of prints then. Eastman Kodak had introduced a simple Brownie camera in 1900, costing $1 and preloaded with enough film for 100 exposures. However, here’s the catch – the camera had to be sent to Kodak headquarters in Rochester, N.Y., for processing and reloading.
Q.
Does the company take a tax deduction for any money collected in the stores from our charity drives, where customers buy blooms, hearts or sneakers to fight cancer, heart disease or juvenile diabetes?
A.
No. We just try to make it easy for people to donate. The only person who can write off the contribution is the customer.
That’s why we issue a receipt.
Q.
Why are members of our board of directors allowed to sit on the boards of other Fortune 500 companies? Our own chairman is on the board of Office Depot and the CEO of McDonald’s is on our board. But we sell both office supplies and food.
Patrick Gagliardo, MGT at 2151 S. Wolf Road in Hillside, Ill.
A.
Our board of directors determines whether there’s a competitive conflict when proposing new members for Walgreens
This photo, from 1949, was the oldest we could find of our photofinishing plant, which could develop 6,000 prints an hour at that time.
board or approving outside board involvement for someone like Dave Bernauer, our CEO and chairman. While we do sell some office supplies and fast-food products, such as soft drinks, these are small parts of our overall business, so neither Office Depot nor McDonald’s is a direct Walgreen competitor. In fact, we were very pleased that McDonald’s
CEO, Jim Skinner, joined our board last year, bringing his extensive expertise on customers, convenient locations and solid execution.
Q.
What does the term 1506 mean? Where did the number come from?
Jeremy Milam, photo specialist at 5881 Som Center Road in Willoughby, Ohio
A.
The number came from damaged and defective store claim form No. 1506, which stores used to fill out and submit for credit. The actual name is “store damaged unsaleable merchandise destroyed at store level.” Now you know why we just say “1506.”
– Marilyn Abbey, Brodie Bertrand, Iris Iglarsh
Walgreen World January/February 2006 15

A A
Da y i n t
“On Oct. 3, 2005, I photographed my team doing lots of things I don’t normally see from the photo department,” wrote Arlene Diaz, photo specialist in
Vernon, Conn., in a note with her entry. “Thank you for the great opportunity.”
Actually, we’re the grateful ones. Thanks to everyone who stepped behind the camera for a day. We received more than 1,200 glimpses into life at Walgreen stores and distribution centers across the country. It was a tough decision, but we narrowed it down to the best of the best, and ee ns printed these snapshots on the next four pages for your enjoyment.
– Angela Dahman
Bonnie Liedke, service clerk at
1525 E. Kimberly
Road in Davenport, Iowa, organizes the
Hallmark aisle.
Dennis Kath (left) and Marilyn Anderson, split-case team members at our Windsor distribution center in Wisconsin, replace rollers and dividers in the split-case lanes.
Midn igh t to
9
:0
0 a.
m
.
.
Annabelle Rivera, head photo specialist in Vernon,
Conn., shows a customer how to use the Fuji
Photo System.
Gary Robinson, receiving function lead at our
Waxahachie distribution center in Texas, uses a forklift to move freight to the receiving dock.
16 Walgreen World January/February 2006
9:
00
a.m
. to
2:00
p.m.

A
Da y i n t
ee ns
Jade Stewart, senior pharmacy technician at 790 W.
Granada Blvd. in Ormond Beach, Fla., works with an insurance company for a patient.
Bellete Gashaw, pharmacist at 9550
Hageman Road in
Bakersfield, Calif., notes potential drug interactions on a prescription.
Midn igh t to
9
:0
0 a.
m
.
Joe Resendez Jr., store manager at 3707 Spencer Hwy. in Pasadena, Texas, unloads water for customers after
Hurricane Rita.
00
Roddrick Smith,
a.m
assistant manager at 28426 State Highway 249 in Tomball,
. to
2:00
p.m.
Texas, unpacks
Halloween product.
Doug Elek, outbound manager at our Lehigh Valley distribution center in Pennsylvania, monitors product flow from
Mission Control.
Juanita Douglas,
SIMS coordinator in Lewisville, Texas, looks up an item for a customer.
Walgreen World January/February 2006 17

Tom Miller, split-case stocker at our Lehigh Valley distribution center in Pennsylvania, opens boxes to stock shelves.
:0
2
0 p.
:0
2
0 p.
m m
. t o
5:
00
p.
m.
Brett Kidd, MGT at
50 Columbia Ave. W. in Battle Creek,
Mich., keeps busy stocking shelves.
(Photo left) Ashley
Eastway, pharmacy technician at 410 E.
Jolly Road in Lansing,
Mich., enters a prescription called in.
Chasity Mills (left) and
Brandi Canady, pharmacy technicians at
950 E. Kenosha St. in
Broken Arrow, Okla., smile despite being short-handed on a day the pharmacy filled
500 prescriptions.
Tricia Roberts, training coordinator in Pharmacy Services, makes travel plans for hurricane volunteers heading to the Gulf Coast.
18 Walgreen World January/February 2006
Dorothy McKendree, SIMS coordinator at
28426 State Highway 249 in Tomball, Texas, works on scan outs in preparation for the next week’s order.
5:00
p.m
. to
M id nig ht

:0
2
0 p.
m
. t o
5:
00
p.
m.
Nique Guerrero, photo specialist at 7115 E.
Tanque Verde Road in
Tucson, Ariz., cleans the negative cartridge for the film processor.
Carolina Rey, store manager at 1515 E. Sunrise
Blvd. in Fort Lauderdale, Fla., charms an upset customer over the phone.
5:00
p.m
. to
M id id nig ht ht
Yari Fanusie, MGT at 8917 Trautwein Road in Riverside, Calif.,
(left) checks EXA Mindy Stephens’ bag before she heads home.
Thierry Ilela, EXA at 12700 W. 32nd Ave. in Wheat
Ridge, Colo., prepares for a reset.
Saroeun Leang, photo specialist at
626 S. Clovis Ave. in
Fresno, Calif., hangs up a photo order.
Marina Fowler, MGT at 1630 Ocean Ave. in San
Francisco, handles an exchange.
Congratulations to our featured photographers: Sonia Alvarez, Sandy Bedford, Debbie Bowman,
Charles Casela, Arlene Diaz, Debbie Engel, Holly Harrison, Deena Herwarth, Brian Jimenez, Amanda
Kauffman, Petric Kerley, Art Krieger, Jennifer Newman, Lisa Preuss, Tina Richards, Sabrina Rodriquez,
Sandy Sarkisian, Susie Sterbenz, Suzanne Waliser, and our Waxahachie distribution center safety team.
Walgreen World January/February 2006 19

Good
TO grow
A crowd welcomes Richmond
’ s 20th and
Walgreens 5,000th store last October.
W algreens needs you, me, all of us and more of us. We’re opening an average of one store every 20 hours. In
Richmond, Va., alone, where our 5,000th store opened two months ago, we now have 20 locations. The Anderson, S.C., distribution center, scheduled for completion in 2007, will eventually employ 800 people.
But hey, you say, I’m already here. What does all this mean for me? We can think of a number of reasons why Walgreens offers a great place to build a career:
You work for a stable, growing, ethical company. This benefit can’t be overstated, especially given the recent high-level fraud cases and financial meltdowns in corporate America. Honesty is engrained in our corporate policies and in our culture. And we have a track record of 31 straight years of record sales and profitability. So we’re in for the long haul.
Our benefits are second to none in the drugstore industry. These include healthcare insurance, an employee discount, our stock purchase plan and our Profit Sharing
Plan, which provides one of the highest matches of any Fortune
100 company.
We offer mobility. Not every job comes with a relocation opportunity – and not every employee wants to move across the country.
But with stores now in 45 states and Puerto Rico, you may well have a chance to follow your dream to the climate of your choice.
We promote from within. Juli
Tipton, store manager at 5161
Franz Road in Katy, Texas, was the first Walgreen business management intern to become a store manager. Stephanie Johnson was a store manager in Springfield, Mass., who was tapped for the
Emerging Leader program but elected to come to Corporate.
She’s now in Recruitment & Diversity Services. Our pharmacists can become pharmacy or district managers, or pharmacy supervisors, or move into corporate departments such as Pharmacy
Services, Purchasing, Real Estate, Store Operations and Walgreens
Health Services. That’s quite a choice.
We hired more than 65,000 hourly employees last year. This year, we expect to need 763 new store managers, 27 more district managers and 1,095 pharmacy managers.
Enough said? We’re growing, and we have room for you.
– Marilyn Abbey
20 Walgreen World January/February 2006

In 2005, Walgreens again ranked No. 1 among food and drug stores on Fortune magazine’s “ Most Admired Companies ” in America list. We also ranked 38th on the Fortune 500 list of the largest U.S.-based companies. With more than 5,000 stores, our 179,000 employees can be proud of what we’ve accomplished. Here’s our list of directors and officers who – with your hard work – have helped make this company strong.
David W. Bernauer
Chairman and Chief Executive Officer
Elected 1999
Jeffrey A. Rein
President and Chief Operating Officer
Elected 2003
William C. Foote
Chairman of the Board,
Chief Executive Officer and President
USG Corporation
Elected 1997 (1) (4*)
James J. Howard
Chairman Emeritus
Xcel Energy, Inc.
Elected 1986 (2) (4)
Alan G. McNally
Chairman
Harris Financial Corporation
Elected 1999 (3) (4)
Cordell Reed
Former Senior Vice President
Commonwealth Edison Co.
Elected 1994 (2*) (3)
David Y. Schwartz
Former Partner
Arthur Andersen LLP
Elected 2000 (1) (3*)
John B. Schwemm
Former Chairman and
Chief Executive Officer
R.R. Donnelley & Sons Co.
Elected 1985 (1*) (2) (4)
James A. Skinner
Vice Chairman and
Chief Executive Officer
McDonald’s Corporation
Elected 2005
Marilou M. von Ferstel
Former Executive Vice President and General Manager
Ogilvy Adams & Rinehart
Elected 1987 (1) (4)
Charles R. Walgreen III
Chairman Emeritus
Elected 1963 (3)
(1) Audit Committee
(2) Compensation Committee
(3) Finance Committee
(4) Nominating and Governance Committee
* Committee Chair
Chairman
David W. Bernauer
Chief Executive Officer
President
Jeffrey A. Rein
Chief Operating Officer
Executive Vice Presidents
Jerome B. Karlin
Store Operations
George J. Riedl
Marketing
Trent E. Taylor
Chief Information Officer
Gregory D. Wasson
President
Walgreens Health Services
Senior Vice Presidents
R. Bruce Bryant
Western Store Operations
John W. Gleeson
Corporate Strategy and Treasurer
Dana I. Green
General Counsel and
Corporate Secretary
Robert M. Kral
Purchasing
J. Randolph Lewis
Distribution & Logistics
Barry L. Markl
Midwest Store Operations
William M. Rudolphsen
Chief Financial Officer
William A. Shiel
Facilities Development
Mark A. Wagner
Eastern Store Operations
Kevin P. Walgreen
Southern Store Operations
Vice Presidents
Kermit R. Crawford
Executive Vice President
PBM Services
Kenneth R. Weigand
Human Resources
Store Operations
William M. Arnoult Jr.
C. Mark Ashworth
Paul T. Bonk
Kenneth B. Corin
Lisa D. Ehlers
George C. Eilers Jr.
Debra M. Ferguson
John J. Foley
David L. Gloudemans
John W. Grant
W. Thomas Grayson
Frank C. Grilli
William M. Handal
Patrick E. Hanifen
William J. Hose
Marlin W. Hutchens
David R. Lovejoy
Nivia L. Santiago
John W. Spina
Roberto M. Valencia
Stewart B. Wasson
Christine D. Whelan
Barry W. Zins
Pharmacy Services
Donald C. Huonker
Walgreens Health Services
Michael D. Tovian
Managed Care Sales
Thomas L. Bergseth
Facilities Planning & Design
Deidra L. Byrd
Employee Relations
John P. Cantlin
Walgreens Health Services
Thomas J. Connolly
Real Estate
Daniel M. Coughlin
Distribution Centers
Frank P. DeStefano
Purchasing
Douglas P. Egan
Marketing Services
Curtis L. Hayden
Architecture & Support
Garrick J. Hodge
Corporate & Regulatory Law
William L. Hubbs
Purchasing
Catherine N. Lindner
Purchasing
Laurie L. Meyer
Corporate Communications
Allan M. Resnick
Law
Robert E. Rogan
Distribution Centers
Jerry A. Rubin
Real Estate
Timothy V. Schmid
Construction
Mia M. Scholz
Controller
Arnold J. Silver
Purchasing
Robert M. Silverman
Real Estate Law
Craig M. Sinclair
Advertising
Patrick W. Tupa
Real Estate
David A. VanHowe
Purchasing
Terry R. Watkins
Distribution Centers
Denise K. Wong
Retail Applications
Chester G. Young
General Auditor
Robert G. Zimmerman
Walgreens Health Services
Walgreen World January/February 2006
21
2

ZONED IN ON 7,000 BY 2010
408
37
90
55
17
215
24
2
5
50
101
1
6
43
47
511
68
98
54
144
166
165
486
152
173
181
59
28
96
37
46
102
42
43
69
2
11
82
52
106
16
18
54
75
653
63
* Includes three mail service facilities at Aug. 31, 2005, and stores closed as of Aug. 31, 2005, due to Hurricane Katrina.
NEW STORE MANAGERS
Positions filled
750
600
450
300
150
’01 ’02 ’03 ’04 ’05
$27
$18
$9
SALES
Billions of dollars
$45
$36
’01 ’02 ’03 ’04 ’05
EARNINGS
Millions of dollars
$1,500
$1,200
$900
$600
$300
’01 ’02 ’03 ’04 ’05
PRESCRIPTIONS FILLED
In millions
500
400
300
200
100
’01 ’02 ’03 ’04 ’05