Walgreen Co. Reports Fiscal 2013 First Quarter Results

Walgreen Co. (NYSE: WAG) (Nasdaq: WAG) today announced earnings and sales results for the first quarter of fiscal year 2013 ended Nov. 30.

Net earnings determined in accordance with generally accepted accounting principles (GAAP) for the fiscal 2013 first quarter were $413 million or 43 cents per diluted share, compared with $554 million or 63 cents per diluted share in the year-ago quarter.

Adjusted fiscal 2013 first quarter net earnings were $553 million or 58 cents per diluted share, compared with adjusted net earnings of $619 million or 71 cents per diluted share in the year-ago quarter. This year’s adjusted first quarter results exclude the negative impacts of 6 cents per diluted share in acquisition-related amortization costs, 4 cents per diluted share from the quarter’s LIFO provision, 3 cents per diluted share in costs related to Hurricane Sandy, and 2 cents per diluted share related to the company’s acquisition of USA Drug and related store closures.

“During a quarter that included a number of non-operational items, as well as the ongoing Express Scripts impact, we saw the underlying performance of our business strengthen with improved gross profit margins and an upswing in comparable prescriptions filled in the quarter,” said Walgreens President and CEO Greg Wasson. “We also were pleased with the business performance of our strategic partner, Alliance Boots, and are on track to meet our first-year synergy targets with them. As I have said before, Walgreens and Alliance Boots both perform well in historically tough economic climates, and together we now are better positioned for growth.

“In many respects, this quarter was a turning point with the increasing pace of return of Express Scripts customers to our pharmacies, as well as the enthusiastic customer response to our Balance Rewards program, with more than 45 million signups since the program launched. In addition, we saw strong demand for flu shots and other immunizations, which has continued into the month of December. Given these factors, we are confident in our strategy and ability to execute going into the new year.”

Walgreens today also announced that it is reporting results from its investment in Alliance Boots on a one-quarter lag rather than a one-month lag period, as previously disclosed. This is intended to align the audit requirements for the investment and more efficiently address regulatory and audit considerations. While this does not affect the underlying equity income and synergies that are anticipated in the first 12 months since the Aug. 2, 2012 completion of Walgreens initial 45 percent investment in Alliance Boots, it does impact the quarterly and fiscal year timing in which the equity income and a portion of the synergies are reported. While only investment results from the month of August 2012 are included in Walgreens fiscal 2013 first quarter performance, the first quarter does fully reflect the incremental shares and interest expense associated with the transaction, resulting in dilution of 7 cents to adjusted EPS in the first quarter, compared with an estimated accretion of 3 cents to adjusted EPS had the company used the previously announced one-month lag period.

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