Earnings Call Excerpt
Walgreen Company (WAG)
F3Q06 Earnings Conference Call
June 26, 2006 8:00 am ET
Executives
Rick J. Hans - Director of Finance
Presentation
Rick J. Hans
Hello, and thanks for tuning in to Walgreens audio webcast for the third quarter of fiscal year 2006. I’m Rick Hans, Walgreens Director of Finance, and I invite you to use this information in conjunction with the press release and other financial information posted on our web site.
Before we begin, I’d like to go over the safe harbor language. Certain statements and projections of future results made in this presentation constitute forward-looking information that is based on current market, competitive and regulatory expectations that involve risk and uncertainty. Please see our Form 10-K for the fiscal year ended August 31, 2005, for a discussion of factors as they relate to forward-looking statements.
Today we announced third quarter earnings were up 14.2% to $469 million, or $0.46 per share diluted. That came on a sales increase of 12.4% to $12.2 billion. This quarter’s earnings were reduced by $20.1 million pre-tax for employee stock option program expenses. Last year these options weren’t expensed.
The quarter’s earnings also include the benefit of a $13.6 million credit from the settlement of certain prior years Internal Revenue Service matters. I should also note that last year’s quarter includes a pre-tax gain from litigation settlements of $6.6 million.
For the first nine months of fiscal 2006, sales increased 11.1% to $35.2 billion. Net earnings rose 8.8% to $1.34 billion, or $1.31 per share diluted. This year’s nine month earnings were reduced by $83.7 million pre-tax for employee stock option program expenses, and include the previously mentioned $13.6 million tax benefit. Last year’s nine month period includes a similar $7.8 million tax benefit, as well as a pre-tax gain of $26.3 million from litigation settlements.
This year’s third quarter LIFO provision was $24.2 million, the same as the previous year’s third quarter.
Front-end, or non-pharmacy sales were strong in the quarter as we gained market share in 57 of our top 59 core product categories, versus our drug store, grocery and mass merchant competitors, compared to a year ago. Pharmacy sales increases turned the quarter in May after a mild flu season with fewer related prescriptions compared to a year ago. We’re also seeing more patients filling prescriptions under the Medicare Drug Benefit program. Pharmacy accounted for 65.2% of our third quarter sales.
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