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The Financial Reporting Project
ACCT 1201: Financial Accounting and Reporting
Kevin Kang
Chris Laughlin
Anthony Mele
Ricardo Ortiz

Progress Report 1
Walgreens Co.
Annual Report: 2012

Company Background
A.The ticker for Walgreens Co. is WAG. Walgreens trades its stock in the New York Stock Exchange (NYSE). B.The auditor’s report included with the annual report is a statement from an external entity, explaining that after careful review of the balance sheets, cash flow statements and all financial statements included in the annual report are accurate. In addition, it ensures that Walgreens has prepared their financial statements in accordance with all the generally accepted accounting principles of the United States. The name of the auditing firm is Deloitte & Touche LLP. C.Walgreens, Co. is the largest drug store chain in the United States. It provides pharmacy services in addition to medical supplies, home needs, convenience goods and cosmetics. It sells a wide range of products from over the counter medicine, foods, cosmetics, supplements and vitamins, soaps and a multitude of other goods. The major service of the company is the pharmacy, for which Walgreens, Co. is most notable. Major competitors include Rite-Aid and CVS pharmacies. D.Closing Price for Walgreens, Co. (WAG) Friday March 1, 2013: $41.32

Developments relating to the Company
A.The demand for the products provided at Walgreens is inelastic. Walgreens offers a number of medical products and the pharmacy service, which is a growing industry in itself. Until another system of delivering medicine to those to whom it is prescribed, a pharmacy will always have demand. The other goods such as cosmetics have an elastic demand, however demand in the past few years has been constant enough to expand that department. B.The growth of the mobile technology industry has opened the door for a personalized customer service experience. Each customer can now access their rewards information, coupons and now check the status of their order at the pharmacy. This is a major stepping-stone for the company and an advantage over its current competitors.

Understanding the Annual Report and 10K
1) 2012’s Net Sales of $71,633 million is the second highest of the last five years, yet it is the only time in the last five years the the company has shown negative growth, with an annual rate of -0.76%. Up until 2012, the trend was of positive growth which could be attributed to the expansion of the company. The number of locations has increased from 6,934 in 2008 to 8,385 in 2012. Furthermore, the downturn of growth rate in net sales might be attributed to a slowing down of expansion. In 2012 there were 175 net openings, as compared to 937 in 2008. Please see figure 1.1 in the Appendix for full calculations. 2012’s Net Income of $2,127 million is the third highest it has been in the last five years. The annual growth rate however is by far the worst it has been at -21.63%. With annual growth’s ranging from -21.63% to 29.79% there is no clear trend of Net Income. Aside from 2011’s spike in net income of $2,714 million though, net income has relatively stayed the same. Though net sales have generally increased over time, net income has likely remained the same because the expansion of the company will result in higher expenses. Please see figure 1.2 in the Appendix for full calculations. 2) Gross margin percentage has remained nearly constant at a rate of roughly 28%. This means that over the past few years the ratio between net sales and gross profit as well as either of their ratios with cost of sales has remained the same. This trend could furthermore be explained by Walgreen’s ability to produce and sell goods at similar costs despite an increase in quantity. Please see figure 2.1 in the Appendix for full calculations. 3) The three largest assets are Property and equipment, Inventories, and Equity investment in...
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