Q1 2012 Earnings Call Transcript

Transcript Call Date 12/21/2011

Operator: Good day, everyone, and welcome to today's Walgreen Company First Quarter 2012 Earnings Call. Today's call is being recorded. I'll turn things over to your host Mr. Rick Hans. Please go ahead, sir.

Rick J. Hans - Divisional VP of IR and Finance: Thank you, Jason. Good morning, everyone. Welcome to our first quarter conference call. Today, Greg Wasson, our President and CEO; and Wade Miquelon, our EVP and Chief Financial Officer will discuss the quarter and update you on Express Scripts. Also joining us on the call and available for questions is Kermit Crawford, our President of Pharmacy, Health and Wellness Services; and Mark Wagner, President of Community Management.

As a reminder, today's presentation includes certain non-GAAP financial measures, and I would direct you to our website at for reconciliation. You can find a link to our webcast under the IR website. After the call, this presentation and a podcast will be archived on the website for 12 months.

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. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statement after this presentation, whether as a result of new information, future events, changes in the assumptions or otherwise. Please see our latest Form 10-K for a discussion of risk factors as they relate to forward-looking statements.

Now, I'll turn the call over to Greg.

Gregory D. Wasson - President and CEO: Thank you, Rick. Good morning, everyone, and thank you for joining us on our call. Today I'll begin with our quarterly results; second, I'll discuss the progress we're making on our strategies and finally I'll provide a brief update on Express Scripts; and then Wade, will give you more details on our performance and the considerations for the year ahead.

Beginning with our results today, as you saw in our release this morning, we reported record first quarter sales of $18.2 billion up 4.7% from $17.3 billion a year ago. First quarter net earnings were $554 million and first quarter earnings per diluted share were $0.63. Compared to the prior year the delay cough, cold and flu season impacted net earnings per diluted share by $0.01. While the strategic decision to no longer be part of Express Scripts Pharmacy network as of January 1, 2012, cost $0.01 per diluted share in comparable pharmacy sales and $0.01 per diluted share in related expenses.

Cash flow from operations for the quarter was $809 million and free cash flow was $309 million. We returned $803 million to shareholders in the quarter, including the largest dividend payment in that Company's history, and $601 million in stock repurchases, up nearly 18% over the first quarter last year.

Now I'd like to put this quarter's results in to context. On our September call, we anticipated we would be see challenging comparisons for gross profit dollar growth in the first quarter and we did. We were up against two strong prior year quarters as we discussed our first quarter is always impacted by volatility and the timing and the severity of the cough, cold and flu season, which this year is off to a slow start.

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