Walgreen Co · 10-K · For 8/31/96

Filed On 11/27/96   ·   SEC File 1-00604   ·   Accession Number 104207-96-7

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Walgreen Co. 10-K for the Fiscal Year 8/31/96         18±    77K 
 2: EX-10       Walgreen Select Senior Executive Retiree Medical       2±    12K 
                          Expense Plan                                           
 3: EX-13       Annual Report to Shareholders                         17±    82K 
 4: EX-21       Subsidiaries of the Registrant                         1      7K 
 5: EX-23       Consent of Independent Public Accountants              1      5K 
 6: EX-27       Financial Data Schedule                                1      8K 

10-K   ·   Walgreen Co. 10-K for the Fiscal Year 8/31/96
Document Table of Contents

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       S E C U R I T I E S   A N D   E X C H A N G E   C O M M I S S I O N
WASHINGTON, D.C. 20549

FORM 10-K 
(Mark One)                                                                      
 X         Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

      FOR THE FISCAL YEAR ENDED AUGUST 31, 1996.

    or
    Transition Report Pursuant to Section 13 or 15(d) of the
 Securities Exchange Act of 1934
     For the Transition Period From _________________ to _______________

       Commission file number 1-604.

WALGREEN CO.  
  (Exact name of registrant as specified in its charter)

  ILLINOIS                                36-1924025
         (State of incorporation)           (I.R.S. Employer Identification No.)

200 WILMOT ROAD, DEERFIELD, ILLINOIS                    60015   
(Address of principal executive offices)                (Zip Code)  

   Registrant's telephone number, including area code:  (847) 940-2500

Securities registered pursuant to Section 12(b) of the Act:                     
                                               Name of each exchange
    Title of each class                        on which registered
                                               NEW YORK STOCK EXCHANGE
COMMON STOCK ($.3125 PAR VALUE)                   CHICAGO STOCK EXCHANGE    
                                               NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS                   CHICAGO STOCK EXCHANGE    

Securities registered pursuant to section 12(g) of the Act:    NONE             

 Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during   
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.                                                               
Yes   X        No ______

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by                                                                 
reference in Part III of this Form 10-K or any amendment to this form 10-K.  [ ]

AS OF OCTOBER 31, 1996, THERE WERE 246,141,072 SHARES OF WALGREEN CO. 
COMMON STOCK, PAR VALUE $.3125 PER SHARE, ISSUED AND OUTSTANDING AND THE        
AGGREGATE MARKET VALUE OF SUCH COMMON STOCK HELD BY NON-AFFILIATES (BASED UPON  
THE CLOSING TRANSACTION PRICE ON THE NEW YORK STOCK EXCHANGE) WAS APPROXIMATELY 
$9,064,665,000.                                                                 

DOCUMENTS INCORPORATED BY REFERENCE                                             
     PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED AUGUST 31,
1996, ONLY TO THE EXTENT EXPRESSLY SO STATED HEREIN, ARE INCORPORATED BY        
REFERENCE INTO PARTS I, II AND IV OF FORM 10-K.  PORTIONS OF THE REGISTRANT'S   
PROXY STATEMENT FOR ITS 1996 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY  
8, 1997, ARE INCORPORATED BY REFERENCE INTO PART III OF FORM 10-K.              

PART I

Item 1.  Description of Business                                                

(a)  General development of business.                               

      Walgreen Co. (the "company" or "Walgreens") is America's largest drugstore
retailer and during the fiscal year ended August 31, 1996, had net sales of     
$11,778,408,000.  The company served customers in 34 states and Puerto Rico     
through 2,191 retail drugstores and 2 mail order facilities.                    

In fiscal 1996, the company opened 210 new or relocated drugstores, 
completed remodelings of 71 units, and closed 102 drugstores.  In the last five 
fiscal years, the company has opened 872 new drugstores, 2 new mail service     
facilities, acquired 15 stores, completed remodelings of 481 units and closed   
341 drugstores and one mail service facility.  In addition, one major           
distribution center was added during the five-year period.                      

    Prescription sales were 45.2% of total sales for fiscal 1996 compared to
43.4% in 1995 and 40.8% in 1994.  Pharmacy sales trends are expected to continue
primarily because of expansion into new markets, increased penetration in       
existing markets and demographic changes such as the aging population.          

The company expects to open at least 230 new stores in fiscal 1997, 
including units in the new markets of Detroit and Kansas City.  Plans are to    
escalate new store openings to 300 per year beginning in 1998 and to be         
operating 3,000 stores across the country by the year 2000.  Intercom Plus, an  
advanced pharmacy computer and workflow system, is expected to be completed in  
fiscal 1997.                                                                    

(b)  Financial information about industry segments.                 

 The company's primary business is the operation of retail drugstores.

(c)  Narrative description of business.                             

             (i)  Principal products produced and services rendered.

                The drugstores are engaged in the retail sale of
                 prescription and nonprescription drugs and carry additional
           product lines such as general merchandise, cosmetics,
    toiletries, liquor and beverages, and tobacco.

1 

                      The estimated contributions of various product classes
             to sales for each of the last three fiscal years are as
follows:                                  

                                                    Percentage
                       Product Class                1996       1995       1994

                       Prescription Drugs            45%        43%        41%
                      General Merchandise *         24         24         24
                      Nonprescription Drugs *       13         13         13
                      Cosmetics, Toiletries *        8          8          9
                      Liquor, Beverages              7          8          9
                      Tobacco Products *             3          4          4

                       Total Sales                  100%       100%       100%
                                                    ======     ======     ======
             * Estimated based, in part, on store scanning
information.                

(ii)  Status of a product or segment.     

Not applicable.                 

       (iii)  Sources and availability of raw materials.

                    Inventories are purchased from numerous domestic and
                  foreign suppliers.  The loss of any one supplier or group of
              suppliers under common control would not have a material
effect on the business.                   

                        Fuel and other sources of energy are relied upon for the
                  distribution of merchandise and in the general operations of
               the retail stores.  Increased energy costs over the years
           have not materially increased the cost of operations.

         (iv)  Patents, trademarks, licenses, franchises and
concessions held.             

                         Walgreens markets products under various trademarks and
      trade names and holds assorted business licenses
                 (pharmacy, occupational,liquor, etc.) having various lives,
               which are necessary for the normal operation of business.

(v)  Seasonal variations in business.     

                  The business is seasonal in nature, with Christmas
               generating a higher proportion of sales and earnings than
                   other periods.  See the caption "The Walgreen Year...A Review
                  by Quarters" on Page 30 of the Annual Report to Shareholders
                 for the year ended August 31, 1996 ("Annual Report"), which
is incorporated herein by reference.      

(vi)  Working capital practices.          

                       During fiscal 1996 the company did obtain funds through
               the placement of commercial paper.  The company generally
                finances its inventory and expansion needs with internally
          generated funds.  However, short-term borrowings are
               anticipated during fiscal 1997 to support working capital
              needs.  Long-term borrowings may be necessary due to the
planned escalation of new store openings. 

         2
                   Due to the nature of the retail drugstore business,
           sales are principally for cash.  Customer returns are
immaterial.                               

         (vii)  Dependence upon limited number of customers.

                     Sales are to numerous customers which include various
                managed care organizations; therefore, the loss of any one
                 customer or a group of customers under common control would
              not have a material effect on the business.  No customer
       accounts for ten percent or more of the company's
consolidated revenue.                     

(viii)  Backlog Orders.                   

Not applicable.                 

(ix)  Government contracts.               

                        The company is not a party to any significant government
contracts.                                

(x)  Competitive conditions.              

                      The drug store industry is highly competitive.  As one
                  of the volume leaders in the retail drug industry, Walgreens
          competes with various retailers, including chain and
                independent drugstores, mail order prescription providers,
                   grocery, variety and discount department stores.  Competition
           remained keen during the fiscal year with the company
                competing on the basis of price, convenience, service  and
                   variety.  The company's geographic dispersion tends to offset
                 the impact of temporary economic and competitive conditions
in individual markets.                    

                Sales by geographic area for fiscal 1996 were as
follows:                                  
                                                       Percent
                   State                                of Sales
               Florida                                19
               Illinois                               16
               Texas                                   8
               Arizona                                 7
               California                              6
               Wisconsin                               5
               28 other states and Puerto Rico        39
                                                     100
                                                     ===
(xi)  Research and development activities.

                    The company does not engage in any material research
activities.                               

(xii)  Environmental disclosures.         

                 Federal, state and local environmental protection
       requirements have no material effect upon capital
           expenditures, earnings or competitive position of the
company.                                  

(xiii)  Number of employees.              

                       The company employs approximately 77,000 persons, about
                 25,000 of whom are part-time employees working less than 30
hours per week.                           

3 

(d)  Financial information about foreign and domestic operations and
export sales.                                             

                All the company sales occur within the continental United States
and Puerto Rico.  There are no export sales.              

Item 2.  Properties                                                             

The number and location of the company's drugstores is incorporated by
reference to the table under the caption "Walgreens Nationwide" on page 33 of   
the Annual Report.  Most of the company's drugstores are leased.  The leases are
for various terms and periods.  See the caption, "Leases" on page 26 of the     
Annual Report, which section is incorporated herein by reference.  The company  
owns approximately 6% of the retail stores open at August 31, 1996.  The        
decision has been made to purchase, rather than lease, more store locations than
in the past.  This may necessitate future long-term borrowings.  The company has
an aggressive expansion program of adding new stores and remodeling and         
repositioning existing stores.  Net selling space of drugstores was increased   
from 20.7 million to 22.1 million square feet at August 31, 1996.  Approximately
60% of company stores have been opened or remodeled during the past five years. 

    The company's retail drugstore operations are supported by nine warehouses
with a total of approximately 3,300,000 square feet of space, of which 2,500,000
square feet is owned.  The remaining space is leased with an option to buy.  All
warehouses are served by electronic data processing systems for order processing
control, operating efficiencies and rapid merchandise delivery to stores.  In   
addition, the company uses public warehouses to handle distribution needs.      
Distribution capacity is adequate now, but as the company continues to expand,  
additional space will be needed to maintain service levels.  Studies are ongoing
to determine where and when distribution space will be added.                   

     The company owns one mail service facility with a ground lease and leases a
second facility.  The combined square footage of the facilities is approximately
120,000 square feet.  There are four principal office facilities containing     
approximately 500,000 square feet of which 400,000 square feet is owned and the 
remainder is leased.  The mail order and office facilities are adequate for     
current needs.                                                                  

Item 3.  Legal Proceedings                                                      

The information in response to this item is incorporated herein by
reference to the caption "Contingencies" on page 27 of the Annual Report.       

Item 4.  Submission of Matters to a Vote of Security Holders                    

       No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year.                                                     

4 

EXECUTIVE OFFICERS OF THE REGISTRANT                                  

The following information is furnished with respect to each executive 
officer of the company as of August 31, 1996:                                   

NAME AND BUSINESS EXPERIENCE               AGE        OFFICE HELD               

Charles R. Walgreen III                    60         Chairman of the Board,    
       Chairman of the Board since April               Chief Executive Officer
       1976                                               and Director
Chief Executive Officer since 1971                              
Director since 1963                                             

L. Daniel Jorndt                           55         President, Chief Operating
      President and Chief Operating                     Officer and Director
Officer since February 1990                             
Director since January 1990                                     

Vernon A. Brunner                          56         Executive Vice President  
Executive Vice President since                                  
February 1990                                           

Glenn S. Kraiss                            63         Executive Vice President  
Executive Vice President since                                  
February 1990                                           

David W. Bernauer                          52         Senior Vice President     
Senior Vice President since July 1996                           
Chief Information Officer since                                 
February 1995                                           
Vice President                                                  
February 1990 to July 1996                              
Treasurer                                                       
February 1990 to June 1992                              

Roger L. Polark                            48         Senior Vice President and 
        Senior Vice President and                        Chief Financial Officer
Chief Financial Officer since                           
February 1995                                           
Vice President since June 1988                                  

John A. Rubino                             55         Senior Vice President     
Senior Vice President since July 1991                           

William A. Shiel                           45         Senior Vice President     
Senior Vice President since July 1993                           
Vice President                                                  
May 1985 to July 1993                                   

Robert C. Atlas                            61         Vice President            
Vice President since September 1987                             

5 

EXECUTIVE OFFICERS OF THE REGISTRANT - continued:                     

NAME AND BUSINESS EXPERIENCE              AGE        OFFICE HELD                

W. Lynn Earnest                           53         Vice President             
Vice President since July 1992                                  
Treasurer July 1992 to February 1996                            
Regional Vice President                                         
July 1980 to June 1992                                  

Robert H. Halaska                         56         Vice President             
Vice President since April 1995                                 
President, WHP Health Initiatives, Inc.                         
since October 1995                                      
President, Walgreens Healthcare Plus,                           
Inc. since September 1991                               
Senior Vice President, Sales &                                  
Marketing, Blue Cross/Blue                              
Shield of Illinois                                      
February 1985 to September 1991                         

Jerome B. Karlin                          54         Vice President             
Vice President since September 1987                             

J. Randolph Lewis                         46         Vice President             
Vice President since March 1996                                 
Divisional Vice President, Logistics                            
and Planning                          
September 1992 to February 1996                         
Partner, Ernst & Young                                          
October 1986 to August 1992                             

Julian A. Oettinger                       57         Vice President,            
Vice President, Secretary and                  Secretary and    
  General Counsel since January 1989         General Counsel

Roger H. Clausen                          54         Controller                 
Controller since June 1988                                      

Jeffrey A. Rein                           44         Treasurer                  
Treasurer since March 1996                                      
District Manager                                                
July 1990 to February 1996                              

   There is no family relationship between any of the aforementioned
officers of the company.                                            

         6

PART II 

Item 5.  Market for the Registrant's Common Stock and Related Security
Holder Matters                                      

        The company's common stock is traded on the New York and Chicago
  Stock Exchanges under the symbol WAG.  As of October 31, 1996 there were
37,878 recordholders of company common stock according to the records 
maintained by the company's transfer agent.                           

      The range of the sales prices of the company's common stock by
  quarters and the cash dividends declared per common share during the two
years ended August 31, 1996 are as follows:                           

             Dividends               Common Stock Prices
                 Declared            1996                   1995
  Quarter Ended  1996    1995      High       Low         High       Low
       November     $  .11  $.0975   $31  1/4   $24  1/2    $21  3/16  $18   1/2
       February        .11   .0975    36  3/8    28  1/2     24         20   1/4
       May             .11   .0975    34  7/8    30  7/8     24 13/16   22 13/16
       August          .11   .0975    34  7/8    30  3/4     26  9/16   23   5/8
       Fiscal Year  $  .44  $.39     $36  3/8   $24  1/2    $26  9/16  $18   1/2

==========================================================================      

Item 6.  Selected Financial Data                                      

          The information in response to this item is incorporated herein by
reference to the caption "Eleven-Year Summary of Selected Consolidated
Financial Data" on pages 18 and 19 of the Annual Report.              

  Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations             

          The information in response to this item is incorporated herein by
   reference to the caption "Management's Discussion and Analysis of Results
 of Operations and Financial Condition" on pages 20 and 21 of the Annual
Report.                                                               

Item 8.  Financial Statements and Supplementary Data                  

See Item 14.                                            

Item 9.  Disagreements on Accounting and Financial Disclosure         

None.                                                   

           7

PART III

  The information required for Items 10, 11 and 12, with the
exception of the information relating to the executive officers of the
Registrant, which is presented in Part I under the heading "Executive 
 Officers of the Registrant", is incorporated herein by reference to the
following sections of the Registrant's Proxy Statement:               

        Captions in Proxy                                     Proxy Page Numbers

Names and ages of Director nominees,                            
their principal occupations and                                 
 other information                                               2

 Securities Ownership of Directors and Executive             4 - 5
Officers                                                        

 Executive Compensation                                     6 - 11

8 
PART IV 

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K      

(a)  Documents filed as part of this report                                     

    (1)  The following financial statements, supplementary data, and auditors'
    report appearing in the Annual Report are incorporated herein by
reference.                                                  
                                                                  Annual
                                                                  Report
                                                                   Page Number
         Consolidated Statements of Earnings and Retained Earnings          22
for the years ended August 31, 1996, 1995 and 1994          

         Consolidated Balance Sheets at August 31, 1996 and 1995            23

         Consolidated Statements of Cash Flows                              24
for the years ended August 31, 1996, 1995 and 1994          

         Statement of Major Accounting Policies                        25 - 26

         Notes to Consolidated Financial Statements                    26 - 28

         Report of Independent Public Accountants                           29

         Summary of Quarterly Results for the years ended                   30
August 31, 1996 and 1995 (Unaudited)                        

         Walgreens Nationwide                                               33

(2)  The following financial statement schedule and related auditors' 
report are included herein.                                 
                                                                      10-K
                                                                     Page Number
         Schedule II    Valuation and Qualifying Accounts                   14

         Supplemental Report of Independent Public Accountants              15

     Schedules I, III, IV and V are not submitted because they are not
     applicable or not required or because the required information is
       included in the Financial Statements in (1) above or notes thereto.

Other Financial Statements -                                

     Separate financial statements of the registrant have been omitted
          because it is primarily an operating company, and all its subsidiaries
are included in the consolidated financial statements.      

9 

(3)  Exhibits 10(a) through 10(n) constitute management contracts or  
       compensatory plans or arrangements required to be filed as exhibits
pursuant to Item 14(c) of this Form 10-K.                   

(b)  Reports on Form 8-K                                                        

          A report on Form 8-K was filed on July 11, 1996, reporting under "Item
5. Other Events." that the Board of Directors of the Registrant had on July 10, 
1996 declared a dividend of one preferred share purchase right for each         
outstanding share of common stock of the Registrant.  The dividend distribution 
was made on August 21, 1996, to shareholders of record on that date.  The rights
replaced preferred share purchase rights that expired August 21, 1996.          

(c)  Exhibits                                                                   

        3.  (a)  Articles of Incorporation of the company, as amended, filed
                 with the Securities and Exchange Commission as Exhibit 3(a)
                to the company's Annual Report on Form 10-K for the fiscal
               year ended August 31, 1995, and incorporated by reference
herein.                                   

             (b)  By-Laws of the company, as amended and restated effective as
                 of February 1, 1990, filed as Exhibit 4.03 to the company's
      Form S-8 Registration Statement on July 15, 1992
                (Registration No. 33-49676), and incorporated by reference
herein.                                   

    4.  (a)   (i) Walgreen Co. Debt Securities Indenture dated as of
                     May 1, 1986, between the company and Harris Trust and
                    Savings Bank, Trustee, filed with the Securities and
                    Exchange Commission as Exhibit 4(c) to the company's
               Form S-3 Registration Statement on May 22, 1986
               (Registration No. 33-5903), and incorporated by
reference herein.               

                 (ii) Walgreen Co. Resolutions of Pricing Committee Relating
                 to Debt Securities, filed with the Securities and
                    Exchange Commission as Exhibit 4(a) to the company's
              Current Report on Form 8-K dated June 17, 1986
                       (File No. 1-604), and incorporated by reference herein.

         (b)   Rights Agreement dated as of July 10, 1996, between the
             company and Harris Trust and Savings Bank, filed with
               the Securities and Exchange Commission as Exhibit 1. to
                Registration Statement on Form 8-A on July 11, 1996, and
incorporated by reference herein.       

10.  (a)  Top Management Long-Term Disability Plan.  (Note 3) 

            (b)  Executive Short-Term Disability Plan Description.  (Note 3)

          (c)  Walgreen Management Incentive Plan (as restated effective
               October 12, 1994), filed with the Securities and Exchange
                   Commission as Exhibit 10(a) to the company's Quarterly Report
               on Form 10-Q for the quarter ended November 30, 1994, and
incorporated by reference herein.         

________________________________________________________________________________
See Notes on page 13.                                                 

10

         (d)   (i)  Walgreen Co. Restricted Performance Share Plan and
                        amendments thereto effective October 18, 1988 and July
                 8, 1992, filed with the Securities and Exchange
                     Commission as Exhibit 10(d) to the company's Annual
                      Report on Form 10-K for the fiscal year ended August
                 31, 1992, and incorporated by reference herein.

          (ii)  Amendment No. 3 to the Walgreen Co. Restricted
                       Performance Share Plan (effective September 1, 1994),
                   filed as Exhibit 10(b) to the company's Quarterly
                        Report on Form 10-Q for the quarter ended November 30,
             1994, and incorporated by reference herein.

           (e)   (i)  Walgreen Co. Executive Stock Option Plan (as amended
                       effective October 13, 1992) filed with the Securities
                        and Exchange Commission as Exhibit 19 to the company's
                     Quarterly Report on Form 10-Q for the quarter ended
                  February 28, 1993, and incorporated by reference
herein.                       

        (f)    (i) Walgreen Co. 1986 Director's Deferred Fee/Capital
Accumulation Plan.  (Note 1)  

              (ii) Walgreen Co. 1987 Director's Deferred Fee/Capital
Accumulation Plan.  (Note 2)  

             (iii) Walgreen Co. 1988 Director's Deferred Fee/Capital
Accumulation Plan.  (Note 4)  

           (iv) Walgreen Co. 1992 Director's Deferred Retainer
          Fee/Capital Accumulation Plan.  (Note 8)

(g)    (i) Walgreen Co. 1986 Executive Deferred     
                   Compensation/Capital Accumulation Plan.  (Note 1)

 (ii) Walgreen Co. 1988 Executive Deferred
                   Compensation/Capital Accumulation Plan.  (Note 4)

              (iii) Amendments to Walgreen Co. 1986 and 1988 Executive
                   Deferred Compensation/Capital Accumulation Plans.
(Note 6)                      

 (iv) Walgreen Co. 1992 Executive Deferred
                  Compensation/Capital Accumulation Plan Series 1.
(Note 8)                      

  (v) Walgreen Co. 1992 Executive Deferred
                  Compensation/Capital Accumulation Plan Series 2.
(Note 8)                      

        (h)  Walgreen Co. Executive Deferred Profit-Sharing Plan (as
                   restated effective April 13, 1994), filed with the Securities
               and Exchange Commission as Exhibit 10(b) to the company's
                 Quarterly Report on Form 10-Q for the quarter ended May 31,
 1994, and incorporated by reference herein.

________________________________________________________________________________
See Notes on page 13.                                                     
11
       (i)    (i) Form of Change of Control Employment Agreements.
(Note 5)                      

                (ii) Amendment to Employment Agreements adopted July 12,
1989. (Note 7)                

         (j)  Walgreen Select Senior Executive Retiree Medical Expense
Plan.                                     

             (k)   (i)  Walgreen Co. Profit-Sharing Restoration Plan (restated
                       effective January 1, 1993), filed with the Securities
                 and Exchange Commission as Exhibit 10(k) to the
                     company's Annual Report on Form 10-K for the fiscal
                 year ended August 31, 1993, and incorporated by
reference herein.             

                  (ii)  Walgreen Profit Sharing Restoration Plan Amendment No.
                        1 (effective October 12, 1994), filed as Exhibit 10(c)
                        to the company's Quarterly Report on Form 10-Q for the
                      quarter ended November 30, 1994, and incorporated by
reference herein.             

              (l)  Walgreen Co. Retirement Plan for Outside Directors.  (Note 7)

              (m)  Walgreen Section 162(m) Deferred Compensation Plan (effective
               October 12, 1994), filed with the Securities and Exchange
                   Commission as Exhibit 10(d) to the company's Quarterly Report
               on Form 10-Q for the quarter ended November 30, 1994, and
incorporated by reference herein.         

              (n)  Agreement dated October 13, 1994, by and between Walgreen Co.
                 and Charles D. Hunter (for consulting services), filed with
                the Securities and Exchange Commission as Exhibit 10(e) to
                 the company's Quarterly Report on Form 10-Q for the quarter
            ended November 30, 1994, and incorporated by reference
herein.                                   

    11.  The required information for this Exhibit is contained in the
             Consolidated Statements of Earnings and Retained Earnings for the
      years ended August 31, 1996, 1995 and 1994 and also in the
         Statement of Major Accounting Policies, each appearing in the
        Annual Report and previously referenced in Part IV, Item 14,
Section (a)(1).                                     

         13.  Annual Report to shareholders for the fiscal year ended August 31,
          1996. This report, except for those portions thereof which are
           expressly incorporated by reference in this Form 10-K, is being
        furnished for the information of the Securities and Exchange
              Commission and is not deemed to be "filed" as a part of the filing
of this Form 10-K.                                  

21.  Subsidiaries of the Registrant.                          

23.  Consent of Independent Public Accountants.               

27.  Financial Data Schedule.                                 

________________________________________________________________________________
See Notes on page 13.                                                 

12

NOTES                                                                 

    (Note 1)    Filed with the Securities and Exchange Commission as
                      Exhibit 10 to the company's Annual Report on Form 10-K for
                   the fiscal year ended August 31, 1986 (File No. 1-604),
 and incorporated by reference herein.

    (Note 2)    Filed with the Securities and Exchange Commission as
                     Exhibit 10 to the company's Quarterly Report on Form 10-Q
                     for the quarter ended November 30, 1986 (File No. 1-604),
 and incorporated by reference herein.

    (Note 3)    Filed with the Securities and Exchange Commission as
                      Exhibit 10 to the company's Annual Report on Form 10-K for
                   the fiscal year ended August 31, 1990 (File No. 1-604),
 and incorporated by reference herein.

    (Note 4)    Filed with the Securities and Exchange Commission as
                     Exhibit 10 to the company's Quarterly Report on Form 10-Q
                     for the quarter ended November 30, 1987 (File No. 1-604),
and incorporated by reference herein. 

    (Note 5)    Filed with the Securities and Exchange Commission as
                  Exhibit 10 to the company's Current Report on Form 8-K
                     dated October 18, 1988 (File No. 1-604), and incorporated
by reference herein.                

    (Note 6)    Filed with the Securities and Exchange Commission as
                     Exhibit 10 to the company's Quarterly Report on Form 10-Q
                     for the quarter ended November 30, 1988 (File No. 1-604),
 and incorporated by reference herein.

    (Note 7)    Filed with the Securities and Exchange Commission as
                  Exhibit 10 to the company's Annual Report on Form 10-K
               for the fiscal year ended August 31, 1989 (File No.
         1-604), and incorporated by reference herein.

    (Note 8)    Filed with the Securities and Exchange Commission as
                      Exhibit 10 to the company's Annual Report on Form 10-K for
                      the fiscal year ended August 31, 1992, and incorporated by
reference herein.                   

13

WALGREEN CO. AND SUBSIDIARIES 

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994

(Dollars in Thousands)

                 Additions
                            Balance at    Charged to              Balance at
                       Beginning     Costs and                 End
Classification                of Period     Expenses    Deductions  of Period   

Allowances deducted from receivables                                            
for doubtful accounts -                                                 

Year ended August 31, 1996   $ 24,633     $  2,035     $(12,192)     $ 14,476   
                          ========     ========     =========     ========

Year ended August 31, 1995   $ 21,601     $  7,499     $ (4,467)     $ 24,633   
                          ========     ========     =========     ========

Year ended August 31, 1994   $ 23,050     $  4,018     $ (5,467)     $ 21,601   
                          ========     ========     =========     ========

14

SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS         

To the Board of Directors and Shareholders of Walgreen Co.:   

We have audited in accordance with generally accepted         
auditing standards, the consolidated financial statements     
included in Walgreen Co. and Subsidiaries' annual report to   
shareholders incorporated by reference in this Form 10-K,     
and have issued our report thereon dated September 27, 1996.  
Our audits were made for the purpose of forming an opinion    
on those statements taken as a whole.  Schedule II included   
in this Form 10-K is the responsibility of the company's      
management, is presented for purposes of complying with the   
Securities and Exchange Commission's rules, and is not part   
of the basic financial statements.  The supplemental          
schedule has been subjected to the auditing procedures        
applied in the audits of the basic financial statements and,  
in our opinion, fairly states in all material respects the    
financial data required to be set forth therein in relation   
to the basic financial statements taken as a whole.           

Arthur Andersen LLP                                           

Chicago, Illinois                                             
September 27, 1996                                            

    15

    SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities
    Exchange Act of 1934, the registrant has duly caused this report to be
 signed on its behalf by the undersigned, thereunto duly authorized.

WALGREEN CO.                                                      
(Registrant)                                                      

    By ______R. L. Polark_______                  Date:  November 27, 1996
R. L. Polark                                    
Senior Vice President                                     
Chief Financial Officer                                     

          Pursuant to the requirements of the Securities and Exchange Act of
      1934, this report has been signed below by the following persons on behalf
of the registrant, and in the capacities and on the dates indicated.

            Name                         Title                        Date

____C. R. Walgreen III____  Chairman of the Board, Chief     November 27, 1996
C. R. Walgreen III      Executive Officer and Director                

_____L. D. Jorndt__________  President, Chief Operating      November 27, 1996
L. D. Jorndt            Officer and Director                        

_____Roger H. Clausen______  Controller                      November 27, 1996
Roger H. Clausen                                                    

_____Theodore Dimitriou____  Director                        November 27, 1996
Theodore Dimitriou                                                  

_____James J. Howard_______  Director                        November 27, 1996
James J. Howard                                                     

_____C. D. Hunter__________  Director                        November 27, 1996
C. D. Hunter                                                        

_____Cordell Reed__________  Director                        November 27, 1996
Cordell Reed                                                        

_____John B. Schwemm_______  Director                        November 27, 1996
John B. Schwemm                                                     

_____William H. Springer___  Director                        November 27, 1996
William H. Springer                                                 

_____Marilou M. von Ferstel  Director                        November 27, 1996
Marilou M. von Ferstel                                              

16  

INDEX TO EXHIBITS   

A.  DOCUMENTS FILED WITH THIS REPORT                                    

Exhibit 10(j)         Walgreen Select Senior Executive Retiree Medical
Expense Plan.             

Exhibit 13            Annual Report to Shareholders for the Fiscal    
 Year Ended August 31, 1996.

Exhibit 21            Subsidiaries of the Registrant.                 

Exhibit 23            Consent of Independent Public Accountants.      

Exhibit 27            Financial Data Schedule.                        

B.  DOCUMENTS INCORPORATED BY REFERENCE                               

     Exhibit 3(a)          Articles of Incorporation of the company, as amended.

Exhibit 3(b)          By-Laws of the company, as amended and restated.

Exhibit 4(a)(i)       Walgreen Co. Debt Securities Indenture dated    
                as of May 1, 1986, between the company and
             Harris Trust and Savings Bank, Trustee.

Exhibit 4(a)(ii)      Walgreen Co. Resolutions of Pricing Committee   
  Relating to Debt Securities.

Exhibit 4(b)(i)       Rights Agreement dated as of July 9, 1986,      
                   between the company and Harris Bank and Trust
Company.                  

Exhibit 4(b)(ii)      Amendment to Rights Agreement dated as of       
                      October 18, 1988, between the company and Harris
Bank and Trust Company.   

Exhibit 10            Material Contracts                              

                        (a)      Top Management Long-Term Disability Plan.

                   (b)      Executive Short-Term Disability Plan
    Description.

                  (c)      Walgreen Management Incentive Plan,
    as restated.

                        (d)  (i) Walgreen Co. Restricted Performance Share
         Plan, as amended.

                      (ii) Amendment No. 3 to the Walgreen Co.
                          Restricted Performance Share Plan.

     INDEX TO EXHIBITS
     (continued)

                        (e)  (i) Walgreen Co. Executive Stock Option Plan,
   as amended.

                    (f)  (i) Walgreen Co. 1986 Director's Deferred
                      Fee/Capital Accumulation Plan.

                        (ii) Walgreen Co. 1987 Director's Deferred
                      Fee/Capital Accumulation Plan.

                       (iii) Walgreen Co. 1988 Director's Deferred
                      Fee/Capital Accumulation Plan.

                        (iv) Walgreen Co. 1992 Director's Deferred
                               Retainer Fee/Capital Accumulation Plan.

                   (g)  (i) Walgreen Co. 1986 Executive Deferred
                         Compensation/Capital Accumulation
Plan.   

                       (ii) Walgreen Co. 1988 Executive Deferred
                         Compensation/Capital Accumulation
Plan.   

                     (iii) Amendments to Walgreen Co. 1986 and
                             1988 Executive Deferred Compensation/
                   Capital Accumulation Plans.

                       (iv) Walgreen Co. 1992 Executive Deferred
                              Compensation/Capital Accumulation Plan
 Series 1.

                        (v) Walgreen Co. 1992 Executive Deferred
                              Compensation/Capital Accumulation Plan
 Series 2.

              (h)      Walgreen Co. Executive Deferred
                         Profit-Sharing Plan, as restated.

                   (i)  (i) Form of Change of Control Employment
   Agreements.

                      (ii) Amendment to Employment Agreements.

                      (k)  (i) Walgreen Co. Profit-Sharing Restoration
          Plan, as restated.

                           (ii) Walgreen Profit Sharing Restoration Plan
        Amendment No. 1.

               (l)      Walgreen Co. Retirement Plan for
          Outside Directors.

               (m)      Walgreen Section 162(m) Deferred
          Compensation Plan.

                        (n)      Consulting Agreement between Walgreen Co.
              and Charles D. Hunter.

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		7/8/92
		7/15/92
		8/31/92
		10/13/92
		1/1/93
		2/28/93
		8/31/93
		4/13/94
		5/31/94		10-Q
		8/31/94		10-K
		9/1/94
		10/12/94
		10/13/94
		11/30/94		10-Q
		8/31/95		10-K
		7/10/96
		7/11/96		10-Q, 8-A12B, 8-K
		8/21/96		8-A12B
For The Period Ended		8/31/96
		9/27/96
		10/31/96
Filed On / Filed As Of		11/27/96
		1/8/97		DEF 14A
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