Key questions from the first quarter earnings call conducted by Walgreen Company on December 21, 2007.

Edward Kelly (Credit Suisse): Could you quantify the benefit from the lower legal insurance and store closing costs in the quarter?

William M. Rudolphsen: The major reason for the increase or the change in the growth rate was store salaries. We grew at 18% in the first quarter of last year, only 9.5% this year. About a third of that improvement is related to store salaries.

Edward Kelly (Credit Suisse): The year over year lower SG&A rate of 19 basis points is mostly the insurance and the store closing costs. Is that correct?

William M. Rudolphsen: That is correct.

Edward Kelly (Credit Suisse): Your comps have decelerated and generics are playing a role in that, but your new store comps are still robust. What your older stores are comping at this standpoint if we call it stores older than five years?

Jeffrey A. Rein: They still are going well. We did see a traffic slowdown in mid October and that is what we talked about in November. During that traffic slowdown, you saw the customer buying down and the customer count once again went down. The comparable stores are still doing well in those stores open more than three years. Overall we did see a decrease in customer count starting in about mid October when the sub prime and crisis became big news. We saw people trading down and that slowed down the comparable store sales.

Edward Kelly (Credit Suisse): What do you expect going forward the rest of this year, on the front-end?

Jeffrey A. Rein: It is a top economic environment right now, but we are not commenting particularly on sales for this month and also how it is going to be for the rest of the year.

Edward Kelly (Credit Suisse): What your promotional strategy is going to be going forward on the front-end and is it getting more aggressive?

Jeffrey A. Rein: We will do what we need to do to either meet or beat competition. If we need to get more aggressive, we certainly can. We do a good job day in, day out. I have no problems with that. We have always been promotionally oriented not only in our ads but in the way we merchandize our stores. As you know, most of the products that we sell in our stores are low end products and they lend themselves to promotional building. People come into our stores based on convenience looking for 1.6 items, they leave with 3.3 items. That has been consistent whether the economy is great or the economy is poor.

Patricia Baker (Merrill Lynch): Why do you think the fourth quarter did end up with much higher SG&A than anticipated?

Jeffrey A. Rein: In the fourth quarter of 2007 we did a poor job of managing and focusing on expenses. We are a 3 cents company and that is our mantra right now. We have got to remain focused. During that time period, our payroll was out of sight. We also had inaudible expenses and advertising that we had in the fourth quarter of last year that we did not have in the previous year. From this quarter, there is more focus on controlling discretionary costs; we are making sure that when we have the budgets and the sales those are being matched up. We are taking outliners back to budget. If they get and do more sales then the budget is saying, then they get more hours. If they do not, then we take hours out. The biggest leverage that the store manager can control in terms of expenses is that payroll salary line. By matching up the budgeted hours with the budget sales, we will do better.

Meredith Adler (Lehman Brothers): The 18% SG&A growth you had in the first quarter last year was related to Happy Harry. Is it fair to say that some of the improvement in the payroll this year is of a function of fully integrating Happy Harry and that those were one-time costs?

Jeffrey A. Rein: I would not say that completely. The reason being it is an ongoing process with Harry’s. We have put some payroll in but the stores were not necessarily all set completely. We are still going through that right now with them, to make sure they are set to Walgreens’ system. I would not classify that at all as the main reason. The main reason that we controlled expenses is that we had diligent efforts and we are tracking it on a daily and weekly basis much better than we did in the past.

Meredith Adler (Lehman Brothers): How many of the stores you have been opening are 24-hours?

Jeffrey A. Rein: Right now we have approximately 27% of our company 24-hours, about 1,600 stores that are 24-hours. It is hard to determine exactly to say how many we are going to open per year because it is based on script numbers, the competition and so on, so that ebbs and flows.

Meredith Adler (Lehman Brothers): Over the five year time frame where you have had very stable sales and script count, what has happened to labor and real estate costs?

William M. Rudolphsen: They have been stable. As we do expand into the northeast and California, we would see higher occupancy costs in those areas. Overall our costs have been stable.

Meredith Adler (Lehman Brothers): On the chart you do where you look at return on average invested capital, are you capitalizing leases in that calculation?