Consumer Staples – Company Presentation

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Consumer Staples – Company Presentation Powered By Docstoc
					Consumer Staples –
Company
Presentation
Laura Fillman
Mary Kanet
Outline
 Recommendation
 Sector Overview
 Anheuser-Busch Overview
 Procter & Gamble Overview
 Altria Overview
 Walgreens Overview
Recommendation
   Under-weight Consumer Staples
       Economy is still trying to rebound from recession
            Consumer staples do not perform well coming out of recession
       Prices, earnings and net profit margins are trending downwards
       Estimate revisions and selling activity indicate skepticism about
        consumer staples’ future performance
       S&P 500 at 9.47% as of 12/31/02
       Target weight of 9.12% in SIM Portfolio

   Under-weight the following stocks
       Procter & Gamble to 1.75% from 2.15%
       Altria to 1.48% from 3.07%
Sector Overview
Business Analysis
 Growth/Mature Life Cycle
 Defensive Business Cycle
 A lot of risk due to foreign exposure
 Low pricing power
 Increasing supply with demand
Financial Analysis
 Increasing earnings but decreasing return
  on equity
 Price increases during recessions and
  decreases during expansions
 Revenues are decreasing and earnings
  are increasing
Valuation Analysis
   + Dividends, Dividend yield is higher than S&P
    500 and trends toward remaining that way
   - Earnings, Earnings growth is not as high as
    S&P 500 and is slowing
   - P/E ratios are declining, it is a signal of bad
    things to come, not more value
   Overall, the total return is too low, and will be
    worse with a strengthening economy
Consumer Staples Composition
SIM Companies
 Procter & Gamble, 2.15% (Household
  Products)
 Walgreens, 1.63% (Retail Drugs)
 Altria Group, Inc., 3.07% (Tobacco)
 Anheuser-Busch, 4.26% (Beverage -
  Alcoholic)
    Comparison of Industries
   Food and Drug Retailing: The aging of the American population and
    momentum to reform the Medicare system bode well for this industry.
   Beverages: Alcoholic beverage companies have implemented a round of
    price hikes and reduced discounting practices. This has improved these
    companies’ fundamentals.
   Food Products: Industry has underperformed the first few weeks of 2003,
    with 70% of the companies seeing their shares trading lower. Most companies
    will be experiencing price increases that they will try to pass on to consumers.
   Tobacco: Profit margins are tightening due to weak domestic economy,
    introduction of discount cigarettes, high state excise taxes and ongoing
    litigation problems.
   Household Products: These companies are the “plodding stalwarts.”
    They’re mature and unexciting but good “defensive” choices. Some market
    share battles.
   Personal Products: Industry is impervious to most economic pressures.
    Small ticket items that lift people psychologically. Immune to moderate shifts
    in the economy.
Anheuser-Busch
Business Analysis
   Businesses:
     Domestic and International Beer
     Packaging
     Theme Parks
   Main Products
     Budweiser
     Michelob
     Busch
     Natural   Light
Business: Demand
   Anheuser-Busch's domestic beer shipments to
    wholesalers grew to an all-time high of 101.8
    million barrels in 2002 -- increasing 2.1 million
    barrels or 2.1 percent over 2001
   International growth has contributed to at least
    20% of A-B’s earnings over the past five years
   Demographics – Growth of the 21 to 27 year old
    age group
Business: Supply and Pricing
Power
 A-B rolled out Bacardi Silver 0 beginning
  March 3, 2003
 Price increases in the 4th quarter of 2002
 Discount reductions
 Another price increase due in the
  beginning of 2003
 A-B has a lot of pricing power
 Financial Analysis: Cash Flows
                                                   Cash Flow Analysis
ANHEUSER-BUSCH COMPANIES INC (BUD)                                                                              StockVal ®
FYE Dec
                                   2001    % Chg       2000    % Chg      1999    % Chg     1998    % Chg     1997

Net Income Reported ($ Mil)      1704.5       10      1551.6      11    1402.2       14   1233.3        5   1169.2
  Accounting Adjustment            -11.3                 0.0                0.0               0.0             10.0
Net Income Adjusted              1693.2        9      1551.6      11    1402.2       14   1233.3        5   1179.2
  Depreciation & Amort            834.5        4       803.5       3     777.0        5    738.4        8    683.7
Cash Flow Adjusted               2527.7        7      2355.1       8    2179.2       11   1971.7        6   1862.9
  Capital Expenditures           1022.0       -5      1074.5      24     865.3        6    817.5      -32   1199.3
Free Cash Flow Adjusted          1505.7       18      1280.6      -3    1313.9       14   1154.2       74    663.6
  Dividends Common ($ Mil)        622.1        7       579.4       5     553.1        5    526.5        5    499.7
Free Cash Flow After Dividends    883.6       26       701.2      -8     760.8       21    627.7      283    163.9


Net Cash From Operations         2360.6        5      2257.5       6    2135.8       -4   2213.4       22   1816.6
Net Cash From Investing          -1282.4     -15     -1117.4     -37     -812.7      41   -1384.0      26   -1882.6
Net Cash From Financing          -1075.5       5     -1132.3      19    -1395.8     -86    -751.9            119.7
Other Cash Flows                     0.0                 0.0                0.0               0.0    3100       0.0
Change In Cash & Equiv               2.7     -65         7.8              -72.7             77.5       44     53.7
Financial: DuPont Analysis                       DuPont Analytics
 ANHEUSER-BUSCH COMPANIES INC (BUD)                                                              StockVal ®
 Price 47.890 02/21/03 FYE Dec
                        INT           TAX           ASSET
         MARGIN%      BURDEN       BURDEN%           TURN       LEVERAGE


            EBIT        EBT                T         Sales         Assets
            -------      -------      1 - ----        -------        -------   ROE     Acct     ROE
           Sales        EBIT           EBT          Assets         Equity      Rpt%    Adj%     Adj%


  2001      21.42         0.86         61.59           0.96           3.29     41.62    -0.27   41.35
  2000      20.23         0.86         62.00           0.97           3.19     38.55    0.00    38.55
  1999      19.47         0.87         62.00           0.95           3.09     34.46    0.00    34.46
  1998      18.84         0.86         61.98           0.94           2.93     29.87    0.00    29.87
  1997      18.74         0.88         61.60           1.01           2.75     28.97    0.25    29.22


  1996      19.35         0.89         61.08           1.04           2.49     28.12    -1.59   26.53
  1995      16.17         0.87         60.66           0.99           2.39     14.52    7.76    22.28
  1994      18.74         0.88         60.53           0.97           2.40     23.81    -0.41   23.40
  1993      14.09         0.85         57.60           0.94           2.28     13.40    7.67    21.07
  1992      18.61         0.89         61.85           0.96           2.16     20.26    1.03    21.29


  1991      18.57         0.86         62.11           0.96           2.33     23.16    -0.96   22.20
  1990      17.63         0.82         62.47           0.99           2.65     24.85    -1.21   23.64
  1989      17.49         0.87         62.96           1.00           2.50     24.74    -0.72   24.02
  1988      17.08         0.89         62.28           1.12           2.18     23.88    -0.63   23.25
  1987      16.93         0.90         57.95           1.15           2.16     22.38    -0.34   22.04


  1986      16.15         0.92         54.86           1.19           2.09     20.47    -0.34   20.13
Valuation Analysis: Valuation
 ANHEUSER-BUSCH COMPANIES INC (BUD) Price 47.9                                                StockVal®
        1993   1994    1995    1996    1997    1998    1999    2000    2001     2002   2003     2004   2005
 1.5
                                                                                                 HI    1.45
 1.2                                                                                             LO    0.61
                                                                                                 ME    0.93
                                                                                                 CU    1.21
 0.9
                                                                                                 02-19-1993
 0.6                                                                                             02-21-2003
       PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 1.2                                                                                             HI    1.15
                                                                                                 LO    0.71
 1.0                                                                                             ME    0.78
                                                                                                 CU    1.13
 0.8                                                                                             FY1   1.14
                                                                                                 FY2   1.10
                                                                                                 03-31-1993
 0.6                                                                                             12-31-2002
                 EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 3
                                                                                                 HI    2.96
 2                                                                                               LO    0.91
                                                                                                 ME    1.38
                                                                                                 CU    2.38
 1
                                                                                                 02-19-1993
 0                                                                                               02-21-2003
               PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 2.1
                                                                                                 HI    2.09
 1.8                                                                                             LO    1.33
                                                                                                 ME    1.49
                                                                                                 CU    2.00
 1.5
                                                                                                 03-31-1993
 1.2                                                                                             12-31-2002
        NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Analysis: Valuation
ANHEUSER-BUSCH COMPANIES INC (BUD) Price 47.9                                                  StockVal®
      1993      1994    1995    1996    1997    1998   1999    2000    2001    2002     2003     2004   2005
1.4
                                                                                                  HI    1.30
1.2                                                                                               LO    0.60
                                                                                                  ME    0.85
1.0                                                                                               CU    1.20
0.8
                                                                                                  02-19-1993
0.6                                                                                               02-21-2003
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
1.2                                                                                               HI    1.14
1.1                                                                                               LO    0.88
                                                                                                  ME    1.01
1.0                                                                                               CU    1.14
                                                                                                  FY1   1.21
0.9                                                                                               FY2   1.23
                                                                                                  03-31-1993
0.8                                                                                               12-31-2002
             EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
3.0
                                                                                                  HI    2.69
2.5                                                                                               LO    1.03
                                                                                                  ME    1.56
2.0                                                                                               CU    2.52
1.5
                                                                                                  02-19-1993
1.0                                                                                               02-21-2003
         PRICE / SALES RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
2.0
                                                                                                  HI    1.99
1.8                                                                                               LO    1.58
                                                                                                  ME    1.81
                                                                                                  CU    1.93
1.6
                                                                                                  03-31-1993
1.4                                                                                               12-31-2002
  NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
Valuation: Earnings
                              Prospective Growth & Margin Check                                                           StockVal ®
  ANHEUSER-BUSCH COMPANIES INC (BUD)
  Price 47.890 02/21/03
                                    Percent Change                   Actual      Year      Profit                Momentum %
  Quarter     Revenue     REV       RPS        EARN       EPS         EPS        Ago      Margin %     SF       REV        EPS
   Mar 01       3,044.2         6          8          9         11     0.42        0.38         12.6        0     +6             +9
   Jun 01       3,452.0         4          5      10            12     0.58        0.52         15.2        0     +4           +14
   Sep 01       3,522.2         2          4          8         11     0.62        0.56         15.8        0     +2           +13
   Dec 01      2,893.1         2          5      10            13     0.26        0.23          8.0        0     +2             +6
   Mar 02       3,136.6         3          5      19            21     0.51        0.42         14.5        0     +3           +19
   Jun 02       3,626.1         5          7      12            14     0.66        0.58         16.1        0     +5           +16
   Sep 02       3,706.2         5          8      11            15     0.71        0.62         16.7        0     +6           +18
   Dec 02      3,097.5         7         11      19            23     0.32        0.26          8.9        0     +6           +11
     T4Q       13,566.4         5          8      14            17     2.20                     14.3
 Mar 03 E       3,279.3         5          8          8         12     0.57        0.51         15.0              +4           +11
 Jun 03 E       3,784.3         4          7      11            14     0.75        0.66         17.1              +5           +16
 Sep 03 E       3,872.5         4          6      12            13     0.80        0.71         17.9              +5           +15
 Dec 03 E      3,188.6         3          3      13            13     0.36        0.32          9.8              +3             +7
   F4Q E       14,124.6         4          6      11            13     2.48                     15.2
                           Point-to-Point Growth Rates (%)                    Long-Term Growth Rate Estimates (%)
               Years      REV       RPS        EARN       EPS                 Median Estimate                   12.0%
                 1              5          8      14            17            Number of Estimates                  13
                 3              4          7      11            14            Standard Deviation                      0
                 5              4          7      10            13            Default GRE Estimate              11.0%
                10              4          7          7         10            Analyst GRE Estimate              11.0%
                15              5          7          8         10
                20              6          7      10            12            Expected Report Date          04/24/03
 Valuation: Dividends

     ANHEUSER-BUSCH COMPANIES INC (BUD)                                                                              77
                                                                                                                          ANHEUSER-BUSCH COMPANIES INC (BUD) Price 47.9                                                  StockVal®
     PRICE 47.9 DATE 02-21-2003                                                                                      66          1993     1994    1995    1996     1997    1998    1999    2000    2001    2002   2003     2004   2005
     StockVal®                                                                                                       56   1.96

47                                                                                                                   47   1.81

40                                                                                                                   40   1.68

34                                                                                                                   34   1.56                                                                                              HI    1.88
                                                                                                                                                                                                                            LO    1.00
29                                                                                                                   29   1.45                                                                                              ME    1.31
25                                                                                                                   25                                                                                                     CU    1.88
                                                                                                                          1.35
21                                                                                                                   21   1.25
18                                                                                                                   18   1.16
15                                                                                                                   15   1.08                                                                                              03-31-1993
13                                                                                                                   13                                                                                                     12-31-2002
                                                                                                                          1.00
11                                                                                                                   11                 DIVIDENDS-PER-SHARE RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
                                                                                                                          2.2
 9                                                                                    The Ohio State University       9
 8                                                                                    Fisher College of Business      8   2.0
     1993   1994   1995    1996     1997    1998    1999        2000      2001    2002    2003    2004    2005     2006   1.8
Price Change     %   Diff SP5     First Call Data     2003        2004      2005               Data Page # 1                                                                                                                HI    2.06
1-Week         0.55     -3.22     Mean Estimate        2.48       2.75       NE      Revenues ($Mil)            13,566   1.6                                                                                               LO    0.73
4-Weeks       -2.56       1.85    Change             +13%        +11%                 Market Value ($Mil)        41,382                                                                                                     ME    1.18
                                                                                                                          1.4                                                                                               CU    0.87
QTD           -1.05       2.54    High                 2.52        2.80               Shares Out (Mil)            864.1
YTD           -1.05       2.54    Low                  2.45        2.68               Daily Volume (Thou)         2,344   1.2
2002           7.06     30.42     Total                 14            9               Daily Volume ($Mil)         112.3
                                                                                                                          1.0
2001          -0.64     12.41     # Up                  12            2               Dividend Estimate            0.78
2000         28.39      38.53     # Down                  0           2               Payout Ratio                 31%    0.8
                                                                                                                                                                                                                            02-19-1993
1999           8.00   -11.53      House Estimate                                      Retention Rate               69%
                                                                                                                          0.6                                                                                               02-21-2003
    FYE Dec 2002 EPS 2.20         PE Ratio            19.3        17.4           NE   Dividend Yield             1.63%
                                                                                                                                           DIVIDEND YIELD RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
Valuation: Total Returns
  ANHEUSER-BUSCH COMPANIES INC (BUD) Price 47.9                                              StockVal®
        1993   1994    1995    1996   1997    1998    1999    2000    2001   2002     2003     2004   2005
  1.9

  1.6
  1.4
                                                                                                HI    1.77
  1.2
                                                                                                LO    0.57
                                                                                                ME    0.86
  1.0
                                                                                                CU    1.50

  0.8
  0.7

  0.6
                                                                                                02-19-1993
  0.5                                                                                           02-21-2003
               TOTAL RETURN RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
  1.0


  0.9


  0.8                                                                                           HI    0.93
                                                                                                LO    0.47
                                                                                                ME    0.63
  0.7                                                                                           CU    0.93

  0.6


  0.5
                                                                                                02-19-1993
  0.4                                                                                           02-21-2003
           GROWTH RATE ESTIMATE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Summary
   + Valuation
     Shows dip in comparison to S&P 500, but in
      comparison to Consumer Staples it is performing well
   + Earnings
     Earnings   are on the increase and looking positive
   + Dividends
     Dividends  per share continue to increase and the
      dividend yield compared to the S&P 500 is rising
Recommendation
   Keep A-B at its current weight
     Over-weighted   at 4.26%
   Opportunities and Rewards
     Increasing volume and demand
     Increasing internal growth to meet demand
     Good pricing power
     Opportunities to expand in the alcoholic
      beverages industry
Procter & Gamble
Business Analysis
   Businesses
     Detergents,    Soaps
     Toiletries
     Foods
     Paper
     Industrial   Products
   Main Brands
     Tide,Dawn, Bounty, Downy
     Crest, Always, Charmin
     Folgers, Pringles
     Cover Girl, Olay, Pantene, Herbal Essences, Clairol
Business: Demand
 Expected sales of $42,500 million in 2003,
  increase of 5.6% from 2002
 50% of total sales come from abroad
 Gaining market share in diapers market
  even though it is already saturated
Business: Supply and Pricing
Power
 Iams unit will begin offering pet insurance
 Acquired Clairol to transition more into
  health and beauty-care businesses
 Finished restructuring program
 Acquisitions will continue to account for a
  large part of growth
    Financial Analysis: Cash Flows
                                                   Cash Flow Analysis
PROCTER & GAMBLE COMPANY (PG)                                                                                   StockVal ®
FYE Jun
                                   2002    % Chg       2001    % Chg      2000    % Chg     1999    % Chg     1998

Net Income Reported ($ Mil)      4352.0       49      2922.0     -18    3542.0       -6   3763.0        0   3780.0
  Accounting Adjustment           706.0      -52      1475.0     114     688.0       79    385.0                0.0
Net Income Adjusted              5058.0       15      4397.0       4    4230.0        2   4148.0       10   3780.0
  Depreciation & Amort           1693.0      -25      2271.0       4    2191.0        2   2148.0       34   1598.0
Cash Flow Adjusted               6751.0        1      6668.0       4    6421.0        2   6296.0       17   5378.0
  Capital Expenditures           1679.0      -32      2486.0     -18    3018.0        7   2828.0       11   2559.0
Free Cash Flow Adjusted          5072.0       21      4182.0      23    3403.0       -2   3468.0       23   2819.0
  Dividends Common ($ Mil)       2135.4        9      1967.8       8    1826.8       11   1649.4       11   1480.2
Free Cash Flow After Dividends   2936.6       33      2214.2      40    1576.2      -13   1818.6       36   1338.8


Net Cash From Operations         7742.0       33      5804.0      24    4675.0      -16   5544.0       13   4885.0
Net Cash From Investing          -6835.0    -271     -1843.0      66    -5345.0    -146   -2175.0      58   -5210.0
Net Cash From Financing           197.0              -3014.0   -1438     -196.0      92   -2606.0    -586    -380.0
Other Cash Flows                   17.0                -56.0    -331      -13.0      28     -18.0      81     -96.0
Change In Cash & Equiv           1121.0       26       891.0             -879.0            745.0             -801.0
Financial: DuPont Analysis
                                                  DuPont Analytics
  PROCTER & GAMBLE COMPANY (PG)                                                                    StockVal ®
  Price 84.240 02/21/03 FYE Jun
                         INT           TAX           ASSET
          MARGIN%      BURDEN       BURDEN%           TURN       LEVERAGE


             EBIT        EBT                T         Sales         Assets
             -------      -------      1 - ----        -------        -------   ROE      Acct     ROE
            Sales        EBIT           EBT          Assets         Equity      Rpt%     Adj%     Adj%


   2002      17.36         0.91         68.18           1.07           2.92     33.85     5.49    39.34
   2001      13.79         0.85         63.30           1.14           2.83     24.05    12.14    36.19
   2000      15.66         0.88         63.98           1.20           2.73     29.10     5.65    34.75
   1999      17.02         0.90         64.46           1.21           2.60     30.98     3.17    34.15
   1998      16.84         0.91         66.22           1.27           2.41     31.13     0.00    31.13


   1997      15.95         0.92         65.06           1.29           2.33     28.74     0.00    28.74
   1996      14.60         0.91         65.24           1.26           2.50     27.30     0.00    27.30
   1995      13.40         0.89         66.13           1.25           2.76     27.24     0.51    27.75
   1994      12.60         0.87         66.08           1.20           3.10     27.17     1.26    28.43
   1993       2.96         0.39         77.08           1.24           2.97      -7.95   32.36    24.41


   1992      11.56         0.85         64.89           1.32           2.65     22.28     -0.73   21.55
   1991      11.40         0.87         65.98           1.39           2.55     23.25     0.00    23.25
   1990      11.89         0.85         66.17           1.38           2.54     23.33     1.17    24.50
   1989      10.89         0.83         62.20           1.37           2.48     19.22     1.24    20.46
   1988      10.09         0.84         62.58           1.36           2.31     16.55     0.00    16.55


   1987       5.71         0.64         53.00           1.27           2.24      5.48     7.68    13.16
Valuation Analysis: Valuation
 PROCTER & GAMBLE COMPANY (PG) Price 84.2                                                      StockVal®
         1993   1994    1995    1996    1997    1998    1999    2000    2001     2002   2003     2004   2005
 1.8
                                                                                                  HI    1.54
 1.5                                                                                              LO    0.61
                                                                                                  ME    1.20
 1.2                                                                                              CU    1.25
 0.9
                                                                                                  02-19-1993
 0.6                                                                                              02-21-2003
        PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 1.23                                                                                             HI    1.19
                                                                                                  LO    0.81
 1.11                                                                                             ME    0.92
                                                                                                  CU    1.15
 1.00                                                                                             FY1   1.12
                                                                                                  FY2   1.07
 0.90
                                                                                                  03-31-1993
 0.81                                                                                             12-31-2002
                  EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 3
                                                                                                  HI    2.55
 2                                                                                                LO    0.83
                                                                                                  ME    1.51
                                                                                                  CU    2.18
 1
                                                                                                  02-19-1993
 0                                                                                                02-21-2003
                PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 2.1
                                                                                                  HI    1.89
 1.8                                                                                              LO    1.12
                                                                                                  ME    1.30
 1.5                                                                                              CU    1.75
 1.2
                                                                                                  03-31-1993
 0.9                                                                                              12-31-2002
         NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Analysis: Valuation
 PROCTER & GAMBLE COMPANY (PG) Price 84.2                                                       StockVal®
       1993      1994    1995    1996    1997    1998   1999    2000    2001    2002     2003     2004   2005
 1.8
                                                                                                   HI    1.79
 1.5                                                                                               LO    0.88
                                                                                                   ME    1.06
 1.2                                                                                               CU    1.24
 0.9
                                                                                                   02-19-1993
 0.6                                                                                               02-21-2003
 PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
 1.3                                                                                               HI    1.23
                                                                                                   LO    1.00
 1.2                                                                                               ME    1.10
                                                                                                   CU    1.15
                                                                                                   FY1   1.19
 1.1                                                                                               FY2   1.20
                                                                                                   03-31-1993
 1.0                                                                                               12-31-2002
              EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
 3.0
                                                                                                   HI    2.69
 2.5                                                                                               LO    1.07
                                                                                                   ME    1.62
 2.0                                                                                               CU    2.30
 1.5
                                                                                                   02-19-1993
 1.0                                                                                               02-21-2003
          PRICE / SALES RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
 1.8
                                                                                                   HI    1.76
 1.6                                                                                               LO    1.17
                                                                                                   ME    1.50
 1.4                                                                                               CU    1.69
 1.2
                                                                                                   03-31-1993
 1.0                                                                                               12-31-2002
   NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
Valuation: Earnings
                            Prospective Growth & Margin Check                                                                StockVal ®
 PROCTER & GAMBLE COMPANY (PG)
 Price 84.240 02/21/03
                                       Percent Change                   Actual      Year      Profit                Momentum %
  Quarter       Revenue     REV        RPS        EARN       EPS         EPS        Ago      Margin %     SF       REV        EPS
   Mar 01         9,511.0         -3         -1          9         11     0.71        0.64         10.5        0     -3             +9
   Jun   01      9,582.0         -1          2          6          9     0.60        0.55          8.7        0     -1             +7
  Sep 01          9,766.0         -2         -1          8          9     0.96        0.88         13.8        0     -2           +10
  Dec 01         10,403.0          2          3      10            11     1.03        0.93         13.9        0     +2           +12
   Mar 02         9,900.0          4          4      18            18     0.84        0.71         11.9        0     +4           +16
   Jun 02       10,169.0          6          5      30            28     0.77        0.60         10.7        0     +6           +20
  Sep 02         10,796.0         11         10          9          8     1.04        0.96         13.6    -1       +10             +9
  Dec 02         11,005.0          6          6          3          3     1.06        1.03         13.5    -1        +6             +3
     T4Q         41,870.0          7          6      13            12     3.71                     12.5
 Mar 03 E        10,272.7          4          4      13            13     0.95        0.84         13.0              +4           +12
 Jun 03 E       10,551.7          4          4      10            10     0.85        0.77         11.3              +4             +8
 Sep 03 E        11,437.8          6          6      16            16     1.21        1.04         14.8              +6           +17
 Dec 03 E        11,649.8          6          6      18            18     1.25        1.06         15.0              +6           +19
   F4Q E         43,912.0          5          5      14            15     4.26                     13.6
                             Point-to-Point Growth Rates (%)                     Long-Term Growth Rate Estimates (%)
                 Years      REV        RPS        EARN       EPS                 Median Estimate                   10.0%
                   1               7          6      13            12            Number of Estimates                     9
                   3               2          3          6          7            Standard Deviation                      1
                   5               3          4          8          9            Default GRE Estimate              9.0%
                  10               3          3      11            10            Analyst GRE Estimate              9.0%
                  15               6          6      12            12
                  20               6          6      10             9            Expected Report Date          04/30/03
 Valuation: Dividends

      PROCTER & GAMBLE COMPANY (PG)                                                                                 168
                                                                                                                          PROCTER & GAMBLE COMPANY (PG) Price 84.2                                                      StockVal®
      PRICE 84.2 DATE 02-21-2003                                                                                    144         1993      1994    1995    1996    1997    1998    1999    2000    2001    2002   2003     2004   2005
      StockVal®                                                                                                     120   2.1

100                                                                                                                 100
                                                                                                                          1.8
 84                                                                                                                  84
 72                                                                                                                  72   1.6                                                                                              HI    1.92
                                                                                                                                                                                                                           LO    1.00
 60                                                                                                                  60   1.4
                                                                                                                                                                                                                           ME    1.38
 52                                                                                                                  52                                                                                                    CU    1.92

 44                                                                                                                  44   1.2

 36                                                                                                                  36
 32                                                                                                                  32
                                                                                                                          1.0
 28                                                                                                                  28                                                                                                    03-31-1993
                                                                                                                          0.9                                                                                              12-31-2002
 24                                                                                                                  24
                                                                                                                                       DIVIDENDS-PER-SHARE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 20                                                                                                                  20   2.4
                                                                                     The Ohio State University
                                                                                     Fisher College of Business           2.2
 16                                                                                                                  16
      1993   1994   1995   1996     1997    1998    1999        2000     2001    2002     2003    2004    2005     2006   2.0
Price Change     %   Diff SP5     First Call Data     2003        2004      2005               Data Page # 1                                                                                                               HI    2.37
                                                                                                                          1.8
1-Week         1.86     -1.91     Mean Estimate        4.05       4.45      NE      Revenues ($Mil)           41,870                                                                                                     LO    0.79
4-Weeks       -1.39       3.02    Change             +13%        +10%                 Market Value ($Mil)      118,155    1.6                                                                                              ME    0.94
QTD           -1.98       1.62    High                 4.06        4.47               Shares Out (Mil)          1,402.6                                                                                                    CU    1.05
                                                                                                                          1.4
YTD           -1.98       1.62    Low                  4.04        4.40               Daily Volume (Thou)         3,648
                                                                                                                          1.2
2002           8.61     31.97     Total                   9           9               Daily Volume ($Mil)         307.3
2001           0.88     13.92     # Up                    9           7               Dividend Estimate            1.64   1.0
2000         -28.41    -18.27     # Down                  0           0               Payout Ratio                 40%
                                                                                                                          0.8                                                                                              02-19-1993
1999          19.99       0.46    House Estimate                                      Retention Rate               60%
                                                                                                                          0.6                                                                                              02-21-2003
    FYE Jun 2002 EPS 3.60         PE Ratio            20.8        18.9          NE    Dividend Yield             1.95%
                                                                                                                                          DIVIDEND YIELD RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation: Total Returns
   PROCTER & GAMBLE COMPANY (PG) Price 84.2                                                   StockVal®
         1993   1994    1995    1996   1997    1998    1999    2000    2001   2002     2003     2004   2005
  1.80

  1.60

  1.40
  1.30                                                                                           HI    1.66
                                                                                                 LO    0.62
  1.10                                                                                           ME    1.16
                                                                                                 CU    1.48
  1.00

  0.89

  0.79

  0.70                                                                                           02-19-1993
  0.62                                                                                           02-21-2003
                TOTAL RETURN RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
  0.84

  0.81

  0.78
                                                                                                 HI    0.82
  0.75                                                                                           LO    0.60
                                                                                                 ME    0.76
  0.72                                                                                           CU    0.77

  0.69

  0.66

  0.63
                                                                                                 02-19-1993
  0.60                                                                                           02-21-2003
            GROWTH RATE ESTIMATE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Summary
   - Valuation
     Compared     to both the S&P 500 and Consumer
        Staples, PG has reached its resistance level and
        appears to be on the decline
   - Earnings
     Earnings   do not show as much potential for growth as
        other companies
   + Dividends
        PG continues to provide dividends, but the yield
        compared to the S&P 500 is decreasing
Recommendation
 Underweight Procter & Gamble from
  2.15% to 1.75%
 Too many risks and downsides
     Cost cutting
     Market share battles in a mature market
     Increasing foreign exposure
     Acquisitions instead of internal growth
Altria
Business Analysis
   Businesses
     Tobacco  (57% of ’01 revenues)
     Food (38%)
     Miller Beer (4%, sold this last July for $1.7b, for a
      $.80/share gain)
     Financial Services and Real Estate (1%)
   Main Products/Brands
     Marlboro,   Benson & Hedges, Merit, Virginia Slims,
      Lark
     Coffee, Post cereal and packaged goods, including
      Jell-O, Kool-Aid, Oscar Mayer, Kraft, Velveeta and
      Miracle Whip
Business: Demand
   Weak domestic markets, rapidly escalating state cigarette taxes and
    discount cigarettes are tightening profit margins for the tobacco
    industry. Discount cigarettes now account for 10% of the US
    market, up from 3% in 1998.
   In 2002, the US cigarette shipment volume fell 7.5%, compared to
    3.7% for the industry.
   Altria's market share in the US premium cigarette market is 48.9%
    (down from 51.0% in 2001). One out of three cigarettes sold in the
    US is a Marlboro.
   Greater competition from RJR and smaller tobacco rivals.
   Sales revenue dropped from $90b in 2001 to $80b in 2002.
   Altria is trying to focus more attention on its portfolio of brands,
    including Kraft and Nabisco. Philip Morris is considering relocating
    its headquarters to Richmond, Virginia due to New York’s increasing
    hostility towards smokers (where packs of cigarettes are selling for
    more than $7.50). Altria will remain in New York.
Business: Supply and Pricing
Power
   Due to state cigarette taxes, the price of premium cigarettes
    (averaging $3.60) has doubled during the past five years.
    At least 20 other states are considering raising taxes in
    2003.
   With the higher price for premium cigarettes, discount
    cigarettes are stealing market share from Altria. Altria is
    having to engage in heavy discounting and promotional
    spending to prevent further market erosion.
   The threat of litigation is still looming, with the full extent of
    this liability still unknown. One lawsuit filed last year
    awarded the plaintiff $80m, and the Oregon Supreme Court
    has declined to reconsider this case. The US Supreme
    Court is expected to look at this next.
Financial Analysis: Cash Flows
                                                   Cash Flow Analysis
ALTRIA GROUP INCORPORATED (MO)                                                                                  StockVal ®
FYE Dec
                                   2001    % Chg       2000    % Chg      1999    % Chg     1998    % Chg     1997

Net Income Reported ($ Mil)       8560.0       1      8510.0      11    7675.0       43   5372.0      -15   6310.0
  Accounting Adjustment            396.7              -155.0             327.9      -87   2485.8      216    786.0
Net Income Adjusted               8956.7       7      8355.0       4    8002.9        2   7857.8       11   7096.0
  Depreciation & Amort            2337.0      36      1717.0       1    1702.0        1   1690.0       -1   1700.0
Cash Flow Adjusted               11293.7      12     10072.0       4    9704.9        2   9547.8        9   8796.0
  Capital Expenditures            1922.0      14      1682.0      -4    1749.0       -3   1804.0       -4   1874.0
Free Cash Flow Adjusted           9371.7      12      8390.0       5    7955.9        3   7743.8       12   6922.0
  Dividends Common ($ Mil)        4906.2       7      4589.4       4    4421.5        8   4109.3        5   3907.2
Free Cash Flow After Dividends    4465.5      17      3800.6       8    3534.4       -3   3634.5       21   3014.8


Net Cash From Operations          8893.0     -19     11044.0      -3   11375.0       40   8120.0       -3   8340.0
Net Cash From Investing          -2916.0      83    -17506.0    -553    -2682.0      -5   -2554.0    -313    -619.0
Net Cash From Financing          -6440.0              2658.0            -7497.0     -93   -3894.0      29   -5521.0
Other Cash Flows                   -21.0      94      -359.0    -103     -177.0            127.0             -158.0
Change In Cash & Equiv            -484.0      88     -4163.0            1019.0      -43   1799.0      -12   2042.0
 Financial: DuPont Analysis
                                                DuPont Analytics
ALTRIA GROUP INCORPORATED (MO)                                                                  StockVal ®
Price 37.630 02/21/03 FYE Dec
                       INT           TAX           ASSET
        MARGIN%      BURDEN       BURDEN%           TURN       LEVERAGE


           EBIT        EBT                T         Sales         Assets
           -------      -------      1 - ----        -------        -------   ROE     Acct     ROE
          Sales        EBIT           EBT          Assets         Equity      Rpt%    Adj%     Adj%


 2001      17.73         0.90         62.15           1.10           4.74     49.44    2.30    51.74
 2000      18.87         0.93         61.31           1.14           4.63     56.15    -1.02   55.13
 1999      17.83         0.92         60.85           1.30           3.85     48.73    2.08    50.81
 1998      14.03         0.88         59.69           1.28           3.72     34.53   15.97    50.50
 1997      16.58         0.90         59.80           1.30           3.80     43.31    5.40    48.71


 1996      17.26         0.89         59.00           1.27           3.85     44.70    0.00    44.70
 1995      16.18         0.87         58.61           1.24           3.98     40.72    0.20    40.92
 1994      14.71         0.86         57.51           1.25           4.25     38.71    0.00    38.71
 1993      12.74         0.80         57.59           1.20           4.18     25.56    7.72    33.28
 1992      17.28         0.84         57.38           1.21           3.88     39.39    0.00    39.39


 1991      15.50         0.80         56.33           1.20           3.84     24.58    9.78    34.36
 1990      15.93         0.77         56.09           1.20           3.95     32.90    0.00    32.90
Valuation Analysis: Valuation
 ALTRIA GROUP INCORPORATED (MO) Price 37.6                                                    StockVal®
        1993   1994    1995    1996    1997    1998    1999    2000    2001     2002   2003     2004   2005
 0.9
                                                                                                 HI    0.90
 0.6                                                                                             LO    0.19
                                                                                                 ME    0.62
                                                                                                 CU    0.51
 0.3
                                                                                                 02-19-1993
 0.0                                                                                             02-21-2003
       PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 1.2                                                                                             HI    1.09
                                                                                                 LO    0.67
 1.0                                                                                             ME    0.79
                                                                                                 CU    1.03
 0.8                                                                                             FY1   0.95
                                                                                                 FY2   0.88
 0.7
                                                                                                 03-31-1993
 0.6                                                                                             12-31-2002
                 EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 1.2
                                                                                                 HI    1.11
 0.9                                                                                             LO    0.24
                                                                                                 ME    0.79
 0.6                                                                                             CU    0.77
 0.3
                                                                                                 02-19-1993
 0.0                                                                                             02-21-2003
               PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
 1.8
                                                                                                 HI    1.75
 1.6                                                                                             LO    1.05
                                                                                                 ME    1.30
 1.4                                                                                             CU    1.69
 1.2
                                                                                                 03-31-1993
 1.0                                                                                             12-31-2002
        NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Analysis: Valuation
ALTRIA GROUP INCORPORATED (MO) Price 37.6                                                      StockVal®
      1993      1994    1995    1996    1997    1998   1999    2000    2001    2002     2003     2004   2005
0.8
                                                                                                  HI    0.77
0.6                                                                                               LO    0.27
                                                                                                  ME    0.57
                                                                                                  CU    0.51
0.4
                                                                                                  02-19-1993
0.2                                                                                               02-21-2003
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
1.1                                                                                               HI    1.06
                                                                                                  LO    0.81
1.0                                                                                               ME    0.98
                                                                                                  CU    1.03
                                                                                                  FY1   1.00
0.9                                                                                               FY2   0.99
                                                                                                  03-31-1993
0.8                                                                                               12-31-2002
             EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
1.2
                                                                                                  HI    1.02
1.0                                                                                               LO    0.41
                                                                                                  ME    0.83
0.8                                                                                               CU    0.81
0.6
                                                                                                  02-19-1993
0.4                                                                                               02-21-2003
         PRICE / SALES RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
1.8
                                                                                                  HI    1.63
1.6                                                                                               LO    1.29
                                                                                                  ME    1.49
                                                                                                  CU    1.63
1.4
                                                                                                  03-31-1993
1.2                                                                                               12-31-2002
  NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
Valuation: Earnings
                                                     Growth & Margin Check                                                            StockVal ®
ALTRIA GROUP INCORPORATED (MO)                                                                         Default Growth Rate Estimate 7.5%
Price 37.630 02/21/03                                                                                  Analyst Growth Rate Estimate 7.5%
                                       Percent Change                      Actual      Year         Profit                  Momentum %
 Quarter       Revenue      REV           RPS        EARN       EPS         EPS         Ago        Margin %       SF       REV          EPS
  Mar 01        22,359.0          12            16          5          9     0.95         0.87          9.5            0        +12           +9
  Jun 01        23,188.0          11            14          6          8     1.03         0.95          9.9            0        +11           +9
  Sep 01        22,404.0          12            14          7          9     1.08         0.99         10.6            0        +11           +9
  Dec   01     21,973.0          13            16      11            14     0.99         0.87          9.8            0        +12         +12
  Mar 02        20,535.0          -8            -6      12            15     1.09         0.95         11.5        -1            -8         +14
  Jun 02        21,103.0          -9            -6      18            21     1.25         1.03         12.8            0         -9         +21
  Sep 02        19,996.0        -11             -7      12            17     1.26         1.08         13.4            0        -11         +16
  Dec 02       18,774.0        -15         -10         -11           -6     0.93         0.99         10.2            0        -15           -5
    T4Q         80,408.0        -11             -7          8         12     4.53                      12.0
  Mar 03                   Mean Estimate Next Quarter                 -2     1.07        Long-Term Growth Rate Estimates
                           High Estimate                               1     1.10     Median Estimate                                      9.5%
                           Low Estimate                               -6     1.02     Number of Estimates                                      8
                           Number of Estimates                         6              Standard Deviation                                       2
                               Point-to-Point Growth Rates (%)                             Least Squares Growth Rates (%)
                Years       REV           RPS        EARN       EPS        Years       REV           RPS          EARN                EPS
                  1             -11             -7          8         12     1             -11               -8             7                 12
                  3                1             5          7         11     3                 3             6              8                 12
                  5                2             5          6          9     5                 4             7              6                  9
                  7                3             5          8         11     7                 4             7              7                 10
                 10                3             6          7         10    10                 4             6              9                 12
                 15                7             9      12            14    15                 6             8             10                 12
                 20               10            12      13            15    20                11           12              14                 15
       Valuation: Dividends
     ALTRIA GROUP INCORPORATED (MO)                                                                                75   ALTRIA GROUP INCORPORATED (MO) Price 37.6                                                     StockVal®
     PRICE 37.6 DATE 02-21-2003                                                                                    67         1993     1994    1995    1996     1997    1998    1999    2000    2001    2002   2003     2004   2005
     StockVal®                                                                                                          2.5
                                                                                                                   60
53                                                                                                                 53   2.2

47                                                                                                                 47
                                                                                                                        1.9                                                                                              HI    2.29
42                                                                                                                 42                                                                                                    LO    1.00
38                                                                                                                 38                                                                                                    ME    1.55
                                                                                                                        1.6
                                                                                                                                                                                                                         CU    2.29
34                                                                                                                 34
                                                                                                                        1.4
30                                                                                                                 30
27                                                                                                                 27
                                                                                                                        1.2
24                                                                                                                 24
                                                                                                                                                                                                                         03-31-1993
21                                                                                                                 21   1.0                                                                                              12-31-2002

19                                                                                                                 19                DIVIDENDS-PER-SHARE RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
                                                                                                                        10
17                                                                                                                 17
                                                                                     The Ohio State University           9
15                                                                                   Fisher College of Business 15
                                                                                                                         8
     1993   1994   1995   1996     1997    1998    1999       2000      2001     2002    2003    2004    2005    2006
Price Change     %   Diff SP5    First Call Data    2003        2004       2005               Data Page # 1              7                                                                                               HI    9.57
1-Week         0.43     -3.34    Mean Estimate       4.64       5.02      5.56     Revenues ($Mil)          80,408                                                                                                     LO    1.32
                                                                                                                         6                                                                                               ME    2.37
4-Weeks       -4.85     -0.44    Change             +2%         +8%       +11%       Market Value ($Mil)      77,856
                                                                                                                                                                                                                         CU    3.65
QTD           -7.16     -3.56    High                4.80        5.08       5.56     Shares Out (Mil)         2,069.0    5
YTD           -7.16     -3.56    Low                 4.55        4.97       5.56     Daily Volume (Thou)        8,343    4
2002         -11.60     11.76    Total                10            4          1     Daily Volume ($Mil)        314.0
2001           4.20     17.25    # Up                   1           0          0     Dividend Estimate           2.56    3
2000          91.30   101.44     # Down                 9           3          0     Payout Ratio                55%     2                                                                                               02-19-1993
1999         -57.01   -76.54     House Estimate                                      Retention Rate              45%                                                                                                     02-21-2003
                                                                                                                         1
    FYE Dec 2002 EPS 4.53        PE Ratio             8.1         7.5          6.8   Dividend Yield            6.80%                    DIVIDEND YIELD RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
       Valuation: Total Returns
ALTRIA GROUP INCORPORATED (MO)                         Price     37.6                          StockVal ®
       1993   1994    1995    1996    1997    1998    1999     2000     2001   2002     2003      2004      2005
1.20



1.10



1.00

0.96

0.92

0.88                                                                                               HI       1.11
                                                                                                   LO       0.56
0.84
                                                                                                   ME       0.90
                                                                                                   CU       0.97
0.80

0.76

0.73

0.70

0.67

0.64

0.61

0.58
                                                                                                    02-19-1993
                                                                                                    02-21-2003
0.55
         TOTAL RETURN RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-W td



ALTRIA GROUP INCORPORATED (MO)                         Price    37.6                           StockVal ®
       1993   1994    1995    1996    1997    1998    1999   2000      2001    2002     2003     2004    2005
1.20

1.10

1.00

0.92

0.85

0.78

0.72
                                                                                                  HI     1.13
0.66                                                                                              LO     0.32
                                                                                                  ME     0.84
0.61
                                                                                                  CU     0.92
0.56

0.51

0.47

0.43

0.39

0.36

0.33
                                                                                                   02-19-1993
                                                                                                   02-21-2003
0.30
              TOTAL RETURN RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-W td
Valuation Summary
   - Valuation
     Compared      to both the S&P 500 and Consumer
        Staples, Altria has reached its peak.
   - Earnings
     Earnings   do not show as much potential for growth as
        other companies.
   + Dividends
       Altria continues to pay out large dividends, which is
        attractive to income-oriented investors.
Recommendation
 Underweight Altria from 3.07% to 1.48%
 Too many risks and downsides
     Weak domestic economy
     State taxes
     Discount cigarettes
     Litigation
Walgreens
Business Analysis
 Walgreens is the nation’s largest drugstore
  operator, with 3,954 stores and 12
  distribution centers
 Pharmacy: 60% of sales in 2002
 General merchandise: 29% of sales
 Nonprescription drugs: 11% of sales
Business: Demand
   Demographic trends provide a favorable basis on which to invest in the
    pharmacy services industry. The Census Bureau forecasts a doubling of the
    American population aged 65 and older by the year 2030.
   The Federal Government is expected to overhaul the Medicare system and
    add a prescription drug benefits program for the elderly. The House majority
    leader, Bill Frist (a former heart surgeon) is now leading this initiative in
    conjunction with House democrats.
   Walgreens achieved its 28th consecutive year of record sales and profits in
    2002 and is also expected to achieve record sales and profits for 2003.
   The general drop in consumer spending generated softer-than-expected
    returns, which reduced Walgreens’ ability to leverage its SG&A expenses.
    Nonetheless, Walgreen’s returns were good.
   The increase in sales of lower-priced generic drugs reduced pharmacy
    sales by approximately 2% in 2002, however these drugs allow for higher
    margins.
Business: Supply
   Walgreens is aggressively expanding its store base and
    consequently increasing its share of the market. Last
    year, Walgreens opened 363 stores (adjusted for
    closings and relocations).
   Walgreens has increased its target number of store
    locations from 6000 to 7000 for 2010.
   Walgreens appears to be entering markets currently
    occupied by Longs and Eckerd and successfully
    capturing their markets.
   Walgreens expects 35% of the US population to be
    residing in CA, FL and TX in the next 25 years. They
    have subsequently been opening more stores in these
    locations.
  Financial Analysis: Cash Flows
                                                  Cash Flow Analysis
WALGREEN COMPANY (WAG)                                                                                       StockVal ®
FYE Aug
                                  2002    % Chg       2001    % Chg      2000    % Chg    1999    % Chg    1998

Net Income Reported ($ Mil)      1019.2      15       885.6      14     776.9       24   624.1       22   511.0
  Accounting Adjustment            -4.2      69       -13.6      34      -20.5              0.0              3.0
Net Income Adjusted              1015.0      16       872.0      15     756.4       21   624.1       21   514.0
  Depreciation & Amort            307.3      14       269.2      17     230.1       10   210.1       11   189.0
Cash Flow Adjusted               1322.3      16      1141.2      16     986.5       18   834.2       19   703.0
  Capital Expenditures            934.4     -24      1237.0      11    1119.1       61   696.3        9   641.0
Free Cash Flow Adjusted           387.9               -95.8      28     -132.6           137.9      122    62.0
  Dividends Common ($ Mil)        149.7       4       144.1       5     137.7        4   131.9        5   125.7
Free Cash Flow After Dividends    238.2              -239.9      11     -270.3              6.0            -63.7


Net Cash From Operations         1473.8     105       719.2     -26     971.7       49   652.0        9   596.5
Net Cash From Investing          -551.9      51     -1134.5      -9    -1037.4     -61   -645.5     -29   -502.3
Net Cash From Financing          -488.9               419.4              -63.3    -596     -9.1      60    -22.7
Other Cash Flows                    0.0    -392         0.0                0.0    3100      0.0              0.0
Change In Cash & Equiv            433.0    9999         4.1             -129.0   -4862     -2.6            71.5
Financial: Dupont Analysis
                                                   DuPont Analytics
WALGREEN COMPANY (WAG)                                                                             StockVal ®
Price 28.580 02/21/03 FYE Aug
                          INT           TAX           ASSET
         MARGIN%        BURDEN       BURDEN%           TURN       LEVERAGE


             EBIT         EBT                T         Sales         Assets
              -------      -------      1 - ----        -------        -------   ROE     Acct     ROE
             Sales        EBIT           EBT          Assets         Equity      Rpt%    Adj%     Adj%


 2002          5.75         0.99         62.25           3.07           1.64     17.82    -0.07   17.75
 2001          5.85         0.99         62.25           3.09           1.69     18.76    -0.29   18.47
 2000          5.98         1.00         61.50           3.26           1.69     20.13    -0.53   19.60
 1999          5.78         1.00         60.75           3.30           1.71     19.71    0.00    19.71
 1998          5.75         1.00         61.23           3.36           1.74     19.57    0.12    19.69


 1997          5.34         1.00         61.24           3.41           1.78     19.75    0.00    19.75
 1996          5.17         1.00         61.25           3.42           1.80     19.38    0.00    19.38
 1995          5.06         1.00         61.24           3.39           1.82     19.06    0.00    19.06
 1994          5.00         0.99         61.50           3.43           1.82     19.10    0.00    19.10
 1993          4.90         0.98         61.37           3.42           1.86     16.98    2.20    19.18


 1992          4.94         0.96         62.49           3.38           1.91     19.06    0.00    19.06
 1991          4.92         0.94         62.49           3.39           1.96     19.23    0.00    19.23
 1990          4.96         0.94         62.16           3.40           2.01     19.72    0.00    19.72
 1989          4.88         0.93         63.25           3.40           2.06     20.08    0.40    20.48
 1988          4.69         0.91         61.77           3.42           2.14     19.34    0.00    19.34


 1987          4.96         0.91         53.35           3.37           2.16     17.60    0.39    17.99
Valuation Analysis: Valuation
WALGREEN COMPANY (WAG) Price 28.6                                                             StockVal®
        1993   1994    1995    1996    1997    1998    1999    2000    2001     2002   2003     2004   2005
2.1
                                                                                                 HI    2.00
1.8                                                                                              LO    1.01
                                                                                                 ME    1.32
1.5                                                                                              CU    1.49
1.2
                                                                                                 02-19-1993
0.9                                                                                              02-21-2003
       PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
2.0                                                                                              HI    1.81
                                                                                                 LO    0.86
1.6                                                                                              ME    1.01
1.3                                                                                              CU    1.78
                                                                                                 FY1   1.78
                                                                                                 FY2   1.79
1.0
                                                                                                 03-31-1993
0.8                                                                                              12-31-2002
                 EARNINGS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.2
                                                                                                 HI    1.11
1.0                                                                                              LO    0.47
                                                                                                 ME    0.64
0.8                                                                                              CU    0.77
0.6
                                                                                                 02-19-1993
0.4                                                                                              02-21-2003
               PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
0.60
                                                                                                 HI    0.57
0.55                                                                                             LO    0.44
                                                                                                 ME    0.45
0.50                                                                                             CU    0.50
0.45
                                                                                                 03-31-1993
0.40                                                                                             12-31-2002
        NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
Valuation Analysis: Valuation
WALGREEN COMPANY (WAG) Price 28.6                                                              StockVal®
      1993      1994    1995    1996    1997    1998   1999    2000    2001    2002     2003     2004   2005
3
                                                                                                  HI    2.47
2                                                                                                 LO    0.87
                                                                                                  ME    1.17
                                                                                                  CU    1.49
1
                                                                                                  02-19-1993
0                                                                                                 02-21-2003
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
2.0                                                                                               HI    1.79
                                                                                                  LO    1.00
1.7                                                                                               ME    1.19
                                                                                                  CU    1.79
1.4                                                                                               FY1   1.89
                                                                                                  FY2   2.01
1.2
                                                                                                  03-31-1993
1.0                                                                                               12-31-2002
             EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
1.5
                                                                                                  HI    1.40
1.2                                                                                               LO    0.50
                                                                                                  ME    0.66
0.9                                                                                               CU    0.81
0.6
                                                                                                  02-19-1993
0.3                                                                                               02-21-2003
         PRICE / SALES RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
0.7
                                                                                                  HI    0.60
0.6                                                                                               LO    0.48
                                                                                                  ME    0.52
                                                                                                  CU    0.48
0.5
                                                                                                  03-31-1993
0.4                                                                                               12-31-2002
  NET PROFIT MARGIN ADJUSTED RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
 Valuation: Growth
                                                   Growth & Margin Check                                                     StockVal ®
WALGREEN COMPANY (WAG)                                                                         Default Growth Rate Estimate 14.0%
Price 28.580 02/21/03                                                                          Analyst Growth Rate Estimate 14.0%
                                     Percent Change                   Actual    Year         Profit                Momentum %
 Quarter     Revenue      REV           RPS        EARN    EPS         EPS       Ago        Margin %     SF       REV          EPS
  Feb 01       6,429.0          15            13      23         22     0.28       0.23          4.5          0        +15         +26
  May 01       6,296.2          17            16      12         11     0.21       0.19          3.4          0        +16         +10
  Aug 01      6,283.6          17            16      11         11     0.21       0.19          3.4          0        +15         +10
  Nov 01       6,559.4          17            14      23         20     0.18       0.15          2.8      +1           +15         +14
  Feb 02       7,488.5          16            16      15         14     0.32       0.28          4.4          0        +17         +18
  May 02       7,397.9          17            17      19         19     0.25       0.21          3.5          0        +17         +17
  Aug 02      7,235.3          15            15      15         14     0.24       0.21          3.4          0        +14         +13
  Nov 02       7,484.9          14            14      17         17     0.21       0.18          2.9          0        +13         +12
    T4Q       29,606.6          16            16      16         16     1.02                     3.6
  Feb 03                 Mean Estimate Next Quarter              13     0.36       Long-Term Growth Rate Estimates
                         High Estimate                           16     0.37   Median Estimate                                  16.0%
                         Low Estimate                             6     0.34   Number of Estimates                                   17
                         Number of Estimates                     17            Standard Deviation                                     2
                             Point-to-Point Growth Rates (%)                        Least Squares Growth Rates (%)
              Years       REV           RPS        EARN    EPS        Years     REV           RPS        EARN                EPS
                1               16            16      16         16     1              15           15            15                 15
                3               17            16      17         16     3              16           16            17                 16
                5               17            16      18         17     5              17           16            19                 18
                7               16            15      18         17     7              16           15            18                 18
               10               14            14      16         16    10              15           14            17                 17
               15               13            13      16         15    15              13           13            15                 15
               20               14            14      15         15    20              13           13            14                 14
 Valuation: Dividends

     WALGREEN COMPANY (WAG)                                                                                      73   WALGREEN COMPANY (WAG) Price 28.6                                                              StockVal®
     PRICE 28.6 DATE 02-21-2003                                                                                  58          1993     1994    1995    1996     1997    1998    1999    2000    2001    2002   2003     2004   2005
     StockVal®      EPS Lagged 1-Year                                                                                 1.65
                                                                                                                 46
37                                                                                                               37   1.55

29                                                                                                               29   1.47

                                                                                                                      1.39                                                                                              HI    1.58
23                                                                                                               23                                                                                                     LO    1.00
19                                                                                                               19   1.32                                                                                              ME    1.37
                                                                                                                                                                                                                        CU    1.57
15                                                                                                               15   1.25
12                                                                                                               12   1.18

 9                                                                                                                9   1.12

 7                                                                                                                7   1.06                                                                                              03-31-1993
 6                                                                                                                6   1.00                                                                                              12-31-2002
 5                                                                                                                5                 DIVIDENDS-PER-SHARE RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
                                                                                                                      0.8
 4                                                                                                                4
                                                                                   The Ohio State University
 3                                                                                 Fisher College of Business     3   0.7
     1993   1994   1995    1996     1997    1998    1999      2000     2001    2002    2003    2004    2005    2006
Price Change     %   Diff SP5     First Call Data     2003      2004       2005             Data Page # 1             0.6                                                                                               HI    0.75
1-Week         4.50       0.73    Mean Estimate        1.14      1.33      1.51   Revenues ($Mil)          29,607                                                                                                      LO    0.23
                                                                                                                                                                                                                        ME    0.49
4-Weeks       -8.72     -4.30     Change             +15%      +17%       +14%     Market Value ($Mil)      29,435    0.5                                                                                               CU    0.28
QTD           -2.09       1.51    High                 1.16      1.40       1.51   Shares Out (Mil)         1,029.9
YTD           -2.09       1.51    Low                  1.11      1.28       1.51   Daily Volume (Thou)        3,743   0.4
2002         -13.28     10.09     Total                 17        17           1   Daily Volume ($Mil)        107.0
2001         -19.50     -6.45     # Up                    7         4          0   Dividend Estimate           0.15
                                                                                                                      0.3
2000          42.95     53.09     # Down                  9         3          0   Payout Ratio                13%                                                                                                      02-19-1993
1999          -0.11    -19.63     House Estimate                                   Retention Rate              87%                                                                                                      02-21-2003
                                                                                                                      0.2
    FYE Aug 2002 EPS 0.99         PE Ratio            25.1      21.5       18.9    Dividend Yield            0.52%                     DIVIDEND YIELD RELATIVE TO S&P 500 INDEX WITH OPERATING EPS (SPX)
Valuation Summary
   = Valuation
        Even though the company seems to be dropping
        compared to the S&P 500, it is still doing well against
        the Consumer Staples Sector with earnings, net profit
        margin is decreasing
   + Earnings
       Earnings expectations are positive and the overall
        expected growth is high
   = Dividends
        Walgreens is increasing its dividends per share but
        its yield has been decreasing
Recommendation
   Keep Walgreens at its current weight of 1.63%
   The company has been performing well in
    earnings.
   Net profit margin has been decreasing but
    appears to be on the rebound.
   Expectations for the future are good with
    expected growth at 16%, the highest of all of our
    companies.
Comparison of Companies
   Business
       Anheuser-Busch has the most opportunities for potential internal
        growth, Procter & Gamble does, but is looking at foreign
        acquisitions instead
   Financial
       Altria has decreasing margins and is depleting its cash balance,
        but Walgreens has had a huge surge in cash
   Valuation
       A-B and Walgreens show the most potential for stock
        appreciation and improved earnings in the future, Altria’s and
        Procter & Gamble’s returns look like they will come mostly from
        dividends