safe harbor statement - rite aid pharmacy harbor statement this is an oral presentation which is...
TRANSCRIPT
January 12, 2009
Unlocking the Value of Rite Aid
Safe Harbor Statement
This is an oral presentation which is accompanied by slides. Investors are urged to review Rite Aid’s SEC filings.
Statements, estimates, targets, projections and other information that might be considered forwardlooking may be made during today’s presentation. These forwardlooking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially from those projected or implied. The risk factors associated with those uncertainties are described in Rite Aid’s most recent Form 10K, Form 10Q and other filings with the SEC.
Rite Aid assumes no obligation to update the information or the forward looking statements contained in this presentation, whether as a result of new information or otherwise. Also during today’s presentation, a nonGAAP financial measure is referenced. The definition and purpose for using this measure are in the Rite Aid’s Form 8K furnished to the SEC.
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Investment Highlights
Leading national drug chain with 4,900 stores Over $26 billion in annual pharmacy
and front end revenues Fill 300 million scripts per year 27.7% of the U.S. population visits our stores
at least once a year Strong market shares in most of the largest U.S. markets Opportunity to unlock value of Brook’s Eckerd acquisition Minimal capital investment required to execute
our business plan Significant opportunity to take unnecessary cost out of the
business
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Leading National Drugstore Chain With ~5,000 Stores
(1) Excludes Florida. Source: Metro Markets 2007.
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3 rd Quarter Accomplishments
8.5% increase in Adjusted EBITDA to $252MM Brooks/Eckerd integration completed Improved same store sales; positive FE and Rx comps Gross margin flat quarter to quarter; margin improved on a FIFO basis
by 53 bps SG&A as a % of sales improved
Less integration expense, better labor control, lower worker’s compensation, general liability and medical costs
Closed 29 underperforming stores Liquidity $430 million at quarter end
Controlled inventory $223 MM lower than Q3 FY ‘08 Senior management changes
John Standley – President and Chief Operating Officer Frank Vitrano – Chief Financial Officer and Chief Administration Officer Ken Martindale – Senior Executive VP, Merchandising, Marketing
and Logistics 4
Segmentation Unlocks Rite Aid’s Value
Benefits of Segmentation Enables key initiatives Focuses efforts where
highest return is made Maximizes limited
resources
Store Segmentation Consumer/demographics Urban/suburban High volume/low volume Growth potential Earnings
High Volume Store Segmentation Example
$200 million opportunity if we achieve 7% EBITDA
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Marketing and Consumer Positioning Strengthen our customer value proposition
New strategic pricing application based on store segmentation
Efficient use of circular markdowns to drive consumer value
Increase private brand penetration Better use of instore signage & displays
to show value Improve our health & wellness positioning
Developing Rx loyalty program Introduced Living More program for Seniors Launched our free Rx Savings Card Leverage GNC as point of differentiation
Key Business Initiatives
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Key Business Initiatives
Improve Pharmacy Service Improve customer service in the store
“Ready When Promised” Nexgen key performance indicators Fully utilize customer feedback tools Focus on underperforming stores
Grow our automated courtesy refill program Continue consistency & compliance programs
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Key Business Initiatives
Assortment Optimization
Reviewing current itemization to evaluate transferable demand Improve controls around item selection Merchandise to the needs of local customers/neighborhoods based
on store segmentation Reduce overall inventory investment Reduce discontinued and outdated
inventory costs Markdowns Labor Transportation
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Reduce Supply Chain costs Enabled by lowering
inventory investment Warehouse operating
efficiencies Elimination of satellite
facilities Facilities consolidation Improved transportation
routing Delivery frequency based
on store segmentation
Key Business Initiatives
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Key Business Initiatives
Labor Reduce inventory handling costs New operating model for low volume stores Updating and improving labor standards and scheduling tool Improved tracking and reporting Indirect Procurement Purchasing reviews in all areas
of the business Online auctions where possible Administrative Costs Reduced headcount by over 400 Benefit plan changes Advertising Review of distribution Printing costs Paper costs
¹ SG&A on an adjusted EBITDA basis
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Financial Overview 11
Q3’09 Financial Highlights
(1) Rite Aid adjusted EBITDA is a NonGAAP financial measure and is defined and reconciled to historical operating results in Rite Aid’s 8K furnished to the SEC on December 18, 2008.
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Historical Financial Summary
Note: For fiscal year ended March 1. Fiscal 2006 includes 53 rd week. (1) Reflects $8.9 million add back of losses from discontinued operations. 2008 Adjusted EBITDA including discontinued operations is $963 million. (2) Reflects $6.2 million addback of losses from discontinued operations. Adjusted EBITDA including discontinued operations is $980 million. (3) Rite Aid adjusted EBITDA is a NonGAAP financial measure and is reconciled to operating results in Rite Aid’s 8K furnished to the SEC on December 18, 2008.
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Debt Maturity Profile
Accounts receivable securitization facility matures January 15, 2009 with backstop in place The revolver and tranche 1 term loan will mature in September 2010
The Company anticipates refinancing the revolver and tranche 1 term loan at the end of 2009/beginning of 2010
Refinancing is expected to be a combination of new revolver, term loan and senior secured notes
No other significant maturities until June 2014
Note: Calendar years are reflected in graphs. Maturity schedule excludes A/R securitization. 14
Adequate Liquidity to Execute Plan
$495 million of revolver availability as of December 18, 2008
Accounts receivable securitization facility matures January 15, 2009 with backstop in place
Removed restrictions on ability to borrow the full availability of the $1.75 billion revolver with the refinancing in Q2’09
Reduction in capital expenditure spend by approximately $50 million
Additional significant working capital opportunities
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Reverse Stock Split
Stockholders approved 1for10, 1for15 or 1for20 ratio on Dec. 2, 2008
Expect to regain full compliance with NYSE stock price listing rule by April 16, 2009
Rite Aid Board of Directors expects to select timing and ratio by February 28, 2009.
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Unlocking the Value of Rite Aid
Segmentation
Marketing and Consumer Positioning
Improve Pharmacy Service
Assortment Optimization
Cost Reduction
Minimal capital investment required to execute our business plan
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