safe harbor statement - rite aid pharmacy harbor statement this is an oral presentation which is...

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January 12, 2009 Unlocking the Value of Rite Aid

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Page 1: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

January 12, 2009

Unlocking the Value of Rite Aid

Page 2: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 3: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 4: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

Leading National Drugstore Chain With ~5,000 Stores

(1) Excludes Florida. Source: Metro Markets 2007.

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Page 5: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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

Page 6: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 7: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 8: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 9: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 10: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 11: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 12: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

Financial Overview 11

Page 13: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 14: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 15: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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

Page 16: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 17: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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Page 18: Safe Harbor Statement - Rite Aid Pharmacy Harbor Statement This is an oral presentation which is accompanied by slides. Inv estors are urged to ... Improve Pharmacy Service

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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