Professional Documents
Culture Documents
Credit Conference
December 3, 2009
Safe Harbor Statement
Investors are urged to review Rite Aid’s SEC filings. Statements, estimates, targets, projections and other information included herein
and therein might be considered forward-looking. These statements and estimates are based upon various assumptions that may not
prove to be correct. Such assumptions are inherently subject to significant uncertainties and contingencies, many of which are beyond
the company’s control. No representation is made, and no assurance can be given, that such results can or will be attained. The risk
factors associated with those uncertainties are described in Rite Aid’s most recent Form 10-K and other filings with the SEC and in the
offering memorandum prepared in connection with the offering referenced herein.
Rite Aid assumes no obligation to update the information or the forward-looking statements contained herein, whether as a result of new
information or otherwise. Also included herein are non-GAAP financial measures. The definition and purpose for using these measures
are in Rite Aid’s Form 8-K furnished to the SEC on September 24, 2009. See also the reconciliation of non-GAAP financial measures in
the appendix to this presentation.
This presentation contains forward-looking statements, including guidance, which are subject to certain risks and uncertainties that could
cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause
actual results to differ materially from those expressed or implied in such forward-looking statements include our high level of
indebtedness; our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our senior
secured credit facility and other debt agreements; general economic conditions, inflation and interest rate movements; our ability to
improve the operating performance of our stores in accordance with our long term strategy; our ability to realize same store sales growth
for the acquired Brooks Eckerd stores; our ability to hire and retain pharmacists and other store personnel; the efforts of private and
public third-party payors to reduce prescription drug reimbursements and encourage mail order; competitive pricing pressures, including
aggressive promotional activity from our competitors; decisions to close additional stores and distribution centers, which could result in
further charges to our operating statement; our ability to manage expenses; our ability to realize the benefits from actions to further
reduce costs and investment in working capital; continued consolidation of the drugstore industry; changes in state or federal legislation
or regulations; and the outcome of lawsuits and governmental investigations. Consequently, all of the forward-looking statements made
in this presentation, including our guidance, are qualified by these and other factors, risks and uncertainties. Readers are also directed
to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission
and in the offering memorandum. Forward-looking statements can be identified through the use of words such as “may”, “will”, “intend”,
“plan”, “project”, “expect”, “anticipate”, “could”, “should”, “would”, “believe”, “estimate”, “contemplate”, and “possible”.
2
Company Update
3
Leading National Drugstore
Chain
Overview Strong National Footprint
year 27 95
98
199
67
► 27.7% of the U.S. population visits our Rite Aid States
No. of Rite Aid stores
stores at least once a year Rite Aid Distribution Centers
Note: As of 8/29/09.
Leadership Position in Eastern U.S. MSAs(2) Market Share for Selected Markets
Other
16%
Other #1 Share
16% 34%
#1 Share
#3 Share #3 Share 34%
19% 19%
#2 Share
31%
#2 Share
31%
Source: Metro Market Data
(1) Rite Aid adjusted EBITDA is a Non-GAAP financial measure and is reconciled to operating results in the
Appendix hereto. Includes add-back related to A/R securitization expense of $45 million.
4 (2) Excludes Florida.
Last 12 Months’ Progress
Improve our liquidity Improved to $822 million, 50% increase from prior year
Reduce our costs SG&A declined $90.5 million (1) from prior year 2nd
Quarter
Grow our EBITDA First half steady despite the challenging environment
Improve our cash flow First half cash flow from operations increased by $220
million
Reduce our debt Debt is $407 million lower than prior year 2nd Quarter
($ in millions)
(1) Presented on an Adjusted EBITDA basis and reconciled to the related GAAP measure in the Appendix hereto.
6
Comparable Script Count
Growth
2.5%
2.2%
1.8%
2.0% 1.8%
1.4%
1.5%
1.0%
0.5%
0.2%
0.0%
Q1 FY'09 Q2 FY'09 Q3 FY'09 Q4 FY'09 Q1 FY'10 Q2 FY'10 Sept Oct
-0.5%
-1.0% (0.9%)
(1.0%)
-1.5%
(1.7%)
-2.0%
FY’09 FY’10
7
Front End Comparable
Store Sales
3.5%
2.5% 2.3%
1.9%
1.7%
1.5%
0.5%
-1.5%
(1.6%)
(2.0%)
-2.5% (2.3%)
(2.7%)
-3.5%
-4.5%
(4.9%)
-5.5%
FY’09 FY’10
8
SG&A Growth/Decline (1)
(1) Calculated as the change in Adjusted EBITDA SG&A compared to the corresponding prior year quarter.
9
Operating Initiatives
► Segmentation (targeted at specific stores/customers)
▪ High volume store operating improvement
▪ New operating model for low volume stores
▪ Sales growth opportunities in front end and pharmacy
► All Stores
▪ wellness+
▪ Grow script count
▪ Control labor costs
▪ Reduce shrink expense
▪ Reduce supply chain costs
▪ Increase private brand penetration
▪ Indirect procurement
▪ Reduce working capital
10
Segmentation Initiatives
► High Volume Stores
Fiscal 2010 Estimated
▪ Best Ball Savings in Millions
▪ Metro store operating model
▪ Changes to field structure to support high volume stores
$550
► Low Volume Stores
$500
▪ New ad format with fewer pages
▪ Fewer deliveries $400
▪ New labor model
$300
► Sales Growth Opportunities
▪ Low volume FE/High Volume RX $200
▪ Low volume RX/High Volume FE
$150
► New Pricing Strategy
▪ Based on store segmentation/clustering
11
Low Volume Stores Adjusted
EBITDA Improvement
2nd Quarter Fiscal 2010 Compared to 2nd Quarter Fiscal 2009
($ in millions)
Adjusted
EBITDA ► New labor model
Impact (1) ► Bi-weekly delivery
12
Store Segmentation – Script
Opportunity Stores
Script Growth Tool Box Same Store Script Growth
► Improve customer service
7.00%
► Grass roots marketing effort
6.00%
► Transfer coupons
5.00%
► Rx Savings Card
4.00%
► Courtesy refill
3.00%
2.00%
1.00%
0.00%
-1.00%
March April May June July August September October
13
All Store Initiatives
► Indirect Procurement
$100
► Reduce Working Capital
$50
14
wellness+
Every time members scan their wellness+ card, they earn points
For every dollar spent on eligible non-prescription purchases when they
1 point
scan their card at the register
25 points For every prescription when they scan their card at the register
CSI Score
74%
▪ Fully utilize customer feedback 73%
tools 72%
▪ Focus on underperforming 71%
stores 70%
69%
100,000 100,000
17
Control Labor Costs
Front End Sales per Labor Hour Pharmacy Scripts per Pharmacist Hour
$110 15
14
$100
13
$90 12
Mar Apr May Jun Jul Aug Sept Oct Mar Apr May Jun Jul Aug Sept Oct
FY09 FY10
FY09 FY10
18
Total Headcount Reduction
110.0
107.5
108.0
106.0
106.0 105.5
104.0
102.4
102.0
100.3
100.0
99.1
98.6
98.1 97.6
98.0
96.0
Feb '08 May '08 Aug '08 Nov '08 Feb '09 May '09 Aug '09 Sep '09 Oct '09
19
Reduce Supply Chain Costs
Q1 Q2 Q3 Q4 Q1 Q2
20
Private Brand Penetration
17.0%
► New brand architecture
16.0%
► 250 new items 15.3% 15.1% 15.5%
15.0% 15.0% 15.0% 14.8%
► Package redesign 14.5%
15.0%
14.4%
14.0% 14.1% 14.2%
Percent Penetration
13.9%
► Increased promotional support 13.6%
13.3%
13.0%
12.8%
► Pricing review 12.5%
12.0%
11.0%
10.0%
Mar Apr May June July Aug Sept Oct
FY 2010 FY 2009
21
Fiscal 2010 Indirect
Procurement
Expense Reduction
Identified Savings
In-bound Freight
P Card Purchasing
Telecom
Rx Temp Labor
Online Auctions
22
Working Capital Reduction
Working Capital Initiatives FIFO Inventory
► Reduced 3,700 SKU’s ($ in millions)
▪ Labor $3,700
▪ Transportation Q2 Q4 Q1 Q2
23
Financial Highlights
24
Historical Financial
Summary
Revenue (1) Adjusted EBITDA (2)
($ in billions) ($ in millions)
$30.0 Rx Sales Front End Sales
$26.3 $26.0 $985 $991 $996
$24.3 $1,000 8.0%
$25.0
$8.6 $8.4
$8.0 $800 $719
$20.0 $688 6.0%
$17.3 $17.4
$15.0 $600
$6.3 $6.3
4.0%
4.0% 4.1% 4.0%
$10.0 $400 3.8% 3.8%
$16.2 $17.6 $17.6
2.0%
$5.0 $10.9 $11.0 $200
$0.0 $0 0.0%
Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 LTM 8/29/2009 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 LTM 8/29/2009
Note: For Fiscal year ended February 28. Fiscal 2006 includes 53rd week. Rite Aid acquired Jean Coutu on June 4, 2007 (Fiscal 2008).
(1) Includes other revenue which is not a component of sales.
(2) Rite Aid adjusted EBITDA is a Non-GAAP financial measure and is reconciled to operating results in the Appendix hereto. Includes adjustment related to A/R securitization expense.
25
Q2 Fiscal 2010
Financial Highlights
2nd Quarter Result Commentary
26
26 (1) Rite Aid adjusted EBITDA is a Non-GAAP financial measure and is reconciled to operating results in the Appendix hereto. Includes adjustment related to A/R securitization expense.
Fiscal 2010 Guidance Recap
Low High
27
27 (1) Rite Aid adjusted EBITDA is a Non-GAAP financial measure and is reconciled to operating results in the Appendix hereto. Includes adjustment related to A/R securitization expense.
Capex and New Store
Development
Investment in Cap Ex by Fiscal Year
$900
$740
$700
Capital Expenditures
$541
$500
$300 $250
$100
2008 2009 2010 (1)
$1,000 $970
$902
$822
$800
$724
$600 $549
$430
$400 $340
$200
$0
Q1 Q2 Q3 Q4 Q1 Q2
29
Financing Overview
30
Refinancing of September 2010
Maturities Completed with this
Transaction
► Successfully amended existing credit facility to permit the refinancing of Rite Aid’s existing 2010
maturities
► Completed refinancing of the $1,750 million Revolver and $145 million Tranche 1 Term Loan due
September 2010 in June 2009
▪ $1,000 million new Revolver
▪ $525 million Tranche 4 Term Loan
▪ $410 million 1st Lien Senior Secured Notes
► Refinancing the existing A/R Securitization facilities will completely refinance the September 2010
maturities
▪ $175 million Revolver Add-on
▪ $125 million Tranche 4 Term Loan Add-on
▪ $270 million 2nd Lien Senior Secured Notes
31
Refinancing Improves Debt
Maturity Profile
Pro Forma for Refinancing
($ in millions)
Revolver Add-on =
$175
$1,600
$1,439 Tranche 4 Term
Loan Add-on =
$125
(1)
$1,175
$1,200 $1,068
$500
$410 $470 $423
$400
$191 $270
$11
$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 Thereafter
1st Lien 2nd Lien Unsecured
32
Conclusion
► We have identified significant quantifiable opportunities to
improve our results
► We have a number of key initiatives underway to capture these
opportunities
► Our initiatives do not require a significant amount of capital
► Our initiatives are starting to have a positive impact on critical
components of our business
► We have adequate liquidity to run our business
Bank of America Merrill Lynch
Credit Conference
December 3, 2009