RAD RiteAid December 2009 Presentation

8/9/2019 RAD RiteAid December 2009 Presentation

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December 3, 2009

Bank of America Merrill Lynch

Credit Conference


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Company Update3


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Leading National Drugstore

Chain

Leading national drug chain with 4,812

stores as of August 29, 2009 Over $26 billion in pharmacy and front

end revenues and $996 million (1)

Adjusted EBITDA for LTM August 2009

Fill approximately 300 million scripts per

year 27.7% of the U.S. population visits our

stores at least once a year

4

Strong National Footprint

140

1471

1

600

2220

287

10230

117

88

67

27 95

98

244

575

104

81

196

38 69

1624779

271

43D.C.

199

664

7146

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.(2) Excludes Florida.

Overview

Leadership Position in Eastern U.S. MSAs(2) Market Share for Selected Markets

#1 Share34%

#2 Share31%

#3 Share19%

Other16%

Note: As of 8/29/09.

Rite Aid States

No. of Rite Aid stores

Rite Aid Distribution Centers

#1 Share

34%

#2 Share

31%

#3 Share

19%

Other

16%


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Last 12 Months Progress

5

Game Plan Progress

Refinance 2010 maturities $2.5 billion refinanced

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 2

nd

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

(1) Represents Adjusted EBITDA SG&A.


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Fiscal 2010 1st Half

Adjusted EBITDA Results

6

($ in millions)

Actual Prior Year B/(W)Revenues $12,853 $13,113 $(260)

Gross Profit (1) $3,506 $3,636 $(129)

% to sales 27.3% 27.7% -0.4%

SG&A (1) $3,041 $3,175 $134

% to sales 23.7% 24.2% 0.5%

Adjusted EBITDA $466 $461 $5

% to sales 3.6% 3.5% 0.1%

(1) Presented on an Adjusted EBITDA basis and reconciled to the related GAAP measure in the Appendix hereto.


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Comparable Script Count

Growth

7

0.2%

(1.7%)

(1.0%)(0.9%)

2.2%

1.4%

1.8%1.8%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Q1 FY'09 Q2 FY'09 Q3 FY'09 Q4 FY'09 Q1 FY'10 Q2 FY'10 Sept Oct

FY09 FY10


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Front End Comparable

Store Sales

8

1.7% 1.9%

2.3%

(2.0%)(1.6%)

(4.9%)

(2.3%)(2.7%)

-5.5%

-4.5%

-3.5%

-2.5%

-1.5%

-0.5%

0.5%

1.5%

2.5%

3.5%

Q1 FY'09 Q2 FY'09 Q3 FY'09 Q4 FY'09 Q1 FY'10 Q2 FY'10 Sept Oct

FY09 FY10


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SG&A Growth/Decline (1)

9(1) Calculated as the change in Adjusted EBITDA SG&A compared to the corresponding prior year quarter.


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Operating Initiatives

10

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


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Segmentation Initiatives

11

High Volume Stores

Best Ball

Metro store operating model Changes to field structure to support high volume stores

Low Volume Stores

New ad format with fewer pages

Fewer deliveries

New labor model

Sales Growth Opportunities

Low volume FE/High Volume RX

Low volume RX/High Volume FE

New Pricing Strategy

Based on store segmentation/clustering

$550

$500

$400

$300

$200

$150

Fiscal 2010 EstimatedSavings in Millions


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Low Volume Stores Adjusted

EBITDA Improvement

12

($ in millions) AdjustedEBITDAImpact (1)

Front End Sales & Gross Profit ($9.8)

Payroll 11.4

DC Freight & Handling 7.0

Other Operating Expenses 2.0

Total Improvement $10.6

New labor model

Bi-weekly delivery

Inventory reduction

Reduced ad in some stores

2nd Quarter Fiscal 2010 Compared to 2nd Quarter Fiscal 2009

(1) Excludes impact of Rx sales and margin.


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Store Segmentation Script

Opportunity Stores

13

Same Store Script GrowthScript Growth Tool Box

Improve customer service Grass roots marketing effort

Transfer coupons

Rx Savings Card

Courtesy refill

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

March April May June July August September October

All Other Stores Rx Opportunity


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All Store Initiatives

14

wellness+

Grow Script Count

Control Labor Costs

Reduce Shrink Expense

Reduce Supply Chain Costs

Increase Private Brand Penetration

Indirect Procurement

Reduce Working Capital

Fiscal 2010 EstimatedSavings in Millions

$200

$150

$100

$50


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wellness+

15

for every125 points*

500 points

500 points

1,000 points

A one time, 10% off non-prescription purchasesshopping pass

10% off all non-prescription purchases every day

Free health screening

20% off all non-prescription purchases every day

*Up to 375 points

For every dollar spent on eligible non-prescription purchases when theyscan their card at the register

25 points For every prescription when they scan their card at the register

Every time members scan their wellness+ card, they earn points

Accumulate points to earn tiered benefits

1 point


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Improve Pharmacy Service

& Grow Scripts

16

Improve customer service in thestore

Ready When Promised Nexgen key performance

indicators

Fully utilize customer feedbacktools

Focus on underperformingstores

69%

70%

71%

72%

73%

74%

75%

76%77%

78%

CSIScore

FY08 FY09 FY10 Linear (FY08)

Pharmacy CSI FY Comparison (1)

(1) CSI = Customer Satisfaction Indicator


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Improve Pharmacy Service

& Grow Scripts

17

Grow our automated courtesyrefill program

Continue persistency &compliance programs

Expand Voxify capacity

Grow Rx Savings Card

Targeted use of transfercoupons

Grass roots marketingcampaigns at store level

Monthly Program Membership Growth

100,000

150,000

200,000

250,000

300,000

350,000

100,000

600,000

1,100,000

1,600,000

2,100,000

2,600,000

3,100,000

3,600,000

4,100,000

MonthlyNewUse

rCount

Acc

umulatedUserCount

Monthly New Users Accumulated Users


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Control Labor Costs

18

Pharmacy Scripts per Pharmacist HourFront End Sales per Labor Hour

$90

$100

$110

Mar Apr May Jun Jul Aug Sept Oct

FY09 FY10

12

13

14

15

Mar Apr May Jun Jul Aug Sept Oct

FY09 FY10


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Total Headcount Reduction

19

Total Headcount (000s)

107.5

106.0105.5

102.4

99.1

100.3

98.698.1 97.6

96.0

98.0

100.0

102.0

104.0

106.0

108.0

110.0

Feb '08 May '08 Aug '08 Nov '08 Feb '09 May '09 Aug '09 Sep '09 Oct '09


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Reduce Supply Chain Costs

Enabled by lowering inventoryinvestment

Warehouse operating efficiencies

Elimination of satellite facilities

Facility closures

Atlanta

Long Island

Improved transportation routing

More efficient delivery model basedon store segmentation

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Distr ibution Costs as % of Sales

1.79%1.80%

1.69%

1.53%

1.48%

1.55%

Q1 Q2 Q3 Q4 Q1 Q2


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Private Brand Penetration

21

Private Brand Initiatives

New brand architecture

250 new items

Package redesign

Increased promotional support

Pricing review

13.9%

14.5%

15.3% 15.1% 15.5%

15.0% 15.0% 14.8%

12.5%

14.1% 14.2%

15.0%14.4%

13.6%13.3%

12.8%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

Mar Apr May June July Aug Sept Oct

PercentPenet

ration

FY 2010 FY 2009

Fi l 2010 I di t


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Fiscal 2010 IndirectProcurement

Expense Reduction

22

P Card Purchasing

Telecom

In-bound Freight

Rx Temp Labor

Online Auctions

Identified Savings


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Working Capital Reduction

Working Capital Initiatives

Reduced 3,700 SKUs

Improve controls around itemselection

Implement assortmentoptimization during plan-o-gramreviews

Reduce discontinued andoutdated inventory costs

Markdowns

Labor

Transportation

23

$4,551

$4,256

$4,116 $4,200

$3,700

$3,900

$4,100

$4,300

$4,500

$4,700

Q2 Q4 Q1 Q2

FIFO Inventory

($ in millions)


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Financial Highlights24


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Historical Financial

Summary

25

$10.9 $11.0

$16.2$17.6 $17.6

$6.3 $6.3

$8.0$17.3 $17.4

$24.3

$26.3 $26.0

$8.6 $8.4

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 LTM 8/29/2009

Rx Sales Front End Sales

Revenue (1) Adjusted EBITDA (2)

($ in billions)

$719

$985 $991 $996

$688

4.0% 4.1%3.8% 3.8%

4.0%

$0

$200

$400

$600

$800

$1,000

Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 LTM 8/29/2009

0.0%

2.0%

4.0%

6.0%

8.0%

($ in millions)

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.

Quarterly Comp Store Sales


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Q2 Fiscal 2010

Financial Highlights

26

26

2nd Quarter Result Commentary

Revenue

$6.3 billion

Same Store Sales

Total: (1.1)%

Pharmacy: 0.8%

Front end: (4.9)%

Solid sales performance in pharmacy as the numberof prescriptions filled increased 1.4%

Front end sales negatively impacted by a morediscount-driven customer in weak economicenvironment

$217 million

3.4% margin

Strong improvement in various cost savings

initiatives SG&A margins improved 75 basis points from last

years second quarter

$116 million No integration costs

Less store closing and impairment charges

No loss on debt modification

$822 million Revolver andsecuritization availability

Benefits from working capital initiatives

Benefits from expense initiatives and reduced capital

expenditures

Net Loss

Adjusted EBITDA (1)

Revenues and SameStore Sales

(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.

Liquidity


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Fiscal 2010 Guidance Recap

27

27

Fiscal 2010 Guidance

Low High

Sales $25.7 billion $26.2 billion

Same Store Sales (1.00)% 1.00%

Adjusted EBITDA (1) $900 million $1,000 million

Net Loss ($615 million) ($390 million)

Gross Capital Expenditures $250 million $250 million

(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.


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FYE February New Relocations Total2008 1909 65 1974

2009 42 56 98

2010 18 42 60

$740

$541

$250

$100

$300

$500

$700

$900

2008 2009 2010

CapitalExpe

nditures

(1)

(1) Guidance given on September 24, 2009

(1)

Investment in Cap Ex by Fiscal Year

Capex and New Store

Development

29


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Ample Liquidity to Execute

Plan

29

$340

$549

$430

$724

$902

$822

$0

$200

$400

$600

$800

$1,000

Q1 Q2 Q3 Q4 Q1 Q2

Liquidity Trend Over Last Six Quarters(Revolver & Securitization Capacity)

($ in millions)

$970(1)

(1) Pro forma for the refinancing


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Financing Overview30


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Refinancing of September 2010Maturities Completed with this

Transaction Successfully amended existing credit facility to permit the refinancing of Rite Aids existing 2010

maturities

Completed refinancing of the $1,750 million Revolver and $145 million Tranche 1 Term Loan dueSeptember 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 2010maturities

$175 million Revolver Add-on

$125 million Tranche 4 Term Loan Add-on

$270 million 2nd Lien Senior Secured Notes

Benefits of this refinancing include:

Lower interest costs

Eliminate borrowing base deficiencies

Extend maturities

31


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Refinancing Improves Debt

Maturity Profile

32

Pro Forma for Refinancing($ in millions)

Tranche 4 TermLoan Add-on =

$125

New 2nd

Lien Notes =$270

(1)

Revolver Add-on =$175

Note: Calendar years and face amounts are reflected in graphs.(1) $1,175 million Revolver matures in September 2012. Pro forma for the refinancing, $37 million outstanding as of 8/29/09.

$1,175

$1,439

$650

$410$470

$270

$500$423

$1,068

$191

$11

$810

$0

$400

$800

$1,200

$1,600

2009 2010 2011 2012 2013 2014 2015 2016 2017 Thereafter

1st Lien 2nd Lien Unsecured


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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


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December 3, 2009

Bank of America Merrill Lynch

Credit Conference

RAD RiteAid December 2009 Presentation

Documents

Transcript of RAD RiteAid December 2009 Presentation