Safe Harbor Statement

Transcription

1 September, 2013

2 Safe Harbor Statement You 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. 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 10-K filed with the SEC on April 23, This presentation contains forward-looking statements, 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, including the impact of continued high unemployment and changing consumer behavior, 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 maintain or grow prescription count and realize front end same store sales growth; our ability to hire and retain qualified personnel; the efforts of private and public third-party payors to reduce prescription drug reimbursements and encourage mail order and limit access to payor networks; 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 and our investment in working capital; continued consolidation of the drugstore and pharmacy benefit management industries; changes in state or federal legislation or regulations and the continued impact from the ongoing implementation of the Patient Protection and Affordable Care Act and the outcome of lawsuits and governmental investigations. Consequently, all of the forward-looking statements made in this presentation 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. 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

3 Leading National Drugstore Chain OVERVIEW STRONG NATIONAL FOOTPRINT Leading national drug chain with 4,604 stores as of August 31, 2013 Approximately $25.2 billion in pharmacy and front end revenues and $1.332 billion in Adjusted EBITDA for the LTM ended August 31, 2013 Fill approx. 297 million scripts per year 25.5% of the U.S. population visits our stores at least once a year LEADING POSITION IN EASTERN U.S. MSAs (1) D.C % 28% #1 Share #2 Share 21% 28% #3 Share Other Rite Aid States No. of Rite Aid stores Rite Aid Distribution Centers 3 Source: Metro Market Data (1) Excludes Florida. Note: As of 8/31/2013

4 Recent Accomplishments Key Goals: What We Accomplished: REINVIGORATE TOP-LINE GROWTH STRENGTHEN CUSTOMER LOYALTY Strong Fiscal 2013 results in same store front end sales (1.4%) and comparable store script count growth (3.0%) Administered over 2.3 million flu shots in Fiscal 2013, exceeding goal of 2 million High retention of ESI business Over 25 million active wellness+ members Rolled out wellness 65+ in June of 2013 almost 1 million seniors enrolled INVEST IN STORES Completed 1,019 wellness remodels as of August 31, 2013 Recent FE trends in wellness stores exceeding the chain s average by over 340 bps and script trends are improving Introduced Genuine Wellbeing format enhancements CONTROL COSTS GROW EBITDA Significantly reduced SG&A expenses since start of FY10 Provides strong foundation for future sales leverage Eleven consecutive quarters of year-over-year EBITDA growth Achieved net income for four consecutive quarters PROACTIVELY MANAGE DEBT MATURITIES Recent refinancings extend maturities and reduce interest expense Credit facility maturity extended to 2018 Limited bond maturities until 2019 Cash interest expense reduced by approximately $85 million per year 4

5 EBITDA Turnaround $ in millions $1,250 $1,322 $1,200 $1,150 $1,100 $1,128 $1,050 $1,000 $950 $991 $925 $943 $900 $850 $800 $ LTM Ended Aug. 31,

6 Return to Profitability Net Income/Loss in Millions FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Q1 $118.1 $89.7 Q2 $32.8 -$ $ $

7 Q2 Fiscal 2014 Financial Highlights REVENUES & SAME STORE SALES Fiscal Results: Revenue: $6.3 billion Same Store Sales: - Total:1.0% - Pharmacy: 1.7% - Front end: (0.3)% - Scripts: 0.0% Commentary: Pharmacy sales impacted 249 bps by new generic penetration Same store prescriptions flat due to the cycling of the ESI benefit in prior years. Front-end trends impacted by a cautious consumer and softness in seasonal categories ADJUSTED EBITDA $342 million 5.4% margin Pharmacy and front end margin and good expense control drove the improvement Pharmacy margin improved due to the benefit of new generics NET INCOME $33 million Fourth consecutive quarter of net income Improvement in EBITDA and reductions in interest expense offset by loss on debt retirement LIQUIDITY $1.029 billion Revolver availability and invested cash Benefits from EBITDA improvements Recent refinancings extended maturities to 2018 and reduced annual cash interest expense by $85 million 7

8 Comparable Store Sales Growth FY 2011 FY 2012 FY 2013 FY 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Front End Sales 0.0% 1.0% 0.0% 2.5% 0.0% 1.6% 2.7% 1.4% 1.1% 0.3% 0.4% Rx Sales -1.3% -0.9% 0.8% 1.1% 2.0% 2.9% 3.8% 2.4% -0.3% 1.7% -0.9% -1.8% -1.9% -0.7% -2.7% -3.1% -3.8% Script Count 0.8% 0.4% 0.1% 0.5% 2.4% 3.0% 4.0% 3.6% 3.0% 0.0% -1.7% -2.1% -1.7% -0.1%

9 Gross Profit Improvement/Decline (1) $150 $100 $50 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 $33.8 (2) $69.9 $56.8 $47.9 $106.2 $103.8 (2) $56.3 $116.6 $0 ($50) ($100) ($150) ($10.7) ($5.0) ($29.4) ($45.8) ($54.3) ($83.7) ($93.9) ($100.9) $0.5 ADJ. EBITDA (3) 9 (1) Calculated as the change in Adjusted EBITDA Gross Margin compared to the corresponding prior year quarter. (2) Presented on a 13 week basis. (3) Shows change in Adjusted EBITDA compared to the corresponding prior year quarter.

10 SG&A Growth/Decline (1) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 $150 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 $100 (2) $50 $24.8 $28.8 $45.5 $13.5 $32.3 $20.1 (2) $0 ($50) ($100) ($35.5) ($54.8) ($78.3) ($90.5) $5.8 ($4.1) ($2.5) ($21.1)($18.0) ($14.3) ($6.3) ($150) ADJ. EBITDA (3) (1) Calculated as the change in Adjusted EBITDA SG&A compared to the corresponding prior year quarter. (2) Presented on a 13 week basis. (3) Shows change in Adjusted EBITDA compared to the corresponding prior year quarter. 10

11 Debt Maturity Profile ($ in millions) $3,500 $3,000 $2,500 $907 FIRST LIEN SECOND LIEN REVOLVER COMMITMENT UNSECURED $2,000 $470 $1,500 $1,000 $1,118 $650 $810 $500 $0 $1,161 $677 $500 $64 $270 $295 $ Note: Maturities reflect calendar year.

12 12 Fiscal 2014 Initiatives

13 wellness+ Benefits Earn Points every time you shop 1 Point: For every dollar spend on non-prescription purchases 25 Points: For every prescription filled The more you earn, the more rewards you ll receive Plus Tier: Members-only savings for circular items 250 Points Bronze Tier: 10% off all private label purchases every day and a onetime, 10% off shopping pass 500 Points Silver Tier: 10% off all non-prescription purchases every day and wellness rewards including free health screening, magazine subscriptions and GNC Gold card membership 1,000 Points Gold Tier: 20% off all non-prescription purchases every day Enjoy everyday benefits including 24/7 exclusive access to a pharmacist at RITE-AID or online chat Special member-only offers on store receipts, , and online Online account access and relationship dashboard $100 - $200 in +UP Rewards available each week Load2Card digital couponing 13

14 Loyalty Card Comparison RAD CVS WAG Weekly sales price for members Weekly TPR/Coupons + Ups Extra Bucks $ Points Script Rewards Loyalty Points Extra Bucks $ Points Loyalty Rewards Up to 20% 2% None 14

15 Wellness

16 Wellness 65+ Benefits Value Benefit NEW points on co-pays for government scripts Exclusive sale day (20% OFF the entire store the 1st Wednesday of every month) Bundling of Pharmacy & Clinical Services Targeted to Seniors Medication reviews, POC compliance, Medicare D plan reviews, blood pressure screenings and pharmacy services reviews Monthly themed health and wellness events aligned with wellness65+ Wednesdays Extensive Customer Engagement Top-market mobile event tour Increased community outreach activation of wellness ambassadors Advanced CRM segment and 1:1 marketing plans Almost 1 million Seniors enrolled since the start of the program 16

17 Expanding Our Healthcare Offering Immunization Services -Flu shot program -14 Diseases Expanding the role of the pharmacist - Medication therapy management and patient consultation - Focus on polychronic patients ACA Open Enrollment - Using in-store agents in almost 2,000 stores to educate customers about the Affordable Care Act. 17

18 Immunization Growth Flu Other 2,765, ,000 2,945, , ,900 77, ,000 1,664, ,000 1,458,000 2,350,000 2,500,000 FY2011 FY2012 FY2013 FY2014 Goal 18

19 Genuine Wellbeing Wellness Store Renovations Introduction of Genuine Wellbeing format Wellness Ambassador over 1,700 as of August 31, 2013 Front end sales results exceeded the chain average by over 330 bps in the quarter ended August 31, ,019 stores completed as of August 31, 2013 Approx. 1,200 stores to be completed by the end of Fiscal

20 Project Clean Slate Premise: wiping the slate clean and rebuilding our store processes to minimize store effort and maximize customer interaction Key front end process improvements - Best in class checkout experience - Optimized in-stock position at shelf - Efficient DC delivery, receiving and stocking - Organized and productive stockrooms - Technology store of the future Key pharmacy process improvements - Electronic capture and transmission of immunization services to physicians - MTM and immunization records now tracked in NexGen - Date of birth requirement in POS to sell prescription to the correct patient GOALS: Make stores easier to operate Improve associate satisfaction Improve customer service 20

21 Private Brand Trends 12.9% 14.1% 15.2% 16.0% 17.1% 18.3% 18.1% FY08 FY09 FY10 FY11 FY12 FY13 FY14 YTD 21

22 Improving the Customer Experience with Better Service GET is a chain-wide program to emphasize importance of customer service - Greet each customer - Engage each customer - Thank each customer 15 Minute Prescription Pledge - Prescriptions ready in a timely manner is one of the most important customer service attributes Earned top position in customer service among major drugstore chains in recent American Customer Satisfaction Index Survey 22

23 Fiscal 2012 Fiscal 2014 CapEx Comparison ($ in millions) FY 2012 FY 2013 FY % 10.9% 7.5% 24.0% 8.1% 17.5% 8.0% 7.8% 14.2% 11.5% 12.9% 2.0% 11.5% 16.2% 14.0% 30.0% 44.3% 45.8% $250 $383 $400 Store Growth Maintenance Remodels Rx Scripts Technology Other 23

24 Fiscal 2014 Guidance Recap Low GUIDANCE High Sales $25.1 billion $25.3 billion Comp % (0.50%) 0.50% Adjusted EBITDA $1,240 million $1,300 million Net Income $182 million $268 million Diluted Earnings per share $0.18 $0.27 Gross Capital Expenditures $400 million $400 million 24

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