Douglas E. Donley – Chief Accounting Officer & Senior Vice President Mary F. Sammons – Chairman of the Board, President & Chief Executive Officer John T. Standley – President & Chief Operating Officer Frank G. Vitrano – Chief Administrative Officer & Chief Financial Officer Chris [All] – Unidentified Executive

Meredith Adler – Barclays Capital Edward Kelly – Credit Suisse Analyst for Lisa Gill – J.P. Morgan Mark Wiltamuth – Morgan Stanley John Heinbockel – Goldman Sachs Robert Willoughby – Bank of America Securities Tom O’Neill – Barclays High Yield Carla Casella – J.P. Morgan Reed Kim – Merrill Lynch Bryan Hunt – Wachovia Securities LLC

Welcome to Rite Aid’s second quarter results conference call. (Operator Instructions) Now, I would like to turn the call over to Doug Donley, Chief Accounting Officer for Rite Aid. . Douglas E. Donley: On the call with me are Mary Sammons our Chairman and CEO, John Standley our new President and Chief Operating Officer and Frank Vitrano our new Chief Administrative Officer and Chief Financial Officer. On today’s call Mary will give an overview of our second quarter results and I will discuss the key financial highlights and then we will take questions. Before we start, I would like to remind you that today’s conference call includes certain forward-looking statements. These forward-looking statements are made in the context of certain risks and uncertainties that could cause actual results to differ. Also, we will be using non-GAAP financial measure. The risks, uncertainties and definition of the non-GAAP financial measure along with the reconciliation to the related GAAP measure are described in our press release. I would also encourage you to reference our SEC filings for more detail. With these introductory remarks in mind, let’s get started. Mary F. Sammons: Today’s call will be slightly different from our usually format in light of the new management appointments that we also announced this morning. I’m pleased that John and Frank have been able to join us on the call today and I will talk more about them in just a few moments. First, I will give an overview of our second quarter results. As you can see it was a challenging quarter and a difficult operating environment but despite these challenges we continue to see results from many of our initiatives and the beginning of a clear turnaround in the sales in our acquired stores. We remain confident in the benefits of the Brooks Eckerd acquisition including our expanded presence in key markets and the integration and conversion activities are almost behind us. We are currently putting the finishing touches on the last 25 minor remodels which will take just a few more days. I have just come back from visiting former Brooks Eckerd stores in several markets and couldn’t be more pleased with the results. The stores were clean and inviting and the décor upgrades look great. But, most important, our pharmacy and front end associates were excited about their future prospects. With the integration behind us we can now focus all of our energies on growing profitable sales. We delivered positive cash flow from operations this quarter marking solid improvement from the first quarter of this year. We strengthened our liquidity position by completing a $700 million refinancing and increasing the number of sale lease back transactions this quarter too. As a result, we have the financial flexibility we need to support our business plans while managing our debt. At the same time we’ve developed a plan to improve cash flows by further cutting SG&A expense in the second half of our fiscal year. In this increasingly challenging economic environment, it’s a given that we must manage our business responsibly while continuing to deliver the level of service our customers expect. We also expect to begin paying down debt at the end of fiscal 2009 using free cash flow to reduce the outstanding balance on our revolver. But, even with this additional cost cutting, you’ll see that we’ve lowered guidance because of current pharmacy sales trends and the weak forecasts that we’re hearing from most economist for the second half of the year. Doug will talk more about our revised guidance later on the call. Now, let me get in to more details about the quarter. We saw solid sales performance in our core stores in both front end where same stores sales grew 3.6% and pharmacy even as pharmacy growth continued to slow. In fact IMS Health’s latest forecast is now for only a 1% to 2% growth in both prescription sales and volume for the year across the industry. Our initiatives are helping us grow our scripts in spite of the industry slowdown. And, on the front end, we kept a much better balance between markdowns and margins than we did last quarter. Front end same store sales in our acquired stores decreased by 2.7% in the quarter but turned positive for the month of August while pharmacy narrowed the decline from the first quarter. We saw strong increases in these stores both from high margin private brand sales and generic dispensing and core drug store categories like OTC and vitamins had positive gains. I’m pleased to report that with only three days left in the month, we expect to support September sales that continue to show very positive sales trends in both the acquired and core stores and we continue to expect total same store sales in the acquired stores to turn positive in the third quarter. Looking more closely at pharmacy, same store sales were flat for the quarter reflecting a 2.8% increase in the core Rite Aid stores and a narrowing decline to 4.6% in the acquired stores. Pharmacy gross profit rate improved in large part due to the growth in generic dispensing although new generics added 264 negative basis points impact in pharmacy sales in the quarter. Our core stores hit a record generic dispense rate of 68.4% with the acquired stores catching up quickly at 66.6%. We have added to the acquired stores the education and marketing programs that continue to give Rite Aid the highest generic dispense rate in the industry. The Brooks Eckerd pharmacy same store sales are also showing progress from the first quarter and have continued to improve in September. Customer satisfaction improved in the pharmacy and all of our stores but especially in the acquired stores as our associates worked diligently to bring back customers. Customer complaints are also down across all stores. Combining core and acquired stores under one field management structure, which we did earlier this year, has really made a difference. We believe that moving pharmacy operations under our executive vice president of store operations Brian Fiala, which we did at the end of the second quarter, will also lead to more cohesive management and better performance in the stores. We continue to attract the very important senior segment in to our stores as our Living More Senior loyalty program grew to more than 3.8 million members. We’ve had a lot of requests from younger seniors to join the program so we’ve lowered enrollment age from 60 to 55 opening the door to many more patients who on average take more prescriptions than any other demographic. Our continued push on pharmacy acquisitions is delivering exceptional results and we’ve completed 25% more deals than at this time last year. Our retention rate remains high and we’ve been able to entice many of the pharmacy staff to move over to Rite Aid along with the prescription files. We’ve had such good results with our new Rite Aid Rx savings card in states like Michigan and California that next week we plan to launch it nationwide. The card which offers substantial savings on generic and brand prescriptions, over-the-counter medications and Rite Aid brand products is much broader than the $4 generic program and it doesn’t have a membership fee as some other cards do. We designed it to benefit patients with no or limited prescription insurance but it is available to anyone who enrolls. The card is driving new customers to Rite Aid with its 400 generics at only $8.99 for a 30 day supply and $15.99 for a 90 day supply as well as 20% off all other generic and brand prescriptions. Our Fill Up Fuel Up, a very successful transfer program that rewards patients with a chance to win a year’s worth of free gas continues to bring in new customers to Rite Aid. We’ve seen such great response to this kind of promotion that the national launch of our automated courtesy refill service where our pharmacies automatically fill a prescription before it runs out for patients who sign on includes a chance to win a hybrid car and $3,000 in gas gift cards. Response has been good even in just a few weeks. We expect that expanding our compliance programs, targeting marketing programs to win back customers and continued focus on health and wellness initiatives like our recently launched Caregiver program will also continue to improve our pharmacy results. Core drug store categories contributed to these positive trends as did vitamins, especially our GNC vitamin department. GNC continues to be a powerful differentiator for Rite Aid and we now have more than 1,700 of them including 386 being added to the acquired stores. Private brand sales were very strong in all of our stores as customers continued to search for value, reaching 14% of front end sales for the core stores and 12.1% for the acquired stores which was up significantly over the first quarter. The value of Rite Aid brands will be a continued focus of our marketing program in this tough economy. While we saw softer back to school sales like other retailers, our team did a good job of managing inventory to sales expectations. Photo continued to be difficult as we continued the transition from Kodak to our expanded state of the art photo offerings with Fuji Film which is taking a few months longer than we originally expected. On our last call I mentioned our increased focus on eCommerce initiatives to drive sales. One of these initiatives is the new Rite Aid online OTC store which we have announced we will launch later this year. While the site will be powered by DrugStore.com, it will be managed, marketed and branded by Rite Aid. Most importantly we will own this database and be able to market directly to these Internet customers, an important next step in our digital strategy. You may remember that up until now our Internet offering has been basically a link to DrugStore.com. We’ll give you more details on our new OTC store on the next call. As many of you know, managing expenses has been a critical priority for us this year and through our spend efficiency program we’ve realized significant savings on non-retail purchases across the change. But, the growing uncertainty in this economy and the growing reluctance of customers to spend their dollars dictate that we tighten our belts further. Let me give you some more details on our plan to improve cash flows through additional cost reductions. First, we are going to operate more efficiently. That includes improving labor scheduling in the stores. We had a good system before but now we have a better one. We’re going to make sure store hours match customer demand and shorten them where they don’t. We’re increasing efficiency in the distribution centers and reducing administrative costs that don’t impact the store level. Basically we are putting our day-to-day expenses in line with the sales we expect. Of course, we’ll keep a close eye on our customer satisfaction scores to make sure we’re still delivering a high level of service to our customers. Second, we are cutting capital expenditures by about $50 million. These cuts effect projects that would be nice to have but not necessary this year and we’re tightening budgets on projects in which we will invest. We continue to plan to open 85 new and relocated stores this fiscal year and continue to plan to remodel our stores that need it. Third, we will pursue additional sale and lease back transactions over the second half of the year. As you can see from our revised guidance, we now expect $200 million from sale and lease backs in fiscal 2009 compared to $150 million previously. With these cost reductions along with the improvement in operating results we expect for the second half of the year, we expect to start paying down debt by reducing drawings on our revolver at the end of this fiscal year. Now, I’ll turn it over to Doug to cover the financial highlights. Douglas E. Donley: I’ll talk now about the numbers in detail. Revenues for the second quarter were $6.50 billion compared to $6.57 billion last year, a 1.1% decrease. Same store sales increased .62% and were offset by the net reduction in store count of 58 stores. Total company front end same store sales increased 1.9%. Gross profit was $1.78 billion or 27.36% of revenues for this quarter versus $1.79 billion or 27.23% of revenues for last quarter. The current quarter included a non-cash LIPO charge of $15.1 million versus a $16 million charge in last year’s quarter. The 13 basis point improvement in gross margin rate was primarily the net result of a 70 basis point increase in pharmacy gross margin partially offset by a 53 basis point lower front end gross margin, a 20 basis point increase in product handling and distribution expense. Selling, general and administrative expenses for the quarter increased as a percent of revenues by 89 basis points compared to the prior year. The increase is primarily due to the following, a 51 basis point increase in wages and benefits, a 26 basis point increase in occupancy expense resulting from our new store programs and our recent sale and lease back transactions, a 26 basis point increase in depreciation and amortization due to the Brooks Eckerd acquisition, prescription file purchases and a new store program. The cost increases were partially offset by a 32 basis point reduction in integration expense. Adjusted EBITDA for the current year second quarter was $215.3 million or 3.3% of revenues, a decrease of $46.2 million from the prior year primarily due to the increase in our SG&A expenses. The schedule attached to our press release reconciles our net loss to our adjusted EBITDA. Store closing and impairment charges were $35.2 million higher than last year’s charge. This was due primarily to more stores sold or closed. Interest expense was $118.6 million for the quarter versus $123.2 million in last year’s quarter. The decrease was primarily due to a shift in the debt portfolio to more variable rate debt. That mix change resulted in a lower combined interest rate. This is partially offset by the increase in debt that funded the acquisition and refinancing. Cash interest expense was $112.9 million for this year’s second quarter versus $116.7 million last year and non-cash interest expense was $5.7 million this year versus a $6.6 million last year. Regarding income taxes, the current year’s second quarter had income expense. We did not recognize any income tax benefit for the pre-tax loss. In other words differed tax assets related to pre-tax loss were fully reserved with a valuation allowance. The prior year’s second quarter included income tax benefit because at that time we were recording differed tax assets without any valuation allowance. Net loss for the quarter was $222 million versus $70 million last year. Net cash provided by operations was $96.1 million this quarter versus cash used in operations of $139.6 million in last year’s second quarter. A couple of comments about liquidity, availability of the revolver increased to $549 million at quarter end compared to $530 million at the end of the first quarter. At the end of the second quarter we had utilized account receivable securitization agreements for $500 million. On September 16, 2008 we completed an amendment to the securitization agreements whereby the commercial paper vehicle entities renewed their commitment to fund the purchase of our pharmacy related receivables until January 15, 2009. The securitization agreements continue to be backed stopped by standalone bank commitments through September, 2010 that we can use for funding if commercial paper vehicle entities do not renew. As previously announced during the quarter we completed refinancing of three notes and thereby removed any restrictions that they had on the availability of the revolver. We have no significant required maturities in the foreseeable future. Our required maturities are currently less than $25 million for the next 24 months. In September, 2010 the revolver and the $145 million term loan mature. When the time comes we expect to be able to refinance them with some combination of revolver, term loan or secured notes. Now, let’s turn to guidance. We are estimating fiscal 2009 sales to be in the range of $26 billion to $26.5 billion. Same store sales guidance which includes the Brooks Eckerd stores starting June, 2008 is 1.5% to 3%. We are estimating fiscal 2009 adjusted EBITDA to be in a range of $950 million to $1.025 billion. Our fourth quarter is expected to be our strongest quarter. We are estimating our operating results for fiscal 2009 to be a net loss between $445 million to $535 million or a loss between $0.56 to $0.67 per diluted share. Attached to our press release is a table that reconciles our adjusted EBITDA guidance to our guidance for net loss. Capital expenditures before sale and lease back proceeds which includes the continuing new and relocated store program and integrated capital expenditures are estimated to be $550 million for fiscal 2009. We estimate sale and lease back proceeds to be $200 million. Now, let’s go back to Mary. Mary F. Sammons: As I mentioned at the beginning of the call we are also taking steps to strengthen our management team in order to drive profitable growth at Rite Aid. First, we are very pleased that John Standley is returning to Rite Aid as President and Chief Operating Officer. John assumes the role of President from me and the role of COO from Rob Easley who will be leaving the company to pursue other interests. Second, we are pleased that Frank Vitrano is joining the company as our new Chief Financial Officer and Chief Administrative Officer. Frank assumes the CFO role from Kevin Twomey and the CAO position from Pierre Legault, both of whom are leaving the company. We are combining the CFO and the CAO positions in order to help us further improve operational efficiency. I want to thank Rob, Kevin and Pierre for their dedicated service and contributions to the company and wish them well in the future. John and Frank will both report to me and bring Rite Aid an optimal blend of financial, operational and turnaround experience that our company needs at this juncture. John is a proven leader with a broad based financial background backed by hands on operational experience over a 23 year career in the retail grocery and pharmacy industry. He returns to us from Pathmark Stores, Inc., a $4 billion food and drug retailer with a strong pharmacy business. John engineered and led the successful turnaround and sale of Pathmark to A&P during his tenure as Chief Executive Officer and Board Director from August, 2005 through 2007. Many of you will remember John from his time at Rite Aid several years ago. He has intimate knowledge of our operations and earned broad respect throughout the company during the six years he spent as our Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer. He made significant contributions to Rite Aid, chief among which include he was a key member of the team that helped turn around our operating results earlier this decade. He also led the design of our financial controls and was intimately involved in the development of our current information systems, real estate strategy and compliance programs. He has worked closely with our banks, auditors and outside counsel. Finally, John has served for the past few months in an advisory capacity with the company and is therefore ready to hit the ground running. John would like to share a few brief words with you. John T. Standley: First of all I’d also like to welcome Frank Vitrano to Rite Aid. I’m very, very excited to have Frank join us here, he is a very talented retail executive and played a great role at Pathmark helping us be successful. So, Frank welcome aboard, great to have you here. Mary, I also want to thank you for this opportunity, I’m very, very excited to be here today and to join this great Rite Aid team. Rite Aid has a tremendous amount of opportunity in front of it. I’m very excited to get involved here and do what I can to help this company be great and move forward. We have lots of things to do. Mary is touching on a lot of great things here that we have to work on and I really see a lot of success for us in the future so it’s great to be here. Thank you Mary. Mary F. Sammons: I’m really glad to have you back. I want to say a few words about Frank too. I have not yet had an opportunity to work much time with Frank but he is a really accomplished executive with strong track record of over 35 years at Pathmark serving in a variety of positions. Most recently he was President, CFO and Treasurer reporting to John and was instrumental in the company’s rebound and sale to A&P. His experience across a number of operating and financial disciplines from implementing cost savings initiatives to engineering debt and credit facilities will serve Rite Aid as well as we move forward. John and Frank forged a strong partnership at Pathmark which will enable them to begin working quickly in partnership with me to deliver results for the company. This is the right time for these changes as Rite Aid focuses on delivering strong value for shareholders, suppliers and customers in a challenging business environment. With the integration of Brooks Eckerd behind us and same stores sales in the acquired stores continuing to trend upward, the key task before us is to drive profitable growth. With John and Frank we are bringing in seasoned executives who have proven they can work through challenging situations and achieve growth and value through a combination of operational excellence, commitment to a high level of service and effective cost management. It is even more important to do this now so we can best capitalize on the opportunities ahead for our business despite the difficult economic climate. Before opening up the call for questions, I want to emphasize several key points in closing. First, the integration of Brooks Eckerd is now complete enabling us to focus on growing profitable sales across all our stores. Second, sales trends in the acquired stores continue to move in the right direction and we expect positive same stores sales from these stores in the third quarter. Third, with the completion of the debt refinancing in the second quarter and our continued pursuit of sale and lease back transactions, we have the financial flexibility necessary to support our business plan. Fourth, we are taking prudent steps to operate even more efficiently as we navigate the challenging economic environment. Fifth, with expected continued improvement in our operating results and additional cost reductions we anticipate that we’ll be able to start paying down debt at the end of this fiscal year. And sixth, with this management team Rite Aid can build on the foundation we have in place to sharpen our focus on invigorating sales, reducing costs and strengthening our overall financial position. In summary, we believe that we have the right strategy, right initiatives and the right executive team in place to create sustainable, profitable growth and long term value for our shareholders. Now, we’ll be glad to answer your questions. Operator, we’re ready to take questions.

(Operator Instructions) Our first question comes from Meredith Adler – Barclays Capital. Meredith Adler – Barclays Capital: A couple of questions for you, maybe could we talk a little bit about working capital? There was improvement this quarter a bit but – well, I guess not for total working capital, there’s improvement in payable. Could you talk a little bit about what you’re doing to manage inventory and is there anything you can do with your payables which I think should have improved more this quarter. Mary F. Sammons: Meredith we have a pretty extensive overall working capital plan with a really high focus on inventory itself as really probably the key driver in what we need to do and it is store based as well as distribution center based and really we expect I think the majority of that improvement to show up through the third and fourth quarters. Last year we built a lot of inventory in the third quarter as we set up the categories in the acquired stores and then it took us a long time to work through the old inventory and so we have pretty aggressive numbers in the plan as we finish the year and one of the things that John already has zeroed in on is the fact that we believe there is probably significantly more working capital improvement even by year end than we had in our original plans and we’ll probably share more of that as we move through the next quarter. John T. Standley: I think it’s a really good point Meredith and a great opportunity for us and I think there are lots of things for us to work on to kind of get after it and I think we can make some improvements there. I think it’s a good source of liquidity for us as we go forward. Meredith Adler – Barclays Capital: Then I just have another question about slowing down your capital spending. Obviously, you haven’t given guidance for next year but it seems to me that one of the opportunities with this Brook Eckerd transaction was to do two for one relocations, to move two strip center stores in to one much better corner location. Does that remain a priority for whatever capital you do spend? Or, are you going to be cutting back almost completely on relocations? Mary F. Sammons: No, that’s absolutely a priority. In fact, relocations will continue to be a key focus for us. Where we will cut back is probably just on the number of what you call net new stores because we have so many relocation opportunities and remember we had just completed a refresh and remodel of about 1,800 stores and we also next year have allocated capital spend towards that refreshing of core stores in a lot of these same markets so that the whole market presents itself in the same way to customers. We were very prudent in how we really went back through our cap ex plan and making sure that it was again, more the nice to have things that we took out versus the need to have. John T. Standley: And I think for next year we’re going to continue to be really efficient with our capital. Mary F. Sammons: And you really have to in today’s environment until you see really a change in what’s going on out there. We need to get the benefit out of what we’ve been investing in and really keep on working on improvement of the stores that we have. Meredith Adler – Barclays Capital: I have on final question, what kind of comp do you need in the pharmacies at the acquired stores to be able to leverage the fixed costs? Because clearly, there’s a limit to how much you can cut labor in those pharmacies. Are you very far from being breakeven in the pharmacies? Mary F. Sammons: First, we’re very careful relative to labor in the pharmacies too to make sure we have the right level of pharmacist and technician help to really be able to take care of customers and support the script level. It’s important to remember that the acquired stores had high volume of scripts. In fact, that was one of the key positives that we really want to make sure that we protect on a go forward basis and grow because both Eckerd stores and Brooks stores actually did higher scripts per store than core Rite Aid stores. So, during systems conversions, no matter how well planned they are and how well executed you lose some customers during that transitions and our competitors were very active in going after those customers so we are marshalling all resources to get those customers back and get the script base to where it needs to be to then start growing from there. So, we’re really not doing anything that’s going to negative impact that pharmacy service.

Our next question comes from Edward Kelly – Credit Suisse. Edward Kelly – Credit Suisse: Mary, could you provide us a little bit of detail on what’s taking place in Eckerd in the pharmacy business? Why comps are still down there, maybe what some of the issues have been and when you expect them to stabilize? Mary F. Sammons: Again, Ed, I don’t know if you heard my comments to Meredith but I think our real focus is on getting customers back that we lost and if you go from quarter, to quarter, we’ve seen improvement each quarter but they’re still negative and they’re improving at a slower rate than we would have originally had expected. But, I think a lot of that is because you do lose a certain number of customers and then they’re loss until you’ve really got the strategies well executed to get them back and that’s where our focus is. We still believe that those pharmacy sales will take a little bit longer than the front end sales to get positive but as we move through the end of the year we would expect to be very close to that positive number. Edward Kelly – Credit Suisse: Has the issue there really been centered around the integration and the upgrading of the systems and is that why you basically are losing pharmacy customers? Mary F. Sammons: That would be the number one cause of it and the aggressive activities by our competitors to also get our customers. But, we are being equally aggressive, if not more so, in initiatives to get them back now and have a very well defined program around any of the declining script stores that really pulls in the operational initiatives that need to be in place, the marketing initiatives and then the follow up with those customers that we lost as well as the kind of programs I described to get new customers for the pharmacy business. Those are also fully deployed in all of our acquired stores too. John T. Standley: I think the great news here is the integration is done. Mary F. Sammons: Yeah, it is behind us. John T. Standley: Right, and so the pharmacists are largely digesting, have digested kind of what has happened here and I think from a service perspective things have improved a lot over the last several months and so we made a lot of progress operationally I think kind of getting things back in order and being where we want to be. And, as Mary said, we have some really good marketing programs out there attacking this thing so we have a plan in place to get there over the next couple of months, by the end of the third quarter. Edward Kelly – Credit Suisse: Could you discuss the opportunity to exit any underperforming markets or closing underperforming stores kind of similarly like you did in Las Vegas? Are there other opportunities out there like that? Mary F. Sammons: That’s part of our ongoing review so we always have a list of stores that we will be working on to either improve or if we don’t believe we can improve them than just as over the first half of the year we closed a fair number of stores there that just weren’t going to be able to pass the hurdle that they needed to and we’ll continue to keep evaluating them. And, I think I’ve talked a little bit about before that we have what you call some non-core markets there and a lot of them other than the Las Vegas market that we divested earlier this year, we really have positive EBITDA contributions overall on a market basis but we would still look at some that we are not investing in if the opportunity came up and it was right, but it’s a minimal number of markets. Edward Kelly – Credit Suisse: You had indicated that there’s opportunity in working capital and inventory [inaudible] the rest of the year but the third quarter is typically a seasonal build up. Will you be drawing down on your revolver in the third quarter? And, how much do you expect that to be? Mary F. Sammons: Well, we’ve built that in to our plans and obviously that was a big consideration for us on making sure that we had the financial flexibility. Remember we built inventory so high last year because not only did we have the seasonal build, we had the build for putting all the new planograms in the acquired stores and we had all of the old inventory from the acquired stores so even with a build in inventory we feel very comfortable with where we are at on our draw on our revolver and our liquidity that is available even at the lowest point of need. Edward Kelly – Credit Suisse: Just one last question, in your capital spending and sort of how we should think about the next couple of years because you’ve brought your cap ex down a bit from where you started, at least your plan this year, you’re increasing your sale lease backs so your net spend is really not much. My guess is that the opportunity for sale lease backs next year is not quite as much so potentially I guess we’re talking about an increases in net cap ex. But, what is the level of cap ex that we should really be thinking about in terms of your business and what you need to spend in order to accomplish your goals of turning the business around? Mary F. Sammons: Again, I think it’s going to be very important to us in this kind of operating and economic environment that we be prudent with our cap ex spend and disciplined in what we spend because we want to really be able to pay down debt and not have as much draw on the revolver so we’ll be balancing what we spend in cap ex against cash flow created by operations and it’s just so important to remember that we just finished investing significant dollars in remodeling about 1,800 stores, we’ve been opening new stores and relocating stores and we’re going to continue that program prudently. Edward Kelly – Credit Suisse: So your feeling is a lower level of spend next year will not hinder you from improving the profitability of those acquired stores is what you’re saying? Mary F. Sammons: No, absolutely. In fact, I think if anything it just focuses more of our resources against the number one priority we have which is increasing profitable sales, getting our script business where it needs to be and continuing to grow front end business or getting some of that productivity improvement that we know is out there.

Our next question comes from Analyst for Lisa Gill – J.P. Morgan. Analyst for Lisa Gill – J.P. Morgan: Just a couple more questions on the same store sales guidance. First of all how much of the lower same store sales guidance was related to the longer than expected turnaround of the Brooks Eckerd pharmacy sales versus the overall weakness in the economy? Then secondly can you give us a sense of the level of the conservatism you’ve included in that guidance within the overall same store sales guidance as to whether the bottom ends assumes a continuation of the current weak economic environment or if things get dramatically worse from here? Mary F. Sammons: We were, I think, very cautious in looking at the sales forecast and we want to make sure we don’t put a number out there that is high at this point to what we’re either seeing or hearing about and we don’t know what the holiday season will actually end up being but everything that you’re hearing out there and reading out there says to be careful so I think it’s prudent to take it down. The probably single biggest thing that is always built in there is probably a little bit longer time it’s going to take to get the pharmacy script business to where we want it to be or need it to be for the acquired stores. Analyst for Lisa Gill – J.P. Morgan: Then just another follow up, can you give us a sense of your expectations around gross profit given the commentary that you provided about the heavily promotional environment? Are you expecting to see continued increases in that going forward? Mary F. Sammons: I think we’ve got a strong focus on continuing to grow private brands, keep increasing generic penetration in pharmacy. We still have much more opportunity in the acquired stores and that will help us relative to offsetting some of that pressure relative to just the promotional environment and we’ve really worked hard on the plans with our suppliers for being able to put more value items out there for our customers in terms of the front end. If you look at some of the programs that I talked about on pharmacy, a lot of those are to create additional volume in the pharmacy, grow the scripts per store per week and to get incremental business that would offset any gross profit erosion that might be there. So, we feel overall pretty good about our ability to hold the gross margins.

Our next question comes from Mark Wiltamuth – Morgan Stanley. Mark Wiltamuth – Morgan Stanley: I wanted to ask a little bit about the Wal-Mart $4 generic drugs. When this program first came out I think most of us thought this would not be a big impact on the drug store industry because it was targeted more to cash paying customers and your business is more focused on insured customers. But now that we’ve seen it spread out more to grocery stores as well, I’m curious if you think that this is having an impact on the overall script trend for the industry and just how are you countering that with your prescription savings card? Mary F. Sammons: I think as we saw this proliferation of this discount program, I think as that grew I think it did start impacting overall choices of where customers were getting their prescriptions and you saw one of our competitors introduce a program of theirs that was also set to go after the same particular customer. So, we really started with a pilot in Michigan with our own Rx savings card and what we found was the results of that pilot were very encouraging because of the incremental script growth that we saw really helped relative to the impact on margins. So, we rolled it out to a couple more areas, a couple in the south and Carolinas and then over to California and continued to monitor results and based on the results have made the decision to roll it out everywhere. I think it’s just as the economy has worsened and people are paying more attention to where they spend their dollar having some kind of response to this was important to have and I believe we have a good response and our card is free for those who enroll where others can have a charge and we have attached more value to it by giving some broader based discounts on generics that aren’t included on the program. Mark Wiltamuth – Morgan Stanley: You’d mentioned in some of your earlier comments that you only have, I think it was $25 million in financing you need to do over the next 24 months. Give us the picture of what it looks like beyond that and what your plans are to address financing beyond the 24 month window? Mary F. Sammons: Well, we haven’t spent a lot of time on that, that far out on the refinancing. I think really our effort was on what we needed to do to pass a year where we took care of earlier in the second quarter of completing the refinancing to remove those indenture restrictions. Really the major things that we have to work on over the next 18 months or so is the revolver. John T. Standley: I’m looking at the capital structure and there’s just not a lot that comes up in the next period of time, not until 2013. So, again in the near term there’s just not a lot of refinancing to be done other than what Mary talked about and what Doug talked about.

Our next question comes from John Heinbockel – Goldman Sachs. John Heinbockel – Goldman Sachs: A couple of issues I wanted to drill down on, one is the consumer and the promotional intensity you mentioned. As you look at that intensity, September, August, July, kind of yourselves and across the industry, what’s the trend been? Has it picked up, moderated? And then do you find the customer cherry picking you more because that’s one of the things we’ve heard. Mary F. Sammons: John, I think we have a better balance in our ads. If you take a look at them from say the first order and that we’re using items in categories strategically to get a better balance and still get that customer in but not totally give away margin on that whole ad. We’ve worked with what we’re merchandising in the stores on ends to create more value for the customers when they’re in the stores. So, we actually saw I think improvement there with what we did in Q2. We’ll keep on that and try to keep some balance there and know that we have to do the right things to drive sales. John T. Standley: I think the markdown trend is good actually from the first quarter to second quarter. John Heinbockel – Goldman Sachs: And within the second quarter did it get better? John T. Standley: In terms of I’d say sales momentum and results, yes. John Heinbockel – Goldman Sachs: How about the markdown trend? John T. Standley: The markdown trend was very good across the quarter I’d say. John Heinbockel – Goldman Sachs: There wasn’t much trend beginning to end kind of stayed pretty stable? Mary F. Sammons: In fact, I think that’s our initiatives to really do that balance relative to how we were using promotion to drive sales and if we saw improvement as the quarter progressed and continued to see it in September and I mentioned that our September sales trend, we’re almost through the month have continued to show that same kind of improvements so we feel good about what we’re doing here. John Heinbockel – Goldman Sachs: Can you see any change in the consumer, whether it was July, August, September, particularly as the kind of economic outlook has darkened a bit here have you seen anything or not really your consumer has not changed their behavior? Mary F. Sammons: Based on the sales results that we’re seeing for the front end, I would say we’re doing a good job of offering value and getting the customer in. John Heinbockel – Goldman Sachs: Now, if you look at the back half of the year, the EBTIDA trends would have to improve to get you to sort of the midpoint of your guidance, what’s the biggest swing factor the improvement first half to second? Is it mostly the expense line or do you think margins look better as well? Mary F. Sammons: Well, we have absolutely a big focus on expense and driving really all costs out that we can during that time period but doing it prudently. We also are going to continue, I think, working strongly on getting the sales that are there for us to get and as we see continued improvement in the acquired stores sales trend which is going to keep strengthening from front end and keep improving to finally get in positive territory on the scripts in those acquired stores, that’s a big part of where we see the growth coming from. John T. Standley: That’s really important John, I think that improvement a little bit in the leverage situation on the costs as these results turnaround is really important as we look at the second half of the year. John Heinbockel – Goldman Sachs: So on the Eckerd side you think any positive comp would improve margin there, is that fair? John T. Standley: It would help EBITDA margin, absolutely. Mary F. Sammons: Absolutely. John Heinbockel – Goldman Sachs: Then finally, John what are going to spend most of your time on say the next three or four months? Give me one or two priorities given where the business is today? John T. Standley: I think this thing for us John is really going to happen in 5,000 stores. I’m really excited to just have the opportunity to really dig in with Brian Fiala and Brian [Shirkwood] and John [Larish] and all these guys to really dive in to the day-to-day business to see what we really can do to connect with the consumer and to operate our business more efficiently. I think there’s just lots and lots of good stuff to work on and there’s some good stuff underway here that’s going on right now that helps the third quarter a little bit but really helps the fourth quarter so I’m excited to get involved with that stuff and see what we can do to push it along and bring it to fruition. John Heinbockel – Goldman Sachs: How does the macro environment which you probably hadn’t planned for it to be this tough, and how has that kind of changed what you’re prioritizing the next couple of quarters? John T. Standley: Well you can see John what we’re trying to do is be a little bit more conservative with the sales and that really helps you address that situation because if we had gone with too aggressive of a sales plan then we tend to over spend on the expenses so we’re really trying to tighten our revenue estimates in to a much tighter range of where we think we’re going to be and then really use that to help us be more efficient on the cost side of the business. Mary and the whole gang have really started to do that over the last several weeks that I’ve been here and have really got some good initiatives underway and they start to hit again a little bit in the third quarter and then we really kind of get moving in the fourth quarter. I would say what’s changing about us is we realize the revenue base kind of is where it is at this point, it’s going to improve a little bit as we go through the rest of the year but we’ve got to make our cost structure work inside that revenue base and that’s how we’re going to get there.

Our next question comes from Robert Willoughby – Bank of America Securities. Robert Willoughby – Bank of America Securities: You mentioned distribution center savings somewhere in the prepared remarks. Does that entail any fundamental change in your working relationships with your primary wholesale drug distributor or is this just kind of moving some shelves around at the various facilities you do have? John T. Standley: It does not involve [Mchefson]. I mean really the distribution costs on pharmaceuticals are really the smallest part of the distribution equation, it’s really about front end merchandise. We added facilities as we went through the Eckerd transaction so we’re really trying to use our facilities as efficiently as we can to make sure we’re putting the right products through those facilities and looking at how we’re moving products between the warehouses and the stores. These are really big opportunities for us to really focus on. We really tried to over deliver as we went through the integration, it was really important to provide as much support to the stores that we could as we went through that process but now we’re at the point where we really get the opportunity to see how we can make the value out of all the volume we added in the integration and we’re really excited about that. I think the DC side of this thing is a great opportunity. We’ve got a good guy there with Wilson Lester and we’re going to really get focused on this over the next couple of quarters and make some progress. Robert Willoughby – Bank of America Securities: Just my other question, it looks like the D&A guidance you’ve broken out in the press release is below the trajectory that you’re currently on but can you point to what causes that D&A number to drop off in the second half of the year? Douglas E. Donley: It’s mostly the weighted script files amortized because the amortized script files not only a 10 year basis but we also amortize them on an accelerated method so as you basically front end that amortization. John T. Standley: So they amortize quickly at first and then you have a bubble of script files that appear to be coming fully amortized as we move in to the second half of the year. Douglas E. Donley: That and just with cap ex we’ve done over the last couple of years, some of the computer equipment and those lower amortization items will also be rolling out as well. Robert Willoughby – Bank of America Securities: So a sequentially flat number then is the wrong assumption, we need to tweak that down a bit? Douglas E. Donley: That is correct.

Our next question comes from Tom O’Neill – Barclays High Yield. Tom O’Neill – Barclays High Yield: Having shopped your stores regularly there’s no question you offer great value proposition to consumers in the front end. Given the weaker economy with consumers looking for more value, what are you doing differently to get your message out there? Are you considering changing the mix between your circulars and other forms of advertising? And, if you can distinguish between the legacy Brook Eckerd stores and the Rite Aid stores that would be helpful. Mary F. Sammons: We still put most of our effort in to our circular in terms of getting our message to customers and then how our stores actually merchandise when you come in. I think that applies equally to our acquired stores as it does to the core stores. We have a huge opportunity in the future to be able to get a lot more sales out of the front end in the acquired stores because one of the benefits we saw from the acquisition is that we had a 35% productivity improvement opportunity in those stores compared to the core stores in the same market. With what we loss in sales last year, we’ve got to recover those, which we’ve done and are showing nice improvement then we can start growing towards closing that gap with our core stores. So, just big opportunity. We’re also doing some things really with data mining and understanding our customer segmentation and best customers and market basket analysis to really help us in the future to be able to with more precision target customers and what they need. As we get in to this next year we’ll probably have more to share on what we’re doing there too because it’s a key strategy for us. Tom O’Neill – Barclays High Yield: Just one other questions, you mentioned the proceeds from sale lease back transactions will now be approximately $200 million for this year. Can you give us a ballpark figure on your capacity to do sale lease back transactions in future years? How much sort of unused capacity do you have there? Then also, given the current real estate market what changes, if any, are you seeing in terms of the economics related to these sale lease back transactions? John T. Standley: I think I missed the end of the question but I’ll hit the first part and then maybe you can ask the second part again. In terms of our ability to do sale leases backs, as it relates to new stores, relocated store activity we can pretty much do everything that comes up there. So, as long as we reinvest those proceeds in the business we pretty much have the flexibility we need there with no limitations. Chris is telling me we have a limitation in the indenture, is that right? Chris [All]: There’s $150 million basket under the current indentures. That’s of historically owned properties. John T. Standley: Right. Tom O’Neill – Barclays High Yield: Then the second part of my question was given the real estate market right now, have the economics changed related to each sale lease back transaction? Mary F. Sammons: I’d say economic have changed. But again, they’re still very doable and Chris [All] who sort of led our effort here has been very successful in what we set out to do here and we continue to work on them just as John said. John T. Standley: I think real estate is getting cheaper and financing is getting more expensive. That’s kind of the blend of these economics in a sales lease back event.

Our next question comes from the line of Carla Casella – J.P. Morgan. Carla Casella – J.P. Morgan: You mentioned that the acquired stores you expect to be positive in terms of same stores sales this quarter. Would you say we should see that progressing throughout the quarter or are you already starting to see them comping positive? Mary F. Sammons: We expect them to be positive really closer to the end of the quarter in total same store sales. Again, due to the little bit longer time it’s going to take to get the prescription business where it needs to be. The front end is doing great relative to what our expectation is but we need a little bit more time on the pharmacy so towards the end of the third quarter. Carla Casella – J.P. Morgan: Some of the pharmacy [inaudible] in the stores, is part of that related to are they having a greater impact to the generic than Rite Aid because they were pushing fewer generics in the past. Mary F. Sammons: I don’t think it’s that. I really think it’s what we talked about earlier that you lost a certain group of customers during the systems conversion and through competitor activities and now that things are stabilized in the integration and all those activities are behind us we really have full court press on getting those lost customers back and getting new customers. Carla Casella – J.P. Morgan: You had mentioned they were doing higher scripts per store than Rite Aid pre acquisition. Does that actually fall below Rite Aid during the transition? Mary F. Sammons: No. Carla Casella – J.P. Morgan: Then last question, on the cost savings going forward, have you begun any further negotiations with or do you think you have opportunities to negotiate with vendors for better volume pricing? John T. Standley: I think a lot of that was done back at the integration so I think as it relates to the acquired stores that’s a lot of that value we got earlier on I think in the process. I mean, we’re always working as hard as we can everyday to get the best value we can from our vendor partners but I don’t see any dramatic change or dynamic shift going on in terms of that today.

Our next question comes from Reed Kim – Merrill Lynch. Reed Kim – Merrill Lynch: I just had a quick question going back to the liquidity earlier. If you look in the second half of the year, could you tell us approximately what you think your minimum net availability will be in the course there? John T. Standley: I don’t think – I’m just trying to figure out if we’ve traditionally done that in the past. It doesn’t sound like we have. I guess what we would tell you is we’re very comfortable with where we are from a liquidity position given where everything sits today. As Mary mentioned earlier, we’re building substantially less inventory this year for the holiday than we did last year which is a tremendous help so we think we’re in pretty good shape. Reed Kim – Merrill Lynch: Then my other question was just on comps, I was curious giving the store [pours] that you’ve been doing and maybe the inflation in some of the front end merchandise, how much that boost comps? Potentially [pours] might comp at, I don’t know 50%, I would give a guess and I was just wondering if you could comment on that and help us understand that part of the guidance. John T. Standley: I’ll make a quick comment and then I’ll kick it to Mary. In terms of the [poured] stores they comp’d tremendously but unfortunately it’s just not enough when you have 5,000 stores to make a huge dent in the comps. So, while it’s certainly helpful in a boarder sense when you average everything together, it’s not a significant driver in what we see going on with the comps today. On an inflation side, obviously we do some work for LIPO provisions and other purposes and we see a little bit of inflation in our numbers but we see the benefit of improved baskets and what not really out weighing any impact of inflation. Mary F. Sammons: That really does answer it Bob. Both those are, I think, appropriate. Operator we’ll take one more question.

Your final question comes from Bryan Hunt – Wachovia Securities LLC. Bryan Hunt – Wachovia Securities LLC: My first question is on your distribution center expense targets. It seems like now that your systems are in place and all the integration or at least the integration has been completed, there’s a real opportunity to close some distribution centers. One, can you talk about the opportunity to consolidated? Two, what type of working capital that could pull out of the system? And then three, what is your cost savings target when that transpires? Then, I’ve got a follow up. John T. Standley: Do you want to give me a hint on the follow up or should I just dive in? Bryan Hunt – Wachovia Securities LLC: Just dive in, I don’t want to give you too much at one time. John T. Standley: In terms of the distribution network, I think we need to evaluate that carefully. Obviously we have a fair number of DCs in the system so to the extent that there was some consolidation ability, that would provide some savings but I don’t think we’re in a position right now to say we’re quite far enough along in the evaluation of that to announce that we’re going to close distribution centers or anything like that today. In terms of working capital, I think there is, as we said to Meredith and others, I think working capital is a huge opportunity for us. I don’t want to give exact guidance on it or something but I think it is hundreds of millions of dollars that we can work on here in terms of working capital and it directly relates to distribution center expenses. Obviously, some of the challenges we have is we do have some satellite facilities out there and other kinds of situations we’re working through after the integration and so to the extend we can become a little bit more efficient with inventory and turn it a little bit better, that effectively frees up square footage in distribution centers which reduces handling costs which obviously reduces expenses. So, we have a good opportunity to become a little bit more efficient through the – I guess I’d say through the ordering and merchandising and the warehouse process to really drive some efficiencies in those facilities. And, it really takes all of us through the whole inventory process working together to kind of get at those dollars. But, I think there is some real value there. I don’t know if I answered your question or not? Bryan Hunt – Wachovia Securities LLC: You definitely beat around the bush. John T. Standley: What did I not answer? Do you want me to tell you we’re going to close five distribution centers or something, I can’t do that today. I’m not there yet. Bryan Hunt – Wachovia Securities LLC: But that’s definitely on the table it sounds like? John T. Standley: It’s definitely on the table, we’re looking at it. Mary F. Sammons: But, the first priority is really where we’ve had to use excess space because of the say inventory issues last year and just not being as efficient bringing that use down and then address the issue of the number of facilities. John T. Standley: Right. That’s the key. Like any of these things you want to get to value as quick as you can that’s there but you also have to be careful not to impact the service to our customers and destabilize the situation. So, you go for the low hanging fruit first which is what we’re doing and there are things we can do without closing a single distribution center that will bring significant value here and as we work our way through that then we start to noodle through some of these other issues once we see what the potential is. Bryan Hunt – Wachovia Securities LLC: Then my follow up and this question has been posed before but the environment has definitely changed. The multiples that are being tossed around for your California competitor are fairly high and there’s a battle for Longs and there’s going to be a winner and there’s going to be a loser, obviously in this situation. Do the multiples that are begin tossed around and having a potential loser out there in this equation that once more stores in the west coast market cause you to reevaluate being in the west coast given your strength on the east coast? Mary F. Sammons: Our policy has always been not to really comment a lot on this subject. You always look at that question that comes up but we have very profitable business out on the west coast, it’s continued to grow and it’s even grown in a difficult economic environment out there and we’ve made a lot of investment in it over the years. There are some probably unique characteristics of the whole Longs transaction out there and how they’re valuation was determined at a PBM and a lot of owned real estate so you’ve got to think about that when you think about the multiple possibility. Thank you everyone for your interest. We may be a little slower on answering calls the rest of the day but we will certainly keep a record of anybody who calls and get back to you as quickly as we can with a response either Frank, or John or myself or Doug. So, please call us if we didn’t get to your question and you’ll hear from us. Thank you again.

This concludes Rite Aid’s second quarter results conference call.