Frank Vitrano - Senior Executive Vice President, CFO and Chief Administrative Officer Mary Sammons - Chairman and CEO John Standley - President and Chief Operating Officer

John Heinbockel - Goldman Sachs Meredith Adler – Barclays Capital Edward Kelly - Credit Suisse Mark Wiltamuth – Morgan Stanley Robert Willoughby - Banc of America Securities Carla Casella – JP Morgan Emily Shanks - Barclays Capital

(Operator Instructions) Welcome everyone to the Rite Aid Fourth Quarter Fiscal 2009 Conference Call. Mr. Vitrano you may begin your conference.

We welcome you to our fourth quarter and year end conference call. On the call with me are Mary Sammons, our Chairman and CEO, and John Standley, our President and Chief Operating Officer. As you’ve probably seen this morning we also released our March sales and shortly we will be announcing plans to close our Atlanta distribution center as part of our distribution center network consolidation program, so we have a lot to talk about today. Mary will give an overview of our fourth quarter and year end results and I will discuss the key financial highlights and guidance for fiscal 2010. John will then provide some more detail on the quarter as well as fiscal 2010 plan, as well as talk about our March sales. Mary will finish with comments on our overall outlook for the current fiscal year and then we’ll open it up for questions. As we mentioned in our release we are providing slides related to the material we will be discussing today on our website at www.RiteAid.com under the investor information tab for conference calls. We will not be referring to them directly in our remarks but hope you will find them helpful as they summarize some of the key points made on the call. Before we start I’d 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 uncertainty that can cause actual results to differ. Also, we will be using a non-GAAP financial measure. The definition of the non-GAAP financial measure, along with the reconciliation to the related GAAP measurements are described in our press release. I would also encourage you to reference our SEC filings for more details. With these remarks I’d now like to turn it over to Mary.

As Frank said, we have a lot of news today so let me begin with our fourth quarter and year end results. As you can see from our release, non-cash impairment charges and the write down of a deferred tax asset had a significant negative impact on our net loss. Excluding those non-cash charges we had a net loss of $0.14 in the fourth quarter and a net loss of $0.79 for the year. Adjusted EBITDA was $261.4 million for the quarter and $965.1 million for the year within our revised yearly guidance. We finished fiscal 2009 with solid progress on our initiatives to improve our financial position, especially in the fourth quarter. We reduced operating costs as a percent of sales and trimmed working capital through significant inventory reduction. By generating positive cash flow from operations and conserving capital by reducing capital expenditures we significantly improved our liquidity so that at the end of the quarter we had more than $700 million of availability on our revolving credit facility and also maintained access to our accounts receivable financing. With the completion of the Brooks Eckerd integration and the strengthening of our management team we have been able to significantly improve our business in the second half of the year. As we continue to look for every opportunity to improve efficiency in our company its important to note that many of the initiatives we have in place are not just to help us manage through the current economic storm. We are also changing the way we operate for the long term, so that when customer spending picks up again we will see the impact on the bottom line. We expect these initiatives to deliver greater benefits in fiscal 2010 as we focus on improving cash flows and reducing our debt. John will give you an update on where we are with these key initiatives and also talk about some of the programs we have to grow profitable sales. He and his team have done a terrific job of putting together a comprehensive plan that recognizes the need for us to give even more value to our customers as we create more value for ourselves. In this uncertain economy we are focused more than ever on meeting the needs of this value driven customer which is evident from the additions we’ve made to our private brand offerings and the rise in our generic dispense rate to almost 70%. Our Free RX Savings Card, which we launched nationally six months ago, has helped make prescriptions more affordable for more than 1.7 million patients. Before I turn it over to Frank to provide financial highlights I want to take a minute to address the non-cash charge we reported today for goodwill impairment. Accounting rules dictated that in the fourth quarter we impair all of our goodwill which is largely related to the Brooks Eckerd acquisition. While the impairment had a significant impact on our net loss it has no impact on our business operations, credit facilities, liquidity, or existing debt covenants. Just as importantly, it also has no impact on our continued belief in the long term benefit of the acquisition to our company. We have already seen significant cost savings synergies in areas like purchasing, advertising, and administration. As you can see from our release today on the closing of the Atlanta distribution center we will soon reap additional benefits from our planned warehouse consolidation. While the stores have not yet met original sales expectations their pharmacy trends continue to improve in the quarter and also in March. We have seen significant progress in generic dispense rate, private brand sales and shrink control. My recent roundtable with pharmacy managers and technicians in one of our newer markets impressed me with the dedication and commitment our newer associates are bringing to our company and the many good ideas they have for improving their business even more. Now I’ll turn it over to Frank for our financial highlights.

I would like to say that I remain as excited about the opportunity here at Rite Aid as when I joined back in September, maybe even a little more so. Although there are certain accounting adjustments which are impacting the quarterly numbers, I believe we have made solid progress both in reducing our SG&A and improving our working capital position. As John will discuss in more detail, these were the first two areas we identified back in September as significant opportunities in where we were going to attack first. As the results indicate, we made very good progress in lowering our SG&A and improving our liquidity. A third priority was the renewal of our AR securitization program. During the quarter we refinanced our accounts receivable securitization facility in what I think everyone would agree was a very difficult credit market. On the call this morning I plan to walk through our fourth quarter and full year financial results, provide an update on the capital expenditure program, discuss our liquidity position as well as provide some thoughts on our September 2010 credit facility refinancing. Finally I will discuss our fiscal 2010 guidance. This morning we reported revenues for the quarter of $6.7 billion compared to $6.8 billion for the fourth quarter last year. The decrease in total sales was primarily driven by a reduction in total store count. In the quarter we closed 19 stores and quarter over quarter we had 158 new fewer stores. The year over year reduction in store count reflects combining acquired stores in close proximity to other stores and stores closed due to underperformance, both of which improves earnings. Same store sales decreased 10 basis points reflecting the weak front end holiday season and soft sales in February due to lower cough, cold and flu business then the prior year. Front end same store sales were down 200 basis points and pharmacy sales were higher by 80 basis points during the quarter. Pharmacy sales included an approximate 301 basis point negative impact from new generic drugs and pharmacy script count decreased 90 basis points, negatively impacted by the Brooks Eckerd stores. Script growth in core Rite Aid continues to be positive. Excluding the acquired Brooks Eckerd stores, same store sales for the 13 week fourth quarter increased 80 basis points over the prior year with front end decreasing 1.9% and pharmacy growing by 2.4%. At the Brooks Eckerd stores, same store sales decreased 1.9% during the quarter while front end decreased 2.1% and pharmacy decreased 1.9%. Adjusted EBITDA came in at $261.4 million or 3.9% of revenues for the fourth quarter compared to last years fourth quarter of $276.3 million or 4.1%. The decline in sales and lower FIFO gross margin were partially offset by lower SG&A dollars. SG&A dollars adjusted for non-EBITDA expenses were $28.2 million lower and one basis point lower as a percent to sales. This improvement reflects the various cost saving initiatives which John will talk about including store labor management, field controllable expenses and indirect procurement savings. Net loss for the quarter was $2.3 billion or $2.67 per diluted share compared to last year’s fourth quarter net loss of $952.2 million or $1.20 per diluted share. The increase in net loss was driven by significant non-cash charges including a goodwill impairment charge of $1.8 billion or $2.10, a non-cash income tax charge of $280.7 million or $0.33 per share and a non-cash charge of $85.8 million or $0.10 per diluted share for store impairment. Last year’s fourth quarter included a non-cash charge of $894 million or $1.12 per share to record a valuation allowance against deferred tax assets. The goodwill charge of $1.8 billion was required under FAS142 which requires the company to test if an event occurs or circumstances change that would more likely then not, reduce the fair value of the company below its net asset carrying amount. We tested for goodwill impairment in the third quarter and concluded that it was not impaired as our market capitalization adjusted for control premium was higher then our net asset carrying balance. We disclosed in our third quarter 10-Q that we would likely have an impairment if our stock price did not improve over time. Based upon the fourth quarter share stock price, which was below our net asset carrying costs for the entire quarter, we concluded that goodwill was impaired. Under the accounting rules we are writing off the entire amount of goodwill on our books, including approximately $1.2 billion of goodwill added when we purchased Brooks Eckerd. The income tax expense of $289.4 million in the quarter relates to a write down of our remaining deferred tax assets through the establishment of an additional tax valuation allowance. In our circumstance the accounting rules do not permit us to assume future use of the $1.8 billion net deferred tax asset which includes our net operating loss carry forwards and accordingly require us to establish a full reserve. This charge does not impact our ability to use our NOLs it just precludes us from recording them on the books. The store impairment charge of $85.8 million relates primarily to the write down of store level assets to their net realizable value based upon a five year discounted cash flow analysis. There were 269 stores included in this write down. The three non-cash charges, the goodwill, the store impairment and tax asset write down totaled $2.2 billion or $2.53 per share. Additionally, the company experienced product cost increases which resulted in additional non-cash inventory valuation LIFO charge that’s compared to last year’s fourth quarter. The LIFO charge was $94.6 million or $0.11 per share this year as compared to a LIFO credit in last year’s fourth quarter of $25 million or $0.03 per share. Excluding the LIFO charge and the three other non-cash charges net loss would have been $22.3 million or $0.03 per share in the quarter. Interest expense was $114 million or $13 million lower then the prior year due to a drop in Libor rates where virtually no integration expenses in the quarter that’s compared to $37.7 million in last year’s quarter. The Brook Eckerd integration was completed in September. Gross margin dollars in the quarter were $165 million lower then last year’s fourth quarter or 1.97%. This includes the $94.6 million LIFO charge that’s compared to a LIFO credit last year. On a FIFO basis gross margin dollars decreased $44.8 million or 19 basis points. Three quarters of that decrease in dollars was driven by lower sales with the balance resulting from lower promotional funding on the front end due to lower purchases and lower RX reimbursement rates, partially offset by lower front end and RX shrink and $20 million in lower distribution center costs as well as higher generic penetration. Product handling and distribution center expenses as a percent of sales improved 29 basis points due to operational efficiency improvements. Selling, general and administrative expenses for the quarter were lower by $74.4 million or 65 basis points as a percent of sales as compared to last year. SG&A expense not reflected in adjusted EBITDA were lower by $46.2 million primarily driven by the $38 million in lower integration costs and an RX anti-trust settlement, partially offset by higher depreciation and amortization as well as severance costs related to work force reduction which occurred during the quarter. Adjusted EBITDA SG&A which excludes the previously mentioned items and is calculated in the earnings supplemental information slide on our website were lower by $28.2 million or one basis point as a percent to sales. This reduction in dollars reflects the aggressive cost saving initiatives that have been implemented over the past six months. The SG&A improvement was driven by better labor controls for about $37 million lower, we had lower advertising costs about $11 million, and lower field controllable costs including supplies and maintenance costs, partially offset by $10 million of higher union health and welfare contributions primarily due to a pension holiday last year, higher occupancy costs as a result of the sale lease back transaction that was completed earlier in the year which was about $4.2 million higher and then we incurred $4.1 million in higher accounts receivable securitization costs as a result of the new facility. These three items unfavorably impacted our year over year quarterly comparison by $18 million. On a sequential quarter over quarter basis we reduced our adjusted EBITDA SG&A from being 88 basis points unfavorable in the second quarter to 25 basis points unfavorable in the third quarter to a one basis point positive expense leverage in the fourth quarter. Overall we were very pleased with the progress made and expect continued improvements in the coming quarters. As I mentioned in my opening remarks, we made significant improvement in our working capital initiative that began six months ago. Total FIFO inventory was reduced by $244 million over the prior year’s fourth quarter with the lions share coming from front end inventory. During the quarter we had 158 fewer stores which accounted for a third of the reduction. A significant piece of the reduction was the result of our work. As you can see from the results on the cash flow statement for the quarter, net cash provided by operating activities was $324.8 million as compared to $309.4 million in last year’s fourth quarter. Inventory generated cash of $378 million as compared to $255 million last year. This is a direct result of the working capital initiative. Other assets and liabilities used cash of $177.3 million which include prepaid rent paid in February for March, an increase in incurred expenses of $53 million and payments for closed stores of about $26 million. Accounts payable was a use of cash of $88 million in the quarter. Our day’s payable outstanding in the quarter was 23 days, this compares to 25 days in the third quarter. The decline from the third quarter to the fourth quarter reflects the historical season shift. The inventory reduction initiative also influences our DPO as our purchases and payables were lower as we didn’t replace all the inventory that was sold. It should be noted that the company received one time extended payment terms for certain front end items in fiscal 2008 to facilitate resetting the Brooks Eckerd stores. This abnormally increased our DPOs during fiscal 2008. Our DPOs at the end of this year is in line with day’s payable outstanding in fiscal 2006 and fiscal 2007. Our vendor partners continue to be very supportive. Net cash used in investing activities for the quarter was $53.8 million versus $158 million last year. This reflects our proactive plan put in place six months ago to reduce capital expenditures. During our fourth quarter we opened six net new stores, relocated 10 stores, and closed 19 stores. Our cash capital expenditures were $64.4 million which includes $3.1 million spent on completing the integration related remodel, $5 million to acquire script files as compared to $12.1 million script files purchased last year. On a year to date basis we opened 33 net new stores, relocated 56, acquired nine, and closed 200 stores. Our cash capital expenditures were $541 million which include $135 million spent on integration related activities and $80 million to acquire script files. For the 52 week fiscal year ended February 28, 2009, Rite Aid had revenues of $26.3 billion as compared to revenues of $24.3 billion. Revenues increased 8.1% primarily driven by an additional quarter of sales for the acquired Brooks Eckerd stores. Same store sales for the year which include 39 weeks of the acquired stores increased 80 basis points over the prior 52 week comp period. This increase consisted of a 90 basis point front end same store sale increase and a 70 basis point increase in pharmacy same store sales. The number of prescriptions filled in same stores decreased 96 basis points, negatively impacted primarily by the acquired stores. Prescription revenues accounted for 67.2% of total sales and third party prescription revenues were 96.3% of pharmacy sales. Net loss for fiscal ’09 was $2.9 billion or $3.49 per diluted share compared to last year’s net loss of $1.1 billion or $1.54 per diluted share. Excluding significant non-cash charges net loss for the year was $640 million or $0.79 per diluted share. The significant non-cash charge include the non-cash charge related to goodwill of $1.8 billion, non-cash income tax charge of $307.7 million for recording the additional valuation allowance against deferred tax assets, and a non-cash charge of $157 million related to store impairment. These items account for $2.2 billion or $2.70 per diluted share of net loss. The LIFO charge was $185 million for the year or $0.22 per diluted share. Adjusted EBITDA of $965 million or 3.7% of revenues for the year compared to $962.8 million or 4% of revenues last year. Now let’s discuss liquidity which is an area that we’ve made significant progress. At the end of the fourth quarter we had $838 million of borrowings outstanding under our $1.75 billion senior secured credit facility, a reduction of $308 million of revolver borrowing from the third quarter. We had $188 million of outstanding letters of credit and $540 million drawn under our first and second lien accounts receivable securitization facilities. At the end of the fourth quarter we had $724 million of availability under our senior secured credit facility and today we have $762 million available under that facility. Given our $240 million inventory reduction target for fiscal 2010 and its resulting impact on our borrowing base calculation its possible our maximum availability will be impacted. Our liquidity position remains a top priority for the company and we plan in fiscal 2010 to reduce debt. During the fourth quarter the company successfully completed a $225 million AR second lien refinancing which further strengthened our liquidity position. Although we still have 18 months before our September 2010 credit facility renewal we are talking with our bank partners to explore refinancing options. Given the current credit market conditions its premature to predict the final outcome but we feel confident that through our various initiatives to reduce debt by improving working capital and our performance, coupled with a term loan or high yield offering, we will be able to fully satisfy our future liquidity requirements albeit at a higher rate which is not factored into our guidance. Turning to our fiscal ’10 guidance, we developed our plan based on our current sales trend and a weaker economy. The company expects total sales to be between $26.3 and $26.7 billion and expects adjusted EBITDA to be in a range of $1.025 and $1.125 billion for fiscal 2010. Same store sales expected to improve 50 basis points to 250 basis points over fiscal ’09. Net loss for fiscal 2010 is expected to be between $210 and $435 million or a loss per diluted share of $0.23 and $0.53. Our 2010 initiatives are not capital intensive and we have reduced our capital expenditure plan to $250 million. We plan to open 20 new stores and relocate 55 stores. We are not planning to complete any sale lease back transactions. We expect to be free cash flow positive for the year which will reduce our debt. The guidance does include a provision to close a total of 117 stores of which 67 stores will be closed in the first quarter as well as closure of our Atlanta, Georgia distribution center which we announced this morning. That completes my portion of the presentation and now I’d like to turn it over to John.

I know there’s a lot of noise in the fourth quarter results with the goodwill write off and other charges, but the operating performance is actually pretty good and shows significant improvement in the key areas that we said were our focus last quarter. As Frank mentioned, adjusted EBITDA for the quarter was $261.4 million versus $276.3 million last year. As Frank also mentioned, last year’s number includes a $10 million benefit from a union health and welfare contribution suspension and this year numbers absorbs $4.1 million of incremental accounts receivable securitization fees and $4.2 million of rent from a sale lease back of Brooks Eckerd stores that occurred in the first half of this year. Also remember that last year’s results included $38 million of acquisition related labor, advertising, and other expenses below EBITDA which have been completely eliminated this year. Helping us achieve our solid EBITDA performance in a difficult sales environment was the significant improvement in our SG&A expenses. In fact, our fourth quarter SG&A expenses declined from the prior year as a percent of sales and in dollars. On an EBITDA adjusted basis SG&A as a percent of sales was just slightly below last year compared to just two quarters ago when it was increasing year over year by almost 90 basis points as a percent of sales. Contributing to our dramatic improvement in SG&A was a truly outstanding performance in labor control by our operations team which is particularly impressive given that several of our key initiatives designed to improve store productivity won’t be rolled out until the second quarter of fiscal 2010. I should also mention that the labor improvement was in both front end and pharmacy and is the result of dramatic improvement in adherence to our labor standards and use of our labor scheduling tool. Another big contributor to our improved SG&A was a significant reduction in our advertising expense resulting from reduced page counts and a tighter distribution of ads around our stores. Part of the page count reduction was a reduced ad format that we tested in 566 stores during the quarter. Store supplies and other store expenses also improved in the quarter. In total, including the stores, administrative offices, and distribution centers, we have reduced headcount by about 6,500 people or 6% since August. Partially offsetting these and other improvements was an increase in union benefit costs in part due to a health and welfare holiday, as we mentioned earlier, that occurred in the prior year, a $4.1 million increase in accounts receivable securitization fees and rent in the current year from the sale lease back of the Brooks Eckerd stores that occurred in the first half of fiscal 2009. Also on the cost side but reflected in gross profit was a large reduction in warehouse and transportation expenses. Our product distribution costs declined over $20 million or 25 basis points as a percent of sales in the quarter. This improvement is due to more efficient transportation routing, bi-weekly deliveries in 440 low volume stores, bi-weekly delivery on central pick items across the entire chain, a reduction in administrative headcount in our distribution facilities, lower fuel costs, and lower product handling costs resulting from a significant reduction in inventory. On that front, FIFO inventory decline $243 million from the fourth quarter last year. The inventory reduction resulted from the removal of 2,600 low volume SKUs, lower back room inventory, a reduction in store safety stock in certain stores and categories, and a smaller amount of promotional inventory and lower volume stores. In addition to helping us reduce store and distribution labor our lower inventory investment contributed to the improvement in our liquidity in the quarter. Despite our improvement in distribution costs FIFO gross margin declined slightly or 19 basis points in the quarter. Front end margin benefited from a reduction in promotional mark downs, a 180 basis point increase in private brand penetration to 14.4% and better shrink, offset by lower scanned credits and vendor funding resulting from lower inventory purchases and reduced promotional spending in the quarter. Pharmacy margin also declined slightly in the quarter due to continued pressure on reimbursement rates, mostly offset by generic increase, generic penetration. As Mary mentioned, generic penetration increased 300 basis points to almost 70% in the quarter. As Frank mentioned, total comps for the quarter were down 10 basis points. Fourth quarter front end same stores sales decreased 2% over the prior year with core Rite Aid decreased 1.9% and the acquired Brooks Eckerd stores declining 2.1%. Front end sales were strong in vitamins, GNC, general merchandise and some consumable categories but weak and seasonal categories, cough, cold, and flu related categories and photo with most other categories near the total results. Front end sales may have been impacted somewhat by a reduced page count and promotional spend which was due in part because we didn’t repeat several Brooks Eckerd integration ads from the prior year. From an overall profitability perspective I think we came out ahead here. Fourth quarter pharmacy same store sales increased 82 basis points over the prior year with core Rite Aid increased 2.4% and the acquired Brooks Eckerd stores decreasing 1.9% and as Frank mentioned, total script count declined about 90 basis points in the quarter. A weak cough, cold and flu season was a significant negative factor impacting script count in the quarter. Script count grew in the core Rite Aid stores but declined in the Brooks Eckerd stores, although the decline in the Brooks Eckerd stores was at a lower rate then the third quarter and showed sequential improvement in every quarter this year. Script count in the quarter was helped by the continued growth of our RX Savings Card and courtesy refill programs. Over 1.7 million unique customers have used our RX Savings Card and 1.6 million customers have enrolled in our courtesy refill program. March pharmacy same store sales increased 2% with core Rite Aid increasing 3.7% and the Brooks Eckerd stores declining 0.9%. March front end sales which declined 6.3% were significantly impacted by the shift in Easter with a decline in Easter related categories impacting front end comp sales about 400 basis points. I think the Easter impact may be larger then that but I don’t know how to quantify the impact of the lost seasonal baskets on the rest of the categories in the store. Core Rite Aid sales decline 6% and the Brooks Eckerd stores declined 7.3%. Front end sales are strong in vitamins, GNC and electronics and some consumable categories but weak and seasonal categories and photo with most other categories near the Easter adjusted results. Looking forward to fiscal 2010 I’m very excited about the significant opportunities before us. We have a great opportunity to grow profitable sales in both front end and pharmacy, reduce our costs, increase our cash flow and improve our capital structure. Ultimately I think we can create a lot of value for all of our stakeholders but we have a lot of work to do. As you would expect of a retailer with 4,900 stores, we have a diverse customer base and as I talked about on the last call, we also have a very diverse store base in terms of operating performance. Our opportunity is to meet the needs of our diverse customers and tailor our initiatives to address the varying level of operating performance in our store base. Our segmentation approach will enable us to do this which we believe is the key to unlocking Rite Aid’s value. With this in mind we have a number of initiatives underway many of which I just discussed which have had a significant impact on fourth quarter results, particularly in SG&A. Segmentation initiatives for 2010 include a new low volume store operating model including changes to store labor, delivery frequency, ad format and merchandise. A new metro store operating model also including changes to store labor, ad format and merchandising. Operating efficiency improvements for our higher volume stores that will help them maximize their EBITDA margin and a field structure reorganization designed to meet the different levels of supervision required for different types of stores. In terms of the status of the segmentation initiatives, several of the key components of the low volume operating model were tested in the fourth quarter including the new ad format and the change in delivery frequency. While we still have a few bugs to work out I’m pleased with the results of these tests and am encouraged that we’re going to be able to improve the cash flow contribution from our lower volume stores as we get these initiatives rolled out over the next couple of quarters. Our new model for the metro markets was originally tested in Philadelphia. We made some significant improvements to the program and we’re in the process of implementing this program in another metro market right now. During the fourth quarter we reorganized the field structure to place more direct supervision closer to our higher volume and hard to operate stores while eliminating some higher level field supervision to make this change cost neutral. Initiatives that support segmentation but impact all stores include SKU optimization, our new strategic pricing application, promotional and seasonal demand forecasting, building our private brand, consolidating out distribution network and our RX Loyalty Program. SKU optimization has been completed for three categories and is in the process of being rolled out in new planograms right now. We plan to use the same models for all new planograms starting in the third quarter. The strategic pricing application tool was completed in the fourth quarter and is being rolled out in the test market right now. I think this tool will really help us improve our pricing and show the consumer a better value without sacrificing a substantial amount of margin. We are working on ways to improve our promotional and seasonal forecasting. Seasonal selection and quantities have been modified to reduce product distributions to low volume in metro stores which typically don’t sell a lot of seasonal product, and increased distributions to higher volume suburban stores that do sell more. We are also working on improving our promotional forecasting which we think is a significant sales and customer service opportunity and will have more about that in future quarters. As I mentioned, private brand sales are growing strongly for us and we have a great opportunity to continue to grow them this year. In fiscal 2010 we’ll add 250 new items, execute a package redesign for substantial number of items and provide aggressive promotional support. We expect private brand penetration to grow another 100 basis points during fiscal 2010. We have an excellent opportunity to continue to make our distribution network more efficient as we reduce our inventory. As I’m sure you saw this morning we announced that we will be closing our Atlanta distribution center which will save us $3.6 million annually. We also announced during the fourth quarter that we are closing our Bohemia distribution center on Long Island which will save us $1.3 million annually. I’m very excited about our RX Loyalty Program that we will be launching in the second half of this fiscal year in certain test markets. I think this program will help us build loyal customers in both the pharmacy and the front end while will lead to improve sales and profitability. We’ll have more to say about that as our launch draws near. In addition to the RX Loyalty Program, other sales building initiatives include regional targeted marketing efforts, a grass roots script count growth program, a new ad format supporting health and wellness positioning and improving our value positioning. We have two regional marketing efforts underway right now in areas we have identified with good potential for a return on the incremental investment. Our grass roots script count program which evolved from last year’s successful make it personal program engages store associates to grow scripts in their stores using a variety of tools we provide them including transfer coupons. Associates that achieve the script count growth target in their store will receive a special bonus. Our new ad format which will be launched in the second quarter will be much easier for consumers to shop, will show a better value presentation to the consumer and will support our new health and wellness positioning. We have a number of other things underway to improve our value positioning including pricing, private brand, and our new ad format that I’ve already mentioned and some additional merchandising changes that we are working on. In addition to these initiatives we have a number of other operating initiatives focused on reducing shrink, reducing indirect procurement expenses, and reducing our administrative costs which includes a wage freeze for all salaried non-store associates. In terms of quantification, the initiatives identified above should provide us cost savings and sales growth that have an EBITDA impact of $300 million in fiscal 2010 which will be partially offset by cost increases. Many of these initiatives will also provide significant benefit in fiscal 2011 as well. In addition to EBITDA improvement, these initiatives should help us take another $240 million of inventory out of the system next year. Ultimately the operational improvements we are making should make our stores run better which will significantly improve the shopping experience for our customers and make our stores a better place for associates to work. I think you can see now why we are so excited about the future. I will now turn the call back to Mary.

I want to clarify something with regards to the guidance. The EPS range is $0.26 to $0.53, I think I misspoke, I apologize for that. Also, in fiscal ’10 going forward our adjusted EBITDA is going to exclude both interest expense as well as securitization costs. Securitization costs in fiscal ’09 were approximately $26 million and that’s outlined on chart 10 of the press release package.

As you can see from John’s remarks and our fourth quarter results, we’re working diligently to improve our business overall. As I said at the start of the call, improve it for the long term. We expect that retail spending may pick up somewhat as the year progresses we’ve taken the conservative view that the recession and unemployment will continue to negatively impact us throughout fiscal 2010 and are planning accordingly. We will continue to look for additional ways to grow profitable sales by increasing the value of our offerings, building customer loyalty and as John described, unlocking the value of our diverse store base. At the same time, we will continue to aggressively pursue reducing costs by operating more efficiently and taking unnecessary expense out of the business. As John said, we believe we have a lot more opportunity in those areas. All of these initiatives are designed to improve cash flows so that in fiscal 2010 we are in a position to start reducing our debt. We are also committed to growing associate and customer satisfaction and recognize how important our associates are in creating the customer experience. We owe much of our success in improving results in the back half of the year to our associate’s efforts and their success in raising their level of service to their customers. I want to thank all of them for their commitment. Now operator we’d be happy to take questions.

(Operator Instructions) Your first question comes from John Heinbockel - Goldman Sachs John Heinbockel - Goldman Sachs: When you look at the capital budget for this coming fiscal year what are you guys planning in terms of file buys, numbers and then maybe what might the amount look like?

Right now we’ve scaled down our plans for fiscal ’10. Last year we spent about $80 million. Right now we’re planning to spend about $10 million. John Heinbockel - Goldman Sachs: Would you think there’s more of an opportunity to buy good files given the economy, Medicaid cuts, etc. such that $10 million could end up being a lot higher or would that make the overall capital spend of $250 million higher or you pull out from other areas?

We would pull out from other areas because it’s really important for us to stay focused on keeping overall expenses to the levels that we’ve built into our plan. If business improves also at a faster clip and we see faster traction on all of the initiatives that John talked about it certainly could open up more dollars but we believe we should be very prudent in all of our spend this year. John Heinbockel - Goldman Sachs: You would rather spend more then $10 million correct on file buys if you could?

I’d like to spend more then $10 million but I’m pretty focused on getting our debt down here that’s really the story here. There’s obviously a trade off, there’s a high return on a file buy, there’s also at this point its very important to increase liquidity and get this debt down, so that’s the trade off. John Heinbockel - Goldman Sachs: Do you have to spend on the new and relocated stores or can you push those out.

Honestly that’s where I think it comes from. Right now we’ve worked very diligently to quite honestly shrink the pipeline as far as we can. Realistically its very possible additional stores could fall out over time and that could create some flexibility for us on the file buy side. Where we’re at right now that’s our plan. John Heinbockel - Goldman Sachs: Where do you see the Medicaid reimbursement environment right now? Obviously some states have been in the news but you would think its going to be tougher as we go through this year and into 2010.

I think the Medicaid reimbursement rate environment’s been pretty tough. In the fourth quarter its still an issue like it was in the fourth quarter and the first quarter. I think its going to continue to be all year. Things we have going for us, again is generic penetration, and I think that’s one thing that a lot of the Medicaid’s can do is work on their mix and improve their generic penetration, that will help them.

As the whole healthcare reform begins to unfold I think you’re going to see more emphasis put on helping the states be able to do what they need to with these Medicaid programs too. I think John’s point on continuing to push on increasing generics will help the states with their spend. John Heinbockel - Goldman Sachs: If you look at some of the cuts you made, cutting back labor and advertising and inventory, is there any sense that that has contributed to a step down particularly in front end comp, not so much pharmacy, or is the front end weakness just all macro do you think?

I think it’s a little bit of both. When we went into this we said we’re going to try and be cautious and have as little impact as we can on the store with all the things that we’re going to do. I think we tried to test things and be cautious. Clearly when you make the changes that we’re making there can be some impact on the top line and realistically there probably has been some. The things that we’re doing get better a little every day, as the stores get used to executing it and they get used to the changes things kind of bounce back a little bit and you steadily get better. John Heinbockel - Goldman Sachs: Your comment on Easter impact would suggest that the March front end trend is kind of similar to the prior months, hasn’t gotten worse, and hasn’t gotten better.

I was back and forth about whether to really say anything about that. The thing I cautioned about in my comments and I’ll caution you too right now is there are certain very specific Easter categories. I can see Easter candy, I can see some greeting cards, I can see certain things, but clearly those baskets had impact all across the store. That’s probably the low end of what the impact is. Having said that, we’ll see how the next month shakes out.

Until you really get through April you really can’t separate it out and can already see strengthening in front as you move past last year’s Easter and begin to hit this year.

Your next question comes from Meredith Adler – Barclays Capital Meredith Adler – Barclays Capital: I’d like to first talk a little bit about some of the pharmacy programs you’re talking about. What are the economics of some of these coupon programs that you have? I assume you’ve tested the programs where you’ve given incentives to employees to drive script volume. What is the cost effectiveness of that and how effective are they generally?

The biggest one we did was last year we did a program called Make It Personal where we basically incentivized stores and that program was really, stores were incentivized based on the number of coupons that got issues, that’s basically how it worked. We saw a tremendous amount of traction from that program; we got a large number of scripts in. We’ve tracked the performance of those scripts over time to see how they behaved, did we retain those people, and actually had a very good payback when you stirred it all together. We modified that program, we have one going right now in the first quarter which I referred to as the grass roots program because its not just transfer coupons, there’s a number of other things that we’ve asked associates to focus on including the courtesy refill program and other things. What we’re finding is that it has a very good payback on it. In terms of just transfer coupons by themselves when you use a $25 transfer coupon you need at least a couple refills to get the economics of that to really work. When we stir it all together and look at it on whole big pool of transfers in related to those coupons we are getting an adequate amount of retention to pay for those things. It seems like they’re working. Meredith Adler – Barclays Capital: A question about distribution, all you really commented on today was closing Atlanta and Bohemia. Bohemia, I believe, was an overflow facility. Is Atlanta a full line distribution center? Without mentioning specific areas is there more opportunity to reduce your distribution network?

Atlanta was a full line distribution facility. I think we’re going to have additional opportunities to make this network more efficient. Are we going to take out whole warehouses? I’m not sure I know that yet. We have a number of satellite facilities and I think that’s probably the next step in this thing is to try and work down on more satellite facilities. Meredith Adler – Barclays Capital: My final question would be in terms of addressing inventory at the stores and the backrooms, can you talk at all about the specific initiatives that get you to lower inventory at the stores and how much of it is a function of the volume the store is doing and how much of it is just generally becoming more efficient in apply better tools?

Part of it is the SKU optimization process that we’re going through. We’re really trying to look at the number and mix and SKUs inside the store. That’s a fairly big effort to take some inventory out so that’s a portion of our target for next fiscal year. We also have a backroom inventory project that I didn’t mention that we’re very excited about. We used it at another company and it works really, really well. We’re testing it here in a few stores right now; we’re seeing some very good results from it. The concept there is really to make that backroom inventory more productive. You know a lot of times inventory gets hung up or lost in a backroom particularly when you use totes like we do to transport inventory and you can’t necessarily see what’s in the backroom. The backroom inventory system creates an inventory accounting methodology for the backroom that allows the stores to be able to stand on the sales floor and look and see effectively if that item is in the backroom, and know right where it is, which tote, so it makes it much more efficient to work inventory out of the backroom. We think we’re going to get a bunch of inventory associated with the backrooms from that. In addition to that, we’re looking at safety stock in the stores as I had mentioned kind of the mid max levels. That goes to your point about lower volume stores, higher volume store, how much safety stock to you really need, and does it need to be the same across all stores, which it doesn’t. There’s just a number of different ways to really get at this inventory investment. I’d tell you the SKU optimization project is probably about half of what we’re looking for next year and the other half of it is probably—also we’re looking at the way we’re handling promotional inventory in the lower volume stores. There are probably two or three big chunks here; SKU is one, promo is one, and the backroom at the store level is probably the third. Meredith Adler – Barclays Capital: Do you need to add technology to accomplish those inventory goals and are you getting support from vendors, is this something that they think is good?

Most vendors really support it and I’ll tell you one of the things that Rite Aid has struggled with historically with the vendors is a large number of returns. We’ve had large returns expense in part due to our volume per store. As we get our inventory investment more efficient it’s going to take pressure off of returns expense so I think the vendors very much support that. Obviously vendors who get their SKUs reduced aren’t thrilled about that but overall I think its going to be very positive to our vendor relationships and take some pressure off of discussions about returns expense. As we look at technology we have the fundamental technology in place to execute what we need to do. The areas where we’re working really deal with I’d almost call it ad hoc modeling, they’re not store systems changes they’re analytical tools that we’re using behind the scenes. We’ve been building a tool on the SKU optimization. We’ve also been working on a tool for our promotional forecasting. Those are two behind the tool scenes. We’ve made a tool that’s already kind of done. We’re testing for the stores in terms of the backroom inventory. Those are the technology changes. It’s not like we’ve got to roll out a new perpetual inventory system or anything like that.

With all the points that John made in his comments earlier this whole view of looking at the store base in segments is a real key to this, brought up the promotional piece but its really everything you need the same kind of assortment and I think in the past you tended to put too much into those stores and as we solve that issue as well as operate them better you’re going to end up with really taking a lot of inventory out of the pipeline. Meredith Adler – Barclays Capital: Based on your early tests for these programs do you believe that the pace of store closures can slow meaningfully in out years, that you will have the stores and you’ll be getting them running in a way that’s cash flow positive?

That’s our objective. I always like to leave a lot of flexibility on these things because things can twist or turn along the way. We still have some work to do to get to a final conclusion on this. I think we have a real opportunity to get a better model for these lower volume stores that could definitely have a huge impact on our profitability and could make a large number of them much more sustainable then they are today. I think that will definitely have an impact on future closure as we get this thing to work.

Your next question comes from Edward Kelly - Credit Suisse Edward Kelly - Credit Suisse: You touched on this a bit earlier but you clearly believe that there is a good opportunity out there on the cost side and on the working capital side. You mentioned that they have had maybe some impact anyway on sales. Given that, it seems like most of this opportunity is still ahead of you. What’s the risk that the impact on sales actually gets larger from here not smaller?

I’ll tell you what’s changed in my thinking a little about this along the way. When I initially started and what we outlined on the last call was really a lot about SG&A and that’s we really attacked aggressively here in the last three to six months. As I get more and more into this thing I get more and more excited about the sales opportunity on this thing. I think there’s a lot of potential here on the sales side. I’ll tell you something, a lot of the things that we’re doing on the SG&A I believe are going to make our stores easier to run for store management and for store associates. We’re doing a lot of things to power the stores, we’re trying to simplify things, and we’re trying to make it easier to run a lower volume store. As we do that, I think ultimately our store conditions are going to get a lot better because it’s just going to be flat out easier to execute in one of these stores. I think that’s what’s going to drive the long term sales growth of this company. I think the answer is on this thing there may be a small amount or some amount of short term pain that we had last quarter and that could continue to nibble at us a little bit as we go through this we’re going to try and minimize that to the best ability we can. Getting these things right leads to the long term growth of this company. That’s what we need to do, that will get us there in the long run as we get these store conditions improved. I know Brian and Ken and everybody else are really working hand in hand here to improve these stores. I think we’re going to end up in a great place.

As high of a percent of revenues coming out of pharmacy and you look at the trends on pharmacy and the core stores and the continuing improving trends on the pharmacy side for Brooks Eckerd or John described as initiatives around pharmacy loyalty and loyalty offering. I think that’s also going to be a real plus too as we get more pharmacy customers and getting them to be front end customers in our stores. Edward Kelly - Credit Suisse: Could you provide a little more color on the SKU rationalization? I don’t know if you can tell us what percent of the SKUs you’re looking to sort of cut out. How are you making these decisions and are there categories that are more affected then others?

First of all in terms of how we’re doing we’ve been working on them, what we tested in three quarters in three categories was a transferable demand model. The concept basically is, we have a lot of data here around all the items in the categories and what we try and do is do some analysis that gives us some sense as you change the category, take items in or out, whether that demand will transfer or whether that demand is lost. You do that by trying to understand what’s important to the consumer about a category, is it flavor, is it size, is it attribute, what is it that’s driving the key decision in that category by a consumer in terms of what they purchase. That’s the transferable demand concept, that’s what we were testing in those three categories that we’re rolling out right now we’ll kind of see how they behave as we get them out. That’s how we’re going out it. In terms of categories, generally speaking categories with more SKUs are going to have a better opportunity for this thing to work. If it’s a fairly narrow category with not a lot of SKUs in it the transferable demand concept just won’t go there. That’s really where you go, you go to the categories, you can visually just see quite honestly or probably over SKUd when you go into a store. That’s where you’re going to find most of the value in this thing. I don’t know if I answered all the parts to that question. What else was it? In terms of the potential in it, I think we’re targeting something in the 5% to 10% of our SKUs to kind of get at that number. Edward Kelly - Credit Suisse: Is this as simple as just saying you don’t need five flavors of a certain product or is it deeper then that saying maybe we don’t need to carry the top four brands in a certain category, maybe we should be relying just the top two.

Right there its going to depend on the decision tree that you think drives the consumer. You’re going to go to some categories and say that flavors are very, very important. It might be hair color, and we need to have all the different flavors in hair color because a customer comes in, if they want to be a blond versus a brunette they’re obviously going to leave if we don’t have what they need. In this particular instance we need flavors. We might go to another category where we carry three national brands that all have the exact same attributes and say you know what, brand name maybe isn’t relevant here, it’s the attributes, whether its dandruff control or some other attribute that the consumer is focused on so now I don’t need to have three national brands all with that attribute I can take a national brand out or two and have the attributes but I don’t need all the different brands to get there. Does that make any sense? Edward Kelly - Credit Suisse: Absolutely. Last question, you talk about private label penetration increasing I think you said maybe another 100 basis points or so. Is that adding product or is that giving it better facing, is that done on pricing, how do you accomplish that initiative?

There are a couple of key things that we’re working on. First of all we did say we’re going to add probably 250 additional items in this fiscal year. We are working on our package design which we think is important just from an appearance. We are looking at the merchandising of it. We’re supporting private label right now pretty well with promotion, we’re going to continue to do that.

Your next question comes from Mark Wiltamuth – Morgan Stanley Mark Wiltamuth – Morgan Stanley: I’m focused on getting over the September 2010 revolver refinancing. If you could outline a little more detail on how big you think that final refinancing number is going to need to be. It looks like right now your balance on the revolver is about $920 million and if you hit your working capital reduction targets it looks like something around $680 or $700 million left to go. How big a free cash flow number do you think you could hit in 2010 if you hit your adjusted EBITDA goals?

Right now as we model this thing out our ability to generate free cash flow is in a range of $200 to $250 million, which is really derived by the reduction in the CapEx program, the working capital initiatives, and the improvement in our performance. The strategy here is to use that to reduce what our overall borrowing requirements are going to be on a go forward basis. Mark Wiltamuth – Morgan Stanley: The remaining parts are the size of the debt deal then that just leaves you with the remaining amount to refinance. Do you have any sense from the bank on how big a number they’re comfortable with refinancing?

We’re continuing to have those discussions. Sitting here today our revolver availability, our revolver facility in total is $1.750 billion. It’s not going to be $1.750 billion just given the marketplace today. It’s going to be something less then that. We’ve heard different ranges so I won’t necessarily comment in terms of that it might be. It’ll clearly be less which is why whatever gap there would be between the $1.750 billion and whatever the revolver balance can be we would fill by reducing our debt $200, $250 million as well as doing some other supplement piece of paper either a term loan or a high yield piece of paper.

We have additional secured debt capacity today.

And we have additional secured debt.

Right. So we have a number of different tools to work with. Mark Wiltamuth – Morgan Stanley: Your overall confidence level on getting this done without some asset sales, give us some sense of that.

We’re confident that we’re going to be able to get this thing done.

Your next question comes from Robert Willoughby - Banc of America Securities Robert Willoughby - Banc of America Securities: Can you break out what portion of the inventory on the balance sheet actually are pharmaceuticals? Have you ever explored opportunities or are you exploring opportunities to move to distribution relationships more on a consignment basis?

The split on inventory about 60% of our inventory is front end and about 40% is pharmacy.

I don’t think we’re headed in that direction and the issue there is you give up buying power and allowances and discounts and things so it’s not a great answer quite honestly and I don’t think it’s somewhere we need to go.

Your next question comes from Carla Casella – JP Morgan Carla Casella – JP Morgan: I have one housekeeping question, the annual rent, and then I’ve got a few other follow up questions. What percentage of your total sales pharmacy today is Medicare?

Medicare is probably about 19% of sales. Carla Casella – JP Morgan: You’ve not made any changes like what we’ve heard from some of your competitors where you’re not servicing certain markets because of reimbursement rates or are you considering doing the same?

Are you talking about Medicaid? Carla Casella – JP Morgan: I was talking about in Washington State.

Yes, that’s Medicaid. I think over the years issues have come up in other states relative to punitive Medicaid reimbursement rate proposals and what not and we’ve taken different actions depending on what that rate is. Right now this is sort of in a state of flux even in the State of Washington. There has been some litigation that’s already taken place in putting a halt to what is happening there at least on a temporary basis. We’ll monitor that and we’ll make decisions based on what it does to specific given stores. We have a pretty good Medicaid business there in that state and some stores do a larger percentage of Medicaid sales then other stores. It really is a by store decision. Carla Casella – JP Morgan: Medicaid, what percentage is that of your total pharmacy?

It’s about 9% of our total. Carla Casella – JP Morgan: Your low volume stores, you had talked about you were promoting less at some of those stores and we may see some sales weakness. What about on the script side or gross margin dollars, are you seeing in the markets where you’ve started it, the gross margin dollars are up even though the sales are down?

Pretty much yes. There’s clearly a tradeoff there. In terms of the low volume stores I think we just talked about inventory impact and overall promotionally we spent a little less, actually a lot less in the fourth quarter then we did in the prior year. That’s more specific about the sales comments. As far as the low volume stores go, what we change there in the 566 stores we ran a test ad that was reduced page count ad. Initially when we tried that test that did get the sales going sideways a little bit but as we worked our way through we made some improvements to the ad and kind of got it down a little bit. We really saw the sales in those stores actually perform as well as the overall chain. They actually did fine once we got it worked out and got it going the right way. I think overall we’re going to be able to get this stuff to work without having a huge sales impact here. I think it’s going to help the margins and I think it’s going to get some cost out of this thing. Carla Casella – JP Morgan: On the script side, are those stores low volume just in general or do they have a different mix between front end and pharmacy.

They’re generally low volume overall, those stores that we’re addressing there. We’ve kind of diced up the store base. We have some stores, its kind of interesting we do have some stores that are high volume stores that have a little bit under producing in the front end and visa versa and that’s a different group of stores we’re there, we’re more focused on the cross marketing opportunity between the front end and the pharmacy. We’re pretty excited about that too because we think there’s a great chance to grow sales in those stores. We’re kind of attacking that group of stores a different way. Generally speaking when we talk about the lower volume stores they’re low both in the front end and the pharmacy. Carla Casella – JP Morgan: Is the script count coming up at all from your efforts?

The script count is probably behaving pretty close to the total chain in those stores. What we’re doing hasn’t really impacted pharmacy per se. Carla Casella – JP Morgan: The store closures you talked about for next year are any of those full markets where you may be able to sell some of the markets or scripts?

No. To go back to your initial question net rent would be just under $1 billion. Carla Casella – JP Morgan: The $20 million of DC savings in the fourth quarter is that a good run rate to go forward until we hit the closures of Bohemia and Atlanta, or you think that was particularly strong savings this quarter because of lower fuel costs, etc.

I think we’re going to continue to see good savings. The only thing we have to be careful about is the sales volume in the fourth quarter is a little bit higher so the percent may fluctuate a little bit. The savings that we got we think are going to go forward into fiscal 2010. Carla Casella – JP Morgan: The impairment you took does that affect any of your bank lines or borrowing ability.

No it doesn’t.

Your last question comes from Emily Shanks - Barclays Capital Emily Shanks - Barclays Capital: I just wanted to make sure, I think I heard your comments right about fiscal year 2010 inventory reduction. You said $240 million correct?

That’s correct. Emily Shanks - Barclays Capital: You also, in one of the questions referenced your ability to incur debt. Is it still around the $812 million number that it was at the end of third quarter or what is your debt incur capability at the end of fourth quarter?

Second lien? Emily Shanks - Barclays Capital: First and second then maybe if you could tell me second.

The comparable number would be $870 million. Emily Shanks - Barclays Capital: I can assume that incorporates the additional incremental availability and the revolver and then the rest of it can be done in second.

That’s exactly right. Emily Shanks - Barclays Capital: Around the sale lease back market I know that you said that you don’t plan on utilizing it for this fiscal year. If you could just comment to us if its, on the past call you actually described it as frozen, if that is the case. Then if you could update us on what the unencumbered real estate left over is right now in terms of stores, DCs and headquarters.

In terms of owned stores there’s about 225, 230 owned facilities that would be unencumbered.

I think its seven DCs that we own and we own this building that we’re sitting in here.

In terms of the sales lease back markets it’s just generally been pretty soft out there so we don’t think it’s very prudent to plan to have any in our plan. Emily Shanks - Barclays Capital: We appreciate the slide deck that you provided particularly the CapEx details. If you could just give us a little color around the significant year over year reduction on the backstage infrastructure on maintenance line items. Can you talk to us about how you’re thinking about that, what your comfort levels is with dialing maintenance CapEx to those levels. As you look post 2010 will there be a period that you actually need to basically ramp up or do catch up CapEx at all and how should we think about that.

The driver in the backstage infrastructure and maintenance between ’09 and ’10, that’s largely the reduction in the file buys. That’s really what changed it. In terms our plans going forward we would clearly look to increase our CapEx spending going forward but as we look at the priorities for fiscal ’10 its really to reduce our overall debt here and a lot of the initiatives that John and Mary have talked about are really not capital intensive initiatives. Really as we look at this thing there were new stores that we were committed to and most of what we have in the CapEx program is really in new stores we were committed to and some maintenance CapEx.

As the CapEx recovers it’ll probably be blended a little bit more towards the existing store base and a little less on growth until we do that effective catch up.

Thanks everybody for being on the call. We appreciate your interest in our company.

This concludes today’s conference call. You may now disconnect.