Chris Hall - Investor Relations Mary F. Sammons - Chairman of the Board, Chief Executive Officer Frank G. Vitrano - Chief Financial Officer, Senior Executive Vice President, Chief Administrative Officer John T. Standley - President, Chief Operating Officer

Meredith Adler - Barclays Capital Lisa Gill - J.P. Morgan Mark Wiltamuth - Morgan Stanley Bryan Hunt - Wells Fargo Securities Carla Casella - J.P. Morgan John Heinbockel - Goldman Sachs Analyst for Ed Kelly - Credit Suisse Emily Shanks - Barclays Capital Karu Martesen - Deutsche Bank Mary Galeberger - Imperial Capital Neil Currie - UBS

Good morning. My name is Celithia and I will be your conference operator today. At this time, I would like to welcome everyone to Rite Aid's second quarter fiscal 2010 conference call. (Operator Instructions) Mr. Hall, you may begin.

Thank you and good morning, everyone. We welcome you to our second quarter conference call. On the call with me are Mary Sammons, our Chairman and CEO; John Standley, our President and Chief Operating Officer; and Frank Vitrano, our Chief Financial and Chief Administrative Officer. On today’s call, Mary will give an overview of our second quarter results and fiscal 2010 outlook, Frank will discuss the key financial highlights, John will discuss our business, then we will take questions. As we mentioned in our release, we are providing slides related to the material we will be discussing today on our website, www.RiteAid.com, under the investor relations 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 reconciliations 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 remarks I’d now like to turn it over to Mary. Mary F. Sammons: Thanks, Chris and thanks, everyone for joining us today and for your interest in our company. This morning, Frank, John, and I are going to review our second quarter results, update you on the progress of our segmentation strategy, and give you more insight on why we changed our outlook for the remainder of fiscal 2010. You will also hear about our programs to boost sales in the third and fourth quarters as we continue to adjust our initiatives to the realities of this tough economy, a changing customer, and a challenging pharmacy environment. And we will discuss our focus on further improving operating efficiency to help maintain our strong liquidity position. But first let’s talk about the quarter. As you can see from our results, we again made significant progress on many of our key initiatives and finished the quarter with more than $800 million in availability on our credit and accounts receivable facilities. Our team did a great job of reducing SG&A and controlling inventory, critical in a challenging environment like this one. As we said in the past, maintaining strong liquidity is a priority for us. Our script growth initiatives again delivered results as we continued to fill more prescriptions. In the second quarter, we reached the highest generic dispense rate ever for our company, 70.4%, and dramatically increased enrolment in our RX Savings card, making prescriptions more affordable for our patients. Our pharmacy teams did an outstanding job taking care of our customers too, with our pharmacy customer satisfaction ratings at an all-time high, especially in the areas of friendliness and courtesy of staff and timely filling of prescriptions. With three more days left to go on our September sales reporting period, both pharmacy sales and prescription growth trends are positive. Despite all of these positive factors, our pharmacy results were tempered by increased pressure on margins which continued to deteriorate throughout the quarter, especially for generics. John will go into greater detail in a few minutes. As for front-end sales, although we’ve seen improvement in September, they continue to be negatively impacted by a value-driven customer searching for discounts, buying more items on sale than they have in the past. On the positive side, this same customer looking for value helped pushed private brand penetration 90 basis points higher than last year, and private brand will continue to be a focus growth area for us. As we move into the second half of the year, we expect the negative trends that impacted our second quarter to continue. As a result, we’ve lowered out outlook for fiscal 2010 and also widened our guidance because of the uncertainty we see over the next six months about the timing of the economic recovery and the strength of the cough, cold, and flu season. Our pharmacy teams and stores are prepared for a very busy season but we’ve seen before that cold and flu can fail to materialize. And as Frank will discuss, we’ve also included the impact of the upcoming AWP rollback on Medicaid brand reimbursement which hits this weekend. On the front-end, we expect softer holiday sales than last year. To help combat these trends, we have multiple initiatives to grow profitable sales in the third and fourth quarter. We are stepping up our successful compliance programs, continuing targeted script growth programs for under-performing stores, and increasing file buys. We’ve launched additional promotions in the front end to encourage return shopping trips. We will soon begin a test in a group of pilot stores of our new loyalty program which we believe will differentiate us because of its emphasis on pharmacy. While we don’t expect it to impact sales this year, we believe we have developed an exciting program that will drive sales when launched nationwide next year. As we work on growing profitable sales, we will not take our focus off taking expenses out of the business and improving both sales and reducing costs with our segmentation strategy. We believe it’s the right strategy. While some of our tactics may need to be tweaked, it’s clear that we are on the right track as John will show you later in his comments. We expect with all these initiatives our liquidity will remain strong. Even with our revised guidance, we are forecasting $200 million in free cash flow this year and our priority remains starting to pay down debt at the end of this fiscal year. I will now turn it over to Frank to discuss financial details. Frank. Frank G. Vitrano: Thanks, Mary and good morning, everyone. Although it was a challenging quarter for sales and margin, we made solid progress on a number of fronts during the quarter. We are better positioned for long-term growth with the September 10 refinancing substantially completed, improved liquidity as a result of working capital initiatives, and reduced capital expenditures, continued improvement in lowering our operating costs, and finally beginning to implement some of the segmentation work that John will discuss in more detail. On the call this morning I plan to walk through our second quarter financial results, provide an update on capital expenditure programs, discuss our liquidity position, review our rent reduction program, as well as talk about the accounts receivable securitization refinancing. Finally I’ll discuss our updated fiscal ’10 guidance reflecting ongoing front-end sales and pharmacy margin pressure. This morning we reported revenues for the quarter of $6.3 billion compared to $6.5 billion for the second quarter last year. The decrease in total sales was primarily driven by a reduction in total store count and front-end sales. In the quarter, we closed 16 stores and year-to-date we closed 102 stores. On a quarter over quarter basis, we had 118 fewer stores. Same-store sales declined 110 basis points, reflecting soft front-end sales but positive pharmacy script growth. Front-end same-store sales were down 490 basis points and pharmacy sales were higher by 80 basis points during the quarter. Pharmacy scripts increased 140 basis points. Excluding the acquired Brooks-Eckerd stores, same-store sales for the 13 week second quarter decreased 60 basis points over the prior year with front-end decreased 490 basis points and pharmacy growing 200 basis points. At Brooks-Eckerd stores, same-store sales decreased 230 basis points during the quarter while front-end decreased 470. Pharmacy decreased 140 basis points in the quarter. Beginning with our monthly September sales release, we will no longer break out core Rite Aid and the acquired Brooks-Eckerd store sales. We do not have internal initiatives that are acquired store specific. The business initiatives are centered around segmentation and other projects and not specific to the Brooks-Eckerd stores. Adjusted EBITDA came in at $216.5 million, or 3.4% of revenues for the second quarter. This compares to last year’s second quarter of $219.9 million or 3.38% or a 1.5% decrease. The results were driven by lower sales and lower FIFO gross margin dollars, mostly offset by lower SG&A dollars. SG&A dollars adjusted for non-EBITDA expenses were $90.5 million lower and 75% as a percent to sales. This is an increase from the 30 basis points we achieved in the first quarter. We are very pleased with these results given the $178 million or 2.74% decline in quarter over quarter revenues. This improvement reflects the various cost-saving initiatives which John will talk about, including store labor management, field controllable expenses, and distribution center savings. Net loss for the quarter was $116 million, or $0.14 per diluted share, compared to last year’s second quarter net loss of $222 million, or $0.27 per diluted share. The decrease in net loss was driven by no integration costs in this quarter compared to $32 million last year; a loss on debt modification last year of $36 million, lower store closing and impairment charge of $23 million; as well as a gain on sale of assets during the quarter. The lease termination charge of $28.7 million relates to stores which were closed during the quarter. As I mentioned on the last call, we expect to close 117 stores I fiscal ’10. The LIFO charge of $14.8 million is consistent with the first quarter of fiscal ’10. Interest and securitization expense was $142.3 million, which is $19.7 million increase over last year. The increase was a result of the refinancing completed in June, as well as the increase in securitization expense from the second lien term facility renewed back in February. Later in my remarks, I will discuss our plans to refinance the accounts receivable securitization which matures in September of ’10. Net cash interest, primarily debt issuance cost amortization and workers’ compensation interest accretion was $10.1 million. Gross margin dollars in the quarter was $89.9 million lower than last year, or 65 basis points. FIFO gross margin percent was also lower by 65 basis points, which is worse than the gross margin trends we saw in the last two quarters. We saw a 53 basis point erosion in front-end sales margins, primarily caused by the sales shortfall and an increase in the percent of items sold on promotion and an 88 basis point shortfall in pharmacy driven by lower RX reimbursement rates but fewer new generics and higher generic product costs. The margin dollar shortfall was partially offset by lower distribution center costs and lower front-end and RX shrink. Product handling and distribution expense as a percent of sales improved 25 basis points due to operational efficiency improvements and lower fuel costs. Tom will review the proactive measures implemented by the distribution center team in the quarter to drive these improvements. Selling, general, and administrative expenses for the quarter were lower by $134.7 million, or 135 basis points as a percent to sales as compared to last year. SG&A expense not reflected in adjusted EBITDA were lower by $44 million, primarily driven by no integration costs in the quarter as compared to $32 million last year. Adjusted EBITDA SG&A dollars, which excludes specific items, the details of which are included in the second quarter of fiscal ’10 earnings supplement information, which you can find on our website, were lower by $90.5 million, or 75 basis points as a percent to sales. This reduction in dollars reflects the aggressive cost saving initiatives that have been implemented over the last 12 months. The SG&A improvement was driven by better labor controls and lower field controllable costs, including supplies, insurance costs, as well as utilities. Corporate expenses were also lower. On a sequential quarter over quarter basis, we reduced our adjusted EBITDA SG&A from being 92 basis points unfavorable in the second quarter of fiscal ’09 to 25 basis points unfavorable in the third quarter to eight basis points favorable leverage in the fourth quarter of fiscal ’09, where 30 basis points of favorable sales leverage in fiscal ’10 and now 75 basis points here in the second quarter. As previously mentioned, our liquidity is strong as a result of the various working capital initiatives. As compared to the second quarter of fiscal ’09, FIFO inventory is lower by $351 million, of which 80% is due to our initiatives and the balance to store closings. FIFO inventory increased from the first quarter by $83.7 million, reflecting normal seasonal builds. Our cash flow statement for the quarter shows net cash provided by operating activity in the quarter as the use of $146.9 million as compared to a source of 96.1 last year. Repayment of the accounts receivable securitization of $125 million, normal seasonal inventory build, and changes in other assets and liabilities were the driver. The changes in other assets and liabilities reflect store payment, closed store payments, and the timing of accrued interest payments. Year-to-date, net cash provided by operating activity was a $210 million source of cash. Accounts payable in the quarter was a small use of cash, $16 million. Our days payable outstanding in the quarter was 24.2 days. This compares to 24.1 days in the fourth quarter and 28.3 in the second quarter of last year. The change from last year was driven by rent checks, which were included in AP last year but not issued or included in AP this year because of our August 29th cut-off date. Net cash used in investing activities for the quarter was $27 million versus $90 million last year. This reflects our proactive plan to trim capital expenditures. It also includes proceeds from script files and other asset sales. Year-to-date, net cash used in investing activities was $42 million. During the quarter, we opened three net new stores, relocated 10, and closed 16. Our cash capital expenditures was $40.4 million. Now let’s discuss liquidity -- at the end of the second quarter, we had $822 million of availability under our credit facility and accounts receivable securitization programs and today we have $850 million of availability. We had no outstanding revolver borrowings under the $1 billion senior secured credit facility. We did have $188 million of outstanding letters of credit and a $78 million borrowing base deficiency. I expect to periodically have borrowing-based deficiencies during the year as we experience seasonal inventory swings, as well as continue to adjust inventory levels for the various working capital initiatives. We had $400 million drawn under our $570 million first and second lien accounts receivable securitization facilities with a borrowing base deficit of $92 million -- borrowing base deficiency, excuse me, of $92 million. The total debt including AR securitization was lower by $250 million from year-end. Lowering our overall leverage and improving our credit maturity profile is a top priority for the company. The company’s overall debt leverage, including off-balance sheet accounts receivable securitization, decreased from 6.6 times in the fourth quarter to 6.3 times at the end of the second quarter. As we announced in June, we completed the refinancing of a portion of our senior secured credit facility which was set to mature in September of ’10. The outcome extended the maturities three to seven years, giving us sufficient runway to execute our business plan. We have begun to examine several alternatives to refinance our accounts receivable securitization program which also expires in September of ’10. That program has a $345 million first lien revolver portion and a $225 million second lien term facility. The first lien initially expires in January ‘010 and has a back-stop feature which extends the maturity to September of ’10. We are looking at both on-balance sheet and off-balance sheet alternatives including one refinancing as a new conduit securitization. This is probably the least likely execution as the receivable conduit capacity is really decreased here for issuers. The second option is to refinance with a special purpose entity non-recourse off-balance sheet first loan term loan or senior secured note, and the third would be to refinance with a combination of either a first lien and second line on balance sheet and do that on balance sheet. Our indentures restrict our first lien capacity to $3.7 billion of first lien debt, which would restrict our ability to refinance the entire $570 million of AR with first lien debt. If we were to bring the facility on balance sheet, we would be limited to $320 million of first lien debt with the remainder financed as second lien. Keeping the facility off balance sheet would maintain our first lien capacity however presently we do not have sufficient borrowing base capacity under credit facility for any incremental secured debt, first lien debt. There is a specific carve-out for the accounts receivable facility which allows us to use up to $320 million for accounts receivable. Given the quality of the collateral, we are very confident that the accounts receivable facility will be refinanced. Now I’d like to discuss the landlord rent reduction initiative we discussed on the last call. We contracted with a nationwide real estate firm to assist us in working with 465 of our worst-performing stores to seek rent concessions. These locations under review for possible -- these are locations under review for possible closure and are seeking rent concessions from our landlords to improve the overall profitability and viability of the stores. Through both our internal resources, which are working on an additional 230 locations, as well as our outside real estate firm, we have achieved rent concessions in about 20% of the locations with the reduction fully achieved over a five- to six-year period of time. We continue to work with our landlord partners to arrive at a satisfactory outcome on the remaining locations. Now let’s turn to our fiscal ’10 guidance update. We’ve revised our guidance to reflect a challenging front-end sales and margin climate as well as growing -- as well as growing pharmacy margin pressures -- excuse me, ongoing pharmacy margin pressures and the AWP rollback. Total sales are now projected in the range of $25.7 billion to $26.2 billion, which reflects a reduction in our same-store sales guidance to a range of negative 100 basis points to up 100 basis points. This reflects the expectation of a continuing difficult economic environment and a discount driven customer. We expect front-end comps to be negative for the balance of the year, despite easier comps in the back half of the year. A stronger flu season would push us to the higher end of the sales range. We revise our adjusted EBITDA guidance to be in the range of $900 million to $1 billion. This includes the sales impact as well as an estimated $21 million hit to our pharmacy margins as a result of the AWP rollback which will take effect on September 26th. The annualized impact of the AWP rollback on our Medicaid business is $52 million. Net loss is now expected to be in the range of $390 million to $615 million, or $0.48 to $0.74 per share. We have not made any adjustments to capital expenditures or the other line items in our guidance. We now expect to generate $200 million in free cash flow for the year. The guidance does include a provision to close 117 stores in fiscal 10. This completes my portion of the presentation. Now I’d like to turn it over to John. John T. Standley: Thank you, Frank. As both Frank and Mary mentioned, even though it was a difficult quarter from a front-end sales and pharmacy margin perspective, we did a very good job managing our expenses and holding EBITDA very close to last year’s number. I’ll just recap again one more time a few of the key accomplishments in the quarter. Script count in comparable stores grew 1.4% for the quarter. The RX Savings card enrolment has now grown to over 3.5 million members. SG&A declined an impressive 135 basis points to 26% of sales compared to 27.4% last year and 75 basis points of the 135 basis point decline were EBITDA expenses. Distribution costs were 1.55% of sales, our fourth consecutive quarter of improvement versus the prior year. FIFO inventory was $351 million lower than last year and our availability under the revolving facility and the asset securitization facility was $822 million. As Frank mentioned, total comps for the quarter were down 1.1%; second quarter front-end same-store sales decreased 4.9% over the prior year. Front-end sales were soft in most categories and were impacted by the weak economy and because we have held steady on our promotional spending versus last year compared to the rest of the market that has become much more aggressive. As I mentioned last quarter, front-end sales may have also been somewhat impacted by the SG&A working capital initiatives we have implemented over the last four quarters. In fact, the 1800 bi-weekly delivery stores negatively impacted our front-end comp store sales about 1.4% in the quarter. The good news, however, is that the EBITDA excluding pharmacy margin in those stores increased $10 million over the prior year, a big step in the right direction. When we get the sales going in these stores, we will get more of the savings from our changes to the operating model to the bottom line. To help with sales in these stores, we’ve made some operational changes including an increase in safety stock to help improve shelf conditions. In addition, we are working on some exciting merchandising changes for these stores that we will be rolling out next year. Script count grew 1.4% in comparable stores and pharmacy same-store sales increased 80 basis points in the quarter. Similar to last quarter the low volume pharmacies with high-volume front-ends continue to respond well to our targeted marketing efforts and the RX Savings card continues to provide significant script count growth and as Mary mentioned, we continue to take good care of customers with strong customer service scores in the quarter. In terms of recent trends, September sales have improved in both front-end and pharmacy compared to August. Front-end is declining at about half the rate we saw in August and script count is stronger than last quarter. Looking forward to the second half on sales, we have some exciting plans in place to help us improve our front-end sales, including some of the operational changes I just mentioned, our continued focus on growing our opportunity in under-performing stores, and some initiatives designed to reward customer loyalty like our rake in the savings program we have going this fall. Speaking of customer loyalty, our new comprehensive pharmacy loyalty program will be in test in a small group of stores in the next few weeks. Additionally, due to our strong liquidity position, we are going to increase our file by spend for the second half which should help us late this year and early next year. Having said all that, we are still expecting a pretty tough selling environment for front-end sales in the second half of this year. FIFO gross margin declined 65 basis points in the quarter, driven by an 88 basis point decline in pharmacy margin and a 53 basis point reduction in front-end margin and it was partially offset by a reduction distribution expenses. Front-end margin declined in the quarter because one, promotional markdowns increased as a percent to sales even though we were flat in dollars to the prior year; and two, slightly lower vendor allowances due to a reduction in inventory purchases. Partially offsetting these negatives were continued improvements in shrink expense and a 90 basis point increase in private brand penetration in the quarter, increasing private brand penetration to 15.2% of front-end sales. Pharmacy margin declined 88 basis points in the quarter, a further reduction from last quarter’s pharmacy margin. Similar to last quarter, the decline was due to reductions in reimbursement rates that were at levels similar to last year but we were unable to offset the impact of these reductions with generic product cost improvements and benefits from new generics. Generic penetrate did increase 274 basis points to 70.4% in the quarter. Looking forward on margins, front-end margin will continue to be pressured in the second half because the economic downturn will continue to impact customers, making it more difficult to drive foot traffic into our stores. Medicaid pharmacy margin will be reduced an estimated $21 million from the AWP rollback that goes into effect this weekend. Although the rollback is significantly impacting our Medicaid business, third-party plans have provided us language that [will hold us harmless] from the rollback. Also impacting pharmacy in the second half is the cycling of a number of significant new generics that were introduced during the first and second quarters last year. This will hurt our margins because they are becoming less profitable as they mature because they are getting [macked] and because they are now in our run-rate so they are not helping us offset current year rate reductions from third parties. As I mentioned on the last call, another significant factor that has hurt pharmacy margin quite a bit this year is the tightening of the generic supply market. It’s more difficult to find cost savings today to offset reimbursement rate reductions and in fact we have seen some cost increases. The positive trend in distribution expense has continued in the second quarter. The improvement is due to the initiatives we started last year and continue to roll out this year, including more efficient transportation, routing, bi-weekly deliveries in 1800 low volume stores, a reduction in administrative headcount in our distribution facilities, lower fuel costs and lower product handling costs resulting from a significant reduction in inventory. Also, the Bohemia Long Island facility and the Atlanta facility are now closed. As Frank mentioned, FIFO inventory was $351 million lower than last year. Since we started the inventory reductions initiative last year, we have reduced our SKU count by about 3700 SKUs, or about 13%. I think we are through the steepest part of the inventory reduction. Ongoing initiatives include our back-room inventory reduction program and our SKU optimization initiative. These two initiatives will provide some smaller more gradual inventory reduction over the remainder of the year and should help us put the disciplines in place to help keep our inventory under control going forward. With that in mind, we are expecting inventory purchases to return to more normal levels over the next two quarters, which should help us with vendor allowances. SG&A declined an impressive 135 basis points from the prior year, of which 75 basis points were EBITDA expenses with the remaining reduction coming mostly from the integration costs in the prior year. The reduction in SG&A expenses resulted from reductions in store labor, other store expenses including supplies, repairs and maintenance, utilities, advertising, insurance costs and lower corporate administrative expenses. The reduction in labor and other store expenses was driven by the initiatives we introduced over the last several quarters, including the low volume store initiative, our best ball efforts, effective use of our new labor scheduling tool, and improved labor standards for certain store initiatives. Stirring it all together, our initiatives really helped us reduce SG&A and offset the impact of the difficult sales environment and the decline in our pharmacy margin in the second quarter. Unfortunately, when we prepared our plan and ultimately our guidance for the year, it was our thinking that we would get more of these savings to the bottom line. Looking forward to the remainder of the year and based on second quarter results, we believe that our initiatives will exceed our initial cost saving estimates by $50 million but pharmacy margin and front-end sales will continue to be difficult and will more than offset these incremental savings. In addition, we will begin to cycle the changes we put in place in the third and fourth quarter last year, making it more difficult to achieve the kind of year over year SG&A improvement that we obtained in the second quarter and making it harder to offset the front-end sales and pharmacy margin impact. The combination of all of these factors is causing us to revise the guidance, as Frank discussed. I remain convinced that the course of action that we are taking is the right one and despite the difficult pharmacy margin, if we can get our sales going, we really have positioned ourselves from a cost structure perspective to make the most of it. Finally, as you may have seen in our press release yesterday, Robert Thompson has been promoted to Executive Vice President of Pharmacy and Bill Wolf has been promoted to Senior Vice President of Pharmacy, Managed Care, and Government Affairs. I congratulate both of them on their promotions and I know they will make significant contributions as we go forward. Operator, we are now ready for questions.

(Operator Instructions) Your first question comes from Meredith Adler with Barclays Capital. Meredith Adler - Barclays Capital: Good morning. Can you hear me? A couple of questions. Could you talk a little bit more besides this change in AWP, which is impacting reimbursement rates, could you talk a little bit about kind of how we are seeing, what’s going on that’s making, putting pressure on reimbursement rates? And then also a little bit about why generic pricing or the availability of generic product is not as good as it was? John T. Standley: I’ll jump in there -- I guess a couple of things. I mean, we have reimbursement rate pressure every year, Meredith and there’s pressure from the third party side because obviously the PBMs are all competing with each other to get clients. There’s pressure from Medicaid, given tight state budgets and so that pressure has been going for several years. It continues this year. When I look at the level of reimbursement rate reduction, what we are seeing this year versus last year, it’s not dramatically worse. What’s really hurting us this year is one, the fact that we are having a little bit tougher time on the generic purchasing side really due to market conditions. We’ve had some consolidation in the industry. We’ve had some issues from the FDA where some source has been restricted, so it’s been a little bit tougher on the purchasing side and particularly as it relates to the second half of this year, I think a slowdown from our perspective in terms of the benefit of new generics, which are very important to pharmacy margin. So those are kind of the big factors that I think are sort of rolling around in the margin today. In addition, I think there’s been some ongoing impact from the Walmart $4 generic situation that just continues to evolve as it goes. Mary F. Sammons: And as John mentioned in his comments too, we’ve really grown our RX Savings program, which is a real benefit, gives a lot of value to our customers but it really has had pretty dramatic growth in our mix and I think that’s also a factor. Meredith Adler - Barclays Capital: Great, and then I have a question about the -- how much the reduction in SG&A is coming from lower fuel? And when do you think you will cycle that? Frank G. Vitrano: It’s actually a small amount. It’s actually a couple of million dollars and probably half of the reduction in overall fuel is due to the fact that we actually reduced our routes, so the number of miles we are driving is actually reduced. So the impact of fuel on a dollar basis is actually not that significant. Meredith Adler - Barclays Capital: And the change in routing will last for a while? Frank G. Vitrano: Correct, yes, that’s correct. Meredith Adler - Barclays Capital: Okay, great. That’s about all my questions for now. Thank you.

Your next question comes from Lisa Gill with J.P. Morgan. Lisa Gill - J.P. Morgan: Thanks very much and good morning. My question just has to do with today the initial jobs claims came out. You are talking about unemployment going forward and the future outlook that the consumer is still weak. Even in the last couple of weeks, are you starting to see things improve at all, number one? And then secondly, your private label grew 90 basis points -- is that a pretty good percentage of your sales? Could you maybe just talk about the difference in profit there because I would expect that if you are seeing more private label, it should actually drive more gross profit dollars? John T. Standley: It absolutely does. That’s exactly right and private label is much more profitable, almost 50% more profitable than branded products. So we continue to drive a strong margin there so that’s a real opportunity for us. In terms of recent trends, I think I mentioned while we are still negative on front-end comps, the rate of decline is about half of what it was last month so we’ve seen a little improvement here in -- or actually some big improvement here in September in terms of where front-end same-store sales are right now. Lisa Gill - J.P. Morgan: And don’t they get easier, John? I mean, don’t the comps get easier as we go through the next couple of months? John T. Standley: I think it’s when we get to November -- October was still reasonably staid. I think November it started to slow down. December was a difficult holiday. January actually picked up again, so it’s kind of up and down, I guess, as we look across the rest of the year. Mary F. Sammons: Yeah, I think from the unemployment standpoint, you still have an awful lot of states out there where you’ve got double-digit unemployment. I mean, even though the overall total may be hanging in there about the same level and until I think that unemployment picture lessens as an issue, I think you are going to have some pullback from the customer and they are buying lower priced items and they are going more towards private brand there, buying more on sale and we are anticipating that could impact holiday. Lisa Gill - J.P. Morgan: So when we think about the reduction in guidance, it sounds to me like primarily, I mean, we’re talking about unemployment and some of the issues on the front-end but it sounds to me primarily it’s coming at the pharmacy end, that it’s kind of a double whammy, right? So you’ve got a reduction in reimbursement and on top of it, you’ve got [inaudible], others that are in the market so you can't source the product as well, and so is that really where it’s coming from? It’s not so much on the front-end but much more on the back end? Is that how we should be thinking about it? John T. Standley: I think the double whammy comment is kind of right. I mean, it’s a combination of the two. If it was just one or the other, I think we’d be much closer to being in the range of our prior guidance but the combination of the two makes it very difficult to get there and on the other thing I’d mention on the pharmacy side, two other things -- one is the AWP rollback impact. It’s not just the supply, you know, the cost of generics, and two is just I think fewer new generics in the second half or really even this year versus last year that are going to put a little bit of pressure on pharmacy margin in the back end here. Mary F. Sammons: I think you can't underestimate when the new generics have cycled and they roll off and they are not in your numbers and from the -- or even at the highest profitability and they may now begin to get [macked]. That has a definite impact on your business and we will move through that in the next number of quarters and by the time you get towards the end of next year, you are going to start seeing a lot more newer generics come out and over the next few years, there are a lot of new generics so we have seen these sort of generic ups and downs as you sort of move through the cycle and there’s good news ahead. We just have to get through the next few quarters. Lisa Gill - J.P. Morgan: And could you just remind me, as we move through the cycle, is 180 days of exclusivity better for you or worse for you from a reimbursement profit perspective on generics? John T. Standley: I think it’s much better for us. Lisa Gill - J.P. Morgan: Okay, great. John T. Standley: If they are exclusive, that’s a good thing for us. Lisa Gill - J.P. Morgan: Okay, and it looks like there’s a number that the big ones will -- that will have exclusivity as we move through the next couple of years. Mary F. Sammons: Yes. John T. Standley: Yeah, and so I actually think the new generic environment generally is actually pretty good. We’re at a low point here I think right now but like Mary said next year and the two years after, they are actually quite strong so there is good news out there -- we just have to get there. Lisa Gill - J.P. Morgan: Okay, great. Thank you.

Your next question comes from the line of Mark Wiltamuth with Morgan Stanley. Mark Wiltamuth - Morgan Stanley: I wanted to ask a little bit about what you are seeing on healthcare reform. Obviously there’s still a lot of moving parts there but at least one of the bills out there has got some redefinition of the AMP and I wanted to get your thoughts on that and just anything else in the healthcare reform which you think may impact you on the pharmacy side. Mary F. Sammons: Well, as far as healthcare reform in the AMP, there is definitely a better definition of what it is in some of the proposed bills in that it’s really looking at retail pharmacy but what is still sort of the big question mark is where it all settles out around the multiplier on that AMP -- John T. Standley: A clearer definition. Mary F. Sammons: A clearer definition, yes. Mark Wiltamuth - Morgan Stanley: So the definition is better but the multiplier still kind of is at a level where you might not be very profitable. What level of multiplier do you think you need for the economics to work for -- Mary F. Sammons: Right now the industry is still doing some independent work around that and should have some information to share with legislators over the next few weeks. John T. Standley: But in addition to that, we don’t really know what AMP is. I mean, there’s a definition there but we have no way to compile that data or derive what that number is so we don’t honestly really quite yet understand what the implication of it is. Mary F. Sammons: Because it works off of at least in the new definition an average which again is a lot better than working off lowest price, which was where the deficit reduction act had it, so what’s in the healthcare reform bills is a little bit better but again until you really know what that multiplier is and what that average is likely to look like, you can’t really say what the multiplier needs to be. Mark Wiltamuth - Morgan Stanley: And do you feel like there is any threat to the Medicare/Medicaid margins in general in all this reform or is this just the thing we need to watch, the AMP part? Mary F. Sammons: Well, definitely that’s going to play a factor on margins, wherever that settles out at so I think we do need to be real aware of what’s going on there. The good news is that Medicaid will get expanded so there’s potential to do definitely more scripts but again at what cost will those scripts come to you and I think it’s really important that the industry stay on top of this and I think there’s been a lot of lobbying work going on and a lot of visits to the Hill, even a lot of them this week to really get those points across with the legislators. Mark Wiltamuth - Morgan Stanley: Okay. And any thoughts on what the impact could be for insuring the uninsured? Obviously that number moves also but any rough estimates there? Mary F. Sammons: I don’t know an exact number. I think it varies from bill to bill but it’s a sizable number of people that would be getting covered under any of the bills and it’s going to mean significantly more scripts and like I said, that’s good for all of us in this business. It again comes down to what the reimbursement around it and I guess the other factor that I think the industry is really working hard on has to do with the full MTM part of these healthcare reform bills and how you make sure that the role of the pharmacist is really better defined in any of the initiatives or processes that are put into place around that, so that there is really a good place for retail pharmacy in delivering this kind of healthcare. Mark Wiltamuth - Morgan Stanley: Okay, and just to switch topics, it sounds like you are going to stop reporting Brooks-Eckerd separately so this is probably one of our last shots to ask about it, any reasons why it’s not doing as well as the rest of the base right now and factors you are looking for it to improve and close some of that gap? John T. Standley: In my opinion, it’s really -- as Frank said, it’s really kind of more of a store by store thing at this point. There isn’t anything particular about Brooks-Eckerd that I could point you to that says it should be under-performing at this point. When we go through it, they are just isolated kind of store-by-store instances that we have to deal with as part of our under-performing store initiative. It’s not something germane to the whole group of stores so there’s some underperformers out there. We have to get those stores going the right way and I think that’s kind of more of where it is at this point than any other issue. Mark Wiltamuth - Morgan Stanley: Okay, thank you very much.

Your next question comes from the line of Bryan Hunt with Wells Fargo Securities. Bryan Hunt - Wells Fargo Securities: Good morning. I was wondering if you could explore the RX savings card a little bit further. It sounds like it created a little bit of margin degradation in the quarter. Could you talk about maybe one, the stickiness of that customer? And two, whether you are seeing a different average basket with that customer than your core customer, or your other customers that aren’t RX Savings customers? John T. Standley: In terms of the stickiness of it, it’s actually working pretty well. There’s a good core customer and obviously there’s some one-time use as well but there’s a pretty good core customer that’s using this thing. In terms of its impact on the margin in the quarter, where you have some impact on margin is from cannibalization of your cash business, which is at a higher rate, so you convert some cash customers but honestly in the quarter in terms of gross profit dollars, it drove growth and even if you took our cash business and our RX Savings card business and kind of added them together and compared it to the prior year just to kind of set a benchmark, the gross profit dollars from those two categories are up quite a bit on a year-over-year basis. So I’m not sure it’s not deteriorating our gross profit. It is a rate difference between cash and the RX Savings card but the RX Savings card represents more scripts today than we had in cash in the prior year, so I’m not sure I can quite get to where you want to go. And in terms of its overall rate, it’s a better rate than managed care, it’s a better rate than Medicaid, so it’s a good business for us. Bryan Hunt - Wells Fargo Securities: Great, and then second just looking a little bit more in-depth in the pharmacy, and this hit from AWP, maybe just to give us an idea what type of elasticity you may need on same-store sales to offset the AWP hit. Is there a way you can give us some metrics around that? Or is there a good way to look at that? I mean, you’re taking a $50 million hit. If you were to have a pick-up in pharmacy same-store sales, whether it was from -- Frank G. Vitrano: Here’s the dilemma on that -- I mean, that’s a great way to think about it. Certainly if we can drive script count growth, that’s how we can pay for it. The problem with it is it’s not changing access at all. It’s taking existing scripts and just reducing the rate. So there’s not a real -- there’s not a price play, if you will, as it relates to those -- that book of business. And it would be -- I don’t know if I know the number off the top of my head but it’s a reasonably good script count growth to cover that. Bryan Hunt - Wells Fargo Securities: Mid-single-digit, low-single-digit? Mary F. Sammons: I think it would be single digit. When you think about it across the total of all pharmacy business, but like John said this is just affecting your current business and if Medicaid itself grows and you can get a bigger share of that Medicaid business, it can help offset it but it’s a big [hit]. John T. Standley: I think it would take 2%, 3%, something like that, roughly as I’m sitting here just trying to come up with a number, somewhere in that range. Bryan Hunt - Wells Fargo Securities: All right. Thank you. I appreciate it.

Your next question comes from Carla Casella with [J.P. Morgan]. Carla Casella - J.P. Morgan: One question on the refinancing you mentioned on the AR facility, you didn’t mention as one of your options potentially issuing any second lien debt to take out accounts receivable. Are you limited on your second lien debt to the extent that you wouldn’t be able to refinance the full facility using second lien? Frank G. Vitrano: In terms of -- right now we would have on the first lien side to be able to do a combination of $320 million in first lien and then the balance would be second lien. And the reason why we would do a combination is really from a rate perspective we’d be able to get a better rate obviously on the first lien. Carla Casella - J.P. Morgan: Right but [inaudible] -- in terms of the bond market, if you weren’t to link the lien directly to the AR but to all of the assets, do you have additional second lien capacity to do like a second lien bond on the existing -- using the same assets that your first lien and second lien bonds are linked to? Frank G. Vitrano: As of today, we do not. What we do have is a carve-out which will enable us to re-fi up to the $570 million that we currently have with the accounts receivable. That’s the carve-out that we have. Carla Casella - J.P. Morgan: Oh, okay, great. And then on the store closings that are coming up, how many of those are in what you would consider non-core markets or markets where a low density -- I mean, are you tackling non-core markets by closing stores or are those still potential opportunities to sell some non-core markets? Mary F. Sammons: These stores are pretty well distributed. I mean, it’s not been done on a market by market basis. John T. Standley: It’s really individual store performance is really what’s driving it, Carla. Carla Casella - J.P. Morgan: Okay, so you still have -- do you have still some non-core markets where you are considering whether you would exit, like you did last year when you sold some stores to Walgreen? Mary F. Sammons: I think when we exited Las Vegas, that was really sort of a pretty definite non-core market for us. We had not invested any dollars in that market and really would have got out of it sooner. And I think we sold some last year around the San Francisco core area which again was a very limited number of stores and right now I would have to say we have really now what we non-core identified -- John T. Standley: Anything we did would be opportunistic at this point. Our real objective today is to take those kind of markets in those kind of stores and see what we can do with them. That’s what a lot of the low volume store and other initiatives that we have going are really making the best I think of those assets today. Carla Casella - J.P. Morgan: Okay, and then just one on the results. You mentioned that you are seeing some cost increases in certain areas in SG&A. Could you just give us some more specifics where you are seeing cost increases? John T. Standley: I think generic drugs we talked about just being a more difficult purchasing environment in terms of savings but I don’t think we talked about cost increases in SG&A. Mary F. Sammons: Yeah, that would not fall under SG&A. Carla Casella - J.P. Morgan: Okay, I must have misunderstood. So then do the -- then the gross margin decline, can you just talk a little bit about how much that is front-end versus pharmacy? I may have missed it, if you already talked about that. Frank G. Vitrano: Front-end is down 53 basis points and pharmacy was down 88, Carla. Carla Casella - J.P. Morgan: And back half, you are kind of looking for the same type trends? Frank G. Vitrano: Yeah, we’re not expecting to see any new change in that. Carla Casella - J.P. Morgan: Okay, and then one just last question on holiday -- how much are your total front-end merchandise is typically seasonal type and are you going to have the same type balance of seasonal versus non-seasonal this year as you did last? John T. Standley: I don’t know if I know a percent right off the top of my head but I would tell you as Mary mentioned our expectation is towards probably a little bit of a tougher selling environment this year for the holiday so we have bought a little less inventory for the holidays than we bought last year. Mary F. Sammons: And generally when there’s some uncertainty in the economy, these kind of seasonal buys do get cut back a little bit by the customer. They try to make do with their -- some of their seasonal décor kinds of things a little bit longer and -- Carla Casella - J.P. Morgan: Okay, great. Thank you.

Your next question comes from the line of John Heinbockel with Goldman Sachs. John Heinbockel - Goldman Sachs: A couple of things -- what do you think, if you picked the one or two items that would have the greatest impact between being at the low end of your range and the high end of EBITDA, what would they be? Mary F. Sammons: I think we mentioned in the comments the strength of the cough, cold, and flu season is a definite. I mean, [if we have a strong] season there, the closer to the high end we are going to be. John T. Standley: I think that’s a big one and John, if there were a couple of unanticipated new generics that popped on to the market, which does happen from time to time, I think that would be helpful to us, if we can make a little headway on the generic purchasing in the second half here, that’s going to help us a little bit too. So there’s some things I think that are involved between moving between the low-end and the high-end of guidance. John Heinbockel - Goldman Sachs: Because it sounds like there are more potentially positive surprises than negative surprises. Is that not right? John T. Standley: I’ll tell you what -- I think we made a lot of progress here and we’ve got to just keep focused on the top line at this point. It’s been a big SG&A push and we’ve got to shift gears a little bit here and work on the top line. Mary F. Sammons: I think the great thing is that there’s sustainable expense reductions because they are changes in how we operate, so any top line growth that we see above and beyond what we’ve got in this forecast pushes all of that to the bottom line and we are not done with the expense reductions either. There are more of the initiatives getting traction in the back half of the year. John Heinbockel - Goldman Sachs: And your thought on -- do you think holiday will be more promotional than it has been -- more promotional than the front-end has been up to this point and more promotional than last year, or what? John T. Standley: It seems to me like in terms of just seasonal, merchandise is getting much more promotional, the way people are using it and marketing it has gotten very promotional so I expect that to continue right into the holidays. John Heinbockel - Goldman Sachs: So when you think about having a softer holiday, it’s not so much from a consumer standpoint but more -- because your comparison is fairly easy, it’s more the level of promotional activity out there that will maybe -- John T. Standley: I think it’s going to be both. Mary F. Sammons: And I think you might see customers again gravitating towards some lower ticket kinds of items too and I think you may see that trend through the holiday. John Heinbockel - Goldman Sachs: All right. The $550 million of EBITDA improvement opportunity you highlight, how much of that do you think you will actually see this year? I assume you can measure that pretty cleanly. John T. Standley: Yeah, about $150 million. I am getting the nod from Frank, so I think I got it right. John Heinbockel - Goldman Sachs: Okay, so the end of the day, so that actually is coming -- as you say, that’s coming along as you thought it would, or a little bit better? Mary F. Sammons: A little bit better. John T. Standley: A little bit better. John Heinbockel - Goldman Sachs: And you still think about -- I think in the past you’ve talked about $100 million of EBITDA improvement per year, a lot of it coming from those non-segmentation. Do you still think that’s fair? John T. Standley: Well, I mean obviously we are off the mark just a little this year but I think we are in a little bit of a weird spot here on the pharmacy margin and so I think over time if we can get that situation stabilized, we’ll have a better opportunity to get those to the bottom line. I think there’s some important merchandising things that are coming next year, the loyalty program. If we can get the top line percolating and I think we will over time, it’s not an overnight kind of thing but I think if we can make some good gradual steady improvement here, I think we can get a lot of those dollars to the bottom line just based on where we’ve gotten the cost structure today. So I remain pretty optimistic about where we are going. John Heinbockel - Goldman Sachs: Okay, thanks.

Your next question comes from Ed Kelly with Credit Suisse. Analyst for Ed Kelly - Credit Suisse: It’s actually Jay standing in for Ed. Just to talk about the flu season a little bit, I know you mentioned that it could be a higher or a more strong flu -- within your guidance, are you thinking about a more normalized flu season? Because like you said, we’ve seen periods where it just really hasn’t kind of transpired into anything in pharmacy but is there a possibility that we could be thinking about an above average flu season where that could show up in your guidance? Is that something you are thinking about? Frank G. Vitrano: Right now, kind of looking at it, we’re assuming it’s going to be what I would call a normal flu season okay? To the extent that it gets ramped up a little bit, as we mentioned before, that’s what would get us to the higher end of the sales range. Mary F. Sammons: And I think we all know, any of us that have been in this business very long, that it’s very unpredictable how that season eventually turns out and I am not sure if there is what you would call a real normal season anymore. If you look at all the graphs from the last several years and often times if it starts good, it finishes low and -- and/or visa versa, or -- so it’s just difficult to call. Analyst for Ed Kelly - Credit Suisse: Right. Okay, and you mentioned kind of increasing file buys in the second half -- is this just more the activity that you really didn’t do in the first half or is this more opportunity that you are seeing out there? Frank G. Vitrano: No, we are going to look to allocate some more dollars. We originally talked about allocating only about $10 million in file buys and we are going to up that in the second half of the year. Analyst for Ed Kelly - Credit Suisse: Okay, and just lastly, I know you guys aren’t really exposed to a lot of the categories that grocers are, but is there any deflation in certain areas of categories that might be impacting the front end? And also, I don’t think you mentioned GNC or vitamins -- how was that category this quarter? John T. Standley: Vitamins were good, GNC continues to do well. I don’t think we see any material amount of deflation in any categories, so -- Analyst for Ed Kelly - Credit Suisse: Okay. All right. Thank you.

Your next question comes from Emily Shanks with Barclays Capital. Emily Shanks - Barclays Capital: Good morning. Thank you for taking the question. I had -- I was curious around the inventory. I know that you give a nice breakout of where gross margins went and why but I was just curious -- inventories have come down very significantly on a year-over-year basis. Is anything that’s going on in gross margin attributable to maybe -- I don’t want to use the word liquidation but maybe trying to move inventory faster than normal? John T. Standley: No. I mean, as I mentioned, promotional markdowns and all markdowns really are fairly steady on a dollar basis year over year. Where I think we were a little impacted by the inventory reduction was on vendor allowances. You know, we earn those allowances, a lot of it. We earn a lot of that, a lot of those dollars really based on purchases and so as we brought our inventory down, that’s really reduced our vendor allowances a little bit but in terms of total markdowns, we are pretty close to where we were last year in dollars. Emily Shanks - Barclays Capital: Great, and I don’t know if you want to give this level of specificity but Frank, I was just curious around the free cash flow, what amount of working capital source do you expect to see? I know a couple of calls ago you had indicated you were looking for a $240 million inventory reduction. I was just curious if you wanted to update us on that. Frank G. Vitrano: Right now, we are forecasting to have -- I think actually on the last call we talked about a $280 million benefit from kind of the inventory. Obviously that gets offset by -- the way we look at it obviously from an EBITDA perspective and the cash interest less the cash capital expenditures and we factor in what the closed store payments are, we as I mentioned on the last call we expect to be able to get about $280 million out and kind of the balance, kind of the math to get to the $200 million we referenced before it’s kind of other changes in working capital. Emily Shanks - Barclays Capital: Okay. And can you just remind me, what is the closed store payment running at? Frank G. Vitrano: About $100 million. Emily Shanks - Barclays Capital: Okay, great. And then if I could, just one last one, given there’s been a lot of speculation in the market -- can you just refresh us on where you stand around your West Coast operations and their continued inclusion? John T. Standley: Yeah, I’ll just jump all over that -- we just don’t comment on rumors and speculation. We just don’t do it. Emily Shanks - Barclays Capital: Okay. May I ask, I know in the past the statement around the West Coast operations has been that you guys, and correct me if I am wrong, but that you are open to having discussions with people if the potential arose to sell the operations but it would have to make sense from an economic and -- John T. Standley: I think what we said is we are going to always look at anything that comes up and make the right decisions for all of our stakeholders. That’s what we said -- not particularly any asset or any other thing, so again, our plan right now is to operate the assets we have. That’s where we are going, I think we said that and if something comes up, we’re going to take a look at it and do the right thing for all of our stakeholders but that’s it. Mary F. Sammons: And the west coast is a very strong market for us and we’ve made significant investment in it over the last number of years and continue to invest in it. Emily Shanks - Barclays Capital: Great. Thank you very much, guys. Good luck.

Your next question comes from [Karu Martesen] with Deutsche Bank. Karu Martesen - Deutsche Bank: Good morning. Just to clarify, I thought I heard you say that inventory purchases going forward would return kind of to more normal levels for the next two quarters, so that you can kind of catch up on those vendor allowances but then trying to reconcile that with lower seasonal orders for the holidays and expectations that holiday season will be weaker, are we kind of missing sales because we are under-inventoried right now and we need to play some catch up or what’s driving that? Frank G. Vitrano: What happens is if you think about if you get inventory down, I sell it but I don’t replace it. That’s how inventory declines. That’s just kind of a math thing. So that means I don’t have as much purchases, so that’s what brings inventory down. As inventory reaches the level that we want to have it at, including seasonal merchandise, then we now need to replenish at more normal level to hold it steady. That’s all we are saying. Does that make sense? Karu Martesen - Deutsche Bank: That makes sense, yes, thank you. And in terms of the closed store payments, the $100 m, what’s the expectation of your ability to either bring that down or do you think that with your rent reduction program, there’s an ability to help offset that? John T. Standley: If we don’t close more stores, it will come off naturally in about a 10-year cycle, [so that’s in your amortization], so as we implement various initiatives to bring it down, it will come down a little faster than that. Karu Martesen - Deutsche Bank: Okay, and I noticed that there were some modest amount of sale lease backs in the quarter. Is there a change in the market? Are you seeing opportunities there? John T. Standley: You know, these are one-off deals that come up for very specific reasons. The market in general is still pretty tough. Karu Martesen - Deutsche Bank: Okay. Thank you very much.

Your next question comes from Mary [Galeberger] with Imperial Capital. Mary Galeberger - Imperial Capital: Good morning. I wondered if we could talk about the opportunities going back to this $550 million EBITDA opportunity. You’ve realized 150 factored into the guidance for this year, the $900 million to $1 billion, so if we look out to 2010 and we assume that the consumer is roughly the same next year as this year but we are getting the benefit of the change in the generic reimbursement, meaning with new generics coming on the market we’ll have some positive effect there. I was trying to weigh in the potential opportunity looking out to next year and how we should look at free cash flow, particularly for CapEx and plans for CapEx next year. John T. Standley: I don’t think we are guiding quite that far out. I mean, I guess I would keep a little more general at it and just say I think again, from an SG&A perspective, we made a ton of progress here and if -- I think if we can make some progress on the sales side of this thing, even if margin rate stays where it is today on the pharmacy, we have the opportunity to I think still have a very good year next year and so we just have to kind of see how it plays out from here. I’m not sure I could do a lot more for you than that at this point. Mary Galeberger - Imperial Capital: And then what about plans for CapEx? Because it seems that at the $250 million level, it is kind of below what would be maybe normal maintenance. Is that fair to say? Or how are you viewing CapEx and plans for CapEx over the next few years? John T. Standley: Well, I think it’s mostly focused on maintenance is kind of where we are at -- it’s not that we are not doing maintenance CapEx at this point. I think we are at kind of those levels with a few nickels to spend on some other things. I think what we said before is that we expect as our results improve to gradually increase the level of CapEx over time, so we won't just immediately turn back on the [spicket] and be back to the kind of levels that we were last year or the year before but we would gradually work our CapEx up as our numbers improve. While we are a little bit off our EBITDA guidance, we made some huge progress here with working capital and so liquidity position is very strong and I think if that continues into next year, Frank is going to give me a few more dollars to spend. Mary F. Sammons: And you saw that we did increase what we were allocating to file buys, which also falls into our CapEx spend because it’s a strong return for us and we really still do need to get the investment out of all the dollars we spend over the last few years as we did the conversions and completed the integration. John T. Standley: But the file buys are not incremental CapEx. That’s within the existing budget. Mary Galeberger - Imperial Capital: Right. Okay, and what’s that being increased to? It’s going from $10 million to how much? Frank G. Vitrano: Unidentified right now -- it’s really what the opportunities that we think we can get this year. Mary Galeberger - Imperial Capital: And what are the transactions taking place -- is it like $10 per script? I know it kind of varies by the purchase but can you give us an idea of what the -- where the values are or what you are able to buy? Frank G. Vitrano: As we talked about before, it really varies based upon the location, whether the pharmacist is coming, the gross margin in terms of the scripts that we are acquiring, so the range is pretty broad. I mean, it can be $10 or $20 a script, so it’s pretty broad. Mary Galeberger - Imperial Capital: Okay, so it could be in the range of $10 to $20 per script but nothing below $10, right? Frank G. Vitrano: Who knows? Again, I’m just kind of [inaudible] generic ranges [inaudible]. John T. Standley: Chris does a great job. We’ll see what he can come up with. Mary F. Sammons: -- somebody wants to sell. Mary Galeberger - Imperial Capital: Okay, and then can you also talk about any variation in terms of generics -- I mean, geographic performance that you are seeing? Mary F. Sammons: We really don’t break it out by geography, Mary. Mary Galeberger - Imperial Capital: Okay. All right, great. Thank you very much.

Operator, we’ll take one more call, or one more question.

Your last question comes from the line of Neil Currie with UBS. Neil Currie - UBS: I just wanted to ask a bit more detail on the SG&A reduction, particularly in the labor side. You already have very low SG&A per square foot, probably the lowest in the industry and I am wondering first of all how you continue to get the savings and secondly, is there a point at which if you save anymore money, it starts to be at the detriment of customer service? And maybe this question applies to inventory as well. John T. Standley: Sure. I think that’s a risk and I think as we talked about a little bit of the sales situation that we find ourselves in today is probably just from those kinds of factors, so probably in some areas of the business we sort of touched at those levels. I mean, the enablers of really moving the SG&A downward have been driven by a number of initiatives that now that we’ve put in place, the store segmentation strategy was certainly a big part of that. But just a good labor control from the operations guys, use of the labor scheduling tool we talked about, so there’s a number of different initiatives that we have put into place over the last several quarters that are really taking hold as we look at SG&A expense in this quarter. And that is really what is driving it. Are there more things that we can do? You know, we continue to work our initiatives very hard and I think that’s really where most of our value will come for the remainder of this year and we are cognizant of the sales impact and as Mary mentioned in her talk, and I think I mentioned a little bit too, we are making some changes to some of the initiatives to try and mitigate some sales impact that we think may have happened from some of the things that we did. But that’s a risk. Mary F. Sammons: But from a customer service standpoint, we have seen our customer satisfaction improve. We measure it. We measure it by pharmacy and we measure it by front-end. We measure it by every store and we have been doing that now for -- I think this is our fourth year and the only time we ever had a dip in it was during a conversion integration time period and we’ve made steady improvements since then and [if that were] at our all-time highs in terms of pharmacy and really holding in there at front-end, so I think our associates are doing a great job of taking care of customers. So we are not going to let what we are doing from an SG&A standpoint get in the way of customer service. Neil Currie - UBS: That’s good to hear and would that the same apply to in-stock levels as well? John T. Standley: Theoretically it does. I mean again, we took a lot of SKUs out of this thing and we changed some delivery models and those kinds of things so certainly it’s not our intention to make customer service worse, so we’ve tried to kind of carefully monitor what’s happening and make adjustments as we’ve needed to but again, we may have had some impact on our sales here over the last couple of months. Mary F. Sammons: I think, John, you mentioned that we’ve raised [inaudible] where we needed to in some of these lower volume stores, ones that are on [inaudible] bi-weekly delivery and we are constantly doing some tweaking on that because we don’t want to be out of stock on the shelf. John T. Standley: And we have good measures in place to kind of watch it and see what’s happening so it allows us to make adjustments as we go. We look at service levels pretty carefully and -- Neil Currie - UBS: Great. It seems like you are doing a good job there. Just a final one was you talked a bit about the holiday season, expecting it to be very tough and partly because of [inaudible]. Are there any other behavioral changes you are seeing in shoppers at the moment that cause you to give those comments? John T. Standley: Well, they seem real value-driven. I mean, there’s no question about that. I mean, that’s probably the single biggest change that I can point to in terms of what’s going on. Mary mentioned some trading down in size, potentially, or cost, you know, that’s driving private label sales to go for the lower price point. I think those are the kinds of trends that we see. I don’t know if there’s anything else. Mary F. Sammons: No, those would be the biggest ones. You might see -- I think we mentioned this before, a little bit of impact on end-of-the-month traffic and I’ve always noticed it as a factor but it’s more noticeable in this kind of economy that pay day matters a lot more, mid-month and end of month. Neil Currie - UBS: And would you say these factors are stable or even accelerating? John T. Standley: Well, that’s a good question. I mean, I think what we’ve talked about is that September has gotten a little better than August was, so maybe stable is the right word but not improving. Neil Currie - UBS: Okay. Thanks very much. Mary F. Sammons: Thank you, all for being on the call. Again, thank you for your interest and we will talk to you again in a few months.

This concludes today’s Rite Aid second quarter fiscal 2010 conference call. You may now disconnect.