Matt Schroeder – Group Vice President Strategy, Investor Relations and Treasurer Mary Sammons - Chairman & Chief Executive Officer John Standley - President & Chief Operating Officer Frank Vitrano - Chief Financial Officer & Chief Administrative Officer

Bryan Hunt - Wells Fargo Securities Meredith Adler – Barclays Capital Carla Casella – JP Morgan Karu Martesen - Deutsche Bank Mary Gilbert - Imperial Capital Analyst for Lisa Gill – JP Morgan

Welcome everyone to the Rite Aid fourth quarter fiscal 2010 conference call. (Operator Instructions) I will now turn the conference over to Mr. Matt Schroeder, Group Vice President of Strategy, Investor Relations and Treasurer. Please go ahead, Sir.

Thank you and good morning everyone. We welcome you to our fourth quarter conference call. On the call with me are Mary Sammons, our Chairman and Chief Executive Officer; 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 fourth quarter results. Frank will discuss the key financial highlights and fiscal 2011 outlook. John will discuss our business and 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 would like to remind you that today’s conference call includes certain forward-looking statements. These forward-looking statements are made in the context of certain risks and uncertainty that can cause results to differ. Also we will be using a non-GAAP financial measure. The definitions of the non-GAAP financial measure along with the reconciliations to related GAAP measures are described in our press release. I would also like to encourage you to reference our SEC filings for more detail. With these remarks I would now like to turn it over to Mary.

Thanks, Matt and good morning everyone. Thanks for joining us today as we review our results for the fourth quarter and fiscal 2010 and provide guidance for fiscal 2011. As you can see from our release it was a difficult quarter with mixed results. We improved front-end margins as our team did a better job of managing seasonal inventory, buying down to match the decrease in demand for discretionary items that we have seen all year and once again our team did a good job of controlling operating expenses. But these were not enough to offset lower sales negatively impacted by a cautious consumer and a cough, cold and flu season that started out strong in the third quarter but died out in the fourth and continued pressure on pharmacy margins. With everyone’s focus on healthcare costs it is not surprising we continue to see increased pressure on prescription reimbursement. Frank and John will discuss the impact in greater detail in just a few minutes. As for fiscal 2010, last year was tough for all retailers as the economy and unemployment worsened as the year progressed. Despite these challenges we made a lot of progress transforming our business throughout the year. We are much more efficient operators today which will further benefit our bottom line when we start to see an economic recovery. Even though we held tight on expenses our overall customer satisfaction rating improved every quarter as our associates continued to take great care of their customers. We delivered free cash flow for the first time in three years and started to reduce debt. Thanks to our working capital initiatives we start the new fiscal year with a strong liquidity position enabling us to make strategic investments in initiatives for long-term growth. These include the upcoming national launch of our new customer loyalty program called Wellness Plus, the training of additional immunizing pharmacists to get ready for the next flu season and a new private brand architecture to increase these higher margin sales. You will hear more details a little later from John who has done a great job leading the successful piloting of these growth initiatives as well as launching our segmentation strategy to improve the productivity of our diverse store base. These accomplishments are just some of the reasons why as we announced in January that John will become CEO of Rite Aid at our annual meeting in June and I continue as Chairman. As I have said before, John brings the right combination of operational knowledge, hands-on management and financial orientation to successfully lead our company for the future. This morning we also gave guidance for fiscal 2011 which you can see from our release. We remain cautious about the overall economy with unemployment still around 10% and under-employment even higher which also has a big impact on discretionary spending. We expect customers will continue to be focused on getting the best value for every dollar in a competitive retail environment and we expect pressures on pharmacy to continue as both private and government payors search for more ways to cut healthcare costs. Our guidance also includes investments we will be making in the programs designed for long-term profitable sales growth that I mentioned earlier. Our top priority this year is growing profitable sales. Before I turn it over to Frank let me just add a few comments about the recently passed healthcare reform. We expect the additional 32 million people who will be covered by health insurance in 2014 to be good for our business as will the closing of the donut hole in Medicare Part D which begins with a $250 rebate this year, expands to 50% brand drug coverage in 2011 and is eliminated completely by 2020. We also expect the additional fee for service opportunities for medication therapy management that are in the bill to benefit us long-term. The key will be making sure we are fairly reimbursed for those additional prescriptions and services and making sure our law makers understand the billions of dollars our pharmacists can save on long-term healthcare costs by making sure patients take their medicines correctly. Now I will turn it over to Frank. Frank?

Thanks Mary and good morning everyone. The fourth quarter continued the challenging sales and margin trend experienced all year. On the call this morning I plan to walk through our fourth quarter financial results, discuss our liquidity position and finally we will discuss our fiscal 2011 guidance. This morning we reported revenues for the quarter of $6.5 billion compared with $6.7 billion for the fourth quarter last year. The decrease in total sales was primarily driven by a reduction in total store count as well as soft front-end and pharmacy sales. In the quarter we closed 22 stores and year-to-date we closed 138 stores. On a year-over-year basis we had 121 fewer stores. Same store sales declined 240 basis points reflecting soft front-end and pharmacy sales with pharmacy scripts down 170 basis points. Front-end same store sales were down 260 basis points and pharmacy sales were lower by 240 basis points during the quarter which reflect the economic environment and a weak cough and cold season. Pharmacy sales included an approximate 202 basis point negative impact from new generic drugs. Adjusted EBITDA in the quarter was $205.1 million or 3.17% of revenues, $65.5 million below last year’s fourth quarter of $270 million or 4%. The results were driven by lower sales and lower pharmacy gross margin dollars partially offset by lower SG&A dollars. SG&A dollars adjusted for non-EBITDA expenses were $33.5 million lower but 33 basis points higher as a percent of sales as total revenues were down $245 million quarter-over-quarter. Net loss for the quarter was $208.4 million or $0.24 per diluted share compared to last year’s fourth quarter net loss of $2.3 billion or $2.67 per diluted share. The decrease in net loss was driven by no goodwill impairment charge in the quarter compared to the $1.8 billion non-cash goodwill impairment charge we took last year as well as a non-cash lease termination impairment charge of $77 million this year compared to $104 million in the same period last year and lower income tax expense of $267 million. Without these non-cash charges, last year’s fourth quarter net loss was $116.9 million or $0.14 per diluted share. The lease termination charge includes 10 stores for which we included a closing provision during the fourth quarter. The LIFO charge of $44.1 million is lower than last year by $50.4 million last year we experienced higher front-end inflation. Higher interest and securitization expense of $141.7 million which is an $18.4 million increase over the $123 million last year which resulted from the refinancing of our September 2010 maturities. Non-cash interest, primarily debt issuance, cost amortization and worker’s compensation interest accretion was $11.5 million. The total gross margin dollars in the quarter were $48.4 million lower than last year’s fourth quarter but higher by 22 basis points as a percent of sales. FIFO gross margin dollars were lower by $98.8 million or 41 basis points. Front-end dollar margin was favorable by $1.2 million and 142 basis points despite an $85 million sales decline and an increase in the percent of items sold on promotion. The improvement in front-end margins reflects a $24 million reduction in seasonal promotional mark downs. Our pharmacy margin dollars were lower by $103 million or 1.43% of pharmacy sales driven by lower third-party pharmacy reimbursement rates as well as lower Medicaid reimbursement rates which are largely influenced by the AWP roll back which went into effect in September of last year and is costing us approximately $1 million per week in reimbursement on Medicaid scripts. The lack of new generics and less benefits from generic price cost improvements have also impacted the numbers. The margin dollar shortfall was partially offset by lower distribution center costs and lower front-end and RX shrink. Product handling and distribution center expense as a percent of sales was essentially flat to last year. Selling, general and administrative expenses for the quarter were lower by $58 million or 6 basis points higher as a percent of sales as compared to last year. SG&A expenses not reflected in adjusted EBITDA were lower by $22.8 million or 27 basis points primarily driven by lower depreciation and amortization and the proceeds of a generic drug litigation settlement in the prior year. Adjusted EBITDA SG&A dollars which exclude specific items, the details of which are included in the fourth quarter fiscal 2010 earnings supplemental information which you can find on our website, were lower by $35.5 million or 33 basis points higher as a percent of sales. This reduction in dollars reflects the various cost saving initiatives we have implemented over the past 12 months as well as store closings. The SG&A improvement was driven by better labor control and lower field controllable costs including utilities and supplies. Corporate expenses were also lower. As I mentioned on the third quarter earnings call we began to cycle the various expense initiatives that we introduced in the fourth quarter of fiscal 2009 and it was more difficult for us to fully offset the gross margin shortfall with SG&A reductions as we have been able to do in the last three quarters. As previously mentioned our liquidity remains strong as a result of the various working capital initiatives and lower capital expenditures. As compared to the fourth quarter of fiscal 2009 FIFO inventory was lower by $186 million of which 60% is due to the initiatives and the balance is due to store closings. FIFO inventory decreased $297 million from the third quarter, reflecting normal seasonal sell through. Our cash flow statement results for the quarter show net cash from operations in the quarter as a use of $100 million as compared to a source of $325 million in last year’s fourth quarter. Prepaid rent, interest expense, as well as the timing of purchases and accounts payable payments at the end of the quarter influenced the balance. Year-to-date net cash provided by operating activities was a use of $325 million of cash which reflects the $555 million repayment of the accounts receivable securitization facility. Our day’s payable outstanding in the quarter was 22 days which compares to 23 days in the same period last year. Net cash used in investing activities for the quarter was $36 million versus $54 million last year. This reflects our proactive plans to trim CapEx. It also includes proceeds from script file sales and the proceeds of an online auction of surplus property which netted us about $10 million during the quarter. Year-to-date net cash used in investing activities was $120 million. During our fourth quarter we opened one new store, relocated one store, remodeled one store and closed 22 stores. Our cash capital expenditures were $63.4 million. For the full-year we opened 17 new stores, relocated 41, remodeled 8 and closed 138. Now let’s discuss liquidity. At the end of the fourth quarter we had $945 million of total availability including $936 million under the credit facility and $8.5 million of invested cash. We had $80 million of revolver borrowing outstanding under our $1.75 billion senior secured credit facility with $159 million of outstanding letters of credit. Today we have $1.2 billion of liquidity. Total debt including accounts receivable securitization from last year was lower by $189 million. Now let’s turn to our fiscal 2011 guidance. We developed our plan based on current trends and a continued difficult economy. The company expects total sales to be between $25.2 billion and $25.6 billion and expected adjusted EBITDA to be between $875 million and $975 million for fiscal 2011. Same store sales are expected to be in a range of a decrease of 1% to positive 1% over fiscal 2010. Net loss for fiscal 2011 is expected to be between $355 million and $570 million or a loss per diluted share of $0.41 to $0.65. Our fiscal 2011 capital expenditure plan was increased to $250 million with a $50 million allocation for File Box. We are not planning to complete any sale leaseback transactions in the year. We expect to be free cash flow positive for the year and we also expect to close a total of 80 stores. The adjusted EBITDA guidance includes the startup costs and discounts associated with the chain-wide rollout of the Wellness Plus customer loyalty program. In addition to those costs, generally accepted accounting principles require us to defer a certain portion of the revenues generated by customers as they qualify for their tier discount benefit. A silver member must earn 500 points while a gold member must earn 1,000 points. Once a Wellness Plus member qualifies as a silver or gold member and begins to use their tier discount we are permitted to recognize the deferred revenues as income to offset a portion of the tier discount. Within each customer qualification and discount use period which can span multiple calendar years and fiscal years the net impact of these adjustments has no effect on the income statement as the entries will net to zero over time. Included in our net income guidance is a Wellness Plus deferral provision range of $30-40 million which covers fiscal 2011. Fiscal 2012 will have an additional charge to reflect the full 12-month qualification period. Our bank credit facility has a fixed charge coverage ratio test which increases from 1.05 to 1.10 beginning in the first quarter of fiscal 2011, the impact of which would limit our ability to access the last $150 million under our facility. Given our range of guidance we may be restricted during the course of the year. Based upon our liquidity position which we expect to remain strong throughout the year we do not expect this restriction to have any impact on our business. Finally, we have not factored in any impact of the recently passed healthcare law. However, I can tell you the company does not have any significant post-retiree prescription exposure. That completes my portion of the presentation. Now I would like to turn it over to John.

Thank you Frank. It was a very challenging quarter but a productive fiscal year with a number of exciting initiatives launched that will bear fruit over the next couple of years. Before I get into this year’s accomplishments and next year’s business plan I would like to make a couple of comments about the quarter. The fourth quarter was a difficult quarter for us from a sales and pharmacy margin perspective but we did a good job managing expenses and improving front-end margin and we saw sales improvement in March. Both front-end and pharmacy sales were impacted by a very soft flu season, bad weather and a generally weak economy. As announced this morning, March front-end sales have improved significantly with front-end same store sales increasing 1.8% versus the 2.6% decline last quarter. In March we saw significant improvement in almost all of our core HBC and beauty categories and many of our consumable categories. Front-end sales benefited in a range of 50-75 basis points due to earlier Easter this year. Script count declined 1.2% in March, a modest improvement from the fourth quarter decline of 1.7%, good improvement from February’s 3.4% decline as we are almost done cycling the impact of flu on prior year script count. As Frank and Mary both mentioned front-end margin improved in the quarter due to a much better job this year managing seasonal inventory although we do see some additional sales opportunities for next year. Improvements we have made to our regular inventory management processes including lower cost on reverse logistics also helped front-end margin. Pharmacy margin declined 142 basis points in the quarter which more than explains our year-over-year decline in fourth quarter EBITDA. The decline is primarily due to less gross profit from new generics and lower reimbursement rates on both brand and generic drugs. New generic profitability declined because of our fewer new generics and this year’s new generics had less margin than last year’s. Brand Medicaid reimbursement was impacted by the AWP rollback and generic drugs that were new last year were heavily maxed by government and managed care payors this year. We made some progress reducing generic costs although we continue to see some cost increases on single source generics. Unfortunately reimbursement rate reductions far outweighed our cost reductions. Generic penetration did increase by 2.94% in the quarter but a good portion of that was due to a decline in brand drugs that was not offset by generic conversion. We did see continued strong growth in our RX savings card with total members reaching 5.1 million members during the quarter. We continue to do a good job with SG&A, reducing SG&A dollars by $35 million compared to last year. As a percent of sales we saw a little bit of reverse leverage but did a pretty good job pulling the line in a difficult sales environment. Store and administrative labor costs as well as store expenses were all well managed in the quarter. Unfortunately, and unlike the last few quarters, our improvement in front-end margin and good work with SG&A were more than offset by our pharmacy margin decline. Although the quarter was difficult there were some significant accomplishments in 2010 including the completion of the refinancing of $2.5 billion of near-term maturities, giving ourselves time and liquidity to execute our turnaround. We reduced our SG&A expenses by over $240 million for the year by becoming a much more efficient operator. We developed and tested our Wellness Plus customer loyalty program that will rollout chain-wide early this fiscal year. We launched our segmentation initiatives including different operating models for different types of stores which will allow us to grow sales and become more efficient over the next few years. We reduced our FIFO inventory investment by $186 million. We completed a new pharmaceutical supply agreement which reduced our branded drug costs. We grew our script count for the year in comparable stores by 81 basis points. As I mentioned earlier we grew our RX savings card enrollment to over 5.1 million members. We made our distribution network more efficient by rationalizing the network and improving operations. We reduced our debt by $189 million and we improved our liquidity to $1.2 billion as of yesterday. Looking forward to fiscal 2011 I am very excited about the initiatives we have underway especially our Wellness Plus card based customer loyalty program. Wellness Plus has been in four test markets since last October. Over 50% of front-end sales and 40% of prescriptions in the test markets are now on the card and consumer research tells us the program has been very well received. If we extrapolate enrollment from the test markets to the entire chain we should expect we will have in a range of 15-20 million members enrolled at the programs maturity. The information this program is providing us has already validated our assumptions about the value of loyal customers and our program is uniquely designed versus other retail programs to attract and retain loyal customers through tiered rewards with increasing levels of front-end discounts and health benefits based on the dollar amount of front-end purchases and the number of scripts filled. The program will rollout chain-wide early in the fiscal year with the largest marketing expenditure we have made in several years. This program should really help us grow both front-end and pharmacy sales as it gains traction throughout the fiscal year. We will continue to rollout our segmentation based initiatives in fiscal 2011. While there are still significant segmentation based cost savings opportunities for our low volume and high volume stores like the [best ball] opportunity, we will also focus on the merchandising and sales growth opportunities. From a merchandising perspective we will be working on the low volume stores, urban stores and health and wellness stores. We will also add 105 new GNC departments in existing stores. From a segmentation sales growth perspective Wellness Plus will really help us attack those stores where we are underpenetrated on either the front end or the pharmacy. Another exciting initiative for fiscal 2011 is the expansion of our immunization program. We will increase the number of Rite Aid immunizing pharmacists from 2,000 in fiscal 2010 to over 6,000 in fiscal 2011 which will give us a strong presence in most of our major markets. A very important initiative this year is the rollout of our new private brand architecture that will occur throughout this fiscal year and into next year. The new architecture will include the following new brands; Rite Aid pharmacy will be the new brand for health products. Renewal will be the new brand for beauty products. Pantry will be the new brand for food and certain consumable products. Home will be the brand for household goods. Tugaboos will be the brand for baby and Simplify is our new price fighter brand. All of our existing private brand products with few exceptions will be migrated over time to these new brands with new, more contemporary packaging. This new brand architecture combined with strong promotional support, good price positioning and continued development of new items will help us grow private brand sales and meet the needs of today’s consumer. Our continued focus on improving customer service should help us grow sales this year. In addition to our ongoing support level initiative which allows us to track and improve customer service on a store by store basis we are working to improve in-stock positions primarily around advertised item and planogram changes. We also have an initiative underway called Product Simplification that is helping our associates find better, more efficient ways to operate our stores which should help improve conditions and help them provide better customer service. A big focus area for them will obviously be pharmacy margin. It will be a soft year again for new generics based on what we know today, particularly in the first half. In the second half new generic profitability will be much closer to fiscal 2010. It is important to note that often new generics come to market unannounced so we will probably get some help along the way. On the reimbursement rate side we will continue to work with our managed care providers to try to find some relief. We are working very hard on the purchasing side, looking for opportunities to lower our generic costs and we have the benefit of our new supply agreement with McKesson which will help us with our brand costs. Because there were fewer new generics for fiscal 2010 we are expecting some moderation in reimbursement rate reductions. The other big thing we will do to improve pharmacy profitability is grow script count by continuing to improve customer service, growing our RX savings program, purchasing script files and attracting and retaining high value pharmacy customers which takes us right back to why Wellness Plus is so important. Ultimately, if we can differentiate ourselves with pharmacy service and wellness plus and we can gain some leverage with managed care because employers will request that Rite Aid be included in their networks in order for us to have our services and Wellness Plus benefits for their employees. In terms of cost savings, the segmentation and product simplification initiatives I have already mentioned will help us to continue to successfully manage and reduce our costs. In addition our indirect procurement group has helped us reduce the cost of merchandise and non-merchandise purchases. For the year we are expecting our initiatives are worth about $340 million in EBITDA, most of which will be offset by cost increases and pharmacy reimbursement rate reductions which is why the midpoint of our EBITDA guidance is flat to last year. Included in our cost increases are the expenses that we will incur to rollout Wellness Plus. This year’s $340 million initiatives, approximately $100 million is from our segmentation goal of $550 million. We estimate we obtained $150 million of the segmentation goal in fiscal 2010 leaving us with a $300 million opportunity after this year’s savings are achieved. With that we are now ready to take questions.

(Operator Instructions) The first question comes from the line of Bryan Hunt - Wells Fargo Securities. Bryan Hunt - Wells Fargo Securities: I was wondering when you look at your segmentation opportunities for 2010 where do you feel like the biggest opportunities are? Can you talk about again what you achieved in 2009 from segmentation and where the biggest gains were from?

Sure, we will start with fiscal 2010 or calendar 2009. We made our biggest gains in really working with our low volume stores. We made significant structural changes in the way we operate those stores and there were significant cost savings and increases in profitability in those stores. If you exclude the pharmacy margin impacts we made a ton of headway there. We also started to make some progress on our higher volume stores with our best ball initiative but we still have a lot of ground to gain there. Where some of the biggest segmentation opportunities are still at is related to sales. I think we talked a lot about we have groups of stores that are underpenetrated either at the front-end or pharmacy and this is where Wellness Plus really matches up nicely with where the opportunity is for segmentation because it really provides us some powerful information to work with a situation where maybe we have a strong front-end and a weak pharmacy or vice versa to really see if we can connect with the consumer that is already coming to that store and get the rest of the business. That is where there is I think a really huge opportunity coming up for us. Obviously we have to get Wellness Plus rolled out and we have to get it engaged and that will take the better part of a year to do but that will be a big part of the segmentation this year. In addition to that there are still some cost savings opportunities that come out of segmentation. There is still some work to do with our lower volume stores that we are very focused on. So we have that and there are some merchandising opportunities where we are really segmenting stores not just by kind of stores we have but by the customers that the store has. I think when you throw all those things together we will see a lot of opportunity with our segmentation based initiatives. Bryan Hunt - Wells Fargo Securities: As a follow-up, looking at Wellness Plus and where you tested it, what type of tangible benefit did you receive in terms of sales momentum and profitability enhancements? Were there give-aways in terms of improved volume and what you are giving back to the consumer, do you have a way to eat away from the margin generated from excess sales?

We are going to tell you right now the margin on a rate basis in the Wellness Plus markets is very consistent with where it was before we rolled it out. In terms of sales growth, initially we didn’t see a lot of sales growth. I think we are starting to get a little bit of momentum in those markets today. There are a couple of dynamics to this thing. First of all the way the card program works you do need the card to get our other discounts. So there is some savings that occurs on the mark down line because you need the card to qualify for ad discounts and other discounts we have in-store. That really gives us money to invest with our loyal customers. The second aspect is our vendor partners have really kind of jumped onto this thing and are going to support this program and that is also going to provide us additional monies to invest in sales growth. So I think as the thing plays out over time what you are going to see is it is going to give us the opportunity to again really connect with that loyal customer and attract more loyal customers and we are going to have some savings created by the program and additional vendor funds to invest and we are going to use all that to really try and attack sales.

The next question comes from the line of Meredith Adler – Barclays Capital. Meredith Adler – Barclays Capital: I would like to start by talking a little bit about reimbursement rates in generic and maybe you could talk again about what the impact of…I think you talked about that coming very quickly and that you also weren’t seeing the kinds of reductions in generic costs you had been seeing, I guess in part because there were just fewer generics. But maybe you could talk about that a little bit?

I think there are a couple of different dynamics that are moving around here inside the pharmacy margin. A year ago in the fourth quarter we had fairly strong profitability from new generics. New generics give us gross profit that really subsidizes quite frankly poor reimbursement rate on other drugs. It all balances out at the end of the day to give us the margin that we have. As our new generic profitability has declined year-over-year we have less profit from new generics this year we have seen reimbursement rates that are equal to or exceed reimbursement rate declines we had last year. So we no longer have as much profitability from new generics to help subsidize those reimbursement rate reductions. That is a big factor that is impacting our margins today. On top of that while we did make some substantial savings on the cost side we also saw some costs increase. There are some generics that actually kind of went backwards and became single source. A couple of big ones in particular that cost us a lot of money. So the combination of those dynamics has really put a lot of pressure on pharmacy margins. Then you have the AWP rollback where with Medicaid scripts we really didn’t make whole and that cost us some money in the quarter as well. You start storing all of those things together and you get kind of difficult answer we got this quarter on the pharmacy margin. Meredith Adler – Barclays Capital: Would you say all the commercial payors made you whole on the AMP rollback?

For the most part. There were a couple that didn’t but 99% of them did. Meredith Adler – Barclays Capital: You made another comment about with the new loyalty program you think that will create excitement amongst employees and that will give their employers a reason to include you in their network. Has that been an issue or do you get lower reimbursement because for some reason Rite Aid is not as popular as other pharmacies?

I don’t know what everybody else’s reimbursement rate is. My goal is to improve my existing reimbursement rate. I am not aware that my reimbursement rate is worse because we are not popular because I think we are popular. We have millions and millions of customers and obviously we do a lot of business. The issue for us is to try and gain more leverage with managed care pricing. I think the way we do that is provide the best service we can at retail and having a very compelling offering. That creates demand. Demand works its way backwards up through the supply chain and hopefully encourages [TDM]s to want to have us in their networks which I think they do but it creates more demand for that which hopefully in the long-run gives us more leverage to demand things to be included. That is where we need to get to because the pricing equation today doesn’t seem to be working that good for us. Meredith Adler – Barclays Capital: Switching gears a little bit, you had an initiative this past year to address real estate costs for some of your most underperforming stores. Could you comment about how that went and what you are thinking about those most underperforming stores? You closed over 100 this year and you are talking about 80 this coming year but I think there were more than that you were addressing real estate costs on.

Initially we looked at a population of about 500 stores that kind of fit that bill where they were underperforming stores and we were looking at a number of different ways in order for us to kind of turn around the profitability some of which was operational. We also looked at the other expenses on the P&L and one of which was obviously what we were paying in rent. We embarked on an effort to go back to our landlords and look for rent concessions. We were able to achieve rent concessions in about 200 locations which will have again our annual rent is just over $1 billion so it is not going to have a huge impact on a $1 billion number but we are going to get savings here of $20-25 million. Meredith Adler – Barclays Capital: Has the profitability of all the initiatives in total reduced the number of stores that are underperforming at this point?

I would say yes to that. There is always going to be a group of stores that are on the list, if you will. Again there are a lot of reasons why you get on the list. Maybe some recent sales performance. It could be some competitive hits. There is obviously a whole host of reasons here. Obviously pharmacy margins. But we are continuing to monitor a group of stores here. We do it on a quarterly basis to see what is the best way to address some of the shortcomings in the profitability of that store. Some might ultimately lead to a closing and we do have a provision in our guidance today to close up to 80 locations. Meredith Adler – Barclays Capital: One final question about pharmacy file buys. Did you buy any files in fiscal 2010? It sounds like you are going to buy about $50 million next year.

We did. We probably spent in file buys about $10-11 million.

The next question comes from the line of Carla Casella – JP Morgan. Carla Casella – JP Morgan: One question on the Wellness Plus program. How much of the SG&A costs do you expect to be for that program?

We didn’t give you that number. We will talk about it on a post mortem basis but we are not going to signal ahead what we are doing. Carla Casella – JP Morgan: The vendor partners you talked about it sounds like that is going to reduce your advertising budget as you get your vendor partners to spend some of that for the Wellness Plus program. Is that correct?

You said reduced our advertising. They are going to invest to support price and other promotions to drive sales. Carla Casella – JP Morgan: How much of your $1 billion of rent is for dark stores?

The cash on the dark stores is about $100 million. But that is not in the rent expense because we accrued up that liability. Carla Casella – JP Morgan: I don’t think you disclosed the capacity you have to issue additional first or second lien debt or any debt that would be senior to the first and second lien debt.

We basically don’t have any additional capacity to issue secured debt once you assume a full draw on the revolver. Carla Casella – JP Morgan: You mentioned you expect to generate cash flow for 2011. Do you have a debt reduction target or leverage target?

We clearly do expect to generate some free cash flow and the use of that is to pay down debt. We haven’t necessarily disclosed a number yet. Carla Casella – JP Morgan: Following up on Meredith’s question on gross margin, has it changed…If you look at one generic drug in particular does the margin trend over time, has that changed in this environment? Are there some things where the generic margins came out lower than they were initially and declined faster? Is that what is going on?

Yes. Carla Casella – JP Morgan: That is something that should continue, correct?

Yes.

The next question comes from the line of Karu Martesen - Deutsche Bank. Karu Martesen - Deutsche Bank: In terms of pharmacy reimbursement rates do you still feel the full-year impact is going to be about $52 million from the AWP rollback in September?

Yes. It is right around that range. Karu Martesen - Deutsche Bank: For the quarter what was the weather impact from the snow storms that rolled through the Mideast and mid-Atlantic?

I don’t know if we can quantify an exact number but if you look at February sales they were pretty tough and a good portion of that was driven by weather. Our business is a little different than the supermarket business. Where some of us were a few years ago, everybody shows up before the storm and they kind of buy and move sales around. Our business is a little bit more of a convenience business and a lot of markets if you lose it you don’t get it back. So it is a little bit different that way.

We look at February and basically went back and took a look at the 3-4 storms we had on the East Coast and if you took out the day before, the day of and the day after the storm and re-ran it, it probably impacted the front-end same store sales in the month of February probably 200 basis points so it was pretty significant. Karu Martesen - Deutsche Bank: The guidance range you have given is a fairly wide guidance range. The last couple of years we have gone back and revised those numbers. What is your confidence level with the guidance as you kind of look out for the year?

I will tell you I feel very good about where our retail business is. If you look at this last year had pharmacy margin been more stable we probably would have exceeded the guidance that we gave. That is going to be the same challenge that we face this year. The volatility in our number right now is really driven around pharmacy margin number. I am confident we are going to continue to make great progress here with our retail business. It is really what the pharmacy profitability is going to be and a little bit of the unknown for us is we don’t always have visibility into what we are going to get reimbursed. It is a difficult thing to get insight into. That is why we have a range around this and that is what we are sort of fighting as we go through the year. Karu Martesen - Deutsche Bank: With that reduced visibility on pharmacy margins going forward, do you still feel the valuation of the script file is still in the $10-20 per script range?

That is a great question and we are kind of staring at that too. I think we kind of have to see that develop this year. We are working really hard on the cost side and I think we are going to make some progress there. Then maybe restore the profitability of the value of the script that declined a little bit this year but we just have to see how that plays out. Karu Martesen - Deutsche Bank: We have seen some large acquisitions take place in the market. What are your thoughts on going forward in terms of your network both east coast and west coast and the competitive pressures as new people enter into markets?

We are excited about the network we have and our challenge is to make that network work. Having said that and we have said it 1,000 times before we are going to do what makes sense and what is right for all of our stakeholders. That is our plan.

The next question comes from the line of Mary Gilbert - Imperial Capital. Mary Gilbert - Imperial Capital: Could you give me some idea of how we should look at working capital for this year? Are there opportunities to generate cash? Where are you in your supply chain and efficiencies?

From a working capital perspective we still think there are opportunities for us to take additional inventory out of the system. We are targeting somewhere around $100-110 million of additional inventory we can take out of the stores and/or distribution centers. Mary Gilbert - Imperial Capital: For this year?

For this coming year. Mary Gilbert - Imperial Capital: So we should look at working capital as being a source of cash. Just following up on the dark rent of $100 million, I thought that number was coming down by about $10 million annually. I thought it was going to be somewhere around $11 million for this year. I was thinking it was going to be more like 89?

What happens is from year to year it declines as the fleet payments roll off but as you recall we did add 138 stores into the reserve so that kind of offset the decline. Mary Gilbert - Imperial Capital: So in looking at fiscal 2011 we are still looking at $100 million cash impact from dark rent?

Correct. Mary Gilbert - Imperial Capital: In looking at some of the initiatives you are working on this year, the investments you are making and the $340 million EBITDA opportunity you are talking about, is this something we will see in fiscal 2012?

Our goal is to get the 340 in this fiscal year. The challenge we face is your cost decrease is offset and really what is going to happen in pharmacy margin is the two things offsetting that in the guidance. We think there are significant initiatives for 2012. There is still a big chunk of our segmentation we will get in 2012 and some other things we are working on to help 2012 as well. Mary Gilbert - Imperial Capital: Based on that do you think we could get to over $1 billion particularly with the tailwinds from new generics?

That is a good question. We are going to at some point give guidance for 2012. I [bet] it [isn’t] real positive in 2012 that is going to help us on the pharmacy margin side. We are hopeful that is going to be a good year but I don’t think we are ready to give guidance on it yet. Mary Gilbert - Imperial Capital: What should be thinking and what are some of the critical issues coming out of the healthcare bill and what the impact could be for Rite Aid?

I think if you think about what is happening with getting 32 million more people insured in 2014 obviously we think that will be good for the business long-term. That doesn’t happen for a few years here. The biggest positive impact for us. A few things that happen right away where you have the $250 credit to help start closing the donut hole this year. The 26-year-old’s getting to stay on their parent’s policy. So those are small things that will help this year but the big win is really three years from now. The other sort of not totally known impact is what is going to happen with AMP going in. We know it will be definitely a hit to reimbursement compared to what we are experiencing today but it is much better than what was going to happen to pharmacy if the whole DRA had gone into effect had the injunction stopped. That we won’t know fully the impact until the CMS gets the rules established for the manufacturer’s reporting their AMP to be able to come up with the average weighted AMP. I think the language in the house bill was certainly the best in terms of language out there for pharmacy at the no less than 175% of the average weighted AMP and we expect that at the earliest that would come into play end of September or October 1 but potentially even longer than that. It all depends on how long it takes them to write the rules. I think Frank or John mentioned in their comments that we don’t really have any negative impact from the pension issue so that is a positive for us.

The next question comes from the line of Analyst for Lisa Gill – JP Morgan. Analyst for Lisa Gill – JP Morgan: On the pharmacy reimbursement issue you mentioned pressure from both private payors and Medicaid. If we exclude the impact from the AWP change on a relative basis are you seeing more pressure from the Medicaid side or the private payor side?

On a percentage basis I would say it is pretty challenging on both sides. Medicaid on the generic side is a number of federal upper limit that went into effect in the last year particularly related to the new generics last year. So we saw a very good percentage decline in reimbursement from Medicaid in the last year. For managed care obviously it is substantially more dollars and it is much more impactful to our margin and we have seen pressure on that side as well so it is really on both sides. Analyst for Lisa Gill – JP Morgan: In terms of same store sales guidance what are you sort of baking into those expectations regarding flu for next year? Are you expecting more of a similar flu season to this year, meaning a relatively weak one or more of a normalized flu season?

More of a normalized flu season. Analyst for Lisa Gill – JP Morgan: Finally, you talked about your plans on the new private label architecture. Where do you currently stand in terms of penetration and where do you think it is going to ultimately go and over what time frame?

I think for the fourth quarter we were at 15.3% was our penetration of private label. I personally believe there is still another 100-200 basis points here of pharmacy margin penetration for us to get over the next year or two.

Thank you very much. We really appreciate it and we will talk to you soon.

Ladies and gentlemen, this does conclude today’s conference call. You may disconnect your lines.