Frank G. Vitrano - Chief Administrative Officer, Chief Financial Officer and Senior Executive Vice President John T. Standley - Chief Executive Officer, President, Director and Member of Executive Committee Matt Schroeder - Group Vice President of Strategy & Investor Relations and Treasurer

Karru Martinson - Deutsche Bank AG, Research Division John Heinbockel - Guggenheim Securities, LLC, Research Division Mary Ross Gilbert - Imperial Capital, LLC, Research Division Emily E. Shanks - Barclays Capital, Research Division Karen Eltrich - Goldman Sachs Group Inc., Research Division Mark Wiltamuth - Morgan Stanley, Research Division Steven Valiquette - UBS Investment Bank, Research Division Matthew J. Fassler - Goldman Sachs Group Inc., Research Division Edward J. Kelly - Crédit Suisse AG, Research Division Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division

Good morning. My name is Cassandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Third Quarter Fiscal 2012 Conference Call. [Operator Instructions] And now, I would like to turn the call over to Matt Schroeder. You may begin.

Thank you, Cassandra, and good morning, everyone. We welcome you to our third quarter conference call. On the call with me are John Standley, our President and Chief Executive Officer; and Frank Vitrano, our Chief Financial and Chief Administrative Officer. On today's call, John will give an overview of our third quarter results and discuss our business, Frank will discuss the key financial highlights and fiscal 2012 outlook and then we will take questions. As we mentioned in our release, we're providing slides related to the material we will be discussing today, including annual earnings and sales guidance, on our website, www.riteaid.com, under the Investor Relations Information tab for conference calls. This guidance is a point-in-time estimate made early in the fiscal quarter. The company expressly disclaims any current intention to update it. This conference call and the related slides will be available on the company's website until the next earnings call, unless the company withdraws them earlier, and should not be relied upon thereafter. We will not be referring to the slides 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 uncertainties that can cause actual results to differ. These risks and uncertainties are described in our press release, in Item 1A of our most recent annual report on Form 10-K and in other documents we file or furnish to the Securities and Exchange Commission. Also we'll be using a non-GAAP financial measure. The definition of a non-GAAP financial measure, along with the reconciliations to the related GAAP measure, are described in our press release. With these remarks, I'd now like to turn it over to John. John T. Standley: Thank you, Matt, and thank you, everyone, for joining us this morning to review our fiscal 2012 third quarter results. It is really exciting to see the hard work and effort of our store, distribution and office associates driving our results. Our team's focus on our key initiatives grew our same-store sales and adjusted EBITDA and reduced our net loss compared to a year ago. In fact, our team's efforts have now grown same-store sales and adjusted EBITDA for 4 consecutive quarters. Based on our strong third quarter results, we are raising our adjusted EBITDA guidance. Frank will provide more details about third quarter results and fiscal 2012 guidance in a few minutes. One of the most important initiatives for this quarter was our immunization program. We had over 11,000 certified immunizing pharmacists in place by the time our flu immunization campaign kicked off in August, giving us the ability to offer flu shots at every Rite Aid pharmacy for the first time in our company's history. As a result of this well-planned and executed program, we administered 1.4 million flu shots to date, more than doubling the 675,000 shot last year, which helped us grow our same-store script count and pharmacy sales. We're also on pace to achieve our goal of administering more than 1.5 million flu shots this year. Our customer loyalty program, wellness+, continues to be an enormous success, thanks to the program's robust reward structure and the overall Rite Aid's team commitment to making sure our customers know what wellness+ has to offer. We now have more than 47 million customers enrolled in the program, of which, 74% used their card in the last 26 weeks and 54% used their card more than once in the last 26 weeks. As we continue to accumulate more trend in usage data, we will further explore additional opportunities to build our relationship with our most loyal and active users, as well as better understand how they are engaging with our loyalty program. In the meantime, we're excited about the opportunity to attract even more members and drive more utilization as we launch new rewards features on January 1. On that date, wellness+ members can begin taking advantage of the new Load2Card coupon management tool, which allows customers to download online coupons directly to the wellness+ card and have the amount automatically deducted when they present their card to purchase the items in our stores. This feature is unique and the first of its kind in the drugstore industry. In addition, members will be able to choose their wellness reward, such as a membership to well-known national fitness center or gym, a magazine subscription to one of the top health or fitness publications or a customized health screening when they earn 500 points and achieve Silver tier status. We believe wellness+ is the strongest rewards program in our industry and are committed to making it even better while finding ways to deliver more value to our most loyal customers. And why is that important? Wellness+ members accounted for 70% of front end sales and 66% of script count during the quarter. We have continued to increase the amount of Gold and Silver members that we have in the program, which is important because these customers continue to be our most valuable customers. For example, last week, Gold and Silver customers accounted for 61% of scripts on the wellness card and 52% of front end sales on the wellness+ card. Similar to last quarter, almost 50% of our Gold and Silver members shopped our stores every week, which means we are getting good frequency. More importantly, Gold and Silver members continue to have significantly larger basket size than non-members, with Silver members basket sizes averaging 49% higher and Gold members average basket sizes being 120% higher. In the pharmacy, we continue to see a much higher retention rate with members versus non-members, and members are a very high percentage of our best patients. And our research tells us that wellness+ members are significantly more satisfied with Rite Aid than non-members, which is another good measure of how the program is working. We also continue to strengthen our position as a wellness destination in the third quarter. Our cast of OptumHealth, NowClinic online care in Detroit area stores is still in its early stages, but we remain excited about this opportunity as patients can now enjoy the convenience of being able to talk with a doctor or nurse from the neighborhood Rite Aid store. Patients are able to receive health information and education from a nurse and discuss symptoms with a doctor. Where clinically appropriate, patients can even receive a diagnosis and pick up their prescription all in the same visit. We continue to receive positive feedback and are considering expanding this program to other markets. Customers are also responding very favorably to our first wellness+ program expansion called wellness+ for diabetes, which features an exclusive collaboration with WebMD, a leading online consumer health information destination to provide wellness+ for diabetes members with a multifaceted free program that offers exclusive resources, lifestyle management tools and in-store savings to people living with diabetes and their caregivers. To date, more than 90,000 people have enrolled in the program and we have had more than 200,000 unique visits to the special Rite Aid sponsored section on WebMD's website to take advantage of our diabetes head-to-toe online lifestyle management tools and resources. During November, which is National Diabetes Month, we launched Rite Track Diabetes Tour, which is making more than 30 stops in November and December at select Rite Aid locations to provide free diabetes testing, resources and educational materials. We also expanded our diabetes prevention and control alliance efforts by supporting additional programs in Baltimore and the Washington, D.C. area. These various efforts surrounding diabetes not only provide valuable awareness and resources to our customers, they also highlight the key role our pharmacists can play in supporting patient wellness. In addition to these initiatives that demonstrate our commitment to support the total health and well-being of our communities, we've continued with our planned rollout of our new wellness store format with 159 stores completed as of the end of the quarter. These stores offer expanded clinical pharmacy services as well as new health and wellness product offerings. We're in the process of staffing these stores with our unique on-site wellness ambassadors who will serve as an added resource and bridge from the front end of the store to the pharmacy. All wellness ambassadors will be specially trained to provide customers with information on over-the-counter medications and vitamins and supplements, and will be equipped with special iPad technology to provide customers with additional health-related information. Our customers have responded very favorably to this unique service and approach. Same-store sales results of these stores are in line with the rest of the chain, but it is early on in the process and we are still staffing a significant number of stores with wellness ambassadors. We will continue to assess the results of these stores and we'll continue to evolve this format based upon our learnings and customer feedback. Other key accomplishments during the quarter include a continued rollout of our new private brand architecture. We now have more than 2,300 items converted and we are on track to have 2,900 items in these brands this fiscal year. For the quarter, our private brand penetration increased to 16.8% from 15.6% last year. And we continue to acquire new customers through $11.6 million of prescription follow purchases in the quarter and $28.1 million year-to-date. To sum it up, I'm very pleased with our quarterly results. We are making good progress on a number of fronts and we continue to strengthen our position as a wellness destination. Our entire team is moving forward with purpose and speed. So let me say thanks once again to all of our associates for their hard work and efforts that are delivering the results we are seeing. Frank? Frank G. Vitrano: Thanks, John. Good morning, everyone. As John mentioned, third quarter sales and earnings reflects good progress in our turnaround, and a benefit to the various initiatives we've been working on for the past 2 years. This is the fourth consecutive quarter of EBITDA and same-store sales growth. On the call this morning, I plan to walk through our third quarter financial results, discuss our liquidity position, certain balance sheet items, our capital expenditure program and finally, update you on our fiscal '12 guidance. This morning, we reported revenues for the quarter of $6.3 billion, which was a 1.8% increase to last year's third quarter. This was the second consecutive quarter of total revenue growth reflecting the improvement in same-store sales and fewer store closings. In the quarter, we closed 18 stores and did not open any net new stores. On a year-over-year basis, we operated 86 net fewer stores. Same-store sales increased 2% in the quarter, reflecting the positive impact of wellness+ and positive script count. Front-end same-store sales were flat and pharmacy same-store sales were higher by 2.9%. Pharmacy comp scripts were positive 50 basis points. Pharmacy same-store sales included an approximate 163 basis point negative impact from new generic drugs and were positively impacted by inflation on brand drugs, an increase in 90 days script and strong results from our immunization initiative. Adjusted EBITDA in the quarter was $221.5 million or 3.5% of revenues, which was a $9 million or 4.2% increase than last year's third quarter of $212.5 million or 3.4% of revenues. Again, this is the fourth consecutive quarter of adjusted EBITDA growth. The results were driven by favorable sales trend, stabilizing gross margin trends and continued expense control. Net loss for the quarter improved to $52 million or $0.06 loss per diluted share compared to last year's third quarter net loss of $79.1 million or $0.09 loss per diluted share. Net loss improvement was driven by higher adjusted EBITDA and lower wellness+ deferral revenue charge of $19.7 million, lower depreciation and amortization expense of $17.4 million, lower lease termination and impairment charges of $5.5 million and lower interest expense of $3.8 million, partially offset by a lower gain on sale of assets of $4.9 million as compared to last year's third quarter. In addition, our LIFO charge of $27.5 million was $24.5 million higher than last year. The increase in LIFO this year is driven by product cost increases in both the front end and pharmacy. We're projecting pharmacy inflation of 3% to 4% and front end inflation ranging from 1.5% to 2% for the year. Total gross margin dollars in the quarter were $30.2 million higher than last year's third quarter and flat as a percent of sales. FIFO gross margin dollars were higher by $54 million, and adjusted EBITDA gross profit, which excludes specific items, primarily LIFO and the wellness+ revenue deferral, the details of which are included in the third quarter fiscal '12 earnings supplemental information, which you can find on our website, was favorable to the prior year's third quarter by $33.8 million and 6 basis points as a percent to revenues. Front end gross profit and rate were both higher despite the continued tier discount investments related to wellness+ customer loyalty program. Pharmacy gross profit dollars were also higher and essentially flat on a rate basis despite continued pressure on third-party pharmacy reimbursement rates, including the California Medicaid decreases retroactive back to June 1. Selling, general and administrative expenses for the quarter were higher by $5 million but 36 basis points lower as a percent to revenues as compared to last year. SG&A expenses not reflected in adjusted EBITDA were lower by $19.8 million primarily due to lower depreciation and amortization expense. Adjusted EBITDA SG&A dollars, which excludes specific items, again the details of which are included in the third quarter fiscal '12 earnings supplemental information, were higher by $24.8 million and flat as a percent to revenues. The increases reflect higher advertising costs, higher third-party processing fees, as well as higher associate bonus expense. Although this is only the second increase in adjusted EBITDA SG&A dollars over the past 11 quarters, we continue to believe there are opportunities for us to lower our operating cost through store level workflow improvements, introduction of new technology, as well as indirect procurement initiatives. Turning to the balance sheet. FIFO inventory was $125.6 million higher than third quarter last year. The increased inventory reflects price increases, timing of receipt of seasonal inventory into our distribution center, as well as initiatives to reduce out-of-stocks, whereby we increased the minimum stock quantities on certain items as well as increased the amount of inventory for add items. We are still refining these inventory changes but believe these modifications will increase sales. We expect to reduce inventory levels in the fourth quarter as we sell through our seasonal inventory and complete some of the refinements to our out-of-stock initiative. Our cash flow statement result for the quarter shows net cash from operations in the quarter as a source of $2 million as compared to a use of $46.4 million from last year's third quarter. Higher inventory as well as the timing of accounts payable payments at year end influenced the balance. Our days payable outstanding in the quarter was 26.9 days, which improved from 25.6 days last year. Net cash used in investing activities for the quarter were $57.5 million versus $29.4 million last year and also includes proceeds from script file sales. During the third quarter, we relocated 2 stores, remodeled 119 stores and again, closed 18 stores. Our cash capital expenditures were $67.5 million. We completed and grand reopened 159 wellness remodels as of the end of the third quarter. We expect to complete a total of 300 wellness remodels in fiscal '12. Now let's discuss liquidity. At the end of the third quarter, we had $851 million of liquidity. We had $191 million revolver borrowings under our -- with our outstanding under our $1.175 billion senior secured credit facility with $134.4 million of outstanding letters of credit. Today we have over $900 million of liquidity. Total debt net of invested cash was higher by $62.7 million from last year's third quarter and $92.2 million higher than year end. The increase in debt was driven by higher revolver borrowing as a result of our inventory position. Now let's turn to fiscal '12 guidance. As we have previously stated, fiscal '12 is a 53-week fiscal year and our guidance continues to reflect that extra week. For our fiscal '12 guidance, the company is raising its earnings estimates to reflect year-to-date results of sales, adjusted EBITDA and earnings trends and prospects for the fourth quarter. The company expects total sales to be between $25.85 billion and $26 billion and expects adjusted EBITDA to be between $865 million and $910 million for fiscal '12. Same-store sales are expected to grow in a range of 115 basis points up 175 basis points. Net loss for fiscal '12 is expected to be between $440 million and $325 million, or a loss per diluted share of $0.50 to $0.37. I should point out that our guidance assumes no benefit from the continuing dispute between Walgreens and Express Scripts. Our fiscal '12 capital expenditures are projected to be $250 million, with $90 million allocated to remodels and other merchandising efforts, and $50 million for file buys. We are planning to complete 15 relocations and 300 wellness format remodels. We expect free cash flow slightly positive for the year, and we expect to close a total of 70 stores of which the guidance includes store lease closing provisions to close 20 stores and the remaining 50 stores closing on lease expiration. Included in our net loss guidance is a wellness+ deferral provision ranging from $25 million to $35 million. I should also point out that we will be releasing December sales on January 4, 2012, which will be a 5-week month and will reflect the initial negative impact on same-store sales of generic lipitor. That completes my portion of presentation, and I would now like to open the line up for questions. Sandra?

[Operator Instructions] Your first question comes from the line of John Heinbockel of Guggenheim. John Heinbockel - Guggenheim Securities, LLC, Research Division: A couple of things. So John, can you talk about the thought process in the wellness+ program enhancements in terms of what you did and why you did it now, and to what degree you can get your arms around how that will benefit sales as we go forward? John T. Standley: A bunch, I hope. I mean, we just -- we continue to try and evolve and grow the program. We're obviously learning a lot as we go. We think these enhancements will add a significant amount of value to the program and allow us to continue to grow membership as well as build our relationship with our existing members. And so we think they're good enhancements and they'll help us continue to grow the program. John Heinbockel - Guggenheim Securities, LLC, Research Division: Do you think that adding bronze -- was there a frustration of people getting to silver and how far away it was, and bronze is a nice milestone to get them part of the way there and encourage them to go the rest? John T. Standley: I don't know -- I don't think we have any feedback that there was frustration about getting to silver. But I think it's -- obviously, the goal of the program is to move as many people up to tiers as you can. So it's another incentive to move up the tier structure. John Heinbockel - Guggenheim Securities, LLC, Research Division: Okay. And then on the remodels, because you said the comp was in line with the chains, was that both pharmacy and front end both in line or some split? John T. Standley: Yes. It's -- they're both in line. John Heinbockel - Guggenheim Securities, LLC, Research Division: Now why do you think that is? Because I think you guys thought you might get a bigger front-end lift but I think they'll not... John T. Standley: I'm not sure that's the right question, John. I mean we are expecting that over time, these stores are going to build some sales momentum. So I think part of it is just we need to let it get a little bit of -- let it mature a little bit so we can see how the results evolve. And obviously, we're continuing to fine-tune the concept as we go forward to make sure we get to sales lift that we're looking for. John Heinbockel - Guggenheim Securities, LLC, Research Division: Now you haven't clustered these, so does the customer understand wellness+ and how it's different from a regular Rite Aid? And if you clustered them and marketed heavily, would that help? John T. Standley: It might. I mean, they're -- when you say clustered, you're right. I mean, we didn't take in that market and do our store in the market. We picked 8 markets really to kind of start with and did stores in those 8 markets, so we didn't do them all over the country. So they're somewhat concentrated. But that I think is a key -- a good comment and a key point. We do a grand opening and we try to engage customers in the market area as we do that grand opening. But in our business, that frequency for the casual customer is not high. So again, I think it just takes time for the customer to understand the concept and be aware of it, engage with it. John Heinbockel - Guggenheim Securities, LLC, Research Division: Are you -- and you -- I mean, you're going to do 150 or so in the fourth quarter and then obviously, a large number next year, so there's been no change in the rollout program based on where they are today? John T. Standley: That's correct. John Heinbockel - Guggenheim Securities, LLC, Research Division: Okay. And then one final thing, just talk about the reimbursement environment. So far, pharmacy grows flat but that's certainly better than the alternative. Is reimbursement stable today and how do you think that changes going into next year? John T. Standley: It's not very stable today. I mean, it continues to be very challenging. And my expectation is it will remain challenging next year. John Heinbockel - Guggenheim Securities, LLC, Research Division: Yes. But not get any -- well, not get any worse or we don't know yet? John T. Standley: Well, I mean, there's a number of things on the horizon. We have AMP, we have several states kind of mired down here that we're struggling with currently. So there's a lot going on out there, continue to watch.

The next question comes from the line of Bryan Hunt with Wells Fargo Securities. Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division: I was wondering if we could just discuss the wellness+ remodels in a little bit greater depth. I mean, you expected a sales lift when you did these remodels you're tracking in line with the system overall. Could you maybe talk about what departments and what categories you may be falling short of your expectations? John T. Standley: I think overall, like any of these kinds of renovations, we added -- we expanded certain categories and we took items out of other categories to kind of make the concept work. And so I guess when you sort of stare at it, the way it sort of sits now is we added sales in the categories we expanded but we did lose some sales in categories where we have fewer items today. And that's why I think it's been kind of a washed at the top line in terms of the results. So we're going to continue to work at that merchandising. Also, though, I think 2 other points to be made. One is, again, there's a time element here. We really just started doing these things. And as you would expect, if we look at 159 stores store-by-store, there's some volatility in the numbers. We have some stores that are way up. We have some stores that didn't respond as well. So I think there's some learnings on a store-by-store basis. The other key feature of this thing is -- to make the format really go, is the wellness ambassador, and we are still in the process of staffing up wellness ambassadors. It's a large staffing exercise and we're working aggressively to do that. But we've got a ways to go until we get staffs to where we want to be. So I think that's the other attribute of this thing that needs to get worked out before we really get a great read on what the results are going to be. So it's a little early. They're not doing terrible, that's the good news. They're not where we want them to be on the top line right this instant, that's the bad news. But we feel confident enough about what we're seeing to continue to go forward. Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division: Do you feel like your stores that have a more polished wellness ambassador in them are outperforming the rest of the group that have been remodeled? John T. Standley: It's -- I don't know for sure because it's a little bit hard to track at this point because they're -- we're staffing up as we go. But I believe that the stores with a wellness ambassador are doing better than the ones without. Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division: Okay. Could you switch gears, could you discuss the general trends on prices, file buys and the availability in the marketplace? John T. Standley: Frank, you want to... Frank G. Vitrano: Bryan, yes, we're continuing to see some opportunities. [Indiscernible] probably saw an increase when California Medicaid came through and decreased the reimbursement rates. We saw more independents kind of call us up and begin some discussions about acquiring their files. With regard to pricing, I would say certainly since the last time we talked, since the last call, I'm not sure that there's been any appreciable change in the pricing. Still have the same group of individuals out there, our 2 major competitors as well as some of the supermarket guys out there trying to acquire Scripts. But again, I think the -- probably the news here is that as the states continue to put pressure on reimbursement rates, we would continue to expect some independents to raise their hands. Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division: And as you get more independents raising their hands and increase supply, do you think there'll be some trickle effect down on pricing? Frank G. Vitrano: I wouldn't anticipate that. I'd be happy, but I wouldn't anticipate it. Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division: Okay. My last question is, New York just signed to the law bill that forbids health insurers from acquiring members-ordered drugs on mail order -- from mail order pharmacies. Could you talk about how this legislation initially benefits the company and whether there's any other states examining similar legislation. John T. Standley: I think the issue, well, the -- it's an opportunity, obviously. The question about it is we would need to take obviously mail-order rates. And the dilemma there is that we, Rite Aid, don't receive manufacturer rebates similar to what a mail order -- or PBM gets. And so our challenge is we would have to dispense brand drugs at significant losses if we wanted to participate at mail-order rates. So while it's an opportunity, it's probably something that we'd have to consider very carefully the economic consequences of before we proceeded down that road. In terms of other states, not anything I can think about off the top of my head.

The next question comes from the line of Karru Martinson with Deutsche Bank. Karru Martinson - Deutsche Bank AG, Research Division: When we look at your guidance, you're essentially kind of flat to year-ago EBITDA and the midpoint, I was wondering what was the thought process going into that and what your expectations are for the holiday season? And also, I guess, how the generics are going to play through that? John T. Standley: Yes, I mean, currently, I guess, the midpoint of our guidance right now is that $888 million. And really the factors there are sales range would account for clearly a piece of that. We would expect sales again to range up for the year 115 to 175. Clearly the benefits of lipitor is kind of factored into our thinking there. On the flip side, pharmacy reimbursement rates pressure is something that we continue to be concerned about here and could be a drag for us, as well as kind of front-end margins is also a factor -- that's kind of a factor that's based into -- that factor into our numbers here. And lastly, some incremental advertising cost that we'll see here in the fourth quarter. So those are kind of the things that -- kind of the various attributes that we kind of baked into come up with the numbers. Karru Martinson - Deutsche Bank AG, Research Division: Okay. And just on lipitor, I mean, you guys mentioned that when you report your comps here, we'll take a generic lipitor hit. I mean, what's kind of the magnitude of that top line you recognize -- that you get that back in the gross margin, but what's the kind of the magnitude of the top line hit that we're talking about for lipitor? John T. Standley: In the quarter, if we think about our -- the negative impact on generic rates, it's probably in the quarter maybe about 40 or 50 basis points. Karru Martinson - Deutsche Bank AG, Research Division: Okay. And then you mentioned that your guidance receives no benefit from the Walgreens/Express Scripts dispute. What are you guys seeing in terms of customers whether they're shifting accounts to you or coming -- are you seeing more traffic from that? John T. Standley: I think the short answer is it's a little bit hard to get a beat on. We actually have a lot more clarity when somebody transfers out versus when they transfer in. So it's a little bit hard to get a read on. Also our Express Scripts business this year includes a lot more managed Medicaid, which also makes it a little bit hard to measure. But overall, script count is positive and is showing some growth. So it could be a little bit in the numbers at this point. Karru Martinson - Deutsche Bank AG, Research Division: Okay. And just lastly, when we look at the upcoming year for generics, I mean, there is a tidal wave coming, what's going to be your thought process on the benefit to you guys, I guess, whether it's in your dollar figure range or in terms of traffic coming into your door for that? John T. Standley: Yes. I mean, we've really not done that only because the -- there's 2 sides to the equation, obviously. There's the significant reduction in the cost of drugs but there's also a corresponding reduction in reimbursement rate that often goes with it. So we certainly have some good estimates in terms of what might happen on the cost side of the equation, but the reimbursement rate side of the equation is evolving. And so it's difficult for us to give you guidance yet as to how that's all going to play. Karru Martinson - Deutsche Bank AG, Research Division: But it'll still will be a positive. John T. Standley: That would be our expectation, yes.

The next question comes from the line of Karen Eltrich with Goldman Sachs. Karen Eltrich - Goldman Sachs Group Inc., Research Division: Can you give us a sense, as you look at your 47 million membership, what percentage have actually achieved the Silver and the Gold tier, and what kind of movements are you seeing in that area? John T. Standley: Karen, that's a number we didn't give. It's a good question, but it's one we're actually not going to answer for competitive reasons. But we did give you some percentages of penetration of Gold and Silver as it relates to sales and scripts in the comments. And I think that's a good indication that it's definitely a material part of our sales base. Karen Eltrich - Goldman Sachs Group Inc., Research Division: And it is trending upward from the penetration? John T. Standley: It is. They're definitely growing. Karen Eltrich - Goldman Sachs Group Inc., Research Division: Great. And again, with Express Scripts, first kind of what do you have in your arsenal in terms of advertising and trying to capitalize on that potential expiration if it comes? John T. Standley: Well, that would take all the fun out of it, wouldn't it? Karen Eltrich - Goldman Sachs Group Inc., Research Division: But there are plans in place? John T. Standley: We do -- obviously, we have plans in place and we've -- our goal is to get our fair share of what might come to market if that dispute continues. Karen Eltrich - Goldman Sachs Group Inc., Research Division: And if you look at the nice trends you've been seeing in pharmacy, do you think the 15 Minute Pharmacy Guarantee had an impact on that? Do you think... John T. Standley: I do, I do. I mean, if -- it's always hard to just pick a single thing when you get a sales turnaround and a script growth turnaround. So it's always a lot of things working together. And I think really improving our customer service, which the 15 Minute Guarantee really helped us focus on was a key component of that. I think wellness+, because of the reward structure and the point that you get for Scripts has also been a very significant factor. And then, of course, the immunization program really has played a very big role in the last quarter. Karen Eltrich - Goldman Sachs Group Inc., Research Division: And you did actually typically tell us how comps are trending in the current months. Could you maybe give us a sense, are you seeing any recovery in front end or is that still staying soft? John T. Standley: Front end is in line with where it was last month, so it's still a little bit negative. Script count continues to be... Frank G. Vitrano: Be a strong... John T. Standley: Strong and total comps are in line with where we were a month ago. Karen Eltrich - Goldman Sachs Group Inc., Research Division: And as you look at the softness, is it still seasonal and cough and cold? John T. Standley: Yes. Cough and cold actually continues to be a pretty good drag on the numbers right now, really trending behind last year. Seasonal is starting to pick up a little bit as we get a little closer. But we still got some room to go there. Karen Eltrich - Goldman Sachs Group Inc., Research Division: Great. And final question, with Pfizer's decision to ship lipitor direct, I mean, do you think this is a material development in the industry and how do you see that playing out? John T. Standley: I mean, it -- obviously, it could be going forward if everybody tries to go down that road. But I think that needs to play out and we need to see what the success of that program in as we go through this. I mean, it's obviously -- it's an expensive endeavor for them to do that and we'll eventually see how it plays over time.

Your next question comes from the line of Ed Kelly with Crédit Suisse. Edward J. Kelly - Crédit Suisse AG, Research Division: Just a follow-up on that lipitor question. Can you tell us what the generic dispensing rate of lipitor is right now, just to get a better sense as to what the branded share continues to look like? John T. Standley: Yes. We're close to 70% at this point. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay. And for the portion of the drug that's being sold as a generic under exclusivity, is the profitability of that drug different than past drugs under exclusivity? I guess, what I'm asking is it in line, better or worse? John T. Standley: It -- I think it's pretty much in line, I'd say. Edward J. Kelly - Crédit Suisse AG, Research Division: I wanted to follow-up with the question on the guidance, because Q4 does include an extra week, and if you take that out, it looks like it does imply a plus or minus decline in EBITDA, which to me is surprising given that you do have the generic picking off. So could you just help us maybe a little bit more in terms of why that would be or is there some conservatism built into the numbers? John T. Standley: I think, really what we're looking is kind of looking at the sales trend on the negative side, if you will, in terms of the lower end, okay, would be some concern around the -- what the sales range would be. And then the other 2 factors, I think larger factors there is really what reimbursement range are going to be and kind of front-end margins. Those are kind of the 3 factors that are kind of tailing or that we're driving to the lower end. Obviously, to the higher end, okay, we get to the high end of the range at $910 million would suggest continuation of the existing trends that we've seen. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay. And on the reimbursement rates side, when do you think you'll have a better handle as to how next year is going to end up playing out? Is it really sort of point in time as those macro rates come through? John T. Standley: It definitely gets a lot more clarity. I mean, as we get into January and February, we'll have a lot more visibility into what next year looks like. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay, all right. And then as we think about the wellness+ program, you guys are obviously really happy with how the program's going. Is it safe to assume that this program in total was positive to EBITDA dollars right now? John T. Standley: I think that's correct. Yes. I mean, we kind of looked at gross profit dollars as kind of the key measure there when you kind of stir it all together, and I think it's helping us there. Edward J. Kelly - Crédit Suisse AG, Research Division: And with the new stuff that you're going to roll out next year, there's probably some added cost to that, but I assume that you're doing that because you're assuming the gross profit dollar contribution would accelerate next year? John T. Standley: Well, I mean, you have to start to get with all the other margin components. So it fits into -- we have circular markdowns and all the different pieces of the puzzle, so we have to kind of stir the whole pot to sort of figure it out. Edward J. Kelly - Crédit Suisse AG, Research Division: All right. And then just one last thing for you on the gross margin. The gross margin this quarter, FIFO gross margin was up, right, and actually by my math, since 2008. But you have talked about, potentially on the low end of your guidance, maybe some pressure in Q4. So could you just help us understand what the bigger dropper is for this quarter and then what your concerns are about the front end into Q4? John T. Standley: It's really -- it really has to do with sales trends. We're a little bit softer than we'd like to be at the moment. So depending on like say seasonal sell-through, if there's more at the back end that we've got to clear out, that kind of thing. Those are the kind of things that we're looking at. Edward J. Kelly - Crédit Suisse AG, Research Division: Okay. And one more thing for you. Store closures, where do we stand on your outlook there? Are we coming more towards the tail end of what you plan on doing or is there still more opportunity? Frank G. Vitrano: I mean, again, this year we'll close 70. But as we kind of look into the future here, yes, that's something that we always look at. There's kind of a group of underperforming stores that we kind of evaluate on a regular basis. It's not a huge number, okay, but it's something that we do look at on a quarter-over-quarter basis, Ed.

Your next question comes from the line of Mark Wiltamuth with Morgan Stanley. Mark Wiltamuth - Morgan Stanley, Research Division: So I certainly understand that you don't have the Express in your guidance right now. Can you give us some color on what percentage of your stores are in Walgreens markets but have no CVS nearby? John T. Standley: So I don't know about no CVS nearby. I guess, about 1/3 of our stores are within a mile over Walgreens. Does that help you? Mark Wiltamuth - Morgan Stanley, Research Division: Yes. I think that we had calculated that, too. We're just looking for the places where you'd get the easy wins. Do you think you'll end up capturing more than your national market share if there are scripts leaving Walgreens? John T. Standley: We're going to do our best. We're going to certainly do our best. Mark Wiltamuth - Morgan Stanley, Research Division: Okay. And on your prescription volume and comp for the quarter, how much was the immunization in that number? John T. Standley: I mean, immunization was a big part of the script count comp in the quarter, no question about it. I mean, if you just do the raw numbers on it, it's a big contributor. So of the 1,500 Rite Aids, I guess it is what with within 1 mile, 706 of those also have a CVS within 1 mile. Mark Wiltamuth - Morgan Stanley, Research Division: Okay. Great, that's helpful. And just, I -- if we stand back and look big picture on your prescription business for the year, you're going to have some puts and takes with lipitor and so forth. But if you held your prescription volumes flat, do you think the prescription earnings would be up? And if you'd give some idea of how much? John T. Standley: Well, that goes back to the reimbursement rate question. I mean, all the things being equal, I think it would be up. But I know that reimbursement rate pressure will continue with a number of different things, sort of flying around California being one, AMP being another, and just continued pressure from our third-party friends. So that's the dilemma that we face and that's why there's a range on this guidance. Mark Wiltamuth - Morgan Stanley, Research Division: Okay. So that side is more of the variable than the generic side at this point, is that fair? John T. Standley: Yes.

The next question comes from the line of Emily Shanks with Barclays Capital. Emily E. Shanks - Barclays Capital, Research Division: I had a couple of follow-up questions. The first one was asked earlier around gross margin. I want ask it slightly differently. Given the reimbursement rate pressure, how were you able to protect your gross profit margins, and even on an adjusted EBITDA basis, grow them by 6 basis points? What were the drivers there? John T. Standley: Well, 2 things. I mean, one, front-end margin is actually where we probably had some strength versus pharmacy margin. Pharmacy margin was actually flat to down slightly. And on the pharmacy side, the challenge is to constantly reduce drug cost. I mean, we're out in the market constantly, driving down our drug costs, and that's really what we do to try and offset reimbursement rate declines on generics. So that's kind of the balancing act that goes on everyday in our business, and then really the balance of it was really driven by brand performance. Emily E. Shanks - Barclays Capital, Research Division: Were there any particular category you'd call out in front end that helped? John T. Standley: Yes. I mean, our -- a lot of our core -- I mean, beauty category is very strong. Consumables are really driving some strength for us. Some of the categories we've talked about earlier, just from a volume perspective, probably didn't help us from a mix perspective, like cough and cold and pain. Those are slower right now primarily due to just the difference in flu year-over-year. Emily E. Shanks - Barclays Capital, Research Division: Great. And then my next question is just around the dark rent expense. Can you update us on what the current run rate is annualized? And then secondarily, can you update us on what percent of the footprint is for EBITDA negative? John T. Standley: Yes, Emily, there is a -- right now, run rates for dark store rents about $90 million. And there are a couple of hundred -- as we said in the past, about couple hundred stores that are EBITDA negative. Emily E. Shanks - Barclays Capital, Research Division: Okay. And are there plans for this coming fiscal year to be shuttering more store as we see that dark rent go up or what are your goals around that? John T. Standley: Again, I guess, similar to Ed's question earlier, it's something that we look at on a pretty regular basis. And sitting here today, we don't have any -- or we haven't many decisions to do anything other than continuing to March to those stores and to try to determine whether -- what the appropriate next steps are with them. And stores that come off a lease, those are kind of easier decisions for us to determine whether we're going to extend the lease or not. Emily E. Shanks - Barclays Capital, Research Division: Okay, fair enough. And then my final question is just around your ability to continue to buy in the open market, the 2015 bonds. Can you just update us on what the current RP capacity is or restrictions are around that? John T. Standley: There aren't any really restrictions to do that. That's -- as we said the last time, that will be something that we would continue to consider on an opportunistic basis kind of looking at our overall and obviously, what the market prices are as well as our appetite for that.

The next question comes from the line of Matthew Fassler with Goldman Sachs. Matthew J. Fassler - Goldman Sachs Group Inc., Research Division: Most of my questions have been answered, but I just wanted to follow-up on the gross margin theme as you think about the sustainability of the strength, because that really seems to be where you turned the quarter -- the corner of this quarter, and it sounds like front end really was the driver. How do you feel about the setup for gross going forward if you weigh promotional activity, and then any other factors you want to consider? John T. Standley: Well, I mean, again, that's the -- again, the balancing act on the front end is really trying to get the margin to balance with everyday pricing, promotional activity, wellness+ and obviously top line results. So I think, as we've said in the fourth quarter, if we're watching profit margin very carefully because sales are a tad soft from where we want to be and we obviously need to see how we sell through on seasonal merchandise to really get a good read on fourth-quarter front end margin. So those will be the key factors that sort of determine where it comes out. Matthew J. Fassler - Goldman Sachs Group Inc., Research Division: Let me ask you another quick follow-up question. As you think about the increased penetration of flu immunizations and it might just be that pharmacies are getting share of the immunization market or that actual consumer awareness is increasing, do you feel like that is a factor at all in the cough, cold, flu, is it really much more about the weather, would you say? John T. Standley: It's probably some of both. I think weather is a key factor, though. Even last year, there was a significant number of immunizations in the marketplace. And we still had a pretty good flu season, but it was out in February, as an example. So I think there's a timing element, some of which probably is weather-related and then obviously -- hopefully more people are getting immunized. Matthew J. Fassler - Goldman Sachs Group Inc., Research Division: Got it. And then finally, it would seem like it would be inevitable that sometime in your next fiscal year that whatever the immunization pressures are, the generic wave would overwhelm it from a gross margin rate perspective. Is there any doubt in your mind that, that should materialize? John T. Standley: I mean, again, we're expecting that there will be a good generic benefit next year. And as we get more clarity into reimbursement rates, we'll have a better chance of sort of quantifying what that impact is.

Your next question comes from the line of Steven Valiquette with UBS. Steven Valiquette - UBS Investment Bank, Research Division: John, Frank, I guess not to beat the fiscal fourth quarter questions to death and you guys talked about the... John T. Standley: Go right ahead, [indiscernible] ... Steven Valiquette - UBS Investment Bank, Research Division: I mean, you guys certainly discussed the gross margin in pretty good detail, but as far as the SG&A part of it, you've had pretty good improvements and SG&A as a percentage of sales, there's first 9 months of the fiscal year. Is there anything about the fiscal fourth quarter with the extra week where that would not be on the same trend line , I'm trying to get a sense around just the SG&A component of that. John T. Standley: Steve, nothing out of the ordinary, I would say. Frank G. Vitrano: I mean, I think one point that I think we made before when we were giving guidance was that we do account for rent and everything else kind of on a weekly basis. So there's no free rent or anything like that in the fourth quarter. It's just a regular week with all the regular expenses associated with it. Okay? Steven Valiquette - UBS Investment Bank, Research Division: Okay. And just one other quick follow-up, just to clarify, what were your latest thoughts again around the timing of AMP implementation? Because it looks like it's still kind of up in the air for -- when that's going to go into effect. John T. Standley: Well, I think that's precisely the right terminology to use to describe it, "up in the air" is probably the best thing. As you know, there's been a couple of test sets of data sort of sent out there. There's some rulemaking going on that still has play out but we don't really know with any real clarity when AMP will be implemented at this point. Steven Valiquette - UBS Investment Bank, Research Division: Okay. So you guys don't have a crystal ball in that? John T. Standley: We don't, and the fact of the matter is AMP can be bring it -- can be implemented without all the rules being done. So we just don't know what that timing might be. Okay, this is going to be -- Cassandra, this is going to be our last question.

Okay. And your next question and last question comes from the line of Mary Gilbert with Imperial Capital. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Could you talk about Detroit, what kind of comp sales you're seeing? I know it's early but just wanted to get a feel for how that effort is going. John T. Standley: Yes. It is in fact really early, and I would tell you that it's -- in terms of those online clinics, it's a lot like opening a brand new pharmacy or a brand new in-store clinic. It's very slow to kind of come out of the gate, but it appears to be gaining some traction as we go and it'll take a period of time for that to mature. That's what I would kind of tell you it sort of looks like. Okay? Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay. And then can you give us an update on the value strategy, where that stands? You've obviously brought in some expertise on the grocery side, so I wondered what's going on there and what can we look to for 2012? John T. Standley: I've been told it's top secret, and I can't say. Yes. I mean, we are looking very carefully at the strategy. We're still really strong believers in it, and again, we think food can play a key role, not only in that concept but in all of our stores. And that's really why we brought in some additional expertise. And so those plans are under heavy work right now, and I think we will have something to talk about as we get into next year. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay. And then what about the performance of the value stores both the wall of strategy that you have your own concept and then the joint venture that you have with SUPERVALU? John T. Standley: They're both doing fine. They're both comping negative as they going around significant grand opening activity from last year. But if you look at dollar trends, they're very much in line with where they've been running over the last several months. Last couple of quarters, even. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay. So then one of the plans -- I know that you've abandoned, for now because you're still working on what would make sense for the SUPERVALU joint venture, but what about your own -- expanding your own strategy? John T. Standley: We're going to -- we're working very hard on it. We are going to expand that strategy and we're going to talk about it more probably when we give guidance for next year. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay, great. And then one last thing. So when we're looking at free cash flow, are we looking at net cash generation from working capital? And what kind of free cash flow is it, $50 million to $100 million? Frank G. Vitrano: Probably less than that. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay, less than $50 million. Frank G. Vitrano: Yes. Mary Ross Gilbert - Imperial Capital, LLC, Research Division: Okay. And then the component of cash generation from working capital? Frank G. Vitrano: It'll be modest. John T. Standley: Thank you, everyone, for joining us this morning. We appreciate it, and we'll talk to you next quarter. Frank G. Vitrano: Happy holidays. John T. Standley: Yes, happy holidays.

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