Matt Schroeder - IR John Standley - CEO Kenneth Martindale - President and COO Frank Vitrano - CFO and CAO

George Hill - Deutsche Bank Robert Jones - Goldman Sachs Mark Wiltamuth - Jefferies Edward Kelly - Credit Suisse John Heinbockel - Guggenheim Securities Lisa Gill - JPMorgan Karru Martinson - Deutsche Bank Karen Eltrich - Mitsubishi Bank Kristen McDuffy - Goldman Sachs Bryan Hunt - Wells Fargo Securities Carla Casella - JPMorgan

Ladies and gentlemen, thank you for standing by, and welcome to the Rite Aid fourth quarter fiscal 2014 conference call. [Operator Instructions] I will now turn the conference over to Mr. Matt Schroeder. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We welcome you to our fourth quarter conference call. On the call with me are John Standley, our chairman and chief executive officer; Ken Martindale, our president and chief operating officer; and Frank Vitrano, our chief financial and chief administrative officer. On today's call, John will give an overview of our fourth quarter results and discuss our business, Ken will give an update on some of our key initiatives. Frank will discuss the key financial highlights of fiscal 2014 and fiscal 2015 outlook, 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. These slides include annual earnings and sales guidance. These slides are provided on our website, www.riteaid.com, under the Investor Relations Information tab. This guidance is a point-in-time estimate and 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'll 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 will be using a non-GAAP financial measure. The definition of the non-GAAP financial measure, along with the reconciliations to the related GAAP measure, are described in our press release. We also include in our slides non-GAAP financial measures of adjusted EBITDA gross profit and adjusted EBITDA SG&A, and the reconciliations of these measures to their respective GAAP financial measures. With these remarks, I'd now like to turn it over to John.

Thanks, Matt, and thank you all for joining us to review our fourth quarter and full year results for fiscal 2014. I’m pleased to report that we delivered strong results during the fourth quarter which helped us put the finishing touches on an outstanding fiscal year. For the quarter, we generated more than $356 million in adjusted EBITDA which represents a $16 million increase over the prior year period. We also delivered our sixth consecutive quarter of profitability. Net income for the quarter was more than $55 million compared to over $123 million in the previously year’s fourth quarter. It’s important to note that last year’s net income benefited from a large LIFO credit that was partially offset by a loss on debt retirement. Excluding LIFO and loss on debt retirement from the results of both years, net income this year was higher by $29 million. These strong results contributed to a successful, pivotal, and groundbreaking year for Rite Aid. It was a year in which we delivered excellent financial results and took significant steps in our ongoing health and wellness transformation. Here are a few key highlights. We increased adjusted EBITDA by nearly $200 million to set a new all-time company record. We recorded our second consecutive year of profitability and more than doubled net income compared to last year. We delivered steady script count performance, as we completely cycled Walgreens reentering the ESI network. We exceeded our chain-wide goal by immunizing more than 2.8 million patients against the flu. We completed our 1,200th wellness store remodel and continued to see positive results for these stores compared to the rest of the chain. We successfully launched Wellness 65+ and further engaged seniors, which are a key demographic for our continued success. We expanded our partnership with McKesson to drive further efficiency in our traditional drug dispensing business. We completed additional refinancings to extend maturities, reduce interest expense, and give us the flexibility we need to execute our business plan. And we introduced our innovative and cutting-edge Rite Aid Health Alliance program, which provides comprehensive care to patients with chronic and polychronic health conditions. Ken and Frank will share additional details about our recent performance in just a few moments, but first I would like to discuss why fiscal 2014 was far more than just another great year for Rite Aid. Because of our continued positive momentum, we are now in a position to evolve our strategy from one that focuses on turning our company around to one that emphasizes growth. And because of the rapid change taking place throughout the healthcare industry, we believe there are enormous opportunities to meet evolving marketplace needs, better serve our customers, and demonstrate our value to the healthcare system. Because of our turnaround, we have a strong foundation and will continue to focus on fundamental areas such as operating efficiency, investing in our stores, and effectively leveraging our cost structure. At the same time, our goal is to not only continue our health and wellness transformation but to accelerate it, so that we can become a network of wellness touchpoints that provide convenient and comprehensive healthcare solutions. This new mindset is already coming to life through several of our recently announced initiatives. As we mentioned on our last earnings call, wellness store remodels will continue to be a key part of our strategy over the next few years. But we’re also beginning to build up our real estate pipeline for future relocations and new stores. This is an exciting step for Rite Aid, that is laying the foundation for future growth as we look to deliver our unique brand of health and wellness to additional customers. Another initiative that we’re really excited about is Rite Aid Health Alliance. This cutting-edge program supports individuals with chronic and polychronic health conditions, who represent a key demographic in healthcare. What’s unique about our program is how pharmacists, in-store care coaches, and local physicians work together to support the patient in achieving his or her individual wellness goals. This team-oriented approach provides additional support to patients in between doctor’s visits, and further motivates them in taking steps to improve their health. We are looking forward to expanding Rite Aid Health Alliance to additional markets and stores in fiscal year ’15. Our recent acquisition of Health Dialog, which provides in-store care coaches, will play a key role in advancing Rite Aid Health Alliance, but beyond this program, we believe this strategic acquisition will be mutually beneficial to both companies. We will benefit from Health Dialog’s industry-leading analytics and shared decision making tools as we look to further strengthen our healthcare offering. At the same time, the acquisition will provide Health Dialog with an expanded footprint to help grow its portfolio of clients and services as a wholly owned subsidiary of Rite Aid. We also acquired RediClinic, a leading operator of retail clinics. Retail clinics play a critical role in today’s healthcare delivery system, and will play an important role in Rite Aid’s overall health and wellness strategy heading forward. Today, RediClinic operates 30 clinics in the greater Houston, Austin, and San Antonio areas, and we are committed to working with RediClinic to expand its current footprint in Texas. In the near future, we will begin to leverage the company’s expertise to deliver convenient healthcare and wellness programs to Rite Aid’s customers in select Rite Aid markets. As you can see, our fourth quarter and full year performance has helped position Rite Aid to more aggressively pursue opportunities for growth and accelerate our transformation into a growing retail healthcare company. In many ways, we feel as though we’re beginning a new chapter here at Rite Aid as we look to further expand our healthcare offering and strengthen the many wellness programs that have driven our recent success. At this time, I’d like to turn it over to our president and chief operating officer, Ken Martindale, who has additional information regarding our key initiatives. Ken?

Thanks, John, and thanks, everyone, for joining us on the call this morning. As John mentioned, our positive momentum has paved the way for a new strategy at Rite Aid, one that guides us in making the transition from turnaround to growth. A great example is our wellness store initiative. In the fourth quarter, we continued to make excellent progress by completing 94 remodels, 3 expansions, and 2 relocations. We now have a grand total of 1,215 wellness stores, and these stores continue to outperform the chain in terms of same store front-end sales and script count. The success of our wellness stores has been critical in generating our positive momentum, and as we make the transition from turnaround to growth, we feel that our store development plan, new healthcare initiatives, and commitment to innovative merchandising give us the ingredients we need to make this highly popular format even stronger. In terms of our store development opportunity, we plan to remodel an additional 450 stores in fiscal 2015, while setting the stage for an increase in relocations and new stores over the next five years. By building new stores, we can further develop underpenetrated markets and enter adjacent markets that we have positive demographics for our business, all while bringing our wellness format to additional customers. At the same time, our new healthcare initiatives will support the continued evolution of our wellness stores. When combined with our wellness ambassadors, expanded front-end wellness categories, and stronger offering of pharmacy services, we think the addition of Rite Aid Health Alliance and RediClinics to select wellness stores will provide a powerful healthcare experience in the communities that we serve. Another key component of our chain-wide wellness program is our highly successful immunization program. Thanks to a strong focus on this critical initiative, we immunized more than 3.2 million patients this year, and while we exceeded our company flu shot goal for the second consecutive year, we also administered more than 430,000 non-flu immunizations that protect against conditions such as shingles, whooping cough, and pneumonia. This represents a growth of 5% over the previous year for non-flu immunizations. Our nearly 2,000 wellness ambassadors made significant contributions to this positive result. This year, our wellness stores, which feature our wellness ambassadors, averaged 38% more flu shots than non-wellness stores. In addition, wellness ambassadors helped increase our number of business to business flu shot clinics. This represented a key area of growth during our campaign. Looking ahead, we see opportunities to further engage our customers by developing tools that encourage them to make immunizations an even larger part of their wellness arsenal. We also see opportunities to develop and implement new tools that strengthen our broader offering of pharmacy services, specifically in terms of medication therapy management. Our wellness ambassadors have also played an important role in the successful launch of our new Wellness 65+ loyalty program, which has been very well-received by both new and existing senior customers. To date, more than 1.7 million seniors have enrolled in this program, which is specifically designed to meet the unique needs of our senior customers. In terms of the broader Wellness Plus program, we remain focused on leveraging our database of more than 1.6 billion transactions to form stronger one-to-one relationships with our 25 million active members. Over the past year, we’ve been working with the global leader in segmentation to bring a new level of sophistication to our targeted marketing campaigns. Thanks to these efforts, we’ve had some initial success with our CRM program, and now have a wealth of actionable intelligence to help drive sales and increase loyalty throughout our membership base. We also remain fully committed to finding new ways to make Wellness Plus an even stronger program for our loyal customers. Our customers continue to respond positively to our offering of Rite Aid brand products, with penetration increasing to nearly 19% during the fourth quarter. Looking ahead, we believe that our Rite Aid brand program is solid, but we are focused on further enhancing this offering in order to create a world-class private brand. We’ve demonstrated this commitment by hiring David Abelman to fill a newly created position of senior vice president, brand development and innovation. David is a seasoned retail professional with more than 25 years’ experience and we’re excited to welcome him to the Rite Aid team as we look to further leverage innovative growth opportunities. Throughout the year, we continue to increase our level of investment in the business and had tremendous success with our prescription file buy initiative. In fiscal 2014, we spent $87 million on file buys, an increase of $20 million over the previous year. We continue to view file buys as a significant opportunity for growth, and we’ve allocated $90 million for this opportunity in fiscal 2015. Before I turn it over to Frank, I’d just like to say that we’re pleased with the performance of our existing initiatives and very excited about how our new initiatives will further strengthen our unique brand of health and wellness. Whether it’s Wellness Plus, our store development plan, Rite Aid Health Alliance, or adding clinics to our stores, all of these initiatives are centered around our promise to actively work with our customers to keep them well. At this time, I’ll turn it over to our chief financial and administrative officer, Frank Vitrano, who will provide additional details about our financial results. Frank?

Thanks, Ken, and good morning everyone. Fourth quarter results reflect solid progress and continued benefits from our various initiatives. On the call this morning, I plan to walk through our fourth quarter financial results, discuss our liquidity position, certain balance sheet items, our capital expenditure program, our recent acquisitions, and finally provide fiscal ’15 annual guidance. Revenue for the quarter was $6.6 billion, which was $142 million, or 2.2%, higher than last year’s fourth quarter. The increase was due to higher pharmacy calendar. Overall, same-store sales increased 2.1% in the quarter, reflecting a higher pharmacy inflation rate. Front-end same-store sales were down 70 basis points due to a lack of flu compared to last year. Pharmacy same-store sales were higher by 3.5%, which included an approximately 123 basis point negative impact from new generic drugs, compared to a 659 basis point negative impact from new generic drugs in the prior year’s fourth quarter. Pharmacy same-store sales comp scripts were down 180 basis points, 130 basis points of which was due to the unusually strong flu season last year. Adjusted EBITDA in the quarter was $356.3 million, or 5.4% of revenues, which was $16 million higher than last year’s fourth quarter of $340 million or 5.3% of results. The current quarter’s results were primarily driven by an increase in pharmacy gross profit, driven by generic purchasing efficiency as well as an increase in front-end gross profits. Ongoing strong expense control also benefitted the quarter. Income for the quarter was $55.3 million or $0.06 per diluted share, compared to last year’s fourth quarter net income of $123 million or $0.13 per diluted share. The decline was driven by a $175 million LIFO credit last year as compared to a LIFO charge of $44 million this year, as well as a $6 million income tax benefit this year as compared to an income tax benefit of $47 million last year. This was partially offset by no loss on debt retirement this year compared to $123 million last year, as well as lower interest expense and lower lease termination and impairment charges. Last year’s LIFO credit was driven by significant generic deflation. We realized generic deflation of 42% last year, compared to 10% this year. Brand inflation was higher this year than last year. The tax benefit was lower this year due to an additional tax valuation provision for stock based compensation expense, which was higher than anticipated. Last year, we completed a substantial refinancing of our revolver and first lien term loans, as well as $1.1 billion in bonds, resulting in a $123 million loss on debt retirement in the fourth quarter of fiscal ’13. In March of this year, we repriced our tranche fixed term loan, further reducing our annual interest expense by $5 million. Excluding LIFO and losses on debt retirement in both periods, net income was $99.5 million or $0.10 per diluted share this year, compared to $70.4 million or $0.07 per diluted share last year. Total gross profit dollars in the quarter were $162 million lower than last year’s fourth quarter and 314 basis points lower as a percentage of revenues, mostly due to last year’s LIFO credit. Adjusted EBITDA gross profit, which excludes specific items, primarily LIFO and the Wellness Plus revenue deferral, was favorable to the prior year fourth quarter by $51 million and higher by 14 basis points as a percentage of revenues. Pharmacy gross profit dollars were higher, and margin rate was flat. Pharmacy gross profit benefited from lower product acquisition costs, a true up of certain pharmacy plans, partially offset by continued pharmacy reimbursement rate pressure, and cost increases on certain generic drugs. Front end gross profit dollars and rate were both higher. Front end results were favorably impacted by better seasonal sell through and lower shrink, partially offset by a competitive promotional environment. Selling, general, and administrative expenses for the quarter were higher by $34 million and four basis points lower as a percent of revenues, compared to last year. Adjusted EBITDA SG&A dollars, which excludes specific items, were higher by $34 million and flat as a percent of revenues compared to last year. The increase was driven by benefit increases, higher advertising, as well as higher utility and other weather-related costs, partially offset by our various expense control initiatives. FIFO inventory was lower than the fourth quarter of last year by $58 million, driven by management initiatives, partially offset by higher pharmacy inventory inflation. Our cash flow statement results for the quarter shows net cash from operating activities as the source of $194 million as compared to a source of $220 million in last year’s fourth quarter, with timing differences in accounts receivable driving the variance. Net cash used in investing activities for the quarter was $78 million versus $102 million last year. During the fourth quarter, we remodeled 94 stores, expanded three stores, relocated two stores, and closed eight. At the end of the fourth quarter fiscal 2014, we have completed and grand reopened 1,215 wellness stores. In fiscal ’14, front end same-store sales in the wellness stores exceeded the non-wellness stores by 320 basis points and script growth in the wellness stores exceeded the non-wellness stores by 1%. Now let’s discuss liquidity. At the end of the fourth quarter, we had $1.3 billion of liquidity. Our liquidity has increased $286 million over the last year. We had $400 million of borrowing outstanding under our revolver facility, with $80 million of outstanding letters of credit. Total debt net of invested cash was lower by $263 million from last year’s fourth quarter. Our leverage ratio, defined as total debt less invested cash, over LTM adjusted EBITDA, improved to 4.3x from 5.3x as compared to the fourth quarter of fiscal 2013. For the full year, net income increased $131 million to $249 million and diluted EPS increased $0.11 to $0.23. Adjusted EBITDA increased to $1.325 billion, or 17.4% higher than last year. Fiscal ’14 was clearly a breakout year for us. Now let’s turn to fiscal 2015 guidance. We developed our guidance based upon the anticipated benefits of our wellness remodel program, customer loyalty program, and other initiatives to grow sales and drive operational efficiencies. We expect the current competitive environment to remain promotional. We also consider planned wage and benefit increases. The guidance also reflects continued reimbursement rate pressure, more drug cost increases than normal, offset by the benefits of improved generic purchasing as a result of the new McKesson agreement. We expect a working capital benefit of $150 million as a result of the McKesson agreement, which is planned to be fully realized in the latter half of the year. We expect implementation of [AMP] in July of 2014, and we expect script count growth benefits from the ACA, favorable demographics, file buy acquisitions, growth in immunizations, and other initiatives. We expect the second half of fiscal 2015 to be stronger than the first two quarters, due in part to the strength in fiscal ‘14’s first half as well as the introduction of several new generics in the second half of fiscal 2015. The company expects total sales to be between $26 billion and $26.5 billion, and expect adjusted EBITDA to be between $1.325 billion and $1.4 billion for fiscal 2015. Same-store sales are expected to be in a range of from an increase of 2.5% to 4.5%, including the anticipated negative pharmacy sales impact of approximately 256 basis points from new generic introductions and continued reimbursement rate pressure. We expect fiscal 2015 earnings range of a net income of $313 million for earnings per diluted share of $0.31 to net income of $423 million and earnings per diluted share of $0.42. The range of guidance is primarily driven by our same-store sales range and pharmacy margins. The purchase price of RediClinic and Health Dialog was under $100 million. Our guidance includes investments to integrate both companies. We do not expect the results to have a material impact. We expect to open an additional 70 RediClinics over the next 18 to 24 months. Our fiscal 2015 capital expenditure plan is expected to be higher, spending $525 million with $225 million allocated to remodels and $90 million to file buys. We are planning to open one new store, complete 19 relocations, and remodel 450 wellness stores. We expect free cash flow to be in the range of $350 million to $400 million for the year, including the benefit of lower pharmacy inventory and the acquisition of RediClinic and Health Dialog. We expect to close a total of 40 stores, of which the guidance includes a store lease closing provision of 15 stores, with the balance closing upon lease expiration. The guidance also assumes that we will call and prepay our 10.25 second lien notes due in 2019 sometime after the next step down in October. This completes my portion of the presentation. Now I’d like to turn it back to Jeff.

Thank you, Frank. Before we open up the phone lines for questions, I’d like to thank our team of dedicated Rite Aid associates for all they’ve done to fuel our recent success. As a leadership team, we’ve always worked hard to develop a sensible and effective business strategy, but our nearly 90,000 associates have been the true difference makers in generating our positive momentum and positioning our company to more aggressively pursue opportunities for growth. As we look ahead, we see many more opportunities to enhance the key initiatives we have in place, while launching new programs that expand the scope of what a drug store can offer, while meeting the changing needs of the healthcare marketplace. In essence, we view our network of nearly 4,600 stores as a huge asset that we can leverage in delivering a convenient, affordable, and comprehensive healthcare solution in the communities we serve. That concludes our prepared remarks for this morning. We will now open up the phone lines for questions.

[Operator instructions.] Your first question comes from the line of George Hill of Deutsche Bank George Hill - Deutsche Bank: Maybe I’ll just start with the McKesson deal. You guys highlighted the working capital reduction. I assume that’s going to come out of the inventory. Is there any further color that you can give us with respect to cost savings and impact to profitability or its contribution to earnings growth in fiscal 2015.

It’s included in our guidance. [laughter] George Hill - Deutsche Bank: I guess no further color on that. [laughter] And then also, congrats on the clinic deals. That seems to be a great opportunity, and to merge that with Health Dialog. I guess as you think about that business longer term, in how much of the footprint do you see the clinic business or the clinic footprints being a part of the total store footprint, I guess as that business reaches maturity? And how big should we think is the opportunity for that business?

I think it can be a good percentage of the footprint. It certainly won’t work in all stores, but I think there are a good number of our stores that it will work in over time. Obviously, for this year it’s really about getting it integrated and working with the outstanding RediClinic management team to really build a good plan to address our store base. But I think over the next few years it’s a really good growth vehicle for us. George Hill - Deutsche Bank: You talked about contribution from ACA, albeit it’s very early. I guess can you talk about what you’re seeing in your stores, or what you think the impact from ACA is thus far?

I think you hit the nail on the head. It’s a little bit early. We’re kind of watching two key things. One, we’re looking at pharmacy benefit plans that we think are primarily attributable to the Affordable Care Act. Those would be plans that are part of an exchange offering or in some other way attributable to the Affordable Care Act. We’re also watching our Medicaid business to see how it develops, given the expansion in I think about 18 of the states that we operate in. I guess the quick answer is, we have seen some uptick in business in both groups, probably a little bit stronger in the Medicaid, than it has been, and plans that we attribute to the Affordable Care Act. One thing that we can see, though, is that there is significant overlap between customers that we already had a relationship with and customers that are showing up in benefit plans that look like they’re attributable to the Affordable Care Act. So in terms of net incremental business, it’s probably too early to tell, but the overlap’s probably higher than we expected in what we’re seeing in the Affordable Care Act plans.

Your next question comes from the line of Robert Jones from Goldman Sachs. Robert Jones - Goldman Sachs: Just had one on the store remodels. It sounds like the wellness stores’ front end saw a 340 basis point improvement, pharmacy it sounded like 100 this quarter. So front end a little better than last quarter, pharmacy a little worse. You know, I just was curious, as you think about 2015 and the remodels, any guideposts you can give us on the lifts you’re expecting from the wellness stores on both the pharmacy and the front end, as you think about fiscal 2015?

I think on the pharmacy side, we’re continuing to see some improvements and some growth there. And I think as patients get more accustomed to visiting the store and seeing the improvements and the addition of a consultation room and whatnot, that we’re going to continue to see some improvement on the pharmacy side. On the front end side, Ken is continuing to add innovation there, and we would expect to continue to see growth on the front end side.

Just to clarify, the results I gave you were actually the full year results. The full year, on the front end, was up about 320 basis points and on pharmacy it was 100 basis points. On the front end side, that softened a little bit here in the fourth quarter, but pharmacy was pretty consistent.

Just kind of followed our broader trends in the fourth quarter. But we remain very excited about overall what we’re seeing out of the wellness stores, and our overall expectations for what those stores delivered has not changed. Robert Jones - Goldman Sachs: Just two quick questions on generics. You mentioned anticipating generic price inflation in 2015. I know it’s a tricky thing to forecast. I was wondering what gives you the visibility there. And then not to get too specific on individual drugs, but big needle mover in Nexium. Was curious how that’s being factored into guidance given the uncertainty on how and when that might come to the market.

I’ll maybe start with the last part of the question, which I think is very significant. And I think Frank mentioned it in his comments. We’re going to cycle a couple of big generic impacted quarters in the first half of 2015. We’re going to be comparing to some pretty tough comparables from 2014. But we’re still benefitting from the large generic wave, so we’ve got some very tough comparisons in the first half of the year. Because we are expecting Nexium and Diovan really to be later in fiscal 2014. So we put them in the back half is really the way we’ve addressed that in our guidance. So what that’s kind of causing is first half earnings to be a little bit softer and back half earnings to be a little bit stronger in our guidance. On inflation, we’re watching recent trends. Towards the end of this fiscal year, we saw some cost increases come through, which will impact fiscal ’15, so we had some visibility from that. It’s also been a bit of a developing broader trend, so you do have to use some judgment and estimates to kind of get at it.

Your next question comes from the line of Mark Wiltamuth from Jefferies. Mark Wiltamuth - Jefferies: Wanted to ask a little bit about your specialty strategy. We saw the announcement the other day of the URAC accreditation. Can you talk about that a little bit? Does that open up more volume opportunity for you? And just in general, how do you compete out there in the specialty market given that you really don’t have a mail facility or a specialized call center.

Well, we do. We do actually have a specialty facility in Maryland. In terms of our specialty business, the biggest part of our specialty business today is really in oral solids business. We are on a couple of limited distribution drugs and now that we have URAC accreditation, it allows us to compete to get more limited distribution drugs to put through our facility in Maryland. So far, our strategy has really been an organic growth strategy, and that’s really, I think now that we have this accreditation, what we’re going to continue to focus on. But honestly, over the next 12 to 24 months. It’s not going to be a significant financial impact on our results. Mark Wiltamuth - Jefferies: And how much of an opportunity is it here to have more of the limited distribution drugs through? How big can that be over time?

I think right now we’re kind of on a slow growth strategy. They’re difficult to get. It’s a very competitive marketplace. We have to build our reputation in the marketplace. So while there’s probably a decent opportunity there, I think it’s not a rapid growth strategy for us. It’s going to be slow and steady. Mark Wiltamuth - Jefferies: And flipping over to the McKesson, you included the inventory reduction in the free cash flow numbers. How big was that by itself for the free cash flow guidance?

$150 million.

Your next question comes from the line of Edward Kelly of Credit Suisse. Edward Kelly - Credit Suisse: My first question is really related to the comp guidance. You’re projecting 2.5% to 4.5%. That’s obviously an acceleration from where you are now. Could you just kind of walk us through the drivers of that, and maybe even some color on how you’re thinking about underlying script growth, how are you thinking about front end?

I think there’s a couple of factors. One is we are, based upon some of the things we were talking about before, expecting to see some improvement in our script growth. As we think about ACA being a piece, file buy acquisitions being another piece, just improving demographics, just continuing to be opportunities on the immunization side. That’s going to help us to drive script volume. On the revenue side, from pharmacy, it would really be a combination of the scripts as well as continuing to see some [unintelligible] inflation that will help to drive that. And then on the front end side, again, we’re continuing to expand the wellness remodels. Ken talked a little bit about, in his comments, about Wellness Plus and some of the work that we’re doing around there, and would expect to see some continuing improvements on the front end side. So those are kind of the key drivers to it. Edward Kelly - Credit Suisse: And any thoughts on the cadence of the comp growth throughout the year?

It probably follows the earnings trajectory that we talked about earlier. We have a lot of initiatives and programs underway that we expect will continue to gain traction throughout the year, so we think it builds a little bit as we go through the year. So between the way we’ve mapped out the top line growth, we talked about new generics impacting the back half of the year, and also, while we factored McKesson into our guidance, it’s another thing that’s in the process of implementation. So it also is a little bit back end loaded here as we go through the year. So in terms of cadence, that’s really the way the year sort of steps out. It’s a little tougher in the first half because as these things we’re working on gain traction through the year, we’re thinking a stronger back half. Edward Kelly - Credit Suisse: And then my second question for you, John, obviously you’ve thought more about this transition to growth, and it sounds like there’s going to be more relos and even some new stores now coming into the pipeline. Could you just maybe talk about the philosophy behind looking to grow the store base a little bit. And if we think about this over a five-year period, what type of growth could we be looking at? And how do you balance existing markets versus you did talk about new markets?

Great question. One of the exciting things that we’re working on now, we’re getting to the fun stuff, is really starting to map out a real staged strategy and rebuild our pipeline and do a lot of the fun stuff that we haven’t gotten to do for a five years. And so we’re putting a lot of thought into those questions. We have some markets that we do need to address, either primarily where we acquired stores where the market just wasn’t fully built out. And so I think we have an opportunity, in the early stages of our store growth strategy, to really get at those markets and fill them in a little bit. Then there’s probably some contiguous opportunities for us to get at, which we think have good economics associated with them. And while we’re probably working on those opportunities, we’ll be working on the underlying strategy to maybe crack into a couple of additional markets. But that’s several years from now.

Your next question comes from the line of John Heinbockel with Guggenheim Securities. John Heinbockel - Guggenheim Securities: Just following on that, when you think about the balance between growing the business versus harvesting margin, are we now at a point where the former, growing the business, new stores, new clinics, things that might lose money up front, negatively impact margin, we sort of shift where the growth will be more top line driven, less margin driven. Where do you want that balance to be?

I think we have to try to do it in a responsible way. We have the opportunity to invest in things like remodels and some technology opportunities and things that will provide more immediate cash on cash returns, and we need to balance those things with some of the investments in growth, some things like net new stores that will take some period of time to become profitable, as you point out. But I think we want to try and do it in a responsible way, so that we can strike a balance and not get to maybe some places we inadvertently got to in the past. John Heinbockel - Guggenheim Securities: Where do you think you’ve been with regard to aggressiveness? Take the front end, and I know a lot of it revolves around Wellness Plus and getting credit for that, but margin is up, the front end comp has been kind of flattish but down if you take out the remodels. Is that an area you could be more aggressive productively and spend gross margin dollars? Or not really?

I think we just are trying to do it on a rational and smart way in terms of what we invest. Could we get more aggressive in the short term and spike our comps a little bit? We’re good at giving stuff away, we know how to do that. We can do that, but to your point, I think we are trying to be rational about it, do it in an effective way that builds relationships with customers, using Wellness Plus. And you know, I think we’ve said it all along, we’re going to do what we have to do ultimately to protect our business. So I think if we see ourselves in some sort of position where we think our business is being permanently infringed upon, we’re going to get more aggressive. John Heinbockel - Guggenheim Securities: And then just lastly, when you think about Wellness Plus, Wellness Ambassadors, how do you grapple with the issue on tobacco and the current ball that CVS threw everybody, which now has people, insurers, regulators, asking the question, should you and Walgreens be in that business? My guess is you’re going to keep doing it, but how do you grapple with that?

Well, I think when you look at our business model, you just have to come to grips with the fact that we do a couple of different things, and they’re all important to making our model work. So we have a pharmacy, we’re trying to build more of a healthcare position, but we also have a convenience business. And where we sit today is, we want to meet the needs of our customers the best that we can, but honestly, we continue to look at the situation and think about kind of where we’re going as a company.

Your next question comes from the line of Lisa Gill with JPMorgan. Lisa Gill - JPMorgan: I just had a couple of quick follow up questions. First, on the RediClinic, a number of the stores are in Texas today, and you don’t have stores in Texas. So is the anticipation that you’re going to roll out some [storage] strategy in Texas?

No, not initially. I think we just talked about, our primary focus is really sort of working in some of our underdeveloped existing markets and then probably the next logical step is to touch on some contiguous markets before we leap into some markets where we’re not in at all. So right now I think we’re kind of focused on that strategy. The real opportunity with RediClinic is to, I think, one, bring it to Rite Aid stores, and two, to continue to support their business like they’ve done with their very good partner down in Texas. Lisa Gill - JPMorgan: And then secondly, your comment around the initial ACA customer [unintelligible], I’m just curious, are you seeing an increase in utilization by those customers now that they’re covered under some new program with ACA?

I will tell you that the average script per patient look a little higher, but that’s also a broader trend, so I’m not sure I can point to ACA on that. Lisa Gill - JPMorgan: And my last question, you did call out Nexium, and we know that there’s a definite possibility that’s going to be pushed out. However, there’s also a possibility that we see an over the counter product come to the market. Can you maybe just help us understand how an over the counter product profitability for a drug retailer and where you think you could potentially drive market share on an over the counter Nexium type product?

Generally, it’s not a good answer on an over the counter product versus a pharmacy product. A pharmacy product is limiting distribution to pharmacies, and an over the counter product goes everywhere. And so generally, it’s not as profitable an answer for us. Having said that, with Nexium, we’re really talking about two different strengths. Our anticipation is that the lower strength will go over the counter and the other strength will remain a pharmaceutical item and go generic late in the fiscal year. Lisa Gill - JPMorgan: Can you talk about the profitability, though? My understanding is that it’s probably going to be only the 10 mg that will go over the counter? But if you think about profitability for you, is an over the counter product generally more profitable, less profitable?

I thought I answered that question. It’s less profitable. We’ll have less of it, and it’s generally less profitable.

Your next question comes from the line of Karru Martinson of Deutsche Bank. Karru Martinson - Deutsche Bank: When we look at the EBITDA guidance you guys gave us in the third quarter, you certainly handily exceeded that. What were the drivers of the results versus your original expectations?

I think in the big picture, stronger pharmacy margin, really driven mostly on the cost side of the equation. We did a really good job, I think, on the back half of the year in pharmacy purchasing, and that helped us offset some reimbursement rate erosion that we were staring at that really caused us to think about the guidance in the back half and we changed it. Karru Martinson - Deutsche Bank: And it’s great to be talking about free cash flow again. Just wanted to get a sense, what are the planned uses for that free cash flow beyond the near term expansion?

Based upon the $350 million to $400 million that we’ve got there right now, we’ll primarily look to pay down the existing revolver. We obviously have stepped up our capital expenditures from $425 million to $525 million this year, as well as made the acquisition here. So as we think about the free cash flow generated, we’ll continue to look to maybe increase capex as well as continue to pay down some debt. Karru Martinson - Deutsche Bank: And just lastly, historically the payback on a new store was kind of around three years. Have those metrics changed for you?

I don’t think the payback on a new store is three years. It’s really when is a new store positive in terms of cash flow, because it takes a period of time for the store to reach critical mass. And I think we’ve said in the past that’s kind of a three to five year sort of time horizon. And really, we look at a 10-year payback on a net new store in terms of how we analyze it. On our relocations, it’s substantially faster.

Your next question comes from the line of Karen Eltrich of Mitsubishi Bank. Karen Eltrich - Mitsubishi Bank: As I look at your vision for your company, it kind of sounds like, with regard to healthcare, you want to be solution driven. How are you employing your GNC store within a store to achieve this? How much operating leverage can you get off that, and how many new GNCs do you plan on expanding into?

Well, I mean, GNC is a pretty important element in our overall front end offering. We’ve had the relationship with them for a long time. I think we told you on the last call that we renewed the relationship for an additional term. And so we don’t have a set number that we’ve targeted, but we have some contractual agreements. We’re going to open at least 50 of those a year, and they continue to perform well. In the new format, we’re expanding the layout, and we’re trying to reposition it a little bit, so that it’s even more impactful when you walk in the door. So it’s a very important piece of the strategy for us going forward. Karen Eltrich - Mitsubishi Bank: And with all the new initiatives that you, as we look to the year ahead, what is your advertising strategy? You mentioned using the Wellness card database, which is an obvious for you, but what else are you thinking about in terms of media?

Well, I don’t know that it’s going to change a lot from what we’ve done in the last couple of years. We’re going to continue to drive all of our promotional activity through Wellness Plus. It’s obviously at the heart of our marketing strategy. And you know, you just mentioned it, but we’re going to continue to ramp up our efforts on building relationships one to one with these customers. And eventually, I think we need to move more into digital and mobile. So we’re working hard at that, but I don’t see a major shift overnight in that direction. But over time, you’re going to see more and more emphasis on that. And again, we’ve got a huge database now that we can work against. So that will be the primary shift that you’re going to see over the next few years for us. Karen Eltrich - Mitsubishi Bank: And how many Rite Aid stores do you think have the potential to have a clinic within it?

A lot. [laughter] Karen Eltrich - Mitsubishi Bank: Fair enough. What is the cost to implement a clinic within?

It’s about $200,000 all in.

Your next question comes from the line of Kristen McDuffy of Goldman Sachs. Kristen McDuffy - Goldman Sachs: As a quick follow up to Karru’s question, can you talk about whether you plan to call your 10.25s with cash?

We will decide that as we get closer, but that’s clearly an option, given the free cash flow. Kristen McDuffy - Goldman Sachs: And can you talk about any early trends you’re seeing in your front end business in the start of fiscal 2015, how the promotional environment compares to the prior first quarter and whether the shift in Easter is a big deal?

Well, the shift in Easter was a big deal, it was a very big deal.

Given the month of March numbers.

I think, you know, in terms of trends that we’ve seen in the business, pharmacy scripts have continued to strengthen, so we feel pretty good about the trends there. Front end, I think for the month, will be positive, but we’ll obviously benefit from the significant shift in the Easter timing. So it’s one of those seasonal periods where it’s hard to give you a precise read, but we have to see how it kind of develops. Kristen McDuffy - Goldman Sachs: And just lastly, can you give us a sense for what percentage of your store base you consider to still be in the underperforming tier?

I would say probably 10%. Kristen McDuffy - Goldman Sachs: And what is your target private label percentage over time?

You know, we don’t really have a target that we’ve laid out there, but we think that there’s a substantial opportunity for us to grow that business. I think we’ve got a very solid program on the street right now, but obviously we’re going to spend a lot of time and a lot of effort to truly build a world-class brand here. And so we think that there’s substantial upside. We wouldn’t want to quantify it right now, but there’s substantial upside for us.

Your next question comes from the line of Bryan Hunt of Wells Fargo Securities. Bryan Hunt - Wells Fargo Securities: I’d like to say, the opportunities in front of you appear more dynamic today than they’ve seemed in the last decade, so kudos. But I’d like to focus in on your engagement of patients with chronic illnesses. How do you sustain the day with your engagement of those patients relative to your expectations, and as you move forward, what do you see the mix of those patients kind of maxing out as a percentage of your script counts?

Well, they’re a big percentage today. I mean, when we look at our underlying business, there’s a core group of patients that really make up a big percentage of our script count. And so in terms of mix, it’s actually pretty high today. We have a number of opportunities today to work with chronically ill patients, things that we do in our store around their medications, comprehensive medication reviews and whatnot, to try and work with those patients. But we’re pretty excited about the Rite Aid Health Alliance, really working providers and bringing care coaches to our stores to really work with those patients to really deepen that relationship and help them address their chronic illness. We think that’s just a really exciting opportunity. And there’s a number of things about that model that are interesting. I think one, we think it’s really beneficial for providers that work with us, because we believe that we’re helping them really reduce costs in the healthcare system, and providers who are interested in working with us are really those who are on the types of payment models where they’re assuming some risk. And so that really encourages them to think about the kinds of things that we want to think about in this model. We think it’s great for the patient, obviously, because we’re really giving them some face to face help in meeting their healthcare goals. And for us it allows us to deepen that relationship with the kinds of patients that are important to our pharmacy business. So I think it’s a big opportunity. Bryan Hunt - Wells Fargo Securities: Is there any way you can isolate the performance of your stores with RediClinics in them today versus the ones without? And again, I know there’s a lot of moving pieces with Wellness Plus as well.

Sure, and the answer to that is we don’t have any RediClinics in our stores today, so that’s a pretty easy one to answer. Bryan Hunt - Wells Fargo Securities: Well, I mean the stores they’re in. I know you’re buying them, and they’ve got stores where they have exposure. Can you just talk about, in general, what your expectations might be once you put a RediClinic in, in terms of the pipeline?

Just to be clear, RediClinic today works with a grocery company down in Texas, and that’s where their clinics are. RediClinic is going to continue to operate those clinics in those stores, and we hope to have a growing relationship with that partner over time in Texas. And so for us, then we’re going to bring these clinics to our stores. There’s a couple of things about it. We understand, I think, the economics of the existing RediClinics, so we have the opportunity to hopefully have a profitable clinic business in and of itself. As we introduce those in our stores, like a pharmacy, it will take time for that patient base to build to a critical mass. We have that opportunity. And in addition, we would expect that those clinics will throw off some scripts, the majority of which we would hope to get into our pharmacies and drive some script volume as well. So there’s really kind of two aspects to it.

Your final question will come from the line of Carla Casella with JPMorgan. Carla Casella - JPMorgan: One question on the store buildout for the RediClinics. You said that there’s 70 lined up for the next 18 to 24 months. Were those already in the works? Or are those things that you’ve kind of quickly identified since you’ve been [unintelligible] take it over?

They’re ones we’re identifying now, that we’re going to open up in the next 18 to 24 months. Carla Casella - JPMorgan: And are they all with the existing partner?

It will be a combination of the existing partner as well as in Rite Aid stores. Carla Casella - JPMorgan: So in other markets, are you also considering going in with other partners? So clinics that are in stores that are not Rite Aid?

Yes. And Webb, who’s the CEO of RediClinic, is going to compete for capital with the rest of us a little bit. [laughter] But if he has opportunities that make sense for us to grow our clinic business, we’re going to do those. Carla Casella - JPMorgan: And then just one housekeeping, can you tell us what the dark store rent is today?

It looks like it’s about $70 million.

One of these quarters, we’re going to do so good you’re not going to ask us that question. [laughter] Carla Casella - JPMorgan: Well, it keeps coming down. It’s going in the right direction.

Thanks, and thanks to everybody for joining us on the call today. Appreciate your time and your questions. Thank you, everybody.