8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): December 20, 2012

Rite Aid Corporation

(Exact name of registrant as specified in its charter)

Delaware	1-5742	23-1614034
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS EmployerIdentification Number)

30 Hunter Lane, Camp Hill, Pennsylvania 17011

(Address of principal executive offices, including zip code)

(717) 761-2633

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition.

On December 20, 2012, Rite Aid Corporation (the “Company”) reported its financial position and results of operations as of and for the thirty-nine week period ended December 1, 2012 (the third quarter of fiscal 2013).  The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  The release includes a non-GAAP financial measure, “Adjusted EBITDA.”  The Company uses the non-GAAP measure in assessing its performance in addition to net income determined in accordance with GAAP. The Company believes the non-GAAP measure serves as an appropriate measure to be used in evaluating the performance of its business.  The Company defines Adjusted EBITDA as net income (loss) excluding the impact of income taxes (and any corresponding reduction of tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to customer loyalty program and other items. The Company references this particular non-GAAP financial measure frequently in its decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and external comparisons to competitors’ historical operating performance. In addition, incentive compensation is based on Adjusted EBITDA and the Company bases certain of its forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. The Company includes this non-GAAP financial measure in its earnings announcement in order to provide transparency to its investors and enable investors to better compare the Company’s operating performance with the operating performance of its competitors, including with those of the Company’s competitors having different capital structures.  Adjusted EBITDA should not be considered in isolation from, and is not intended to represent an alternative measure of, operating results or of cash flows from operating activities, as determined in accordance with GAAP.  The Company’s definition of Adjusted EBITDA may not be comparable to similarly titled measurements reported by other companies.  The press release attached hereto as Exhibit 99.1 includes a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.

Item 8.01.  Other Events.

As more fully described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on May 25, 2012, one of the elements of the Company’s Long Term Incentive Plan (“LTIP”) for the past several years has been performance awards.  Performance awards provide executives, including the Company’s named executive officers, with units which are denominated in a target cash value and payable in cash if the designated Company performance goals are achieved over the prescribed performance period.  The Compensation Committee of the Company’s Board of Directors has historically utilized Adjusted EBITDA as the sole performance metric with respect to performance awards.  The Compensation Committee, after reviewing and discussing a variety of other metrics, established Adjusted EBITDA and leverage ratio (net debt divided by Adjusted EBITDA) as performance metrics with respect to performance awards for the Company’s President and Chief Executive Officer, its Senior Executive Vice Presidents and its Executive Vice Presidents for the three year period comprising Fiscal 2013 through Fiscal 2015.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits.

99.1Press Release, dated December 20, 2012.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RITE AID CORPORATION
Dated: December 20, 2012	By:	/s/ Marc A. Strassler
		Name:	Marc A. Strassler
		Title:	Executive Vice President,
			General Counsel and Secretary

3

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated December 20, 2012.

4

EX-99.1

Exhibit 99.1

Press Release
For Further Information Contact:
INVESTORS:	MEDIA:
Matt Schroeder	Susan Henderson
(717) 214-8867	(717) 730-7766
or investor@riteaid.com

FOR IMMEDIATE RELEASE

RITE AID REPORTS NET INCOME AND RECORD ADJUSTED EBITDA

IN THIRD QUARTER FISCAL 2013

·Third Quarter Net Income of $0.07 per Diluted Share, Compared to Prior Third Quarter Net Loss of $0.06 per Diluted Share

·Third Quarter Adjusted EBITDA of $295.3 Million Compared to Adjusted EBITDA of $221.5 Million in Prior Third Quarter

·Third Quarter Results Benefited from Continued Front End Sales and Prescription Count Growth

·Eighth Consecutive Quarter of Adjusted EBITDA Increases

·Rite Aid Raises Earnings Guidance

Camp Hill, Pa. (Dec. 20, 2012) - Rite Aid Corporation (NYSE: RAD) today reported improved financial results for its fiscal third quarter ended Dec. 1, 2012. The company reported revenues of $6.2 billion, net income of $61.9 million, or $0.07 per diluted share, and Adjusted EBITDA of $295.3 million, or 4.7 percent of revenues.

“We have reached a significant milestone in our turnaround efforts by returning to profitability,” said Rite Aid Chairman, President and CEO John Standley. “We have now increased Adjusted EBITDA and same store prescription counts for eight consecutive quarters. Our third quarter performance is the result of our entire team’s continued efforts to fundamentally improve our business.”

“Our record Adjusted EBITDA was driven by strong prescription count growth, an increase in front-end same store sales and higher pharmacy gross margin resulting from the introduction of new generic medications. While we are pleased with our third quarter results, we remain focused on sustaining our positive momentum and achieving long-term success,” Standley added.

-More-

Rite Aid FY 2013 Q3 Press Release - page 2

Third Quarter Summary

Revenues for the 13-week quarter were $6.2 billion versus revenues of $6.3 billion in the prior year third quarter. Revenues decreased 1.2 percent primarily due to the impact of the introduction of lower cost generics on pharmacy same store sales as well as store closings.

Same store sales for the quarter decreased 1.5 percent over the prior year 13-week period, consisting of a 1.1 percent increase in front end sales offset by a 2.7 percent decrease in pharmacy sales. Pharmacy sales included an approximate 924 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 3.6 percent over the prior year period, which includes the benefit of additional prescriptions resulting from the Walgreens/Express Scripts dispute. Prescription sales accounted for 67.8 percent of total drugstore sales, and third party prescription revenue was 96.5 percent of pharmacy sales.

Net income was $61.9 million or $0.07 per diluted share compared to last year’s third quarter net loss of $52.0 million or $0.06 per diluted share. The improvement in net income resulted primarily from an increase in Adjusted EBITDA as well as a lower LIFO charge.

Adjusted EBITDA (which is reconciled to net income on the attached table) was $295.3 million or 4.7 percent of revenues for the third quarter compared to $221.5 million or 3.5 percent of revenues for the like period last year. Adjusted EBITDA improved due to increases in front end sales and script count as well as an improvement in pharmacy gross margin resulting from new generic introductions. Also included in Adjusted EBITDA in the current quarter was an $18.1 million benefit related to the settlement of interchange fee litigation which was not included in the company’s guidance.

In the third quarter, the company relocated three stores, remodeled 114 stores and closed ten stores. Completed wellness stores at the end of the third quarter totaled 687. Stores in operation at the end of the third quarter totaled 4,633.

Rite Aid Raises Earnings Guidance

Rite Aid has updated its fiscal 2013 guidance with sales expected to be between $25.150 billion and $25.300 billion and same store sales to range from a decrease of 0.90 percent to a decrease of 0.30 percent compared to fiscal 2012. Rite Aid has raised its Adjusted EBITDA (which is reconciled to net loss/income on the attached table) guidance to be between $1.050 billion and $1.075 billion and its net loss/income guidance to be between a net loss of $38 million or $0.05 per diluted share and net income of $33 million or $0.03 per diluted share. Capital expenditure guidance has been raised to $360 million.

-More-

Rite Aid FY 2013 Q3 Press Release – page 3

Conference Call Broadcast

Rite Aid will hold an analyst call at 8:30 a.m. EST today with remarks by Rite Aid’s management team. The call will be simulcast via the internet and can be accessed through the websites www.riteaid.com in the conference call section of investor information and www.StreetEvents.com. Slides related to materials discussed on the call will be available on both sites. A playback of the call will be available on both sites starting at 12 p.m. EST today. A playback of the call will also be available by telephone beginning at 12 p.m. EST today until 11:59 p.m. EST on Dec.22, 2012. The playback number is 1-855-859-2056 from within the U.S. and Canada or 1-404-537-3406 from outside the U.S. and Canada with the eight-digit reservation number 75462616.

Rite Aid is one of the nation’s leading drugstore chains with 4,633 stores in 31 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through Rite Aid’s website at www.riteaid.com.

Statements, including guidance, in this release that are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” and “will” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, our high level of indebtedness and our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our debt agreements, general economic, market and competitive conditions, our ability to improve the operating performance of our stores in accordance with our long term strategy, the efforts of private and public third-party payers to reduce prescription drug reimbursements and encourage mail order, our ability to manage expenses and our investments in working capital, outcomes of legal and regulatory matters and changes in legislation or regulations, including healthcare reform. These and other risks, assumptions and uncertainties are described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and in other documents that we file or furnish with the Securities and Exchange Commission, which you are encouraged to read. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Rite Aid expressly disclaims any current intention to update publicly any forward-looking statement after the distribution of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

See the attached table for a reconciliation of a non-GAAP financial measure, Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure. We define Adjusted EBITDA as net income (loss) excluding the impact of income taxes (and any corresponding reduction of tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to our customer loyalty program and other items.

###

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

	December 1, 2012			March 3, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	263,641		$	162,285
Accounts receivable, net	917,033			1,013,233
Inventories, net of LIFO reserve of $1,090,625 and $1,063,123	3,096,988			3,138,455
Prepaid expenses and other current assets	194,930			190,613
Total current assets	4,472,592			4,504,586
Property, plant and equipment, net	1,901,542			1,902,021
Other intangibles, net	476,413			528,775
Other assets	335,595			428,909
Total assets	$	7,186,142		$	7,364,291
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	229,041		$	79,421
Accounts payable	1,437,728			1,426,391
Accrued salaries, wages and other current liabilities	1,176,903			1,064,507
Total current liabilities	2,843,672			2,570,319
Long-term debt, less current maturities	5,827,936			6,141,773
Lease financing obligations, less current maturities	95,434			107,007
Other noncurrent liabilities	995,214			1,131,948
Total liabilities	9,762,256			9,951,047
Commitments and contingencies	—			—
Stockholders’ deficit:
Preferred stock - Series G	1			1
Preferred stock - Series H	179,406			171,569
Common stock	903,827			898,687
Additional paid-in capital	4,278,576			4,278,988
Accumulated deficit	(7,888,349		)	(7,883,367		)
Accumulated other comprehensive loss	(49,575		)	(52,634		)
Total stockholders’ deficit	(2,576,114		)	(2,586,756		)
Total liabilities and stockholders’ deficit	$	7,186,142		$	7,364,291

Chart 1

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

	Thirteen weeks ended December 1, 2012			Thirteen weeks ended November 26, 2011
Revenues	$	6,237,847		$	6,312,584
Costs and expenses:
Cost of goods sold	4,426,526			4,641,204
Selling, general and administrative expenses	1,612,198			1,583,098
Lease termination and impairment charges	14,366			11,540
Interest expense	128,371			129,927
Gain on sale of assets, net	(6,262		)	(2,172		)
	6,175,199			6,363,597
Income (loss) before income taxes	62,648			(51,013		)
Income tax expense	777			972
Net income (loss)	$	61,871		$	(51,985	)
Basic and diluted earnings (loss) per share:
Numerator for earnings (loss) per share:
Net income (loss)	$	61,871		$	(51,985	)
Accretion of redeemable preferred stock	(26		)	(26		)
Cumulative preferred stock dividends	(2,651		)	(2,498		)
Income (loss) attributable to common stockholders - basic	59,194			(54,509		)
Add back - Interest on convertible notes	1,334			—
Income (loss) attributable to common stockholders - diluted	$	60,528		$	(54,509	)
Denominator:
Basic weighted average shares	891,031			886,629
Outstanding options	1,977			—
Convertible notes	24,800			—
Diluted weighted average shares	917,808			886,629
Basic and diluted income (loss) per share	$	0.07		$	(0.06	)

Chart 2

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

	Thirty-nine weeks ended December 1, 2012			Thirty-nine weeks ended November 26, 2011
Revenues	$	18,937,018		$	18,974,468
Costs and expenses:
Cost of goods sold	13,666,505			13,963,208
Selling, general and administrative expenses	4,918,433			4,773,086
Lease termination and impairment charges	34,292			43,748
Interest expense	388,013			391,516
Loss on debt modifications and retirements, net	17,842			17,510
Gain on sale of assets, net	(19,267		)	(7,812		)
	19,005,818			19,181,256
Loss before income taxes	(68,800		)	(206,788		)
Income tax (benefit) expense	(63,818		)	533
Net loss	$	(4,982	)	$	(207,321	)
Basic and diluted loss per share:
Numerator for loss per share:
Net loss	$	(4,982	)	$	(207,321	)
Accretion of redeemable preferred stock	(77		)	(77		)
Cumulative preferred stock dividends	(7,837		)	(7,384		)
Loss attributable to common stockholders - basic and diluted	$	(12,896	)	$	(214,782	)
Denominator:
Basic and diluted weighted average shares	889,187			885,388
Basic and diluted loss per share	$	(0.01	)	$	(0.24	)

Chart 3

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)

	Thirteen weeks ended December 1, 2012		Thirteen weeks ended November 26, 2011
Net income (loss)	$	61,871	$	(51,985	)
Other comprehensive income:
Defined benefit pension plans:
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost	1,020		590
Total other comprehensive income	1,020		590
Comprehensive income (loss)	$	62,891	$	(51,395	)

Chart 4

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

	Thirty-nine weeks ended December 1, 2012			Thirty-nine weeks ended November 26, 2011
Net loss	$	(4,982	)	$	(207,321	)
Other comprehensive income:
Defined benefit pension plans:
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost	3,059			1,771
Total other comprehensive income	3,059			1,771
Comprehensive loss	$	(1,923	)	$	(205,550	)

Chart 5

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION

(Dollars in thousands, except per share amounts)

(unaudited)

	Thirteen weeks ended December 1, 2012			Thirteen weeks ended November 26, 2011
SUPPLEMENTAL OPERATING INFORMATION
Revenues	$	6,237,847		$	6,312,584
Cost of goods sold	4,426,526			4,641,204
Gross profit	1,811,321			1,671,380
LIFO charge	—			27,501
FIFO gross profit	1,811,321			1,698,881
Gross profit as a percentage of revenues	29.04		%	26.48		%
LIFO charge as a percentage of revenues	0.00		%	0.44		%
FIFO gross profit as a percentage of revenues	29.04		%	26.91		%
Selling, general and administrative expenses	1,612,198			1,583,098
Selling, general and administrative expenses as a percentage of revenues	25.85		%	25.08		%
Cash interest expense	120,719			121,321
Non-cash interest expense	7,652			8,606
Total interest expense	128,371			129,927
Adjusted EBITDA	295,284			221,460
Adjusted EBITDA as a percentage of revenues	4.73		%	3.51		%
Net income (loss)	61,871			(51,985		)
Net income (loss) as a percentage of revenues	0.99		%	-0.82		%
Total debt	6,152,411			6,311,671
Invested cash	167,241			1,258
Total debt net of invested cash	5,985,170			6,310,413
SUPPLEMENTAL CASH FLOW INFORMATION
Payments for property, plant and equipment	84,984			55,852
Intangible assets acquired	25,692			11,643
Total cash capital expenditures	110,676			67,495
Equipment received for noncash consideration	504			1,358
Equipment financed under capital leases	2,017			4,095
Gross capital expenditures	$	113,197		$	72,948

Chart 6

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL OPERATING AND CASH FLOW INFORMATION

(Dollars in thousands, except per share amounts)

(unaudited)

	Thirty-nine weeks ended December 1, 2012			Thirty-nine weeks ended November 26, 2011
SUPPLEMENTAL OPERATING INFORMATION
Revenues	$	18,937,018		$	18,974,468
Cost of goods sold	13,666,505			13,963,208
Gross profit	5,270,513			5,011,260
LIFO charge	27,502			67,503
FIFO gross profit	5,298,015			5,078,763
Gross profit as a percentage of revenues	27.83		%	26.41		%
LIFO charge as a percentage of revenues	0.15		%	0.36		%
FIFO gross profit as a percentage of revenues	27.98		%	26.77		%
Selling, general and administrative expenses	4,918,433			4,773,086
Selling, general and administrative expenses as a percentage of revenues	25.97		%	25.16		%
Cash interest expense	364,929			365,744
Non-cash interest expense	23,084			25,772
Total interest expense	388,013			391,516
Adjusted EBITDA	788,102			668,570
Adjusted EBITDA as a percentage of revenues	4.16		%	3.52		%
Net loss	(4,982		)	(207,321		)
Net loss as a percentage of revenues	-0.03		%	-1.09		%
Total debt	6,152,411			6,311,671
Invested cash	167,241			1,258
Total debt net of invested cash	5,985,170			6,310,413
SUPPLEMENTAL CASH FLOW INFORMATION
Payments for property, plant and equipment	233,195			146,138
Intangible assets acquired	45,659			28,090
Total cash capital expenditures	278,854			174,228
Equipment received for noncash consideration	2,636			3,092
Equipment financed under capital leases	7,251			6,476
Gross capital expenditures	$	288,741		$	183,796

Chart 7

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(In thousands)

	Thirteen weeks ended December 1, 2012			Thirteen weeks ended November 26, 2011
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss)	$	61,871		$	(51,985	)
Adjustments:
Interest expense	128,371			129,927
Income tax expense	777			972
Depreciation and amortization	102,790			107,579
LIFO charges	—			27,501
Lease termination and impairment charges	14,366			11,540
Stock-based compensation expense	4,219			4,089
Gain on sale of assets, net	(6,262		)	(2,172		)
Closed facility liquidation expense	1,396			1,527
Customer loyalty card program revenue deferral	(11,746		)	(5,846		)
Other	(498		)	(1,672		)
Adjusted EBITDA	$	295,284		$	221,460
Percent of revenues	4.73		%	3.51		%

Chart 8

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands)

	Thirty-nine weeks ended December 1, 2012			Thirty-nine weeks ended November 26, 2011
Reconciliation of net loss to adjusted EBITDA:
Net loss	$	(4,982	)	$	(207,321	)
Adjustments:
Interest expense	388,013			391,516
Income tax (benefit) expense	(63,818		)	533
Reduction of tax indemnification asset	60,237			—
Depreciation and amortization	311,160			333,381
LIFO charges	27,502			67,503
Lease termination and impairment charges	34,292			43,748
Stock-based compensation expense	12,872			11,612
Gain on sale of assets, net	(19,267		)	(7,812		)
Loss on debt modifications and retirements, net	17,842			17,510
Closed facility liquidation expense	4,263			5,159
Severance costs	(72		)	256
Customer loyalty card program revenue deferral	16,247			22,905
Other	3,813			(10,420		)
Adjusted EBITDA	$	788,102		$	668,570
Percent of revenues	4.16		%	3.52		%

Chart 9

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

	Thirteen weeks ended December 1, 2012			Thirteen weeks ended November 26, 2011
OPERATING ACTIVITIES:
Net income (loss)	$	61,871		$	(51,985	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	102,790			107,579
Lease termination and impairment charges	14,366			11,540
LIFO charges	—			27,501
Gain on sale of assets, net	(6,262		)	(2,172		)
Stock-based compensation expense	4,219			4,089
Changes in operating assets and liabilities:
Accounts receivable	9,343			(21,190		)
Inventories	(74,724		)	(126,646		)
Accounts payable	172,614			28,800
Other assets and liabilities, net	(15,697		)	24,466
Net cash provided by operating activities	268,520			1,982
INVESTING ACTIVITIES:
Payments for property, plant and equipment	(84,984		)	(55,852		)
Intangible assets acquired	(25,692		)	(11,643		)
Proceeds from sale-leaseback transactions	2,405			2,428
Proceeds from dispositions of assets and investments	11,844			7,592
Net cash used in investing activities	(96,427		)	(57,475		)
FINANCING ACTIVITIES:
Net proceeds from revolver	—			118,000
Principal payments on long-term debt	(7,824		)	(4,392		)
Change in zero balance cash accounts	4,974			11,934
Net proceeds from the issuance of common stock	99			62
Deferred financing costs paid	(26		)	—
Net cash (used in) provided by financing activities	(2,777		)	125,604
Increase in cash and cash equivalents	169,316			70,111
Cash and cash equivalents, beginning of period	94,325			78,363
Cash and cash equivalents, end of period	$	263,641		$	148,474

Chart 10

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

	Thirty-nine weeks ended December 1, 2012			Thirty-nine weeks ended November 26, 2011
OPERATING ACTIVITIES:
Net loss	$	(4,982	)	$	(207,321	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	311,160			333,381
Lease termination and impairment charges	34,292			43,748
LIFO charges	27,502			67,503
Gain on sale of assets, net	(19,267		)	(7,812		)
Stock-based compensation expense	12,872			11,612
Loss on debt modifications and retirements, net	17,842			17,510
Changes in operating assets and liabilities:
Accounts receivable	95,732			(7,636		)
Inventories	13,055			(298,936		)
Accounts payable	55,498			179,925
Other assets and liabilities, net	55,533			124,067
Net cash provided by operating activities	599,237			256,041
INVESTING ACTIVITIES:
Payments for property, plant and equipment	(233,195		)	(146,138		)
Intangible assets acquired	(45,659		)	(28,090		)
Proceeds from sale-leaseback transactions	6,355			2,428
Proceeds from dispositions of assets and investments	27,744			16,955
Net cash used in investing activities	(244,755		)	(154,845		)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt	426,263			341,285
Net (repayments to) proceeds from revolver	(136,000		)	163,000
Principal payments on long-term debt	(479,147		)	(439,553		)
Change in zero balance cash accounts	(43,507		)	(106,347		)
Net proceeds from the issuance of common stock	1,103			566
Financing fees paid for early debt redemption	(11,069		)	—
Deferred financing costs paid	(10,769		)	(2,789		)
Net cash used in financing activities	(253,126		)	(43,838		)
Increase in cash and cash equivalents	101,356			57,358
Cash and cash equivalents, beginning of period	162,285			91,116
Cash and cash equivalents, end of period	$	263,641		$	148,474

Chart 11

RITE AID CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF NET (LOSS) INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE

YEAR ENDING MARCH 2, 2013

(In thousands, except per share amounts)

	Guidance Range
	Low			High
Sales	$	25,150,000		$	25,300,000
Same store sales (a)	-0.9		%	-0.3		%
Gross capital expenditures	$	360,000		$	360,000
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income	$	(38,000	)	$	33,000
Adjustments:
Interest expense	518,000			518,000
Income tax benefit	(102,000		)	(104,000		)
Reduction of tax indemnification asset	95,000			95,000
Depreciation and amortization	416,000			416,000
LIFO charge	30,000			—
Store closing and impairment charges	87,000			80,000
Stock-based compensation expense	17,000			17,000
Loss on debt modification	18,000			18,000
Customer loyalty card program revenue deferral	21,000			20,000
Other	(12,000		)	(18,000		)
Adjusted EBITDA	$	1,050,000		$	1,075,000
Diluted (loss) income per share	$	(0.05	)	$	0.03

(a)Reflects approximately 700 basis points reduction in pharmacy same store sales from new generic introductions.

Chart 12