Rite Aid Announces Third Quarter Results

Rite Aid Corporation (NYSE, PCX:RAD) today announced financialresults for its third quarter ended November 26, 2005.

Revenues for the 13-week third quarter were $4.15 billion versusrevenues of $4.11 billion in the prior year third quarter. Revenuesincreased 0.9 percent.

Same store sales increased 1.7 percent during the third quarter ascompared to the year-ago like period, consisting of a 0.7 percentpharmacy same store sales increase and a 3.4 percent increase infront-end same store sales. Prescription sales accounted for 63.8percent of total sales, and third party prescription sales represented94.1 percent of pharmacy sales.

The third quarter had a net loss of $5.2 million or $.02 perdiluted share compared to last year's third quarter net income of $.3million or $.02 loss per diluted share. The change was due primarilyto a $21.7 million decrease in adjusted EBITDA (which is reconciled tonet loss or income on the attached table), a $1.8 million increase inthe LIFO charge, a $2.8 million increase in depreciation andamortization expense and a $13.8 million decrease in gain fromlitigation settlements. These negative factors were partially offsetprimarily by a $3.7 million decrease in interest expense, a $1.1million income tax benefit compared to a $5.4 million income taxexpense in the prior year quarter and no loss on debt modificationcompared to a $20.2 million loss in the prior year quarter.

Adjusted EBITDA amounted to $141.3 million or 3.4 percent ofrevenues. This compares to $163.0 million or 4.0 percent of revenuesfor the like period last year. The decrease was primarily due to anincrease in salary, wages and benefit expense and occupancy costs.

"We are pleased with the positive sales trends in the thirdquarter, with pharmacy sales moving back into positive territory andsolid gains on the front end," said Mary Sammons, Rite Aid presidentand CEO. "We expect that with our continued focus on initiatives togain new customers and improve customer satisfaction, along with theseasonality of our business and an extra week this fiscal year, wewill deliver a strong fourth quarter. We're also looking forward to asignificant number of new and relocated store openings in the fourthquarter, keeping us on track to meet our goal of 80 new and relocatedstores by the end of the fiscal year."

In the third quarter, the company opened 8 stores, relocated 8stores, acquired 2 stores, closed 22 stores, which includes 13 storesclosed due to hurricane Katrina, and remodeled 53 stores. Stores inoperation at the end of the quarter totaled 3,333.

Company Confirms Guidance for Fiscal 2006

Rite Aid confirmed its fiscal 2006 guidance. The company said itexpects sales to be between $17.1 billion and $17.4 billion, with samestore sales improving 0.5 percent to 2.0 percent over fiscal 2005. Netincome for fiscal 2006 is expected to be between $31 million and $62million or a loss per share of $.01 to net income of $.04 per dilutedshare. Adjusted EBITDA (which is reconciled to net income on theattached table) is expected to be between $675 million and $725million. Capital expenditures are expected to be between $350 millionand $400 million.

Conference Call Broadcast

Rite Aid will hold an analyst call at 10:30 a.m. Eastern Timetoday with remarks by Rite Aid's management team. The call will besimulcast via the internet and can be accessed through the websiteswww.riteaid.com in the conference call section of investor informationand www.StreetEvents.com. A playback of the call will be available onboth sites starting at 2 p.m. Eastern Time today. A playback of thecall will also be available by telephone for 48 hours beginning at 2p.m. Eastern Time today until 2 p.m. Eastern Time on December 17. Theplayback number is 1-800-642-1687 from within the U.S. and Canada or1-706-645-9291 from outside the U.S. and Canada with the seven-digitreservation number 3332166.

Rite Aid Corporation is one of the nation's leading drugstorechains with annual revenues of $16.8 billion and approximately 3,300stores in 28 states and the District of Columbia. Information aboutRite Aid, including corporate background and press releases, isavailable through the company's website at www.riteaid.com.

This press release may contain forward-looking statements, whichare subject to certain risks and uncertainties that could cause actualresults to differ materially from those expressed or implied in theforward-looking statements. Factors that could cause actual results todiffer materially from those expressed or implied in suchforward-looking statements include our high level of indebtedness, ourability to make interest and principal payments on our debt andsatisfy the other covenants contained in our senior secured creditfacility and other debt agreements, our ability to improve theoperating performance of our existing stores in accordance with ourlong term strategy, our ability to hire and retain pharmacists andother store personnel, the outcomes of pending lawsuits andgovernmental investigations, competitive pricing pressures, continuedconsolidation of the drugstore industry, the efforts of private andpublic third-party payors to reduce prescription drug reimbursementsand encourage mail order, changes in state or federal legislation orregulations, the success of planned advertising and merchandisingstrategies, general economic conditions and inflation, interest ratemovements, access to capital and our relationship with our suppliers.Consequently, all of the forward-looking statements made in this pressrelease are qualified by these and other factors, risks anduncertainties. Readers are also directed to consider other risks anduncertainties discussed in documents filed by the Company with theSecurities and Exchange Commission. Forward-looking statements can beidentified through the use of words such as "may", "will", "intend","plan", "project", "expect", "anticipate", "could", "should", "would","believe", "estimate", "contemplate", and "possible".

See the 8-K furnished to the Securities and Exchange Commission onDecember 15, 2005 for definition, purpose and reconciliation ofnon-GAAP financial measures referred to herein to most comparable GAAPfinancial measures.

RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)

November 26, February 26,
2005 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 105,130 $ 162,821
Accounts receivable, net 308,702 483,455
Inventories, net 2,485,723 2,310,153
Prepaid expenses and other current
assets 62,904 50,325
------------ ------------
Total current assets 2,962,459 3,006,754
Property, plant and equipment, net 1,678,357 1,733,694
Goodwill 684,535 684,535
Other intangibles, net 186,360 179,480
Other assets 324,540 328,120
------------ ------------
Total assets $ 5,836,251 $ 5,932,583
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and lease financing obligations $ 188,684 $ 223,815
Accounts payable 870,886 757,571
Accrued salaries, wages and other
current liabilities 714,740 690,351
------------ ------------
Total current liabilities: 1,774,310 1,671,737
Convertible notes 248,625 247,500
Long-term debt, less current maturities 2,478,758 2,680,998
Lease financing obligations, less current
maturities 165,122 159,023
Other noncurrent liabilities 817,118 850,391
------------ ------------
Total liabilities 5,483,933 5,609,649

Commitments and contingencies - -
Stockholders' equity:
Preferred stock - Series E 120,000 120,000
Preferred stock - Series F - 113,081
Preferred stock - Series G 119,122 113,081
Preferred stock - Series H 118,247 113,081
Preferred stock - Series I 116,074 -
Common stock 525,407 520,438
Additional paid-in capital 3,110,869 3,121,404
Accumulated deficit (3,735,396) (3,756,146)
Accumulated other comprehensive loss (22,005) (22,005)
------------ ------------
Total stockholders' equity 352,318 322,934
------------ ------------
Total liabilities and
stockholders' equity $ 5,836,251 $ 5,932,583
============ ============




RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)


Thirteen Thirteen
Weeks Weeks
ended ended
November November
26, 2005 27, 2004
----------- -----------
Revenues $4,145,683 $4,107,336
Costs and expenses:
Costs of goods sold, including occupancy
costs 3,127,776 3,098,555
Selling, general and administrative
expenses 956,017 909,016
Store closing and impairment charges 2,652 2,397
Interest expense 66,909 70,653
Loss on debt modifications and
retirements, net - 20,216
(Gain) loss on sale of assets and
investments, net (1,372) 849
----------- -----------

4,151,982 4,101,686
----------- -----------

(Loss) income before income taxes (6,299) 5,650

Income tax (benefit) expense (1,079) 5,362

----------- -----------
Net (loss) income $ (5,220) $ 288
=========== ===========

Basic and diluted (loss) income per share:

Numerator for (loss) income per share:
Net (loss) income $ (5,220) $ 288
Accretion of redeemable preferred stock (26) (26)
Cumulative preferred stock dividends (7,254) (8,694)
----------- -----------
Loss attributable to common stockholders -
basic and diluted $ (12,500) $ (8,432)
=========== ===========

Denominator:
Basic and diluted weighted average shares 525,349 519,876

Basic and diluted loss per share $ (0.02) $ (0.02)




RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)


Thirty-nine Thirty-nine
Weeks ended Weeks ended
November November
26, 2005 27, 2004
------------ ------------
Revenues $12,499,642 $12,475,599
Costs and expenses:
Costs of goods sold, including occupancy
costs 9,386,317 9,388,222
Selling, general and administrative
expenses 2,839,158 2,748,014
Store closing and impairment charges 26,305 11,263
Interest expense 205,273 224,973
Loss on debt modifications and
retirements, net 9,186 19,425
Gain on sale of assets and investments,
net (3,865) (1,323)
------------ ------------

12,462,374 12,390,574
------------ ------------

Income before income taxes 37,268 85,025

Income tax expense 10,635 11,139

------------ ------------
Net income $ 26,633 $ 73,886
============ ============

Basic and diluted (loss) income per share:

Numerator for (loss) income per share:
Net income $ 26,633 $ 73,886
Premium to redeem preferred stock (5,883) -
Accretion of redeemable preferred stock (77) (77)
Cumulative preferred stock dividends (25,020) (25,573)
------------ ------------
(Loss) income attributable to common
stockholders - basic and diluted $ (4,347) $ 48,236
============ ============

Denominator:
Basic weighted average shares 523,296 518,095
Outstanding options - 13,963
------------ ------------
Diluted weighted average shares 523,296 532,058
============ ============

Basic and diluted (loss) income per
share $ (0.01) $ 0.09





RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)


Thirteen Thirteen
Weeks Weeks
ended ended
November November
26, 2005 27, 2004
---------- ----------


Reconciliation of net (loss) income to adjusted
EBITDA:
Net (loss) income $ (5,220) $ 288
Adjustments:
Interest expense 66,909 70,653
Recurring income tax (benefit) expense (1,079) 5,362
Depreciation and amortization 63,114 60,334
LIFO charges (a) 7,612 5,763
Store closing and impairment charges 2,652 2,397
Stock-based compensation expense 6,054 5,421
(Gain) loss on sale of assets and
investments, net (1,372) 849
Loss on debt modifications and
retirements, net (b) - 20,216
Litigation settlements, net (c) (701) (14,508)
Legal and accounting expenses (d) 65 3,243
Closed store liquidation expense (e) 2,609 2,454
Other 656 547
---------- ----------
Adjusted EBITDA $ 141,299 $ 163,019
========== ==========
Percent of revenues 3.41% 3.97%


Notes:

(a) Represents non-cash charges to value our inventories
under the last-in first-out ("LIFO") method.

(b) Represents loss related to debt modifications and
retirements, net.

(c) Represents net impact of non-recurring litigation.

(d) Charges consist primarily of fees paid for legal
services related to defending against litigation
related to prior management's business practices
and to defend prior management.

(e) Represents costs to liquidate inventory at stores
that are in the process of closing.





RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)


Thirty- Thirty-
nine nine
Weeks Weeks
ended ended
November November
26, 2005 27, 2004
--------- ---------

Reconciliation of net income to adjusted EBITDA:
Net income $ 26,633 $ 73,886
Adjustments:
Interest expense 205,273 224,973
Recurring income tax expense 18,483 11,139
Income tax benefit from favorable tax
settlement (7,848) -
Depreciation and amortization 184,740 185,581
LIFO charges (a) 22,837 17,276
Store closing and impairment charges 26,305 11,263
Stock-based compensation expense 15,219 14,525
Gain on sale of assets and investments,
net (3,865) (1,323)
Loss on debt modifications and
retirements, net (b) 9,186 19,425
Litigation settlements, net (c) (13,145) (14,183)
Legal and accounting expenses (d) 2,301 8,050
Closed store liquidation expense (e) 6,213 5,849
Other 1,858 1,601
--------- ---------
Adjusted EBITDA $494,190 $558,062
========= =========
Percent of revenues 3.95% 4.47%


Notes:

(a) Represents non-cash charges to value our
inventories under the last-in first-out ("LIFO")
method.

(b) Represents loss related to debt modifications and
retirements, net.

(c) Represents net impact of non-recurring litigation.

(d) Charges consist primarily of fees paid for legal
services related to defending against litigation
related to prior management's business practices,
to defend prior management and for transaction
consultation.

(e) Represents costs to liquidate inventory at stores
that are in the process of closing.




RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)


Thirteen Thirteen
Weeks Weeks
ended ended
November November
26, 2005 27, 2004
--------- -----------


Operating activities:
Net (loss) income $ (5,220) $ 288
Adjustments to reconcile to net cash provided
by operations:
Depreciation and amortization 63,114 60,334
Stock-based compensation expense 6,054 5,421
Store closing and impairment charges 2,652 2,397
Loss on debt modifications and retirements,
net - 20,216
(Gain) loss on sale of assets and
investments, net (1,372) 849
Benefit for deferred income taxes (1,253) (514)
Change in income tax receivables and
payables 375 (186)
Change in operating assets and liabilities (96,478) (132,395)
Net proceeds from accounts receivable
securitization 55,000 335,000
--------- -----------
Net cash provided by operating
activities 22,872 291,410
Investing activities:
Expenditures for property, plant and
equipment (97,439) (44,627)
Intangible assets acquired (11,269) (8,482)
Proceeds from sale-leaseback transactions 24,603 53,800
Proceeds from dispositions 8,034 2,062
--------- -----------
Net cash (used in) provided by
investing activities (76,071) 2,753
Financing activities:
Principal payments on long-term debt (2,429) (4,519)
Principal payments on bank credit facility (446,625) (1,147,125)
Proceeds from bank credit facility - 438,015
Net proceeds from revolver 496,000 99,000
Change in zero balance cash accounts 24,921 13,358
Proceeds from the issuance of preferred
stock 5,335 -
Payments for preferred stock dividends (3,458) -
Proceeds from the issuance of common stock 1,380 32
Deferred financing costs paid (6,889) (4,041)
--------- -----------
Net cash provided by (used in)
financing activities 68,235 (605,280)
--------- -----------
Increase (decrease) in cash and cash
equivalents 15,036 (311,117)
Cash and cash equivalents, beginning of period 90,094 406,885
--------- -----------
Cash and cash equivalents, end of period $105,130 $ 95,768
========= ===========




RITE AID CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)


Thirty-nine Thirty-nine
Weeks Weeks
ended ended
November November
26, 2005 27, 2004
----------- -----------


Operating activities:
Net income $ 26,633 $ 73,886
Adjustments to reconcile to net cash provided
by operations:
Depreciation and amortization 184,740 185,581
Stock-based compensation expense 15,219 14,525
Store closing and impairment charges 26,305 11,263
Loss on debt modifications and
retirements, net 9,186 19,425
Gain on sale of assets and investments,
net (3,865) (1,323)
Provision (benefit) for deferred income
taxes 13,582 (2,712)
Change in income tax receivables and
payables 1,018 40,354
Change in operating assets and
liabilities (131,060) (152,101)
Net proceeds from accounts receivable
securitization 195,000 335,000
----------- -----------
Net cash provided by operating
activities 336,758 523,898
Investing activities:
Expenditures for property, plant and
equipment (191,184) (120,455)
Intangible assets acquired (34,599) (21,202)
Proceeds from sale-leaseback transactions 72,505 53,800
Proceeds from dispositions 21,096 6,178
----------- -----------
Net cash used in investing
activities (132,182) (81,679)
Financing activities:
Principal payments on long-term debt (336,437) (78,676)
Principal payments on bank credit
facility (448,875) (1,150,000)
Proceeds from bank credit facility - 438,015
Net proceeds from revolver 530,000 99,000
Change in zero balance cash accounts 5,251 11,500
Proceeds from financing secured by owned
property 5,352 -
Proceeds from the issuance of preferred
stock 116,885 -
Payments for the redemption of preferred
stock (123,533) -
Payments for preferred stock dividends (9,244) -
Proceeds from the issuance of common
stock 5,490 2,996
Deferred financing costs paid (7,156) (4,041)
----------- -----------
Net cash used in financing
activities (262,267) (681,206)
----------- -----------
Decrease in cash and cash equivalents (57,691) (238,987)
Cash and cash equivalents, beginning of
period 162,821 334,755
----------- -----------
Cash and cash equivalents, end of period $ 105,130 $ 95,768
=========== ===========





RITE AID CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME GUIDANCE TO ADJUSTED EBITDA GUIDANCE
(In thousands)


Guidance Range
-------------------
Low High
--------- ---------
Year Year
Ending Ending
March 4, March 4,
2006 2006
--------- ---------

Reconciliation of net income to adjusted EBITDA:

Net income $ 31,000 $ 62,000
Adjustments:
Interest expense 275,000 275,000
Income tax expense, net 23,000 32,000
Loss on debt modifications and
retirements, net 9,000 9,000
Depreciation and amortization 252,000 252,000
LIFO charge 25,000 30,000
Store closing, liquidation, and impairment
charges 50,000 55,000
Stock-based compensation expense 20,000 20,000
Legal and accounting expenses and
litigation settlements, net (10,000) (10,000)
--------- ---------
Adjusted EBITDA $675,000 $725,000
========= =========

Diluted (loss) income per share $ (0.01) $ 0.04