Rite Aid — Merger or Acquisition (May 2018)
118 slides from Rite Aid's merger presentation, May 15, 2018
Slide 1: The Leader in Food, Health and Wellness Analyst Day Presentation
The Leader in Food, Health and Wellness Analyst Day Presentation May 15, 2018
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS 2 Important Notice Regarding Forward - Looking Statements This communication contains certain “forward - looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 , both as amended by the Private Securities Litigation Refo
Slide 3: Forward Looking Statements (Cont'd)
FORWARD LOOKING STATEMENTS (CONT’D) 3 Additional Information and Where to Find It In connection with the proposed merger involving Rite Aid and Albertsons, Rite Aid and Albertsons have prepared and Albertsons has filed with the SEC on April 6 , 2018 a registration statement on Form S - 4 , as amende
Slide 4: Today's Presenters
TODAY’S PRESENTERS 4 John Standley CEO Jim Donald President & COO, Albertsons Kermit Crawford President & COO, Rite Aid Susan Morris EVP & COO, Albertsons Bryan Everett SEVP, COO Rite Aid Stores Shane Sampson EVP & CMMO, Albertsons Bob Dimond EVP & CFO, Albertsons Jocelyn Konrad EVP Rite Aid Pharmac
Slide 5: Agenda
AGENDA 5 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 6: Combination Rationale
6 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 7: Differentiated Leader in Food, Health and Wellness
7 DIFFERENTIATED LEADER IN FOOD, HEALTH AND WELLNESS Note: Financial figures add together LTM statistics for Rite Aid and Albertsons Companies per respective latest Q4, other than s hare in MSA which is an Albertsons figure, and lives under management (Includes Envision Rx Options) (1) Revenue and A
Slide 8: Combination Highlights
Strong position and local scale in highly attractive markets Unique opportunity to build narrow networks and drive significant loyalty among pharmacy and grocery customers Growing our eCommerce capabilities is critical to meeting our customers needs, where, when and how they want to shop Leveraging
Slide 9: Incumbents Are Exploring New Business Models in an Evolving Healthcare Landscape
INCUMBENTS ARE EXPLORING NEW BUSINESS MODELS IN AN EVOLVING HEALTHCARE LANDSCAPE x Ability to engage with patients in low cost settings Pharmacy as key point to the healthcare ecosystem Horizontal acquisitions to leverage scale Convergence with retail Drive customers to stores, focusing on overlappi
Slide 10: Transaction Catapults US to Be One of the Largest Food and Pharmacy Providers
$318 $186 $123 $112 $82 $72 $60 $22 Source: Company filings and Wall Street Equity research estimates. (1) Approximate data as of May 5, 2018, rounded to nearest 10 . (2) Includes 1,695 pharmacies within Target stores. (3) Includes 1,932 pharmacies acquired from Rite Aid and pro forma for announced
Slide 11: Our Local Presence in Attractive Markets Is Key
#1 integrated food and drug retailer on the West Coast (1) Strong position in the Northeast Note: Rite Aid information is pro forma for its store divestitures to WBA. The sale of all stores under the asset purchase agree ment with WBA was completed in March 2018; the transfer of three remaining
Slide 12: Highly Recognizable Banners National Footprint
WITH HIGHLY RECOGNIZABLE BANNERS 12 We Have a National Footprint and Density in Attractive Markets Note: Rite Aid information is pro forma for its store divestitures to WBA. The sale of all stores under the asset purchase agree ment with WBA was completed in March 2018; the transfer of three remaini
Slide 13: Combination Strengthens Our Pharmacy Presence in Important States
COMBINATION STRENGTHENS OUR PHARMACY PRESENCE IN IMPORTANT STATES 13 (1) Share based on number of pharmacy counters in a given state. (2) Includes all Philadelphia area CBSAs. State Pharmacy counters Counter Share (1) Total Pharmacy Counters Counter Share (1) Rank CA 569 10.4% 945 17.3% #2 PA (2) 61
Slide 14: We Are Expanding Our Convenience in Our Most Attractive Markets
WE ARE EXPANDING OUR CONVENIENCE IN OUR MOST ATTRACTIVE MARKETS 14
Slide 15: Unique Combination of Pharmacy & Grocery Provides a Competitive Advantage
x x x x x x x x x x x x x x x x UNIQUE COMBINATION OF PHARMACY & GROCERY PROVIDES A COMPETITIVE ADVANTAGE 15 Standalone Pharmacies Fresh (1) PBM Drive Up & Go & Grocery Delivery Meal Kits in - store and online subscription Loyalty Program (1) Includes produce, meat, seafood, deli and bakery.
Slide 16: Focusing on Our Relationship with Our Most Valuable Customers
~$24 ~$66 ~$92 Grocery customer Rx customer Grocery spend Rx spend FOCUSING ON OUR RELATIONSHIP WITH OUR MOST VALUABLE CUSTOMERS 16 Spend per transaction >3.5x Higher total spend per week >2.5x Higher grocery spend per week (1) Based on Albertsons customer data for FY’17 Q3. (2) Does not include Fro
Slide 17: Unmatched Manufacturing and Distribution Network with Own Brands Innovation
UNMATCHED MANUFACTURING AND DISTRIBUTION NETWORK WITH COMPREHENSIVE OWN BRANDS INNOVATION 17 Rite Aid Distribution Centers Albertsons Distribution Centers Albertsons Manufacturing facilities National Vertically Integrated Network Note: Financial figures reflect FY’17 statistics. We manufacture $1.3b
Slide 18: Own Brands Category Expertise Will Drive Combined Penetration
19% 23% 30% Rite Aid Albertsons Goal OWN BRANDS CATEGORY EXPERTISE ACROSS FORMATS WILL DRIVE COMBINED PENETRATION 18 Driving Combined Penetration (1) Use Albertsons Own Brands in food and consumables to transform the Rite Aid Front End Use Rite Aid Own Brands and expertise to grow Albertsons GM/HBC
Slide 19: Building Strong Relationships Through Omni-Channel Offering
BUILDING STRONG RELATIONSHIPS WITH OUR CUSTOMERS THROUGH OMNI - CHANNEL OFFERING 19 Fulfillment People Digital PBM Retail Fulfillment Retail Marketplace Digital PBM Brands/Offerings Seamlessly providing what the customers want, where, when and how they want it
Slide 20: Growing Our eCommerce Capabilities Is Critical to Our Strategy
GROWING OUR ECOMMERCE CAPABILITIES IS CRITICAL TO OUR OVERALL STRATEGY 20 In - store offering will be in 650+ premium stores by end of FY’18 Seamlessly providing what the customers want, where, when and how they want it Commitment to same - day convenience across Food, Health and Wellness Anticipate
Slide 21: Proprietary Technology as a Competitive Strength
PROPRIETARY TECHNOLOGY AS A COMPETITIVE STRENGTH AND A POWERFUL ENABLER 21 Digital Platform eCommerce Loyalty & Reward Customer Data Data Science DC Automation Pricing & Promotions In - store Technology Building a state - of - the - art digital platform Robust mobile app functionality with scrip
Slide 22: Substantial Synergy Opportunities
SUBSTANTIAL SYNERGY OPPORTUNITIES 22 $375m Run - Rate Cost Synergies Expected to fully realize within 36 months $3.6bn Incremental Revenue Opportunities Driving traffic and growth COGS 75% SG&A 25% Partner with EnvisionRxOptions, other PBMs and local payors to form preferred pharmacy networks Re
Slide 23: Strengthened Financial Profile
STRENGTHENED FINANCIAL PROFILE 23 $ billions + Expected Synergies Store count 2,550 2,318 4,868 Revenues (1) $ 22.0 $ 61.0 $ 83.0 +$3.6bn Revenue opportunities Adj. EBITDA (1) % margin $ 0.6 (2) 3.0% $ 2.7 4.4% $ 3.4 4.1% $ 3.7 (3) 4.5% Net Debt / Adj. EBITDA (4) 4.2x 4.3x 4.2x (5) 3.9x (5) Note: St
Slide 24: Supported by Diversified Free Cash Flow and Valuable Real Estate Portfolio
Valuable Real Estate Portfolio SUPPORTED BY LARGE, DIVERSIFIED FREE CASH FLOW AND A VALUABLE REAL ESTATE PORTFOLIO 24 Highly valuable “first and main” locations High proportion of owned and ground - leased supermarket properties Significant number of “trophy” locations with opportunities for d
Slide 25: Our Plan Delivers Accelerated Growth in Revenue & Profitability
OUR PLAN DELIVERS ACCELERATED GROWTH IN REVENUE & PROFITABILITY 25 1.5% 2.0% 1.0% 1.0% 1.0% 1.5% Low High 4.0% 5.0% 2.0% 3.0% 0.0% 0.5% 5.0% 6.5% Low High Revenue Adj. EBITDA Adj. EPS Core Retail Business PBM Synergies Expected revenue growth 3.5% – 4.5% Growth Outlook – 3 year CAGR Safeway Synergie
Slide 26: Our Companies: Albertsons Overview
26 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 27: Our Philosophy and Culture
OUR PHILOSOPHY AND CULTURE 27 “Our Customers’ Favorite Local Supermarket” At Albertsons Companies, our purpose is to be the best local supermarket for our customers, employees, partners and communities across the U.S. We’re about Our Communities We’re about Our People Supporting causes that impact o
Slide 28: Albertsons at a Glance
ALBERTSONS AT A GLANCE 28 2,318 stores in 35 states and the District of Columbia 102 million scripts (1) per year (1,777 in - store pharmacies) Ranked #1 or #2 in 66% of 122 MSAs $60bn in sales $11.5bn in Own Brands sales Manufactures $1.2bn in our facilities, of which ~$870m is our Own
Slide 29: Our Core Strategy and Diverse Set of Capabilities
OUR CORE STRATEGY AND DIVERSE SET OF CAPABILITIES 29 Well Positioned for Growth in 2018 Operate Stores at GOLD+ Standards: Full, Fresh, Friendly, Fast & Clean Deliver Superior Customer Service Provide a Compelling Product Offering Expand Natural and Organic Offering Further Strengthen Own Brand Port
Slide 30: Operate Our Stores to the Highest Standards
OPERATE OUR STORES TO THE HIGHEST STANDARDS 30 Run Really Great Stores: 4 F’s and 1 C Well merchandised stores with no out of stocks Great events and promotions Locally relevant products throughout the store Emphasis on Natural, Organic, Specialty, Health and Ethnic (NOSHE) Full Fresh Supe
Slide 31: Provide a Compelling Product Offering
PROVIDE A COMPELLING PRODUCT OFFERING 31 Heavy focus on organic offerings driven by produce department Vast assortment of O Organics and Open Nature offerings from our Own Brands portfolio Butcher blocks stocked with best - in - class variety for meat and seafood We only offer USDA choice be
Slide 32: Provide a Compelling Product Offering
PROVIDE A COMPELLING PRODUCT OFFERING 32 Broad assortment with exclusive offerings both locally and world wide Offer over a thousand high quality cheeses that can be cut and hand wrapped Fruits and vegetables cut fresh daily in store We offer unmatched quality fresh, hand breaded fried chick
Slide 33: Grow Natural / Organic & Fresh Categories
Premium store resets adding 2,500+ specialty items per store Launched premium specialty brand in Signature Reserve to significantly exceed national brand quality El Rancho partnership utilizing the BakeMex facility launching Mexican products in Albertsons stores Probiotic destination sets ad
Slide 34: Distinguished Own Brands Portfolio & Assortment
DISTINGUISHED OWN BRANDS PORTFOLIO & ASSORTMENT 34 Note: Financial figures reflect LTM Q4’17 and statistics are as of end of Q4’17. (1) Measured by units sold / week / store. Four $1.0bn brands at Albertsons $11.5bn business Over 6x the size of the next largest CPG Distinguished Own Brands Portfolio
Slide 35: Albertsons Has Top Private Label Brands
ALBERTSONS HAS 7 OF TOP 10 PRIVATE LABEL BRANDS 35 95 92 89 87 84 84 85 84 84 82 80 81 81 79 79 81 76 81 80 73 94 90 89 78 83 84 81 81 81 80 80 76 79 82 76 76 81 76 72 81 70 65 62 55 50 48 49 47 46 47 47 50 46 44 48 45 44 44 47 45 Willingness to Recommend Satisfaction Willingness to Repurchase Sourc
Slide 36: Heavy Own Brands Buyers Are Far More Loyal
HEAVY OWN BRANDS BUYERS ARE FAR MORE LOYAL 36 Compared to total store shoppers, heavy Own Brands buyers make 3 more trips to Albertsons and spend $91 more each quarter Quarterly Trips Quarterly Spend 10 $324 $415 13 ABS Heavy Own Brands Buyer ABS Total Store Shopper Source: IRI Consumer Network, 13
Slide 37: Diverse Store Format Appeals to Multiple Customers
Well - located settings in affluent communities Best quality, beautifully displayed fresh products, including abundant NOSHE selection Differentiated selection, restaurant quality prepared foods Personal Concierge Services 100 to 150 stores Ultra - premium banners Inspires me to discover som
Slide 38: Well Invested Store Portfolio
~$2,000 ~$435 ~$515 ~$650 ~$ 400 ~$4,000 New stores, remodels, upgrades, merchandising and maintenance innitiatives Distribution Centers & Manufacturing Facilities Technology Integration Capex Other Total Capex investment in the past 3 years WELL INVESTED STORE PORTFOLIO 38 Significant Investments H
Slide 39: Our Unique & Strategically Located Supply Chain Capabilities
23 strategically located distribution centers and 5 fulfillment centers − 83% owned (by square footage) − ~18m square feet Distribution center consolidation completed 1.3bn cases shipped annually 1,425 tractors; 5,700 trailers Plated meal kit fulfillment facilities located in Dallas, Carol
Slide 40: Vertically Integrated to Manufacture Many Own Brand Products
VERTICALLY INTEGRATED TO MANUFACTURE MANY OF OUR OWN BRAND PRODUCTS 40 We operate 20 manufacturing facilities, and constantly monitor “make vs. buy" decisions Significant opportunity to leverage fixed costs and drive proprietary innovation Enables significant growth in our Own Brands portfolio
Slide 41: Innovative New Items from Self Manufacturing Capabilities
INNOVATIVE NEW ITEMS BEING INTRODUCED FROM OUR SELF MANUFACTURING CAPABILITIES 41
Slide 42: $1BN eCommerce Target for FY'18
$1BN ECOMMERCE TARGET FOR FY’18 42 2007 2015 2016 2017 2018E 2020E $1bn $244m $222m $154m $345m (1) Building Breadth of Services Rolled out Home Delivery & Rush Delivery Nationwide Built our own fleet to 1,000 trucks and 1,200+ drivers Expand Drive Up & Go to 500 stores in FY’18 Focus on gro
Slide 43: Multi-Functional eCommerce Solutions
MULTI - FUNCTIONAL ECOMMERCE SOLUTIONS 43 Home delivery New eCommerce website & App rolled out to all divisions 14% increase in web conversion and 65% increase in mobile conversion Pushing operational improvements through new detailed operations playbook Goals & metrics to track progress, al
Slide 44: Continuously Evolving eCommerce Capabilities
CONTINUOUSLY EVOLVING ECOMMERCE CAPABILITIES 44 Plated First omni - channel meal kit offering with national scale Time - saving solution, additional convenience Address new channels with focus on families (larger portions, higher profits) Roll out in - store product to 650+ premium stores in
Slide 45: Aggressively Growing Digital, Loyalty & Rewards
AGGRESSIVELY GROWING DIGITAL, LOYALTY & REWARDS 45 Personalized Deals Saves customers money with personalized deals, coupons, free items and rewards Using data to generate 400m personalized deals per week Increases basket size and drives trips for our 13m registered households Changing custo
Slide 46: Albertsons & Safeway Integration Expertise
ALBERTSONS & SAFEWAY INTEGRATION EXPERTISE 46 Safeway Integration Expected to be Completed by Sept 2018 Significant in - house integration expertise and capabilities and a dedicated integration team with a proven track record of delivering synergy targets COMPLETED NO CONVERSION TO BE CONVERTED 615
Slide 47: Rite Aid Overview
47 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 48: Rite Aid Mission, Strategy and Culture
RITE AID MISSION, STRATEGY AND CULTURE 48 Grow Front End through convenient shopping & tailored offering Serve as the Trusted Advisor for our pharmacy customers Built a winning value proposition for payors and providers DIGITAL ENABLED CUSTOMER EXPERIENCE GROWTH AS LEADERS AT ALL LEVELS Our Mission:
Slide 49: Rite Aid Experience
RITE AID EXPERIENCE 49 Leadership Effectiveness Chain of Excellence Associate Experience Customer Experience Business Growth Business growth is the reward when we provide an exceptional associate and customer experience. If our customers have a great experience AND they build an emotional connection
Slide 50: Our Commitment to Our Communities
OUR COMMITMENT TO OUR COMMUNITIES 50 Customer in - store round - up campaign with The Rite Aid Foundation’s KidCents program resonates with our best customers 446 local KidCents Charities focused on improving children’s health and wellbeing in local communities National partnerships with Children’s
Slide 51: Rite Aid Overview
51 RITE AID OVERVIEW Note: Financial figures and statistics are as of Fiscal Year ended March 3, 2018. Rite Aid information is pro forma for its store divestitures to WBA. The sale of all stores under the asset purchase agreement with WBA was completed in March 2018; the transfer of three remaining
Slide 52: Rite Aid Mission, Strategy and Culture
RITE AID MISSION, STRATEGY AND CULTURE 52 Grow Front End through convenient shopping & tailored offering Serve as the Trusted Advisor for our pharmacy customers Build a winning value proposition for payors and providers DIGITAL ENABLED CUSTOMER EXPERIENCE GROWTH AS LEADERS AT ALL LEVELS Our Mission:
Slide 53: Rite Aid Has an Attractive, Differentiated Own Brands Portfolio
RITE AID HAS AN ATTRACTIVE, DIFFERENTIATED OWN BRANDS PORTFOLIO 53 Differentiated assortment and great quality to build customer loyalty Comprehensive integrated marketing campaign to increase penetration of our Own Brands
Slide 54: Relaunched Wellness+ Rewards with Enhanced Benefits
RELAUNCHED WELLNESS+ REWARDS WITH ENHANCED BENEFITS, EXPANDED DEALS, MORE LOYALTY 54 Weekly sales price for members x x x Weekly Offers / Coupons BonusCash ExtraBucks Balance Rewards Points Script Rewards wellness+ Points ExtraBucks Balance Rewards Points Loyalty Discount Up to 20% 2% None Program
Slide 55: Our Wellness+ Customers Are Active and Loyal
OUR WELLNESS+ CUSTOMERS ARE SOME OF OUR MOST ACTIVE AND LOYAL CUSTOMERS 55 $27.74 $35.61 $46.42 Bronze Silver Gold Wellness+ Average Customer Basket (1) Over 13m Active Members (2) (1) Based on results for LTM ended April 30, 2018. (2) Active member defined as a customer who shopped a store two or m
Slide 56: Hyper-Personalization Drives Sales and Engagement
HYPER - PERSONALIZATION DRIVES SALES AND ENGAGEMENT ACROSS ALL CHANNELS 56 Circular Offer
Slide 57: Our Mobile App Improves Pharmacy Loyalty and Adherence
OUR MOBILE APP IMPROVES PHARMACY LOYALTY AND ADHERENCE 57 Rated 4.7 stars in Apple App Store Easy - to - scan script refills is most frequently used feature Additional features include prescription history and services, among others
Slide 58: Wellness Store Renovations Drive Strong Performance
WELLNESS STORE RENOVATIONS DRIVE STRONG PERFORMANCE AND ATTRACTIVE RETURNS 58 New store renovations have resulted in improved comp results that continue to exceed chain average (1) Frond end sales growth outperformance of 173 bps in Q4’17 Script count growth outperformance of 259 bps in Q4’17
Slide 59: Piece Pick and eCommerce Fulfillment Capabilities Differentiate Distribution Network
PIECE PICK AND ECOMMERCE FULFILLMENT CAPABILITIES ARE DIFFERENTIATORS FOR OUR DISTRIBUTION NETWORK 59 Six Distribution Centers − 4.5 million square feet of space in use − 1.1 billion units picked and shipped annually Multiple central pick locations 96% Piece Pick vs case and/or pallet pick U
Slide 60: Rite Aid Mission, Strategy and Culture
RITE AID MISSION, STRATEGY AND CULTURE 60 Grow Front End through convenient shopping & tailored offering Serve as the Trusted Advisor for our pharmacy customers Build a winning value proposition for payors and providers DIGITAL ENABLED CUSTOMER EXPERIENCE GROWTH AS LEADERS AT ALL LEVELS Our Mission:
Slide 61: Technology: Improving Patient Experience & Pharmacy Efficiency
TECHNOLOGY: IMPROVING THE PATIENT EXPERIENCE & PHARMACY EFFICIENCY 61 Automated Courtesy Refills One Trip Refills Mobile App Rx Status Notifications Workload Balancing E - Script Prioritization Central Fill Prescription Prioritization Prescription refills processed automatically Sync multiple pr
Slide 62: Clinical Engagement: Reducing Costs & Improving Outcomes
CLINICAL ENGAGEMENT: REDUCING COSTS & IMPROVING OUTCOMES 62 Predictive analytics used to identify patient opportunities at risk of being non - adherent Decrease overall healthcare costs and deliver on pay for performance contracts Key focus on adherence rates for all key Star Measures: Diabete
Slide 63: Patient Safety Is a Top Priority
PATIENT SAFETY IS A TOP PRIORITY 63 Naloxone Program Available at all Rite Aid locations without a prescription Pharmacists complete a two (2) hour training Available to any customer upon request; Pharmacists proactively identify “at - risk” patients and recommend Naloxone Stocked in all store
Slide 64: Proprietary Pharmacy System Enabling Patient Care
PROPRIETARY PHARMACY SYSTEM ENABLING PATIENT CARE 64 Patient Centric Platform Integration Efficiency NexGen Outcomes Driven Patient Safety and Convenience Tools Red Flag Process Predictive Refill (OTR/ACR) Text messaging enrollment Personalized preferences Clinical Decision Engine using Aggr
Slide 65: Rite Aid Mission, Strategy and Culture
RITE AID MISSION, STRATEGY AND CULTURE 65 Grow Front End through convenient shopping & tailored offering Serve as the Trusted Advisor for our pharmacy customers Build a winning value proposition for payors and providers DIGITAL ENABLED CUSTOMER EXPERIENCE GROWTH AS LEADERS AT ALL LEVELS Our Mission:
Slide 66: Pharmacy Networks Overview
PHARMACY NETWORKS OVERVIEW 66 3 Types of Pharmacy Networks Open / Broad Networks Access: members have access to largest network of pharmacies Out - of - pocket costs: same at all pharmacies in the network Preferred Networks Two - tier network with co - pay differential Access: members retain
Slide 67: Continued Growth of Limited and Preferred Networks in Commercial Plans
CONTINUED GROWTH OF LIMITED AND PREFERRED NETWORKS IN COMMERCIAL PLANS 67 % of Employees 29% 36% 53% 13% 14% 21% 2015 2016 2017 Preferred Network Limited Network Source: Drug Channels Institute. Note: PDP stands for prescription drug plan.
Slide 68: Medicare Part D PDPs with Preferred Pharmacy Networks
MEDICARE PART D PDP’S WITH PREFERRED PHARMACY NETWORKS 68 Number of Regional Prescription Drug Plans (PDP’s) 1,026 892 520 328 131 132 113 10 83 140 511 841 870 754 633 772 2011 2012 2013 2014 2015 2016 2017 2018E Open Pharmacy Network Preferred Cost Sharing Pharmacy Networks Source: Drug Channels I
Slide 69: Pharmacy Networks Dynamics
Grocery Customers PHARMACY NETWORKS DYNAMICS 69 Preferred Networks Drive Traffic Preferred Pharmacies Pharmacy Customers Payors 1 3 2 Preferred pharmacies provide lower costs to payors in exchange for increased traffic Payors offer customers lower costs at preferred pharmacies Customers choose prefe
Slide 70: Why Would Payors Partner with Us?
WHY WOULD PAYORS PARTNER WITH US? 70 Leverage the convenience of a pharmacy and grocery retail model with a very competitive preferred or limited network offering Utilize the combined network of over 300 retail - based clinics to serve its members Implement a highly discounted retail/mail limi
Slide 71: Leverage WBAD Option to Enhance Pharmacy Purchasing
LEVERAGE WBAD OPTION TO ENHANCE PHARMACY PURCHASING AND ENABLE NARROW NETWORK PARTICIPATION 71 Option currently available to Rite Aid − Option expires May 2019 − Need to coordinate with McKesson contract expiration (March 2019) − Requires brands to be sourced through AmerisourceBergen − Meaningful
Slide 72: EnvisionRxOptions
ENVISIONRXOPTIONS 72 EnvisionRx Transparent Pass - through PBM EnvisionPharmacies Mail Order/ Specialty Pharmacy MedTrakRx Traditional PBM DesignRx Cash - pay Infertility Treatment EnvisionInsurance Medicare Approved Insurance Company EnvisionSavings Discount Card LakerSoftware Third - party Claims
Slide 73: Envision Insurance Company Drives Med-D Growth
ENVISION INSURANCE COMPANY (“EIC”) DRIVES MED - D GROWTH 73 National provider of Medicare Part D prescription drug plans focused on Chooser and Employer Group Waiver Plan (“EGWP”) segments Integrated Part D and PBM operations and communication allows for best - in - class service and administrat
Slide 74: RediClinics Provide Further Growth Opportunities
REDICLINICS PROVIDE FURTHER GROWTH OPPORTUNITIES 74 Albertsons Has 200+ Stores That Are “Clinic Ready” Mission − To provide consumers with easy access to high - quality, affordable health care Scope of services − Acute, episodic care − Preventive care − Weight management (weigh forward) Experi
Slide 75: Health Dialog: Integrated Population Health Management Solution
HEALTH DIALOG: INTEGRATED POPULATION HEALTH MANAGEMENT SOLUTION 75 Outcomes - Based Partner for Managing the Health of Your Population(s) Cost Effective Programs Powerful Tools and Services Rite Aid/Envision Rx Options Adherence Solutions Total Population Health Chronic Care Management Wellnes
Slide 76: Establish a Premier Health, Food & Wellness Destination
ESTABLISH A PREMIER HEALTH, FOOD & WELLNESS DESTINATION 76 Combined Albertsons & Rite Aid expertise, offering and branding creates a greater reach across the health and wellness spectrum Nutrition Health Organic and BFY Food Preventative Screening Immunizations Disease - Specific Coaching Health Cli
Slide 77: Synergies
77 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 78: Combination Creates Opportunities to Drive Traffic and Growth
Approach payors and PBMs to create preferred network leveraging numerous convenient locations across multiple states Increase traffic in stores and basket size by rebranding the pharmacies as Rite Aid (2) and merging and cross - offering loyalty programs Creating long term solutions to meet our cust
Slide 79: What Does the Combined Company Network Look Like?
WHAT DOES THE COMBINED COMPANY NETWORK LOOK LIKE? 79 State Pharmacy counters Counter Share (1) Total Pharmacy Counters Counter Share (1) Rank CA 569 10.4% 945 17.3% #2 PA (2) 614 19.6% 676 21.6% #1 WA 138 13.3% 329 31.7% #1 OR 73 12.9% 182 32.0% #1 (1) Share based on number of pharmacy counters in t
Slide 80: Partnerships Drive Customer Count & Spend
PARTNERSHIPS DRIVE CUSTOMER COUNT & SPEND 80 Significant Opportunity to Convert Lives Total Lives: ~50 million Addressable Lives (1) Lives in Partnership (2) New Grocery and Rx Customers Integrated Healthcare Network Every additional 100,000 lives drives $200m in incremental combined grocery and dru
Slide 81: Leverage Loyalty Programs to Drive Cross Shopping
WE WILL LEVERAGE EACH COMPANY’S STRONG LOYALTY PROGRAMS TO DRIVE CROSS SHOPPING 81 Drive cross - enrollment and /or customer mapping Drive to store Drive regular shopping habits Journey Enrollment incentives 1 st trip driver incentives Continuity/basket building How to influence? Multi - touch appro
Slide 82: Brand, Location and Convenience
BRAND, LOCATION AND CONVENIENCE 82 4,327 Pharmacy locations With the combination of a single National Drug Brand and the Leading Local Grocery Brands in many markets providing increased brand recognition and loyalty for both banners One Recognized Pharmacy Brand With over 4,868 locations in 38 State
Slide 83: Cross Merchandising
Albertsons can expand its Health and Beauty care offering CROSS MERCHANDISING 83 Improve Fresh & Own Brands Offering at Rite Aid Albertsons has private label HHPC products (e.g., Signature Care) but can benefit from Rite Aid’s private label health and beauty offerings Products include − Nail car
Slide 84: Provide Enhanced Patient Care Experience in Our Clinics
PROVIDE ENHANCED PATIENT CARE EXPERIENCE IN OUR CLINICS 84 More than $400m of Capex spent to build out facilities with waiting rooms and 1 - 2 patient rooms Organically grown ~250 clinics locations filled by partners, providing services including blood draw labs, urgent care and telemedicine C
Slide 85: Expand Omni-Channel Capabilities Across the Company
EXPAND OMNI - CHANNEL CAPABILITIES ACROSS THE COMPANY 85 Expand Delivery Capabilities Create unique offerings to provide a compelling omni - channel experience to the customer Attract new customers by offering both Grocery and Rx delivery in one trip Expand delivery services to Rite Aid’s front
Slide 86: Opportunity to Deliver Significant Cost Synergies
OPPORTUNITY TO DELIVER SIGNIFICANT COST SYNERGIES Expected Cost Synergies: $375 million EBITDA Contribution (1) Consolidate certain back office corporate administrative functions Consolidate regional pharmacy operations Purchasing, formulary optimization, and expansion of central fill capabili
Slide 87: Albertsons' Proven Integration Expertise
ALBERTSONS’ PROVEN INTEGRATION EXPERTISE Planned At Announcement $800m (1) FY’18E (2) run - rate $823m Albertsons has exceeded the initial synergy target in the Safeway integration IT Conversion Own Brands Corporate Overhead Vendor Funds Marketing & Advertising Distribution Pharmacy Manufacturing In
Slide 88: We Are Focused on Integration & Synergy Realization
WE ARE FOCUSED ON INTEGRATION & SYNERGY REALIZATION 88 Our Team We have a dedicated Integration Management Office (IMO) that for Albertsons has internally managed the integration of Safeway (to be completed September’18) and for Rite Aid has managed the transition of stores to WBA and the related
Slide 89: Omni-Channel Approach
89 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 90: Aggressively Grow Our Omni-Channel Experience
AGGRESSIVELY GROW OUR OMNI - CHANNEL EXPERIENCE 90 3 rd Par t y Mar k e tp l a c e DC Automation Albertsons D ire c t Store retail Constellation of Brands and Offerings Suppli e r D ire c t Ful f il l m e nt by Albertsons Delivery Dark Store / DC Drive Up & Go Fulfillment GM / HBC Home Delivery F ue
Slide 91: Robust Roadmap to Developing Integrated Platform
ROBUST ROADMAP TO DEVELOPING INTEGRATED PLATFORM 91 Complete mobile functionality Fresh clean modern look; consistent design language Single sign - on across all our websites / apps High quality images, improved search Integrated digital platform that is complementary to our brick - and - mortar sto
Slide 92: Robust Loyalty Programs
ROBUST LOYALTY PROGRAMS 92 Benefits of Loyalty Programs Supported by strong data analytic capabilities Loyalty Program shoppers are more loyal households Basket size is ~3x that of non - loyalty users Shoppers purchase in more categories across the store Leverage best customer data to driv
Slide 93: Data Driven Marketing
DATA DRIVEN MARKETING 93 Performance Media Digital & Social Marketing Connect with the shopper and win with the brands because we can prove sales attribution and ROI Activate Marketing & Measure ROI Facebook Grocery Value Proposition: Real People come into your stores. Real people come onto our plat
Slide 94: Leveraging Data & Advanced Analytics
LEVERAGING DATA & ADVANCED ANALYTICS 94 Customer Centric Retailing Aggressively implementing insights from our customer data to drive assortment and promotional planning decisions within our stores Continue to monitor pricing vs competition and overlay customer insights to ensure we are priced r
Slide 95: Leveraging Intelligent Information to Enhance Operations
LEVERAGING INTELLIGENT INFORMATION TO ENHANCE OPERATIONS 95 Data Science Platform Enable advanced analytics capabilities within organization Revenue Synergies Convert pharmacy customers to grocery customers Loyalty & Digital Marketing Personalization & digitally enabled marketing to drive loyalty Pr
Slide 96: Modernizing Technology and Stores
MODERNIZING TECHNOLOGY AND STORES 96 “Quick dip” EMV for card processing optimized to reduce processing time <2 seconds Eliminate signature requirement for cards with EMV chip Enhance and expand digital receipt - will reduce time for check - out , and help us Capture real time customer experie
Slide 97: Diverse eCommerce Capabilities
DIVERSE ECOMMERCE CAPABILITIES 97 eCommerce Current Capabilities Exploring Breadth of Services & Depth of Customer Choices with New and Developing Capabilities 100k Items on infinite aisle Ready - to - eat foods Wine, floral, baby & pet Single unit pick fulfillment 100+ locations Subscription, insto
Slide 98: Financials
98 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 99: Albertsons Historical Financial Overview & FY'18 Guidance
$15,483 $16,062 $16,641 $16,361 ~$17,000 26.9% 27.3% 27.9% 27.3% 27.9% 2/28/2015 2/27/2016 2/25/2017 2/24/2018 FY'18E ALBERTSONS HISTORICAL FINANCIAL OVERVIEW & FY’18 GUIDANCE 99 (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) Gross Profit / % Margin Revenue Adj.
Slide 100: Albertsons Q4'17 Results
ALBERTSONS Q4’17 RESULTS Total sales during Q4'17 increased 1.6% to $14.0bn compared to $13.8bn in Q4’16 primarily due to ID sales increase of 0.6% and higher fuel sales, principally driven by higher average pump prices − ID sales improved sequentially by 240 basis points compared to the third qua
Slide 101: Albertsons' FY'18 Guidance
ALBERTSONS’ FY’18 GUIDANCE $2,398 ~$170 ~$100 ~$30 ~$2,700 EBITDA FY 2017A Inventory Shrink Improvement Remaining Safeway Synergies Other EBITDA FY 2018E ($ in millions) 101 Source: Management estimates. (1) Based on FY 2018E Albertsons management outlook as reported in Albertsons’ Form 8 - K filed
Slide 102: Rite Aid Historical Financial Overview & FY'18 Guidance
RITE AID HISTORICAL FINANCIAL OVERVIEW & FY’18 GUIDANCE 102 (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) Gross Profit / % Margin Revenue (1) Adj. EBITDA / % Margin Free Cash Flow / % Conversion (2) $4,104 $6,394 $5,897 $16,558 $16,667 $16,534 $15,632 $21,900 $1
Slide 103: Rite Aid Business Has Stabilized
RITE AID BUSINESS HAS STABILIZED 103 Performance Update Pharmacy sales , margin, and reimbursement rates negatively impacted in recent years, while Front End maintained margin stabi lit y Rite Aid maintained effective SG&A cost control throughout the extended WBA merger and asset sale process With t
Slide 104: Rite Aid Q4'17 Results
RITE AID Q4’17 RESULTS 104 Q4’17 13 Weeks Q4’16 14 Weeks ($ in millions) 3/3/2018 3/4/2017 Front End Sales ID % (0.6%) 0.1% Rx Sales ID % (2.3%) (4.7%) Script Count ID % (1.8%) (0.1%) Total Retail Sales ID % (1.7%) (3.1%) Sales $5,394 $5,903 Gross Profit $1,270 $1,349 Gross Margin % 23.5% 22.9% PF A
Slide 105: Rite Aid FY'18 Guidance
RITE AID FY’18 GUIDANCE 105 Summary Financials Commentary FY 2018 Outlook Guidance Range ($ in millions) Low High Average Net Loss ($95) ($40) ($68) Adjustments: Interest Expense 210 210 210 Income Tax Benefit (15) (10) (13) D&A 380 380 380 LIFO Charge 35 35 35 Loss on Debt Retirements 15 15 15 Stor
Slide 106: Pro Forma Historical & Projected Financial Overview
PRO FORMA HISTORICAL & PROJECTED FINANCIAL OVERVIEW 106 (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) (FYE, $ in millions) Gross Profit / % Margin Revenue Adj. EBITDA / % Margin Free Cash Flow / % Conversion (1) $57,497 $58,734 $59,678 $59,829 $83,000 $16,558 $16,667 $16,534 $15,632
Slide 107: Attractive Growth Outlook
ATTRACTIVE GROWTH OUTLOOK 107 1.5% 2.0% 1.0% 1.0% 1.0% 1.5% Low High 4.0% 5.2% 1.8% 3.0% 0.2% 0.3% 5.0% 6.5% Low High Revenue Adj. EBITDA Adj. EPS Core Retail Business PBM Synergies Growth Outlook – 3 year CAGR Safeway Synergies / Shrink / Other Interest expense of ~$1.0bn in year one ended Feb 20
Slide 108: Capitalization and Pro Forma Maturity Profile
CAPITALIZATION AND PRO FORMA MATURITY PROFILE 108 Note: Debt shown at face value. Pro Forma Maturity Profile does not include ~$225 million of NAI Medium Term Notes due 2017 - 2028 , ~$950 million of Capital Leases, and ~250 million of Other Unsecured Debt. (1) Combined EBITDA of $3,425m represents
Slide 109: Bringing It All Together
109 I. Combination Rationale II. Our Companies i. Albertsons Overview ii. Rite Aid Overview III. Synergies IV. Omni - channel Approach V. Financials VI. Bringing it All Together
Slide 110: A Differentiated Leader in Food, Health and Wellness Offering
A DIFFERENTIATED LEADER IN FOOD, HEALTH AND WELLNESS OFFERING 110 Empowering you to take care of yourself, your family, and your community With leading food and wellness offerings Conveniently available however you want to shop FASTER HEALTHIER PREMIUM USDA Choice Beef FRESH Quality Produce MAKING E
Slide 111: Different Because...
DIFFERENT BECAUSE… 111 Unparalleled combination of wellness resources to improve the quality of your life Freshest high quality perishables Unique products available only from us Personalized and compelling value proposition Available where, when and how you want to interact
Slide 112: How It Comes to Life
HOW IT COMES TO LIFE 112 Receive medications, counseling and advice from our pharmacies Lose weight, exercise more, quit smoking and conquer other behavioral change with the help of our healthcare coaches Find the unique wellness or beauty products that meet your individual needs Cook from scratch,
Slide 113: What It Looks Like
WHAT IT LOOKS LIKE 113 Emphasis on organic and natural consumable products combined with a deep selection of health, beauty and general merchandise in our retail drugstores and supermarket drugstores One digital platform that combines loyalty rewards, personalized promotions, omni - channel shopping
Slide 114: The End Result
THE END RESULT 114 We have deeper relationships with our customers because of our integrated food, health and wellness model Customers are using our health and wellness capabilities to improve their quality of life Customers are achieving positive outcomes that lower medical costs Customers choose u
Slide 115: Appendix
115 Appendix
Slide 116: Albertsons – Net Income to EBITDA Reconciliation
ALBERTSONS – NET INCOME TO EBITDA RECONCILIATION 116 ($ in millions) Fiscal Year Ending February of Following Year 2014PF 2015A 2016A 2017A Net (loss) Income ($327) ($502) ($374) $46 (Gain) loss on interest rate and commodity hedges, net 2 16 (7) (6) Facility closures and related transition costs --
Slide 117: Rite Aid – Net Income to EBITDA Reconciliation
RITE AID – NET INCOME TO EBITDA RECONCILIATION 117 ($ in millions) Fiscal Year Ending February of Following Year 2014A 2015A 2016A 2017A Net (loss) income—continuing operations $2,012 $102 $4 ($350) Interest expense 117 186 200 203 Income tax expense (1,740) 50 44 306 Depreciation and amortization e
Slide 118: The Leader in Food, Health and Wellness
The Leader in Food, Health and Wellness Important Notice Regarding Forward-Looking Statements This communication contains certain “forward-looking statements” within the meaning of the Securities Act and the Exchange Act, both as amended by the Private Securities Litigation Reform Act of 1995. State