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Here’s the entire text of the Q&A from Rite Aid’s (ticker: RAD) fiscal Q3 2006 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Question-and-Answer Session

Operator

At this time, I’d like to remind everyone if you would like to ask a question press “*” then the number “1” on your telephone keypad. Hold off for just a moment to compile the Q&A. Your first question comes from John Heinbockel of Goldman Sachs.

Q - Eric Weissman

Good morning guys this is Eric Weissman from Goldman.

A - Mary Sammons

Hi, Eric.

Q - Eric Weissman

Hi, with respect to expenses, kind of, as you guys both mentioned in your remarks, it looks like the expansion program in your pharmacy investments are causing a fair bit of expense pressure at least they were during this quarter. It’s just something that guys are expecting to persist kind of until pharmacy comp momentum picks up a lot from where you’re today, and I guess secondly is there anything that you guys are doing proactively to mitigate the expense pressure in the interim?

A - Mary Sammons

Let me give you a brief response here. We’ve always been very focused on containing cost overall, and yet we feel though it’s important for us to spend dollars on the important initiatives. We have continued to emphasize overall what we call spend management initiatives in our company. We really identified some new areas across the company where we can look for expense savings as we move forward to help mitigate some of the expenses we know are going to spend.

A - Kevin Twomey

And I would like to add Eric the, the sales lift that you get, like say in the fourth quarter has that significant impact on the SG&A percentage. So, we expect things to continue being added to SG&A in connection with support of our new and relocated store program as well as continued dues of the accounts receivable securitization facility for example and, tactical promotional activities, but nonetheless with the sales lift the rate overall will start you to settle down.

Q - Eric Weissman

Okay, and then secondly, I think this is the question for you Kevin, could you give us the sense for the, of the amount of EBITDA dollars that you are attaching to the extra week during the quarter, and how much is embedded in the guidance that you’ve given for the year, is that 2% number kind of 12 million to 15 million, is that about right?

A - Kevin Twomey

I think we’ve talked about that in earlier, our call and basically we have no better information to change that at this point in time, and we will update you when we complete our fourth quarter.

Q - Eric Weissman

Okay, is that fair to assume kind of a 2% number though for the year is that’s what embedded?

A - Kevin Twomey

2% of what Eric?

Q - Eric Weissman

The 2% of the, I mean, is the, is the extra week worth about 2% of the annual EBITDA?

A - Kevin Twomey

Is that translates to the 12 million to 15 million that you just said?

Q - Eric Weissman

Yeah.

A - Kevin Twomey

Yes.

Q - Eric Weissman

Okay. Okay and then lastly, can you give us an update on what’s happening with the Federal Medicaid Legislation in Washington, and then what stage they are in the process then how do you see this, how do you see this eventually playing out?

A - Mary Sammons

Well, there is a lot going on, and I think this is probably one area where the industry is pretty united too in. The message that we’re giving to both house and senate and to any of the legislators that can have an impact there. And it still and heavy discussion, where we are focusing the lobby effort along with NACDS is on, the mandating and expensing key on, how pricing calculations are updated timing in particular, and how is your enforceable co-pay, and this effort has been continue to go on and we know that there is going to be a change that, the final answer is, here we are (ph).

Q - Eric Weissman

Okay, and then I guess this is a follow-up assuming, assuming it just past, it seems like, something in someway share perform well, so what do you, to what degree do you think it will be a negative for Rite Aid and is there anything that you guys can do, it kind of mitigate the hit, either as you mentioned through increased dispensing fees, or reducing expenses in stores with, have you Medicaid mix?

A - Mary Sammons

Obviously we’ll have to look at stores that have, extraordinarily high percentages of Medicaid sale because depending on the degree of change, reimbursement change some of those stores may not be able to fill scripts, I mean, that is something we have to look at. And no matter what path is it, it will have a negative effect not just on Rite Aid, but on the industry in general and that’s an issue that overall industry has to take up. So it will come down to continuing to build incremental volume across pharmacy customer base, and to continue to work on other initiative areas that can help offset some of the margin impact, for instance the focus on growing generics. That’s a key initiative for us where it’s highly successful with it, and we intent to be the most successful in future years.

Q - Eric Weissman

Okay, thank you.

Operator

Our next question comes from Meredith Adler of Lehman Brothers.

Q - Meredith Adler

Hi, guys couple of questions. You talked about continuing to meet your goals on pharmacy power buys. Do you anticipate that the advent of Part D is going to provide more opportunity for you guys to buy files?

A - Mary Sammons

Yes, I expect there is going to be significant pressure on independent as well as from all regional and that there will be opportunities for us to increase our level of purchase activity here.

Q - Meredith Adler

And what’s been happening with the pricing of those files. Is there a lot of competition for the sales or is that lessened at all?

A - Mary Sammons

There is definitely competition for them, and I’d say over the last several years the cost has gone up, that we’re still doing an ROY on every single file, and it has to meet our hurdle rates and its still is most effective way to grow script base in the store and return to purchase price very quickly.

Q - Meredith Adler

I was also wondering if you could talk a little bit about your PBM, how quickly do you anticipate that the PBM will actually be able to be functioning and covering a lot and then, is there a still a chance for you to get involved in some of what’s going on with Part D, maybe not for this year, but it would be your intention to try to bid to be the PBM for some purchase plans for ’07?

A - Mary Sammons

Yeah, Meredith, I don’t see that happening for ’07, it’s, we are still in very early stages, but we are actually in contract stages now with at least one new client and in contract discussions with more. So, we will begin to strategically cover live and we are being very focused on how we go about this effort, and I mentioned in my comments that we’ve just recently hired a VP of Sales in addition to our General Mangers, that our marketing programs put together, and so we should begin to make some precarious progress over the next 3 to 6 months.

Q - Meredith Adler

Can I just have one final question about pharmacy, there has been some noise coming out of large PBMs about creating limited networks, or limiting the number of pharmacies that are in their networks. I am wondering whether you guys are seeing any of that, I know way back when, I guess it was General Motors I think we are going out of their network and you, you guys and CDS stayed in it. But I am wondering if you are seeing more of that, is that becoming more of an issue?

A - Mary Sammons

I don’t know that I’ve seen more of it, I think there has been some amount of that over the past number of years, I think that we’ve had some active participation in some more limited and preferred networks, and I would expect that to still happen. I haven’t really seen that we’ve been eliminated from many networks that I am aware off.

Q - Meredith Adler

Okay great thank you.

Operator

Your next question comes from John Ransom of Raymond James & Associates.

Q - John Ransom

Hi, good morning, a couple of questions, it looks like according to the data we have that mail order has really slowed quite a bit. And I know that a year ago, or so guys were citing the UAW contract as a reason, for your pharmacy slowdown. Now that, that’s played out and mail order has evaded. Do you think there is another structural reason why your pharmacy volume numbers appear to be lagging the industry a little bit? As the mail order threat seems to be at least for the moment receding?

A - Mary Sammons

Yeah, John I see the, quite a single bit of factor is that we have not grown our store base over the last 5 years. We just started back up our growth program this last year, and expect to open about 80 stores between relocations and net new, and then I mentioned the 125 to 150 next year. And our competitors have been growing pretty rapidly and if you factor into account, the impact of new store growth on comps is pretty significant because I see what this is going to do for us over the next 5 years.

Q - John Ransom

Right.

A - Mary Sammons

So I think that’s the single biggest issue.

Q - John Ransom

Okay, and then secondly, obviously your Medicaid exposure is about 700 basis points higher than your peers, and you operate this from States with some presumably pretty high Medicaid reimbursement levels that the other 8 MBT (ph) mono-states with no mac, like Pennsylvania and New Jersey and New York. Are you seeing anything coming out of these PDPs for the dual eligibles that would be kind of a meaningful delta for your generic pricing in those states? Yes.

A - Mary Sammons

I’m not really seeing anything at this point, you are correct and that we have a higher percentage of Medicaid business.

Q - John Ransom

Right.

A - Mary Sammons

And that’s where we are located.

Q - John Ransom

Right. Well, it just looks to us, I mean, just and you don’t want to redo, but some of the states with no mac and no cost plus pricing, the Medicaid prices are significantly higher. So I guess we assume, as you transfer these dual eligibles into the PDPs that the pricing will come back and little closer to market. But, I just didn’t know if you’re see anything specific on any of the price schedule ship?

A - Mary Sammons

No we have factored that we expect to be the impact from the dual eligibles moving over into our January, February forecast.

Q - John Ransom

Okay.

A - Mary Sammons

Because that’s part of our fourth quarter, and we have good data around our dual eligible population by state et cetera and so, we can make some pretty decent judgment from what that’s going to be.

Q - John Ransom

And I mean what sort of impact do you think it has, I mean is it noticeable or is it, I mean you are talking about a strong fourth quarter and yet you haven’t absorbed this margin had. So obviously is it less noticeable than the people might think?

A - Mary Sammons

Well, the dual eligible population is not as a larger percentage as a total Medicare population as I think maybe some people have said at least not for us.

Q - John Ransom

Okay.

A - Mary Sammons

And so we believe, it is going to be impact full, but that we have taken it into consideration, if I’ll just go back again and say that, overall the changes that are happening with Medicare necessitates getting incremental volumes offset because of the margin. Because there is no doubt about, if there is going to be any hit to margin on just converting your own customers, so all of our marketing plans have been built around getting new customers into our stores.

Q - John Ransom

Right.

A - Mary Sammons

That another reason we’ve launched the loyalty program for seniors reason for our partnerships with Edna, Coventry Healthcare, Humana. And that we put marketing spend behind that, so that you can get more seniors into our stores.

A - Kevin Twomey

And just so that everybody has the same data to our Medicaid percentage of our pharmacy business is about 18%. And the dual eligible that if you have to break that that 18% down you say its 14% non-dual eligibles and then 4% dual eligible. That I think people have got us higher mix of dual eligible than that.

Q - John Ransom

But is it, that’s, that’s patients correct?

A - Kevin Twomey

That’s sales.

A - Mary Sammons

No net sales.

Q - John Ransom

Well, that is sales. Okay. So 4% of your total pharmacy sales come from the duals in other words…

A - Kevin Twomey

Right.

Q - John Ransom

Okay that’s helpful. And just finally we are hearing stories about some fairly low dispensing fees. Coming out of the, some of the PDP contracts can you comment on that, that the generics spreads look like they are okay, but the dispensing fees look fairly skinny. What are you seeing out of that?

A - Mary Sammons

I have not really seen anything that I could confirm that.

Q - John Ransom

Okay. All right thanks a lot.

A - Kevin Twomey

You bet.

Operator

Our next question comes from Ed Kelly of Credit Suisse First Boston.

Q - Ed Kelly

Good morning.

A - Kevin Twomey

Hi Ed.

Q - Ed Kelly

Could you discuss in more detail your initiatives to gain new pharmacy customers, how much of this is done through far bys versus internal initiatives and could you talk just some more, more in depth in terms of what these internal initiatives are?

A - Mary Sammons

Power buys is an important keys of our overall gaining new customers that a whole lot of it is really centered around first improving the pharmacy experience in our stores. So we gain a better reputation and can get, better word to mouth out there, if well, we’ve also done with our capital marketing initiatives in particularly priority and strategic markets to get new customers either transfer to us, or bring us a new script and give them incentives to do that. It’s the cost marketing efforts against our front-end customers to become pharmacy customers that doctor detailing initiatives that we also have in place out there. Is that a combination of I say initiatives that are all squarely on it, even what we done with our organization structure to really put more focus on pharmacy so that we give more support to our stores in terms of that pharmacy experience has been key. We invested significant dollars in new technology in the past year, we’ve rolled out a new pharmacy dispensing and management system that’s been a real plus and attracting new pharmacist to our company, it’s a state-of-art system, and that also helps us in terms of just overall staffing initiatives. And, but every thing around customer satisfaction as well as very specific targeted marketing efforts are part of getting new pharmacy customers. And then our PBM down the road to help us feel in terms of being able to work directly with specific plans our employers has been bringing new customers to our stores. I mentioned that also that Take Care initiative was, in those practitioner clinics. Moreover in that is just a pilot they certainly show that you can get new customers into your store.

Q - Ed Kelly

Okay, and is there an opportunity to accelerate power buys as you ramp up new store growth to help these stores, ramp up the profitability more quickly?

A - Mary Sammons

We have accelerated and then we would be willing to accelerate and even further as more opportunities began…

A - Kevin Twomey

Yeah, we’re taking advantage of what is economically available and make sense already Ed.

Q - Ed Kelly

Okay. Great thank you.

Operator

Our next question comes from Alley Roginsky (ph) of Citigroup.

Q - Roginsky

Hi, can you talk about your acquisition strategy especially along with PBM line. Would you be interested in looking at other PBMs in order to accelerate your development there and also I know that you purchased a few acquired a few drugstores. Please talk about your appetite for acquisitions.

A - Mary Sammons

We really are focused on our strategic markets in terms of ways to grow. And that includes new stores and relocations, but if something else made sense then it was a good value to our shareholders, we would look at that. As far as PBM goes, we believe that’s a strategy we’ve embarked on, its the best one for us, whether other opportunities present themselves down the road, we would look at those as they came off.

Q - Roginsky

How much investment did you have in PBMs which might have impacted your SG&A in this quarter?

A - Kevin Twomey

It is insignificant.

Q - Roginsky

Okay, thank you very much.

Operator

Our next question comes from Mark Wiltamuth of Morgan Stanley.

Q - Mark Wiltamuth

Hi Mark Wills with Morgan Stanley. Could you just give us a little outlook on how you think the first half of the calendar year will progress versus the second half, obviously we have some transitional issues with Medicare Part D and in general do you think Medicare Part D want to be in a net positive for you, or moreover like a neutral impact on earnings?

A - Mary Sammons

Well obviously, I think all of us realized that the guidance will probably come, lower than it was originally forecasted for Medicare Part D. So that would say that you will see more of a positive impact from incremental customers in the back half of the year. All though audit year starts in March, both our first half will end in August. But, you will see more in back half, plus a lot of the Generics kind of, start coming on board in the back half of the year two.

Q - Mark Wiltamuth

Right, and is there any way you give us an overall picture of Medicare in total, one saw the ramp ups in volumes have occurred.

A - Mary Sammons

Well, I think Medicare itself, as I said earlier without incremental customer’s gain, is negative.

Q - Mark Wiltamuth

All right.

A - Mary Sammons

So, it means that you have to have strong marketing programs and also be driving growth of Generics to really offset the margin hit you get from it.

A - Kevin Twomey

And in the margin hit, for the dual eligible hits immediately and the volume growth takes a longer period of time. So the answer to your question Mark in some regards is depended upon the timeframe.

Q - Mark Wiltamuth

Right.

A - Kevin Twomey

That you are setting.

Q - Mark Wiltamuth

Okay. And is there anyway you can bracket the gross margin impact, these are the prescription, per prescription basis or basis points impact anything like that, on how much impact you could get from the dual eligibles, switching over?

A - Kevin Twomey

You know, what you are asking is a good question, but it’s requiring us to certainly comment on customer profitability. And we are just not going to do that.

Q - Mark Wiltamuth

Okay, thank you.

A - Mary Sammons

Thank you.

Operator

Your next question comes from Steve Chick of J.P. Morgan.

Q - Steve Chick

Hi thanks.

A - Mary Sammons

Hi Steve.

Q - Steve Chick

Hi. I have a few questions. I guess first for Kevin related to you’re the gross profit margin comments, I think you said pharmacy margins contributed 12 basis points and that’s lower than what its been in the past two quarters I think, it can sequentially decelerate a little bit, but yet your total gross profit of March relative to Q2, improved, can you speak a little more to that, I mean, what was the sequential improvement, in gross, if you can identify that.

A - Kevin Twomey

It’s a, a little less negative impact from the occupancy but a lot less negative impact in fact none for front end.

Q - Steve Chick

Okay and so that, that 10 basis points impact for occupancy was, that was a little bit…

A - Kevin Twomey

Little bit less than it was in the second quarter.

Q - Steve Chick

Okay, yeah. Because I think, I don’t know if you had given that before actually, do you have those numbers handy?

A - Kevin Twomey

Why don’t you call me and I can go over some of that with you, I don’t have it handy right now.

Q - Steve Chick

Okay, that’s fair. Well, I guess more importantly that 10 basis points, you’re store development, accelerates in fourth quarter and then as you said in the next year, what’s that 10 basis points impact that you saw in Q3, I mean what’s that start to look like do you think as you look forward a little bit…

A - Kevin Twomey

Well, I guess in the fourth quarter there is a, 45 stores there, that will be coming out of the ground lot of it in the very, very end of the fourth quarter and, so its going to continue to be more significant especially for new stores which are starting over the very, very slow sales, very low sales base.

A - Mary Sammons

So we still are, definitely committed to our, our new store growth program whether its relocations are not new because its critical to our strategy advancing up strategic markets.

Q - Steve Chick

Okay, but I guess we’ve lost, you know that basis point impact I guess its, it’s tough to say what that might be on your gross in Q4?

A - Kevin Twomey

In Q4, the gross margin rate should be combination of, it should be lower because of A) 45 stores coming out of the ground and the occupancy expense and also just because of the dual eligibles that we talked about in and that’s the niche of it. And then last but not least, some of the adjusted sales mix. But your gross margin, our gross margin rate for the fourth quarter will be lower, generally speaking because of those factors but with the higher sales base much, much higher sales base in the fourth quarter, we’re still aren’t showing any increase in EBITDA.

Q - Steve Chick

Okay, all right second thing, just may be a little bit of clarity on your, your same stores sales guidance. And Mary, did you say that your, at the end of November your script comps had turned positive in units, did I, did I hear that right?

A - Mary Sammons

Yes, yes.

Q - Steve Chick

So that, that’s pharmacy comp that was up and I guess the 1.4%, are you talking about the end of November or the November comp?

A - Mary Sammons

Until that November, there is not a lot of inflation in pharmacy at this point in time because, I mentioned that we are very successful with generics and generics especially compared to brands had a very nominal inflation.

Q - Steve Chick

Okay, and what is, I mean your guidance for the year, you know 0.5% to 2% sales, it’s a pretty, still a pretty wide range? Should we look at November, and what you did in that month and extrapolate that what we should think about for, December, January, February, I would like should that will be a low point. Now I mean, how do you think about it?

A - Mary Sammons

Well, we expect the fourth quarter sales to strengthen.

Q - Steve Chick

Yet, relative to what we saw in November.

A - Mary Sammons

Yeah.

A - Kevin Twomey

Yeah.

Q - Steve Chick

Okay that’s good. Okay and I guess two last things, did, what is your CapEx, I think you said new stores and relos would be 125 to 150 for FY ‘07. Do you have a sense of what your CapEx spending will look like?

A - Kevin Twomey

In the fourth quarter?

A - Mary Sammons

Or you saying about next year?

Q - Steve Chick

Next year, next year.

A - Mary Sammons

We will really not give out I think that guidance until, probably our next call.

Q - Steve Chick

Okay, but did you said there is no openings to go would accelerate that one, and that’s with relos okay?

A - Kevin Twomey

Right, but it’s the mix of the stores in terms of whether their eternities versus what we build them and then later on sale, we expect that still very much being developed Steve.

Q - Steve Chick

Okay, so I guess this is too early to say if CapEx will go up next year.

A - Kevin Twomey

It will be about the same.

Q - Steve Chick

Okay that’s helpful and the last thing, I know you will eventually get those, forward EBITDA guidance for FY ’07 but you know so at this point even your fourth quarter guidance and the improvement you are going to see even without the extra week there I mean, is it safe to say that at this early stage that next year will be a an up year in EBITDA?

A - Mary Sammons

We aren’t commenting on ’07 guidance at this point.

Q - Steve Chick

Okay thanks.

Operator

Your next question comes from Karen Miller of Bear Sterns.

Q - Karen Miller

Hi, good morning.

A - Mary Sammons

Good morning.

Q - Karen Miller

I wonder if you, you can just tell me in view of the 22 closed stores, what’s the run rate of your dead lease or closed store expense?

A - Kevin Twomey

It’s rough on the annual spend net established income for our closed stores is about 35 million.

Q - Karen Miller

And do you expect that to be about the same with next year in view of the, the impact of Katrina?

A - Kevin Twomey

There is rate of abatements (ph), we’ll just have to wait and see will we end up with our dealings with the landlords, I just, I can’t answer that yet.

Q - Karen Miller

Okay and then, of the 13 stores closed in New Orleans, is that going to be permanent or do you have plans to open those?

A - Mary Sammons

No I think, if you look at each one will be a store-by-store decision and it’s really going to depend on how the area is redeveloping.

Q - Karen Miller

Okay, and then, and do you have the increased sale lease pact, two questions, could you tell us if the 9 stores that were sold on lease pact in 3Q, and those leases reflected on the balance sheet and secondly what can we expect for rent expense going forward next year?

A - Kevin Twomey

The 9 stores…

Q - Karen Miller

Run rate?

A - Kevin Twomey

The 9 stores were, they’re operating leases.

Q - Karen Miller

Okay.

A - Kevin Twomey

They were previously owned and we sold them, and leased them back under operating leases, as far as rent expense for next year, we’re just not prepared to give that to you, we’re not done with our planning.

Q - Karen Miller

And how about for this year, can you give us a run rate?

A - Kevin Twomey

It’s about the same, is what you’ve got for the rent in the 10-K, and remember almost, the vast majority of our new and relocated stores are coming out of the ground in the, those, well, 45 or more coming out of ground of fourth quarter.

Q - Karen Miller

Okay, also and one last question, I mean, in terms of your new stores plan for 4Q and then next year, can you tell us what the mix is in terms of the new and relocated?

A - Mary Sammons

For next year, its probably still about half-in-half relocations in that new, a lot of this timing on the project coming to our real estate committee.

Q - Karen Miller

And is that pretty much with trends been this year?

A - Mary Sammons

I guess. A little bit more on relos.

Q - Karen Miller

Okay thanks.

Operator

Once again, I would like to remind everyone, if you would like to ask a question, press “*” “1”. Your next question comes from Jeff Covalars (ph) of Citigroup.

Q - Jeff

Hi, good morning. Sure (ph) can you comment about, you’ve mentioned that pharmacy, as far as pharmacy satisfaction was a, can you elaborate about that?

A - Mary Sammons

I think we’ve talked before on our call that we have had a road progress on improving customer satisfaction, over I’d say the last 18 months. We have what I would call it a customer phoning survey based on their experience in the store both pharmacy and front end separate transactions but we have really worked to improve those results over these past years, by really focusing on the experience itself and we have still not hit our goal, we’re very aggressive on our goal because we believe this can be differentiator in the future, but we’ve made good steady progress upward and I think its beginning to shown our results.

Q - Jeff

Is the, this satisfaction measurement, is that up versus to the second quarter or is that still just up versus last year?

A - Mary Sammons

No, it’s up quarter-over-quarter.

A - Kevin Twomey

Sequentially.

A - Mary Sammons

And we have expected to be up even further in the fourth quarter and we use this along with our benchmark survey that we do every year in terms of how we are viewed versus our competitors to really drill in (ph) on stores and areas that we need to help more on improving satisfaction. And we focus a lot on timely delivery of script as well as the overall experience.

Q - Jeff

Okay. Can you comment about your, the new stores you’ve opened so far, and just general comments about how they’re trending as far as ramping up sales and when will they, when will they, in general profitable?

A - Mary Sammons

Well, they’ve been extraordinarily well-received by the customers, as very customer-friendly layout, easy to get around the store, really features the pharmacy and we are talking about, at least 50+ percent being relocations or generally moving from the script center to a corner with a drive through and so, you’re, you get a nice bump on the pharmacy as well as, just a really nice bump on the front end, so a very strong sales results, very strong customer reception and we expect that to continue.

A - Kevin Twomey

And those sales are meeting the expectations that we’ve set, when we made decisions to invest in them.

Q - Jeff

And trends to get into profitability, what are rules, if I am, you’re using or…

A - Mary Sammons

Well, on relocations generally get profitable even within just a little over a year of getting agents on its corner, a new store can take 3 to 4 years and I think that would be pretty typical of the industry, it depends on the side and how old the expanse factors are all in.

Q - Jeff

All right thank you.

Operator

Our next question comes from Steve Pollock (ph) of Deutsche Bank Securities.

Q - Steve Pollock (ph)

Yes. I was wondering if you could comment on the impact on the Medicare eligible seniors who currently a cash customers who will be moving perhaps to an insurance program?

A - Mary Sammons

That will have, it’s going to be another component of what happens with the Medicare program and it will also have a negative impact on margin, so it also set us a gain, that’s why it’s important grow the senior base. And we have taken that into account in our planning as we move forward.

Q - Steve Pollock (ph)

I was going to ask one last question on the customer service in the pharmacy department, is that primarily a labor scheduling or software scheduling or what are the key components are there to improve the pharmacy customer satisfaction?

A - Mary Sammons

As a combination, it’s the overall experience but it starts with timely delivery of the script, so that the customer get the script when they expect it, was it ready when promised. So that for Rite Aid, a key component of it. Then the rest is, just the acceptability of the pharmacists, the ability to talk with the pharmacists, the overall experience and what the customers do to our telephoning survey about their experiences to raid us on each component of the experience and then also give us an overall customer satisfaction rating. And the only rating is that we look at and developing scores for our stores, is what you call a top box rating. So the customer has to be highly satisfied for the score to earn a mark that’s counted in scrolling up their customer satisfaction score. And we have ran incentive programs through almost all quarters of this year, that really reward each and every associate in the store for achieving certain customer satisfaction, those who will continue to do that to.

A - Kevin Twomey

And the corporate associates, a portion of their incentive compensation is depending upon improving customer scores, customer satisfaction scores also.

Q - Steve Pollock (ph)

Thank you.

Kevin Twomey, Chief Financial Officer

Operator, we have time for one more call.

Operator

At this time, there are no further questions.

Kevin Twomey, Chief Financial Officer

Okay.

Operator

Twomey, are there any closing remarks?

Kevin Twomey, Chief Financial Officer

Nothing other than happy holidays everybody and thanks for joining us.

Operator

This concludes the Rite Aid Third Quarter Conference Call, you may now disconnect.

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Source: Full Transcript of Rite Aid’s F3Q06 (Qtr Ending Nov 26, 2005) Conference Call - Q&A (RAD)
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