Rite Aid 2011 Annual Report Download - page 14

under our revolving credit facility. Our ability to pay cash to holders of the Convertible Notes may be
limited by our financial resources at the time of such repurchase. We cannot assure you that sufficient
financing will be available on terms acceptable to us if necessary to make any required repurchase of
the Convertible Notes.
Risks Related to Our Operations
We need to improve our operations in order to improve our financial condition, but our operations will not
improve if we cannot effectively implement our business strategy or if our strategy is negatively affected by
worsening economic conditions.
We have not yet achieved the sales productivity level of our major competitors. We believe that
improving the sales of existing stores is important to improving profitability and operating cash flow. If
we are not successful in implementing our strategies, including our efforts to increase sales and further
reduce costs, or if our strategies are not effective, we may not be able to improve our operations. In
addition, any further adverse change or continued weakness in general economic conditions or major
industries can adversely affect drug benefit plans and reduce our pharmacy sales. Adverse changes in
general economic conditions could affect consumer buying practices and consequently reduce our sales
of front end products, and cause a decrease in our profitability. Failure to improve operations or a
continued weakness in major industries or general economic conditions would adversely affect our
results of operations, financial condition and cash flows and our ability to make principal or interest
payments on our debt.
For so long as Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu family)
maintain certain levels of Rite Aid stock ownership, Jean Coutu Group (and, subject to certain conditions,
certain members of the Coutu family) could exercise significant influence over us.
At February 26, 2011, Jean Coutu Group owned approximately 27.4% of the voting power of Rite
Aid. As a result, Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu
family) generally has the ability to significantly influence the outcome of any matter submitted for the
vote of our stockholders. The stockholder agreement (the ‘‘Stockholder Agreement’’) that we entered
into at the time of the Brooks Eckerd acquisition provides that Jean Coutu Group (and, subject to
certain conditions, certain members of the Coutu family) has the right to designate four of the fourteen
members of our board of directors, subject to adjustment based on its ownership position in us.
Accordingly, Jean Coutu Group generally is able to significantly influence the outcome of all matters
that come before our board of directors. As a result of its significant interest in us, Jean Coutu Group
may have the power, subject to applicable law (including the fiduciary duties of the directors designated
by Jean Coutu Group), to significantly influence actions that might be favorable to Jean Coutu Group,
but not necessarily favorable to our financial condition and results of operations. In addition, the
ownership position and governance rights of Jean Coutu Group could discourage a third party from
proposing a change of control or other strategic transaction concerning us. Additionally, the
Stockholder Agreement provides Jean Coutu Group with certain preemptive rights that provide Jean
Coutu Group with the ability to maintain their ownership percentage in Rite Aid and in certain
circumstances, requires two thirds of our Board to approve certain transactions.
Conflicts of interest may arise between us and Jean Coutu Group, which may be resolved in a manner that
adversely affects our business, financial condition or results of operations.
Following the Brooks Eckerd acquisition, Jean Coutu Group has continued its Canadian
operations but no longer has any operations in the United States, and we currently have no operations
in Canada. Despite the lack of geographic overlap, conflicts of interest may arise between us and Jean
Coutu Group in areas relating to past, ongoing and future relationships, including corporate
opportunities, potential acquisitions or financing transactions, sales or other dispositions by Jean Coutu
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