Rite Aid 2013 Annual Report Download - page 15

We are in compliance with all New York Stock Exchange continued listing requirements. However, if we do not
continue to maintain compliance with such requirements, our common stock may be delisted.
We are in compliance with all NYSE listing rules, have actively been taking steps to maintain our
listing and expect our efforts to maintain our NYSE listing will be successful. However, there can be no
assurance that we will maintain compliance with the NYSE minimum share price rule or other
continued listing requirements. In the event of a delisting, all holders of our $64.2 million of
outstanding 8.5% Convertible Notes due May 2015 (‘‘Convertible Notes’’) would be entitled to require
us to repurchase their Convertible Notes. Our senior secured credit facility permits us to make such a
repurchase of the Convertible Notes; provided that, before and after such transaction, no default or
event of default shall have occurred and be continuing under the senior secured credit facility and we
have more than $100.0 million of availability 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 March 2, 2013, Jean Coutu Group owned approximately 19.0% of the voting power of Rite
Aid. 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 two members of our board
of directors, subject to adjustment for future reductions in its ownership position in us. On April 17,
2013, the Jean Coutu Group announced that it had sold 72,500,000 of its 178,401,162 shares of our
common stock and now owns approximately 11.3% of our voting power. As a result of such sale, the
Jean Coutu Group was required to cause one of its designees to immediately resign from our board of
directors and accordingly Michel Coutu resigned from our board of directors effective April 17, 2013.
The Jean Coutu Group will continue to have the right to designate one member of our board of
directors, subject to adjustment for future reductions in its ownership position in us. Accordingly, Jean
Coutu Group generally is, and is expected to continue to be, 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
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