1. What Is Impacting Rating Changes? Rating Trends and Outlook Retail, Consumer Goods & Hospitality Moody’s 2002 Corporate Finance Credit Outlook Investor Briefing New York, January 15, 2002

2. Elaine Francolino, VP - Senior Credit Officer Marie Menendez, VP - Senior Credit Officer Retail

3. Moody’s Retail Ratings Span the Rating Spectrum

4. Continuing Negative Credit Trend: Downgrades Exceed Upgrades For US Retailers

5. Why Are Retail Ratings So Volatile? Record prosperity masked fundamental problems Growth strategies increased risk profile Slower economy will hurt certain retailers disproportionately Competition is not static

6. Impact of Economic Downturn on Retail Credit Quality Turnarounds will be more difficult to achieve Consumers will be difficult to read Political concerns could influence consumer behavior over the intermediate term The gap between the strong and the weak will widen

7. Rating Considerations Market segment risks Market position Execution Capability Strategic Vision Diversification Financial risk and flexibility

8. Who Are the Challenged Retailers? Apparel retailers (including department stores) Lifestyle-oriented specialty retailers Retailers of discretionary goods Retailers with flawed strategies or poor execution

9. Retailers Who Can Weather the Storm Food should be relatively stable Discounters Retailers with scale and superior business models Retailers with good expense and inventory controls

10. Adequate Liquidity is More Important Than Ever Liquidity arrangements are critical, especially at peak Availability of public markets is never a certainty Re-financing in the bank market is increasingly difficult, even for highly rated companies

11. Key Ratios Fixed Charge Coverage EBITDA Coverage of Interest, before and after capital expenditures Adjusted Debt/EBITDAR Retained Cash Flow/Adjusted Debt Productivity and Market Share

12. Drug Store Retailers Richard Baldwin, AVP - Analyst

13. Universe of Rated Drug Retailers

14. Per-capita Drug Spending Growth > 10% per year

15. Low-margin Rx Becoming Larger Part of Sales Mix

16. The Importance of Scale in Maintaining Operating Margins Stronger negotiating position with HMOs, PBMs, & other 3rd-party payers Able to amortize investment in Rx labor savings over larger revenue base Efficiencies in marketing & purchasing Potentially more appealing career option for pharmacists

17. Rating Outlook is Stable Overall + Internally generated CF largely finances capital investment + Located in defendable markets - Lack scale to gain efficiencies - Decreasing front-end sales Factors driving individual ratings:

18. Food, Beverage and Other Consumer Products Companies Peter H. Abdill, CFA VP - Senior Credit Officer

19. Industry Characteristics Consistent, repeat purchases Scale generates efficiencies Margin growth mostly from cost cutting Product and market maturity Importance of product differentiation and brand value

20. Risks and Strategic Responses Commoditization -- Innovate, flight to premium, build brand value Retailer clout -- Improve systems and service, build scale and brand value Mature markets -- Innovate and expand geographically High raw materials costs -- Cut operating costs, achieve scale

21. Rating Outlook Overall industry outlook: Stable Positive: Those with strong brands, leading positions, improving financial measures Negative: Those that have financial and integration risk due to M&A activity Negative: If execution faltered, costs grew disproportionately or brand slipped

22. Key Rating Considerations Balancing investment with realistic growth potential Improving supply chain management Finding new ways to reduce costs without sacrificing quality or brand investment Event risk (litigation, regulation etc.) Financial management

23. Peggy Holloway, VP - Senior Analyst Keith Foley, VP - Senior Analyst Gaming and Lodging

24. Rating Action Summary Since 9/11/01 Lodging & Resorts Gaming 16 companies placed on review for possible downgrade 2 companies confirmed, but rating outlook changed to negative 3 companies downgraded 8 companies placed on review for possible downgrade 2 companies confirmed, but rating outlook changed to negative Reviews to be completed in the near term

25. Year-to-Year Percent Change in REVPAR

26. Key Rating Considerations in Lodging Sector Some improvement in trends but pricing and yields still soft High degree of dependence on air travel and economy Minimal supply growth and leaner cost structures a plus Lower-end hotel product in second tier markets less volatile than high-end Business model

27. Key Rating Considerations in Gaming Sector Absence of new attractions in Las Vegas Atlantic City will eventually compete with NY State New wave of gambling initiatives across the U.S. could impact riverboat markets Timing and magnitude of recovery difficult to predict

28. Credit Metrics Were Already Weak An over reliance on EBITDA growth Economic upheaval under estimated Capital spending increasing faster Lower returns on capital investment Increased share repurchase activity More aggressive financial policies

29. What is the Result? More pressure on ratings and outlooks Qualitative considerations alone cannot sustain ratings Reduced earnings visibility