Rite Aid 2011 Annual Report Download - page 89

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009
(In thousands, except per share amounts)
10. Indebtedness and Credit Agreement (Continued)
senior secured notes due July 2016. These notes are unsecured unsubordinated obligations of Rite Aid
Corporation and rank equally in right of payment with all other unsubordinated indebtedness. The
Company’s obligations under the notes are guaranteed, subject to certain limitations, by subsidiaries
that guarantee the obligations under its senior secured credit facility and the 9.75% senior secured
notes. The guarantees are secured by shared second priority liens with holders of the Company’s 7.5%
senior secured notes due 2017 and 10.25% senior secured notes due 2019. The indenture that governs
the 10.375% senior secured notes due 2016 contains covenant provisions that, among other things,
include limitations on the Company’s ability to pay dividends, make investments or other restricted
payments, incur debt, grant liens, sell assets and enter into sale-leaseback transactions. The senior
10.375% secured notes due July 2016 were issued at 90.588% of par.
In May 2008, the Company issued $158,000 of 8.5% convertible notes due May 2015. These notes
are unsecured and are effectively junior to the secured debt of the Company. The notes are
convertible, at the option of the holder, into shares of the Company’s common stock at a conversion
price of $2.59 per share, subject to adjustments to prevent dilution, at any time. Proceeds from the
issuance of these notes were used to fund the redemption of the Company’s 6.125% notes due
December 2008. The Company recorded a loss on debt modification of $3,347 related to the early
redemption of the 6.125% notes, which included payment of a make whole premium to the noteholders
and unamortized debt issue costs on the notes. The remaining 8.5% convertible notes require the
Company to maintain a listing on the NYSE or certain other exchanges. In the event of a NYSE
delisting, holders of these notes could require the Company to repurchase them, which the Company
has the ability to do under the terms of its senior secured credit facility. On July 30, 2010, the
Company received a notice of non-compliance from the NYSE because the price of our common stock
has fallen below the NYSE’s minimum share price rule. The Company’s common stock continued to
trade as usual on the NYSE and on March 1, 2011, the Company received notice that it had regained
compliance with the NYSE’s minimum share price listing requirement. The Company is currently in
compliance with all NYSE listing rules. As of February 26, 2011, $64,188 aggregate principal amount of
the notes remained outstanding.
Interest Rates and Maturities
The annual weighted average interest rate on the Company’s indebtedness was 7.5%, 6.8%, and
6.6% for fiscal 2011, 2010, and 2009, respectively.
The aggregate annual principal payments of long-term debt for the five succeeding fiscal years are
as follows: 2012—$45,043; 2013—$114; 2014—$194,690; 2015—$1,373,088 and $4,535,188 in 2016 and
thereafter.
11. Leases
The Company leases most of its retail stores and certain distribution facilities under noncancellable
operating and capital leases, most of which have initial lease terms ranging from five to 22 years. The
Company also leases certain of its equipment and other assets under noncancellable operating leases
with initial terms ranging from 3 to 10 years. In addition to minimum rental payments, certain store
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