Rite Aid 2010 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
፤ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended February 27, 2010
OR
អTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From To
Commission File Number 1-5742
RITE AID CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1614034
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30 Hunter Lane, Camp Hill, Pennsylvania 17011
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (717) 761-2633
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ፤No អ
Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or section 15(d) of the
Exchange Act. Yes អNo ፤
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ፤No អ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit
and post such files). Yes អNo អ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ፤No អ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of ‘‘Accelerated Filer’’ and ‘‘Large Accelerated Filer’’ in Rule 12b-2 of the Exchange Act.
Large Accelerated ፤Accelerated Filer អNon-Accelerated Filer អSmaller reporting company អ
(Do not check if a
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes អNo ፤
The aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of
the registrant based on the closing price at which such stock was sold on the New York Stock Exchange on August 29,
2009 was approximately $996,928,866. For purposes of this calculation, executive officers, directors and 5% shareholders
are deemed to be affiliates of the registrant.
As of April 20, 2010 the registrant had outstanding 887,670,198 shares of common stock, par value $1.00 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the registrant’s annual meeting of stockholders to be held on June 23, 2010 are
incorporated by reference into Part III.

Table of contents

  • Page 1
    ...Ended February 27, 2010 OR អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From To Commission File Number 1-5742 RITE AID CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction...

  • Page 2
    ... About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...Directors and Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 3
    ... charges to our operating statement; • our ability to manage expenses; • our ability to realize the benefits from actions to further reduce costs and investment in working capital; • continued consolidation of the drugstore industry; • changes in state or federal legislation or regulations...

  • Page 4
    ...stores include a drive-thru pharmacy; approximately 40% include one-hour photo shops; and approximately 40% include a GNC store-within-Rite Aid-store. Our headquarters are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011, and our telephone number is (717) 761-2633. Our common stock is listed...

  • Page 5
    ... Care Act is still being determined. Strategy Our objectives and goals are to grow profitable sales by unlocking the value of our diverse store base, improve customer loyalty by improving customer and associate satisfaction, generate positive cash flow by taking unnecessary costs out of the business...

  • Page 6
    ... we plan to grow script count by continuing to improve customer service, growing our Rx savings program, purchasing prescription files and attracting and retaining high value pharmacy customers through our wellness+ loyalty program. Generate positive cash flow by continuing to take unnecessary costs...

  • Page 7
    ... to accommodate new stores. Our customers may also order prescription refills over the Internet through www.riteaid.com, or over the phone through our telephonic automated refill systems for pick up at a Rite Aid store. As of February 27, 2010, we had a total of 997 automated pharmacy dispensing...

  • Page 8
    ..., mass merchandisers, discount stores, dollar stores and mail order pharmacies. We compete on the basis of store location and convenient access, customer service, product selection and price. We believe continued consolidation of the drugstore industry, the aggressive discounting of generic drugs by...

  • Page 9
    ...pharmacy sales, including a free Rx Savings Card, which provides significant cost savings on generic and brand prescriptions and over-the-counter medications to patients with limited or no insurance; • Emphasis on the value of Rite Aid brand products; • Support of specific initiatives and stores...

  • Page 10
    ...long-term outcome or effect of legislation from these efforts on our business. Our pharmacy business is subject to patient privacy and other obligations, including corporate, pharmacy and associate responsibility imposed by the Health Insurance Portability and Accountability Act. As a covered entity...

  • Page 11
    ...for the Chief Executive Officer and Senior Financial Officers, our Code of Ethics and Business Conduct and our Related Person Transaction Policy are posted on the corporate governance section of our website at www.riteaid.com and are available in print upon request to Rite Aid Corporation, 30 Hunter...

  • Page 12
    ...timely manner. Further, any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay...

  • Page 13
    ..., any securities that are convertible into or exchangeable for, or that represent the right to receive, common shares or preferred stock or any substantially similar securities, whether for cash, as part of incentive compensation or in refinancing transactions. Any additional future issuances...

  • Page 14
    .... The shares of Rite Aid common stock that the Jean Coutu Group currently holds are generally restricted, but Jean Coutu Group may sell these shares under certain circumstances, including pursuant to a registered underwritten public offering under the Securities Act or in accordance with Rule 144...

  • Page 15
    ... over our management and affairs. As a result of the Brooks Eckerd acquisition, a number of the directors on our board of directors are persons who are also officers or directors of Jean Coutu Group or its subsidiaries. Service as a director or officer of both Rite Aid and Jean Coutu Group or its...

  • Page 16
    ... drugstores, supermarkets, mass merchandisers, discount stores, dollar stores, mail order and internet pharmacies. Our industry also faces growing competition from companies who import drugs directly from other countries, such as Canada, as well as from large-scale retailers that offer generic drugs...

  • Page 17
    ..., health maintenance organizations, managed care organizations, pharmacy benefit management companies, other State and local government entities, and other third-party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation relating to how drugs are priced...

  • Page 18
    .... Additionally, any such failure could damage our reputation or brand. Our pharmacy business is subject to the patient privacy and other obligations including corporate, pharmacy and associate responsibility, imposed by the Health Insurance Portability and Accountability Act. As a covered entity...

  • Page 19
    ...be subject to costly government enforcement actions or private litigation. Through our sales and marketing activities, we collect and store certain personal information that our customers provide to purchase products or services, enroll in promotional programs, register on our web site, or otherwise...

  • Page 20
    ... Number Percentage Freestanding ...Drive through pharmacy ...One-hour photo development department GNC stores-within a Rite Aid-store ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 2,799 2,393 1,911 1,908 58.6% 50.1% 40.0% 39.9% We lease 4,522 of our operating drugstore...

  • Page 21
    ... foot ice cream manufacturing facility located in El Monte, California. On February 17, 2010 we sold the 68,000 square foot office building in Warwick, Rhode Island which was acquired as part of the Brooks Eckerd acquisition. On a regular basis and as part of our normal business, we evaluate store...

  • Page 22
    ... or class action lawsuits filed in federal or state courts in Pennsylvania, New Jersey, New York, Maryland, Ohio and Oregon, purportedly on behalf of, in some cases (i) current and former assistant store managers, or (ii) current and former store managers and assistant store managers, respectively...

  • Page 23
    ... report. The Chief Executive Officer of the Company certified to the NYSE on July 1, 2009 that she was not aware of any violation by the Company of the NYSE's corporate governance listing standards. STOCK PERFORMANCE GRAPH The graph below compares the yearly percentage change in the cumulative total...

  • Page 24
    ... statements and related notes. Selected financial data for the fiscal years 2009, 2008, 2007 and 2006 have been adjusted to reflect the operations of our 28 stores in the Las Vegas market area as a discontinued operations as the Company entered into an agreement to sell the prescription files...

  • Page 25
    ... weighted average shares(7) Number of retail drugstores ...Number of associates ...(1) (2) (3) (4) ... Revenues for the fiscal years 2007 and 2006 have been adjusted by $108,336 and $107,924 respectively for the effect of discontinued operations. Cost of goods sold for the fiscal years 2007 and 2006...

  • Page 26
    ... in fiscal 2009 was due to higher inflation on front end products in that year. Acquisition of Brooks Eckerd. On June 4, 2007, we acquired all of the membership interests of Jean Coutu USA, the holding company for Brooks Eckerd, from Jean Coutu Group, pursuant to the terms of the agreement dated...

  • Page 27
    ...under the Securities Act of 1933, as amended, of the shares of our common stock issued to Jean Coutu Group or acquired by Jean Coutu Group pursuant to certain stock purchase rights or open market rights under the Stockholder Agreement. Debt Refinancing. In fiscal years 2010 and 2009, we took several...

  • Page 28
    ...closed. Relocation stores are not included in same store sales until one year has lapsed. Pharmacy same store sales increased 0.1%. Same store prescription growth was 0.8% for fiscal 2010, which was positively impacted by the growth of our Rx Savings Card program, the benefit of grassroots marketing...

  • Page 29
    ...sales for the core Rite Aid stores increased 1.2% for the year, while front end same store sales for the Brooks Eckerd stores declined by 0.5%. Costs and Expenses February 27, 2010 (52 Weeks) Year Ended February 28, 2009 (52 Weeks) (Dollars in thousands) March 1, 2008 (52 Weeks) Costs of goods sold...

  • Page 30
    ... and number of locations as follows: Year Ended February 27, February 28, March 1, 2010 2009 2008 (52 Weeks) (52 Weeks) (52 Weeks) (Dollars in thousands) Impairment charges ...Facility and equipment lease exit charges ...Impairment charges Number of Stores ...Number of Distribution Centers ...Lease...

  • Page 31
    ... business activities, we assess stores and distribution centers for potential closure. Decisions to close stores in future periods would result in charges for store lease exit costs and liquidation of inventory, as well as impairment of assets at these stores. Interest Expense In fiscal 2010, 2009...

  • Page 32
    ... borrowing base consisting of accounts receivable, inventory and prescription files. At February 27, 2010, we had $80.0 million outstanding under the revolving credit facility. At February 27, 2010, we also had letters of credit outstanding against the revolving credit facility of $159.0 million...

  • Page 33
    ... our store deposit accounts, cash necessary to cover our current liabilities and certain other exceptions) and from accumulating cash on hand with revolver borrowings in excess of $100.0 million over three consecutive business days. The senior secured credit facility also states that if at any time...

  • Page 34
    ... During fiscal 2010 we sold a total of 3 owned stores to independent third parties. Net proceeds from these sales were $8.0 million. Concurrent with these sales, we entered into agreements to lease the stores back from the purchasers over minimum lease terms of 10 to 20 years. We accounted for all...

  • Page 35
    ...million shares of Series I preferred stock automatically converted into common stock, at a rate of 5.6561 common shares per preferred share, which resulted in the issuance of 13.7 million shares of our common stock. Sale Leaseback Transactions During fiscal 2009 we sold a total of 72 owned stores to...

  • Page 36
    ...E preferred stock. Sale Leaseback Transactions During fiscal 2008 we sold a total of 22 owned stores to independent third parties. Net proceeds from these sales were $93.3 million. Concurrent with these sales, we entered into agreements to lease the stores back from the purchasers over minimum lease...

  • Page 37
    ... (Dollars in thousands) Total Contractual Cash Obligations Long term debt(1) ...Capital lease obligations(2) ...Operating leases(3) ...Open purchase orders ...Redeemable preferred stock(4) ...Other, primarily self insurance and retirement plan obligations(5) ...Minimum purchase commitments(6) Total...

  • Page 38
    ...fund the Brooks Eckerd acquisition, net proceeds from our revolving credit facility, the change in the zero balance cash accounts and net proceeds from the issuance of common stock, offset by financing costs paid, scheduled debt payments and preferred stock dividends. Capital Expenditures We plan to...

  • Page 39
    ... our prescription sales are made to customers that are covered by third party payors, such as insurance companies, prescription benefit management companies, government agencies, private employers, health maintenance organizations or other managed care providers. We recognize and report receivables...

  • Page 40
    ...updated annually. Should actual sales growth rates and related incremental cash flow differ from those forecasted and projected, we may incur future impairment charges related to the stores being evaluated. Changes in our discount rate of 50 basis points would not have a material impact on the total...

  • Page 41
    ... mortality rate, the discount rate, the expected rate of return on plan assets and the rate of increase in future compensation levels. These rates are updated annually and are based on available public information, market interest rates and internal plans regarding compensation and any other changes...

  • Page 42
    ... impairment charge ...Lease termination and impairment charges Stock-based compensation expense ...(Gain) loss on sale of assets, net ...Loss on debt modifications and retirements, net ...Incremental acquisition costs ...Closed facility liquidation expense ...Severance costs ...Other ...Adjusted...

  • Page 43
    ...Risk Our future earnings, cash flow and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our major market risk exposure is changing interest rates. Increases in interest...

  • Page 44
    ... in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based...

  • Page 45
    ... of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Rite Aid Corporation Camp Hill, Pennsylvania We have audited the internal control over financial reporting of Rite Aid Corporation and subsidiaries (the ''Company'') as of February 27, 2010, based on...

  • Page 46
    ...63 Exhibit Numbers 2.1 Amended and Restated Stockholder Agreement, dated August 23, 2006, amended and restated as of June 4, 2007, by and between Rite Aid Corporation, The Jean Coutu Group (PJC) Inc., Jean Coutu, Marcelle Coutu, Francois J. Coutu, Michel Coutu, Louis Coutu, Sylvie Coutu and Marie...

  • Page 47
    Exhibit Numbers Description Incorporation By Reference To 2.2 Registration Rights Agreement, dated August 23, 2006, by and between Rite Aid Corporation and The Jean Coutu Group (PJC) Inc. Restated Certificate of Incorporation dated December 12, 1996 Certificate of Amendment to the Restated ...

  • Page 48
    ...related to the Company's 8.125% Senior Secured Notes due 2010 Indenture, dated as of May 20, 2003, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 9.25% Senior Notes due 2013 Exhibit 4.1 to Registration Statement on Form S-4, File No. 333...

  • Page 49
    ... of June 4, 2007, between Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A. to the Indenture dated as of February 21, 2007 between Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 7.5% Senior Secured Notes due...

  • Page 50
    ... February 15, 2007, between Rite Aid Corporation and The Bank of New York Trust Company, N. A., related to the Company's 8.625% Senior Notes due 2015 Amended and Restated Indenture, dated as of June 4, 2007 among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors...

  • Page 51
    ..., dated as of October 26, 2009, among Rite Aid Corporation, as issuer, the Subsidiary Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee 1999 Stock Option Plan* 2000 Omnibus Equity Plan* 2001 Stock Option Plan* Exhibit 4.20 to Form 10-Q, filed on July 10, 2008...

  • Page 52
    ... Numbers Description Incorporation By Reference To 10.4 10.5 10.6 10.7 2004 Omnibus Equity Plan* 2006 Omnibus Equity Plan* Supplemental Executive Retirement Plan* Amended and Restated Employment Agreement by and between Rite Aid Corporation and John T. Standley, dated as of January 21, 2010...

  • Page 53
    ...Donley, dated as of December 18, 2008* Rite Aid Corporation Special Executive Retirement Plan* Employment Agreement by and between Rite Aid Corporation and Brian Fiala, dated as of June 26, 2007* Amendment No. 1 to Employment Agreement by and between Rite Aid Corporation and Brian Fiala, dated as of...

  • Page 54
    ... to Management Services Agreement by and between Rite Aid Corporation and Leonard Green & Partners, L.P., dated as of February 12, 2007 Amended and Restated Credit Agreement, dated as of June 5, 2009, among Rite Aid Corporation, the lenders from time to time party thereto and Citicorp North America...

  • Page 55
    ...Guarantors and Wilmington Trust Company, as collateral agent Intercreditor Agreement, dated as of February 18, 2009, by and among Citicorp North America, Inc. and Citicorp North America, Inc., and acknowledged and agreed to by Rite Aid Funding II Exhibit 10.4 to Form 8-K, filed on June 11, 2009 10...

  • Page 56
    ... 19, 2009 and effective as of October 26, 2009, among Rite Aid Corporation, the lenders party thereto, Citicorp North America, Inc., as administrative agent and collateral agent and the other agents party thereto. Statement regarding computation of earnings per share Statement regarding computation...

  • Page 57
    ... developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Rite Aid Corporation may be found elsewhere in this report and the Company's other public filings, which...

  • Page 58
    ...'s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

  • Page 59
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) February 27, 2010 February 28, 2009 ASSETS Current assets: Cash and cash equivalents . Accounts receivable, net . . Inventories, net ...Prepaid expenses and other ...current assets ...net ...$...

  • Page 60
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended February 28, 2009 (52 Weeks) February 27, 2010 (52 Weeks) March 1, 2008 (52 Weeks) Revenues ...Costs and expenses: Cost of goods sold ...Selling, general and ...

  • Page 61
    ... shares to Jean Coutu Group Exchange of restricted shares for taxes . Issuance of restricted stock ...Cancellation of restricted stock ...Amortization of restricted stock balance Stock-based compensation expense ...Stock options exercised ...Dividends on preferred stock ...Preferred stock beneficial...

  • Page 62
    ... ...Stock-based compensation expense ...Loss on debt modifications and retirements, net ...Changes in deferred taxes ...Proceeds from sale of inventory ...Proceeds from insured loss ...Changes in operating assets and liabilities: Net (repayments to) proceeds from accounts receivable securitization...

  • Page 63
    ...of the largest retail drugstore chains in the United States, with 4,780 stores in operation as of February 27, 2010. The Company's drugstores' primary business is pharmacy services. The Company also sells a full selection of health and beauty aids and personal care products, seasonal merchandise and...

  • Page 64
    ... per share amounts) 1. Summary of Significant Accounting Policies (Continued) Allowance for Uncollectible Receivables Approximately 96% of prescription sales are made to customers that are covered by third-party payors, such as insurance companies, government agencies and employers. The Company...

  • Page 65
    ... of minimum lease payments or fair market value and amortized over the estimated useful life of the related property or term of the lease. The Company capitalizes direct internal and external development costs and direct external application development costs associated with internal-use software...

  • Page 66
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Cost of Goods Sold Cost of goods ...

  • Page 67
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Insurance The Company is self-...

  • Page 68
    ... The Company's pharmacy sales were primarily to customers covered by health plan contracts, which typically contract with a third party payor that agrees to pay for all or a portion of a customer's eligible prescription purchases. During fiscal 2010, the top five third party payors accounted for...

  • Page 69
    ...have a material adverse effect on the Company's business and results of operations. During fiscal 2010, the Company purchased brand pharmaceuticals and some generic pharmaceuticals which amounted to approximately 93.5% of the dollar volume of its prescription drugs from a single wholesaler, McKesson...

  • Page 70
    ... the Stock Purchase Agreement (the ''Agreement'') dated August 23, 2006. As consideration for the acquisition of Jean Coutu USA (the ''Acquisition''), the Company paid $2,307,747 and issued 250,000 shares of Rite Aid common stock. The Company financed the cash payment via the establishment of a new...

  • Page 71
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 2. Acquisition (Continued) The pro forma information does not purport to be indicative of ...

  • Page 72
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 3. Loss Per Share (Continued) Due to their antidilutive effect, the following potential ...

  • Page 73
    ...of closed stores ...Changes in assumptions about future sublease income, terminations and change of interest rate ...Reversals of reserves for stores that management has determined will remain open ...Interest accretion ...Leased properties of Jean Coutu USA closed or designated to be closed ...Cash...

  • Page 74
    .... The fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. 74

  • Page 75
    ...1, 2009 2008 (52 Weeks) (52 Weeks) (Dollars in thousands) Revenues ...Costs and expenses: Cost of goods sold ...Selling, general and administrative expenses Loss (gain) on sale of assets ... ... $ 267 1,652 1,936 48 3,636 $90,815 70,171 33,039 (8,100) 95,110 (4,295) (1,505) $ (2,790) Total costs...

  • Page 76
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 6. Income Taxes The provision for income taxes was as follows: February 27, 2010 (52 Weeks...

  • Page 77
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 6. Income Taxes (Continued) future taxable income to support the recognition of deferred ...

  • Page 78
    ... the consolidated U.S. income tax return for Brooks Eckerd for fiscal years 2006 thru 2007. In fiscal 2010, the IRS completed the examination of the consolidated U.S. income tax return for Rite Aid Corporation and subsidiaries for fiscal year 2008 and issued a no change report. Additionally the IRS...

  • Page 79
    ... of accounts receivable. The allowance for uncollectible accounts at February 27, 2010 and February 28, 2009 was $31,549 and $37,490, respectively. The Company's accounts receivable are due primarily from third-party payors (e.g., pharmacy benefit management companies, insurance companies or...

  • Page 80
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 7. Accounts Receivable (Continued) responsibility. The SPE then transferred an interest in...

  • Page 81
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 7. Accounts Receivable (Continued) At February 28, 2009, the Company's interest in the ...

  • Page 82
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 9. Goodwill and Other Intangibles Assets (Continued) The Company's intangible assets are ...

  • Page 83
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 11. Indebtedness and Credit Agreement Following is a summary of indebtedness and lease ...

  • Page 84
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 11. Indebtedness and Credit Agreement (Continued) Credit Facility The Company has a senior...

  • Page 85
    ... store deposit accounts, cash necessary to cover the Company's current liabilities and certain other exceptions) and from accumulating cash on hand with revolver borrowings in excess of $100,000 over three consecutive business days. The senior secured credit facility also states that if at any time...

  • Page 86
    ..., accounts receivable and prescription files of the subsidiary guarantors. Rite Aid Corporation is a holding company with no direct operations and is dependent upon dividends, distributions and other payments from its subsidiaries to service payments due under the senior secured credit facility...

  • Page 87
    ..., except per share amounts) 11. Indebtedness and Credit Agreement (Continued) Other 2010 Transactions In October 2009, the Company issued $270,000 of 10.25% senior secured notes due October 15, 2019. These notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally...

  • Page 88
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 11. Indebtedness and Credit Agreement (Continued) Company's 7.5% senior secured notes due ...

  • Page 89
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 12. Leases The Company leases most of its retail stores and certain distribution ...

  • Page 90
    ...at a redemption price of $100 per share plus accumulated and unpaid dividends. The Class A Cumulative Preferred Stock pays dividends quarterly at a rate of 7.0% per annum of the par value of $100 per share when, as and if declared by the Board of Directors of Rite Aid Lease Management Company in its...

  • Page 91
    ... 2010, 2009 and 2008 include $23,794, $31,448 and $40,439 of compensation costs related to the Company's stock-based compensation arrangements. The Company reserved 22,000 shares of its common stock for the granting of stock options and other incentive awards to officers and key associates under...

  • Page 92
    ...fair market value of a share of common stock on the date of grant. The aggregate number of shares authorized for issuance for all plans is 91,694 as of February 27, 2010. The Company has issued options to certain senior executives pursuant to their individual employment contracts. These options were...

  • Page 93
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 15. Stock Option and Stock Award Plans (Continued) Stock Options The Company determines ...

  • Page 94
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 15. Stock Option and Stock Award Plans (Continued) Cash received from stock option ...

  • Page 95
    ... be paid to eligible associates based upon years of service and, in some cases, eligible compensation. The Company's funding policy for The Rite Aid Pension Plan (The ''Defined Benefit Pension Plan'') is to contribute the minimum amount required by the Employee Retirement Income Security Act of 1974...

  • Page 96
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 16. Retirement Plans (Continued) Net periodic pension expense and other changes recognized...

  • Page 97
    ... well as the funded status and amounts recognized in the Company's balance sheet as of February 27, 2010 and February 28, 2009: Defined Benefit Pension Plan 2010 2009 Nonqualified Executive Retirement Plan 2010 2009 Change in benefit obligations: Benefit obligation at end of prior year Service cost...

  • Page 98
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 16. Retirement Plans (Continued) The accumulated benefit obligation for the defined ...

  • Page 99
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 16. Retirement Plans (Continued) • Balance the correlation between assets and ...

  • Page 100
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (In thousands, except per share amounts) 16. Retirement Plans (Continued) The following table sets forth by level within the fair ...

  • Page 101
    ... Proceedings The Company is currently a defendant in several putative collective or class action lawsuits filed in federal or state courts in Pennsylvania, New Jersey, New York, Maryland, Ohio and Oregon, purportedly on behalf of, in some cases (i) current and former assistant store managers, or (ii...

  • Page 102
    ... have a material adverse effect on its consolidated results of operations, financial position or cash flows. Guaranteed Lease Obligations In connection with certain business dispositions, the Company continues to guarantee lease obligations for 134 former stores. The respective purchasers assume the...

  • Page 103
    ... employment as President and Chief Operating Officer, Rite Aid paid Mr. Standley a consulting fee of $294. 20. Interim Financial Results (Unaudited) First Quarter Second Quarter Fiscal Year 2010 Third Quarter Fourth Quarter Year Revenues ...Cost of goods sold ...Selling, general and administrative...

  • Page 104
    ... Year Revenues ...Cost of goods sold ...Selling, general and administrative expenses ...Goodwill impairment charge ...Lease termination and impairment charges ...Interest expense ...Loss on debt modifications and retirements, net ...Loss (gain) on sale of assets and investments, net ... ... $6,612...

  • Page 105
    ... listed as follows: 2010 Carrying Amount Fair Value Carrying Amount 2009 Fair Value Variable rate indebtedness ...Fixed rate indebtedness ... $2,120,618 $4,097,590 $1,990,963 $3,632,738 $2,397,288 $3,420,603 $1,674,069 $1,076,476 Cash, trade receivables and trade payables are carried at market...

  • Page 106
    RITE AID CORPORATION AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008 (dollars in thousands) Balance at Beginning of Period Additions Charged to Costs and Expenses Allowances Related to the Purchase of Jean ...

  • Page 107
    ... duly authorized. RITE AID CORPORATION By: /s/ MARY F. SAMMONS Mary F. Sammons Chairman of the Board and Chief Executive Officer Dated: April 28, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 108
    Signature Title /s/ FRANCOIS J. COUTU Francois J. Coutu Director /s/ JAMES L. DONALD James L. Donald Director /s/ DAVID R. JESSICK David R. Jessick Director /s/ ROBERT G. MILLER Robert G. Miller Director /s/ MICHAEL N. REGAN Michael N. Regan Director /s/ PHILIP G. SATRE Philip G. Satre ...

  • Page 109
    ... EXECUTIVE OFFICER I, Mary F. Sammons, Chairman and Chief Executive Officer, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Rite Aid Corporation (the ''Registrant''); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 110
    ...Vitrano, Senior Executive Vice President, Chief Financial Officer and Chief Administration Officer, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Rite Aid Corporation (the ''Registrant''); Based on my knowledge, this report does not contain any untrue statement of a material...

  • Page 111
    ... Act of 2002 In connection with the Annual Report on Form 10-K of Rite Aid Corporation (the ''Company'') for the annual period ended February 27, 2010 as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), Mary F. Sammons, as Chief Executive Officer of the Company...

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