Rite Aid 2010 Annual Report Download - page 36

Preferred Stock Transactions
During the fourth quarter of fiscal 2005, we issued 2.5 million shares of our Series E Mandatory
Convertible preferred stock (‘‘Series E preferred stock’’). The Series E preferred stock automatically
converted into common stock on February 1, 2008 at a rate of 14.0056 common shares per preferred
share, as determined by the adjusted applicable market value of our common stock (as defined in the
Series E preferred stock agreement) on the date of conversion. The Series E preferred stock
conversion resulted in the issuance of 35.0 million shares of our common stock to the holders of the
Series 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 terms of 20 years. We accounted for 14 of
these leases as operating leases and the remaining eight were accounted for using the financing method
as these lease agreements contain a clause that allow the buyer to force us to repurchase the properties
under certain conditions. Subsequent to March 1, 2008, the clause that allowed the buyer to force us to
repurchase the property lapsed on all of these leases. Therefore, these leases are now accounted for as
operating leases.
Off Balance Sheet Obligations
Until October 26, 2009, we maintained securitization agreements (the ‘‘First Lien Facility’’) with
several multi-seller asset-backed commercial paper vehicles (‘‘CPVs’’). Under the terms of the First
Lien Facility, we sold substantially all of our eligible third party pharmaceutical receivables to a
bankruptcy remote Special Purpose Entity (‘‘SPE’’) and retained servicing responsibility. The SPE then
transferred an interest in these receivables to various CPVs. We also maintained a $225.0 million
second priority accounts receivable securitization term loan (‘‘Second Lien Facility’’).
On October 26, 2009, we terminated both accounts receivable securitization facilities and replaced
them with senior secured notes, increased borrowing capacity under our existing senior secured
revolving credit facility and an increase in borrowings under our Tranche 4 Term Loan. As part of this
refinancing, we incurred a prepayment penalty of $2.3 million in relation to the Second Lien Facility
and recognized $3.8 million of unamortized discount related to the Second Lien Facility. These charges
are recorded as a component of selling, general, and administrative expenses.
The table below details receivable transfer activity for the years presented (in thousands). Note
that for the period ended February 27, 2010, receivables securitization activity is reflected through
October 26, 2009, the date of the termination of the securitization facilities.
Year Ended
February 27, February 28, March 1,
2010 2009 2008
(52 Weeks) (52 Weeks) (52 Weeks)
Average amount of outstanding receivables transferred ....... $ 226,521 $ 471,319 $ 332,115
Total receivable transfers ............................. $2,240,000 $6,940,000 $4,992,000
Collections made by the Company as part of the servicing
arrangement on behalf of the CPVs ................... $2,320,000 $7,045,000 $4,907,000
The program fee under the First Lien Facility was LIBOR plus 2.0% of the total amount advanced
under the facility. The liquidity fee was 3.5% of the total facility commitment of $345.0 million. The
program and the liquidity fees are recorded as a component of selling, general and administrative
expenses. Program and liquidity fees for fiscal 2010, 2009 and 2008 were $12.0 million, $24.9 million
and $22.3 million, respectively.
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