Rite Aid 2011 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 26, 2011
OR
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 23-1614034
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
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 No
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 No
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
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 Filer Accelerated Filer Non-Accelerated Filer Smaller reporting company
(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 No
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 28,
2010 was approximately $568,118,447. For purposes of this calculation, executive officers, directors and 5% shareholders
are deemed to be affiliates of the registrant.
As of April 14, 2011 the registrant had outstanding 890,240,871 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, 2011 are
incorporated by reference into Part III.

Table of contents

  • Page 1
    ... 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 28, 2010 was approximately $568,118,447. For purposes of this calculation, executive officers, directors and 5% shareholders are deemed to be affiliates of the...

  • 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
    ... of private and public third party payors to reduce prescription drug reimbursement and encourage mail order; • competitive pricing pressures, including aggressive promotional activity from our competitors; • decisions to close additional stores and distribution centers, which could result...

  • Page 4
    ... 35% include one-hour photo shops; and 43% 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 on the New York Stock Exchange under the trading symbol of ''RAD...

  • Page 5
    ... purchase of prescription files from $24.2 million in fiscal 2011 to $75.0 million in fiscal 2012. Immunization services-During fiscal 2011, we tripled the amount of immunizing pharmacists to 7,400, expanded our immunization services to over 3,000 stores and administered 675,000 flu shots. We plan...

  • Page 6
    ... and assisting them with their purchases. We made investments in technology in fiscal 2011 that make it easier for our store associates to perform necessary tasks, such as price changes and backroom inventory management, which will free up their time to focus on the customer. During fiscal 2012, we...

  • Page 7
    ...the Internet through www.riteaid.com, or over the phone through our telephonic automated refill systems for pick up at a Rite Aid store. We have automated pharmacy dispensing units in high volume stores, which are linked to our pharmacists' computers that fill and label prescription drug orders. The...

  • Page 8
    ... our pharmacy sales were to customers covered by third party payors (such as insurance companies, prescription benefit management companies, government agencies, private employers or other managed care providers) that agree to pay for all or a portion of a customer's eligible prescription purchases...

  • Page 9
    ... group, consisting of managers and staff from all components of our business that is responsible for using feedback from associates throughout the Company to create a better work environment. As a result of more licensed pharmacists and new graduates seeking positions in many markets, the national...

  • Page 10
    ...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 11
    ... review corporate governance developments and modify these materials and practices as warranted. Our website also provides information on how to contact us and other items of interest to investors. We make available on our website, free of charge, our annual reports on Form 10-K, quarterly reports...

  • Page 12
    ... 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 our debts or refinance our indebtedness could have a material adverse effect on us. Borrowings under our senior secured credit facility are...

  • Page 13
    ... sale of a substantial number of our shares by Jean Coutu Group or our other stockholders within a short period of time could cause our stock price to decrease, make it more difficult for us to raise funds through future offerings of Rite Aid common stock or acquire other businesses using Rite Aid...

  • Page 14
    ... 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 four of...

  • Page 15
    ... different implications for Rite Aid and for Jean Coutu Group. Apart from the conflicts of interest policy contained in our Code of Ethics and Business Conduct and applicable to our directors, we and Jean Coutu Group have not established any formal procedures for us and Jean Coutu Group to resolve...

  • Page 16
    ...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, may impact...

  • Page 17
    ... of pharmacy. We are also governed by federal and state laws of general applicability, including laws regulating matters of wage and hour laws, working conditions, health and safety and equal employment opportunity. Certain risks are inherent in providing pharmacy services; our insurance may...

  • Page 18
    ...to purchase products or services, enroll in promotional programs, register on our web site, or otherwise communicate and interact with us. We also gather and retain information about our associates in the normal course of business. We may share information about such persons with vendors that assist...

  • Page 19
    ..., 2011: State Store Count Alabama ...California ...Colorado ...Connecticut ...Delaware ...District of Columbia Georgia ...Idaho ...Indiana ...Kentucky ...Louisiana ...Massachusetts ...Maine ...Maryland ...Michigan ...Mississippi ...North Carolina ...Nevada ...New Hampshire ...New Jersey ...New York...

  • Page 20
    ... Number Percentage Freestanding ...Drive through pharmacy ...One-hour photo development department GNC stores-within a Rite Aid-store ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 2,798 2,404 1,669 2,009 59.4% 51.0% 35.4% 42.6% We lease 4,456 of our operating drugstore...

  • Page 21
    ... conducted by the OIG, the United States Attorney's Office for the Central District of California and the United States Department of Justice Commercial Litigation Branch. The subpoena requests records related to any gift card or similar programs for customers who transferred prescriptions for drugs...

  • Page 22
    ... the third quarter of fiscal 2000 and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Our senior secured credit facility and some of the indentures that govern our other outstanding indebtedness restrict our ability to pay dividends. We have not sold any...

  • Page 23
    ... money managers typically select. STOCK PERFORMANCE GRAPH Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 February 2011 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 3/4/2006 3/3/2007 Rite Aid Corporation 3/1/2008 2/28/2009 2/27/2010 2/26/2011 Russell...

  • Page 24
    ...the fiscal years 2009, 2008 and 2007 have been adjusted to reflect the operations of our 28 stores in the Las Vegas market area as a discontinued operations as we entered into an agreement to sell the prescription files and terminate the operations of these stores during the fourth quarter of fiscal...

  • Page 25
    ...2008. February 26, 2011 (52 weeks) Fiscal Year Ended February 27, February 28, March 1, 2010 2009 2008 (52 weeks) (52 weeks) (52 weeks) (Dollars in thousands, except per share amounts) March 3, 2007 (52 weeks) Summary of Operations: Revenues(1) ...Costs and expense: Cost of goods sold(2) ...Selling...

  • Page 26
    ... value of Rite Aid Corporation, as indicated by the trading price of our common stock, was less than the carrying value of our net assets as of February 28, 2009. Income Tax: Net loss for fiscal 2011 included income tax expense of $9.8 million and was primarily comprised of an accrual for state and...

  • Page 27
    ... provide cash of $183.2 million. (b) On March 21, 2011, we launched a stock option exchange offer providing eligible associates the opportunity to surrender certain stock options for a lesser number of new stock options with a strike price that was determined based on the closing market price 27

  • Page 28
    ..., 2011 (52 Weeks) Year Ended February 27, February 28, 2010 2009 (52 Weeks) (52 Weeks) (Dollars in thousands) Revenues ...Revenue (decline) growth ...Same store sales (decline) growth ...Pharmacy sales (decline) growth ...Same store pharmacy sales (decline) growth ...Pharmacy sales as a % of total...

  • Page 29
    ...front end same store sales. 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, a strong flu season and growth in our automated refill reminder program and other prescription compliance...

  • Page 30
    ...of amounts and number of locations as follows: Year Ended February 26, February 27, February 28, 2011 2010 2009 (52 Weeks) (52 Weeks) (52 Weeks) (Dollars in thousands) Impairment charges ...Facility and equipment lease exit charges ...Number of Stores ...Number of Distribution Centers ...Lease exit...

  • Page 31
    ..., 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 2011, 2010, and 2009, interest...

  • Page 32
    ... under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At February 26, 2011, we had $28.0 million outstanding under the revolver and had letters of credit outstanding against the revolver of $143.0 million, which resulted in...

  • Page 33
    ... cash located in 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...

  • Page 34
    ... of our senior secured credit facility. On July 30, 2010 we 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. Our common stock continued to trade as usual on the NYSE and on March 1, 2011, we received notice...

  • Page 35
    ... ability to pay dividends, make investments or other restricted payments, incur debt, grant liens, sell assets and enter into sale-leaseback transactions. The 9.75% senior secured notes due June 2016 were issued at 98.2% of par. Sale Leaseback Transactions During fiscal 2010 we sold a total of three...

  • Page 36
    ... million shares of our common stock. Sale Leaseback Transactions During fiscal 2009 we sold a total of 72 owned stores to independent third parties. Net proceeds from these sales were $193.0 million. Concurrent with these sales, we entered into agreements to lease the stores back from the purchasers...

  • Page 37
    ..., Investing and Financing Activities Cash flow provided by operating activities was $395.8 million in fiscal 2011. Cash flow was positively impacted by a reduction in inventory and an increase in accounts payable due to the timing of purchases. Additionally, the reductions in accounts receivable are...

  • Page 38
    ... made by management to reduce excess inventory and a decrease in purchasing volume, which also impacted accounts payable. Cash used in investing activities was $156.7 million in fiscal 2011. Cash was used for the purchase of property, plant and equipment and prescription files which was partially...

  • Page 39
    ... at specific locations (including stores and distribution centers), as well as overall loss trends as determined during physical inventory procedures. The estimated shrink rate is calculated by dividing historical shrink results for stores inventoried in the most recent six months by the sales for...

  • Page 40
    ...enrolled in this program. Members participating in our wellness+ loyalty card program earn points on a calendar year basis for eligible front end merchandise purchases and qualifying prescriptions. One point is awarded for each dollar spent towards front end merchandise and 25 points are awarded for...

  • Page 41
    ... LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to customer loyalty programs and other items. We...

  • Page 42
    ... 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 ...Customer loyalty card programs revenue deferral Other...

  • Page 43
    ... If the market rates of interest for LIBOR changed by 100 basis points as of February 26, 2011, our annual interest expense would change by approximately $11.1 million. A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments...

  • Page 44
    ... Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible...

  • Page 45
    ...accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended February 26, 2011 of the Company and our report dated April 26, 2011 expressed an unqualified opinion on...

  • Page 46
    ... of Cash Flows for the fiscal years ended February 26, 2011, February 27, 2010 and February 28, 2009 ...Notes to Consolidated Financial Statements ...2. Financial Statement Schedule Schedule II-Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable, not...

  • Page 47
    ..., The Jean Coutu Group (PJC) Inc., Jean Coutu, Marcelle Coutu, Francois J. Coutu, Michel Coutu, Louis Coutu, Sylvie Coutu and Marie-Josee Coutu Letter Agreement to the Amended and Restated Stockholder Agreement, dated April 20, 2010, by and between Rite Aid Corporation and The Jean Coutu Group (PJC...

  • Page 48
    ... The Bank of New York Trust Company, N.A. to the Indenture, dated as of May 20, 2003, between Rite Aid Corporation and BNY Midwest Trust Company, related to the Company's 9.25% Senior Secured Notes due 2013 Exhibit 4A to Registration Statement on Form S-3, File No. 033-63794, filed on June 3, 1993...

  • Page 49
    ... Secured Notes due 2017 Indenture, dated as of February 21, 2007, between Rite Aid Corporation, as issuer, and The Bank of New York Trust Company, N.A., as trustee, related to the Company's 8.625% Senior Notes due 2015 Exhibit 4.10 to Form 10-Q, filed on July 10, 2008 4.8 Exhibit 99.1 to Form...

  • Page 50
    ... as of June 4, 2007, among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as Trustee, related to the Company's 9.5% Senior Notes due 2017 Exhibit 4.14 to Form 10-Q, filed on January 9, 2008 4.13...

  • 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, related to the Company's 10.25% Senior Secured Notes due 2019. Exhibit 4.20 to Form 10-Q, filed on July 10, 2008 4.18...

  • Page 52
    ... 2001 Stock Option Plan* 2004 Omnibus Equity Plan* 2006 Omnibus Equity Plan* 2010 Omnibus Equity Plan* Amendment No. 1, dated September 21, 2010, to the 2010 Omnibus Equity Plan* Supplemental Executive Retirement Plan* Amended and Restated Employment Agreement by and between Rite Aid Corporation and...

  • Page 53
    ... 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 December 18, 2008* Exhibit 10.2 to Form 8-K, filed on...

  • Page 54
    Exhibit Numbers Description Incorporation By Reference To 10.26 Employment Agreement by and between Rite Aid Corporation and Ken Martindale, dated as of December 3, 2008* Letter Agreement, dated July 27, 2010, to the Employment Agreement by and between Rite Aid Corporation and Ken Martindale, ...

  • Page 55
    ... 2009, among Rite Aid Corporation, the lenders from time to time party thereto and Citicorp North America, Inc., as administrative agent and collateral agent Amendment No. 1, dated as of August 19, 2010, relating to the Amended and Restated Credit Agreement, dated as of June 5, 2009, among Rite Aid...

  • Page 56
    ..., dated as of June 5, 2009, among Rite Aid Corporation, each subsidiary named therein or which becomes a party thereto, Wilmington Trust Company, as collateral trustee, Citicorp North America, Inc., as senior collateral processing agent, The Bank of New York Trust Company, N.A., as trustee under the...

  • Page 57
    ... 18, 2009, by and among Citicorp North America, Inc. and Citicorp North America, Inc., and acknowledged and agreed to by Rite Aid Funding II Senior Lien Intercreditor Agreement dated as of June 12, 2009, among Rite Aid Corporation, the subsidiary guarantors named therein, Citicorp North America, Inc...

  • Page 58
    ... fiscal years ended February 26, 2011, February 27, 2010 and February 28, 2009, (iii) Condensed Consolidated Statements of Stockholders' (Deficit)/Equity for the fiscal years ended February 26, 2011, February 27, 2010 and February 28, 2009, (iv) Condensed Consolidated Statements of Cash Flow for the...

  • Page 59
    ... 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 60
    ...Rite Aid Corporation and subsidiaries as of February 26, 2011 and February 27, 2010, and the results of their operations and their cash flows for each of the three years in the period ended February 26, 2011, in conformity with accounting principles generally accepted in the United States of America...

  • Page 61
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) February 26, 2011 February 27, 2010 ASSETS Current assets: Cash and cash equivalents . Accounts receivable, net . . Inventories, net ...Prepaid expenses and other ...current assets ...net ...$...

  • Page 62
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended February 27, 2010 (52 Weeks) February 26, 2011 (52 Weeks) February 28, 2009 (52 Weeks) Revenues ...Costs and expenses: Cost of goods sold ...Selling, general and ...

  • Page 63
    ... (DEFICIT)/EQUITY For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands) Preferred Stock-Series G Shares BALANCE MARCH 1, 2008 ...Net loss ...Other comprehensive income: Changes in Defined Benefit Plans ...Comprehensive loss ...Exchange of restricted shares for...

  • Page 64
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended February 27, 2010 (52 Weeks) February 26, 2011 (52 Weeks) February 28, 2009 (52 Weeks) OPERATING ACTIVITIES: Net loss ...Adjustments to reconcile to net cash (used in) provided by operating ...

  • Page 65
    ... States, with 4,714 stores in operation as of February 26, 2011. 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 a large private brand product line. The Company...

  • Page 66
    ... of three months or less when purchased. 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 recognizes receivables that represent...

  • Page 67
    ... approximates the anticipated prescription file retention and related cash flows. Purchased prescription files acquired in other than business combinations are amortized over their estimated useful lives of five years on a straight-line basis. Deferred Financing Costs Costs incurred to issue debt...

  • Page 68
    ... 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Revenue Recognition For all sales other than third party pharmacy sales, the Company recognizes revenue from the sale of merchandise at the time the merchandise is sold...

  • Page 69
    ... (Continued) For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Rent The Company records rent expense on operating leases on a straight-line basis over the minimum lease...

  • Page 70
    ... Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Stock-Based Compensation The Company has several stock option plans, which are described in detail in Note 14. The Company accounts...

  • Page 71
    ...have a material adverse effect on the Company's business and results of operations. During fiscal 2011, the Company purchased brand pharmaceuticals and some generic pharmaceuticals which amounted to approximately 91.4% of the dollar volume of its prescription drugs from a single wholesaler, McKesson...

  • Page 72
    ... requirements for working capital, debt service and capital expenditures through fiscal 2012. The Company has a $1,175,000 senior secured revolving credit facility of which $28,000 was outstanding at February 26, 2011. Derivatives The Company may enter into interest rate swap agreements to hedge...

  • Page 73
    ... of the Company subject to anti-dilution limitations. February 26, 2011 (52 Weeks) Year Ended February 27, 2010 (52 Weeks) February 28, 2009 (52 Weeks) Numerator for loss per share: Net loss ...Accretion of redeemable preferred stock ...Cumulative preferred stock dividends ...Loss applicable to...

  • Page 74
    ... of locations as follows: February 26, 2011 (52 Weeks) Year Ended February 27, 2010 (52 Weeks) February 28, 2009 (52 Weeks) Impairment charges ...Facility and equipment lease exit charges ...Impairment charges Number of Stores ...Number of Distribution Centers ...Lease exit charges Number of Stores...

  • Page 75
    ... as follows: February 26, 2011 (52 Weeks) Year Ended February 27, 2010 (52 Weeks) February 28, 2009 (52 Weeks) Revenues ...Loss from operations ...Included in these stores' loss from operations Depreciation and amortization ...Inventory liquidation charges ...(Gain) loss from sales of assets ...are...

  • Page 76
    ... of 17 of those stores to other entities and closed the remaining leased stores. The Company has sold three of the owned stores and plans to sell the remaining one owned store. The sale and transfer of the prescription files has been completed and the inventory at the stores has been liquidated. 76

  • Page 77
    ... in discontinued operations: Year Ended February 28, 2009 (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 Total costs and expenses ...Loss from...

  • Page 78
    ... expected statutory federal tax and the total income tax benefit was as follows: February 26, 2011 (52 Weeks) Year Ended February 27, 2010 (52 Weeks) February 28, 2009 (52 Weeks) Expected federal statutory expense at 35% . Nondeductible expenses ...State income taxes, net ...Increase of previously...

  • Page 79
    ... February 27, 2010: 2011 2010 Deferred tax assets: Accounts receivable ...Accrued expenses ...Liability for lease exit costs . . Pension, retirement and other Long-lived assets ...Other ...Credits ...Net operating losses ... ...benefits ... ... ... ... ... ... ... ... ... ... ... ... ... $ 39,021...

  • Page 80
    ...income tax returns for Brooks Eckerd for the periods leading up to the acquisition which include fiscal years 2004 through 2007. A revenue agent report (RAR) has been received for each of the three audit cycles, with the last RAR received in the third quarter of fiscal 2011. The Company is appealing...

  • Page 81
    ... of accounts receivable. The allowance for uncollectible accounts at February 26, 2011 and February 27, 2010 was $25,116 and $31,549, respectively. The Company's accounts receivable are due primarily from third-party payors (e.g., pharmacy benefit management companies, insurance companies or...

  • Page 82
    ... securitization facilities. February 26, 2011 (52 Weeks) Year Ended February 27, 2010 (52 Weeks) February 28, 2009 (52 Weeks) Average amount of outstanding receivables transferred ...Total receivable transfers ...Collections made by the Company as part of the servicing arrangement on behalf of the...

  • Page 83
    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) 8. Goodwill and Other Intangibles Assets At February 28, 2009, the Company impaired ...

  • Page 84
    ... 28, 2009 (In thousands, except per share amounts) 10. Indebtedness and Credit Agreement Following is a summary of indebtedness and lease financing obligations at February 26, 2011 and February 27, 2010: 2011 2010 Secured Debt: Senior secured revolving credit facility due September 2012 ...Senior...

  • Page 85
    ... 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) Credit Facility The Company has a senior...

  • Page 86
    ... on, among other things, accounts receivable, inventory 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...

  • Page 87
    ... of our senior credit facility. On July 30, 2010 the Company received a notice of non-compliance from the NYSE because the price of its common stock had 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 87

  • Page 88
    ... and Credit Agreement (Continued) 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. 2010 Transactions In October 2009, the Company issued $270,000 of 10.25% senior...

  • Page 89
    ...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...

  • Page 90
    .... During fiscal 2009, the Company sold 72 owned stores to several independent third parties. Proceeds from these sales totaled $192,819. The Company entered into agreements to lease these stores back from the purchasers over minimum lease terms of 20 years. Sixty-seven leases were accounted for as...

  • Page 91
    ...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 92
    ... converted at a rate of 5.6561 which resulted in the issuance of 13,665 shares of Rite Aid common stock. The Company also has outstanding Series G and Series H preferred stock. The Series G preferred stock has a liquidation preference of $100 per share and pays quarterly dividends at 7% of...

  • Page 93
    ... of the 2006 Omnibus Equity Plan became effective upon the closing of the Acquisition. In June 2010, the stockholders of Rite Aid Corporation approved the adoption of the Rite Aid Corporation 2010 Omnibus Equity Plan. Under the plan, 35,000 shares of Rite Aid common stock are available for granting...

  • Page 94
    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) 14. Stock Option and Stock Award Plans (Continued) Stock Options The Company ...

  • Page 95
    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) 14. Stock Option and Stock Award Plans (Continued) total intrinsic value of stock ...

  • Page 96
    ... 2009. The Company has established the nonqualified executive retirement plan for certain officers who, pursuant to their employment agreements, are not participating in the defined contribution supplemental retirement plan. Generally, eligible participants receive an annual benefit, payable monthly...

  • Page 97
    ... for the defined benefit plans included the following components: Defined Benefit Pension Plan 2010 Nonqualified Executive Retirement Plan 2011 2010 2009 2011 2009 Service cost ...Interest cost ...Expected return on plan assets ...Amortization of unrecognized prior service cost ...Amortization of...

  • Page 98
    ...in the Company's balance sheet as of February 26, 2011 and February 27, 2010: Defined Benefit Pension Plan 2011 2010 Nonqualified Executive Retirement Plan 2011 2010 Change in benefit obligations: Benefit obligation at end of prior year . Service cost ...Interest cost ...Distributions ...Change due...

  • Page 99
    ...net cost for the fiscal years ended February 26, 2011, February 27, 2010 and February 28, 2009 were: Defined Benefit Pension Plan 2011 2010 2009 Nonqualified Executive Retirement Plan 2011 2010 2009 Discount rate ...Rate of increase in future compensation levels ...Expected long-term rate of return...

  • Page 100
    ... Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 15. Retirement Plans (Continued) The investment objectives of the Defined Benefit Pension Plan, the only defined benefit plan with assets, are to: • Achieve a rate of return on investments...

  • Page 101
    ... Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 15. Retirement Plans (Continued) The Company expects to contribute $10,919 to the Deferred Benefit Plan and $1,582 to the nonqualified executive retirement plan during fiscal 2012. Included...

  • Page 102
    ... 2011, $19,328 in fiscal 2010 and $10,924 in fiscal 2009. 16. Commitments, Contingencies and Guarantees Legal 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...

  • Page 103
    ... conducted by the OIG, the United States Attorney's Office for the Central District of California and the United States Department of Justice Commercial Litigation Branch. The subpoena requests records related to any gift card or similar programs for customers who transferred prescriptions for drugs...

  • Page 104
    ... of $894 for services provided under this agreement for the year ended February 28, 2009. As of February 26, 2011, the Jean Coutu Group owned approximately 251,975 shares (27.4% of the voting power of the Company) of common stock. During fiscal 2011, 2010 and 2009, the Company paid Leonard Green...

  • Page 105
    ...) For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 18. Related Party Transactions (Continued) into a month-to-month agreement with Leonard Green & Partners, L.P., as amended whereby the Company has agreed to pay Leonard Green...

  • Page 106
    ... the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 (In thousands, except per share amounts) 19. Interim Financial Results (Unaudited) (Continued) Fiscal Year 2010 Third Quarter First Quarter Second Quarter Fourth Quarter Year Revenues ...Cost of goods sold ...Selling...

  • Page 107
    ... listed as follows: 2011 Carrying Amount Fair Value Carrying Amount 2010 Fair Value Variable rate indebtedness ...Fixed rate indebtedness ... $1,425,019 $4,654,548 $1,386,861 $4,544,974 $2,120,618 $4,097,590 $1,990,963 $3,632,738 Cash, trade receivables and trade payables are carried at market...

  • Page 108
    ... Exchange Program (''Program'') for eligible associates only. Under the Program, eligible associates had the opportunity to surrender certain stock options for a lesser number of new stock options with a strike price that was determined based on the closing market price on April 21, 2011, the day...

  • Page 109
    RITE AID CORPORATION AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 (dollars in thousands) Balance at Beginning of Period Additions Charged to Costs and Expenses Balance at End of Period Allowances ...

  • Page 110
    ..., thereunto duly authorized. RITE AID CORPORATION By: /s/ JOHN T. STANDLEY John T. Standley President and Chief Executive Officer Dated: April 26, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 111
    Signature Title /s/ MICHEL COUTU Michel 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 112
    ...2011 (52 Weeks) Year Ended February 27, February 28, March 1, 2010 2009 2008 (52 Weeks) (52 Weeks) (52 Weeks) (dollars in thousands) March 3, 2007 (52 Weeks) Fixed charges: Interest expense ...Interest portion of net rental expense(1) ...Fixed charges before capitalized and preferred stock dividend...

  • Page 113
    ...764 South Broadway-Geneva, Ohio, LLC ...Ann & Government Streets-Mobile, Alabama, LLC ...Apex Drug Stores, Inc...Broadview and Wallings-Broadview Heights Ohio, Inc...Central Avenue & Main Street Petal-MS, LLC ...Eagle Managed Care Corp...Eckerd Corporation ...EDC Drug Stores, Inc...Eighth and Water...

  • Page 114
    ... Indiana, Inc...Rite Aid of Kentucky, Inc...Rite Aid of Maine, Inc...Rite Aid of Maryland, Inc...Rite Aid of Massachusetts, Inc. . Rite Aid of Michigan, Inc...Rite Aid of New Hampshire, Inc. Rite Aid of New Jersey, Inc...Rite Aid of New York, Inc...Rite Aid of North Carolina, Inc. . Rite Aid of Ohio...

  • Page 115
    ...Baltimore, Maryland/One, LLC . . Silver Springs Road-Baltimore, Maryland/Two, LLC . . State & Fortification Streets-Jackson, Mississippi, LLC State Street and Hill Road-Gerard, Ohio, LLC ...The Jean Coutu Group (PJC) USA, Inc...The Lane Drug Company ...Thrift Drug Services, Inc...Thrifty Corporation...

  • Page 116
    ..., and the effectiveness of Rite Aid Corporation and subsidiaries' internal control over financial reporting, appearing in this Annual Report on Form 10-K of Rite Aid Corporation and subsidiaries for the year ended February 26, 2011. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania April 26...

  • Page 117
    ... OF CHIEF EXECUTIVE OFFICER I, John T. Standley, President 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...

  • Page 118
    Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Frank G. 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 ...

  • Page 119
    ...10-K of Rite Aid Corporation (the ''Company'') for the annual period ended February 26, 2011 as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), John T. Standley, as Chief Executive Officer of the Company, and Frank G. Vitrano, as Senior Executive Vice President...