Rite Aid 2011 Annual Report Download - page 81

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)
5. Income Taxes (Continued)
At February 26, 2011, the Company had state NOL carryforwards of approximately $5,953,877, the
majority of which will expire between fiscal 2020 and 2028.
At February 26, 2011, the Company had federal business tax credit carryforwards of $58,475, the
majority of which will expire between 2012 and 2020. In addition to these credits, the Company had
alternative minimum tax credit carryforwards of $3,221.
Valuation Allowances
The valuation allowances as of February 26, 2011 and February 27, 2010 apply to the net deferred
tax assets of the Company. The Company maintained a full valuation allowance of $2,199,302 and
$1,984,468 against net deferred tax assets at February 26, 2011 and February 27, 2010, respectively.
6. Accounts Receivable
The Company maintains an allowance for doubtful accounts receivable based upon the expected
collectibility 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 governmental agencies) and are recorded net of any allowances provided for under the respective
plans. Since payments due from third-party payors are sensitive to payment criteria changes and
legislative actions, the allowance is reviewed continually and adjusted for accounts deemed uncollectible
by management.
Until October 26, 2009, the Company 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, the Company sold substantially all of its 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. The Company
also maintained a $225,000 second priority accounts receivable securitization term loan (the ‘‘Second
Lien Facility’’).
On October 26, 2009, the Company terminated both accounts receivable securitization facilities
and replaced them with senior secured notes, increased borrowing capacity under the Company’s
existing senior secured revolving credit facility and an increase in borrowings the Company’s Tranche 4
Term Loan. The new borrowings are discussed in more detail in Note 10. As part of this refinancing,
the Company incurred a prepayment penalty of $2,250 in relation to the Second Lien Facility and
recognized $3,822 of unamortized discount related to the Second Lien Facility. These charges are
recorded as a component of selling, general, and administrative expenses.
At October 26, 2009, prior to the termination of the First Lien Facility, the total outstanding
receivables that had been transferred to CPV’s were $250,000. At February 28, 2009, the total
outstanding receivables that had been transferred to CPVs were $330,000.
The table below details receivable transfer activity for the years ended February 26, 2011,
February 27, 2010 and February 28, 2009. Note that for the fifty-two period ended February 27, 2010,
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