Rite Aid 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 Rite Aid annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

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 March 3, 2012
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.
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 27,
2011 was approximately $682,941,816. For purposes of this calculation, executive officers, directors and 5% shareholders
are deemed to be affiliates of the registrant.
As of April 10, 2012 the registrant had outstanding 898,966,064 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 21, 2012 are
incorporated by reference into Part III.

Table of contents

  • Page 1
    ... The Fiscal Year Ended March 3, 2012 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...

  • Page 2
    ... ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...Exhibits and Financial Statement Schedule ...49...

  • Page 3
    ...to close additional stores and distribution centers, which could result in further charges to our operating statement; • our ability to manage expenses and our investment in working capital; • continued consolidation of the drugstore and the pharmacy benefit management industries; • changes in...

  • Page 4
    ... stores included a drive-thru pharmacy; 24% included one-hour photo shops; and 46% included 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...

  • Page 5
    ... of the drugstore industry, continued new store openings, increased competition from internet based providers and aggressive generic pricing programs at competitors such as Wal-Mart and various supermarket chains will further increase competitive pressures in the industry. The pharmacy business has...

  • Page 6
    ... customers to sign up for wellness +, and continuing to communicate in print, signage and other advertising channels that we accept Express Scripts pharmacy benefit management network patients. Wellness remodels-During fiscal 2012, we introduced our new Wellness format store. These stores offer...

  • Page 7
    ... 2012 were the following: Product Class Percentage of Sales Prescription drugs ...Over-the-counter medications and Health and beauty aids ...General merchandise and other . . ...personal care ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 68.1% 9.8% 5.2% 16.9% We offer...

  • 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
    ... and stores, including competitor market intrusion and prescription file buys; and • Our vision to be the customer's first choice for health and wellness products, services and information. Under the umbrella of our ''With Us It's Personal'' brand positioning, we promote educational programs...

  • 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
    ... print upon request to Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, Attention: Corporate Secretary. Our Board will regularly review corporate governance developments and modify these materials and practices as warranted. Our website also provides information on how to contact...

  • Page 12
    ... 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 based upon variable rates of...

  • Page 13
    .... 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 14
    ... 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 15
    ... corporate opportunities, potential acquisitions or financing transactions, sales or other dispositions by Jean Coutu Group of its interests in us and the exercise by Jean Coutu Group of its influence over our management and affairs. A number of the directors on our board of directors are persons...

  • Page 16
    ..., as well as from large-scale retailers that offer generic drugs at a substantial discount. Some of our competitors have or may merge with or acquire pharmaceutical services companies or pharmacy benefit managers, which may further increase competition. We may not be able to effectively compete...

  • Page 17
    ... the planned conversion of a number of popular medications, to over-the-counter medications may reduce our pharmacy sales and customers may seek to purchase such medications at non-pharmacy stores. Also, if the rate at which new prescription drugs become available slows or if new prescription drugs...

  • Page 18
    ...effect on our business. Sales of prescription drugs reimbursed by third party payors, including the Medicare Part D plans and state sponsored Medicaid and related managed care Medicaid agencies, represented 96.5% of our business in fiscal 2012. The continued efforts of the Federal government, health...

  • 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
    comprehensive information security program, revise HIPAA-related policies and procedures and retain an independent assessor to conduct periodic compliance reviews. Item 1B. None Item 2. Properties Unresolved SEC Staff Comments As of March 3, 2012, we operated 4,667 retail drugstores. The overall ...

  • Page 21
    ... 2012: 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 22
    ... and acquisitions of facilities and prescription files. When we reduce in size, close or relocate a store or close distribution center facilities, we often continue to have leasing obligations or own the property. We attempt to sublease this space. As of March 3, 2012, we had 8,633,833 square feet...

  • Page 23
    ... 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 or medicines to our pharmacies...

  • Page 24
    ...Subpoena Duces Tecum dated August 26, 2011 by the United States Attorney's Office for the Eastern District of Michigan. The subpoena requests records regarding the relationship of Rite Aid's Rx Savings Program to the reporting of usual and customary charges to publicly funded health programs. We are...

  • Page 25
    ... money managers typically select. STOCK PERFORMANCE GRAPH Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 March 2012 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 3/3/2007 3/1/2008 Rite Aid Corporation 2/28/2009 2/27/2010 2/26/2011 3/3/2012 Russell...

  • Page 26
    ... ended March 1, 2008. March 3, 2012 (53 weeks) Fiscal Year Ended February 26, February 27, February 28, 2011 2010 2009 (52 weeks) (52 weeks) (52 weeks) (Dollars in thousands, except per share amounts) March 1, 2008 (52 weeks) Summary of Operations: Revenues ...Costs and expense: Cost of goods sold...

  • Page 27
    ...basic and diluted share. Our operating results are described in detail in the Results of Operations section of this Item 7. Some of the key factors that impacted our results in fiscal 2012, 2011 and 2010 are summarized as follows: Sales Trends: Our revenue growth for fiscal 2012 was 3.6% compared to...

  • Page 28
    ... 2011, we launched a Stock Option 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 an exercise price that was determined based on the closing market...

  • Page 29
    ...same store prescriptions driven in part by our immunization program, our wellness + loyalty program and inflation on brand drugs. Same store sales were also positively impacted by new customers resulting from the decrease in the number of pharmacies in the Express Scripts pharmacy benefit management...

  • Page 30
    ... our wellness + loyalty card program, which resulted in a front-end same store sales increase of 1.0% compared to the fourth quarter last year. Costs and Expenses March 3, 2012 (53 Weeks) Year Ended February 26, 2011 February 27, 2010 (52 Weeks) (52 Weeks) (Dollars in thousands) Costs of goods sold...

  • Page 31
    ... 2010. The pharmacy margin pressure slowed as we continued to cycle the more significant maximum allowable costs (''MAC'') of new generics which occurred last year. Front-end gross margin was lower due primarily to an increase in deferred revenue related to our wellness + customer loyalty program...

  • Page 32
    ... unemployment rates that affect customer shopping patterns, we consider that we operate in a highly competitive industry which includes the actions of other national and regional drugstore chains, independently owned drugstores, supermarkets, mass merchandisers, dollar stores and internet pharmacies...

  • Page 33
    ... been recorded in fiscal 2012, 2011 and 2010: March 3, 2012 Number Charge Year Ended February 26, 2011 Number Charge February 27, 2010 Number Charge Closed facilities: Actual and approved store closings Actual and approved relocations . . Distribution center closings ...Existing surplus properties...

  • Page 34
    ..., we assess stores and distribution centers for potential closure. Decisions to close stores or distribution centers in future periods would result in charges for lease exit costs and liquidation of inventory, as well as impairment of assets at these locations. In fiscal 2012, 2011 and 2010, we...

  • Page 35
    ... partially offset by savings from our current year refinancing of our $650.0 million senior secured credit facility term loan. The annual weighted average interest rates on our indebtedness in fiscal 2012, 2011 and 2010 were 7.4%, 7.5% and 6.8%, respectively. Income Taxes Income tax benefit of $23...

  • Page 36
    ... 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 37
    ...million. Our senior secured credit facility contains covenants which place restrictions on the incurrence of debt beyond the restrictions described above, the payment of dividends, sale of assets, mergers and acquisitions and the granting of liens. Our credit facility has a financial covenant, which...

  • Page 38
    ...'s minimum share price listing requirement. We are currently in compliance with all NYSE listing rules. 2010 Transactions In October 2009, we issued $270.0 million of our 10.25% senior secured notes due October 15, 2019. The notes are unsecured, unsubordinated obligations of Rite Aid Corporation and...

  • Page 39
    ...5 Years After 5 Years (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...

  • Page 40
    ... due to the timing of purchases partially offset by an increase in inventory resulting primarily from price inflation and increased store inventory to support sales growth. Cash flow provided by operating activities was $395.8 million in fiscal 2011. Cash flow was positively impacted by a reduction...

  • Page 41
    ...relocations and remodels and new store construction, 25.0% related to infrastructure and maintenance requirements and 16.7% related to prescription file purchases. Management expects that these capital expenditures will be financed primarily with cash flow from operating activities. Future Liquidity...

  • Page 42
    ... items such as decreases in market prices, changes in the manner in which the store is being used or physical condition, changes in legal factors or business climate, an accumulation of losses significantly in excess of budget, a current period operating or cash flow loss combined with a history...

  • Page 43
    .... Changes in our discount rate of 50 basis points would not have a material impact on the total impairment recorded in fiscal 2012. Revenue recognition: For all sales other than third party pharmacy sales, we recognize revenue from the sale of merchandise at the time the merchandise is sold. For...

  • Page 44
    ..., 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 reference...

  • Page 45
    ... ...LIFO charges ...Lease termination and impairment charges . Stock-based compensation expense ...Gain on sale of assets, net ...Loss on debt modifications and retirements, net ...Closed facility liquidation expense ...Severance costs ...Customer loyalty card programs revenue deferral ...Other...

  • Page 46
    ... Officer and Chief Financial Officer, has evaluated the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ''Exchange Act'')) as of the end of the period covered by this report...

  • Page 47
    ... the next paragraph. (c) Changes in Internal Control Over Financial Reporting There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter ended March 3, 2012 that has...

  • Page 48
    ...Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended March 3, 2012 of the Company and our report dated April 24, 2012 expressed an unqualified opinion on those financial statements and financial...

  • Page 49
    ... Statements of Cash Flows for the fiscal years ended March 3, 2012, February 26, 2011 and February 27, 2010 ...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...

  • Page 50
    ... Corporation, 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...

  • Page 51
    ... and 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 Notes due 2013 Exhibit 4A to Registration Statement on Form S-3, File No. 033-63794, filed on June 3, 1993...

  • Page 52
    ... related to the Company's 7.5% Senior 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...

  • Page 53
    ... Restated Indenture, dated 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., related to the Company's 9.375% Senior Notes due 2015 Exhibit 4.14 to Form 10-Q, filed on January...

  • Page 54
    ...due 2016 Indenture, dated as of June 12, 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 9.750% Senior Secured Notes due 2016 Exhibit 4.2 to Form 8-K, filed on June 7, 2007...

  • Page 55
    ...% Senior Secured Notes due 2020 Indenture, dated as of February 27, 2012, 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 9.25% Senior Notes due 2020 1999 Stock Option Plan* 2000...

  • Page 56
    ..., 2010* Employment Agreement by and between Rite Aid Corporation and Douglas E. Donley, dated as of August 1, 2000* Amendment No. 1 to Employment Agreement by and between Rite Aid Corporation and Douglas E. Donley, dated as of December 18, 2008* Rite Aid Corporation Special Executive Retirement Plan...

  • Page 57
    ... Agreement by and between Rite Aid Corporation and McKesson Corporation, dated as of February 1, 2009** Fourth Amendment to Supply Agreement by and between Rite Aid Corporation and McKesson Corporation, dated as of December 10, 2009** Management Services Agreement by and between Rite Aid Corporation...

  • Page 58
    ... 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 Corporation...

  • Page 59
    ... definitions annex, 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...

  • Page 60
    ...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., as senior collateral agent for the Senior Secured Parties (as defined therein), Citicorp...

  • Page 61
    ..., 2012, among Rite Aid Corporation, the Subsidiary Guarantors and Citigroup Global Markets Inc., Merrill, Lynch, Pierce, Fenner and Smith Incorporated, Wells Fargo Securities, LLC and Credit Suisse Securities (USA) LLC, as the Initial Purchasers Statement regarding computation of earnings per share...

  • Page 62
    ... (iv) Condensed Consolidated Statements of Cash Flow for the fiscal years ended March 3, 2012, February 26, 2011 and February 27, 2010 and (v) Notes to Consolidated Financial Statements, tagged in detail.*** * ** Constitutes a compensatory plan or arrangement required to be filed with this Form 10...

  • Page 63
    ...cash flows for each of the three years in the period ended March 3, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility...

  • Page 64
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) March 3, 2012 February 26, 2011 ASSETS Current assets: Cash and cash equivalents . Accounts receivable, net . . Inventories, net ...Prepaid expenses and other ...current assets ...net ...$ 162...

  • Page 65
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended February 26, 2011 (52 Weeks) March 3, 2012 (53 Weeks) February 27, 2010 (52 Weeks) Revenues ...Costs and expenses: Cost of goods sold ...Selling, general and ...

  • Page 66
    ... of restricted stock balance Stock-based compensation expense ...Stock options exercised ...Dividends on preferred stock ... 66 BALANCE FEBRUARY 26, 2011 ...Net loss ...Other comprehensive income: Changes in Defined Benefit Plans ...Comprehensive loss ...Exchange of restricted shares for taxes...

  • Page 67
    RITE AID CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended February 26, 2011 (52 Weeks) March 3, 2012 (53 Weeks) February 27, 2010 (52 Weeks) OPERATING ACTIVITIES: Net loss ...Adjustments to reconcile to net cash (used in) provided by operating ...

  • Page 68
    ...'s total sales in fiscal years 2012, 2011 and 2010, respectively. The Company's principal classes of products in fiscal 2012 were the following: Product Class Percentage of Sales Prescription drugs ...Over-the-counter medications and personal care Health and beauty aids ...General merchandise and...

  • Page 69
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Cash and Cash Equivalents Cash ...

  • Page 70
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) amount by which the carrying ...

  • Page 71
    ...April 18, 2010, the Company launched its wellness + loyalty card program chain wide. Members participating in the 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...

  • Page 72
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Rent The Company records rent ...

  • Page 73
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 1. Summary of Significant Accounting Policies (Continued) Stock-Based Compensation The Company has several stock option plans, which...

  • Page 74
    ...have a material adverse effect on the Company's business and results of operations. During fiscal 2012, the Company purchased brand pharmaceuticals and some generic pharmaceuticals which amounted to approximately 90.9% of the dollar volume of its prescription drugs from a single wholesaler, McKesson...

  • Page 75
    ...for reporting as discontinued operations. Stores sold where the Company retains the prescription files are excluded from the analysis as the Company retains direct cash flows resulting from the migration of revenue to existing stores. Recent Accounting Pronouncements In September 2011, the Financial...

  • Page 76
    ... the income of the Company subject to anti-dilution limitations. March 3, 2012 (53 Weeks) Year Ended February 26, 2011 (52 Weeks) February 27, 2010 (52 Weeks) Numerator for loss per share: Net loss ...Accretion of redeemable preferred stock ...Cumulative preferred stock dividends ...Loss applicable...

  • Page 77
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 2. Loss Per Share (Continued) Due to their antidilutive effect, the following potential ...

  • Page 78
    ... FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 3. Lease Termination and Impairment Charges (Continued) independently owned drugstores, supermarkets, mass merchandisers, dollar stores and internet...

  • Page 79
    ... been recorded in fiscal 2012, 2011 and 2010: March 3, 2012 Number Charge Year Ended February 26, 2011 Number Charge February 27, 2010 Number Charge Closed facilities: Actual and approved store closings Actual and approved relocations . . Distribution center closings ...Existing surplus properties...

  • Page 80
    ...-lived assets using Level 3 inputs 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. 80

  • Page 81
    ... center in fiscal 2010. As part of its ongoing business activities, the Company assesses stores and distribution centers for potential closure. Decisions to close stores or distribution centers in future periods would result in charges for lease exit costs and liquidation of inventory, as well...

  • Page 82
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 3. Lease Termination and Impairment Charges (Continued) locations. The following table reflects the closed store and distribution center...

  • Page 83
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 4. Income Taxes The provision for income taxes was as follows: March 3, 2012 (53 Weeks) ...

  • Page 84
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 4. Income Taxes (Continued) The fiscal 2011 income tax expense was primarily comprised of ...

  • Page 85
    .... The Company files U.S. federal income tax returns as well as income tax returns in those states where it does business. The consolidated federal income tax returns have been subject to examination by the Internal Revenue Service (IRS) through fiscal 2008. However, any net operating losses that...

  • Page 86
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 4. Income Taxes (Continued) expenses. State income tax returns are generally subject to ...

  • Page 87
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 5. Accounts Receivable (Continued) relation to the Second Lien Facility and recognized $3,...

  • Page 88
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 6. Property, Plant and Equipment (Continued) Depreciation expense, which included the ...

  • Page 89
    ...the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 9. Indebtedness and Credit Agreement Following is a summary of indebtedness and lease financing obligations at March 3, 2012 and February 26, 2011: 2012 2011 Secured Debt: Senior secured...

  • Page 90
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 9. Indebtedness and Credit Agreement (Continued) Credit Facility The Company has a senior secured credit facility that consists...

  • Page 91
    ...3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 9. Indebtedness and Credit Agreement (Continued) on debt modification of $22,434 due to the write off of debt issue costs of $2,716 and unamortized original issue discount of $19,718. The senior secured credit...

  • Page 92
    ..., 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 senior secured credit facility. The Company...

  • Page 93
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 9. Indebtedness and Credit Agreement (Continued) $404,844 aggregate principal amount of ...

  • Page 94
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 9. Indebtedness and Credit Agreement (Continued) require the Company to repurchase them, ...

  • Page 95
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 10. Leases The Company leases most of its retail stores and certain distribution ...

  • Page 96
    ...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 97
    ... Operating results for fiscal 2012, 2011 and 2010 include $15,861, $17,336 and $23,794 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...

  • Page 98
    ... stock, stock options, phantom stock, stock bonus awards and other equity based awards at the discretion of the Board of Directors. The adoption of the 2006 Omnibus Equity Plan became effective upon the closing of the Acquisition. In June 2010, the stockholders of Rite Aid Corporation approved...

  • Page 99
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 13. Stock Option and Stock Award Plans (Continued) The weighted average fair value of ...

  • Page 100
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 13. Stock Option and Stock Award Plans (Continued) Cash received from stock option ...

  • Page 101
    ... 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. However, the Company may, at its...

  • Page 102
    ...recognized in other comprehensive income for the defined benefit plans included the following components: Defined Benefit Pension Plan 2012 2011 2010 Nonqualified Executive Retirement Plan 2012 2011 2010 Service cost ...Interest cost ...Expected return on plan assets ...Amortization of unrecognized...

  • Page 103
    ... in the Company's balance sheet as of March 3, 2012 and February 26, 2011: Defined Benefit Pension Plan 2012 2011 Nonqualified Executive Retirement Plan 2012 2011 Change in benefit obligations: Benefit obligation at end of prior year . Service cost ...Interest cost ...Distributions ...Change due to...

  • Page 104
    ...cost for the fiscal years ended March 3, 2012, February 26, 2011 and February 27, 2010 were: Defined Benefit Pension Plan 2012 2011 2010 Nonqualified Executive Retirement Plan 2012 2011 2010 Discount rate ...Rate of increase in future compensation levels ...Expected long-term rate of return on plan...

  • Page 105
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 14. Retirement Plans (Continued) • Balance the allocation of assets between the investment managers to minimize concentration...

  • Page 106
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 14. Retirement Plans (Continued) The following table sets forth by level within the fair ...

  • Page 107
    ... multi-employer union pension plans that are not sponsored by the Company. Total expenses recognized for the multi-employer plans were $14,594 in fiscal 2012, $19,053 in fiscal 2011 and $19,328 in fiscal 2010. 15. Multiemployer Plans that Provide Pension Benefits The Company contributes to a number...

  • Page 108
    ... rate of 9.16% of gross wages earned per associate. Southern California United Food and Commercial Workers Unions and Drug Employers Pension Fund ... 51-6029925-001 Green- 12/31/2011 Green- 12/31/2010 No $ 459 $ 6,585 $ 6,742 No 7/15/2012 Contributions of $0.154 per hour worked...

  • Page 109
    ...effect on its results of operations for the period in which they are resolved. The Company is currently a defendant in several putative collective or class action lawsuits filed in federal or state courts in several states, including Pennsylvania, New Jersey, New York, Maryland, Massachusetts, Maine...

  • Page 110
    ...'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 or medicines to the Company's pharmacies, and...

  • Page 111
    ...Company's management does not believe that the outcome of any of these legal matters will have a material effect on its financial statements. Contingencies: The California Department of Health Care Services (''DHCS''), the agency responsible for administering the State of California Medicaid program...

  • Page 112
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 17. Supplementary Cash Flow Data March 3, 2012 Year Ended February 26, 2011 February 27, ...

  • Page 113
    ... is no longer on the Company's board of directors. 19. Interim Financial Results (Unaudited) First Quarter Second Quarter Fiscal Year 2012 Third Quarter Fourth Quarter Year Revenues ...Cost of goods sold ...Selling, general and administrative expenses ...Lease termination and impairment charges...

  • Page 114
    ...) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 19. Interim Financial Results (Unaudited) (Continued) Fiscal Year 2011 Third Quarter First Quarter Second Quarter Fourth Quarter Year Revenues ...Cost of goods sold ...Selling...

  • Page 115
    RITE AID CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (In thousands, except per share amounts) 20. Financial Instruments The carrying amounts and fair values of financial instruments at...

  • Page 116
    RITE AID CORPORATION AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 3, 2012, February 26, 2011 and February 27, 2010 (dollars in thousands) Balance at Beginning of Period Additions Charged to Costs and Expenses Balance at End of Period Allowances deducted ...

  • Page 117
    ..., thereunto duly authorized. RITE AID CORPORATION By: /s/ JOHN T. STANDLEY John T. Standley President and Chief Executive Officer Dated: April 24, 2012 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 118
    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/ MICHAEL N. REGAN Michael N. Regan Director /s/ MARCY SYMS Marcy Syms Director 118

  • Page 119
    ... is representative of the interest factor in those rentals. March 3, 2012 (53 Weeks) Year Ended February 26, February 27, February 28, 2011 2010 2009 (52 Weeks) (52 Weeks) (52 Weeks) (dollars in thousands) March 1, 2008 (52 Weeks) Fixed charges: Interest expense ...Interest portion of net rental...

  • Page 120
    ...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 Streets-Urichsville, Ohio, LLC ...England Street-Asheland Corporation ...Fairground...

  • Page 121
    ...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, Inc...Rite Aid of Pennsylvania, Inc...Rite Aid...

  • Page 122
    ... Road-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 Inc...Thrifty Corporation...

  • Page 123
    ...and financial statement schedule of Rite Aid Corporation and subsidiaries, 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 March 3, 2012...

  • Page 124
    ...and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of...

  • Page 125
    ...and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of...

  • Page 126
    ...10-K of Rite Aid Corporation (the ''Company'') for the annual period ended March 3, 2012 as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), John T. Standley, as President and Chief Executive Officer of the Company, and Frank G. Vitrano, as Senior Executive Vice...