SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5742
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Rite Aid 401(k) Distribution Employees Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
TABLE OF CONTENTS
-------------------------------------------------------------------------------
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002,
AND FOR THE YEAR ENDED DECEMBER 31, 2003:
Statements of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 8
All other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted because
they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator and Participants of
Rite Aid 401(k) Distribution Employees Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Rite Aid 401(k) Distribution Employees Savings Plan (the
"Plan") as of December 31, 2003 and 2002, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2003.
These financial statements are the responsibility of the Plan Administrator.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for the
year ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is
not a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan Administrator. Such
supplemental schedule has been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 17, 2004
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
2003 2002
ASSETS:
Investments $1,900,378 $1,471,674
Employee contributions receivable 3,378 6,351
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $1,903,756 $1,478,025
========== ==========
See notes to financial statements.
-2-
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2003
-------------------------------------------------------------------------------
ADDITIONS:
Employee contributions $ 230,625
Net appreciation in fair value of investments 228,442
Investment income
32,473
----------
Total additions 491,540
DEDUCTIONS:
Benefit payments
65,809
----------
INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 425,731
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 1,478,025
----------
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $1,903,756
==========
See notes to financial statements.
-3-
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
1. PLAN DESCRIPTION
The following brief description of the Rite Aid 401(k) Distribution
Employees Savings Plan (the "Plan") is provided for general informational
purposes only. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
General--The Plan is a defined contribution plan sponsored by Rite Aid
Corporation (the "Company" or "Plan Sponsor"). An individual account is
established for each participant and provides benefits that are based on
(a) amounts the participant contributes to the participant's account, and
(b) investment earnings (losses), less any administrative expenses
charged to the Plan.
On December 11, 2002, the Plan Sponsor created the Trustee Search
Committee ("TSC"), charged with engaging an institutional trustee for the
Plan. Effective April 1, 2003, Northern Trust Company was engaged to
serve as Plan trustee with respect to all assets other than the Company
stock fund. LaSalle Bank National Association was engaged to serve as the
Plan trustee with respect to the Company stock fund. On that date, the
TSC was renamed the Employee Benefits Administration Committee and named
plan administrator ("Plan Administrator"). The Plan Administrator is
responsible for the preparation of the Plan's financial statements.
Participation--The Plan covers union employees at the Rite Aid of Rome,
New York Distribution Center and the Rite Aid of West Virginia
Distribution Center who have completed at least one year of service (a
twelve-month period when at least 1,000 hours are credited), and have
attained the age of 21 years.
Contributions--Each year, a participant may contribute up to 15% of the
participant's pretax annual compensation, as defined in the Plan.
Participants age 50 and over may make additional pre-tax contributions,
as defined by the Plan. A participant also may contribute, or rollover,
amounts representing distributions from another qualified defined benefit
or defined contribution plan. There are no Plan Sponsor contributions,
except as described in the next paragraph.
Various settlement agreements had been entered into with respect to
litigation involving the Company common stock held by the Plan. Under
these settlement agreements, certain additional contributions were made
to the Plan as restorative payments, which were in addition to the
contributions otherwise made to the Plan. In February 2004, restorative
payments of $21,520 were made to the Plan. The restorative payments were
allocated to the accounts of certain participants (as described in the
settlement agreements) whose accounts under the Plan included investments
in the Company common stock. The restorative payments are fully vested
and have been commingled with the eligible individuals' before-tax
contributions. There will be no further contributions stemming from these
settlement agreements. These restorative payment amounts have not been
recorded in the Statement of Net Assets Available for Benefits or the
Statement of Changes in Net Assets Available for Benefits as of and for
the year ended December 31, 2003.
Investment Options--The Plan provides employees with the option of
investing in twelve funds. The funds vary in degree of risk and
investment objective.
-4-
Payment of Benefits--Upon termination of service, a participant may elect
to receive a lump sum amount equal to the value of the participant's
account or installment payments.
Loans--A participant may elect to borrow against the participant's vested
balances at a reasonable rate of interest as determined by the Plan
Administrator. A participant may borrow up to 50% of the participant's
vested balance, with a minimum loan of $1,000 and a maximum loan of
$50,000. A participant may have only one loan outstanding at any one
time.
Vesting--A participant is vested immediately in all contributions
credited to the participant's account plus actual earnings (losses)
thereon.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements have been
prepared on the accrual basis of accounting.
Investments--The Plan's investments are stated at fair value, except the
Guaranteed Interest Account, as measured by quoted prices in an active
market. Realized gain or loss on investment transactions is determined
using the first-in, first-out method; investment transactions are
recorded at the trade date. Interest income is recorded on the accrual
basis. Dividend income is recognized on the ex-dividend date.
The Plan had 6,284 and 6,595 shares of Company common stock at December
31, 2003 and 2002, respectively.
The Guaranteed Interest Account ("GIA") is a group annuity insurance
product issued by The Prudential Insurance Company of America. Interest
on the GIA is credited daily. Prudential declares the current interest
rate on each successive calendar quarter which remains in effect until
the end of the calendar year following the year of purchase. The GIA is
deemed to be fully benefit responsive, therefore, it is presented at
contract value which approximates fair value. The average yield was 3.25%
for 2003. As of December 31, 2003 and 2002, the crediting interest rates
were 3.00% and 3.75%, respectively.
Administrative Expenses-- Plan fees and expenses related to account
maintenance, transaction and investment fund management are allocated to
participant accounts. Under the terms of the Plan document, costs
relating to Plan administration may be paid by the Plan Sponsor. For the
year ended December 31, 2003, the Plan Sponsor has paid substantially all
administrative expenses.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires the Plan Administrator to make estimates and assumptions
that affect the reported amounts of net assets available for benefits at
the date of the financial statements and the reported changes to the
Plan's net assets available for benefits during the reporting period.
Actual results may differ from those estimates and assumptions.
The Plan invests in mutual funds, corporate stocks and the GIA.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit, and overall market volatility. Due to the level
of risk associated with certain investment securities, it is reasonably
possible that changes in the values of investment securities will occur
in the near term and that such changes could materially affect the
amounts reported in the Statements of Net Assets Available for Benefits.
-5-
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's assets:
December 31,
----------------------
2003 2002
Prudential Guaranteed Interest Account $ 769,299 $ 437,735
Prudential Dryden Stock Index Fund 308,703 154,817
Prudential Jennison Growth Fund 278,186 189,205
Prudential MFS Total Return Fund 238,735 -
Prudential Strategic Partners International Value Fund 141,379 96,881
Prudential MoneyMart Assets Fund - 232,505
Prudential Dryden Active Balanced Fund - 181,156
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in value as follows:
Year Ended
December 31,
2003
-------------
Investments, at fair value:
Mutual Funds $ 206,370
Common Stock 22,072
---------
Total appreciation $ 228,442
=========
4. TAX STATUS
The Plan obtained its latest determination letter dated June 27, 2003, in
which the Internal Revenue Service ("IRS") stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code ("IRC"). The Plan has been amended since receiving
the determination letter. The Plan Administrator believes that the Plan is
currently designed and being operated in compliance with the applicable
requirements of the IRC. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsor has
the right under the Plan to terminate the Plan subject to the provisions
of ERISA.
6. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Prudential,
the custodian of the Plan. The transactions related to such investments
qualify as party-in-interest transactions. The Plan has also permitted
investment in the common stock of the Plan Sponsor and therefore these
transactions qualify as party-in-interest transactions. The Plan does not
consider Plan Sponsor contributions or benefits paid by the Plan to be
party-in-interest transactions.
-6-
7. CONTINGENCY
In late 1999, the Plan Sponsor's Board of Directors hired a new executive
management team to address and resolve various business, operational and
financial challenges confronting the Plan Sponsor. New management reviewed
the administration of the Plan for purposes of determining compliance with
provisions of the Plan and regulatory requirements. The Plan Administrator
identified certain processes not in compliance with the provisions of the
Plan or regulatory requirements, the more significant of which was as
follows:
a) The Plan was not being operated in accordance with the Plan document
relating to the disbursement of minimum account balances. The Plan
calls for lump-sum disbursements of a participant's account following
a termination or retirement if that participant's account is not more
than $5,000. The estimate of the minimum account balances subject to
disbursement in accordance with the Plan document at December 31,
2003 is $10,834. The Plan Sponsor expects to make required
distributions to the respective participants during 2004.
The Plan Administrator has not filed a Voluntary Correction Program
("VCP") with the IRS requesting a compliance statement and approval of the
correction method for operational failures identified in the Plan. The
Plan Administrator expects to file the VCP with the IRS in 2004. The Plan
Administrator believes that the proposed correction methods are acceptable
under IRS guidelines.
The Plan Administrator believes that the processes identified for
remediation would not cause the Plan to be disqualified by the IRS.
Penalties, taxes and remedial payments, if any, due to non-compliance will
be paid by the Plan Sponsor.
******
-7-
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
FORM 5500, SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
-------------------------------------------------------------------------------------------------
Current
Identity of Issuer Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 37,958
*Prudential Guaranteed Interest Account 769,299
*Prudential Dryden Stock Index Fund 308,703
*Prudential Jennison Growth Fund 278,186
*Prudential MFS Total Return Fund 238,735
*Prudential Strategic Partners International Value Fund 141,379
AIM Small-Cap Growth Fund
567
Alliance Growth & Income Fund 53,297
Franklin Templeton Balance Sheet Fund
588
Lord Abbett Mid-Cap Value Fund
2,031
Pimco Total Return Fund 19,141
*Participant notes Loan Fund** 50,494
-----------
TOTAL $ 1,900,378
===========
*Party-in-interest
** The loans range in interest rates from 5.0% to 10.5% and expire through 2008.
-8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
RITE AID 401(k) DISTRIBUTION EMPLOYEES
SAVINGS PLAN
By: /s/ Theresa G. Nichols
-------------------------------------------
Theresa G. Nichols, not in her
individual capacity, but solely as
an authorized signatory for the
Employee Benefits Administration Committee
Date: June 28, 2004
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
23 Consent of Deloitte & Touche LLP