UNITED STATES
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, 2006
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
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Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31,
2006 and 2005 2
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2006 3
Notes to Financial Statements as of December 31, 2006 and 2005, and
for the Year Ended December 31, 2006 4-9
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Line 4i--Schedule of Assets (Held at End of Year)
as of December 31, 2006 10
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
To the 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, 2006 and 2005, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2006. 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Plan is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by the Plan Administrator, 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,
2006 and 2005, and the changes in net assets available for benefits for the year
ended December 31, 2006, 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 audit of the basic 2006 financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic 2006
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 29, 2007
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2006 AND 2005
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2006 2005
ASSETS:
Participant-directed investments - at fair value $2,963,062 $2,461,457
Employee contributions receivable 7,619 12,311
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NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE 2,970,681 2,473,768
Adjustments from fair value to contract value for fully benefit-
responsive investment contracts 5,009 707
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NET ASSETS AVAILABLE FOR BENEFITS $2,975,690 $2,474,475
========== ==========
See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2006
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ADDITIONS:
Employee contributions $ 354,874
Net appreciation in fair value of investments 224,352
Investment income 49,268
-----------
Total additions 628,494
-----------
DEDUCTIONS:
Benefit payments 125,966
Administrative expenses 1,313
-----------
Total deductions 127,279
INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 501,215
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 2,474,475
-----------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $ 2,975,690
===========
See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2006 AND 2005, AND FOR THE YEAR ENDED DECEMBER 31, 2006
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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 participant accounts, if any.
T. Rowe Price Trust Company serves as Plan trustee with respect to all
assets other than Company stock. GreatBanc Trust Company serves as Plan
trustee with respect to Company stock. The Employee Benefits
Administration Committee is the plan administrator ("Plan Administrator")
and 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 age 21.
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 pretax contributions, as
defined in the Plan. A participant also may contribute, or roll over,
amounts representing distributions from another qualified defined benefit
or defined contribution plan. There are no Plan Sponsor contributions.
Investment Options-- The Plan provides participants with the option of
investing the participant's account balances into various investment
options offered by the Plan. The Plan currently offers 17 mutual funds, 5
custom funds, 2 common/collective trusts, a stable value fund and Rite Aid
Corporation Common Stock.
The Plan's custom funds are custom investment option created specifically
for the Plan by Northern Trust Global Advisors, Inc. The custom funds are
unregistered custom accounts maintained by the trustee. The performance of
the custom funds is based on the performance of the underlying mutual
funds which are registered in the market.
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
balance at a reasonable rate of interest as defined in the Plan. A
participant may borrow up to 50% of the participant's vested balance, with
a maximum loan of $50,000. A participant may only have one loan
outstanding at any one time with the exception that participants may have
up to two outstanding loans which were grandfathered at the time when the
Plan was amended to no longer allow more than one loan.
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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.
Adoption of new Accounting Guidance--The financial statements reflect the
retroactive adoption of Financial Accounting Standards Board Staff
Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully
Benefit-Responsive Contracts Held by Certain Investment Companies Subject
to the AICPA Investment Company Guide and Defined-Contribution Health and
Welfare and Pension Plans (the "FSP"). As required by the FSP, the
statements of net assets available for benefits presents investment
contracts at fair value as well as an additional line item showing an
adjustment of fully benefit responsive contracts from fair value to
contract value. The statement of changes in net assets available for
benefits is presented on a contract value basis and was not affected by
the adoption of the FSP. The adoption of the FSP did not impact the amount
of net assets available for benefits at December 31, 2005.
Investment Valuation and Income Recognition--The Plan's investments are
stated at fair value. Shares of mutual funds are valued at quoted market
prices, which represent the net asset value of shares held by the Plan at
year end. Custom funds are stated at fair value which is based on the net
asset value of participation units held by the Plan at year-end and is
calculated based on the shares held in underlying mutual fund investments
and the net asset value of those investments. Common stock is valued at
quoted market prices.
Common collective trust funds are stated at fair value as determined by
the issuer of the common collective trust funds based on the fair market
value of the underlying investments. Common collective trust funds with
underlying investments in investment contracts are valued at fair market
value of the underlying investments and then adjusted by the issuer to
contract value.
The stable value fund ("SVF") includes two fully benefit-responsive
synthetic guaranteed investment contracts ("GIC") whose underlying
investments are stated at fair value investments and then adjusted by the
issuer to contract value. Fair value of the underlying investments is
determined by the issuer of the synthetic GIC based quoted on market
prices and a fair value estimate of the wrapper contract. Fair market
value of the wrapper is estimated by converting the basis points assigned
to the wrap fees into dollars.
Participant loans are valued at the outstanding loan balances.
The common collective trust funds and the stable value fund may invest in
fixed interest insurance investment contracts, money market funds,
corporate and government bonds, mortgage-backed securities, bond funds,
and other fixed income securities. Participants may ordinarily direct the
withdrawal or transfer of all or a portion of their investment at contract
value. Contract value represents contributions made to the fund, plus
earnings, less participant withdrawals.
Purchases and sales of securities are recorded on a trade-date basis.
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. Dividends
are recorded on the ex-dividend date.
Management fees and operating expenses charged to the Plan for investments
in the mutual funds are deducted from income earned on a daily basis and
are not separately reflected. Consequently,
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management fees and operating expenses are reflected as a reduction of
investment return for such investments.
The Plan had 6,373 and 6,109 shares of Company common stock at December
31, 2006 and 2005, respectively.
Valuation of Investment(s) Contracts--The Plan offers the SVF as an
investment option. On October 1, 2006, the Plan began to offer the T. Rowe
Price SVF with the Prudential SVF blended together as a single investment
split fifty percent into each of these underlying investments. These are
trust products and are comprised of a group annuity insurance product
issued by The Prudential Insurance Company of America ("Prudential"), T.
Rowe Price Retirement Plan Services ("T. Rowe Price") and a portfolio of
assets owned by the plan or designee. Interest on the SVF is credited
daily. For the first three quarters of 2006, Prudential declared an
effective annual interest rate at the beginning of each calendar quarter
which is credited and compounded on a daily basis. Beginning with the
fourth calendar quarter, T. Rowe Price calculated a blended rate which was
credited and compounded on a daily basis. The blended rate is based upon
the Prudential and T. Rowe Price rates and the 50%-50% asset split. The
SVF is deemed to be fully benefit responsive; therefore, it is presented
at contract value, which approximates fair value.
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 or paid from Plan
forfeitures. For the year ended December 31, 2006, 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 SVF. 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.
3. SYNTHETIC GUARANTEED INVESTMENT CONTRACT
The plan provides a self managed stable value investment option to
participants that includes a synthetic guaranteed investment contract
which simulates the performance of a guaranteed investment contract
through an issuer's guarantee of a specific interest rate (the wrapper
contract) and a portfolio of financial instruments that are owned by the
plan. The synthetic GIC contract includes underlying assets which are
held in trust owned by the plan and utilizes benefit-responsive wrapper
contract. A portion of the master trust's Stable Value Fund is issued by
The Prudential Insurance Company of America and a portion is managed by
T. Rowe Price Associates, Inc. ("TRPA"). The TRPA portion of the Fund
consists of synthetic investment contracts which are selected by TRPA and
issued by banks and other financial institutions. TRPA also manages the
fixed income instruments underlying the investment contracts in its
portion of the Fund. The contract provides that participants execute plan
transactions at contract value. Contract value represents contributions
made to the fund, plus earnings, less participant withdrawals. The
interest rates are reset quarterly based on market rates of other similar
investments, the current yield of the underlying investments and the
spread between the market value and contract
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value. Certain events such as plan termination or a plan merger initiated
by the plan sponsor, may limit the ability of the plan to transact at
contract value or may allow for the termination of the wrapper contract at
less than contract value. The plan sponsor does not believe that any
events that may limit the ability of the plan to transact at contract
value are probable.
2006 2005
Average yields:
Based on annualized earnings (1) 5.33% 5.08%
Based on interest rate credited to participants (2) 4.55% 4.64%
(1) Computed by dividing the annualized one-day actual earnings of the
contract on the last day of the plan year by the fair value of the
investments on the same date.
(2) Computed by dividing the annualized one-day earnings credited to
participants on the last day of the plan year by the fair value of the
investments on the same date.
4. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
assets:
December 31
----------------------
2006 2005
Stable Value Fund $915,269 $ 886,394
Dodge & Cox Balanced Fund 401,870 333,966
T. Rowe Price Equity Index Trust 334,863 267,949
Northern Trust Global Advisors Large-Cap Growth Fund 279,805 248,867
Northern Trust Global Advisors International Equity Fund 199,797 164,525
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in value for the
year ended December 31, 2006, as follows:
Investments:
Rite Aid Corporate Stock $ 12,394
Mutual Funds 60,538
Custom Funds 65,050
Common Collective Trusts 44,542
Stable Value Funds 41,828
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Net appreciation (depreciation) in
fair value of investments $224,352
========
5. 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.
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6. 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.
7. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price Trust Company, the trustee and 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 Administrator does not consider
Plan Sponsor contributions or benefits paid by the Plan to be
party-in-interest transactions.
8. 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, including failure to make certain
deferral contributions and failure to make de minimis distributions to
Plan participants. The Plan Administrator has not submitted a Voluntary
Correction Program filing with the IRS requesting a compliance statement
and approval of the correction method for operational failures identified
in the Plan, but intends to complete the filing in 2007. The Plan
Administrator believes that the processes identified for remediation, as
well as the remediation procedures related to de minimis distributions
already taken, would not cause the Plan to be disqualified by the IRS,
therefore no provision for income taxes has been included in the Plan's
financial statements. Penalties, taxes and remedial payments, if any, due
to noncompliance will be paid by the Company.
9. RECONCILIATION OF FINANCIALS TO FORM 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31, 2006.
2006
Net assets available for benefits per the financial
statements at contract value $ 2,975,690
Adjustment from contract value to fair value for fully
benefit-responsive investment contracts (5,009)
--------------
Net assets available for benefits per the Form 5500 $ 2,970,681
==============
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For the year ended December 31, 2006, the following is a reconciliation of
net investment income per the financial statements to the Form 5500:
Total net appreciation in contract value of investments $224,352
Total Investment income 49,268
Adjustment on net appreciation and investment income (5,009)
--------
Total earnings per the Form 5500 $268,611
========
******
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
FORM 5500, SCHEDULE H, LINE 4i--SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2006
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Identity of Issuer, Borrower, At
Lessor or Similar Party and Description Number Fair Market
of Shares Value
Common and collective trusts:
*T. Rowe Price Equity Index Trust 8,088 $ 343,437
*T. Rowe Price Bond Index Trust 5 130
-----------
Total common and collective trusts 343,567
-----------
Mutual Funds:
*T. Rowe Price Retirement 2010 8,312 131,907
*T. Rowe Price Retirement 2025 7,631 98,131
*T. Rowe Price Retirement 2015 5,962 73,746
*T. Rowe Price Retirement 2020 3,640 63,148
*T. Rowe Price Retirement 2035 2,009 26,455
*T. Rowe Price Retirement 2040 930 17,437
*T. Rowe Price Retirement 2030 934 17,357
*T. Rowe Price International Equity Index Fund 1,078 15,759
*T. Rowe Price Retirement 2045 317 3,917
*T. Rowe Price Retirement 2005 178 2,062
*T. Rowe Price Extended Equity Market Index Fund 29 471
*T. Rowe Price Retirement Income Fund 28 369
Dodge & Cox Balanced Fund 4,615 401,870
Pimco Total Return Fund 8,214 85,264
Vanguard Small-Cap Index Fund 10 326
-----------
Total mutual funds 938,219
-----------
Custom Funds:
Northern Trust Global Advisors Large-Cap Growth Fund 22,841 279,805
Northern Trust Global Advisors International Equity Fund 12,566 199,797
Northern Trust Global Advisors Large-Cap Value Fund 5,524 76,285
Northern Trust Global Advisors Mid-Cap Fund 1,683 22,164
Northern Trust Global Advisors Small-Cap Fund 669 9,926
-----------
Total custom funds 587,976
-----------
Stable Value Fund Synthetic Guaranteed Investment Contract:
Prudential and *T. Rowe Price Stable Value Fund 81,502 901,682
-----------
Total Stable Value Fund Synthetic Guaranteed Investment Contract 901,682
-----------
Company Stock Fund:
*Rite Aid Corporation Company Stock Fund 6,373 34,670
*Participant notes Loan Fund** 156,947
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Total Assets Held at End $ 2,963,062
===========
*Party-in-interest
**The loans range in interest rates from 5.0% to 9.5% and expire through 2011.
SIGNATURES
The Plan. 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 29, 2007
EXHIBIT INDEX
Exhibit
Number Description
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23.1 Consent of Independent Registered Public Accounting Firm