form11-k.htm
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, 2007

 
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:
  
   
   Statements of Net Assets Available for Benefits as of December 31, 2007 and 2006
2
   
   Statement of Changes in Net Assets Available for Benefits for the Year Ended
  
      December 31, 2007
3
   
   Notes to Financial Statements as of December 31, 2007 and 2006, and for the Year Ended
  
      December 31, 2007
4–9
   
SUPPLEMENTAL SCHEDULE:
  
   
   Form 5500, Schedule H, Line 4i — Schedule of Assets (Held at End of Year)
  
      as of December 31, 2007
11
   
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, 2007 and 2006, and the related statement of changes in net assets available for benefits for the year ended December 31, 2007. 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, 2007 and 2006, and the changes in net assets available for benefits for the year ended December 31, 2007, 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 2007 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2007 financial statements taken as a whole.
 
/s/ Deloitte & Touche LLP
 
Philadelphia, Pennsylvania
June 27, 2008
 
 
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
            
             
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
            
AS OF DECEMBER 31, 2007 AND 2006
            
             
             
   
2007
    
2006
  
             
ASSETS:
            
  Participant-directed investments — at fair value
   $ 3,227,464     $ 2,963,062  
  Employee contributions receivable
     8,088       7,619  
                 
NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE
     3,235,552       2,970,681  
                 
Adjustments from fair value to contract value for fully
                
   benefit-responsive investment contracts
     1,102       5,009  
                 
NET ASSETS AVAILABLE FOR BENEFITS
   $ 3,236,654     $ 2,975,690  
                 
                 
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, 2007
      
       
       
ADDITIONS:
      
  Employee contributions
   $ 369,935  
  Rollover contributions
     1,716  
  Net appreciation in fair value of investments
     86,783  
  Investment income
     79,528  
         
           Total additions
     537,962  
         
DEDUCTIONS:
        
  Benefit payments
     275,984  
  Administrative expenses
     1,014  
         
           Total deductions
     276,998  
         
INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS
     260,964  
         
NET ASSETS AVAILABLE FOR BENEFITS — Beginning of year
     2,975,690  
         
NET ASSETS AVAILABLE FOR BENEFITS — End of year
   $ 3,236,654  
         
         
See notes to financial statement.
        
 
 
- 3 -
 
RITE AID 401(K) DISTRIBUTION EMPLOYEES SAVINGS PLAN
 
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 
 
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 19 mutual funds, 5 custom funds, 1 common/collective trust, 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.
 
- 4 -
 
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 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.
 
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 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.
 
- 5 -
 
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, management fees and operating expenses are reflected as a reduction of investment return for such investments.
 
The Plan had 6,919 and 6,373 shares of Company common stock at December 31, 2007 and 2006, 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. 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, 2007, 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 value. Certain events such as plan termination or a plan merger initiated by the plan sponsor, may limit
 
- 6 -
 
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.

 
   
2007 
2006 
       
 
Average yields:
    
 
  Based on annualized earnings (1)
5.05 % 
5.33 % 
 
  Based on interest rate credited to participants (2)
4.47 % 
4.55 % 
 
 
(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 
     
2007
    
2006
  
               
 
Stable Value Fund
   $ 932,679     $ 915,269  
 
Dodge & Cox Balanced Fund
     434,038       401,870  
 
Vanguard Institutional Index Fund
     363,133      
       *
  
 
Northern Trust Global Advisors Large-Cap Growth Fund
     315,134       279,805  
 
Northern Trust Global Advisors International Equity Fund
     241,388       199,797  
 
Participant Loan Fund
     178,415       156,947  
 
T. Rowe Price Retirement 2010
     168,100       131,907  
 
T. Rowe Price Equity Index Trust
    
       *
       334,863  
                   
 
*  This was not an investment option in the plan year presented.
                
 
The Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated/(depreciated) in value for the year ended December 31, 2007, as follows:
 
 
Investments:
      
 
  Rite Aid Corporate Stock
   $ (18,031 )
 
  Mutual Funds
     (24,988 )
 
  Custom Funds
     64,526  
 
  Common and Collective Trusts
     21,000  
 
  Stable Value Funds
     44,276  
           
 
Net appreciation (depreciation) in fair value of investments
   $ 86,783  
 
- 7 -
 
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.
 
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 2008. 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, 2007.
 
 
- 8 -
 
     
2007
  
         
 
Net assets available for benefits per the financial
      
 
  statements at contract value
   $ 3,236,654  
 
Adjustment from contract value to fair value for fully
        
 
  benefit-responsive investment contracts
     (1,102 )
           
 
Net assets available for benefits per the Form 5500
   $ 3,235,552  
 
For the year ended December 31, 2007, 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
   $ 86,783  
 
Total Investment income
     79,528  
 
Adjustment on net appreciation and investment income
     3,907  
           
 
Total earnings per the Form 5500
   $ 170,218  
 
 
* * * * * *
 
 
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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, 2007
              
               
Identity of Issuer, Borrower,
          
At
  
Lessor or Similar Party and Description
    
Number
Fair Market
  
     
of Shares
Value
  
Common and collective trust:
              
  *T. Rowe Price
Bond Index Trust
     33     $ 846  
                   
        Total common and collective trust
               846  
                   
Mutual Funds:
                  
  *T. Rowe Price
Retirement 2010
     10,370       168,100  
  *T. Rowe Price
Retirement 2025
     8,224       108,395  
  *T. Rowe Price
Retirement 2020
     4,761       84,460  
  *T. Rowe Price
Retirement 2015
     6,561       82,998  
  *T. Rowe Price
Retirement 2040
     1,953       37,500  
  *T. Rowe Price
Retirement 2030
     1,881       35,839  
  *T. Rowe Price
International Equity Index Fund
     1,634       25,859  
  *T. Rowe Price
Retirement 2035
     1,841       24,869  
  *T. Rowe Price
Retirement 2045
     1,037       13,203  
  *T. Rowe Price
Retirement 2005
     340       4,006  
  *T. Rowe Price
Extended Equity Market Index Fund
     96       1,477  
  *T. Rowe Price
Retirement Income Fund
     56       750  
  *T. Rowe Price
Retirement 2050
     1       3  
  *T. Rowe Price
Retirement 2055
     1       3  
   Dodge & Cox
Balanced Fund
     5,358       434,038  
   Vanguard
Instl Index Fund
     2,707       363,133  
   Pimco
Total Return Instl Fund
     1,930       20,630  
   Vanguard
Small-Cap Index Fund
     17       541  
                   
        Total mutual funds
               1,405,804  
                   
Custom Funds:
                  
   Northern Trust Global Advisors
Large-Cap Growth Fund
     23,395       315,134  
   Northern Trust Global Advisors
International Equity Fund
     13,212       241,388  
   Northern Trust Global Advisors
Large-Cap Value Fund
     6,438       91,999  
   Northern Trust Global Advisors
Mid-Cap Fund
     1,940       29,124  
   Northern Trust Global Advisors
Small-Cap Fund
     879       13,901  
                   
        Total custom funds
               691,546  
                   
Stable Value Fund Synthetic
                  
  Guaranteed Investment Contract:
                  
   Prudential and *T. Rowe Price
Stable Value Fund
     79,242       931,549  
                   
           Total Stable Value Fund Synthetic
                  
             Guaranteed Investment Contract
               931,549  
                   
Company Stock Fund:
                  
  *Rite Aid Corporation
Company Stock Fund
     6,919       19,304  
                   
  *Participant notes
Loan Fund**
             178,415  
                   
Total Assets Held at End
             $ 3,227,464  
                   
  *Party-in-interest
                  
**The loans range in interest rates from 5.0% to 9.25% and expire through 2012.
                
 
 
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/ Chuck Carlsen
   
Chuck Carlsen, not in his individual capacity, but solely as an authorized signatory for the Employee Benefits Administration Committee

Date:  June 27, 2008
 
 
 
EXHIBIT INDEX

Exhibit
Number
 
Description
23.1
Consent of Independent Registered Public Accounting Firm