As filed with the Securities and Exchange Commission on August 8, 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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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.)
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30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(Address of Principal Executive Offices)
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1990 Omnibus Stock Incentive Plan
1999 Stock Option Plan
2000 Omnibus Equity Plan
2001 Stock Option Plan
(Full Title of the Plans)
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Robert B. Sari, Esq.
Senior Vice President and General Counsel
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(717) 760-7867 (facsimile)
(Name, Address and Telephone Number,
Including Area Code, of Agent for Service)
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CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------------------------
Title of Amount To Be Proposed Maximum Proposed Maximum Amount of
Securities Registered (1) Offering Price Aggregate Offering Registration
To Be Registered Per Share Price Fee(1)
------------------------------------------------------------------------------------------------------
Common Stock, par 33,778,661 $3.78 $127,683,339 $10,330(2)
value $1.00 per
share: shares subject
to outstanding options
Common Stock, par 3,222,743 $4.51 $14,534,571 $1,176(3)
value $1.00 per
share: shares issued
pursuant to
employee benefit plans
---------- ----- ------------ -------
37,001,404 N/A $142,217,910 $11,506
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(1) Pursuant to Rule 457(p), the full amount of the registration fee due
with respect to this registration is being paid by applying a
portion of the $834,000 filing fee paid in connection with Rite Aid
Corporation's Form S-3 (File No. 333-70777) filed on January 19,
1999 and subsequently withdrawn.
(2) Computed in accordance with Rule 457(h) under the Securities
Act, such computation is based on the weighted average exercise
price of $3.78 per share covering 33,778,661 options.
(3) Computed in accordance with Rule 457(h) under the Securities Act by
averaging the high and low sales prices of Rite Aid common stock as
reported by the NYSE on August 7, 2003.
EXPLANATORY NOTE
Rite Aid Corporation has prepared this registration statement in
accordance with the requirements of Form S-8 under the Securities Act of 1933,
as amended (the "Securities Act"), to register shares of its common stock, $1.00
par value per share. This registration statement also includes a reoffer
prospectus. The reoffer prospectus may be utilized for reofferings and resales
on a continuous or a delayed basis in the future of up to 37,001,404 shares of
common stock that constitute "control securities" and/or "restricted securities"
which have been issued prior to or issuable after the filing of this
registration statement. The reoffer prospectus does not contain all of the
information included in the registration statement, certain items of which are
contained in schedules and exhibits to the registration statement as permitted
by the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Statements contained in this reoffer prospectus as to the contents of
any agreement, instrument or other document referred to are not necessarily
complete. With respect to each such agreement, instrument or other document
filed as an exhibit to the registration statement, we refer you to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by this reference.
PART I
RITE AID CORPORATION
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of Form
S-8 will be sent or given to employees as specified by Rule 428(b)(1) of the
Securities Act. Such documents need not be filed with the SEC either as part of
this registration statement or as prospectuses or prospectus supplements
pursuant to Rule 424 of the Securities Act. These documents and the documents
incorporated by reference in this registration statement pursuant to Item 3 of
Part II of this registration statement, taken together, constitute a prospectus
that meets the requirements of Section 10(a) of the Securities Act.
REOFFER PROSPECTUS
37,001,404 SHARES
RITE AID CORPORATION
COMMON STOCK
This reoffer prospectus relates to 37,001,404 shares of our common
stock, par value $1.00 per share, consisting of 3,222,743 restricted shares and
33,778,661 shares issuable upon exercise of currently outstanding options, which
may be offered for sale from time to time by certain stockholders of Rite Aid
Corporation, as described under the caption "Selling Stockholders." These
stockholders are current or former directors, officers or employees of ours. We
will not receive any proceeds from the sale of shares of common stock pursuant
to this reoffer prospectus. The selling stockholders acquired the common stock
pursuant to grants under our various benefit plans, including pursuant to
individual employment agreements, and these stockholders may resell all, a
portion, or none of the shares of common stock from time to time.
The shares of common stock are "control securities" and/or "restricted
securities" under the Securities Act of 1933, as amended, before their sale
under this reoffer prospectus. This reoffer prospectus has been prepared for the
purpose of registering the shares under the Securities Act to allow for future
sales by selling stockholders, on a continuous or delayed basis, to the public
without restriction. Each stockholder that sells shares of our common stock
pursuant to this reoffer prospectus may be deemed to be an "underwriter" within
the meaning of the Securities Act. Any commissions received by a broker or
dealer in connection with resales of shares may be deemed to be underwriting
commissions or discounts under the Securities Act.
You should read this reoffer prospectus and any accompanying prospectus
supplement carefully before you make your investment decision. The sales may
occur in transactions on the New York Stock Exchange or Pacific Exchange at
prevailing market prices or in negotiated transactions. We will not receive any
proceeds from any of these sales. We are paying the expenses incurred in
registering the shares, but all selling and other expenses incurred by each of
the selling stockholders will be borne by that stockholder.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
Our common stock is listed on the New York Stock Exchange and the
Pacific Exchange under the trading symbol "RAD." The last reported sale price of
our common stock on the New York Stock Exchange on August 7, 2003, was $4.50 per
share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this reoffer prospectus is August 8, 2003.
TABLE OF CONTENTS
DOCUMENTS INCORPORATED BY REFERENCE...............................................................................1
AVAILABLE INFORMATION.............................................................................................2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................................................3
THE COMPANY.......................................................................................................4
RISK FACTORS......................................................................................................9
USE OF PROCEEDS..................................................................................................16
SELLING STOCKHOLDERS.............................................................................................16
PLAN OF DISTRIBUTION.............................................................................................18
LEGAL MATTERS....................................................................................................18
EXPERTS..........................................................................................................18
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DOCUMENTS INCORPORATED BY REFERENCE
We are incorporating by reference certain information that we have
filed with the SEC under the informational requirements of the Securities
Exchange Act of 1934, which means that we disclose important information to you
by referring you to another document filed separately with the SEC. The
information contained in the documents we are incorporating by reference is
considered to be part of this reoffer prospectus and the information that we
later file with the SEC will automatically update and supercede the information
contained or incorporated by reference into this reoffer prospectus. We are
incorporating by reference:
o our annual report on Form 10-K for the fiscal year ended March 1,
2003, which we filed with the SEC on May 2, 2003;
o our current report on Form 8-K, which we filed with the SEC on
March 5, 2003;
o our current report on Form 8-K, which we filed with the SEC on
April 15, 2003;
o our current report on Form 8-K, which we filed with the SEC on
May 14, 2003;
o our current report on Form 8-K, which we filed with the SEC on
May 30, 2003;
o our current report on Form 8-K, which we filed with the SEC on
August 7, 2003; and
o our quarterly report on Form 10-Q for the fiscal quarter ended
May 31, 2003, which we filed with the SEC on July 3, 2003.
All documents that we subsequently file pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing
of a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this registration statement and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this registration statement shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement contained
in this registration statement, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference in this registration
statement, modifies or supersedes such prior statement. Any statement contained
in this registration statement shall be deemed to be modified or superseded to
the extent that a statement contained in a subsequently filed document that is
or is deemed to be incorporated by reference in this registration statement
modifies or supersedes such prior statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this registration statement.
We will provide without charge to each person to whom a reoffer
prospectus is delivered, upon written or oral request by such person, a copy of
any or all of the documents that have been incorporated by reference in this
registration statement but not delivered with the reoffer prospectus. Written
requests should be sent to:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Investor Relations
Oral requests should be made by telephoning (717) 761-2633.
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AVAILABLE INFORMATION
We are subject to the information requirements of the Securities
Exchange Act of 1934. Accordingly, we file annual, quarterly and current
reports, proxy statements and other information with the SEC. We also furnish
our stockholders annual reports, which include financial statements audited by
our independent auditors and other reports which the law requires us to send to
our stockholders. The public may read and copy any reports, proxy statements or
other information that we file at the SEC's public reference room at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional
office at 505 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
public may obtain information on the public reference room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to the public from commercial
documents retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov." You may obtain a copy of any of these documents at no
cost, by writing or telephoning us:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Investor Relations
Phone: (717) 761-2633
We also make available on our website (www.riteaid.com), free of
charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and
current reports on Form 8-K, as soon as practical after we file these reports
with the SEC.
Our common stock is listed on the New York Stock Exchange and the
Pacific Exchange under the symbol "RAD." You can inspect and copy reports, proxy
statements and other information about us at the NYSE's offices at 20 Broad
Street, New York, New York 10005 and at the offices of the Pacific Exchange, 301
Pine Street, San Francisco, California 94104 and 618 South Spring Street, Los
Angeles, California 90014.
We have filed with the SEC a registration statement on Form S-8 under
the Securities Act with respect to the shares offered by this reoffer
prospectus. This reoffer prospectus does not contain all of the information in
the registration statement. You will find more information about us and our
common stock in the registration statement. Any statements made in this reoffer
prospectus concerning the provisions of legal documents are not necessarily
complete and you should read the documents which are filed as exhibits to the
registration statement or otherwise filed with the SEC.
You should only rely on the information included or incorporated by
reference in this reoffer prospectus or any supplement. We have not authorized
anyone else to provide you with different information. The common stock is not
being offered in any state where the offer is not permitted. You should not
assume that the information in this reoffer prospectus or any supplement is
accurate as of any date other than the date on the front of this reoffer
prospectus.
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This reoffer prospectus and the documents incorporated by reference
into this reoffer prospectus include forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are identified by terms and phrases such as
"anticipate," "believe," "intend," "estimate," "expect," "continue," "should,"
"could," "may," "plan," "project," "predict," "will" and similar expressions and
include references to assumptions and relate to our future prospects,
developments and business strategies.
Factors that could cause actual results to differ materially from those
expressed or implied in such forward-looking statements include, but are not
limited to:
o our high level of indebtedness;
o our ability to make interest and principal payments on our debt
and satisfy the other covenants contained in our senior secured
credit facility and other debt agreements;
o our ability to improve the operating performance of our existing
stores in accordance with our management's long term strategy;
o our ability to hire and retain pharmacists and other state
personnel;
o the outcomes of pending lawsuits and governmental investigations;
o competitive pricing pressures and continued consolidation of the
drugstore industry; and
o the efforts of third party payors to reduce prescription drug
costs, changes in state or federal legislation or regulations,
the success of planned advertising and merchandising strategies,
general economic conditions and inflation, interest rate
movements, access to capital, and our relationships with our
suppliers.
We undertake no obligation to revise the forward-looking statements
included or incorporated by reference in this reoffer prospectus to reflect any
future events or circumstances. Our actual results, performance or achievements
could differ materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or contribute to such
differences are discussed in the section entitled "Risk Factors" included in
this reoffer prospectus.
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THE COMPANY
OUR BUSINESS
We are the third largest retail drugstore chain in the United States
based on revenues and number of stores. As of May 31, 2003, we operated 3,396
drugstores in 28 states across the country and in the District of Columbia.
During fiscal 2003 and our first quarter in fiscal 2004, we generated $15.8
billion and $4.0 billion in revenues, respectively. Since the beginning of
fiscal 1997, we have relocated 980 stores, opened 476 new stores, remodeled 649
stores and closed or sold an additional 1,412 stores. As a result, we believe we
have a modern store base.
In our stores, we sell prescription drugs and a wide assortment of
other merchandise, which we call "front-end" products. In fiscal 2003, our
pharmacists filled more than 200 million prescriptions, which accounted for
approximately 63.2% of our total sales. In the first quarter of fiscal 2004,
pharmacy sales accounted for 64.5% of our total sales. We believe that our
pharmacy operations will continue to represent a significant part of our
business due to favorable industry trends, including an aging population,
increased life expectancy and the discovery of new and better drug therapies. We
offer approximately 24,000 front-end products, including over-the-counter
medications, health and beauty aids, personal care items, cosmetics, household
items, beverages, convenience foods, greeting cards, seasonal merchandise and
numerous other everyday and convenience products, as well as photo processing,
which accounted for the remaining 36.8% and 35.5% of our total sales in fiscal
2003 and the first quarter of fiscal 2004, respectively. We distinguish our
stores from other national chain drugstores, in part, through our private brands
and our strategic alliance with General Nutrition Companies, Inc., a leading
retailer of vitamin and mineral supplements. We offer over 1,900 front-end
products under the Rite Aid private brand, which contributed approximately 10.8%
and 10.9% of our front-end sales in categories where private brand products are
sold in fiscal 2003 and the first quarter of fiscal 2004, respectively.
BACKGROUND
Under prior management, we were engaged in an aggressive expansion
program from the beginning of fiscal 1997 until 1999. During that period, we
purchased 1,554 stores, relocated 866 stores, opened 445 new stores, remodeled
308 stores and acquired PCS Health Systems, Inc. These activities had a
significant negative impact on our operating results and financial condition,
severely strained our liquidity and increased our indebtedness to $6.6 billion
as of February 26, 2000, which contributed to our inability to access the
financial markets. In October 1999, we announced that we had identified
accounting irregularities and our former chairman and chief executive officer
resigned. In November 1999, our former auditors resigned and withdrew their
previously issued opinions on our financial statements for fiscal 1998 and
fiscal 1999. We needed to restate our financial statements and develop
accounting systems and controls that would allow us to manage our business and
accurately report the results of our operations. In addition, the SEC and the
U.S. Attorney for the Middle District of Pennsylvania began investigations into
our affairs. Also, the complaint in a securities class action lawsuit, which had
been filed against us in March 1999, was amended to include allegations based
upon the accounting irregularities we had disclosed.
In December 1999, a new management team was hired, and since that time
we have been addressing our business, operational and financial challenges. In
response to our situation, new management has:
o Reduced our indebtedness from $6.6 billion as of February 26,
2000 to $3.9 billion as of May 31, 2003;
4
o Restated our financial statements for fiscal 1998 and fiscal
1999, as well as engaged Deloitte & Touche LLP as our new
auditors to audit our financial statements for fiscal years
beginning with fiscal 1998;
o Settled the securities class action and related lawsuits in
February 2002 for $45.0 million, funded with insurance proceeds,
and $149.5 million of senior secured (stockholder) notes (which
we redeemed in February 2003);
o Addressed and corrected problems with our accounting systems and
controls, and resumed normal financial reporting;
o Implemented initiatives to improve all aspects of our supply
chain, including buying practices, category management systems
and other inventory issues;
o Addressed out-of-stock inventory levels and strengthened our
vendor relationships; and
o Completed the refinancing of a substantial portion of our
indebtedness.
OUR STRENGTHS
We believe that we are well-positioned to build on the significant
investment in our modern store base by capitalizing on our competitive
strengths, including the following:
STRONG BRAND NAME WITH LEADING SHARES IN KEY MARKETS
o We are one of the nation's three largest drugstore chains with
3,396 stores as of May 31, 2003.
o We have a first or second market position in 74 of the 130 major
U.S. metropolitan markets in which we operate.
o Our stores are primarily located in convenient locations within
fast growing metropolitan markets.
o We believe that our brand name has helped us establish a large
group of loyal customers.
NEW MANAGEMENT TEAM LEADING OPERATIONAL TURNAROUND
o We improved front-end same store sales growth from a negative
2.2% in fiscal 2000 to a positive rate of growth by improving
store conditions and product pricing and launching a competitive
marketing program.
o We have seen significant reductions in our net loss, which was
$1.6 billion for fiscal 2001 and $112.1 million for fiscal 2003.
o We curtailed our expansion plans and reduced our capital
expenditures by approximately $524.9 million from fiscal 2000 to
fiscal 2003.
o We have commenced, effective fiscal 2004, a program to develop 75
and 100 new and relocated stores for fiscal 2005 and 2006,
respectively.
5
MODERN STORE BASE
o Since the beginning of fiscal 1997, we have opened 476 new
stores, relocated 980 stores, remodeled 649 stores and closed or
sold an additional 1,412 stores, providing us with a modern store
base. Approximately 60% of our stores have been constructed,
remodeled or relocated since the beginning of fiscal 1997.
o Most of our new stores include a drive-thru pharmacy, a one-hour
photo shop and 990 include a GNC store-within-Rite Aid-store.
o To support these new stores we have improved our distribution
network by opening two high capacity distribution centers.
o All of our stores are integrated into a common information
system, which enables our pharmacists to fill prescriptions more
accurately and efficiently and is designed to reduce chances of
adverse drug interaction.
o Each of our stores employs point-of-sale technology that
facilitates inventory replenishment, sales analysis and
recognition of customer trends.
COMPELLING INDUSTRY FUNDAMENTALS AND DEMOGRAPHIC TRENDS
o Increasing life expectancy and the "baby boom" generation
entering their fifties are expected to drive pharmacy sales.
Based upon studies published by pharmacy benefit management
companies and the Congressional Budget Office, management
believes that pharmacy sales growth will increase at least 30%
over the next three years.
o Several factors will contribute to this continued growth in the
pharmacy sector, including a record number of drugs in the FDA
approval pipeline.
OUR BUSINESS STRATEGY
Our strategy is to continue to focus on improving the productivity of
our existing store base. We believe that improving the sales of our existing
stores is important to achieving profitability and improving cash flow. To
achieve this objective, we are implementing the following:
GROW OUR PHARMACY PRESCRIPTION COUNT AND ATTRACT MORE CUSTOMERS
o Continue the focus on generic prescriptions which are a value to
the customer and more profitable for us;
o Enable our pharmacists to work directly with customers through
productivity improvements supported by technology such as
automatic refill programs, our next generation pharmacy system
and e-prescriptions;
o Purchase prescription files from independent pharmacists;
o Attract new customers to our stores and increase sales per
customer visit through various marketing strategies including
weekly circulars, seasonal merchandising programs, crosscategory
merchandising and direct marketing efforts; and
6
o Further enhance the store base through a program to develop new
and relocated stores in our existing markets.
Grow Front End Sales
o Improve inventory and product categories to offer more
personalized products and services to our customers, including
better management of seasonal items;
o Enhance positive perceptions among customers through vendor
promotions and weekly sales items;
o Increase the emphasis on Rite Aid brand products to improve the
customer value offering and improve our gross margin;
o Continue to develop our GNC stores-within-Rite Aid stores and
one-hour photo development departments;
o Increase ethnic product offerings targeted to selected markets to
enhance front-end sales growth; and
o Continue to strengthen our relationships with our suppliers in
order to offer customers a wider selection of products and
categories.
Improve Customer Satisfaction With Focus on Service and Selection in Our Stores
o Implement programs that are specifically directed towards our
pharmacy business, including our "With Us, It's Personal" and
"Ready When Promised" customer service campaigns, and
competitively priced cash prescriptions and expand our
third-party plan networks;
o Improve customer loyalty by establishing a strong community
presence, increasing promotional themes and exclusive offers,
focusing on the attraction and retention of managed care
customers and partnering with major drug suppliers to provide
discount cards to senior citizens; and
o Continue to utilize mystery shoppers and customer communications
to improve our customers' perception of us.
Contain Expenses
o Continue to execute our cost management programs;
o Leverage our modern distribution facilities by utilizing new
category management tools to optimize in-stock conditions and
lower costs; and
o Target expense areas with specific work plans for improvement and
continuously monitor those work plans.
* * *
7
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 Exchange and the Pacific Exchange under the symbol "RAD". We
were incorporated in 1968 and are a Delaware Corporation.
8
RISK FACTORS
Prospective investors should carefully review the following factors
together with the other information contained in this prospectus and any
accompanying prospectus supplement prior to making an investment decision.
RISKS RELATED TO OUR FINANCIAL CONDITION
WE ARE HIGHLY LEVERAGED. OUR SUBSTANTIAL INDEBTEDNESS WILL SEVERELY LIMIT CASH
FLOW AVAILABLE FOR OUR OPERATIONS AND COULD ADVERSELY AFFECT OUR ABILITY TO
SERVICE DEBT OR OBTAIN ADDITIONAL FINANCING IF NECESSARY.
We had, as of May 31, 2003, $3.9 billion of outstanding indebtedness
and stockholders' deficit of $140.6 million. We also had additional borrowing
capacity under our new revolving credit facility of $576.5 million at that time,
net of outstanding letters of credit of $123.5 million. Our debt obligations
adversely affect our operations in a number of ways and, while we believe we
have adequate sources of liquidity to meet our anticipated annual requirements
for working capital, debt service and capital expenditures through the end of
fiscal year 2004, there can be no assurance that our cash flow from operations
will be sufficient to service our debt, which may requires us to borrow
additional funds for that purpose, restructure or otherwise refinance our debt.
Our earnings were insufficient to cover our fixed charges for fiscal 2003 by
$203.9 million and for the first quarter of fiscal 2004 by $38.9 million. It was
also necessary for us to supplement our cash from operations with borrowings
under our then existing senior secured credit facility for our 2001 and 2000
fiscal years.
Our high level of indebtedness will continue to restrict our
operations. Among other things, our indebtedness will:
o limit our ability to obtain additional financing;
o limit our flexibility in planning for, or reacting to, changes in
the markets in which we compete;
o place us at a competitive disadvantage relative to our
competitors with less indebtedness;
o render us more vulnerable to general adverse economic and
industry conditions; and
o require us to dedicate substantially all our cash flow to service
our debt.
Our ability to make payments on our debt depends upon our ability to
substantially improve our future operating performance, which is subject to
general economic and competitive conditions and to financial, business and other
factors, many of which we cannot control. If our cash flow from our operating
activities is insufficient, we may take certain actions, including delaying or
reducing capital or other expenditures, attempting to restructure or refinance
our debt, selling assets or operations or seeking additional equity capital. We
may be unable to take any of these actions on satisfactory terms or in a timely
manner. Further, any of these actions may not be sufficient to allow us to
service our debt obligations or may have an adverse impact on our business. Our
existing debt agreements limit our ability to take certain of these actions. Our
failure to generate sufficient cash to pay our debts or to successfully
undertake any of these actions could have a material adverse effect on us.
9
SOME OF OUR DEBT, INCLUDING BORROWINGS UNDER OUR NEW SENIOR SECURED CREDIT
FACILITY, IS BASED UPON VARIABLE RATES OF INTEREST, WHICH COULD RESULT IN HIGHER
INTEREST EXPENSE IN THE EVENT OF INCREASES IN INTEREST RATES.
Approximately $1.2 billion, or 29.1%, of our outstanding indebtedness
as of May 31, 2003 bears an interest rate that varies depending upon LIBOR. If
we borrow additional amounts under our new senior secured credit facility, the
interest rate on those borrowings will vary depending upon LIBOR. If LIBOR
rises, the interest rates on this outstanding debt will also increase. Therefore
an increase in LIBOR would increase our interest payment obligations under these
outstanding loans and have a negative effect on our cash flow and financial
condition.
THE COVENANTS IN OUR OUTSTANDING INDEBTEDNESS IMPOSE RESTRICTIONS THAT MAY LIMIT
OUR OPERATING AND FINANCIAL FLEXIBILITY.
The covenants in the instruments that govern our outstanding
indebtedness restrict our ability to:
o incur liens and debt;
o pay dividends;
o make redemptions and repurchases of capital stock;
o make loans, investments and capital expenditures;
o prepay, redeem or repurchase debt;
o engage in mergers, consolidations, assets dispositions,
sale-leaseback transactions and affiliate transactions;
o change our business;
o amend some of our debt and other material agreements;
o issue and sell capital stock of subsidiaries;
o restrict distributions from subsidiaries; and
o grant negative pledges to other creditors.
If we are unable to meet the terms of the financial covenants or if we
breach any of these covenants, a default could result under one or more of these
agreements. A default, if not waived by our lenders, could result in the
acceleration of our outstanding indebtedness and cause our debt to become
immediately due and payable. If acceleration occurs, we would not be able to
repay our debt and it is unlikely that we would be able to borrow sufficient
additional funds to refinance such debt. Even if new financing is made available
to us, it may not be available on terms acceptable to us.
If we obtain modifications of our agreement or are required to obtain
waivers of defaults, we may incur significant fees and transaction costs. In
fiscal 2003, as well as in fiscal 2002 and 2001, we modified certain covenants
contained in our then existing senior secured credit facility and loan
agreements. In fiscal 2000, we obtained waivers of compliance contained in our
credit facilities and
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public indentures. In connection with obtaining these modifications and
waivers, we paid significant fees and transaction costs.
RISKS RELATED TO OUR OPERATIONS
MAJOR LAWSUITS HAVE BEEN BROUGHT AGAINST US AND CERTAIN OF OUR SUBSIDIARIES, AND
THERE ARE CURRENTLY PENDING BOTH CIVIL AND CRIMINAL INVESTIGATIONS BY THE UNITED
STATES ATTORNEY. IN ADDITION TO ANY FINES OR DAMAGES THAT WE MIGHT HAVE TO PAY,
ANY CRIMINAL CONVICTION AGAINST US MAY RESULT IN THE LOSS OF LICENSES AND
CONTRACTS THAT ARE MATERIAL TO THE CONDUCT OF OUR BUSINESS, WHICH WOULD HAVE A
NEGATIVE EFFECT ON OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION AND CASH
FLOWS.
There are several major ongoing lawsuits and investigations in which we
are involved. While some of these lawsuits have been settled, pending court
approval or appeal, we are unable to predict the outcome of any of these matters
at this time. If any of these cases result in a substantial monetary judgment
against us or are settled on unfavorable terms, our results of operations,
financial condition and cash flows could be materially adversely affected.
There are currently pending both civil and criminal governmental
investigations by the United States Attorney concerning our operations under
prior management and other matters. Settlement discussions have begun with the
United States Attorney for the Middle District of Pennsylvania, who has proposed
that the government would not institute any criminal proceedings against us if
we enter into a consent judgment providing for a civil penalty payable over a
period of years. The amount of the civil penalty has not been agreed to and
there can be no assurance that a settlement will be reached or that the amount
of the penalty will not have a material adverse effect on our financial
condition and results of operations. We recorded an accrual of $20.0 million in
fiscal 2003 in connection with the resolution of these matters; however, we may
incur charges in excess of that amount and we are unable to estimate the
possible range of loss. We will continue to evaluate our estimate and to the
extent that additional information arises or our strategy changes, we will
adjust our accrual accordingly.
If we were convicted of any crime, certain licenses and government
contracts, such as Medicaid plan reimbursement agreements, that are material to
our operations may be revoked, which would have a material adverse effect on our
results of operations and financial condition. In addition, substantial
penalties, damages, or other monetary remedies assessed against us could also
have a material adverse effect on our results of operations, financial condition
and cash flows.
Given the size and nature of our business, we are subject from time to
time to various lawsuits which, depending on their outcome, may have a negative
impact on our results of operations, financial condition and cash flows.
WE ARE SUBSTANTIALLY DEPENDENT ON A SINGLE SUPPLIER OF PHARMACEUTICAL PRODUCTS
TO SELL PRODUCTS TO US ON SATISFACTORY TERMS. A DISRUPTION IN THIS RELATIONSHIP
WOULD HAVE A NEGATIVE EFFECT ON OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION
AND CASH FLOW.
We obtain approximately 90% of our pharmaceutical products from a
single supplier, McKesson Corp. ("McKesson") pursuant to a long-term contract
that runs until April 2004. Pharmacy sales represented approximately 63.2% of
our total sales during fiscal 2003, and 64.5% of our total sales during the
first quarter of fiscal 2004, and, therefore, our relationship with McKesson is
important to us. Any significant disruptions in our relationship with McKesson
would make it difficult for us to continue to operate our business, and would
have a material adverse effect on our results of operations, financial condition
and cash flows.
11
WE NEED TO CONTINUE TO IMPROVE OUR OPERATIONS IN ORDER TO IMPROVE OUR FINANCIAL
CONDITION, BUT OUR OPERATIONS WILL NOT IMPROVE IF WE CANNOT CONTINUE TO
EFFECTIVELY IMPLEMENT OUR BUSINESS STRATEGY OR IF THEY ARE NEGATIVELY AFFECTED
BY GENERAL ECONOMIC CONDITIONS.
Our operations during fiscal 2000 were adversely affected by a number
of factors, including our financial difficulties, inventory shortages,
allegations of violations of the law, including drug pricing issues, disputes
with suppliers and uncertainties regarding our ability to produce audited
financial statements. To improve operations, new management developed and in
fiscal 2001 began implementing and continues to implement a business strategy to
improve our stores and enhance our relationships with our customers by improving
the pricing of products, providing more consistent advertising through weekly
circulars, eliminating inventory shortages and out-dated inventory,
strengthening our relationships with our vendors, developing programs intended
to provide better customer service, purchasing prescription files and other
means.
Since the beginning of fiscal 1997, we have relocated 980 stores,
remodeled 649 stores, opened 476 new stores and closed or sold an additional
1,412 stores. These new, relocated and remodeled stores represented
approximately 60% of our total stores at May 31, 2003. Although this substantial
investment made in our store base over the last seven years has given us a
modern store base, our store base has not yet achieved a level of sales
productivity comparable to our major competitors. Accordingly, many of our new
and relocated stores have not developed a critical mass of customers needed to
achieve profitability. Our long term business strategy is to focus on improving
the productivity of our existing store base. We believe that improving the sales
of existing stores is important to achieving profitability and continuing to
improve cash flow.
If we are not successful in implementing our business strategy, or if
our business strategy is not effective, we may not be able to continue to
improve our operations. In addition, any adverse change in general economic
conditions can adversely affect consumer buying practices and reduce our sales
of front-end products, which are our higher margin products, and cause a
proportionately greater decrease in our profitability. Failure to continue to
improve operations or a decline in general economic conditions would adversely
affect our results of operations, financial condition and cash flows and our
ability to make principal or interest payments on our debt.
WE ARE DEPENDENT ON OUR MANAGEMENT TEAM, AND THE LOSS OF THEIR SERVICES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND THE RESULTS OF OUR OPERATIONS
OR FINANCIAL CONDITION.
The success of our business is materially dependent upon the continued
services of our executive management team. The loss of key personnel could have
a material adverse effect on our results of operations, financial condition and
cash flows. Additionally, we cannot assure you that we will be able to attract
or retain other skilled personnel in the future.
On June 25, 2003, Mary F. Sammons, formerly our President and Chief
Operating Officer, became our President and Chief Executive Officer. Robert G.
Miller, formerly our Chairman and Chief Executive Officer, retained the position
of Chairman.
TERRORIST ATTACKS, SUCH AS THE ATTACKS THAT OCCURRED IN NEW YORK AND WASHINGTON,
D.C. ON SEPTEMBER 11, 2001, AND OTHER ATTACKS OR ACTS OF WAR MAY ADVERSELY
AFFECT THE MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR PROFITABILITY.
The attacks of September 11, 2001 and subsequent events, including the
military action in Iraq, have caused instability in the United States and other
financial markets and have led to, and may continue to lead to, further armed
hostilities, prolonged involvement in Iraq or further acts of terrorism in the
12
United States or abroad, which could cause further instability in financial
markets and reduced consumer confidence. The threat of terrorist attacks and
other related developments may adversely affect prevailing economic conditions,
resulting in reduced consumer spending and reduced sales in our stores. These
developments will subject us to increased risks and, depending on their
magnitude, could have a material adverse effect on our business.
RISKS RELATED TO OUR INDUSTRY
THE MARKETS IN WHICH WE OPERATE ARE VERY COMPETITIVE AND FURTHER INCREASES IN
COMPETITION COULD ADVERSELY AFFECT US.
We face intense competition with local, regional and national
companies, including other drugstore chains, independently owned drugstores,
supermarkets, mass merchandisers, discount stores and mail order pharmacies. We
may not be able to effectively compete against them because our existing or
potential competitors may have financial and other resources that are superior
to ours. In addition, we may be at a competitive disadvantage because we are
more highly leveraged than our competitors. Because many of our stores are new,
their ability to achieve profitability depends on their ability to achieve a
critical mass of customers. While customer growth is often achieved through
purchases of prescription files from existing pharmacies, our ability to achieve
this critical mass through purchases of prescription files could be confined by
liquidity constraints. Although in the past our competitiveness has been
adversely affected by problems with inventory shortages, uncompetitive pricing
and customer service, we have taken steps to address these issues. We believe
that the continued consolidation of the drugstore industry and additional store
openings will further increase competitive pressures in the industry. As
competition increases, a significant increase in general pricing pressures could
occur which would require us to increase our sales volume and to sell higher
margin products and services in order to remain competitive. We cannot assure
you that we will be able to continue to compete effectively in our markets or
increase our sales volume in response to further increased competition.
CHANGES IN THIRD-PARTY REIMBURSEMENT LEVELS FOR PRESCRIPTION DRUGS COULD REDUCE
OUR MARGINS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Sales of prescription drugs, as a percentage of sales, and the
percentage of prescription sales with third parties, have been increasing and we
expect them to continue to increase. In fiscal 2003 and the first quarter of
fiscal 2004, sales of prescription drugs represented 63.2% and 64.5% of our
sales, respectively, and 92.7% and 93.1% of all of the prescription drugs that
we sold were with third-party payors, respectively. During fiscal 2003, the top
five third-party payors accounted for approximately 29% of our total sales. Any
significant loss of third-party provider business could have a material adverse
effect on our business and results of operations. Also, these third-party payors
could reduce the levels at which they will reimburse us for the prescription
drugs that we provide to their members. Furthermore, if Medicare is reformed to
include prescription benefits, we may be reimbursed for some prescription drugs
at prices lower than our current reimbursement levels. In fiscal 2003,
approximately 11% of our revenues were from state sponsored Medicaid agencies.
There have been a number of recent proposals and enactments by various states to
reduce Medicaid reimbursement levels in response to budget problems, some of
which propose to reduce reimbursement levels in the applicable states
significantly, and we expect other similar proposals in the future. If
third-party payors reduce their reimbursement levels or if Medicare or state
Medicaid covers prescription drugs at reimbursement levels lower than our
current levels, our margins on these sales would be reduced, and the
profitability of our business and our results of operations, financial condition
and cash flows could be adversely affected.
13
WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS, PROCEDURES AND REQUIREMENTS; OUR
NONCOMPLIANCE OR A SIGNIFICANT REGULATORY CHANGE COULD ADVERSELY AFFECT OUR
BUSINESS, THE RESULTS OF OUR OPERATIONS OR OUR FINANCIAL CONDITION.
Our pharmacy business is subject to federal, state and local
regulation. These include local registrations of pharmacies in the states where
our pharmacies are located, applicable Medicare and Medicaid regulations, and
prohibitions against paid referrals of patients. Failure to properly adhere to
these and other applicable regulations could result in the imposition of civil
and criminal penalties and could adversely affect the continued operation of our
business. Furthermore, our pharmacies could be affected by federal and state
reform programs, such as healthcare reform initiatives, the passing of which
could adversely affect our results of operations, financial condition and cash
flows.
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,
we are required to implement privacy standards, train our associates on the
permitted uses and disclosures of protected health information, provide a notice
of privacy practices to our pharmacy customers and permit pharmacy customers to
access and amend their records and receive an accounting of disclosures of
protected health information. Failure to properly adhere to these requirements
could result in the imposition of civil as well as criminal penalties.
CERTAIN RISKS ARE INHERENT IN THE PROVISION OF PHARMACY SERVICES; OUR INSURANCE
MAY NOT BE ADEQUATE TO COVER ANY CLAIMS AGAINST US.
Pharmacies are exposed to risks inherent in the packaging and
distribution of pharmaceuticals and other healthcare products, such as with
respect to improper filling of prescriptions, labeling of prescriptions and
adequacy of warnings. Although we maintain professional liability and errors and
omissions liability insurance, from time to time claims result in the payment of
significant amounts, some portions of which are not funded by insurance. We
cannot assure you that the coverage limits under our insurance programs will be
adequate to protect us against future claims, or that we will maintain this
insurance on acceptable terms in the future. Our results of operations,
financial condition or cash flows may be adversely affected if in the future our
insurance coverage proves to be inadequate or unavailable or there is an
increase in liability for which we self insure or we suffer reputational harm as
a result of an error or omission.
WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY IF WE ARE UNABLE TO ATTRACT, HIRE AND
RETAIN QUALIFIED PHARMACISTS.
There is a nationwide shortage of qualified pharmacists. In response to
this challenge, we have implemented improved benefits and training programs in
order to attract, hire and retain qualified pharmacists. However, we may not be
able to attract, hire and retain enough qualified pharmacists. This could
adversely affect our operations.
RISKS RELATED TO OUR COMMON STOCK
YOU MAY NOT BE ABLE TO SELL YOUR COMMON STOCK WHEN YOU WANT TO AND, IF YOU DO,
YOU MAY NOT BE ABLE TO RECEIVE THE PRICE THAT YOU WANT.
Although our common stock has been actively traded on the New York
Stock Exchange and the Pacific Exchange, we do not know if an active trading
market for the common stock will continue or, if it does, at what prices the
common stock may trade. Since the beginning of fiscal 2000, the reported closing
prices for our common stock have ranged from a high of $41.375 to a low of
$1.75. In addition,
14
the stock markets in general, including the New York Stock Exchange, recently
experienced extreme price and trading volume fluctuations. These fluctuations
have resulted in volatility in the market prices of securities that has often
been unrelated or disproportionate to changes in operating performance. These
broad market fluctuations may adversely affect the market prices of our common
stock. Further, expected and possible issuances described below, will
significantly increase the number of shares of our common stock outstanding, and
could result in a decline in the market price of our common stock. Therefore,
you may not be able to sell our common stock when you want and, if you do, you
may not receive the price you want.
VARIOUS PLANNED ISSUANCES OF STOCK WILL BE, AND OUR CONTINUING DEBT
RESTRUCTURING EFFORTS MAY BE DILUTIVE TO HOLDERS OF OUR COMMON STOCK.
At May 31, 2003, 515.4 million shares of our common stock were
outstanding and an additional 173.8 million shares of our common stock were
issuable related to outstanding stock options (33,778,661 of which are included
as part of this reoffer prospectus), convertible notes and convertible preferred
stock. We will also issue additional shares of common stock pursuant to
outstanding options granted pursuant to our various stock option plans. In
addition, we may undertake additional transactions to simplify and restructure
our capital structure, which may include, as part of these efforts, additional
issuances of equity securities in exchange for our indebtedness. The issuance of
additional shares of common stock may be dilutive to the holders of our common
stock. We cannot predict the extent to which the dilution, the availability of a
large amount of shares for sale, and the possibility of additional issuances and
sales of our common stock will negatively affect the trading price of our common
stock or the liquidity of our common stock.
15
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares which
may be sold by this reoffer prospectus. All expenses of registration incurred in
connection with this offering are being borne by us, but all selling and other
expenses incurred by a selling stockholder will be borne by the selling
stockholder.
SELLING STOCKHOLDERS
The 37,001,404 shares of our common stock to which this reoffer
prospectus relates is comprised of 3,222,743 restricted shares and 33,778,661
shares issuable upon exercise of currently outstanding options, and are being
registered for reoffers and resales by our present and former directors,
officers and employees named below, who acquired the shares pursuant to one of
our "employee benefit plans" as that term is defined in Rule 405 of Regulation C
under the Securities Act. The selling stockholders may resell all, a portion, or
none of the shares of common stock from time to time.
The inclusion in the table of the individuals named therein shall not
be deemed to be an admission that any such individuals are one of our
affiliates.
Information regarding the selling stockholders, including the number of
shares offered for sale, may change from time to time and any changed
information will be set forth in a prospectus supplement to the extent required.
The address of each selling stockholder is care of Rite Aid at 30 Hunter Lane,
Camp Hill, Pennsylvania, 17011.
Number of
Number of shares to be
Number of shares beneficially
shares of covered by owned if all
Name of Selling beneficially this reoffer shares offered
Stockholder Position with Rite Aid owned(1) prospectus(2) hereby are sold
------------------------ ------------------------------ ----------------- -------------- ----------------
Robert G. Miller Chairman of the Board 11,144,541 10,684,091 460,450
Mary F. Sammons President, Chief Executive 8,727,727 8,197,727 75,000
Officer and Director
Alfred M. Gleason Director 378,300 200,000 178,300
George G. Golleher Director 200,000 150,000 50,000
Colin V. Reed Director 125,000 100,000 25,000
Stuart M. Sloan Director 216,644 216,644 0
Ed Beasley Senior Vice President, 399,300 23,300 376,000
Eastern Region
Jerry Cardinale Senior Vice President, 965,625 30,625 935,000
Category Management
Don Davis Senior Vice President, 907,295 208,295 699,000
Information Services
Vince DiMaggio Regional Vice President 151,773 31,773 120,000
Doug Donley Group Vice President, 378,000 25,000 353,000
Accounting
Joe Fairman Regional Vice President 149,826 29,826 120,000
Elliot S. Gerson Former Employee 1,275,233 1,271,233 4,000
Christopher S. Hall Executive Vice President and 1,427,404 1,427,404 0
Chief Financial Officer
Jim Hamilton Former Employee 230,045 95,606 134,439
David R. Jessick Employee 4,412,662 4,412,662 0
16
Number of
Number of shares to be
Number of shares beneficially
shares of covered by owned if all
Name of Selling beneficially this reoffer shares offered
Stockholder Position with Rite Aid owned(1) prospectus(2) hereby are sold
------------------------ ------------------------------ ----------------- -------------- ----------------
Charles Kibler Group Vice President, Loss 815,009 35,000 780,009
Prevention
Keith Lovett Senior Vice President, Human 753,600 53,600 700,000
Resources
James P. Mastrian Senior Executive Vice 2,388,648 2,388,648 0
President, Marketing and
Logistics
Mark Panzer Senior Executive Vice 1,255,499 1,255,499 0
President, Store Operations
Karen Rugen Senior Vice President, 527,000 32,000 495,000
Corporate Communications
and Public Affairs
Robert B. Sari Senior Vice President, 479,871 475,871 4,000
General Counsel and Secretary
Ken Simmons Vice President, Pharmacy 153,201 22,695 130,506
Operations
John T. Standley Senior Executive Vice 4,960,414 4,928,414 32,000
President and Chief
Administrative Officer
Martin Tassoni Former Employee 726,212 64,545 661,667
Murray Todd Senior Vice President, Store 570,794 70,946 499,848
Operations
Kevin Twomey Senior Vice President and 592,500 570,000 22,500
Chief Accounting Officer
(1) The number of shares beneficially owned by the selling stockholders
includes restricted stock and options to purchase shares of our common
stock under our employee benefit plans, whether or not exercisable as
of, or within 60 days of, the date of this prospectus, as well as shares
of common stock beneficially owned by the selling stockholder.
(2) Includes options to purchase shares of our common stock under our
employee benefit plans, whether or not exercisable as of, or within 60
days of, the date of this prospectus. For non-affiliates, options to
purchase shares of our common stock under our employee benefit plans are
excluded.
Any selling stockholder may from time to time sell under this
prospectus any or all of the shares of common stock owned by it. Because the
selling stockholder is not obligated to sell any or all of the shares of common
stock held by it, we cannot estimate the number of shares of common stock that
the selling stockholder will beneficially own after this offering.
17
PLAN OF DISTRIBUTION
The shares of common stock covered by this reoffer prospectus are being
registered by us for the account of the selling stockholders.
The shares of common stock offered hereby may be sold from time to time
directly by or on behalf of the selling stockholder in or one more transactions
on the New York Stock Exchange, Pacific Exchange or on any stock exchange on
which the common stock may be listed at the time of sale, in privately
negotiated transactions, or through a combination of such methods, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at fixed prices (which may be changed) or at negotiated prices.
The selling stockholder may sell shares through one or more agents, brokers or
dealers or directly to purchasers. Such brokers or dealers may receive
compensation in the form of commissions, discounts or concessions from the
selling stockholders and/or purchasers of the shares or both. Such compensation
as to a particular broker or dealer may be in excess of customary commissions.
In connection with their sales, a selling stockholder and any
participating broker or dealer may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions they receive and the proceeds
of any sale of shares may be deemed to be underwriting discounts and commissions
under the Securities Act.
We are bearing all costs relating to the registration of the shares of
common stock. Any commissions or other fees payable to broker-dealers in
connection with any sale of the shares will be borne by the selling stockholder
or other party selling such shares. In order to comply with certain states'
securities laws, if applicable, the shares may be sold in such jurisdictions
only through registered or licensed brokers or dealers. In certain states, the
shares may not be sold unless the shares have been registered or qualified for
sale in such state, or unless an exemption from registration or qualification is
available and is obtained or complied with. Sales of the shares must also be
made by the selling stockholders in compliance with all other applicable state
securities laws and regulations.
In addition to any shares sold hereunder, selling stockholders may sell
shares of common stock in compliance with Rule 144. There is no assurance that
the selling stockholders will sell all or a portion of the common stock offered
hereby.
The selling stockholders may agree to indemnify any broker-dealer or
agent that participates in transactions involving sales of the shares against
certain liabilities in connection with the offering of the shares arising under
the Securities Act of 1933.
We have notified the selling stockholders of the need to deliver a copy
of this prospectus in connection with any sale of the shares.
LEGAL MATTERS
The validity of the shares of common stock which are originally offered
under the Registration Statement of which this prospectus forms a part will be
passed upon for us by Robert B. Sari, our Senior Vice President and General
Counsel.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from our Annual
Report on Form 10-K for the year ended March 1, 2003
18
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference (which report includes
an unqualified opinion and includes an explanatory paragraph relating to the
adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," effective March 3, 2002 and the adoption of Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" as amended, effective March 4, 2001), and
has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
19
RITE AID CORPORATION
37,001,404 SHARES
OF
COMMON STOCK
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
We are incorporating by reference certain information that we have
filed with the SEC under the informational requirements of the Securities
Exchange Act of 1934. The information contained in the documents that we are
incorporating by reference is considered to be part of this reoffer prospectus
and the information that we later file with the SEC will automatically update
and supercede the information contained or incorporated by reference into this
reoffer prospectus. We are incorporating by reference our:
o annual report on Form 10-K for the fiscal year ended March 1,
2003, which we filed with the SEC on May 2, 2003;
o current report on Form 8-K, which we filed with the SEC on
March 5, 2003;
o current report on Form 8-K, which we filed with the SEC on
April 15, 2003;
o current report on Form 8-K, which we filed with the SEC on May
14, 2003;
o current report on Form 8-K, which we filed with the SEC on May
30, 2003;
o current report on Form 8-K, which we filed with the SEC on
August 7, 2003; and
o quarterly report on Form 10-Q for the fiscal quarter ended May
31, 2003, which we filed with the SEC on July 3, 2003.
All documents that we subsequently file pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, will be
deemed to be incorporated by reference into this registration statement from the
date of filing of such documents. These documents are or will be available for
inspection or copying at the locations identified above under the caption "Where
You Can Find More Information."
We will provide without charge to each person to whom a reoffer
prospectus is delivered, upon written or oral request by such person, a copy of
any or all of the documents that have been incorporated by reference in this
registration statement but not delivered with this reoffer prospectus.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Robert B. Sari, our Senior Vice President and General Counsel owns
shares of our common stock and holds options to purchase shares of our common
stock.
II-1
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law ("DGCL"), a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding (i) if such person acted in
good faith and in a manner that person reasonably believed to be in or not
opposed to the best interests of the corporation and (ii) with respect to any
criminal action or proceeding, if he or she had no reasonable cause to believe
such conduct was unlawful. In actions brought by or in the right of the
corporation, a corporation may indemnify such person against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner that person reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which the Court of Chancery or other such court shall deem proper. To the extent
that such person has been successful on the merits or otherwise in defending any
such action, suit or proceeding referred to above or any claim, issue or matter
therein, he or she is entitled to indemnification for expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith. The indemnification and advancement of expenses provided for or
granted pursuant to Section 145 is not exclusive of any other rights of
indemnification or advancement of expenses to which those seeking
indemnification or advancement of expenses may be entitled, and a corporation
may purchase and maintain insurance against liabilities asserted against any
former or current, director, officer, employee or agent of the corporation, or a
person who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, whether or not the power to indemnify is provided by
the statute.
Article Tenth of our Certificate of Incorporation and Article VIII of
our By-laws provide for the indemnification of our directors and officers as
authorized by Section 145 of the DGCL.
The directors and officers of us and our subsidiaries are insured
(subject to certain exceptions and deductions) against liabilities which they
may incur in their capacity as such, including liabilities under the Securities
Act, under liability insurance policies carried by us.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The securities that are to be reoffered or resold pursuant to this
registration statement were issued pursuant to our employee benefit plans,
including pursuant to individual employment agreements, in transactions that
were exempt from registration under the Securities Act.
II-2
ITEM 8. EXHIBITS.
EXHIBIT
NUMBERS DESCRIPTION INCORPORATION BY REFERENCE TO
------- ----------- -----------------------------
3.1 Restated Certificate of Incorporation dated Exhibit 3(i) to Form 8-K filed on
December 12, 1996 November 2, 1999
3.2 Certificate of Amendment to the Restated Exhibit 3(ii) to Form 8-K filed on
Certificate of Incorporation dated October November 2, 1999
25, 1999
3.3 Certificate of Amendment to Restated Certificate Exhibit 3.4 to Registration
of Incorporation dated June 27, 2001 Statement on Form S-1, File No.
333-64950, filed on July 12, 2001
3.4 8% Series D Cumulative Pay-in-kind Preferred Exhibit 3.5 to Form 10-Q filed on
Preferred Stock Certificate of Designation October 12, 2001
dated October 3, 2001
3.5 By-laws, as amended on November 8, 2000 Exhibit 3.1 to Form 8-K filed on
November 13, 2000
3.6 Amendment to By-laws, adopted January 30, 2002 Exhibit T3B.2 to Form T-3 filed on
March 4, 2002
5 Opinion of Robert B. Sari, Esq. Filed herewith
10.1 1999 Stock Option Plan Exhibit 10.1 to Form 10-K filed on
May 21, 2001
10.2 2000 Omnibus Equity Plan Included in Proxy Statement dated
October 24, 2000
10.3 2001 Stock Option Plan Exhibit 10.3 to Form 10-K filed on
May 21, 2001
10.4 Rite Aid Corporation Special Deferred Exhibit 10.21 to Form 10-K filed on
Compensation Plan July 11, 2000
10.5 1990 Omnibus Stock Incentive Plan Exhibit 4 to Registration Statement
on Form S-8, File No. 333-08071,
filed on July 21, 1996
23.1 Consent of Robert B. Sari, Esq. (included as Filed herewith
part of Exhibit 5.1 hereto)
23.2 Independent Auditor's Consent Filed herewith
24.1 Powers of Attorney (included on the signature Filed herewith
page hereto)
II-3
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraph (a)(1)(i) and (a) (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934, (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 6, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed in its behalf by the undersigned, thereunto duly
authorized, in the City of Camp Hill, State of Pennsylvania, on this 7 day of
August, 2003.
RITE AID CORPORATION
By: /s/ Mary F. Sammons
----------------------
Name: Mary F. Sammons
Title: President and
Chief Executive Officer
KNOWN ALL MEN BY THESE PRESENTS that each person whose signature to
this Registration Statement appears below hereby constitutes and appoints Robert
B. Sari and Kevin J. Twomey, or either of them, as such person's true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person and in such person's name, place and stead, in any and all
capacities, to sign any and all amendments to the Registration Statement,
including post-effective amendments, and registration statements filed pursuant
to Rule 462 under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and does hereby grant unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that each said attorney-in-fact
and agent, or any substitute therefor, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert G. Miller
--------------------------------------
Robert G. Miller Chairman of the Board August 7, 2003
/s/ Mary F. Sammons
--------------------------------------
Mary F. Sammons President, Chief Executive August 7, 2003
Officer and Director
/s/ John T. Standley
--------------------------------------
John T. Standley Senior Executive Vice President August 7, 2003
and Chief Administrative Officer
/s/ Christopher S. Hall
--------------------------------------
Christopher S. Hall Executive Vice President and August 7, 2003
Chief Financial Officer
(Principal Financial Officer)
/s/ Kevin Twomey
--------------------------------------
Kevin Twomey Senior Vice President and Chief August 7, 2003
Accounting Officer
(Principal Accounting Officer)
/s/ John G. Danhakl
--------------------------------------
John G. Danhakl Director August 7, 2003
/s/ Alfred M. Gleason
--------------------------------------
Alfred M. Gleason Director August 7, 2003
/s/ George G. Golleher
--------------------------------------
George G. Golleher Director August 7, 2003
/s/ Colin V. Reed
--------------------------------------
Colin V. Reed Director August 7, 2003
/s/ Stuart M. Sloan
--------------------------------------
Stuart M. Sloan Director August 7, 2003
/s/ Jonathan D. Sokoloff
--------------------------------------
Jonathan D. Sokoloff Director August 7, 2003
II-7
EXHIBIT INDEX
EXHIBIT
NUMBERS DESCRIPTION INCORPORATION BY REFERENCE TO
------- ----------- -----------------------------
3.1 Restated Certificate of Incorporation dated Exhibit 3(i) to Form 8-K filed on
December 12, 1996 November 2, 1999
3.2 Certificate of Amendment to the Restated Exhibit 3(ii) to Form 8-K filed on
Certificate of Incorporation dated November 2, 1999
October 25, 1999
3.3 Certificate of Amendment to Restated Certificate Exhibit 3.4 to Registration
of Incorporation dated June 27, 2001 Statement on Form S-1, File No.
333-64950, filed on July 12, 2001
3.4 8% Series D Cumulative Pay-in-kind Preferred Exhibit 3.5 to Form 10-Q filed on
Stock Certificate of Designation dated October 12, 2001
October 3, 2001
3.5 By-laws, as amended on November 8, 2000 Exhibit 3.1 to Form 8-K filed on
November 13, 2000
3.6 Amendment to By-laws, adopted January 30, 2002 Exhibit T3B.2 to Form T-3 filed on
March 4, 2002
5 Opinion of Robert B. Sari, Esq. Filed herewith
10.1 1999 Stock Option Plan Exhibit 10.1 to Form 10-K filed on
May 21, 2001
10.2 2000 Omnibus Equity Plan Included in Proxy Statement dated
October 24, 2000
10.3 2001 Stock Option Plan Exhibit 10.3 to Form 10-K filed on
May 21, 2001
10.4 Rite Aid Corporation Special Deferred Exhibit 10.21 to Form 10-K filed on
Compensation Plan July 11, 2000
10.5 1990 Omnibus Stock Incentive Plan Exhibit 4 to Registration Statement
on Form S-8, File No. 333-08071, filed
on July 12, 1996
23.1 Consent of Robert B. Sari, Esq. (included as Filed herewith
part of Exhibit 5.1 hereto)
23.2 Independent Auditor's Consent Filed herewith
24.1 Powers of Attorney (included on the signature Filed herewith
page hereto)
II-8