SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5742
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Rite Aid Services, L.L.C. 401(k) 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 SERVICES, L.L.C. 401(k) PLAN
TABLE OF CONTENTS
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Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS AS OF December 31, 2003 and 2002,
AND FOR THE YEAR ENDED DECEMBER 31, 2003:
Statements of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 8
All other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are not
applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator and Participants of
Rite Aid Services, L.L.C. 401(k) Plan:
We have audited the accompanying statements of net assets available for
benefits of the Rite Aid Services, L.L.C. 401(k) Plan (formerly the Perry
Distributors, Inc. 401(k) Plan) (the "Plan") as of December 31, 2003 and 2002,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2003. These financial statements are the
responsibility of the Plan Administrator. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for the
year ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is
not a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan Administrator. Such
supplemental schedule has been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 17, 2004
RITE AID SERVICES, L.L.C. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
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2003 2002
ASSETS:
Investments $2,067,914 $1,800,893
Contributions receivable:
Employer 200 481
Employee 2,738 2,796
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Total contributions receivable 2,938 3,277
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NET ASSETS AVAILABLE FOR BENEFITS $2,070,852 $1,804,170
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See notes to financial statements.
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RITE AID SERVICES, L.L.C. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2003
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ADDITIONS:
Employee contributions $ 145,718
Net appreciation in fair value of investments 156,006
Investment income 64,321
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Total additions 366,045
DEDUCTIONS:
Benefit payments 95,280
Loan defaults 3,802
Other 281
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Total deductions 99,363
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 266,682
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 1,804,170
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NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 2,070,852
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See notes to financial statements.
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RITE AID SERVICES, L.L.C. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003
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1. PLAN DESCRIPTION
The following brief description of the Rite Aid Services, L.L.C. 401(k)
Plan (formerly the Perry Distributors, Inc. 401(k) 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. An individual account is
established for each participant and provides benefits that are based on
(a) amounts the participant and Rite Aid Corporation (the "Company" or
"Plan Sponsor") contributed to a participant's account, (b) investment
earnings (losses), and (c) any forfeitures allocated to the account, less
any administrative expenses charged to the Plan.
Effective January 2, 2003, employees of Perry Distributors, Inc. have
become employees of Rite Aid Services L.L.C., a wholly owned subsidiary of
the Plan Sponsor. The Plan has continued to be recognized by the Plan
Sponsor. Accordingly, all participants are provided the same benefits that
were previously provided by the Plan before the creation of Rite Aid
Services, L.L.C.
On December 11, 2002, the Plan Sponsor created the Trustee Search
Committee ("TSC"), charged with engaging an institutional trustee for the
Plan. Effective April 1, 2003, Northern Trust Company was engaged to serve
as Plan trustee with respect to all assets other than the Company stock
fund. LaSalle Bank National Association was engaged to serve as the Plan
trustee with respect to the Company stock fund. On that date, the TSC was
renamed the Employee Benefits Administration Committee and named plan
administrator ("Plan Administrator"). The Plan Administrator is
responsible for the preparation of the Plan's financial statements.
In March 1995, Perry Drug Stores, Inc. was acquired by the Plan Sponsor,
who elected to continue this Plan.
Participation--Each employee who is a member of the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America, Local 614 becomes eligible to participate in the Plan after
attaining age 21 and completing one year of service (a twelve-month
period when at least 1,000 hours are credited).
Contributions--Each year, a participant may elect to contribute up to
15% of the participant's pretax annual compensation, as defined in the
Plan. Participants age 50 and over may make additional pre-tax
contributions, as defined by the Plan. A participant may also
contribute, or rollover, amounts representing distributions from
another qualified defined benefit or defined contribution plan.
Effective June 16, 2001, the Plan Sponsor ceased making contributions
to the Plan pursuant to a collective bargaining agreement dated May
27, 2001. Employees continue to contribute as described above,
however, there is no Plan Sponsor match.
Various settlement agreements had been entered into with respect to
litigation involving the Company common stock held by the Plan. Under
these settlement agreements, certain additional contributions were
made to the Plan as restorative payments, which were in addition to
the contributions otherwise made to the Plan. In February 2004,
restorative payments of $1,296 were made to the Plan. The
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restorative payments were allocated to the accounts of certain
participants (as described in the settlement agreements) whose accounts
under the Plan included investments in the Company common stock. The
restorative payments are fully vested and have been commingled with the
eligible individuals' before-tax contributions. There will be no further
contributions stemming from these settlement agreements. These restorative
payment amounts have not been recorded in the Statement of Net Assets
Available for Benefits or the Statement of Changes in Net Assets Available
for Benefits as of and for the year ended December 31, 2003.
Investment Options--The Plan provides participants with the option of
investing in twelve funds. The funds vary in degree of risk and
investment objective.
Payment of Benefits--Upon termination of service due to death, disability,
or retirement, a participant may elect to receive a lump sum amount equal
to the value of the participant's vested interest in the participant's
account, or installment payments as determined by the Plan Administrator.
Loans--Loans under the Plan are not permitted. However, the Plan
Administrator has identified loans made under the Plan resulting in an
operational failure. To correct this operational failure, the Plan Sponsor
has proposed to retroactively amend the Plan to permit a participant to
have one loan outstanding at any one time. This operational failure and
the proposed correction method have been identified in the Voluntary
Correction Program ("VCP") described in Note 7.
Vesting--A participant is vested immediately in the participant's
voluntary contributions, plus actual earnings (losses) thereon. Vesting in
the Plan Sponsor's contributions is based on years of service, as defined
in the Plan document. A participant becomes fully vested in the Plan
Sponsor contributions upon the participant's death, disability or
attainment of normal retirement age while employed, or the occurrence of a
plan termination. If not vested earlier for one of the foregoing reasons,
and not subject to other exceptions described in the Plan document, a
participant's account becomes fully vested upon the participant's
attainment of five years of service.
Forfeitures--When a participant withdraws from the Plan prior to becoming
fully vested, the non-vested portion of the participant's account is
forfeited and credited to a suspense account. The suspense account will be
reallocated to participants in the same manner as matching contributions.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements are prepared on
the accrual basis of accounting.
Investments--The Plan's investments are stated at fair value, except the
Guaranteed Interest Account, as measured by quoted prices in an active
market. Realized gain or loss on investment transactions is determined
using the first-in, first-out method; investment transactions are recorded
at the trade date. Interest income is recorded on the accrual basis.
Dividend income is recognized on the ex-dividend date.
The Plan had 312 and 347 shares of Company common stock at December 31,
2003 and 2002, respectively.
The Guaranteed Interest Account ("GIA") is a group annuity insurance
product issued by The Prudential Insurance Company of America.
Interest on the GIA is credited daily. Prudential declares the current
interest rate on each successive calendar quarter which remains in
effect until the end of the calendar year following the year of purchase.
The GIA is deemed to be fully benefit responsive, therefore, it is
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presented at contract value which approximates fair value. The average
yield was 3.25% for 2003. As of December 31, 2003 and 2002, the
crediting interest rates were 3.00% and 3.75%, respectively.
Administrative Expenses-- Plan fees and expenses related to account
maintenance, transaction and investment fund management are allocated to
participant accounts. Under the terms of the Plan document, costs relating
to Plan administration may be paid by the Plan Sponsor, net of
forfeitures. For the year ended December 31, 2003, the Plan Sponsor has
paid substantially all administrative expenses.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires the Plan Administrator to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those
estimates and assumptions.
The Plan invests in mutual funds, corporate stocks and the GIA.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit, and overall market volatility. Due to the level of
risk associated with certain investment securities, it is reasonably
possible that changes in the values of investment securities will occur in
the near term and that such changes could materially affect the amounts
reported in the Statements of Net Assets Available for Benefits.
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's assets:
December 31,
----------------------------
2003 2002
Prudential Guaranteed Interest Account $1,081,248 $1,008,531
Prudential Dryden Stock Index Fund 258,194 160,010
Prudential Jennison Growth Fund 215,136 181,419
Prudential MFS Total Return Fund 214,936 -
Prudential Active Balanced Fund - 160,619
The Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value
as follows:
Year Ended
December 31,
2003
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Investments, at fair value:
Mutual Funds $ 154,963
Common Stock 1,043
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Total appreciation $ 156,006
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4. TAX STATUS
The Plan obtained its latest determination letter dated July 8, 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, including the processes
identified for remediation. Therefore, no provision for income taxes
has been included in the Plan's financial statements.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsor
has the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA. In
the event the Plan terminates, participants would become fully vested
in their Plan Sponsor contributions.
6. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by
Prudential, the custodian of the Plan. The transactions related to
such investments qualify as party-in-interest transactions. The Plan
has also permitted investment in the common stock of the Plan Sponsor
and therefore these transactions qualify as party-in-interest
transactions. The Plan does not consider Plan Sponsor contributions
or benefits paid by the Plan to be party-in-interest transactions.
7. CONTINGENCY
In late 1999, the Plan Sponsor's Board of Directors hired a new
executive management team to address and resolve various business,
operational and financial challenges confronting the Plan Sponsor.
New management reviewed the administration of the Plan for purposes
of determining compliance with provisions of the Plan and regulatory
requirements. The Plan Administrator identified certain processes not
in compliance with the provisions of the Plan or regulatory
requirements, the more significant of which was as follows:
a) The Plan was not being operated in accordance with the Plan
document relating to the disbursement of minimum account
balances. The Plan calls for lump-sum disbursements of a
participant's account following a termination or retirement
if that participant's account is not more than $5,000. The
estimate of the minimum account balances subject to
disbursement in accordance with the Plan document at
December 31, 2003 is $4,624. This defect was included within
the Voluntary Correction Program ("VCP") filing with the IRS
and its correction is subject to the receipt of a VCP filing
compliance statement from the IRS as described below.
In July 2001, the Plan Administrator filed a VCP with the IRS
requesting a compliance statement and approval of the correction
method for operational failures identified. The Plan Administrator
has received a compliance statement that contains IRS approval of the
correction methods submitted. This compliance statement has been
signed by the Company and returned to the IRS for signature. Upon
execution by the IRS, the Plan Administrator will receive a fully
executed copy of the compliance statement and begin the correction
process. The Plan Administrator believes that the processes
identified for remediation would not cause the Plan to be
disqualified by the IRS. Penalties, taxes and remedial payments, if
any, due to non-compliance will be paid by the Plan Sponsor.
******
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RITE AID SERVICES, L.L.C. 401(k) PLAN
FORM 5500, SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
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Identity of Issue Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 1,883
*Prudential Guaranteed Interest Account 1,081,248
*Prudential Dryden Stock Index Fund 258,194
*Prudential Jennison Growth Fund 215,136
*Prudential MFS Total Return Fund 214,936
*Prudential Strategic Partners International Stock Fund 56,126
*Prudential MFS Mid-Cap Growth Fund 68
AIM Small-Cap Growth Fund 239
Alliance Growth and Income Fund 17,199
Franklin Templeton Balance Sheet Fund 119
Lord Abbett Mid-Cap Value Fund 68
Pimco Total Return Fund 54,584
*Participant Notes Loan Fund** 168,114
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TOTAL $ 2,067,914
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*Party-in-interest
**The loans range in interest rates from 5.0% to 10.5% and expire through 2021.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
RITE AID SERVICES, L.L.C. 401(k) Plan
By: /s/ Theresa G. Nichols
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Theresa G. Nichols, not in her
individual capacity, but solely as
an authorized signatory for the
Employee Benefits Administration Committee
Date: June 28, 2004
EXHIBIT INDEX
Exhibit
Number Description
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23 Consent of Deloitte & Touche LLP