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, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5742
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Rite Aid 401(k) Distribution Employees Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
TABLE OF CONTENTS
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Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND 2003,
AND FOR THE YEAR ENDED DECEMBER 31, 2004:
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, 2004:
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
To the Plan Administrator and Participants of
Rite Aid 401(k) Distribution Employees Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of the Rite Aid 401(k) Distribution Employees Savings Plan (the
"Plan") as of December 31, 2004 and 2003, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2004.
These financial statements are the responsibility of the Plan Administrator.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Plan is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Plan's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the Plan Administrator, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2004 and 2003, and the changes in net assets available for benefits for the
year ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is
not a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan Administrator. Such
supplemental schedule has been subjected to the auditing procedures applied in
our audit of the basic 2004 financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the
basic 2004 financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 21, 2005
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
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2004 2003
ASSETS:
Participant-directed investments $2,182,057 $1,900,378
Employee contributions receivable 4,087 3,378
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NET ASSETS AVAILABLE FOR BENEFITS $2,186,144 $1,903,756
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See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2004
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ADDITIONS:
Employee contributions $ 224,316
Settlement contributions (Note 1) 21,520
Net appreciation in fair value of investments 107,871
Investment income 87,643
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Total additions 441,350
DEDUCTIONS:
Benefit payments 155,329
Loan defaults 3,633
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Total deductions 158,962
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 282,388
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 1,903,756
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NET ASSETS AVAILABLE FOR BENEFITS--End of year $ 2,186,144
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See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004
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1. PLAN DESCRIPTION
The following brief description of the Rite Aid 401(k) Distribution
Employees Savings Plan (the "Plan") is provided for general
informational purposes only. Participants should refer to the Plan
document for a more complete description of the Plan's provisions.
General--The Plan is a defined contribution plan sponsored by Rite Aid
Corporation (the "Company" or "Plan Sponsor"). An individual account is
established for each participant and provides benefits that are based on
(a) amounts the participant contributes to the participant's account,
and (b) investment earnings (losses), less any administrative expenses
charged to participant accounts, if any.
Effective October 1, 2004, T. Rowe Price Trust Company was engaged to
serve as Plan trustee with respect to all assets other than Company
stock. Prior to October 1, 2004, Northern Trust Company was engaged to
serve as Plan trustee with respect to all assets other than Company
stock. LaSalle Bank National Association serves as Plan trustee with
respect to Company stock. The Employee Benefits Administration Committee
is the plan administrator ("Plan Administrator") and is responsible for
the preparation of the Plan's financial statements.
Participation--The Plan covers union employees at the Rite Aid of Rome,
New York Distribution Center and the Rite Aid of West Virginia
Distribution Center who have completed at least one year of service (a
twelve-month period when at least 1,000 hours are credited), and have
attained the age of 21 years.
Contributions--Each year, a participant may contribute up to 15% of the
participant's pretax annual compensation, as defined in the Plan.
Participants age 50 and over may make additional pretax contributions,
as defined by the Plan. A participant also may contribute, or roll over,
amounts representing distributions from another qualified defined
benefit or defined contribution plan. There are no Plan Sponsor
contributions except as described in the next paragraph.
Two settlement agreements had been entered into with respect to
litigation involving the Company common stock held by the Plan. Under
these settlement agreements, certain additional contributions were made
to the Plan as restorative payments, which were in addition to the
contributions otherwise made to the Plan. In February 2004, restorative
payments of $21,520 were made to the Plan. The restorative payments were
allocated to the accounts of certain participants (as described in the
settlement agreements) whose accounts under the Plan included
investments in the Company common stock. The restorative payments are
fully vested and have been commingled with the eligible individuals'
before-tax contributions. There will be no further contributions
stemming from these settlement agreements.
Investment Options--Prior to the change in the Plan's trustee, employees
were provided with the option of investing in twelve funds. Effective
October 1, 2004, the Plan provided employees with the option of
investing in twenty-three funds. The funds vary in degree of risk and
investment objective.
Payment of Benefits--Upon termination of service, a participant may
elect to receive a lump sum amount equal to the value of the
participant's account or installment payments.
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Loans--A participant may elect to borrow against the participant's
vested balance at a reasonable rate of interest as defined in the Plan.
A participant may borrow up to 50% of the participant's vested balance,
with a maximum loan of $50,000. A participant may only have one loan
outstanding at any one time with the exception that participants may
have up to two outstanding loans which were grandfathered at the time
when the Plan was amended to no longer allow more than one loan.
Vesting--A participant is vested immediately in all contributions
credited to the participant's account plus actual earnings (losses)
thereon.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements have been
prepared on the accrual basis of accounting.
Investments--The Plan's investments are stated at fair value, except the
Stable Value Fund and the Guaranteed Interest Account, as measured by
quoted prices in an active market. Realized gain or loss on investment
transactions is determined using the first-in, first-out method;
investment transactions are recorded at the trade date. Interest income
is recorded on the accrual basis. Dividend income is recognized on the
ex-dividend date.
The Plan had 6,143 and 6,284 shares of Company common stock at December
31, 2004 and 2003, respectively.
On July 9, 2004, the Plan began to offer the Prudential Stable Value
Fund ("SVF"), which is a trust product and is comprised of a group
annuity insurance product issued by The Prudential Insurance Company of
America ("Prudential") and a portfolio of assets owned by the plan or
designee. Interest on the SVF is credited daily. Prudential declares an
annual interest rate on a quarterly basis and credits one-fourth of that
amount on a quarterly basis. The SVF is deemed to be fully benefit
responsive; therefore, it is presented at contract value, which
approximates fair value. The average yield was 4.71% for 2004. As of
December 31, 2004, the crediting interest rate was 4.86%.
The Plan offered, as an investment option, the Guaranteed Interest
Account (the "GIA") until July 9, 2004. The GIA is a group annuity
insurance product issued by Prudential. Interest on the GIA is credited
daily. Prudential declares the current interest rate on each successive
calendar quarter, which remains in effect until the end of the calendar
year following the year of purchase. The GIA is deemed to be fully
benefit responsive; therefore, it is presented at contract value, which
approximates fair value. The average yield was 3.50% for 2004. As of
December 31, 2003, the crediting interest rate was 3.00%.
Administrative Expenses--Plan fees and expenses related to account
maintenance, transaction and investment fund management are allocated to
participant accounts. Under the terms of the Plan document, costs
relating to Plan administration may be paid by the Plan Sponsor or paid
from Plan forfeitures. For the year ended December 31, 2004, the Plan
Sponsor has paid substantially all administrative expenses.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires the Plan Administrator to make estimates and
assumptions that affect the reported amounts of net assets available for
benefits at the date of the financial statements and the reported
changes to the Plan's net assets available for benefits during the
reporting period. Actual results may differ from those estimates and
assumptions.
-5-
The Plan invests in mutual funds, corporate stocks, the SVF 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,
-------------------------------
2004 2003
Prudential Stable Value Fund $823,824 $ -
T. Rowe Price Equity Index Trust 313,982 -
Dodge & Cox Balanced Fund 311,149 -
Northern Trust Global Advisors Large-Cap Growth Fund 283,208 -
Northern Trust Global Advisors International Equity Fund 152,827 -
Prudential Guaranteed Interest Account - 769,299
Prudential Dryden Stock Index Fund - 308,703
Prudential Jennison Growth Fund - 278,186
Prudential MFS Total Return Fund - 238,735
Prudential Strategic Partners International Value Fund - 141,379
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated (depreciated) in
value as follows:
Year Ended
December 31,
2004
Investments:
Mutual Funds $122,475
Common Stock (14,604)
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Total net appreciation $107,871
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4. TAX STATUS
The Plan obtained its latest determination letter dated June 27, 2003,
in which the Internal Revenue Service ("IRS") stated that the Plan, as
then designed, was in compliance with the applicable requirements of the
Internal Revenue Code ("IRC"). The Plan has been amended since receiving
the determination letter. The Plan Administrator believes that the Plan
is currently designed and being operated in compliance with the
applicable requirements of the IRC. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsor has
the right under the Plan to terminate the Plan subject to the provisions
of ERISA.
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6. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price Trust Company, the trustee and custodian of the Plan, and
Prudential, a former custodian of the Plan. The transactions related to
such investments qualify as party-in-interest transactions. The Plan has
also permitted investment in the common stock of the Plan Sponsor, and
therefore these transactions qualify as party-in-interest transactions.
The Plan Administrator does not consider Plan Sponsor contributions or
benefits paid by the Plan to be party-in-interest transactions.
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, 2004 is $18,127.
The Plan Administrator has not filed a Voluntary Correction Program
("VCP") with the IRS requesting a compliance statement and approval of
the correction method for operational failures identified in the Plan.
The Plan Administrator expects to take proper corrective actions,
including contributions and disbursements in 2005. The Plan
Administrator believes that the processes identified for remediation
would not cause the Plan to be disqualified by the IRS, therefore no
provision for income taxes had been included in the Plan's financial
statements. Penalties, taxes and remedial payments, if any, due to
non-compliance will be paid by the Company.
******
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
FORM 5500, SCHEDULE H, LINE 4i--SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2004
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Current
Identity of Issuer Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 22,483
*T. Rowe Price Equity Index Trust 313,982
*T. Rowe Price Retirement 2010 32,426
*T. Rowe Price Retirement 2025 20,381
*T. Rowe Price Retirement 2030 4,017
*T. Rowe Price Bond Index Trust 3,799
*T. Rowe Price Retirement 2015 623
*T. Rowe Price Retirement 2020 330
*T. Rowe Price Retirement 2040 317
*T. Rowe Price Retirement 2035 72
*T. Rowe Price Retirement Income Fund 34
*T. Rowe Price Extended Equity Market Index Fund 19
*T. Rowe Price International Equity Index Fund 12
*Prudential Stable Value Fund 823,824
Dodge & Cox Balanced Fund 311,149
Northern Trust Global Advisors Large-Cap Growth Fund 283,208
Northern Trust Global Advisors International Equity Fund 152,827
Northern Trust Global Advisors Large-Cap Value Fund 74,462
Northern Trust Global Advisors Mid-Cap Fund 16,719
Northern Trust Global Advisors Small-Cap Fund 5,910
Pimco Total Return Fund 39,296
Vanguard Small-Cap Index Fund 3,780
*Participant notes Loan Fund** 72,387
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TOTAL $2,182,057
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* Party-in-interest
** The loans range in interest rates from 5.0% to 10.5% and expire through 2011.
-8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
RITE AID 401(k) DISTRIBUTION EMPLOYEES
SAVINGS PLAN
By: /s/ Theresa G. Nichols
---------------------------------
Theresa G. Nichols, not in her
individual capacity, but solely as
an authorized signatory for the
Employee Benefits Administration
Committee
Date: June 29, 2005
EXHIBIT INDEX
Exhibit
Number Description
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23 Consent of Independent Registered Public Accounting Firm