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 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
------------------------------------------------------------------------------
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2004 and 2003 2
Statement of Changes in Net Assets Available for Benefits for the
year ended December 31, 2004 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Line 4i--Schedule of Assets (Held at End of
Year) as of December 31, 2004 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 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 (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 SERVICES, L.L.C. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
------------------------------------------------------------------------------
2004 2003
ASSETS:
Participant-directed investments $2,407,900 $2,067,914
---------- ----------
Contributions receivable:
Employer 214 200
Employee 2,832 2,738
---------- ----------
Total contributions receivable 3,046 2,938
NET ASSETS AVAILABLE FOR BENEFITS $2,410,946 $2,070,852
========== ==========
See notes to financial statements.
-2-
RITE AID SERVICES, L.L.C. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2004
------------------------------------------------------------------------------
ADDITIONS:
Employee contributions $ 144,406
Settlement contributions (Note 1) 1,296
Net appreciation in fair value of investments 101,032
Investment income 104,131
----------
Total additions 350,865
DEDUCTIONS:
Benefit payments 5,964
Loan defaults 4,807
----------
Total deductions 10,771
INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 340,094
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 2,070,852
----------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $2,410,946
==========
See notes to financial statements.
-3-
RITE AID SERVICES, L.L.C. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND 2003
AND FOR THE YEAR ENDED DECEMBER 31, 2004
-------------------------------------------------------------------------------
1. PLAN DESCRIPTION
The following brief description of the Rite Aid Services, L.L.C. 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 participant
accounts, if any.
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.
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--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 pretax contributions as
defined by the Plan. A participant may also contribute, or roll over,
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.
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 $1,296 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
-4-
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,
participants were provided with the option to invest in twelve funds.
Effective October 1, 2004, the Plan provided participants 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 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--A participant may elect to borrow against the participant's
vested balance at a reasonable rate of interest as defined in the Plan
document. 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 the Plan was amended to no longer allow more than one loan.
Vesting--A participant is vested immediately in the participant's
voluntary contributions, plus actual earnings (losses) thereon. Vesting
in the Plan Sponsor's contributions made prior to June 16, 2001 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. 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 may
be reallocated to participants in the same manner as matching
contributions. There were no forfeitures for the year ended December 31,
2004.
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
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 480 and 312 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%.
-5-
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.
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 $1,204,787 $ -
T. Rowe Price Equity Index Trust 266,920 -
Dodge & Cox Balanced Fund 255,032 -
Northern Trust Global Advisors Large-Cap Growth Fund 205,000 -
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
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 101,920
Common Stock (888)
---------
Total net appreciation $ 101,032
=========
-6-
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 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 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.
As a result of this review, in July 2001, the Plan Administrator filed a
Voluntary Correction Program ("VCP") with the IRS requesting a
compliance statement and approval of the correction method for
operational failures identified. On August 20, 2004, the Plan
Administrator received a fully executed compliance statement containing
IRS approval of the correction methods submitted. The Plan Sponsor
completed all corrections in accordance with the compliance statement by
January 2005, thereby eliminating exposure to penalties, taxes or
disqualification by the IRS.
******
-7-
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, 2004
------------------------------------------------------------------------------
Identity of Issue Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 1,758
*T. Rowe Price Equity Index Trust 266,920
*T. Rowe Price Retirement 2020 43,536
*T. Rowe Price Retirement 2015 33,833
*T. Rowe Price Extended Equity Market Index Fund 8,531
*T. Rowe Price International Equity Index Fund 8,295
*T. Rowe Price Retirement 2040 8,047
*T. Rowe Price Retirement 2025 1,174
*T. Rowe Price Retirement 2030 856
*T. Rowe Price Bond Index Trust 47
*Prudential Stable Value Fund 1,204,787
Dodge & Cox Balanced Fund 255,032
Northern Trust Global Advisors Large-Cap Growth Fund 205,500
Northern Trust Global Advisors International Equity Fund 62,454
Northern Trust Global Advisors Large-Cap Value Fund 19,623
Northern Trust Global Advisors Small-Cap Fund 3,263
Northern Trust Global Advisors Mid-Cap Fund 1,671
Pimco Total Return Fund 65,346
Vanguard Small-Cap Index Fund 8,533
*Participant Notes Loan Fund** 208,694
----------
TOTAL $2,407,900
==========
*Party-in-interest
**The loans range in interest rates from 5.0% to 10.5% and expire through 2021.
-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 SERVICES, L.L.C. 401(k) 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
------ -----------
23 Consent of Independent Registered Public Accounting Firm