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:
The Rite Aid 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
THE RITE AID 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, 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 4-8
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2004:
Form 5500, Schedule H, Line 4i -- Schedule of Assets
(Held at End of Year) 9
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
The Rite Aid 401(k) Plan:
We have audited the accompanying statements of net assets available for
benefits of The Rite Aid 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
THE RITE AID 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
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2004 2003
ASSETS:
Participant-directed investments $1,018,029,128 $926,069,242
Cash 2,573 -
Contributions receivable:
Employer 3,233,270 3,469,972
Employee 646,290 1,170,044
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Total contributions receivable 3,879,560 4,640,016
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NET ASSETS AVAILABLE FOR BENEFITS $1,021,911,261 $930,709,258
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See notes to financial statements.
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THE RITE AID 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2004
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ADDITIONS:
Employee contributions $ 67,996,193
Employer contributions 30,683,999
Settlement contribution (Note 1) 7,040,602
Rollover contributions 1,300,565
Net appreciation in fair value of investments 63,249,925
Investment income 15,942,031
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Total additions 186,213,315
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DEDUCTIONS:
Benefit payments 93,020,973
Loan defaults 1,990,339
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Total deductions 95,011,312
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 91,202,003
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 930,709,258
--------------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $1,021,911,261
==============
See notes to financial statements.
-3-
THE RITE AID 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004
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1. DESCRIPTION OF THE PLAN
The following brief description of The Rite Aid 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 and allocated 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--Substantially all non-union Plan Sponsor employees become
eligible to participate in the Plan after attaining age 21 and completing
three months of service. Participants of the Plan are eligible for
matching contributions upon attaining age 21 and completing one year of
service (a twelve-month period when at least 1,000 hours are credited).
Contributions--Participants may contribute a portion of pretax annual
compensation up to the maximum dollar limit, as defined in the Plan.
Participants age 50 and over may make additional pretax contributions, as
defined in the Plan. The Plan Sponsor matches 100% of a participant's
pretax payroll contributions, up to a maximum of 3% of such participant's
pretax annual compensation. Thereafter, the Plan Sponsor will match 50%
of the participant's additional pretax payroll contributions, up to a
maximum of 2% of such participant's additional pretax annual
compensation. Compensation is limited to eligible compensation as defined
by the Plan and limited by the Internal Revenue Service ("IRS"). A
participant may also contribute, or rollover, amounts representing
distributions from another qualified defined benefit or defined
contribution plan.
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 $7,040,602 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.
-4-
One of the settlement agreements also requires that the Company maintain
the safe-harbor matching formula from 2003 through 2006. In addition,
subject to the terms of that settlement agreement, the Company must make
a supplemental matching contribution for years 2003 through 2006 if the
total dollar amount of the matching contributions for all participants
for each and any of those years is less than the total dollar amount of
the 2002 matching contribution to the Plan. The Company's matching
contribution for 2004 exceeded the 2002 contribution, and no such
supplemental matching contribution was required for the year ended
December 31, 2004. If a supplemental matching contribution is made, it
will be allocated to the accounts of then-current Plan participants who
received a regular matching contribution in proportion to each
participant's regular matching contribution.
Investment Options--Prior to the change in the Plan's trustee,
participants were provided with the option to invest in thirteen funds.
Effective October 1, 2004, the Plan provided a participant the discretion
of investing the participant's account balance in up to 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 benefit distributions in one of several forms, including
annuities, installment payments or lump-sum payments. In certain cases,
spousal consent may be required in order to elect a form of distribution
other than a joint and survivor annuity. Benefits are payable upon
retirement, termination of employment, or the death or disability of the
participant. In certain circumstances, benefits may be paid to a
participant prior to the participant's termination of employment.
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 three outstanding loans which were grandfathered at the time
the Plan was amended to no longer allow more than one loan.
Vesting--Participants are immediately vested in all employee
contributions credited to the participant's accounts plus actual earnings
(losses) thereon. Effective January 1, 2002, participants became
immediately vested in all Plan Sponsor's contributions credited to the
participant's accounts plus actual earnings (losses) thereon made after
that date. Prior to January 1, 2002, vesting in the Plan Sponsor's
contributions was based on years of service, as defined in the Plan
document. A participant becomes fully vested in the Company's
contributions upon the participant's death, disability, attainment of
normal retirement age while employed, or the occurrence of a Plan
termination. 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.
Forfeitures for the year ended December 31, 2004 were $427,609.
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.
-5-
The Plan had 2,708,558 and 2,914,379 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 3.00% 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.
-6-
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's assets:
December 31,
-----------------------------------------
2004 2003
Prudential Stable Value Fund $286,936,935 $ -
T. Rowe Price Equity Index Trust 158,728,316 -
Northern Trust Global Advisors Large-Cap Growth Fund 126,700,016 -
Dodge & Cox Balanced Fund 112,877,488 -
Northern Trust Global Advisors Large-Cap Value Fund 61,242,256 -
Northern Trust Global Advisors Small-Cap Fund 54,996,235 -
Northern Trust Global Advisors International Equity Fund 51,287,851 -
Prudential Guaranteed Interest Account - 283,411,554
Prudential Dryden Stock Index Fund - 155,727,656
Prudential Jennison Growth Fund - 129,804,926
Prudential MFS Total Return Fund - 95,720,393
Alliance Growth & Income Fund - 55,056,803
PIMCO Total Return Fund - 52,429,474
Prudential Strategic Partners International Value Fund - 45,512,559
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 $66,798,825
Common stock (3,548,900)
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Total net appreciation $63,249,925
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4. TAX STATUS
The Plan has received a determination letter dated June 27, 2003, in
which the 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 and subject to
the terms of the settlement agreement whereby the Company must make a
supplemental matching contribution in years 2003 through 2006 if the total
dollar amount of the matching contribution for all participants for each
and any of those years is less than the total dollar amount of the 2002
-7-
matching contribution. In the event the Plan terminates, participants
would become fully vested in the 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 the following actions were taken:
In April 2001, the Plan Administrator filed a Voluntary Correction of
Operational Failures (the "April 2001 VCO") filing with the IRS,
requesting a compliance statement and approval of the correction method
for operational failures identified. The Plan Administrator received a
compliance statement from the IRS regarding the April 2001 VCO filing on
July 18, 2003. The Plan Administrator has completed the corrections in
accordance with the July 18, 2003 compliance statement, thereby
eliminating exposure to penalties, taxes or disqualification by the IRS
for the failures noted in the April 2001 VCO.
In September 2003, the Plan Administrator filed another Voluntary
Correction of Operational Failures program (the "September 2003 VCO")
with the IRS, requesting a compliance statement and approval of the
correction method for additional operational failures identified. The
Plan Administrator is in discussions with the IRS regarding the issues
identified in the September 2003 VCO. The Plan Administrator believes
that the proposed correction methods are acceptable under IRS guidelines.
The Plan Administrator believes that the processes identified for
remediation in the September 2003 VCO would not cause the Plan to be
disqualified by the IRS. Penalties, taxes and remedial payments, if any,
due to noncompliance will be paid by the Plan Sponsor.
******
-8-
THE RITE AID 401(k) 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 Issue Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 9,913,321
*Prudential Stable Value Fund 286,936,935
*T. Rowe Price Equity Index Trust 158,728,316
*T. Rowe Price Retirement 2020 7,643,585
*T. Rowe Price Retirement 2015 5,656,654
*T. Rowe Price Retirement 2030 5,054,941
*T. Rowe Price Retirement 2010 4,298,867
*T. Rowe Price Retirement 2025 2,305,157
*T. Rowe Price International Equity Index Fund 2,269,322
*T. Rowe Price Extended Equity Market Index Fund 2,066,328
*T. Rowe Price Retirement 2040 1,945,571
*T. Rowe Price Retirement 2035 1,333,584
*T. Rowe Price Retirement Income Fund 819,585
*T. Rowe Price Bond Index Trust 783,816
*T. Rowe Price Retirement 2005 537,055
*T. Rowe Price Insurance Fund 756
Northern Trust Global Advisors Large-Cap Growth Fund 126,700,016
Northern Trust Global Advisors Large-Cap Value Fund 61,242,256
Northern Trust Global Advisors Small-Cap Fund 54,996,235
Northern Trust Global Advisors International Equity Fund 51,287,851
Northern Trust Global Advisors Mid-Cap Fund 26,918,230
Dodge & Cox Balanced Fund 112,877,488
Vanguard Small-Cap Index Fund 3,509,721
Pimco Total Return Fund 50,823,417
Sempra Energy Sempra Energy Stock 16,122,435
*Participant notes Loan Fund** 23,257,686
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TOTAL $1,018,029,128
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*Party-in-interest
**The loans range in interest rates from 5.0% to 10.5% and expire through 2021.
-9-
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.
THE RITE AID 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
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23 Consent of Independent Registered Public Accounting Firm