SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2002
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
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 2002:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2002:
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 8
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2001:
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 9
INDEPENDENT AUDITORS' REPORT
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, 2002 and 2001, and the related statements of
changes in net assets available for benefits for each of the three years in
the period ended December 31, 2002. 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 auditing standards generally
accepted in the United States of America. 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 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,
2002 and 2001, and the changes in net assets available for benefits for each
of the three years in the period ended December 31, 2002 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 schedules listed in
the Table of Contents are presented for the purpose of additional analysis and
are not a required part of the basic financial statements, but are
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. These schedules are the responsibility of the Plan
Administrator. Such supplemental schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are 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
May 12, 2003
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
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2002 2001
ASSETS:
Investments $ 1,471,674 $ 1,436,154
Employee contributions receivable 6,351 11,730
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NET ASSETS AVAILABLE FOR BENEFITS $ 1,478,025 $ 1,447,884
=========== ============
See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
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Year ended December 31,
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2002 2001 2000
ADDITIONS:
Employee contributions $ 252,803 $ 269,654 $ 270,591
Rollover contributions 13,637 4,597 270
Investment income 35,771 33,703 23,616
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Total additions 302,211 307,954 294,477
DEDUCTIONS:
Net depreciation in fair value of investments 223,844 101,301 166,624
Benefit payments 48,226 45,405 93,594
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Total deductions 272,070 146,706 260,218
INCREASE IN NET ASSETS AVAILABLE FOR
BENEFITS 30,141 161,248 34,259
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 1,447,884 1,286,636 1,252,377
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NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 1,478,025 $ 1,447,884 $ 1,286,636
=========== =========== ===========
See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002, 2001 AND 2000
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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
agreement 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 the Plan.
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, The Northern Trust Company was
engaged to serve as Plan trustee with respect to all assets other than
the Rite Aid Corporation Company Stock Fund. LaSalle Bank National
Association was engaged to serve as the Plan trustee with respect to the
Rite Aid Corporation 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.
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,
have been credited with at least 1,000 hours of service, 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. A
participant also may contribute, or rollover, 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.
Various settlement agreements have been entered into with respect to
litigation involving the Company common stock held by the Plan. Under
these settlement agreements, certain additional contributions will be
made to the Plan as restorative payments. These restorative payments are
in addition to the contributions otherwise made to the Plan. The
restorative payments will be allocated to the accounts of certain
participants (as described in the settlement agreement) whose accounts
under the Plan included investments in the Company common stock. The
restorative payments will be fully vested when made, and will be
commingled with the eligible individuals' before-tax contributions. Once
the full amount of the restorative payments is received by the Plan,
there will be no further contributions stemming from these settlement
agreements. Participants have been or will be advised if they are
entitled to share in any of the restorative payments. No restorative
payment amounts have been recorded in the Statement of Net Assets
Available for Benefits.
Investment Options--The Plan provides employees with the option of
investing in ten 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--Participants may elect to borrow against the participant's vested
balances at a reasonable rate of interest as determined by the Plan
Administrator. A participant may borrow up to 50% of the participant's
vested balance, with a minimum loan of $1,000 and a maximum loan of
$50,000. Prior to January 1, 2002, a participant may have two loans
outstanding at any one time. Subsequent to January 1, 2002, a
participant may have only one loan outstanding at any one time.
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
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 6,595 and 6,972 shares of Company common stock at December
31, 2002 and 2001, respectively.
The Guaranteed Interest Account ("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 following
four quarters for contributions received during that calendar quarter.
The GIA is deemed to be fully benefit responsive; therefore, it is
presented at contract value which approximates fair value. The average
yields were 4.49%, 5.06% and 5.31% for 2002, 2001 and 2000,
respectively. As of December 31, 2002 and 2001, the crediting interest
rates were 3.75% and 4.50%, respectively.
Administrative Expenses--Under the terms of the Plan agreement, costs
relating to Plan administration may be paid by the Plan Sponsor. For the
years ended December 31, 2002, 2001 and 2000, 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 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.
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3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's assets:
December 31,
---------------------------------
2002 2001
Prudential Guaranteed Interest Account $ 437,735 $ 337,563
Prudential MoneyMart Assets Fund 232,505 150,401
Prudential Jennison Growth Fund 189,205 277,934
Prudential Active Balanced Fund 181,156 185,456
Prudential Stock Index Fund 154,817 170,039
Prudential International Value Fund 96,881 123,690
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) (depreciated) appreciated in
value as follows:
Year Ended December 31,
----------------------------------------------
2002 2001 2000
Investments, at fair value:
Mutual Funds $(205,614) $(123,683) $ (91,626)
Common Stock (18,230) 22,382 (74,998)
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Total depreciation $(223,844) $(101,301) $(166,624)
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4. TAX STATUS
The Plan obtained its latest determination letter dated January 16,
1995, 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. On February 28, 2002,
the Plan Sponsor submitted the Plan for a new determination letter from
the IRS. 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.
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. CONTINGENCIES
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
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management began the process of reviewing the administration of the Plan
for purposes of determining compliance with provisions of the Plan and
regulatory requirements. The Plan Administrator has identified certain
processes not in compliance with the provisions of the Plan or
regulatory requirements, the more significant of which are as follows:
a) During 2000, the Plan Sponsor failed to withhold and contribute
participants' salary deferral contributions associated with
supplemental salary payments in the amount of $825. The Plan
Sponsor has completed an evaluation of the amount of investment
income that would have been earned by the participants on such
salary deferral contributions during 2000 and the prior periods
in question. The Plan Sponsor estimates the maximum foregone
investment income on such contributions to be $0, $16 and $110
for 2002, 2001 and 2000, respectively. The Plan Sponsor expects
to make a contribution to the respective participant accounts
during 2003.
b) 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 for the Plan
years ended December 31, 2002, 2001 and 2000 is $29,264,
$19,296 and $19,295, respectively. The Plan Sponsor expects to
make required distributions to the respective participants
during 2003.
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 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
FORM 5500, SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
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Current
Identity of Issuer Description of Investment Value
*Prudential Guaranteed Interest Account $ 437,735
*Prudential Jennison Growth Fund 189,205
*Prudential Active Balanced Fund 181,156
*Prudential Stock Index Fund 154,817
*Prudential MoneyMart Assets Fund 232,505
*Prudential International Value Fund 96,881
*Prudential Government Income Fund 17,758
Fidelity Magellan Fund 49,363
*Rite Aid Corporation Company Stock Fund 16,157
Putnam Growth & Income Fund 33,007
**Participant notes Loan Fund 63,090
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TOTAL $ 1,471,674
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*Party-in-interest
** The loans range in interest rates from 5.75% to 10.50% and expire through
2007.
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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, 2001
--------------------------------------------------------------------------------
Current
Identity of Issuer Description of Investment Value
*Prudential Guaranteed Interest Account $ 337,563
*Prudential Jennison Growth Fund 277,934
*Prudential Active Balanced Fund 185,456
*Prudential Stock Index Fund 170,039
*Prudential MoneyMart Assets Fund 150,401
*Prudential International Value Fund 123,690
*Prudential Government Income Fund 9,486
Fidelity Magellan Fund 50,053
*Rite Aid Corporation Company Stock Fund 35,279
Putnam Growth & Income Fund 28,818
**Participant notes Loan Fund 67,435
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TOTAL $ 1,436,154
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*Party-in-interest
** The loans range in interest rates from 7.50% to 10.50% and expire through
2006.
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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 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 27, 2003
EXHIBIT INDEX
Exhibit
Number Description
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23 Consent of Deloitte & Touche LLP