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, 2001
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 Saving 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, 2001 AND 2000
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 2001:
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, 2001:
Schedule of Assets Held for Investment Purposes 8
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2000:
Schedule of Assets Held for Investment Purposes 9
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED DECEMBER 31, 1999:
Schedule of Prohibited Transactions 10
INDEPENDENT AUDITORS' REPORT
To the Trustee 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, 2001 and 2000, and the related statements of
changes in net assets available for benefits for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Plan's management. 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 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, 2001 and 2000, and the changes in net assets available for benefits for
each of the three years in the period ended December 31, 2001 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's
management. 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
June 13, 2002
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
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2001 2000
ASSETS:
Investments $ 1,436,154 $ 1,276,509
Employee contributions receivable 11,730 10,127
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 1,447,884 $ 1,286,636
=========== ===========
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, 2001, 2000 AND 1999
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Year Ended December 31,
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2001 2000 1999
ADDITIONS:
Employee contributions $ 269,654 $ 270,591 $ 267,509
Rollover contributions 4,597 270 11,425
Investment income 33,703 23,616 27,756
Net depreciation in fair value of investments (101,301) (166,624) (127,014)
----------- ----------- -----------
Total additions, net 206,653 127,853 179,676
DEDUCTIONS:
Benefit payments 45,405 93,594 55,935
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Total deductions 45,405 93,594 55,935
----------- ----------- -----------
INCREASE IN NET ASSETS AVAILABLE FOR
BENEFITS 161,248 34,259 123,741
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 1,286,636 1,252,377 1,128,636
----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 1,447,884 $ 1,286,636 $ 1,252,377
=========== =========== ===========
See notes to financial statements.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
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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"). 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.
The Company is the 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,
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 may also contribute, or rollover, amounts representing
distributions from another qualified defined benefit or defined
contribution plan. There are no employer contributions.
Investment Options - The Plan provides employees with the option of
investing in 10 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.
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. A participant may only have two loans
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.
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
calendar year for contributions received during that calendar quarter.
The GIA is deemed to be benefit responsive, therefore, it is presented
at contract value which approximates fair value. The average yield was
5.06%, 6.31%, and 5.61% for 2001, 2000 and 1999, respectively. As of
December 31, 2001 and 2000, the crediting interest rate was 4.50% and
6.10%, respectively.
Administrative Expenses - Under the terms of the Plan agreement, costs
relating to Plan administration may be paid by the Company. For the
years ended December 31, 2001, 2000 and 1999, the Company as 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 Plan management 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 various securities including mutual funds and
corporate stocks. 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.
Derivative Instruments and Hedging Activities - On January 1, 2001, the
Plan adopted the Financial Accounting Standards Board Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No.
137 and SFAS No. 138. This standard establishes accounting and
reporting standards for derivative instruments including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires an entity to recognize derivatives as either
assets or liabilities in the statement of financial position and to
measure those instruments at fair value. Adoption of SFAS No. 133, as
amended, did not have a material impact on the financial statements of
the Plan.
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's assets:
December 31,
-------------------------
2001 2000
Prudential Guaranteed Interest Account $ 337,563 $ 283,343
Prudential Jennison Growth Fund 277,934 302,095
Prudential Active Balanced Fund 185,456 164,243
Prudential Stock Index Fund, Class I 170,039 171,362
Prudential MoneyMart Assets Fund 150,401 100,469
Prudential International Value Fund 123,690 122,946
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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,
--------------------------------------------
2001 2000 1999
Investments, at fair value:
Mutual Funds $(123,683) $ (91,626) $ 155,126
Common Stock 22,382 (74,998) (282,140)
------------ ------------ -----------
Total depreciation $(101,301) $(166,624) $(127,014)
============ ============ ===========
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 Company submitted the Plan for a new determination letter
from the IRS. However, the Company, as Plan sponsor, believes that
the Plan is 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 Company 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 also
permits investment in the common stock of the Company, see Note 7. The
Company is the Plan sponsor, as defined by the Plan, and, therefore,
these transactions qualify as party-in-interest transactions. The Plan
does not consider employer contributions or benefits paid by the Plan
to be party-in-interest transactions.
7. CONTINGENCIES
As of January 1, 1999, the Plan had approximately 8% of its assets
invested in Company common stock (Company Stock Fund) at a share price
of $49.75. On October 12, 1999, following the Company's announcement
that its previously issued financial statements should not be relied
upon, the Company suspended all purchases of Company stock through the
Company Stock Fund. Contributions received on or after October 12,
1999, which would otherwise have been directed to the Company Stock
Fund, were invested in the Prudential MoneyMart Assets Fund and will
continue to be invested in the Prudential MoneyMart Assets Fund until
the participant elects otherwise.
In late 1999, the Company's Board of Directors hired a new executive
management team to address and resolve various business, operational
and financial challenges confronting the Company. New management began
the process of reviewing the administration of the Plan for purposes of
determining compliance with provisions of the Plan and regulatory
requirements. Management has identified certain processes not in
compliance with the provisions of the Plan or regulatory requirements,
as follows:
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a) During 2000 and 1999, the Company failed to withhold and
contribute participants' salary deferral contributions
associated with supplemental salary payments in the amounts of
$825 and $110, respectively. The Company has completed an
evaluation of the amount of investment income that would have
been earned by the participants on such salary deferral
contributions during the periods in question. The Company
estimates the maximum foregone investment income on such
contributions to be $126, $110 and $64 for 2001, 2000 and 1999,
respectively. The Company expects to make a contribution to the
respective participant accounts during 2002.
b) During 1999, the Company failed to remit in a timely
manner certain employee salary deferral contributions in the
amount of $20,513 to the Plan custodian, Prudential, in
accordance with the Department of Labor's rules regarding the
timeliness of depositing such employee contributions. The
Company has completed its evaluation of the amount of
investment income that would have been earned by the
participants on those contributions during the period in
question. During 2001, the Company made an additional
contribution to the Plan to be allocated to the affected
participants' accounts in the amount of $377, which represents
the investment income that would have been earned by the
participants had the contributions been deposited with the
custodian on a timely basis.
c) 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. As a result
of the analysis completed in January 2002 related to this
defect, the estimate of the minimum account balances subject to
disbursement in accordance with the Plan document for the Plan
years ended December 31, 2001, 2000 and 1999 is $19,296,
$19,295 and $6,326, respectively. The required distributions
are expected to be made.
Management 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 Company.
******
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2001
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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, Class I 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
-----------
TOTAL $ 1,436,154
===========
*Party-in-interest
** The loans range in interest rates from 7.50% to 10.50% and expire from 1 to 5 years.
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2000
-------------------------------------------------------------------------------------------------------
Current
Identity of Issuer Description of Investment Value
*Prudential Jennison Growth Fund $ 302,095
*Prudential Guaranteed Interest Account 283,343
*Prudential Stock Index Fund, Class I 171,362
*Prudential Active Balanced Fund 164,243
*Prudential International Value Fund 122,946
*Prudential MoneyMart Assets Fund 100,469
*Prudential Government Income Fund 4,890
Fidelity Magellan Fund 36,120
*Rite Aid Corporation Company Stock Fund 18,700
Putnam Growth & Income Fund 22,672
**Participant notes Loan Fund 49,669
-----------
TOTAL $ 1,276,509
===========
* Party-in-interest
** The loans range in interest rates from 9.25% to 10.50% and expire from 1 to 20 years.
-9-
RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
SCHEDULE OF PROHIBITED TRANSACTIONS
YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
Period(s) Employee
Date Remitted to Covered by Deferral
Trustee/Custodian Payroll Amount Check Date
3/25/1999 1/16/1999 $ 4,754 1/21/1999
3/25/1999 1/23/1999 4,634 1/28/1999
5/7/1999 2/6/1999 25 2/11/1999
5/7/1999 2/27/1999 132 3/4/1999
5/26/1999 4/17/1999 5,710 4/22/1999
6/7/1999 4/24/1999 5,252 4/29/1999
3/23/2000 12/30/1999 6 12/30/1999
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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
/s/ Richard J. Varmecky
---------------------------------
Name: Richard J. Varmecky
Title: Trustee
Date: June 28, 2002