UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2005
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:
Statements of Net Assets Available for Benefits as of December 31, 2005 and 2004 2
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 2005 3
Notes to Financial Statements as of December 31, 2005 and 2004, and for the Year Ended
December 31, 2005 4-7
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Line 4i--Schedule of Assets (Held at End of Year)
as of December 31, 2005 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, 2005 and 2004, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2005. 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,
2005 and 2004, and the changes in net assets available for benefits for the year
ended December 31, 2005, 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 2005 financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic 2005
financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 23, 2006
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RITE AID 401(k) DISTRIBUTION EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
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2005 2004
ASSETS:
Participant-directed investments $2,462,164 $2,182,057
Employee contributions receivable 12,311 4,087
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NET ASSETS AVAILABLE FOR BENEFITS $2,474,475 $2,186,144
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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, 2005
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ADDITIONS:
Employee contributions $ 313,427
Rollover contributions 12,287
Net appreciation in fair value of investments 108,373
Investment income 25,706
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Total additions 459,793
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DEDUCTIONS:
Benefit payments 171,462
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Total deductions 171,462
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 288,331
NET ASSETS AVAILABLE FOR BENEFITS-Beginning of year 2,186,144
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NET ASSETS AVAILABLE FOR BENEFITS-End of year $2,474,475
==========
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, 2005
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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.
GreatBanc Trust Company 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 to the Plan stemming from these
settlement agreements.
Investment Options--The Plan provides participants with the option of
investing the participant's account balances in twenty-four 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, 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 6,109 and 6,143 shares of Company common stock at December
31, 2005 and 2004, 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 effective
annual interest rate at the beginning of each calendar quarter which is
credited and compounded on a daily 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 4.84% for 2005. As of
December 31, 2005 and 2004, the crediting interest rate was 4.77% and
4.86%, respectively
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, 2005, 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 and the SVF. 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
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2005 2004
Prudential Stable Value Fund $886,394 $ 823,824
Dodge & Cox Balanced Fund 333,966 311,149
T. Rowe Price Equity Index Trust 267,949 313,982
Northern Trust Global Advisors Large-Cap Growth Fund 248,867 283,208
Northern Trust Global Advisors International Equity Fund 164,525 152,827
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,
2005
Investments:
Mutual Funds $109,512
Common Stock (1,139)
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Total net appreciation $108,373
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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.
3. 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 T. Rowe
Price Trust Company, the trustee and 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.
-6-
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, including failure to make certain
deferral contributions and failure to make de minimis distributions to
Plan participants. The Plan Administrator has not submitted a Voluntary
Correction Program filing with the IRS requesting a compliance statement
and approval of the correction method for operational failures identified
in the Plan, but intends to complete the filing in 2006. The Plan
Administrator believes that the processes identified for remediation, as
well as the remediation procedures related to de minimis distributions
already taken, would not cause the Plan to be disqualified by the IRS,
therefore no provision for income taxes has been included in the Plan's
financial statements. Penalties, taxes and remedial payments, if any, due
to noncompliance 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, 2005
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Current
Identity of Issuer Description of Investment Value
*Rite Aid Corporation Company Stock Fund $ 21,261
*T. Rowe Price Equity Index Trust 267,949
*T. Rowe Price Retirement 2010 100,656
*T. Rowe Price Retirement 2015 52,235
*T. Rowe Price Retirement 2020 34,380
*T. Rowe Price Retirement 2025 28,440
*T. Rowe Price Retirement 2035 13,961
*T. Rowe Price Retirement 2040 10,097
*T. Rowe Price Retirement 2030 8,661
*T. Rowe Price International Equity Index Fund 8,028
*T. Rowe Price Bond Index Trust 3,936
*T. Rowe Price Retirement 2005 941
*T. Rowe Price Retirement Income Fund 220
*T. Rowe Price Extended Equity Market Index Fund 123
Prudential Stable Value Fund 886,394
Dodge & Cox Balanced Fund 333,966
Northern Trust Global Advisors Large-Cap Growth Fund 248,867
Northern Trust Global Advisors International Equity Fund 164,525
Northern Trust Global Advisors Large-Cap Value Fund 65,658
Northern Trust Global Advisors Mid-Cap Fund 21,635
Northern Trust Global Advisors Small-Cap Fund 7,300
Pimco Total Return Fund 76,779
Vanguard Small-Cap Index Fund 4,128
*Participant notes Loan Fund** 102,024
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TOTAL $2,462,164
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*Party-in-interest
**The loans range in interest rates from 5.0% to 9.5% and expire through 2011.
-8-
SIGNATURES
The Plan. 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
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Theresa G. Nichols,
not in her individual
capacity, but solely as an
authorized signatory for
the Employee Benefits Administration
Committee
Date: June 29, 2006
EXHIBIT INDEX
Exhibit
Number Description
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23.1 Consent of Independent Registered Public Accounting Firm