ITEM 1. BUSINESS (a) General Development of Business The information set forth on the inside front cover under the caption "About the Company," and under the captions "Managed Care," "Convenience & Merchandising" and "Technology," commencing on page 6 and ending on page 11 of the Registrant's 1994 Annual Report to Stockholders ("1994 Annual Report"), filed as an exhibit to this Annual Report on Form 10-K, is incorporated herein by reference, excluding any projections and forecasts, all of which shall not be deemed a part of this Annual Report on Form 10-K. (b) Financial Information About Industry Segments As part of a restructuring strategy announced by the Registrant on January 7, 1994, the Registrant authorized the sale of its non-drugstore businesses, namely its auto parts retailing business, its chain of discount bookstores, its chain of retail dry cleaning stores and its plasma collection centers. Commencing in fiscal year 1994, all of such businesses have been reclassified as discontinued operations. Consequently, the Registrant's business is classified solely within the retail drug industry segment. (c) Narrative Description of Business The information set forth under the captions "Managed Care," "Convenience & Merchandising," "Technology" and "Management's Discussion and Analysis of Results of Operations and Financial Condition" commencing on page 6 and ending on page 14 of
the 1994 Annual Report, is incorporated herein by reference, excluding any projections and forecasts, all of which shall not be deemed a part of this Annual Report on Form 10-K. The Registrant employs approximately 27,360 persons. (d) Financial Information About Foreign and Domestic and Export Sales Not Applicable. ITEM 2.
ITEM 2. PROPERTIES The Registrant's general offices and corporate headquarters are located in a 205,000 square foot building in Camp Hill, Pennsylvania owned by the Registrant. The Registrant's principal retail store distribution center encompasses 350,000 square feet in Shiremanstown, Pennsylvania. In addition to the principal store distribution center, the Registrant operates four other distribution centers: the Registrant's Rome, New York retail store distribution center, which has 291,000 square feet; the Registrant's Nitro, West Virginia distribution center, which has 280,000 square feet; the Registrant's Melbourne, Florida distribution center, which has 228,000 square feet; and the Registrant's Winnsboro, South Carolina distribution center which has 265,000 square feet. The Registrant owns each of the foregoing distribution centers, with the South Carolina, West Virginia and New York distribution centers subject to liens arising under industrial development authority financing. The Registrant has the capacity to supply 3,000 stores.
The Registrant leases most of its retail store facilities, including its drug stores, under noncancelable operating leases, many of which expire within ten years. In addition to minimum rental payments, which are set at competitive market rates, certain leases require additional payments based on sales volume, as well as reimbursement for taxes, maintenance and insurance. Most of the Registrant's leases contain renewal options, some of which involve rent increases. At February 26, 1994, the Registrant had 2,690 retail drug stores. ITEM 3.
ITEM 3. LEGAL PROCEEDINGS Not Applicable. ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G(3) of Annual Report on Form 10-K, the following is included as an un-numbered Item in Part I of this Annual Report in lieu of being included in the Proxy Statement for the 1994 Annual Meeting of Stockholders to be held on July 7, 1994. The following is a list of names and ages of all of the executive officers of the Registrant, indicating all positions and offices with the Registrant held by each such person and each such person's principal occupations or employment during the past five years. All such persons have been appointed to serve until the next annual election of officers (which shall occur on July 7,
1994) and until their successors are appointed, or until their earlier resignation or removal. No person other than those listed below has been chosen to become an executive officer of the Registrant.
Alex Grass is the father of Martin Grass. Each of the executive officers listed above has served the Registrant or its subsidiaries in various executive capacities for the past five years, except for the following individuals: Mr.Bowman has held his present position with Registrant for one year. Prior thereto he was a Senior Information Technology Consultant with McKinsey & Company from 1984 to 1993. Mr. Feldman has been Vice President of Managed Care Services since 1991. From September 1989 until his appointment as Vice President, he held the positions of Assistant Vice President of Third Party Sales and Director of Third Party. During 1988 and until September 1989, he held the position of Director of Governmental Affairs for the National Association of Chain Drugstores, located in Alexandria, Virginia. Prior thereto he served as counsel for Davis, Wright and Jones, a law firm in Washington, D.C.
Mr. Coogan was appointed Vice President and Treasurer in April 1993. Mr. Coogan joined Rite Aid as a Business Analyst in January 1989, and achieved the position of Director of Planning and Budgeting in September 1990, and Assistant Treasurer in December 1992. Prior to his employment with Rite Aid, Mr. Coogan was a strategic planning analyst for Armtek Corporation. Mr. Speaker has been Vice President and Retail Controller since April 1993. From February 1991 until his appointment as Vice President, he had the positions of Assistant Vice President and Retail Controller. Mr. Speaker attained the status of Retail Controller in June 1989. Prior thereto, Mr. Speaker served as Controller for Specialty Retailing.
PART II ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the caption "Common Stock and Dividends," which appears on page 14 of the Registrant's 1994 Annual Report, is incorporated herein by reference. ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA The information set forth under the caption "Ten Year Financial Review," which appears on pages 28 and 29 of the Registrant's 1994 Annual Report, is incorporated herein by reference. ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition," which appears on pages 12 through 14 of the Registrant's 1994 Annual Report, is incorporated herein by reference. ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statement information which appears on pages 15 through 27 of the Registrant's 1994 Annual Report is incorporated herein by reference. ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information with respect to the executive officers of the Registrant, reference is made to "Executive Officers of the Registrant," set forth as an unnumbered item in Part I of this Annual Report. The information set forth under the caption "Election of Directors" in the Registrant's Proxy Statement for the 1994 Annual Meeting of Stockholders to be held July 7, 1994 is incorporated herein by reference. ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION The information set forth under the caption "Executive Compensation" in the Registrant's Proxy Statement for the 1994 Annual Meeting of Stockholders to be held July 7, 1994 is incorporated herein by reference. ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Registrant's Proxy Statement for the 1994 Annual Meeting of Stockholders to be held July 7, 1994 is incorporated herein by reference. ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Related Party Transactions" in the Registrant's Proxy Statement for the 1994
Annual Meeting of Stockholders to be held July 7, 1994 is incorporated herein by reference. PART IV ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of Documents Filed as Part of this Report (1) Financial Statements The following consolidated financial statements of the Registrant and its subsidiaries, required to be included in Part II, Item 8 of this Annual Report on Form 10-K, are included in the 1994 Annual Report and are incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheet - February 26, 1994 and February 27, 1993
Consolidated Statement of Income - Each of the years in the three year period ended February 26, 1994
Consolidated Statement of Stockholders' Equity - Each of the years in the three year period ended February 26, 1994
Consolidated Statement of Cash Flows - Each of the years in the three year period ended February 26, 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules The following additional information for the years 1994, 1993 and 1992 is included in Part IV of this Report:
All other schedules are omitted because they are not required, inapplicable or the information is included in the consolidated financial statements or the notes thereto. Financial statements of 50% or less owned companies have been omitted since they do not constitute significant subsidiaries. (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(b) Report on Form 8-K On February 16, 1994, a Form 8-K was filed with the Securities and Exchange Commission to disclose a stock repurchase program approved by Rite Aid Corporation's Board of Directors. The stock repurchase program authorized the Registrant to acquire up to 5 million shares of its common stock in the open market or in privately negotiated transactions.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons, which include the Principal Executive Officer, the Principal Accounting and Financial Officer and a majority of the Board of Directors, on behalf of the Registrant and in the capacities and on the dates indicated:
RITE AID CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In Thousands of Dollars)
RITE AID CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (In Thousands of Dollars)
RITE AID CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (In Thousands of Dollars)
RITE AID CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS (In Thousands of Dollars)
(A) Through revolving credit agreements of $600 million at February 26, 1994 and $400 million at February 27, 1993 and February 29, 1992, Rite Aid Corporation is able to support its commercial paper borrowings on a long-term basis. Accordingly, $156 million, $242 million and $180 million of outstanding commercial paper was classified as long-term debt on the consolidated balance sheet as of February 26, 1994, February 27, 1993 and February 29, 1992, respectively.
(B) Calculated by averaging the daily outstanding balances during the fiscal year.
(C) The weighted average interest rate is the sum of the interest rate multiplied by the net proceeds for each commercial paper note issued during the fiscal year divided by the sum of the commercial paper net proceeds.
INDEPENDENT AUDITORS' REPORT
The Board of Directors Rite Aid Corporation Camp Hill, Pennsylvania
Under date of April 15, 1994, we reported on the consolidated balance sheets of Rite Aid Corporation and subsidiaries as of February 26, 1994 and February 27, 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three year period ended February 26, 1994, as contained in the 1994 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related supplementary financial statement schedules as listed in item 14 (a)(2). These supplementary financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these supplementary financial statement schedules based on our audits.
In our opinion, such supplementary financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the financial statements, the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109 in the fiscal year ended February 27, 1993.
Harrisburg, Pennsylvania April 15, 1994
EXHIBIT INDEX
Exhibit Number Description - - ------- -----------
(11) Statement regarding computation of per share earnings
(13) 1994 Annual Report to Stockholders
(21) Registrant's Subsidiaries
(23) Consent of Independent Certified Public Accoutants