UNITED STATES
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, 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 Services, L.L.C. 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
RITE AID SERVICES, L.L.C. 401(k) 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 Services, L.L.C. 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Rite Aid Services, L.L.C. 401(k) 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 SERVICES, L.L.C. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2005 AND 2004
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2005 2004
ASSETS:
Participant-directed investments $2,662,281 $2,407,900
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Contributions receivable:
Employer 224 214
Employee 8,235 2,832
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Total contributions receivable 8,459 3,046
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NET ASSETS AVAILABLE FOR BENEFITS $2,670,740 $2,410,946
========== ==========
See notes to financial statements.
-2-
RITE AID SERVICES, L.L.C. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2005
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ADDITIONS:
Employee contributions $ 198,294
Employer contributions 10
Net appreciation in fair value of investments 115,881
Investment income 28,309
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Total additions 342,494
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DEDUCTIONS:
Benefit payments 82,700
----------
Total deductions
82,700
INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 259,794
NET ASSETS AVAILABLE FOR BENEFITS-Beginning of year 2,410,946
----------
NET ASSETS AVAILABLE FOR BENEFITS-End of year $2,670,740
==========
See notes to financial statements.
-3-
RITE AID SERVICES, L.L.C. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004
AND FOR THE YEAR ENDED DECEMBER 31, 2005
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1. PLAN DESCRIPTION
The following brief description of the Rite Aid Services, L.L.C. 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 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.
The Plan Administrator is preparing to merge an affiliated defined
contribution plan, the Rite Aid Services, L.L.C. Union Pension Plan, into
the Plan. The merger is expected to be completed by September 30, 2006.
Participation--Each employee who is a member of the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America,
Local 614 becomes eligible to participate in the Plan after attaining age
21 and completing one year of service (a twelve-month period when at least
1,000 hours are credited).
Contributions--Each year a participant may elect to 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 may also contribute, or roll over,
amounts representing distributions from another qualified defined benefit
or defined contribution plan. Effective June 16, 2001, the Plan Sponsor
ceased making contributions to the Plan pursuant to a collective
bargaining agreement dated May 27, 2001. Employees continue to contribute
as described above; however, there is no Plan Sponsor match except for
one-time contributions recorded pursuant to the operational failures
described in Note 7 below.
-4-
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
$1,296 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 due to death, disability,
or retirement, a participant may elect to receive a lump-sum amount equal
to the value of the participant's vested interest in the participant's
account, or installment payments as determined by the Plan Administrator.
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 two outstanding loans which were grandfathered at the time the Plan
was amended to no longer allow more than one loan.
Vesting--A participant is vested immediately in the participant's
voluntary contributions, plus actual earnings (losses) thereon. Vesting in
the Plan Sponsor's contributions made prior to June 16, 2001, is based on
years of service, as defined in the Plan document. A participant becomes
fully vested in the Plan Sponsor contributions upon the participant's
death, disability or attainment of normal retirement age while employed,
or the occurrence of a plan termination. If not vested earlier for one of
the foregoing reasons, and not subject to other exceptions described in
the Plan document, a participant's account becomes fully vested upon the
participant's attainment of five years of service. 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, 2005 were $705.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements are 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 877 and 480 shares of Company common stock at December 31,
2005 and 2004, respectively.
-5-
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.
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
---------------------------
2005 2004
Prudential Stable Value Fund $1,128,720 $1,204,787
Dodge & Cox Balanced Fund 282,812 255,032
T. Rowe Price Equity Index Trust 261,141 266,920
Northern Trust Global Advisors
Large-Cap Growth Fund 226,972 205,000
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 $116,154
Common Stock (273)
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Total net appreciation $115,881
========
-6-
4. TAX STATUS
The Plan obtained its latest determination letter dated July 8, 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, 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 terminate the Plan subject to the provisions
of ERISA. In the event the Plan terminates, participants would become
fully vested in their 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. 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, in July 2001,
the Plan Administrator submitted a Voluntary Correction Program ("VCP")
filing with the IRS requesting a compliance statement and approval of the
correction method for operational failures identified. On August 20, 2004,
the Plan Administrator received a fully executed compliance statement
containing IRS approval of the correction methods submitted. The Plan
Sponsor completed all corrections in accordance with the compliance
statement by January 2005, thereby eliminating exposure to penalties,
taxes or disqualification by the IRS.
Subsequent to the July 2001 filing, the Plan Administrator identified
other operational failures in the Plan, including a failure to make
certain deferral contributions. The Plan Administrator has not submitted a
VCP filing with the IRS requesting a compliance statement and approval of
the correction method for these additional operational failures identified
in the Plan. The Plan Administrator expects to submit this VCP filing in
2006. The Plan Administrator believes that the processes identified for
remediation 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.
******
-7-
RITE AID SERVICES, L.L.C. 401(k) PLAN
FORM 5500 - SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2005
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Identity of Issue Description of Investment Value
* Rite Aid Corporation Company Stock Fund $ 3,051
* T. Rowe Price Equity Index Trust 261,141
* T. Rowe Price Retirement 2020 82,292
* T. Rowe Price Retirement 2030 58,649
* T. Rowe Price Retirement 2010 56,839
* T. Rowe Price Retirement 2015 38,771
* T. Rowe Price International Equity Index Fund 23,745
* T. Rowe Price Extended Equity Market Index Fund 13,632
* T. Rowe Price Retirement 2040 11,044
* T. Rowe Price Retirement 2025 10,342
* T. Rowe Price Retirement 2035 1,328
* T. Rowe Price Bond Index Trust 97
Prudential Stable Value Fund 1,128,720
Dodge & Cox Balanced Fund 282,812
Northern Trust Global Advisors Large-Cap Growth Fund 226,972
Northern Trust Global Advisors International Equity Fund 87,003
Northern Trust Global Advisors Mid-Cap Fund 32,422
Northern Trust Global Advisors Large-Cap Value Fund 28,749
Northern Trust Global Advisors Small-Cap Fund 27,312
Pimco Total Return Fund 82,122
Vanguard Small-Cap Index Fund 13,065
* Participant Notes Loan Fund** 192,173
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$ 2,662,281
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TOTAL
* Party-in-interest
** The loans range in interest rates from 5.0% to 9.5% and expire through 2021.
-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 SERVICES, L.L.C. 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, 2006
EXHIBIT INDEX
Exhibit
Number Description
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23.1 Consent of Independent Registered Public Accounting Firm