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Quarter Report: 2011 May (Form 10-Q)
RITE AID CORP - Quarter Report: 2011 May (Form 10-Q)
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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
|
ý |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 28, 2011 |
OR |
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period
from to . |
Commission File Number: 1-5742
RITE AID CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
(State or other jurisdiction of
incorporation or organization) |
|
23-1614034
(I.R.S. Employer
Identification No.) |
30 Hunter Lane, |
|
|
Camp Hill, Pennsylvania
(Address of principal executive offices) |
|
17011
(Zip Code) |
Registrant's
telephone number, including area code: (717) 761-2633.
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last Report):
Not Applicable
Indicate
by check mark whether he registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the Registrant was required to submit and post such files). Yes ý No o
Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definition of
"Accelerated Filer" and "Large Accelerated Filer" in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
| Large accelerated filer ý |
|
Accelerated filer o |
|
Non-accelerated filer o
(Do not check if a
smaller reporting company) |
|
Smaller reporting company o |
Indicate
by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
The
registrant had 890,227,995 shares of its $1.00 par value common stock outstanding as of June 23, 2011.
Table of Contents
RITE AID CORPORATION
TABLE OF CONTENTS
1
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report, as well as our other public filings or public statements, includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue,"
"should," "could," "may," "plan," "project," "predict," "will" and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.
Factors
that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited
to:
- •
- our high level of indebtedness;
- •
- our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our senior
secured credit facility and other debt agreements;
- •
- general economic conditions (including the impact of continued high unemployment and changing consumer behavior),
inflation and interest rate movements;
- •
- our ability to improve the operating performance of our stores in accordance with our long term strategy;
- •
- our ability to realize same store sales growth;
- •
- our ability to hire and retain qualified personnel;
- •
- the efforts of private and public third party payors to reduce prescription drug reimbursement and encourage mail order;
- •
- competitive pricing pressures, including aggressive promotional activity from our competitors;
- •
- decisions to close additional stores and distribution centers, which could result in further charges to our operating
statement;
- •
- our ability to manage expenses;
- •
- our ability to realize the benefits from actions to further reduce costs and investment in working capital;
- •
- continued consolidation of the drugstore and the pharmacy benefit management industries;
- •
- changes in state or federal legislation or regulations, and the impact of healthcare reform;
- •
- the outcome of lawsuits and governmental investigations;
- •
- our ability to maintain the listing of our common stock on the New York Stock Exchange (the "NYSE"), and the resulting
impact on our indebtedness, results of operations and financial condition; and
- •
- other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission ("the
SEC").
We
undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date
of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or
contribute to such differences are discussed in the section entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein and
included in our Annual Report on Form 10-K for the fiscal year ended February 26, 2011 ("the Fiscal 2011 10-K"), which we filed with the SEC on April 26,
2011. This document is available on the SEC's website at www.sec.gov.
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
May 28,
2011 |
|
February 26,
2011 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
$ |
230,637 |
|
$ |
91,116 |
|
| |
Accounts receivable, net |
|
|
962,475 |
|
|
966,457 |
|
| |
Inventories, net of LIFO reserve of $895,013 and $875,012 |
|
|
3,170,491 |
|
|
3,158,145 |
|
| |
Prepaid expenses and other current assets |
|
|
86,923 |
|
|
195,647 |
|
| |
|
|
|
|
|
| |
|
Total current assets |
|
|
4,450,526 |
|
|
4,411,365 |
|
Property, plant and equipment, net |
|
|
1,987,948 |
|
|
2,039,383 |
|
Other intangibles, net |
|
|
611,687 |
|
|
646,177 |
|
Other assets |
|
|
454,008 |
|
|
458,925 |
|
| |
|
|
|
|
|
| |
|
Total assets |
|
$ |
7,504,169 |
|
$ |
7,555,850 |
|
| |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
| |
Current maturities of long-term debt and lease financing obligations |
|
$ |
23,656 |
|
$ |
63,045 |
|
| |
Accounts payable |
|
|
1,354,259 |
|
|
1,307,872 |
|
| |
Accrued salaries, wages and other current liabilities |
|
|
1,059,188 |
|
|
1,049,406 |
|
| |
|
|
|
|
|
| |
|
Total current liabilities |
|
|
2,437,103 |
|
|
2,420,323 |
|
Long-term debt, less current maturities |
|
|
6,027,616 |
|
|
6,034,525 |
|
Lease financing obligations, less current maturities |
|
|
119,291 |
|
|
122,295 |
|
Other noncurrent liabilities |
|
|
1,190,396 |
|
|
1,190,074 |
|
| |
|
|
|
|
|
| |
|
Total liabilities |
|
|
9,774,406 |
|
|
9,767,217 |
|
Commitments and contingencies |
|
|
— |
|
|
— |
|
Stockholders' deficit: |
|
|
|
|
|
|
|
| |
Preferred stock—series G, par value $1 per share; liquidation value $100 per share; 2,000 shares authorized; shares issued .006 and
.006 |
|
|
1 |
|
|
1 |
|
| |
Preferred stock—series H, par value $1 per share; liquidation value $100 per share; 2,000 shares authorized; shares issued 1,641 and
1,616 |
|
|
164,075 |
|
|
161,650 |
|
| |
Common stock, par value $1 per share; 1,500,000 authorized; shares issued and outstanding 890,221 and 890,297 |
|
|
890,221 |
|
|
890,297 |
|
Additional paid-in capital |
|
|
4,282,903 |
|
|
4,281,623 |
|
Accumulated deficit |
|
|
(7,577,885 |
) |
|
(7,514,796 |
) |
Accumulated other comprehensive loss |
|
|
(29,552 |
) |
|
(30,142 |
) |
| |
|
|
|
|
|
| |
Total stockholders' deficit |
|
|
(2,270,237 |
) |
|
(2,211,367 |
) |
| |
|
|
|
|
|
| |
Total liabilities and stockholders' deficit |
|
$ |
7,504,169 |
|
$ |
7,555,850 |
|
| |
|
|
|
|
|
See
accompanying notes to condensed consolidated financial statements.
3
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Revenues |
|
$ |
6,390,793 |
|
$ |
6,394,336 |
|
Costs and expenses: |
|
|
|
|
|
|
|
| |
Cost of goods sold |
|
|
4,699,874 |
|
|
4,682,632 |
|
| |
Selling, general and administrative expenses |
|
|
1,586,236 |
|
|
1,622,934 |
|
| |
Lease termination and impairment charges |
|
|
17,090 |
|
|
13,457 |
|
| |
Interest expense |
|
|
130,760 |
|
|
141,619 |
|
| |
Loss on debt modifications and retirements, net |
|
|
22,434 |
|
|
— |
|
| |
Loss (gain) on sale of assets, net |
|
|
(4,792 |
) |
|
237 |
|
| |
|
|
|
|
|
|
|
|
6,451,602 |
|
|
6,460,879 |
|
| |
|
|
|
|
|
Loss before income taxes |
|
|
(60,809 |
) |
|
(66,543 |
) |
Income tax expense |
|
|
2,273 |
|
|
7,141 |
|
| |
|
|
|
|
|
Net loss |
|
$ |
(63,082 |
) |
$ |
(73,684 |
) |
| |
|
|
|
|
|
Computation of loss attributable to common stockholders: |
|
|
|
|
|
|
|
| |
Net loss |
|
$ |
(63,082 |
) |
$ |
(73,684 |
) |
| |
Accretion of redeemable preferred stock |
|
|
(25 |
) |
|
(25 |
) |
| |
Cumulative preferred stock dividends |
|
|
(2,425 |
) |
|
(2,285 |
) |
| |
|
|
|
|
|
| |
Loss attributable to common stockholders—basic and diluted |
|
$ |
(65,532 |
) |
$ |
(75,994 |
) |
| |
|
|
|
|
|
| |
Basic and diluted loss per share |
|
$ |
(0.07 |
) |
$ |
(0.09 |
) |
| |
|
|
|
|
|
See
accompanying notes to condensed consolidated financial statements.
4
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Operating activities: |
|
|
|
|
|
|
|
| |
Net loss |
|
$ |
(63,082 |
) |
$ |
(73,684 |
) |
| |
Adjustments to reconcile to net cash provided by operating activities: |
|
|
|
|
|
|
|
| |
|
Depreciation and amortization |
|
|
117,090 |
|
|
127,500 |
|
| |
|
Lease termination and impairment charges |
|
|
17,090 |
|
|
13,457 |
|
| |
|
LIFO charges |
|
|
20,001 |
|
|
20,528 |
|
| |
|
Loss (gain) on sale of assets, net |
|
|
(4,792 |
) |
|
237 |
|
| |
|
Stock-based compensation expense |
|
|
3,571 |
|
|
5,485 |
|
| |
|
Loss on debt modifications and retirements, net |
|
|
22,434 |
|
|
— |
|
| |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| |
|
|
Accounts receivable |
|
|
1,018 |
|
|
(57,153 |
) |
| |
|
|
Inventories |
|
|
(32,486 |
) |
|
42,119 |
|
| |
|
|
Accounts payable |
|
|
174,597 |
|
|
271,173 |
|
| |
|
|
Other assets and liabilities, net |
|
|
129,893 |
|
|
169,905 |
|
| |
|
|
|
|
|
| |
|
|
|
Net cash provided by operating activities |
|
|
385,334 |
|
|
519,567 |
|
| |
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
| |
Payments for property, plant and equipment |
|
|
(48,755 |
) |
|
(35,212 |
) |
| |
Intangible assets acquired |
|
|
(8,072 |
) |
|
(5,377 |
) |
| |
Proceeds from dispositions of assets and investments |
|
|
8,423 |
|
|
4,030 |
|
| |
|
|
|
|
|
| |
|
|
|
Net cash used in investing activities |
|
|
(48,404 |
) |
|
(36,559 |
) |
| |
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
| |
Proceeds from issuance of long-term debt |
|
|
341,285 |
|
|
— |
|
| |
Net payments to revolver |
|
|
(28,000 |
) |
|
(80,000 |
) |
| |
Principal payments on long-term debt |
|
|
(385,865 |
) |
|
(25,804 |
) |
| |
Change in zero balance cash accounts |
|
|
(122,097 |
) |
|
(153,009 |
) |
| |
Net proceeds from issuance of common stock |
|
|
57 |
|
|
93 |
|
| |
Deferred financing costs paid |
|
|
(2,789 |
) |
|
— |
|
| |
|
|
|
|
|
| |
|
|
|
Net cash used in financing activities |
|
|
(197,409 |
) |
|
(258,720 |
) |
| |
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
139,521 |
|
|
224,288 |
|
Cash and cash equivalents, beginning of period |
|
|
91,116 |
|
|
103,594 |
|
| |
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
230,637 |
|
$ |
327,882 |
|
| |
|
|
|
|
|
Supplementary cash flow data: |
|
|
|
|
|
|
|
| |
Cash paid for interest (net of capitalized amounts of $116 and $173, respectively) |
|
$ |
95,228 |
|
$ |
77,133 |
|
| |
|
|
|
|
|
| |
Cash payments of income taxes, net of refunds |
|
$ |
1,085 |
|
$ |
1,314 |
|
| |
|
|
|
|
|
| |
Equipment financed under capital leases |
|
$ |
1,562 |
|
$ |
— |
|
| |
|
|
|
|
|
| |
Equipment received for noncash consideration |
|
$ |
— |
|
$ |
2,028 |
|
| |
|
|
|
|
|
| |
Reduction in lease financing obligation |
|
$ |
— |
|
$ |
— |
|
| |
|
|
|
|
|
| |
Preferred stock dividends paid in additional shares |
|
$ |
2,425 |
|
$ |
2,285 |
|
| |
|
|
|
|
|
| |
Gross borrowings from revolver |
|
$ |
438,000 |
|
$ |
46,000 |
|
| |
|
|
|
|
|
| |
Gross repayments to revolver |
|
$ |
466,000 |
|
$ |
126,000 |
|
| |
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information
and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all
adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen
week period ended May 28, 2011 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in the Company's Fiscal 2011 10-K.
2. Loss Per Share
Basic loss per share is computed by dividing loss available to common stockholders by the weighted
average number of shares of common stock outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company subject to anti-dilution limitations.
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Numerator for loss per share: |
|
|
|
|
|
|
|
| |
Net loss |
|
$ |
(63,082 |
) |
$ |
(73,684 |
) |
| |
Accretion of redeemable preferred stock |
|
|
(25 |
) |
|
(25 |
) |
| |
Cumulative preferred stock dividends |
|
|
(2,425 |
) |
|
(2,285 |
) |
| |
|
|
|
|
|
| |
Loss attributable to common stockholders, basic and diluted |
|
$ |
(65,532 |
) |
$ |
(75,994 |
) |
| |
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
| |
Basic and diluted weighted average shares |
|
|
883,915 |
|
|
881,732 |
|
| |
|
|
|
|
|
| |
Basic and diluted loss per share |
|
$ |
(0.07 |
) |
$ |
(0.09 |
) |
| |
|
|
|
|
|
6
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
2. Loss Per Share (Continued)
Due
to their antidilutive effect, the following potential common shares have been excluded from the computation of diluted loss per share as of May 28, 2011 and May 29,
2010:
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Stock options |
|
|
63,779 |
|
|
75,089 |
|
Restricted stock units |
|
|
669 |
|
|
— |
|
Convertible preferred stock |
|
|
29,832 |
|
|
28,107 |
|
Convertible debt |
|
|
24,800 |
|
|
61,045 |
|
| |
|
|
|
|
|
|
|
|
119,080 |
|
|
164,241 |
|
| |
|
|
|
|
|
Also
excluded from the computation of diluted loss per share as of May 28, 2011 and May 29, 2010 are restricted shares of 6,263 and 5,886, respectively, which are included
in shares outstanding.
3. Lease Termination and Impairment Charges
Lease termination and impairment charges consist of amounts and number of locations as follows:
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Impairment charges |
|
$ |
734 |
|
$ |
1,134 |
|
Facility and equipment lease exit charges |
|
|
16,356 |
|
|
12,323 |
|
| |
|
|
|
|
|
|
|
$ |
17,090 |
|
$ |
13,457 |
|
| |
|
|
|
|
|
Impairment charges: |
|
|
|
|
|
|
|
Number of Stores |
|
|
14 |
|
|
16 |
|
Number of Distribution Centers |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
14 |
|
|
16 |
|
| |
|
|
|
|
|
Lease exit charges: |
|
|
|
|
|
|
|
Number of Stores |
|
|
3 |
|
|
8 |
|
Number of Distribution Centers |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
3 |
|
|
8 |
|
| |
|
|
|
|
|
7
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
3. Lease Termination and Impairment Charges (Continued)
Impairment Charges
These amounts include the write-down of long-lived assets at locations that were assessed for impairment
because of management's intention to relocate or close the location, or because of changes in circumstances that indicated the carrying value of an asset may not be recoverable.
Facility and Equipment Lease Exit Charges
Charges to close a store, which principally consist of lease termination costs, are recorded at the time the store is closed and all
inventory is liquidated, pursuant to the guidance set forth in ASC 420, "Exit or Disposal Cost Obligations." The Company calculates the liability for closed stores on a
store-by-store basis. The calculation includes the discounted effect of future minimum lease payments and related ancillary costs, from the date of closure to the end of the
remaining lease term, net of estimated cost recoveries that may be achieved through subletting or favorable lease terminations. The Company evaluates these assumptions each quarter and adjusts the
liability accordingly.
As
part of our ongoing business activities, the Company assesses stores and distribution centers for potential closure. Decisions to close stores or distribution centers in future
periods would result in charges for lease exit costs and liquidation of inventory, as well as impairment of assets at these locations. The following table reflects the closed store and distribution
center charges that relate to new closures, changes in assumptions and interest accretion:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Balance—beginning of period |
|
$ |
405,350 |
|
$ |
412,654 |
|
| |
Provision for present value of noncancellable lease payments of closed stores |
|
|
864 |
|
|
5,492 |
|
| |
Changes in assumptions about future sublease income, terminations and changes in interest rates |
|
|
9,363 |
|
|
857 |
|
| |
Interest accretion |
|
|
6,944 |
|
|
6,855 |
|
| |
Cash payments, net of sublease income |
|
|
(26,078 |
) |
|
(27,607 |
) |
| |
|
|
|
|
|
Balance—end of period |
|
$ |
396,443 |
|
$ |
398,251 |
|
| |
|
|
|
|
|
The
Company's revenues and income (loss) before income taxes for the thirteen week periods ended May 28, 2011 and May 29, 2010 include results from stores that have been
closed or are
8
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
3. Lease Termination and Impairment Charges (Continued)
approved
for closure as of May 28, 2011. The revenue and income (loss) before income taxes of these stores for the periods are presented as follows:
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Revenues |
|
$ |
17,216 |
|
$ |
67,027 |
|
Operating expenses |
|
|
19,312 |
|
|
75,818 |
|
Gain from sale of assets |
|
|
(5,149 |
) |
|
(1,049 |
) |
Other expenses |
|
|
304 |
|
|
1,252 |
|
Income (loss) before income taxes |
|
|
2,749 |
|
|
(8,994 |
) |
Included in these stores' income (loss) before income taxes are: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
137 |
|
|
778 |
|
Inventory liquidation charges |
|
|
397 |
|
|
1,641 |
|
The
above results are not necessarily indicative of the impact that these closures will have on revenues and operating results of the Company in the future, as the Company often
transfers the business of a closed store to another Company store, thereby retaining a portion of these revenues.
The
Company prioritizes inputs used in measuring the fair value of its nonfinancial assets and liabilities into a hierarchy of three levels: Level 1—quoted prices
(unadjusted) in active markets for identical assets or liabilities; Level 2—inputs other than quoted prices included within Level 1 that are either directly or indirectly
observable; and Level 3—unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that
market participants would use in pricing.
Long-lived
assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the
fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use
assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows and discounting them using a
risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located.
9
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
3. Lease Termination and Impairment Charges (Continued)
The
table below sets forth by level within the fair value hierarchy the long-lived assets as of the impairment measurement date for which an impairment assessment was
performed and total losses for the thirteen week periods ended May 28, 2011 and May 29, 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1) |
|
Significant
Other
Observable
Inputs (Level 2) |
|
Significant
Unobservable
Inputs (Level 3) |
|
Fair Values
as of
Impairment Date |
|
Total Losses
Thirteen week
period ended
May 28, 2011 |
|
Long-lived assets held and used |
|
$ |
— |
|
$ |
— |
|
$ |
1,484 |
|
$ |
1,484 |
|
$ |
(734 |
) |
Long-lived assets held for sale |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
$ |
— |
|
$ |
1,484 |
|
$ |
1,484 |
|
$ |
(734 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1) |
|
Significant
Other
Observable
Inputs (Level 2) |
|
Significant
Unobservable
Inputs (Level 3) |
|
Fair Values
as of
Impairment Date |
|
Total Losses
Thirteen week
period ended
May 29, 2010 |
|
Long-lived assets held and used |
|
$ |
— |
|
$ |
— |
|
$ |
282 |
|
$ |
282 |
|
$ |
(1,134 |
) |
Long-lived assets held for sale |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
$ |
— |
|
$ |
282 |
|
$ |
282 |
|
$ |
(1,134 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
4. Income Taxes
The Company recorded an income tax expense from continuing operations of $2,273 and $7,141 for the thirteen week periods ended May 28, 2011 and May 29, 2010, respectively.
The income tax expense for the thirteen week period ended May 28, 2011 is primarily attributable to the accrual of state and local taxes and adjustments to unrecognized tax benefits. The income
tax expense for the thirteen week period ended May 29, 2010 is primarily due to the need for an accrual of additional state taxes resulting from the receipt of a final audit determination.
The
Company is indemnified by Jean Coutu Group for certain tax liabilities incurred for all years ended up to and including June 4, 2007, related to the June 2007 Brooks Eckerd
acquisition. Although the Company is indemnified by Jean Coutu Group, the Company remains the primary obligor to the tax authorities with respect to any tax liability arising for the years prior to
the acquisition. Accordingly, as of May 28, 2011 and February 26, 2011 the Company had corresponding recoverable indemnification assets of $160,289 and $158,209 from Jean Coutu Group,
respectively, included in the 'Other Assets' line of the Consolidated Balance Sheets, to reflect the indemnification for such liabilities.
The
Company files U.S. federal income tax returns as well as income tax returns in those states where it does business. The consolidated federal income tax returns have been
subject to examination by the Internal Revenue Service (IRS) through fiscal 2008. However, any net operating losses that were generated in these prior closed years may be subject to examination by the
IRS upon utilization. The IRS has completed the examination of the consolidated U.S. income tax returns for Brooks Eckerd for the periods leading up to the acquisition which include fiscal years 2004
through 2007. A revenue agent
10
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
4. Income Taxes (Continued)
report
(RAR) has been received for each of the three audit cycles, with the last RAR received in the third quarter of fiscal 2011. The company is appealing these audit results. Management believes
that the Company has adequately provided for any potential adverse results. Furthermore, pursuant to the tax indemnification referenced above, Jean Coutu Group is required to reimburse the Company for
any assessment that may arise. State income tax returns are generally subject to examination for a period of
three to five years after filing of the respective return. However, as a result of filing amended returns, the Company has statutes open in some states from fiscal 2004.
The
Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the
evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the
current estimate of the tax liabilities.
Over
the next 12 months, the Company believes that it is reasonably possible that the amount of unrecognized tax positions including interest and penalties could decrease tax
liabilities by approximately $96,500, which would impact the effective tax rate if our tax positions are sustained upon audit, the controlling statute of limitations expires or we agree to a
disallowance. The primary driver of the decrease is contingent upon the timing of the conclusion of the pre-acquisition period's audit of the consolidated U.S. income tax returns for
Brooks Eckerd and will impact the effective rate by decreasing tax expense by approximately $60,200. The corresponding indemnification asset will reverse concurrently.
The
valuation allowances as of May 28, 2011 and February 26, 2011 apply to the net deferred tax assets of the Company. The Company continues to maintain a full valuation
allowance of $2,220,585 and $2,199,302 against net deferred tax assets at May 28, 2011 and February 26, 2011, respectively.
5. Intangible Assets
The Company's intangible assets are finite-lived and amortized over their useful lives. Following is a summary of the Company's amortizable intangible assets as of May 28, 2011
and February 26, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 28, 2011 |
|
February 26, 2011 |
|
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Remaining
Weighted
Average
Amortization
Period |
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Remaining
Weighted
Average
Amortization
Period |
Favorable leases and other |
|
$ |
622,712 |
|
$ |
(347,682 |
) |
10 years |
|
$ |
620,786 |
|
$ |
(335,692 |
) |
10 years |
Prescription files |
|
|
1,222,305 |
|
|
(885,648 |
) |
5 years |
|
|
1,217,212 |
|
|
(856,129 |
) |
6 years |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,845,017 |
|
$ |
(1,233,330 |
) |
|
|
$ |
1,837,998 |
|
$ |
(1,191,821 |
) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
11
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
5. Intangible Assets (Continued)
Also
included in other non-current liabilities as of May 28, 2011 and February 26, 2011 are unfavorable lease intangibles with a net carrying amount of $91,331
and $93,952 respectively. These intangible liabilities are amortized over their remaining lease terms.
Amortization
expense for these intangible assets and liabilities was $41,113 and $44,440 for the thirteen week periods ended May 28, 2011 and May 29, 2010, respectively.
The anticipated annual amortization expense for these intangible assets and liabilities is 2012—$136,438; 2013—$111,211; 2014—$85,652; 2015—$68,419 and
2016—$57,078.
12
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
6. Indebtedness and Credit Agreements
Following is a summary of indebtedness and lease financing obligations at May 28, 2011 and February 26, 2011:
|
|
|
|
|
|
|
|
|
|
|
May 28,
2011 |
|
February 26,
2011 |
|
Secured Debt: |
|
|
|
|
|
|
|
| |
Senior secured revolving credit facility due August 2015 (or April 2014, see Credit Facility below)
|
|
$ |
— |
|
$ |
28,000 |
|
| |
Senior secured credit facility term loan due June 2014 |
|
|
1,044,433 |
|
|
1,074,613 |
|
| |
Senior secured credit facility term loan due June 2014 ($342,125 face value less unamortized discount of $19,718) |
|
|
— |
|
|
322,407 |
|
| |
Senior secured credit facility term loan due March 2018 (or December 2014 or September 2015, see Credit Facility below) ($333,367 face value less unamortized discount of $1,673) |
|
|
331,694 |
|
|
— |
|
| |
9.75% senior secured notes (senior lien) due June 2016 ($410,000 face value less unamortized discount of $5,371 and $5,635) |
|
|
404,629 |
|
|
404,365 |
|
| |
8.00% senior secured notes (senior lien) due August 2020 |
|
|
650,000 |
|
|
650,000 |
|
| |
10.375% senior secured notes (second lien) due July 2016 ($470,000 face value less unamortized discount of $28,569 and $29,952) |
|
|
441,431 |
|
|
440,048 |
|
| |
7.5% senior secured notes (second lien) due March 2017 |
|
|
500,000 |
|
|
500,000 |
|
| |
10.25% senior secured notes (second lien) due October 2019 ($270,000 face value less unamortized discount of $1,723 and $1,774) |
|
|
268,277 |
|
|
268,226 |
|
| |
Other secured |
|
|
5,384 |
|
|
5,408 |
|
| |
|
|
|
|
|
|
|
|
3,645,848 |
|
|
3,693,067 |
|
Guaranteed Unsecured Debt: |
|
|
|
|
|
|
|
| |
8.625% senior notes due March 2015 |
|
|
500,000 |
|
|
500,000 |
|
| |
9.375% senior notes due December 2015 ($410,000 face value less unamortized discount of $3,169 and $3,345) |
|
|
406,831 |
|
|
406,655 |
|
| |
9.5% senior notes due June 2017 ($810,000 face value less unamortized discount of $7,805 and $8,130) |
|
|
802,195 |
|
|
801,870 |
|
| |
|
|
|
|
|
|
|
|
1,709,026 |
|
|
1,708,525 |
|
Unsecured Unguaranteed Debt: |
|
|
|
|
|
|
|
| |
9.25% senior notes due June 2013 |
|
|
6,015 |
|
|
6,015 |
|
| |
6.875% senior debentures due August 2013 |
|
|
184,773 |
|
|
184,773 |
|
| |
8.5% convertible notes due May 2015 |
|
|
64,188 |
|
|
64,188 |
|
| |
7.7% notes due February 2027 |
|
|
295,000 |
|
|
295,000 |
|
| |
6.875% fixed-rate senior notes due December 2028 |
|
|
128,000 |
|
|
128,000 |
|
| |
|
|
|
|
|
|
|
|
677,976 |
|
|
677,976 |
|
Lease financing obligations |
|
|
137,713 |
|
|
140,297 |
|
| |
|
|
|
|
|
Total debt |
|
|
6,170,563 |
|
|
6,219,865 |
|
Current maturities of long-term debt and lease financing obligations |
|
|
(23,656 |
) |
|
(63,045 |
) |
| |
|
|
|
|
|
Long-term debt and lease financing obligations, less current maturities |
|
$ |
6,146,907 |
|
$ |
6,156,820 |
|
| |
|
|
|
|
|
13
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
6. Indebtedness and Credit Agreements (Continued)
Credit Facility
The Company has a senior secured credit facility that consists of a $1,175,000 revolving credit facility and two term loans. Borrowings
under the revolving credit facility bear interest at a rate per annum between LIBOR plus 3.25% and LIBOR plus 3.75% if the Company chooses to make LIBOR borrowings, or between Citibank's base rate
plus 2.25% and Citibank's base rate plus 2.75%, in each case based upon the amount of revolver availability, as defined in the senior secured credit facility. The Company is required to pay fees
between 0.50% and 0.75% per annum on the daily unused amount of the revolver depending on the amount of revolver availability. Amounts drawn under the revolver become due and payable on
August 19, 2015, provided that such maturity date shall instead be April 18, 2014 in the event that on or prior to April 18, 2014 the Company does not repay, refinance or
otherwise extend the maturity date of its Tranche 2 Term Loan (as defined below) to a date that is at least 90 days after August 19, 2015 and, in the case of a repayment or
refinancing, the Company must have at least $500,000 of availability under the revolver.
The
Company's ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At May 28, 2011,
the Company had no borrowings outstanding under the revolver and had letters of credit outstanding thereunder of $138,976 which gave the Company additional borrowing capacity of $1,036,024.
The
credit facility also includes a $1,105,000 senior secured term loan (the "Tranche 2 Term Loan"). The Tranche 2 Term Loan will mature on June 4, 2014 and
currently bears interest at a rate per annum equal to LIBOR plus 1.75%, if the Company elects LIBOR borrowings, or at Citibank's base rate plus 0.75%. Mandatory prepayments are required to be made
from proceeds of asset dispositions and casualty events (subject to certain limitations), a portion of excess cash flows (as defined in the senior secured credit facility) and proceeds from certain
issuances of equity or debt (subject to certain exceptions). If at any time there is a shortfall in the borrowing base under the senior secured credit facility, prepayment of the Tranche 2 Term
Loan may also be required.
On
March 3, 2011, the Company refinanced its Tranche 3 Term Loan with a $343.0 million senior secured term loan (the "Tranche 5 Term Loan"). The
Tranche 5 Term Loan matures on March 3, 2018, although the maturity shall instead be December 1, 2014 in the event that the Company does not repay or refinance its outstanding
8.625% senior notes due 2015 prior to that time, or September 16, 2015, in the event that the Company does not repay or refinance its outstanding 9.375% senior notes due 2015 prior to that
time. The Tranche 5 Term Loan bears interest at a rate per annum equal to LIBOR plus 3.25% with a 1.25% LIBOR floor, and is subject to a 1% prepayment fee in the event it is refinanced within
the first year after issuance with the proceeds of a substantially concurrent issuance of new loans or other indebtedness incurred for the primary purpose of repaying, refinancing or replacing the
Tranche 5 Term Loan. The Company must make mandatory prepayments of the Tranche 5 Term Loan with the proceeds of asset dispositions and casualty events (subject to certain limitations),
with a portion of any excess cash flow generated by the Company (as defined in the senior secured credit facility) and with the proceeds of certain issuances of equity and debt (subject to certain
exceptions). If
14
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
6. Indebtedness and Credit Agreements (Continued)
at
any time there is a shortfall in its borrowing base under its senior secured credit facility, prepayment of the Tranche 5 Term Loan may also be required.
The
senior secured credit facility also restricts the Company and the subsidiary guarantors from accumulating cash on hand in excess of $200,000 at any time when revolving loans are
outstanding (not including cash located in the Company's store deposit accounts, cash necessary to cover the Company's current liabilities and certain other exceptions) and from accumulating cash on
hand with revolver borrowings in excess of $100,000 over three consecutive business days. The senior secured credit facility also states that if at any time (other than following the exercise of
remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the
second priority debt) either (a) an event of default exists under the Company's senior secured credit facility or (b) the sum of revolver availability under the Company's senior secured
credit facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $100,000 for three consecutive business days (a "cash sweep period"), the
funds in the Company's deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the senior
secured credit facility, and then held as Collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of the Company's senior secured credit facility.
The
senior secured credit facility allows the Company to have outstanding, at any time, up to $1,500,000 in secured second priority debt and unsecured debt in addition to borrowings
under the senior secured credit facility and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt and unsecured debt shall mature or require scheduled
payments of principal prior to three months after June 4, 2014. The senior secured credit facility allows the Company to incur an unlimited amount of unsecured debt with a maturity beyond three
months after June 4, 2014; however, other debentures limit the amount of unsecured debt that can be incurred if certain interest coverage levels are not met at the time of incurrence of said
debt. The senior secured facility also allows, so long as the senior secured credit facility is not in default, for the repurchase of any debt with a maturity on or before June 4, 2014, for the
voluntary repurchase of debt with a maturity after June 4, 2014, and the mandatory repurchase of the Company's 8.5% convertible notes due 2015 if the Company maintains availability on the
revolving credit facility of at least $100,000.
The
senior secured credit facility contains covenants which place restrictions on the incurrence of debt beyond the restrictions described above, the payments of dividends, sale of
assets, mergers and acquisitions and the granting of liens. The credit facility has a financial covenant, which is the maintenance of a fixed charge coverage ratio. The covenant requires that, if
availability on the revolving credit facility is less than $150,000, the Company must maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 through November 26, 2011. This ratio
increases to 1.05 to 1.00 in the last quarter of Fiscal 2012 and remains at that level for the remaining term of the facility. As of May 28, 2011, the Company was in compliance with this
financial covenant.
The
senior secured credit facility provides for events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if the
Company
15
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
6. Indebtedness and Credit Agreements (Continued)
fails
to make any required payment on debt having a principal amount in excess of $50,000 or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the
holder of such debt to accelerate the maturity or require the repurchase of such debt. The August 2010 amendments to the senior secured credit facility exclude the mandatory repurchase of the 8.5%
convertible notes due 2015 from this event of default.
Substantially
all of Rite Aid Corporation's wholly-owned subsidiaries guarantee the obligations under the senior secured credit facility. The subsidiary guarantees of the senior secured
credit facility; the 9.75% senior secured notes due 2016 and the 8.00% senior secured notes due 2020 are secured by a senior lien on, among other things, accounts receivable, inventory and
prescription files of the subsidiary guarantors. Rite Aid Corporation is a holding company with no direct operations and is dependent upon dividends, distributions and other payments from its
subsidiaries to service payments due under the senior secured credit facility. The Company's 10.375% senior secured notes due 2016, the 7.5% senior secured notes due 2017 and the 10.25% senior secured
notes due 2019 are guaranteed by substantially all of the Company's wholly-owned subsidiaries, which are the same subsidiaries that guarantee the senior secured credit facility, the 9.75% senior
secured notes due 2016 and the 8.00% senior secured notes due 2020, and are secured on a second priority basis by the same collateral as the senior secured credit facility, the 9.75% senior secured
notes due 2016 and the 8.00% senior secured
notes due 2020. The 8.625% senior notes due 2015, the 9.375% senior notes due 2015 and the 9.5% senior notes due 2017 are also guaranteed by all of the same subsidiaries on an unsecured basis.
The
subsidiary guarantees related to the Company's senior secured credit facility and secured notes and on an unsecured basis the guaranteed indentures are full and unconditional and
joint and several, and there are no restrictions on the ability of the parent to obtain funds from its subsidiaries. Also, the Company has no independent assets or operations, and subsidiaries not
guaranteeing the credit facility and applicable indentures are minor. Accordingly, condensed consolidating financial information for the parent and subsidiaries is not presented.
The
indentures that govern the Company's secured and guaranteed unsecured notes contain restrictions on the amount of additional secured and unsecured debt that can be incurred by the
Company. As of May 28, 2011, the amount of additional secured and unsecured debt that could be incurred under these indentures was $1,142,200 (which does not include the ability to enter into
certain sale and leaseback transactions.) However, the Company could not incur any additional secured debt assuming a fully drawn revolver and the outstanding letters of credit. The ability to issue
additional unsecured debt under these indentures is governed by an interest coverage ratio test.
Convertible Notes
On March 1, 2011, the Company was notified by the NYSE that, as of March 1, 2011, it regained compliance with the NYSE
minimum share price listing requirement. The Company is now in compliance with all NYSE listing rules, and has actively been taking steps to maintain its listing and expects its efforts to maintain
its NYSE listing will be successful. However, there can be no assurance that the Company will maintain compliance with the NYSE minimum share price rule or other
16
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
6. Indebtedness and Credit Agreements (Continued)
continued
listing requirements. In the event of a delisting, all holders of its $64.2 million of outstanding 8.5% Convertible Notes due May 2015 ("Convertible Notes") would be entitled to
require the Company to repurchase its Convertible Notes. The Company's senior secured credit facility permits the Company to make such a repurchase of the Convertible Notes; provided that, before and
after such transaction, no default or event of default shall have occurred and be continuing under the senior secured credit facility and the Company has at least $100.0 million of availability
under its revolving credit facility. The Company's ability to pay cash to holders of the Convertible Notes may be limited by its financial resources at the time of such repurchase. The Company cannot
assure you that sufficient financing will be available on terms acceptable to it if necessary to make any required repurchase of the Convertible Notes.
Maturities
The aggregate annual principal payments of long-term debt for the remainder of fiscal 2012 and thereafter are as follows:
2012—$5,205; 2013—$114; 2014—$193,823; 2015—$1,044,692; 2016—$977,618 and $3,859,708 in 2017 and thereafter.
7. Financial Instruments
The carrying amounts and fair values of financial instruments at May 28, 2011 and February 26, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 28, 2011 |
|
February 26, 2011 |
|
|
|
Carrying
Amount |
|
Fair
Value |
|
Carrying
Amount |
|
Fair
Value |
|
Variable rate indebtedness |
|
$ |
1,376,127 |
|
$ |
1,329,312 |
|
$ |
1,425,019 |
|
$ |
1,386,861 |
|
Fixed rate indebtedness |
|
$ |
4,656,722 |
|
$ |
4,550,824 |
|
$ |
4,654,548 |
|
$ |
4,544,974 |
|
Cash,
trade receivables and trade payables are carried at market value, which approximates their fair values due to the short-term maturity of these instruments.
The
following methods and assumptions were used in estimating fair value disclosures for financial instruments:
LIBOR-based borrowings under credit facilities:
The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans and term notes are estimated based on the
quoted market price of the financial instruments.
Long-term indebtedness:
The fair values of long-term indebtedness are estimated based on the quoted market prices of the financial instruments. If
quoted market prices were not available, the Company estimated the fair value based on the quoted market price of a financial instrument with similar characteristics.
17
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
8. Stock Options
On March 21, 2011, the Company launched a Stock Option Exchange Program ("Program") for eligible associates only. Under the Program, eligible associates had the opportunity to
surrender certain stock options for a lesser number of new stock options with an exercise price that was determined based on the closing market price on April 21, 2011, the day the Program
concluded. The number of new options was determined by applying exchange ratios that resulted in providing new stock options with an aggregate fair value that approximated the aggregate fair value of
the options they replaced. The new options vest over two years and have a five year life with an exercise price of $1.03. A total of 14.0 million options with an average exercise price in
excess of $1.77 were cancelled and 5.3 million new options were granted with an exercise price of $1.03. The Company recognized a minimal incremental compensation expense as a result of the
Program.
Following
is a summary of stock option transactions for the quarter ended May 28, 2011:
|
|
|
|
|
|
|
|
Shares |
|
Outstanding at February 26, 2011 |
|
|
74,298 |
|
| |
Granted |
|
|
5,312 |
|
| |
Exercised |
|
|
(65 |
) |
| |
Cancelled |
|
|
(15,765 |
) |
| |
|
|
|
Outstanding at May 28, 2011 |
|
|
63,780 |
|
| |
|
|
|
9. Retirement Plans
Net periodic pension expense recorded in the thirteen week periods ended May 28, 2011 and May 29, 2010, for the Company's defined benefit plans includes the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
Pension Plan |
|
Nonqualified
Executive
Retirement Plans |
|
|
|
Thirteen Week Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
May 28,
2011 |
|
May 29,
2010 |
|
Service cost |
|
$ |
838 |
|
$ |
809 |
|
$ |
5 |
|
$ |
18 |
|
Interest cost |
|
|
1,518 |
|
|
1,516 |
|
|
193 |
|
|
211 |
|
Expected return on plan assets |
|
|
(1,505 |
) |
|
(1,248 |
) |
|
— |
|
|
— |
|
Amortization of unrecognized prior service cost |
|
|
157 |
|
|
215 |
|
|
— |
|
|
— |
|
Amortization of unrecognized net loss |
|
|
422 |
|
|
507 |
|
|
|
|
|
(332 |
) |
| |
|
|
|
|
|
|
|
|
|
Net pension expense |
|
$ |
1,430 |
|
$ |
1,799 |
|
$ |
198 |
|
$ |
(103 |
) |
| |
|
|
|
|
|
|
|
|
|
During
the thirteen week period ended May 28, 2011 the Company contributed $405 to the Nonqualified Executive Retirement Plans. In addition, the Company prepaid $5,100 to the
Defined Benefit Pension Plan during fiscal 2011. During the remainder of fiscal 2012, the Company expects to
18
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
9. Retirement Plans (Continued)
contribute
$1,161 to the Nonqualified Executive Retirement Plans and $5,819 to the Defined Benefit Pension Plan.
10. Commitments and Contingencies
The Company is currently a defendant in several putative collective or class action lawsuits filed in
federal or state courts in Pennsylvania, New Jersey, New York, Maryland and Oregon, purportedly on behalf of, in some cases (i) current and former assistant store managers or
(ii) current and former store managers and assistant store managers, respectively, working in the Company's stores at various locations. The lawsuits allege violations of the Fair Labor
Standards Act and of certain state wage and hour statutes. The lawsuits seek various combinations of unpaid compensation (including overtime compensation), liquidated damages, exemplary damages,
pre- and post-judgment interest as well as attorneys' fees and costs. In one of the cases, Craig et al v. Rite Aid Corporation et
al, pending in the United States District Court for the Middle District of Pennsylvania, brought on behalf of current and former assistant store managers, the Court, on
December 9, 2009, conditionally certified a nationwide collective group of individuals who worked for the Company as assistant store managers since December 9, 2006. Notice of the Craig action
has been sent to the purported members of the collective group (approximately 6,700 current and former store managers) and approximately
1,100 have joined the Craig action. In another of the cases, Indergit v. Rite Aid Corporation et al,
pending in the United States District Court for the Southern District of New York, brought on behalf of current and former store managers and assistant store managers, the Court, on April 2,
2010, conditionally certified a nationwide collective group of individuals who worked for the Company as store managers since March 31, 2007. The Court ordered that Notice of the Indergit action be
sent to the purported members of the collective group (approximately 7,000 current and former store managers) and approximately 1,550
have joined the Indergit action. At this time, the Company is not able to predict the outcome of these lawsuits, or any possible monetary exposure
associated with the lawsuits. The Company's management believes, however, that the lawsuits are without merit and not appropriate for collective or class action treatment. The Company is vigorously
defending all of these claims.
The
Company is currently a defendant in several putative class action lawsuits filed in state courts in California alleging violations of California wage and hour laws pertaining
primarily to pay for missed meals and rest periods. These suits purport to be class actions and seek substantial damages. At this time, the Company is not able to predict the outcome of these
lawsuits, or any possible monetary exposure associated with the lawsuits. The Company's management believes, however, that the plaintiffs' allegations are without merit and that their claims are not
appropriate for class action treatment. The Company is vigorously defending all of these claims.
The
Company was served with a United States Department of Health and Human Services Office of the Inspector General ("OIG") Subpoena dated March 5, 2010 in connection with an
investigation being conducted by the OIG, the United States Attorney's Office for the Central District of California and the United States Department of Justice Commercial Litigation Branch. The
subpoena requests records related to any gift card or similar programs for customers who transferred prescriptions for drugs or medicines to the Company's pharmacies, and whether any customers who
receive federally
19
Table of Contents
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Thirteen Week Periods Ended May 28, 2011 and May 29, 2010
(Dollars and share information in thousands, except per share amounts)
(unaudited)
10. Commitments and Contingencies (Continued)
funded
prescription benefits (e.g. Medicare and Medicaid) may have benefited from those programs. The Company is in the process of producing records in response to the subpoena and is unable to
predict with certainty the timing or outcome of the investigation.
The
Company received a Subpoena dated May 9, 2011 from certain California counties seeking information regarding compliance with environmental regulations governing the management
of hazardous waste. The Company is in the process of gathering records in response to the subpoena. The Company is unable to predict with certainty the timing or outcome of the investigation.
The
Company does not believe that any of these matters will have a material adverse effect on its business or financial condition. The Company cannot give assurance, however, that an
unfavorable outcome in one or more of these matters will not have a material adverse effect on its results of operations for the period in which they are resolved.
The
Company is subject from time to time to various claims and lawsuits and governmental investigations arising in the ordinary course of our business. While the Company's management
cannot predict the outcome of these claims with certainty, the Company's management does not believe that the outcome of any of these legal matters will have a material adverse effect on its business,
consolidated results of operations or financial position.
20
Table of Contents
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Net loss for the thirteen week period ended May 28, 2011 was $63.1 million compared to the net loss of
$73.7 million for the thirteen week period ended May 29, 2010. The decrease in net loss was primarily driven by lower selling, general and administrative expenses ("SG&A") and lower
interest expense, partially offset by lower gross margin and a loss on debt retirements. Revenues were substantially flat in the current quarter with growth in pharmacy same store sales, offset by
store closings. The decrease in gross margin was mainly due to higher markdowns and
revenue deferral both associated with our wellness+ customer loyalty program ("wellness+"). Pharmacy gross margin was flat.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
|
|
(dollars in thousands)
|
|
Revenues |
|
$ |
6,390,793 |
|
$ |
6,394,336 |
|
Revenue decline |
|
|
(0.1 |
)% |
|
(2.1 |
)% |
Same store sales growth (decline) |
|
|
0.8 |
% |
|
(1.0 |
)% |
Pharmacy sales growth (decline) |
|
|
0.6 |
% |
|
(2.0 |
)% |
Same store pharmacy sales growth (decline) |
|
|
1.1 |
% |
|
(0.9 |
)% |
Pharmacy sales as a % of total sales |
|
|
68.7 |
% |
|
68.3 |
% |
Third party sales as a % of total pharmacy sales |
|
|
96.5 |
% |
|
96.3 |
% |
Front-end sales decline |
|
|
(1.3 |
)% |
|
(2.4 |
)% |
Same store front-end sales decline |
|
|
— |
|
|
(1.3 |
)% |
Front-end sales as a % of total sales |
|
|
31.3 |
% |
|
31.7 |
% |
Store data: |
|
|
|
|
|
|
|
| |
Total stores beginning of period |
|
|
4,714 |
|
|
4,780 |
|
| |
New stores |
|
|
— |
|
|
2 |
|
| |
Store acquisitions, net |
|
|
— |
|
|
— |
|
| |
Closed stores |
|
|
(10 |
) |
|
(15 |
) |
| |
Total stores end of period |
|
|
4,704 |
|
|
4,767 |
|
| |
Relocated stores |
|
|
6 |
|
|
8 |
|
| |
Remodeled stores |
|
|
3 |
|
|
1 |
|
Revenue declined 0.1% for the thirteen week period ended May 28, 2011 compared to the thirteen week period ended May 29,
2010. This revenue decline was driven primarily by a reduction in the store base partially offset by increases in same store sales. We operated 63 fewer stores than in the same period last year. Same
store sales increased 0.8% during the quarter reflecting the positive impact of wellness+ and positive script count. Same store sales trends are described in the following paragraphs.
Pharmacy
same store sales increased by 1.1% in the thirteen week period ended May 28, 2011 compared to the thirteen week period ended May 29, 2010. The increase was
primarily driven by a same store prescription increase of 0.4%, partially offset by an approximate 1.5% negative impact from new generic introductions.
21
Table of Contents
Front-end
same store sales were flat in the thirteen week period ended May 28, 2011 compared to the thirteen week period ended May 29, 2010.
We
include in same store sales all stores that have been open or owned at least one year. Relocated stores are not included in the same store sales for one year. Stores in liquidation
are considered closed.
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
|
|
(dollars in thousands)
|
|
Cost of goods sold |
|
$ |
4,699,874 |
|
$ |
4,682,632 |
|
Gross profit |
|
|
1,690,919 |
|
|
1,711,704 |
|
Gross margin |
|
|
26.5 |
% |
|
26.8 |
% |
Selling, general and administrative expenses |
|
|
1,586,236 |
|
|
1,622,934 |
|
Selling, general and administrative expenses as a percentage of revenues |
|
|
24.8 |
% |
|
25.4 |
% |
Lease termination and impairment charges |
|
|
17,090 |
|
|
13,457 |
|
Interest expense |
|
|
130,760 |
|
|
141,619 |
|
Gross margin was 26.5% of sales for the thirteen week period ended May 28, 2011 compared to 26.8% of sales for the thirteen week
period ended May 29, 2010 due to lower
front-end gross margin and flat pharmacy gross margin. The decrease in front end gross margin was due primarily to higher markdowns and revenue deferrals both associated with our
wellness+ customer loyalty program. wellness+ continues to be one of our significant sales initiative programs. Enrolled wellness+ members, who tend to buy more and
shop more often, reached nearly 40 million as of May 28, 2011, significantly exceeding our initial expectations. Pharmacy gross margin was overall flat with generic purchasing savings
offset by continued reimbursement rate pressures.
We
use the last-in, first-out (LIFO) method of inventory valuation, which is estimated on a quarterly basis and is finalized at year end when inflation rates and
inventory levels are final. Therefore, LIFO costs for interim period financial statements are estimated. The LIFO charges were $20.0 million for the thirteen week period ended May 28,
2011 compared to LIFO charges of $20.5 million for the thirteen week period ended May 29, 2010.
Selling, General and Administrative Expenses
SG&A as a percentage of revenues was 24.8% in the thirteen week period ended May 28, 2011 compared to 25.4% in the thirteen week
period ended May 29, 2010. The decrease in SG&A as a percentage of revenues was due primarily to decreases in salaries and benefit costs due to better labor control, continued store and
corporate administrative cost reductions resulting from various initiatives, and lower depreciation and amortization.
22
Table of Contents
Lease termination and impairment charges consist of amounts and number of locations as follows:
|
|
|
|
|
|
|
|
|
|
Thirteen Week
Period Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
Impairment charges |
|
$ |
734 |
|
$ |
1,134 |
|
Facility and equipment lease exit charges |
|
|
16,356 |
|
|
12,323 |
|
| |
|
|
|
|
|
|
|
$ |
17,090 |
|
$ |
13,457 |
|
| |
|
|
|
|
|
Impairment charges: |
|
|
|
|
|
|
|
Number of Stores |
|
|
14 |
|
|
16 |
|
Number of Distribution Centers |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
14 |
|
|
16 |
|
| |
|
|
|
|
|
Lease exit charges: |
|
|
|
|
|
|
|
Number of Stores |
|
|
3 |
|
|
8 |
|
Number of Distribution Centers |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
3 |
|
|
8 |
|
| |
|
|
|
|
|
These amounts include the write-down of long-lived assets at locations that were assessed for impairment
because of management's intention to relocate or close the location, or because of changes in circumstances that indicated the carrying value of an asset may not be recoverable.
Facility and Equipment Lease Exit Charges: Charges to close a store, which principally consist of lease termination costs, are recorded
at the time
the store is closed and all inventory is liquidated, pursuant to the guidance set forth in ASC 420, "Exit or Disposal Cost Obligations." We calculate our liability for closed stores on a
store-by-store basis. The calculation includes the discounted effect of future minimum lease payments and related ancillary costs, from the date of closure to the end of the
remaining lease term, net of estimated cost recoveries that may be achieved through subletting properties or through favorable lease terminations. We evaluate these assumptions each quarter and adjust
the liability accordingly. As part of our ongoing business activities, we assess stores and distribution centers for potential closure. Decisions to close stores or distribution centers in future
periods would result in charges for lease exit costs and liquidation of inventory, as well as impairment of assets at these locations.
Interest expense was $130.8 million for the thirteen week period ended May 28, 2011, compared to $141.6 million
for the thirteen week period ended May 29, 2010. The decrease in interest expense for the thirteen week period ended May 28, 2011 was primarily due to the refinancing of our senior
secured notes, our Tranche 3 Term Loan, the repurchase of a portion of our convertible notes last fiscal year, and lower borrowings on our senior secured revolving credit facility this year.
The weighted average interest rates on our indebtedness for the thirteen week periods ended May 28, 2011 and May 29, 2010 were 7.4% and 7.6%, respectively.
23
Table of Contents
We recorded an income tax expense of $2.3 million and $7.1 million for the thirteen week periods ended May 28,
2011 and May 29, 2010, respectively. The income tax expense for the thirteen week period ended May 28, 2011 is primarily attributable to the accrual of state and local taxes and
adjustments to unrecognized tax benefits. The income tax expense for the thirteen week period ended May 29, 2010 is primarily due to the need for an accrual of additional state taxes resulting
from the receipt of a final audit determination.
The
IRS has completed the examination of the consolidated U.S. income tax returns for Brooks Eckerd for the pre-acquisition fiscal years 2004 through 2007. The revenue agent
reports (RAR) for these periods have been received and we are appealing these audit results. We believe we have adequately provided for any potential adverse results. Furthermore, we are indemnified
by Jean Coutu Group who will reimburse us for any assessment that may arise.
We
recognize tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation
of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current
estimate of the tax liabilities.
Over
the next 12 months, we believe that it is reasonably possible that the amount of unrecognized tax positions including interest and penalties could decrease tax liabilities by
approximately $96.5 million, which would impact the effective tax rate if our tax positions are sustained upon audit, the controlling statute of limitations expires or we agree to a
disallowance. The primary driver of the decrease is contingent upon the timing of the conclusion of the pre-acquisition period's audit of the consolidated U.S. income tax returns for
Brooks Eckerd and will impact the effective rate by decreasing tax expense by approximately $60.2 million. The corresponding indemnification asset will reverse concurrently.
We
evaluate our deferred tax assets on a regular basis to determine if a valuation allowance against the net deferred tax assets is required. A cumulative loss in recent years is
significant negative evidence in considering whether deferred tax assets are realizable. Based on the negative evidence, we are precluded from relying on projections of future taxable income to
support the recognition of deferred
tax assets. The ultimate realization of deferred tax assets is dependent upon the existence of sufficient taxable income generated in the carryforward periods.
Liquidity and Capital Resources
We have three primary sources of liquidity: (i) cash and cash equivalents, (ii) cash provided by operating activities and
(iii) borrowings under the revolving credit facility under our senior secured credit facility. Our principal uses of cash are to provide working capital for operations, to service our
obligations to pay interest and principal on debt and to fund capital expenditures. Total liquidity as of May 28, 2011 was $1.158 billion, which consisted of revolver borrowing capacity
of $1.036 billion and invested cash of $121.6 million.
Our senior secured credit facility consists of a $1.175 billion revolving credit facility and two term loans. Borrowings under
the revolving credit facility bear interest at a rate per annum between LIBOR plus 3.25% and LIBOR plus 3.75%, if we choose to make LIBOR borrowings, or between Citibank's base rate plus 2.25% and
Citibank's base rate plus 2.75% in each case based upon the amount of revolver availability as defined in the senior secured credit facility. We are required to pay fees between
24
Table of Contents
0.50%
and 0.75% per annum on the daily unused amount of the revolver, depending on the amount of revolver availability. Amounts drawn under the revolver become due and payable on August 19,
2015, provided that such maturity date shall instead be April 18, 2014 in the event that on or prior to April 18, 2014 we do not repay, refinance or otherwise extend the maturity date of
our Tranche 2 Term Loan (as defined below) to a date that is at least 90 days after August 19, 2015 and, in the case of a repayment or refinancing, we must have at least
$500.0 million of availability under the revolver.
Our
ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At May 28, 2011, we had no
borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $139.0 million, which resulted in additional borrowing capacity of $1.036 billion.
The
credit facility also includes our $1.105 billion senior secured term loan (the "Tranche 2 Term Loan"). The Tranche 2 Term Loan will mature on June 4, 2014
and currently bears interest at a rate per annum equal to LIBOR plus 1.75%, if we choose to make LIBOR borrowings, or at Citibank's base rate plus 0.75%. We must make mandatory prepayments of the
Tranche 2 Term Loan with the proceeds of asset dispositions and casualty events (subject to certain limitations), with a portion of any excess cash flow generated by us (as defined in the
senior secured credit facility) and with the proceeds of certain issuances of equity and debt (subject to certain exceptions). If at any time there is a shortfall in our borrowing base under our
senior secured credit facility, prepayment of the Tranche 2 Term Loan may also be required.
On
March 3, 2011, we refinanced the Tranche 3 Term Loan with a $343.0 million senior secured term loan (the "Tranche 5 Term Loan"). The Tranche 5 Term
Loan matures on March 3, 2018, although the maturity shall instead be December 1, 2014 in the event that we do not repay or refinance our outstanding 8.625% senior notes due 2015 prior
to that time, or September 16, 2015, in the event that we do not repay or refinance our outstanding 9.375% senior notes due 2015 prior to that time. The Tranche 5 Term Loan bears
interest at a rate per annum equal to LIBOR plus 3.25% with a 1.25% LIBOR floor, and is subject to a 1% prepayment fee in the event it is refinanced within the first year after issuance with the
proceeds of a substantially concurrent issuance of new loans or other indebtedness incurred for the primary purpose of repaying, refinancing or replacing the Tranche 5 Term Loan. We must make
mandatory prepayments of the Tranche 5 Term Loan with the proceeds of asset dispositions and casualty events (subject to certain limitations), with a portion of any excess cash flow generated
by us (as defined in the senior secured credit facility) and with the proceeds of certain issuances of equity and debt (subject to certain exceptions). If at any time there is a shortfall in our
borrowing base under our senior secured credit facility, prepayment of the Tranche 5 Term Loan may also be required.
The
senior secured credit facility also restricts us and the subsidiary guarantors from accumulating cash on hand in excess of $200.0 million at any time when revolving loans are
outstanding (not including cash located in our store deposit accounts, cash necessary to cover our current liabilities and certain other exceptions) and from accumulating cash on hand with revolver
borrowings in excess of $100.0 million over three consecutive business days. The senior secured credit facility also states that if at any time (other than following the exercise of remedies or
acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority
debt) either (a) an event of default exists under our senior secured credit facility or (b) the sum of revolver availability under our senior secured credit facility and certain amounts
held on deposit with the senior collateral agent in a concentration account is less than $100.0 million for three consecutive business days (a "cash sweep period"), the funds in our deposit
accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the senior secured credit facility, and then
held as Collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of our senior secured credit facility.
25
Table of Contents
The
senior secured credit facility allows us to have outstanding, at any time, up to $1.5 billion in secured second priority debt and unsecured debt in addition to borrowings
under the senior secured credit facility and existing indebtedness, provided that not in excess of $750.0 million of such secured second priority debt and unsecured debt shall mature or require
scheduled payments of principal prior to three months after June 4, 2014. The senior secured credit facility allows us to incur an unlimited amount of unsecured debt with a maturity beyond
three months after June 4, 2014; however, other outstanding indebtedness limits the amount of unsecured debt that can be incurred if certain interest coverage levels are not met at the time of
incurrence of said debt. The senior secured facility also allows, so long as the senior secured credit facility is not in default, for the repurchase of any debt with a maturity on or before
June 4, 2014, for the voluntary repurchase of debt with a maturity after June 4, 2014 and the mandatory repurchase of our 8.5% convertible notes due 2015 if we maintain availability on
the revolving credit facility of at least $100.0 million.
Our
senior secured credit facility contains covenants which place restrictions on the incurrence of debt beyond the restrictions described above, the payment of dividends, sale of
assets, mergers and acquisitions and the granting of liens. Our credit facility has a financial covenant, which is the maintenance of a fixed charge coverage ratio. The covenant requires that, if
availability on the revolving credit facility is less than $150.0 million, we maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 through November 26, 2011. This ratio
increases to 1.05 to 1.00 in the last quarter of Fiscal 2012 and remains at that level for the remaining term of the facility. As of May 28, 2011, we were in compliance with this financial
covenant.
The
senior secured credit facility provides for events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if we fail
to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable,
the holder of such debt to accelerate the maturity or require the repurchase of such debt. The August 2010 amendments to the senior secured credit facility exclude the mandatory repurchase of the 8.5%
convertible notes due 2015 from this event of default.
The
indentures that govern our secured and guaranteed unsecured notes contain restrictions on the amount of additional secured and unsecured debt that can be incurred by us. As of
May 28, 2011, the amount of additional secured debt that could be incurred under these indentures was approximately $1.1 billion (which amount does not include the ability to enter into
certain sale and leaseback transactions). However, we could not incur any additional secured debt as of February 27, 2010 assuming a fully drawn revolver and the outstanding letters of credit.
The ability to issue additional unsecured debt under these indentures is governed by an interest coverage ratio test.
Net Cash Provided by/Used in Operating, Investing and Financing Activities
Cash provided by operating activities was $385.3 million in the thirteen week period ended May 28, 2011. Operating cash
flow was positively impacted by an increase in accounts payable due to the timing of purchases as well as rent, pension funding and interest payments.
Cash
used in investing activities in the thirteen week period ended May 28, 2011 was $48.4 million. Cash used for the purchase of property, plant, equipment and
prescription files as well as proceeds from the sale of assets were higher compared to the prior year.
Cash
used in financing activities was $197.4 million for the thirteen week period ended May 28, 2011 due to the reduction of borrowings on our revolving credit facility and
zero balance cash accounts. Additionally, included in financing activities is the refinancing of our $343.0 million Tranche 3 Term Loan with proceeds from our $343.0 million
Tranche 5 Term Loan.
26
Table of Contents
During the thirteen week period ended May 28, 2011, we spent $56.8 million on capital expenditures, consisting of
$11.4 million related to new store construction, store relocation and store remodel projects, $37.3 million related to technology enhancements, improvements to distribution centers and
other corporate requirements, and $8.1 million related to the purchase of prescription files from independent pharmacists. We plan on making total capital expenditures of approximately
$300.0 million during fiscal 2012, consisting of approximately 52.0% related to store relocations and remodels and new store construction, 23.0% related to infrastructure and maintenance
requirements and 25.0% related to prescription file purchases. Management expects that these capital expenditures will be financed primarily with cash flow from operating activities.
We are highly leveraged. Our high level of indebtedness: (i) limits our ability to obtain additional financing;
(ii) limits our flexibility in planning for, or reacting to, changes in our business and the industry; (iii) places us at a competitive disadvantage relative to our competitors with less
debt; (iv) renders us more vulnerable to general adverse economic and industry conditions; and (v) requires us to dedicate a substantial portion of our cash flow to service our debt.
Based upon our current levels of operations, we believe that cash flow from operations, together with available borrowings under the senior secured credit facility and other sources of liquidity, will
be adequate to meet our requirements for working capital, debt service and capital expenditures for at least the next twelve months. Based on our liquidity position, which we expect to remain strong
throughout the year, we do not expect the restriction on our credit facility, that could result if we fail to meet the fixed charge covenant in our senior secured credit facility, to have any impact
on our business in the next twelve months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in light of our operating performance and other relevant
circumstances. Should we determine, at any time, that it is necessary to obtain additional short-term liquidity, we will evaluate our alternatives and take appropriate steps to obtain
sufficient additional funds. There can be no assurance that any such supplemental funding, if sought, could be obtained or if obtained, would be on terms acceptable to us. From time to time, we may
seek deleveraging transactions, including entering into transactions to exchange debt for shares of common stock or may seek to refinance our outstanding debt or may otherwise seek transactions to
reduce interest expense and extend debt maturities.
Critical Accounting Policies and Estimates
For a description of the critical accounting policies that require the use of significant judgments and estimates by management, refer
to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" included in our fiscal 2011 10-K.
Factors Affecting Our Future Prospects
For a discussion of risks related to our financial condition, operations and industry, refer to "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" included in our fiscal 2011 10-K.
Adjusted EBITDA
In addition to net income determined in accordance with GAAP, we use certain non-GAAP measures, such as "Adjusted EBITDA",
in assessing our operating performance. We believe the non-GAAP measures serve as an appropriate measure to be used in evaluating the performance of our business. We define Adjusted EBITDA
as net income (loss) excluding the impact of income taxes,
27
Table of Contents
interest
expense and securitization costs, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings,
stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to customer loyalty programs and other items. We reference this
particular non-GAAP financial measure frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating
performance of prior periods and external comparisons to competitors' historical operating performance. In addition, incentive compensation is based on Adjusted EBITDA and we base certain of our
forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted
EBITDA.
The
following is a reconciliation of adjusted EBITDA to our net loss for the thirteen week periods ended May 28, 2011 and May 29, 2010:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period
Ended |
|
|
|
May 28,
2011 |
|
May 29,
2010 |
|
|
|
(dollars in thousands)
|
|
Net loss |
|
$ |
(63,082 |
) |
$ |
(73,684 |
) |
| |
Interest expense |
|
|
130,760 |
|
|
141,619 |
|
| |
Income tax expense |
|
|
2,273 |
|
|
7,141 |
|
| |
Depreciation and amortization expense |
|
|
117,090 |
|
|
127,500 |
|
| |
LIFO charges |
|
|
20,001 |
|
|
20,528 |
|
| |
Lease termination and impairment charges |
|
|
17,090 |
|
|
13,457 |
|
| |
Stock-based compensation expense |
|
|
3,571 |
|
|
5,485 |
|
| |
Loss (gain) on sale of assets, net |
|
|
(4,792 |
) |
|
237 |
|
| |
Loss on debt modifications and retirements, net |
|
|
22,434 |
|
|
— |
|
| |
Closed facility liquidation expense |
|
|
2,647 |
|
|
2,422 |
|
| |
Severance costs |
|
|
(49 |
) |
|
10 |
|
| |
Customer loyalty card programs revenue deferral |
|
|
21,866 |
|
|
5,037 |
|
| |
Other |
|
|
(6,955 |
) |
|
38 |
|
| |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
262,854 |
|
$ |
249,790 |
|
| |
|
|
|
|
|
In
addition to Adjusted EBITDA, we occasionally refer to several other Non-GAAP measures, on a less frequent basis, in order to describe certain components of our business
and how we utilize them to describe our results. These measures include but are not limited to EBITDA Gross Margin (gross margin adjusted for non-EBITDA items), EBITDA SG&A (SG&A expenses
adjusted for non-EBITDA items), FIFO Gross Margin (gross margin before LIFO charges) and Free Cash Flow (cash provided from operations less cash used in investing activities).
We
include these non-GAAP financial measures in our earnings announcements and guidance in order to provide transparency to our investors and enable investors to better
compare our operating performance with the operating performance of our competitors including with those of our competitors having different capital structures. Adjusted EBITDA or other
non-GAAP measures above should not be considered in isolation from, and is not intended to represent an alternative measure of, operating results or of cash flows from operating
activities, as determined in accordance with GAAP. Our definition of these non-GAAP measures may not be comparable to similarly titled measurements reported by other companies.
28
Table of Contents
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our future earnings, cash flow and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk
is the risk of loss from adverse changes in market prices and interest rates. Our major market risk exposure is changing interest rates. Increases in interest rates would increase our interest
expense. We enter into debt obligations to support capital expenditures, acquisitions, working capital needs and general corporate purposes. Our policy is to manage interest rates through the use of a
combination of variable-rate credit facilities, fixed-rate long-term obligations and derivative transactions. We currently do not have any derivative transactions
outstanding.
The
table below provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal payments and the related weighted
average interest rates by expected maturity dates as of May 28, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
2016 |
|
Thereafter |
|
Total |
|
Fair Value at
05/28/2011 |
|
|
|
(dollars in thousands)
|
|
Long-term debt, including current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
$ |
5,205 |
|
$ |
114 |
|
$ |
190,852 |
|
$ |
— |
|
$ |
974,188 |
|
$ |
3,533,000 |
|
$ |
4,703,359 |
|
$ |
4,597,748 |
|
Average Interest Rate |
|
|
1.16 |
% |
|
7.00 |
% |
|
6.95 |
% |
|
0.00 |
% |
|
8.93 |
% |
|
8.90 |
% |
|
8.82 |
% |
|
|
|
Variable Rate |
|
$ |
— |
|
$ |
— |
|
$ |
2,971 |
|
$ |
1,044,692 |
|
$ |
3,430 |
|
$ |
326,708 |
|
$ |
1,377,801 |
|
$ |
1,330,967 |
|
Average Interest Rate |
|
|
0.00 |
% |
|
0.00 |
% |
|
1.96 |
% |
|
1.97 |
% |
|
4.50 |
% |
|
4.50 |
% |
|
2.57 |
% |
|
|
|
Totals |
|
$ |
5,205 |
|
$ |
114 |
|
$ |
193,823 |
|
$ |
1,044,692 |
|
$ |
977,618 |
|
$ |
3,859,708 |
|
$ |
6,081,160 |
|
$ |
5,928,716 |
|
Our ability to satisfy interest payment obligations on our outstanding debt will depend largely on our future performance, which, in turn, is
subject to prevailing economic conditions and to financial, business and other factors beyond our control. If we do not have sufficient cash flow to service our interest payment obligations on our
outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected. We cannot be
assured that any replacement borrowing or equity financing could be successfully completed.
The
interest rate on our variable rate borrowings, which include our revolving credit facility and our Tranche 2 Term loans and Tranche 5 Term loans, are all based on
LIBOR. However, the interest rate on our Tranche 5 Term loans has a LIBOR floor of 125 basis points. If the market rates of interest for LIBOR changed by 100 basis points as of May 28,
2011, our annual interest expense would change by approximately $10.4 million.
A
change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures,
however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods
subsequent to the periods when the debt matures.
ITEM 4. Controls and Procedures
- (a)
- Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.
29
Table of Contents
- (b)
- Changes in Internal Control over Financial Reporting
There
have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
See Item 3 to Annual Report on Form 10-K for the fiscal year ended February 26, 2011 relating to
material pending legal proceedings. In addition, the Company received a subpoena dated May 9, 2011 from certain California counties seeking information regarding compliance with environmental
regulations governing the management of hazardous waste. The Company is in the process of gathering records in response to the subpoena. The Company is unable to predict with certainty the timing or
outcome of the investigation.
ITEM 1A. Risk Factors
In addition to the information set forth in this Quarterly Report, you should carefully consider the factors discussed in
"Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K", for the year ended February 26, 2011, which could materially affect our business, financial
condition or future results.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Removed and Reserved
ITEM 5. Other Information
Not applicable.
30
Table of Contents
ITEM 6. Exhibits
- (a)
- The
following exhibits are filed as part of this report.
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
2.1 |
|
Amended and Restated Stockholder Agreement, dated August 23, 2006, amended and restated as of June 4, 2007, by and between Rite Aid Corporation, The Jean Coutu Group (PJC) Inc., Jean Coutu, Marcelle Coutu,
Francois J. Coutu, Michel Coutu, Louis Coutu, Sylvie Coutu and Marie-Josee Coutu |
|
Exhibit 2.2 to Form 10-Q, filed on July 12, 2007 |
|
2.2 |
|
Letter Agreement to the Amended and Restated Stockholder Agreement, dated April 20, 2010, by and between Rite Aid Corporation and The Jean Coutu Group (PJC) Inc. |
|
Exhibit 2.2 to Form 10-Q, filed on July 6, 2010 |
|
2.3 |
|
Registration Rights Agreement, dated August 23, 2006, by and between Rite Aid Corporation and The Jean Coutu Group (PJC) Inc. |
|
Exhibit 10.2 to Form 8-K, filed on August 24, 2006 |
|
3.1 |
|
Restated Certificate of Incorporation, dated December 12, 1996 |
|
Exhibit 3(i) to Form 8-K, filed on November 2, 1999 |
|
3.2 |
|
Certificate of Amendment to the Restated Certificate of Incorporation, dated February 22, 1999 |
|
Exhibit 3(ii) to Form 8-K, filed on November 2, 1999 |
|
3.3 |
|
Certificate of Amendment to the Restated Certificate of Incorporation, dated June 27, 2001 |
|
Exhibit 3.4 to Registration Statement on Form S-1, File No. 333-64950, filed on July 12, 2001 |
|
3.4 |
|
Certificate of Amendment to the Restated Certificate of Incorporation, dated June 4, 2007 |
|
Exhibit 4.4 to Registration Statement on Form S-8, File No. 333-146531, filed on October 5, 2007 |
|
3.5 |
|
Certificate of Amendment to the Restated Certificate of Incorporation, dated June 25, 2009 |
|
Exhibit 3.1 to Form 10-Q, filed on July 8, 2009 |
|
3.6 |
|
7% Series G Cumulative Convertible Pay-in-Kind Preferred Stock Certificate of Designation dated January 28, 2005 |
|
Exhibit 3.2 to Form 8-K, filed on February 2, 2005 |
|
3.7 |
|
6% Series H Cumulative Convertible Pay-in-Kind Preferred Stock Certificate of Designation dated January 28, 2005 |
|
Exhibit 3.3 to Form 8-K, filed on February 2, 2005 |
|
3.8 |
|
Amended and Restated By-Laws |
|
Exhibit 3.1 to Form 8-K, filed on January 27, 2010 |
31
Table of Contents
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
4.1 |
|
Indenture, dated August 1, 1993, by and between Rite Aid Corporation, as issuer, and Morgan Guaranty Trust Company of New York, as trustee, related to the Company's 7.70% Notes due 2027 and 6.875% Notes due
2013 |
|
Exhibit 4A to Registration Statement on Form S-3, File No. 033-63794, filed on June 3, 1993 |
|
4.2 |
|
Supplemental Indenture dated as of February 3, 2000, between Rite Aid Corporation, as issuer, and U.S. Bank Trust National Association as successor to Morgan Guaranty Trust Company of New York, to the Indenture
dated as of August 1, 1993, relating to the Company's 7.70% Notes due 2027 and 6.875% Notes due 2013 |
|
Exhibit 4.1 to Form 8-K filed on February 7, 2000 |
|
4.3 |
|
Indenture, dated as of December 21, 1998, between Rite Aid Corporation, as issuer, and Harris Trust and Savings Bank, as trustee, related to the Company's 6.875% Notes due 2028 |
|
Exhibit 4.1 to Registration Statement on Form S-4, File No. 333-74751, filed on March 19, 1999 |
|
4.4 |
|
Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Corporation and Harris Trust and Savings Bank, to the Indenture dated December 21, 1998, between Rite Aid Corporation and Harris Trust
and Savings Bank, related to the Company's 6.875% Notes due 2028 |
|
Exhibit 4.4 to Form 8-K filed on February 7, 2000 |
|
4.5 |
|
Indenture, dated as of May 20, 2003, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 9.25% Senior Notes due 2013 |
|
Exhibit 4.12 to Form 10-Q, filed on July 3, 2003 |
|
4.6 |
|
Supplemental Indenture, dated as of June 4, 2007, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A. to the Indenture, dated as of May 20, 2003, between
Rite Aid Corporation and BNY Midwest Trust Company, related to the Company's 9.25% Senior Secured Notes due 2013 |
|
Exhibit 4.8 to Form 10-Q, filed on January 9, 2008 |
32
Table of Contents
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
4.7 |
|
Second Supplemental Indenture, dated as of June 17, 2008, between Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A., as successor trustee, to the Indenture dated as of
May 20, 2003, between Rite Aid Corporation and BNY Midwest Trust Company, related to the Company's 9.25% Senior Secured Notes due 2013 |
|
Exhibit 4.10 to Form 10-Q, filed on July 10, 2008 |
|
4.8 |
|
Indenture, dated as of February 21, 2007, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, related to the Company's 7.5%
Senior Secured Notes due 2017 |
|
Exhibit 99.1 to Form 8-K, filed on February 26, 2007 |
|
4.9 |
|
Supplemental Indenture, dated as of June 4, 2007, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A. to the Indenture dated as of February 21, 2007,
between Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 7.5% Senior Secured Notes due 2017 |
|
Exhibit 4.12 to Form 10-Q, filed on January 9, 2008 |
|
4.10 |
|
Second Supplemental Indenture, dated as of July 9, 2008, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Mellon Trust Company, N.A., as successor trustee, to the Indenture,
dated as of February 15, 2007, between Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 7.5% Senior Secured Notes due 2017 |
|
Exhibit 4.13 to Form 10-Q, filed on July 10, 2008 |
|
4.11 |
|
Indenture, dated as of February 21, 2007, between Rite Aid Corporation, as issuer, and The Bank of New York Trust Company, N.A., as trustee, related to the Company's 8.625% Senior Notes due 2015 |
|
Exhibit 99.2 to Form 8-K, filed on February 26, 2007 |
33
Table of Contents
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
4.12 |
|
Supplemental Indenture, dated as of June 4, 2007, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A. to the Indenture, dated as of February 21, 2007, between
Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 8.625% Senior Secured Notes due 2015 |
|
Exhibit 4.14 to Form 10-Q, filed on January 9, 2008 |
|
4.13 |
|
Second Supplemental Indenture, dated as of July 9, 2008, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Mellon Trust Company, N.A., as successor trustee, to the Indenture,
dated as of February 15, 2007, between Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 8.625% Senior Notes due 2015 |
|
Exhibit 4.16 to Form 10-Q, filed on July 10, 2008 |
|
4.14 |
|
Amended and Restated Indenture, dated as of June 4, 2007, among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A.,
as Trustee, related to the Company's 9.375% Senior Notes due 2015 |
|
Exhibit 4.1 to Form 8-K, filed on June 6, 2007 |
|
4.15 |
|
First Supplemental Indenture, dated as of July 9, 2008, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Mellon Trust Company, N.A. to the Amended and Restated Indenture, dated
as of June 4, 2007, among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., related to the Company's 9.375% Senior Notes due 2015 |
|
Exhibit 4.18 to Form 10-Q, filed on July 10, 2008 |
|
4.16 |
|
Amended and Restated Indenture, dated as of June 4, 2007, among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A.,
as Trustee, related to the Company's 9.5% Senior Notes due 2017 |
|
Exhibit 4.2 to Form 8-K, filed on June 6, 2007 |
34
Table of Contents
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
4.17 |
|
First Supplemental Indenture, dated as of July 9, 2008, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Mellon Trust Company, N.A., as successor trustee, to the Amended and
Restated Indenture, dated as of June 4, 2007, among Rite Aid Corporation (as successor to Rite Aid Escrow Corp.), the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., related to the Company's 9.5% Senior Notes
due 2017 |
|
Exhibit 4.20 to Form 10-Q, filed on July 10, 2008 |
|
4.18 |
|
Indenture, dated as of May 29, 2008, between Rite Aid Corporation, as issuer, and The Bank of New York Trust Company, N.A., as trustee, related to the Company's Senior Debt Securities |
|
Exhibit 4.1 to Form 8-K, filed on June 2, 2008 |
|
4.19 |
|
First Supplemental Indenture, dated as of May 29, 2008, among Rite Aid Corporation, the subsidiaries named therein and The Bank of New York Trust Company, N.A. to the Indenture dated as of May 29, 2008
between Rite Aid Corporation and The Bank of New York Trust Company, N.A., related to the Company's 8.5% Convertible Notes due 2015 |
|
Exhibit 4.2 to Form 8-K, filed on June 2, 2008 |
|
4.20 |
|
Indenture, dated as of July 9, 2008, between Rite Aid Corporation, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, related to the Company's 10.375% Senior Secured Notes due
2016 |
|
Exhibit 4.23 to Form 10-Q, filed on July 10, 2008 |
|
4.21 |
|
Indenture, dated as of June 12, 2009, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, related to the Company's
9.750% Senior Secured Notes due 2016 |
|
Exhibit 4.1 to Form 8-K, filed on June 16, 2009 |
|
4.22 |
|
Indenture, dated as of October 26, 2009, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, related to the Company's
10.25% Senior Secured Notes due 2019. |
|
Exhibit 4.1 to Form 8-K, filed on October 29, 2009 |
35
Table of Contents
|
|
|
|
|
|
Exhibit
Numbers |
|
Description |
|
Incorporation By Reference To |
| |
4.23 |
|
Indenture, dated as of August 16, 2010, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, related to the Company's 8.00%
Senior Secured Notes due 2020 |
|
Exhibit 4.1 to Form 8-K, filed on August 19, 2010 |
|
10.1 |
|
Refinancing Amendment No. 4, dated as of March 3, 2011, relating to the Amended and Restated Credit Agreement, dated as of June 5, 2009 (as amended, supplemented or otherwise modified from time to time),
among Rite Aid Corporation, the lenders party thereto and Citicorp North America, Inc., as administrative agent and collateral agent |
|
Exhibit 10.1 to Form 8-K, filed on March 3, 2011 |
|
11 |
|
Statement regarding computation of earnings per share. (See Note 2 to the condensed consolidated financial statements) |
|
Filed herewith |
|
31.1 |
|
Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended |
|
Filed herewith |
|
31.2 |
|
Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended |
|
Filed herewith |
|
32 |
|
Certification of CEO and CFO pursuant to 18 United States Code, Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Filed herewith |
|
101. |
|
The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets at May 28, 2011 and February 26, 2011, (ii) Condensed Consolidated
Statements of Operations for the thirteen week periods ended May 28, 2011 and May 29, 2010, (iii) Condensed Consolidated Statements of Cash Flow for the thirteen week periods ended May 28, 2011 and May 29, 2010, and
(iv) Notes to Condensed Consolidated Financial Statements tagged as block text.* |
|
|
36
Table of Contents
SIGNATURES
Pursuant to the requirements 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.
|
|
|
|
|
| Date: July 6, 2011 |
|
RITE AID CORPORATION |
|
|
By: |
|
/s/ MARC A. STRASSLER
Marc A. Strassler
Executive Vice President and General Counsel |
Date: July 6, 2011 |
|
By: |
|
/s/ FRANK G. VITRANO
Frank G. Vitrano
Senior Executive Vice President, Chief Financial Officer and Chief Administrative Officer |
37
