<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 28, 1994
OR
/ / 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 23-1614034
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Hunter Lane 17011
Camp Hill, Pennsylvania (Zip Code)
(Address of principal executive offices)
(717) 761-2633
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the 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 X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class of Common Stock May 28, 1994
--------------------- --------------
<S> <C>
$1.00 par value 85,459,065 shares
</TABLE>
<PAGE> 2
RITE AID CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet May 28, 1994
and February 26, 1994. . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statement of Income Thirteen
Weeks Ended May 28, 1994 and May 29, 1993. . . . . . . . . . 4
Condensed Consolidated Statement of Cash Flows
Thirteen Weeks Ended May 28, 1994 and May 29, 1993 . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . 6
Independent Auditors' Report . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
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<PAGE> 3
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS May 28, 1994 February 26, 1994
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash $ 6,455 $ 17,403
Accounts and Notes Receivable 197,537 185,857
Inventories 871,152 844,074
Prepaid Expenses 21,412 19,231
Net Current Assets of Discontinued
Operations 63,093 58,860
---------- ----------
Total Current Assets 1,159,649 1,125,425
---------- ----------
Property, Plant and Equipment 1,227,348 1,197,261
Less: Accumulated Depreciation and
Amortization 578,262 558,567
---------- ----------
649,086 638,694
---------- ----------
Intangible Assets
Excess of Cost Over Underlying Equity in
Subsidiaries 26,942 27,149
Lease Acquisition Costs 97,978 98,893
---------- ----------
124,920 126,042
---------- ----------
Other Assets 23,792 21,125
---------- ----------
Net Noncurrent Assets of Discontinued
Operations 77,157 77,784
---------- ----------
$2,034,604 $1,989,070
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
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<PAGE> 4
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES May 28, 1994 February 26, 1994
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities
Short-Term Debt and
Current Maturities of Long-Term Debt $ 31,274 $ 30,912
Accounts Payable 198,027 173,825
Income Taxes 19,871 5,016
Sales and Other Taxes Payable 9,572 10,569
Accrued Expenses 47,287 40,587
Reserve for Restructuring and Other Charges 93,870 101,300
---------- ----------
Total Current Liabilities 399,901 362,209
---------- ----------
Long-Term Debt, Less Current Maturities 611,349 613,418
---------- ----------
Deferred Income Taxes 58,082 58,729
---------- ----------
Stockholders' Equity
Common Stock 90,288 90,288
Additional Paid-In Capital 59,429 59,423
Retained Earnings 887,261 866,134
Cumulative Pension Liability Adjustments (2,014) (1,916)
Treasury Stock, At Cost (69,692) (59,215)
---------- ----------
965,272 954,714
---------- ----------
$2,034,604 $1,989,070
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
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<PAGE> 5
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars In Thousands Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
May 28, 1994 May 29, 1993
---------------- -----------------
<S> <C> <C>
NET SALES $1,051,142 $ 999,540
COSTS AND EXPENSES
Cost of Goods Sold Including
Occupancy Costs 769,966 731,652
Selling, General and
Administrative Expenses 216,715 210,397
Interest Expense 8,758 6,051
---------- ----------
995,439 948,100
---------- ----------
Income from Continuing Operations
Before Taxes 55,703 51,440
Income Taxes 21,723 19,804
---------- ----------
Income from Continuing Operations 33,980 31,636
Income from Discontinued Operations - 2,522
---------- ----------
NET INCOME $ 33,980 $ 34,158
========== ==========
EARNINGS PER SHARE
Continuing Operations $.40 $.36
Discontinued Operations - .03
---- ----
Net Income $.40 $.39
==== ====
CASH DIVIDENDS PER COMMON SHARE $.15 $.15
==== ====
AVERAGE SHARES OUTSTANDING 85,738,000 88,072,000
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
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<PAGE> 6
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
May 28, 1994 May 29,1993
---------------- -----------------
<S> <C> <C>
Operating Activities
Income from Continuing Operations
Before Income Taxes $ 55,703 $ 51,440
Depreciation and Amortization 22,910 22,327
Accreted Interest on Zero Coupon Notes 2,896 2,836
Restructuring and Other Charges (6,570) -
Changes in Operating Assets and Liabilities,
Net of Effects from Acquisitions (11,034) 13,854
--------- ---------
63,905 90,457
Discontinued Operations
Income from Operations Before Income Taxes 3,923 4,102
Depreciation and Amortization 2,510 2,143
Changes in Net Operating Assets (8,156) (4,599)
--------- ---------
(1,723) 1,646
Income Taxes Paid (7,515) (10,621)
--------- ---------
Net Cash Provided by Operations 54,667 81,482
--------- ---------
Investing Activities
Purchase of Property, Plant and
Equipment (30,365) (33,177)
Intangible Assets Acquired (2,559) (1,519)
Investing Activities of Discontinued Operations (1,883) (2,434)
Other (2,881) (2,463)
--------- ---------
Net Cash Provided (Used) by Investing
Activities (37,688) (39,593)
--------- ---------
Financing Activities
Proceeds (Payments) of Short-Term and
and Long-Term Debt (4,603) (19,201)
Cash Dividends Paid (12,853) (13,207)
Acquisition of Stock for Treasury (10,477) -
Proceeds from the Sale of Stock 6 782
--------- ---------
Net Cash Provided (Used) by Financing
Activities (27,927) (31,626)
--------- ---------
Increase (Decrease) in Cash $ (10,948) $ 10,263
========= =========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
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<PAGE> 7
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- BASIS OF PRESENTATION
The financial information included herein is unaudited. In
addition, the financial information does not include all
disclosures required under generally accepted accounting
principles because certain note information included in the
Company's annual report has been omitted; however, such infor-
mation reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods. The report of KPMG Peat Marwick commenting upon
their review accompanies the condensed consolidated financial
statements included in Item 1 of Part I.
The results of operations for the thirteen weeks ended
May 28, 1994 and May 29, 1993 are not necessarily indicative
of the results to be expected for the full year.
NOTE 2- EARNINGS PER SHARE
Earnings per share were computed by dividing net income by the
weighted average number of shares of common stock outstanding
during the periods.
NOTE 3- DISCONTINUED OPERATIONS
In the fourth quarter of fiscal year 1994, the company announced
plans to concentrate corporate resources entirely on the drugstore
segment and sell the non-drugstore related businesses. The
businesses to be sold are ADAP auto parts stores, Encore Books
stores, Concord Custom Cleaners and Sera-Tec Biologicals. The
operating results for the quarter ended May 28, 1994 of these
businesses were recorded to the reserve for discontinued operations
which is included in net current assets of discontinued operations
on the balance sheet. The statements of income and cash flows for
the thirteen weeks ended May 29, 1993 have been restated to segregate
the results of the discontinued operations.
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<PAGE> 8
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 1. Financial Statements: (Continued)
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rite Aid Corporation
Camp Hill, Pennsylvania
We have reviewed the condensed consolidated balance sheet of Rite Aid
Corporation and subsidiaries as of May 28, 1994, and the related condensed
consolidated statements of income and cash flows for the thirteen week periods
ended May 28, 1994 and May 29, 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Rite Aid Corporation and
subsidiaries as of February 26, 1994, and the related consolidated statements
of income, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated April 15, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of February 26, 1994, is fairly presented, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
KPMG PEAT MARWICK
Harrisburg, Pennsylvania
June 24, 1994
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<PAGE> 9
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Net sales for the thirteen-weeks ended May 28, 1994 increased 5.2% to
$1,051,142,000 from $999,540,000 last year. The sales gain reflects same-store
sales increases of 4.7% for the drugstore segment. Excluded from the current
period sales were revenues from the 200 underperforming drugstores designated
to close in the restructuring plan. During the quarter, the company opened 13
drugstores and closed approximately 50% of the 200 underperforming units. As
of May 28, 1994, the store count totaled 2,503, not including the stores
remaining to be closed under the restructuring program.
Cost of goods sold including occupancy costs amounted to 73.3% of net sales
compared to 73.2% a year ago. Pressure on margins continued as a greater share
of pharmacy sales were paid for by third party payers. For the thirteen weeks,
57.8% of prescription sales were paid for by third party plans compared to 53%
last year. Typically, third party prescription sales have lower gross profit
margins than other pharmacy sales.
Selling, general and administrative expenses totaled $216,715,000 or 20.6% of
sales for the period against $210,397,000 or 21.0% the previous year. Higher
same-store sales increases of 4.7% versus 4.1% a year earlier enhanced the
company's ability to leverage operating expenses. In addition, operating
expenses for the current thirteen weeks benefitted from the absence of the 200
underperforming drugstores which historically had higher operating expense to
sales percentages.
Interest expense was $8,758,000 and $6,051,000 for the quarters ended May 28,
1994 and May 29, 1993, respectively. The increase resulted from the company's
desire to fix interest costs on a long-term basis at favorable rates by
replacing $200,000,000 of lower rate commercial paper in August 1993 with
20-year, 6 7/8% senior debentures. The company also incurred additional debt
to finance its stock buyback strategy. In February 1994, approximately
2,077,000 shares were acquired for $38,429,000 in a cash self-tender offer.
Later that month, the Board of Directors authorized a 5,000,000 share stock
repurchase program. As of May 28, 1994, 552,000 shares were purchased as part
of this program at a cost of $10,477,000. Another factor contributing to the
higher interest expense was a rise in the weighted average rate on the
company's commercial paper from 3.1% for the first quarter of fiscal 1994 to
3.8% for the current thirteen-week period.
The effective income tax rate for the thirteen weeks ended May 28, 1994 was 39%
compared to 38.5% for the like period a year ago. The increased effective rate
reflects the higher federal income tax rate legislated in August 1993 by the
Omnibus Budget Reconciliation Act of 1993.
Income from continuing operations for the current period amounted to $
33,980,000, versus $31,636,000 for last year's first quarter. Included in the
prior year earnings were net operating losses of $2,637,000 attributable to the
200 underperforming drugstores. For the quarter ended May 28, 1994, pre-tax
charges totaling $7,430,000 associated with the 200 drugstores were recorded to
the reserve for restructuring and other charges.
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<PAGE> 10
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations: (Continued)
During the fourth quarter of fiscal 1994, the company announced plans to
concentrate corporate resources entirely on the drugstore segment and sell its
non-drugstore related businesses. Historical financial statements have been
restated to segregate the results of these discontinued operations. Net income
for the quarter ended May 29, 1993, was $34,158,000 and included $2,522,000 of
income from discontinued operations.
Working capital was $759,748,000 at May 28, 1994, compared to $763,216,000 at
February 26, 1994, and the current ratios were 2.9:1 and 3.1:1, respectively.
Cash provided by operations continues to be adequate to supply working capital,
provide cash for dividend payments and substantially contribute to investing
activities. Additional cash requirements are anticipated for fiscal year 1995
that relate to the 200 drugstore closings, stock buyback program and 67-unit
LaVerdiere's drugstore acquisition expected to be consummated in the second
quarter of fiscal 1995. These additional cash needs will be provided by the
net proceeds received from liquidation of the closing stores' inventories, sale
of the non-drugstore businesses and external sources. The company has
$600,000,000 in revolving credit commitments in contemplation of these and
other future cash needs. There also remains $225,000,000 of registered debt
securities available on a Form S-3 shelf registration statement filed in July
1993.
The company remains financially strong and the restructuring plan will allow
the company to focus entirely on the retail drug business, positioning itself
for future growth.
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<PAGE> 11
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED MAY 28, 1994
PART II
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Item 11. - Statement regarding computation of per share
earnings
Item 15. - Copy of letter from independent accountants'
regarding unaudited interim financial information
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the thirteen weeks ended
May 28, 1994.
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.
RITE AID CORPORATION
(Registrant)
Date: June 24, 1994 /s/ Frank Bergonzi
------------------------ -----------------------
Frank Bergonzi
Senior Vice President,
Finance
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<PAGE> 1
EXHIBIT 11
RITE AID CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIRTEEN WEEKS ENDED MAY 28, 1994 AND MAY 29, 1993
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Earnings Per Common Share-Assuming No Dilution
- - ----------------------------------------------
Earnings
Income from continuing operations $ 33,980 $ 31,636
Income from discontinued operations - 2,522
-------- --------
Net Income $ 33,980 $ 34,158
======== ========
Weighted average number of common shares outstanding 85,738 88,072
======== ========
Primary earnings per common share
Continuing operations $.40 $.36
Discontinued operations - .03
---- ----
Net Income $.40 $.39
==== ====
Earnings Per Common Share-Assuming Full Dilution
- - ------------------------------------------------
Earnings
Income from continuing operations $ 33,980 $ 31,636
Add after tax interest expense applicable to 6 3/4%
convertible notes (a) 1,767 1,744
-------- --------
Income from continuing operations as adjusted 35,747 33,380
Income from discontinued operations - 2,522
-------- --------
Net income as adjusted $ 35,747 $ 35,902
======== ========
Shares
Weighted average number of common shares outstanding 85,738 88,072
Assuming conversion of 6 3/4% convertible notes (a) 6,397 6,397
Assuming exercise of options reduced by the number
of shares which could have been purchased with the
proceeds from exercise of such options 428 253
-------- --------
Weighted average number of common shares outstanding
as adjusted 92,563 94,722
======== ========
Earnings per common share assuming full dilution
Continuing operations $.39 $.35
Discontinued operations - .03
---- ----
Net Income $.39(b) $.38(b)
==== ====
</TABLE>
(a) Shown net of income taxes which were calculated at the company's effective
tax rate.
(b) This calculation is submitted in accordance with Regulation S-K item
601 (b)(11) although not required by APB Opinion No. 15 since dilution
is less than 3%.
<PAGE> 1
(KPMG PEAT MARWICK LETTERHEAD)
Exhibit 15
Rite Aid Corporation
Camp Hill, Pennsylvania
Gentlemen:
Re: Registration Statement No. 2-87981; No. 2-80136 and No. 33-63794
With respect to the subject registration statements, we acknowledge our
awareness of the incorporation by reference therein of our report dated
June 24, 1994 related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK
Harrisburg, Pennsylvania
June 24, 1994
