<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 November 27, 1993
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 November 27, 1993
<S> <C>
$1.00 par value 88,081,859 shares
</TABLE>
<PAGE> 2
RITE AID CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet November 27, 1993
and February 27, 1993 . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statement of Income Thirty-Nine
Weeks Ended November 27, 1993 and November 28, 1992. . . . . 4
Condensed Consolidated Statement of Income Thirteen
Weeks Ended November 27, 1993 and November 28, 1992. . . . . 5
Condensed Consolidated Statement of Cash Flows
Thirty-Nine Weeks Ended November 27, 1993 and
November 28, 1992. . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . 7
Independent Auditors' Report . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 11
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<PAGE> 3
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS November 27, 1993 February 27, 1993
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash $ 7,196 $ 5,419
Accounts and Notes Receivable 209,147 196,075
Inventories 961,523 862,990
Prepaid Expenses 22,982 27,684
---------- ----------
Total Current Assets 1,200,848 1,092,168
---------- ----------
Property, Plant and Equipment 1,251,629 1,131,900
Less: Accumulated Depreciation and
Amortization 580,325 532,486
---------- ----------
671,304 599,414
---------- ----------
Intangible Assets
Excess of Cost Over Underlying Equity in
Subsidiaries 35,535 36,515
Lease Acquisition Costs 105,359 109,251
---------- ----------
140,894 145,766
---------- ----------
Other Assets 41,835 37,884
---------- ----------
$2,054,881 $1,875,232
========== ==========
</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 NOVEMBER 27, 1993
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES November 27, 1993 February 27, 1993
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities
Short-Term Debt and
Current Maturities of Long-Term Debt $ 30,813 $ 30,694
Accounts Payable 238,473 174,955
Income Taxes 29,050 36,177
Sales and Other Taxes Payable 9,848 11,012
Accrued Expenses 38,068 27,685
---------- ----------
Total Current Liabilities 346,252 280,523
---------- ----------
Long-Term Debt, Less Current Maturities 557,670 489,220
---------- ----------
Deferred Income Taxes 73,335 69,846
---------- ----------
Stockholders' Equity
Common Stock 90,282 90,240
Additional Paid-In Capital 59,332 58,592
Retained Earnings 950,757 909,673
Cumulative Translation Adjustments (808) (923)
Cumulative Pension Liability Adjustments (1,153) (1,153)
Treasury Stock, At Cost (20,786) (20,786)
---------- ----------
1,077,624 1,035,643
---------- ----------
$2,054,881 $1,875,232
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
-3-
<PAGE> 5
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27,1993
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>
THIRTY-NINE THIRTY-NINE
WEEKS ENDED WEEKS ENDED
NOVEMBER 27, 1993 NOVEMBER 28, 1992
----------------- -----------------
<S> <C> <C>
NET SALES
Retail Drug $2,981,273 $2,790,903
Specialty Retailing 153,151 138,077
Medical Services 46,283 47,955
---------- ----------
3,180,707 2,976,935
---------- ----------
COSTS AND EXPENSES
Cost of Goods Sold Including
Occupancy Costs 2,330,999 2,177,344
Selling, General and
Administrative Expenses 691,304 634,094
Interest Expense 23,535 24,508
---------- ----------
3,045,838 2,835,946
---------- ----------
Income Before Taxes 134,869 140,989
Income Taxes 54,165 54,378
---------- ----------
NET INCOME $ 80,704 $ 86,611
========== ==========
EARNINGS PER SHARE $.92 $.99
==== ====
CASH DIVIDENDS PER COMMON SHARE $.45 $.4125
==== ======
AVERAGE SHARES OUTSTANDING 88,079,000 87,899,000
</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 NOVEMBER 27, 1993
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
NOVEMBER 27, 1993 NOVEMBER 28, 1992
----------------- -----------------
<S> <C> <C>
NET SALES
Retail Drug $1,008,586 $ 946,489
Specialty Retailing 53,043 48,260
Medical Services 16,198 14,699
---------- ----------
1,077,827 1,009,448
---------- ----------
COSTS AND EXPENSES
Cost of Goods Sold Including
Occupancy Costs 791,402 738,883
Selling, General and
Administrative Expenses 239,662 219,381
Interest Expense 9,206 8,247
---------- ----------
1,040,270 966,511
---------- ----------
Income Before Taxes 37,557 42,937
Income Taxes 14,596 16,559
---------- ----------
NET INCOME $ 22,961 $ 26,378
========== ==========
EARNINGS PER SHARE $.26 $.30
==== ====
CASH DIVIDENDS PER COMMON SHARE $.15 $.1375
==== ======
AVERAGE SHARES OUTSTANDING 88,082,000 87,952,000
</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 NOVEMBER 27, 1993
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE THIRTY-NINE
WEEKS ENDED WEEKS ENDED
NOVEMBER 27, 1993 NOVEMBER 28, 1992
----------------- -----------------
<S> <C> <C>
Operating Activities
Income Before Income Taxes $ 134,869 $ 140,989
Depreciation and Amortization 79,345 74,759
Accreted Interest on Zero Coupon Notes 8,591 7,566
Changes in Operating Assets and
Liabilities, Net of Effects from
Acquisitions (24,456) (103,674)
Income Taxes Paid (57,803) (59,554)
---------- ----------
Net Cash Provided by Operations 140,546 60,086
---------- ----------
Investing Activities
Purchase of Property, Plant and
Equipment (138,713) (92,489)
Purchase of Businesses, Net of
Cash Acquired (9,885) (31,642)
Intangible Assets Acquired (7,336) (3,991)
Other (1,665) (6,494)
---------- ----------
Net Cash Provided (Used) by
Investing Activities (157,599) (134,616)
---------- ----------
Financing Activities
Proceeds from Sale of Long-Term Debt
Securities 197,690 -
Proceeds (Payments) of Commercial
Paper Borrowings (139,000) 92,000
Proceeds (Payments) of Other Debt (1,022) (4,536)
Cash Dividends Paid (39,620) (36,243)
Proceeds from the Sale of Stock 782 3,293
---------- ----------
Net Cash Provided (Used) by
Financing Activities 18,830 54,514
---------- ----------
Increase (Decrease) in Cash $ 1,777 $ (20,016)
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
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<PAGE> 8
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
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 thirty-nine and thirteen weeks
ended November 27, 1993 and November 28, 1992 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- INCOME TAXES
The Company's estimated annual effective tax rate reflects
changes legislated by the Omnibus Budget Reconciliation Act
of 1993 including a change in the federal statutory rate from
34% to 35%. In addition, income taxes for the thirty-nine
weeks ended November 27, 1993, include a charge of $1,754,000
as a result of applying the newly enacted tax rates to
deferred tax balances as of February 27, 1993.
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<PAGE> 9
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
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 November 27, 1993, and the related condensed
consolidated statements of income for the thirteen and thirty-nine weeks ended
November 27, 1993 and November 28, 1992, and the condensed consolidated
statements of cash flows for the thirty-nine weeks ended November 27, 1993 and
November 28, 1992. 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 27, 1993, 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 16, 1993, 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 27, 1993, 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
January 4, 1994
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<PAGE> 10
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Total corporate sales for the third quarter were $1,077,827,000 or 6.8% higher
than the sales reported for the same thirteen-week period a year ago. Sales
year to date were up 6.8% over last year to $3,180,707,000. The retail drug
segment contributed over 90% of the revenue gains from the 119 drugstores added
during the previous twelve months and through same-store sales increases of
2.8% and 3.1% for the thirteen and thirty-nine weeks ended November 27, 1993,
respectively. The low same-store gains reflect weak sales of non-pharmacy
merchandise, a recent decline in cigarette prices, and continued slowdown in
prescription-drug price inflation. Rite Aid operated 2,679 drugstores as of
November 27, 1993.
Cost of goods sold including occupancy costs, as a percentage of sales, was
73.4% and 73.3% for the current quarter and year-to-date periods versus 73.2%
and 73.1% for the respective year-earlier periods. The growth of third party
prescription sales, which usually have lower margins than the other pharmacy
sales, continued to pressure gross profits. Third party prescription sales
accounted for 54.4% of pharmacy revenues for the thirteen weeks and 53.7% for
the thirty-nine weeks ended November 27, 1993. For the comparable periods last
year, third party to pharmacy sales were 51.7% and 51.0%, respectively.
Selling, general and administrative expenses amounted to 22.2% of sales for the
quarter, versus 21.7% for the similar prior year period, and 21.7% year to date
compared to 21.3% a year earlier. Lower same-store sales increases of 2.8% for
the current thirteen weeks against 4.7% last year, and 3.1% year to date from
5.3%, provided less leverage against operating expenses. Also, there were
additional costs associated with the chainwide installation of point-of-sale
cash registers and satellite equipment, as well as a higher number of drugstore
openings and closings. Thus far during fiscal 1994, there were 161 store
openings and 55 closings. Last fiscal year during the same period, 136 stores
were opened, and 28 were closed.
Interest expense was $9,206,000 for the thirteen weeks and $23,535,000 for the
thirty-nine weeks ended November 27, 1993. Last year, interest expense was
$8,247,000 and $24,508,000, respectively. In August 1993, Rite Aid repaid a
large portion of its outstanding commercial paper through the use of proceeds
from the sale of $200,000,000, 6 7/8% senior debentures due August 15, 2013.
The increased expense for the current quarter reflects the higher rate
associated with this long-term financing compared to that of the short-term
commercial paper repaid.
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<PAGE> 11
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations: (Continued)
The effective income tax rate increased to 38.9% for the quarter and 40.2% year
to date, from 38.6% for both year-earlier periods. The estimated fiscal 1994
effective tax rate was revised to reflect changes legislated by the Omnibus
Budget Reconciliation Act of 1993, including a change in the federal statutory
rate from 34% to 35%. In addition, income taxes for the thirty-nine weeks
ended November 27, 1993, were increased by $1,754,000 as a result of applying
the newly enacted tax rates to deferred tax balances as of February 27, 1993.
Working capital was $854,596,000 at November 27, 1993, compared to $811,645,000
at February 27, 1993, and the current ratios were 3.5:1 and 3.9:1,
respectively. Cash provided by operating activities continued to be adequate
in supplying working capital, paying dividends, and financing much of the
capital expenditures. Internally generated cash was supplemented in August
1993 through the issuance of $200,000,000, 6 7/8% senior debentures due August
15, 2013. The proceeds from this offering were used to repay a large portion
of Rite Aid's outstanding short-term commercial paper.
Based on the above, management believes that the company is financially strong
and has the resources to meet its obligations, continue its growth and take
advantage of new opportunities as they arise. If needed, Rite Aid has the
ability to enhance its liquidity through the use of $225,000,000 in debt
securities that remain available in previously filed Form S-3 shelf
registration statements.
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<PAGE> 12
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1993
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
On October 25, 1993, a Form 8-K was filed with the Securities
and Exchange Commission to report the resignation of Mr. Richard
Kogan as a director of Rite Aid Corporation effective
October 18, 1993.
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: January 4, 1994 /S/ Frank Bergonzi
--------------------- -----------------------
Frank Bergonzi
Senior Vice President,
Finance
-11-
<PAGE> 1
EXHIBIT 11
RITE AID CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIRTY-NINE WEEKS ENDED NOVEMBER 27, 1993 AND NOVEMBER 28, 1992
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Earnings Per Common Share - Assuming No Dilution
Earnings
Net income $80,704 $86,611
======= =======
Shares
Weighted average number of
common shares outstanding 88,079 87,899
====== ======
Primary earnings per common share $.92 $.99
==== ====
Earnings Per Common Share - Assuming Full Dilution
Earnings
Net income as reported $80,704 $86,611
Add after tax interest expense applicable
to 6 3/4% convertible debentures (a) 5,141 4,648
------- -------
Net income as adjusted $85,845 $91,259
======= =======
Shares
Weighted average number of
common shares outstanding 88,079 87,899
Assuming conversion of 6 3/4%
convertible debentures 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 275 299
------- -------
Weighted average number of
common shares outstanding as adjusted 94,751 94,595
====== ======
Earnings per common share assuming
full dilution $.91(b) $.97(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> 2
EXHIBIT 11
RITE AID CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIRTEEN WEEKS ENDED NOVEMBER 27, 1993 AND NOVEMBER 28, 1992
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Earnings Per Common Share - Assuming No Dilution
Earnings
Net income $22,961 $26,378
======= =======
Shares
Weighted average number of
common shares outstanding 88,082 87,952
====== ======
Primary earnings per common share $.26 $.30
==== ====
Earnings Per Common Share - Assuming Full Dilution
Earnings
Net income as reported $22,961 $26,378
Add after tax interest expense applicable
to 6 3/4% convertible debentures (a) 1,771 1,549
------- -------
Net income as adjusted $24,732 $27,927
======= =======
Shares
Weighted average number of
common shares outstanding 88,082 87,952
Assuming conversion of 6 3/4%
convertible debentures 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 275 299
------- -------
Weighted average number of
common shares outstanding as adjusted 94,754 94,648
====== ======
Earnings per common share assuming
full dilution $.26(b) $.30(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
January 4, 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
January 4, 1994
