<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 30, 1996
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 30, 1996
---------------------- -------------------
<S> <C>
$1.00 PAR VALUE 83,929,950 SHARES
</TABLE>
Total number of sequentially numbered pages in this filing, including exhibits
thereto: 20.
<PAGE> 2
1
RITE AID CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of November 30, 1996
and March 2, 1996 2
Condensed Consolidated Statements of Income Thirty-Nine
Weeks Ended November 30, 1996 and December 2, 1995. 4
Condensed Consolidated Statements of Income Thirteen
Weeks Ended November 30, 1996 and December 2, 1995 5
Condensed Consolidated Statements of Cash Flows
Thirty-Nine Weeks Ended November 30, 1996 and
December 2, 1995 6
Notes to Condensed Consolidated Financial Statements 7
Independent Auditors' Report 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE> 3
2
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
RITE AID CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30, 1996 MARCH 2, 1996
- ------ ----------------- -------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash $ 8,714 $ 3,131
Accounts Receivable, Net 261,817 246,966
Inventories 1,345,119 1,170,747
Prepaid Expenses and Other
Current Assets 41,044 44,204
----------------- -------------
Total Current Assets 1,656,694 1,465,048
----------------- -------------
Property, Plant and Equipment 1,966,647 1,677,510
Less: Accumulated Depreciation and
Amortization 752,579 697,961
----------------- -------------
Total Property, Plant & Equipment, Net 1,214,068 979,549
----------------- -------------
Intangible Assets
Excess of Cost Over Underlying Equity in
Subsidiaries (less accumulated amortiza-
tion of $12,539 and $9,619) 152,791 141,266
Lease Acquisition Costs and Other
Intangible Assets (less accumulated
amortization of $131,341 and $115,430) 224,100 197,129
----------------- -------------
Total Intangible Assets 376,891 338,395
----------------- -------------
Other Assets 99,242 59,003
----------------- -------------
Total Assets $3,346,895 $2,841,995
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
<PAGE> 4
3
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES NOVEMBER 30, 1996 MARCH 2, 1996
- ------ ----------------- -------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities
Short-Term Debt and
Current Maturities of Long-
Term Debt $ 64,980 $ 232,811
Accounts Payable 310,329 271,782
Income Taxes 83,768 42,463
Sales and Other Taxes Payable 11,311 13,913
Accrued Expenses 62,795 69,030
----------------- -------------
Total Current Liabilities 533,183 629,999
----------------- -------------
Long-Term Debt, Less Current Maturities 1,536,839 994,321
----------------- -------------
Deferred Income Taxes 113,807 114,056
----------------- -------------
Total Liabilities 2,183,829 1,738,376
----------------- -------------
Stockholders' Equity
Common Stock 90,462 90,380
Additional Paid-In Capital 63,247 62,623
Retained Earnings 1,114,536 1,055,795
Cumulative Pension Liability Adjustments (433) (433)
Treasury Stock, At Cost (104,746) (104,746)
----------------- -------------
Total Stockholders' Equity 1,163,066 1,103,619
----------------- -------------
Total Liabilities and
Stockholders' Equity $3,346,895 $2,841,995
========== ==========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
<PAGE> 5
4
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE THIRTY-NINE
WEEKS ENDED WEEKS ENDED
NOVEMBER 30, 1996 DECEMBER 2, 1995
----------------- ----------------
<S> <C> <C>
NET SALES $4,313,019 $4,015,036
COSTS AND EXPENSES
Cost of Goods Sold Including
Occupancy Costs 3,185,468 2,960,998
Selling, General and
Administrative Expenses 883,148 837,629
Interest Expense 57,902 49,546
Nonrecurring Charge Related to
Revco D.S., Inc. Acquisition Costs 16,057 -
----------------- ----------------
4,142,575 3,848,173
----------------- ----------------
Income Before Income Taxes 170,444 166,863
Income Taxes 65,110 64,910
----------------- ----------------
NET INCOME $ 105,334 $ 101,953
========== ==========
EARNINGS PER SHARE $1.26 $1.22
==== ====
CASH DIVIDENDS PER COMMON SHARE $.555 $.51
==== ====
AVERAGE SHARES OUTSTANDING 83,891,000 83,816,000
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
<PAGE> 6
5
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
NOVEMBER 30, 1996 DECEMBER 2, 1995
----------------- ----------------
<S> <C> <C>
NET SALES $1,484,641 $1,331,796
COSTS AND EXPENSES
Cost of Goods Sold Including
Occupancy Costs 1,100,706 985,454
Selling, General and
Administrative Expenses 302,697 276,374
Interest Expense 20,703 16,515
----------------- ----------------
1,424,106 1,278,343
----------------- ----------------
Income Before Income Taxes 60,535 53,453
Income Taxes 23,126 20,793
----------------- ----------------
NET INCOME $ 37,409 $ 32,660
========== ==========
EARNINGS PER SHARE $.45 $.39
==== ====
CASH DIVIDENDS PER COMMON SHARE $.185 $.17
===== ====
AVERAGE SHARES OUTSTANDING 83,919,000 83,758,000
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
<PAGE> 7
6
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE THIRTY-NINE
WEEKS ENDED WEEKS ENDED
NOVEMBER 30, 1996 DECEMBER 2, 1995
----------------- ----------------
<S> <C> <C>
Operating Activities
Income from Continuing Operations
Before Income Taxes $ 170,444 $ 166,863
Depreciation and Amortization 110,662 87,369
Accreted Interest on Long-Term Debt 12,672 9,499
Changes in Operating Assets and Liabilities,
Net of Effects from Acquisitions (147,375) (231,726)
-------------- ------------
146,403 32,005
Discontinued Operations
Income from Operations Before Income Taxes - 190
Depreciation and Amortization - 700
------------- ------------
- 890
Income Taxes Paid (23,965) (29,822)
------------- ------------
Net Cash Provided by Operations 122,438 3,073
------------- ------------
Investing Activities
Purchase of Property, Plant and Equipment (336,619) (206,916)
Purchase of Businesses, Net of Cash Acquired (35,087) (95,374)
Intangible Assets Acquired (20,677) (21,183)
Investments and Advances in Affiliate (30,714) -
Proceeds from Dispositions - 136,928
Other (9,486) (11,248)
------------- ------------
Net Cash Used by Investing Activities (432,583) (197,793)
------------- ------------
Financing Activities
Proceeds from Long-Term Debt 76,785 197,702
Proceeds (Payments) of Commercial Paper 299,435 114,368
Payments of Long-Term Debt (14,605) (44,980)
Cash Dividends Paid (46,593) (42,746)
Redemption of Stock Rights (839) -
Acquisition of Stock for Treasury - (8,969)
Proceeds from the Sale of Stock 1,545 470
------------- -----------
Net Cash Provided by Financing Activities 315,728 215,845
------------- -----------
Increase in Cash $ 5,583 $ 21,125
========= =========
</TABLE>
See accompanying independent auditors' report and notes to condensed
consolidated financial statements.
<PAGE> 8
7
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
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 information reflects all adjustments (consisting
primarily 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 LLP, independent
auditors, 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 weeks and thirteen weeks
ended November 30, 1996 and December 2, 1995 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 - NONRECURRING CHARGE
On April 17, 1996, the Federal Trade Commission ("FTC") voted to deny
approval of Rite Aid's proposed acquisition of Revco D.S., Inc. As a
result of the FTC's action, Rite Aid charged approximately $16,057,000
against earnings for costs related to the proposed acquisition in the
first quarter of the current fiscal year. The charge had the effect of
reducing net income approximately $.12 per share for the thirty-nine
week period ended November 30, 1996.
NOTE 4 - INVESTMENTS AND ADVANCES IN AFFILIATES
On October 28, 1996, the company executed a limited liability company
agreement with Diversified Pharmaceutical Services, Inc., a Minnesota
corporation, to form Diversified Prescription Delivery L.L.C ("DPD").
Each company owns 50 percent of DPD, a joint venture for the purpose,
among other things, to dispense brand name or generic medications and
associated medical products to patients for outpatient usage in the
United States through the use of mail delivery systems.
As of November 30, 1996, the company had investments and advances of
$30,714,000 in the joint venture. The company accounts for the joint
venture using the equity method of accounting which is included with
other assets on the balance sheet.
<PAGE> 9
8
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
ITEM 1. Financial Statements: (Continued)
RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The company had standby letters of credit of $33,900,000 and
$33,188,000 at November 30, 1996 and March 2, 1996, respectively.
The company is the defendant in claims and lawsuits arising in the
ordinary course of business. In the opinion of management, these
matters are covered adequately by insurance, or if not so covered, are
of such nature or involve such amounts as would not have a material
effect on the financial statements of the company if decided adversely.
NOTE 6 - SUBSEQUENT EVENT
On December 12, 1996, in separate meetings, shareholders of both Rite
Aid Corporation and Thrifty PayLess Holdings, Inc. ("TPHI") voted to
approve the merger of Thrifty PayLess into Rite Aid. It was approved by
holders of 81.3 percent of Rite Aid Corporation stock and by the
holders of 77.1 percent of Thrifty PayLess stock. As a result, the
company issued approximately 38.7 million shares of common stock in the
transaction. The Merger will be accounted for under the purchase method
of accounting. Thrifty PayLess is the largest drugstore chain in the
western United States, operating over 1,000 drugstores in 10 states
with annual revenues of over $4.4 billion.
The following represents the unaudited pro forma results of operations
as if the merger of TPHI had occurred at the beginning of the fiscal
period shown below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Unaudited Pro Forma
- ------------------------------------------------------------------------
In thousands of dollars except 39 Weeks Ended
per share amounts November 30, 1996
- ------------------------------------------------------------------------
<S> <C>
Revenues $7,804,800
Income from continuing operations $ 125,700
Earnings per share from continuing operations $ 1.03
- ------------------------------------------------------------------------
</TABLE>
The pro forma results include adjustments to reflect additional
amortization expenses associated with the assignment of goodwill and
other intangible assets. Interest expense and financing costs related
to the additional debt to finance the merger were also recorded. The
pro forma results are not necessarily indicative of what would have
occurred had the merger of TPHI taken place on the dates indicated or
what may be obtained in the future.
<PAGE> 10
9
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
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 30, 1996, and the related condensed
consolidated statements of income for the thirty-nine and thirteen week periods
ended November 30, 1996 and December 2, 1995, and the condensed consolidated
statements of cash flows for the thirty-nine week periods ended November 30,
1996 and December 2, 1995. 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 March 2, 1996, 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 24, 1996, 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 March 2, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Harrisburg, Pennsylvania
January 7, 1997
<PAGE> 11
10
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Net sales for the thirteen week and thirty-nine week periods ended November 30,
1996 were $1,484,641,000 and $4,313,019,000, respectively, representing
increases of 11.5% and 7.4% over the same periods from the previous year.
Same-store sales increased 7.8% for the thirteen-weeks and 7.2% year to date
compared to 6.6% and 7.0% for the comparable periods last year. Pharmacy
same-store sales led the 13-week gain at 10.7%. During the quarter, the
company added 51 drugstores, closed or sold 59 smaller outlets, and enlarged or
relocated 64 locations. Since the beginning of the fiscal year, the company has
added 118 stores, closed or sold 89 smaller outlets, and enlarged or relocated
150 units. As of November 30, 1996, the company operated 2,788 drugstores.
Cost of goods sold including occupancy costs, as a percentage of sales, were
74.1% for the quarter and 73.9% for the year-to-date period compared to 74.0%
and 73.7% for the respective periods a year earlier. The company continues to
experience a greater percentage of prescription sales that are paid for by
third-party plans. These third-party sales typically provide a lower gross
margin than other pharmacy sales. Third-party reimbursed prescription sales, as
a percent of pharmacy sales, were 80.4% for the thirteen weeks and 79.4% for
the thirty-nine weeks ended November 30, 1996, compared to 75.7% for the
quarter and 74.6% for the thirty-nine week period a year ago. The company was
able to offset the effect of greater third-party sales somewhat through a
favorable front-end sales mix, increasing sales of generic versus brand drugs,
and stabilizing margins in third-party plans.
Selling, general and administrative expenses for fiscal 1997 were $302,697,000
for the quarter and $883,148,000 year to date or 20.4% and 20.5% of sales,
respectively. In the prior year, the operating expense to sales ratio was 20.8%
for the thirteen weeks and 20.9% for the thirty-nine weeks. The current fiscal
year benefited from leveraging operating expenses against strong same-store
sales increases and continued cost control efforts at all levels of the
company.
Interest expense was $20,703,000 for the thirteen week period and $57,902,000
for the thirty-nine week period ended November 30, 1996, compared to
$16,515,000 and $49,546,000 for the respective periods last year. The higher
expense resulted from increased debt used to support store construction,
expansions and relocations; fund inventory for the larger prototype stores
being built; and purchase independent drugstores and smaller drugstore chains.
In addition, the company entered into a joint venture arrangement with
Diversified Pharmaceutical Services, Inc. to form Diversified Prescription
Delivery L.L.C. ("DPD"), a mailorder pharmacy business. As of November 30,
1996, the company's investment in DPD was $30,714,000.
The impact of the higher indebtedness was partially offset by lower weighted
average rates on the company's commercial paper, which were 5.4% for the quarter
and 5.5% for the year-to-date periods compared to 6.0% for the quarter and 6.1%
for the thirty-nine week period in the prior year.
<PAGE> 12
11
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations: (Continued)
At fiscal year end 1996 the company entered into a sale and leaseback
transaction of certain leasehold improvements that was accounted for as a
financing. In the third quarter of fiscal year 1997 the company received
$76,785,000 in proceeds from this transaction which were used to retire a
portion of the company's outstanding commercial paper. The lease obligation
accrues interest at a rate of 7.3%. Repayment of this obligation extends
through February 28, 2002.
In the first quarter of fiscal 1997, the company recorded a nonrecurring,
pre-tax charge of $16,057,000 to write off the costs associated with the
attempted acquisition of Revco D. S., Inc. The charge reflected legal fees
incurred in conjunction with settling federal and state issues regarding the
proposed merger, professional fees to prepare economic analyses for the Federal
Trade Commission, costs incurred to arrange financing for the merger, and
consulting fees for information system integration to provide compatibility
between systems and accommodate the increased volume of activity.
The reserve for restructuring and other charges remains adequate to cover the
unsettled leases of the 200 drugstores closed during fiscal 1995. The company
continues to negotiate with landlords of the remaining stores with leases which
have not been terminated. Where favorable terms cannot be agreed upon, the
company will endeavor to sublet the locations until the leases expire.
Working capital was $1,123,511,000 at November 30, 1996 compared to
$847,332,000 at December 2, 1995, and the current ratios were 3.1:1 and 2.2:1,
respectively. Cash from operations is used to support current operations, fund
dividend distributions to shareholders and contribute to investing activities
including store expansions and acquisitions. For the thirty-nine week period
ended November 30, 1996, cash from operations and working capital were impacted
primarily by increased inventories. The rise in inventories was due in part by
the nonrenewal of a wholesaler contract to carry and supply pharmaceuticals to
stores in the Michigan market. As a result, the company is now carrying
increased stock levels at its distribution centers to service the Michigan
stores which had previously been serviced by that wholesaler. Additionally,
increases in inventory occurred as a result of providing additional merchandise
to stock the larger prototype store size.
On October 13, 1996, the company executed a Merger Agreement with Thrifty
PayLess Holdings, Inc. The Merger Agreement provides for the merger of Thrifty
PayLess into Rite Aid as a result of which, among other things, each share of
Class A Common Stock and Class B Common Stock of Thrifty PayLess will be
converted into the right to receive 0.65 shares of Rite Aid Common Stock.
<PAGE> 13
12
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations: (Continued)
Subsequently, on December 12, 1996, in separate meetings, shareholders of both
companies voted to approve the merger. It was approved by holders of 81.3
percent of Rite Aid Corporation stock and by the holders of 77.1 percent of
Thrifty PayLess stock. As a result, the company issued approximately 38.7
million shares of common stock in the transaction. The Merger will be accounted
for under the purchase method of accounting.
In connection with the Thrifty PayLess merger plan, the company entered into an
additional 364 day revolving credit facility with a syndicate of commercial
banks that provides for loans in an aggregate amount of up to $1.0 billion.
This new credit facility is a revolving credit facility that converts in
December 1997 to a term loan that will mature in December 1998. Combined with
the company's five year $1 billion revolving credit facility entered into in
July 1996, the company now has $2 billion in revolving credit commitments. The
credit facilities have per annum facility fees of .07% and .085%, respectively,
and will be used for general corporate purposes including support of the
company's commercial paper program. Revolving loans under the credit facilities
bear interest at a floating rate based, at the company's option, on LIBOR,
Money Market, CD rates or the lenders' Base Rate. No amounts were outstanding
under the credit facilities as of November 30, 1996.
The funds for the repayment of Thrifty PayLess' outstanding obligations under
its secured bank facility of approximately $718.1 million, the conversion of
outstanding Thrifty PayLess stock options into cash upon consummation of the
Thrifty PayLess Merger of approximately $46.3 million, and the payment of
certain fees and expenses relating to the Thrifty PayLess Merger of
approximately $30.0 million were provided through the issuance of commercial
paper on December 13, 1996.
Then on December 20, 1996, the company issued certain unsecured notes and
debentures (the "Securities") with an aggregate principal amount of $1.0
billion that pay interest semiannually. These Securities are not redeemable
prior to maturity and are not subject to any sinking fund. A description of the
Securities issued follows:
<TABLE>
<CAPTION>
Principal Interest
Amount Rate Security Maturity Date Payable
- ------------ ----- ---------- ------------------ ------------
<S> <C> <C> <C> <C>
$350,000,000 6.70% Notes December 15, 2001 Jun./Dec. 15th
$350,000,000 7.125% Notes January 15, 2007 Jul./Jan. 15th
$300,000,000 7.70% Debentures February 15, 2027 Aug./Feb. 15th
</TABLE>
<PAGE> 14
13
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations: (Continued)
The net proceeds of $991.6 million, after deducting expenses, were used to
repay commercial paper issued by the company in connection with the
extinguishment of the Thrifty PayLess secured bank facility and to refinance
other commercial paper previously issued by the company. The company's
commercial paper repaid had a weighted average interest rate of approximately
5.5% per annum.
As a result of the Thrifty PayLess Merger, the company is obligated to offer to
purchase all of Thrifty PayLess' outstanding 12 1/4% Senior Subordinated Notes
due 2004 aggregating $195.0 million principal amount, at 101% of the principal
amount thereof. On December 23, 1996, the company began its tender offer to
purchase these securities and solicited consents that would eliminate
substantially all covenants governing this debt.
The company expects proceeds of approximately $200 million from the sale of its
North Carolina and South Carolina stores to Thrift Drug. In addition, $100
million in proceeds is anticipated in conjunction with a sale and leaseback
transaction of 55 owned locations during the fourth quarter of this year. The
company also plans to divest the 55 Bi-Mart stores acquired through the Thrifty
acquisition and expects to receive proceeds of approximately $60-$80 million.
Management believes that the company remains financially strong and has
adequate liquidity to continue its store acquisition, expansion, remodeling and
relocation programs.
<PAGE> 15
14
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
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
Item 27. - Financial Data Schedule (EDGAR Filing Only)
<PAGE> 16
15
RITE AID CORPORATION
FORM 10-Q
FOR THE THIRTEEN WEEKS ENDED NOVEMBER 30, 1996
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 8, 1997 /S/ FRANK BERGONZI
----------------- -----------------------------
Frank Bergonzi Executive Vice
President, Chief Financial Officer
<PAGE> 1
EXHIBIT 11
RITE AID CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS THIRTY-NINE
WEEKS ENDED NOVEMBER 30, 1996 AND DECEMBER 2, 1995
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1996 1995
---- ----
Earnings Per Common Share-Assuming No Dilution
- - ----------------------------------------------
<S> <C> <C>
Net Income $105,334 $101,953
======== ========
Weighted average number of common shares outstanding 83,891 83,816
======== ========
Primary earnings per common share $1.26 $1.22
==== ====
Earnings Per Common Share-Assuming Full Dilution
- - ----------------------------------------------
Earnings
Net Income $105,334 $101,953
Add after tax interest expense applicable to
6 3/4% convertible notes (a) 6,102 5,845
-------- --------
Net income as adjusted $111,436 $107,798
======== ========
Shares
Weighted average number of common shares outstanding 83,891 83,816
Assuming conversion of 6 3/4% convertible notes 5,953 6,395
Assuming exercise of options reduced by the number
of shares which could have been purchased with the
proceeds from exercise of such options 933 747
-------- --------
Weighted average number of common shares outstanding
as adjusted 90,777 90,958
======== ========
Earnings per common share assuming full dilution $1.23(b) $1.19(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 30, 1996 AND DECEMBER 2, 1995
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Earnings Per Common Share-Assuming No Dilution
- - ----------------------------------------------
Net Income $ 37,409 $ 32,660
======== ========
Weighted average number of common shares outstanding 83,919 83,758
======== ========
Primary earnings per common share $.45 $.39
==== ====
Earnings Per Common Share-Assuming Full Dilution
- - ------------------------------------------------
Earnings
Net Income $ 37,409 $ 32,660
Add after tax interest expense applicable to
6 3/4% convertible notes (a) 2,092 1,954
-------- --------
Net income as adjusted $ 39,501 $ 34,614
======== ========
Shares
Weighted average number of common shares outstanding 83,919 83,758
Assuming conversion of 6 3/4% convertible notes 5,953 6,395
Assuming exercise of options reduced by the number
of shares which could have been purchased with the
proceeds from exercise of such options 933 747
-------- --------
Weighted average number of common shares outstanding
as adjusted 90,805 90,900
======== ========
Earnings per common share assuming full dilution $.44(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
Exhibit 15
(KPMG PEAT MARWICK LLP LETTERHEAD)
Rite Aid Corporation
Camp Hill, Pennsylvania
Gentlemen:
Re: Registration Statement No. 2-87981; No. 333-16431; and No. 333-8071
With respect to the subject registration statements, we acknowledge our
awareness of the incorporation by reference therein of our report dated
January 7, 1997 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 LLP
Harrisburg, Pennsylvania
January 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Rite Aid
Corporation and Subsidiaries Article 5 Financial Data Schedules from 10-Q and is
qualified in its entirety by reference to such third quarter ended November 30,
1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-END> NOV-30-1996
<CASH> 8,714
<SECURITIES> 0
<RECEIVABLES> 267,859
<ALLOWANCES> 6,042
<INVENTORY> 1,345,119
<CURRENT-ASSETS> 1,656,694
<PP&E> 1,966,647
<DEPRECIATION> 752,579
<TOTAL-ASSETS> 3,346,895
<CURRENT-LIABILITIES> 533,183
<BONDS> 1,536,839
0
0
<COMMON> 90,462
<OTHER-SE> 1,072,604
<TOTAL-LIABILITY-AND-EQUITY> 3,346,895
<SALES> 4,313,019
<TOTAL-REVENUES> 4,313,019
<CGS> 3,185,468
<TOTAL-COSTS> 3,185,468
<OTHER-EXPENSES> 899,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,902
<INCOME-PRETAX> 170,444
<INCOME-TAX> 65,110
<INCOME-CONTINUING> 105,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,334
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.23
</TABLE>
