Filed pursuant to Rule 424(b)(3)
Registration No. 333-64950
PROSPECTUS SUPPLEMENT NO. 1
(To the Prospectus dated July 25, 2001)
130,516,017 SHARES OF
RITE AID CORPORATION
COMMON STOCK
-------------
STICKER SUPPLEMENT TO
PROSPECTUS
This prospectus supplement relates to the sale by selling
stockholders, including their respective transferors, donees, pledgees, or
successors of up to 130,516,017 shares of our common stock that the selling
shareholders acquired from us in various private placements and debt for
equity exchanges. We will not receive any of the proceeds from the sale of
any of the shares.
You should read this prospectus supplement in conjunction with the
prospectus dated July 25, 2001. This prospectus supplement is incorporated
by reference into the prospectus, and all terms used herein shall have the
meaning assigned to them in the prospectus. Our common stock is traded on
the New York Stock Exchange under the symbol "RAD."
On October 2, 2001 we issued a press release announcing (i) our
results for our second fiscal quarter ended September 1, 2001, and (ii)
guidance for the second half of fiscal 2002, which are set forth below.
Results for the Second Fiscal Quarter Ended September 1, 2001
Sales for the 13-week quarter were $3.691 billion, up 7.3 percent
from $3.439 billion reported in the prior year's second quarter.
Second quarter same store sales increased 8.9 percent versus the
prior year, reflecting prescription sales growth of 11.7 percent and a 4.8
percent increase in front-end same store sales. Prescription revenue
accounted for 61.0 percent of total drugstore sales and third party
prescription sales represented 92.0 percent of total pharmacy sales.
Second quarter earnings before interest, taxes, depreciation and
amortization, LIFO charges, gains and losses from asset disposals, and
non-cash expenses (EBITDA) amounted to $120.8 million, up 33.2 percent from
the prior year's second quarter EBITDA of $90.7 million. A change in
accounting for leases, which was effective on June 27, 2001 in conjunction
with the company's refinancing, lowered second quarter EBITDA by $9.6
million; on a comparable basis EBITDA increased this year versus last by
$39.8 million or 49.1 percent. Excluding net non-operating income related
to legal settlements of $17.0 million received in the second quarter of
this year and $12.3 million received in the second quarter of last year,
EBITDA was $103.8 million or 2.8 percent of sales this year versus $78.4
million or 2.3 percent of sales for the second quarter of the prior year.
Interest expense for the second quarter was $102.4 million versus
$182.1 million in the prior year's second quarter. Interest expense was
comprised of $93.2 million cash interest on indebtedness and capital lease
obligations and non-cash interest of $9.2 million.
Other non-cash expenses of $86.9 million this quarter consisted of
$21.9 million in losses on debt modifications related to the refinancing
completed on June 27; a $31.0 million loss to mark to market $1.0 billion
of interest rate swap contracts on floating rate bank debt that was retired
in the refinancing; $26.7 million related to store closings and impairment
charges; $4.5 million for losses related to the company's investment in
drugstore.com and $2.8 million of other non-cash expenses.
Net loss from continuing operations for the second quarter was
$179.3 million or a loss per share of $0.40 compared to a net loss from
continuing operations of $425.0 million or a loss per share of $1.87 in the
year ago period. The net loss from continuing operations would have been
$105.3 million or a loss per share of $0.22 without non-cash expenses of
$86.9 million, net proceeds from legal settlements of $17.0 million, $5.6
million of non-recurring legal and accounting expenses and a $1.6 million
gain from asset sales.
During the quarter, the company relocated four stores and closed
37 stores. Stores in operation at the end of the quarter totaled 3,594.
Guidance for the Second Half of Fiscal 2002
The company expects sales of $7.7 billion to $8.0 billion for the
remainder of fiscal 2002 which ends March 2, 2002. Same store sales are
expected to improve 8.0 percent to 10.0 percent versus the prior year.
EBITDA for the second half is expected to be $265.0 million to
$315.0 million, bringing full year EBITDA to $550.0 million to $600.0
million. Excluding the effect of the change in accounting for leases of
approximately $40.0 million, full year EBITDA would be expected to be
$590.0 million to $640.0 million.
Interest expense for the second half is expected to total
approximately $180.0 million with cash interest expense expected to be
approximately $157.0 million and non-cash interest expected to be
approximately $23.0 million.
Depreciation and amortization, including goodwill amortization, is
expected to total approximately $171.0 million with approximately $89.0
million expected in the third fiscal quarter and $82.0 million expected in
the fourth fiscal quarter.
The company does not expect to record federal income tax expense
or benefit for the remainder of fiscal 2002; state taxes of approximately
$2.5 million are expected to be recorded during the balance of fiscal 2002.
Capital expenditures for the remainder of fiscal 2002 are expected
to total approximately $70.0 million bringing full year capital
expenditures to approximately $120.0 million.
Working capital is expected to be lower on a full year basis by
approximately $100.0 million.
The company expects to generate $125.0 million to $175.0 million
of free cash flow for fiscal 2002. Free cash flow represents the excess of
reported EBITDA and working capital reductions over cash interest expenses,
capital expenditures and amounts paid with respect to closed stores.
Preliminary September Sales Results
Final September sales results will be reported on October 9, 2001.
On a preliminary basis, same store sales for the four-week period ended
September 29, 2001 were up approximately 6.0 percent over the prior year
period. Pharmacy same store sales were up approximately 9.7 percent, while
front-end same store sales were slightly positive. While the September 11
tragedy had a negative impact on sales on September 11 and the days
following, same store sales started to recover during the second half of
the month with the last two weeks up approximately 7.7 percent, including
an increase in pharmacy of approximately 11.2 percent and a front-end gain
of approximately 2.2 percent, compared to the same two-week period last
year.
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
September 01, 2001 March 03, 2001
------------------------- ---------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 109,140 $ 92,290
Accounts receivable, net 559,275 503,527
Inventories, net 2,562,561 2,444,525
Investment in AdvancePCS - 491,198
Prepaid expenses and other current assets 86,542 85,292
------------------------- ---------------------
Total current assets 3,317,518 3,616,832
PROPERTY, PLANT AND EQUIPMENT, NET 2,313,772 3,041,008
GOODWILL AND OTHER INTANGIBLES, NET 1,009,842 1,067,339
OTHER ASSETS 193,152 188,732
------------------------- ---------------------
Total assets $ 6,834,284 $ 7,913,911
========================= =====================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term debt and current maturities of long-term debt
and lease financing obligations $ 32,706 $ 36,956
Accounts payable 1,022,456 896,390
Sales and other taxes payable 47,961 31,562
Accrued salaries, wages and other current liabilities 809,175 696,047
------------------------- ---------------------
Total current liabilities 1,912,298 1,660,955
CONVERTIBLE SUBORDINATED NOTES 152,010 357,324
LONG-TERM DEBT, LESS CURRENT MATURITIES 3,342,227 4,428,871
LEASE FINANCING OBLIGATIONS, LESS CURRENT MATURITIES 212,483 1,071,397
OTHER NONCURRENT LIABILITIES 742,600 730,342
------------------------- ---------------------
Total liabilities 6,361,618 8,248,889
------------------------- ---------------------
COMMITMENTS AND CONTINGENCIES --- ---
REDEEMABLE PREFERRED STOCK 19,510 19,457
STOCKHOLDERS' EQUITY (DEFICIT):
PREFERRED STOCK 347,342 333,974
COMMON STOCK 515,939 348,055
ADDITIONAL PAID-IN CAPITAL 3,166,207 2,065,301
ACCUMULATED DEFICIT (3,634,160) (3,171,956)
STOCK-BASED AND DEFERRED COMPENSATION 58,450 19,782
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (622) 50,409
------------------------- ---------------------
Total stockholders' equity (deficit) 453,156 (354,435)
------------------------- ---------------------
Total liabilities and stockholders' equity (deficit) $ 6,834,284 $ 7,913,911
========================= =====================
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
Thirteen Weeks Ended hirteen Weeks Ended
September 1, 2001 T August 26, 2000
------------------------- ---------------------
REVENUES $ 3,691,074 $ 3,439,469
COSTS AND EXPENSES:
Costs of goods sold, including occupancy costs 2,872,390 2,630,258
Selling, general and administrative expenses 809,949 855,082
Goodwill amortization 5,280 5,627
Store closing and impairment charges 22,105 88,292
Interest expense 102,377 182,108
Interest rate swap contracts market value adjustment 31,047 -
Loss on debt and lease conversions and modifications, net 21,882 83,789
Share of loss from equity investment 4,512 12,496
(Gain) loss on sale of assets and investments, net (1,636) 6,850
------------------------- ---------------------
3,867,906 3,864,502
------------------------- ---------------------
Loss from continuing operations before income taxes and
extraordinary item (176,832) (425,033)
INCOME TAX EXPENSE 2,500 -
------------------------- ---------------------
Loss from continuing operations before extraordinary item (179,332) (425,033)
DISCONTINUED OPERATIONS:
Estimated loss on disposal of the PBM segment (net of
income tax benefit of $23,484) - (31,433)
------------------------- ---------------------
Net loss before extraordinary item (179,332) (456,466)
EXTRAORDINARY ITEM, Loss on early extinguishment of debt
(net of income tax expense of $0) (66,589) -
------------------------- ---------------------
Net loss $ (245,921) $ (456,466)
========================= =====================
BASIC AND DILUTED (LOSS) PER SHARE:
Loss from continuing operations $ (0.40) $ (1.87)
Loss from discontinued operations - (0.10)
Loss from extraordinary item (0.14) -
------------------------- ---------------------
Net loss per share $ (0.54) $ (1.97)
========================= =====================
RITE AID CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
Twenty-Six Weeks Ended Twenty-Six Weeks Ended
September 01, 2001 August 26, 2000
------------------------ ------------------------
REVENUES $ 7,401,207 $ 6,881,655
COSTS AND EXPENSES:
Costs of goods sold, including occupancy costs 5,713,130 5,264,711
Selling, general and administrative expenses 1,667,999 1,706,965
Goodwill amortization 10,623 11,701
Store closing and impairment charges 21,741 104,437
Interest expense 231,066 353,483
Interest rate swap contracts market value adjustment 31,047 -
Loss on debt and lease conversions and modifications, net 154,595 83,789
Share of loss from equity investment 10,395 24,070
(Gain) loss on sale of assets and investments, net (51,455) 16,526
------------------------ ------------------------
7,789,141 7,565,682
------------------------ ------------------------
Loss from continuing operations before income taxes and
extraordinary item (387,934) (684,027)
INCOME TAX EXPENSE 2,500 144,382
------------------------ ------------------------
Loss from continuing operations before extraordinary item (390,434) (828,409)
DISCONTINUED OPERATIONS:
Income from discontinued operations (net of income tax
expense of $13,846) - 11,335
Estimated loss on disposal of the PBM segment
(net of income tax benefit of $734) - (334,763)
------------------------ ------------------------
Net loss before extraordinary item (390,434) (1,151,837)
EXTRAORDINARY ITEM, Loss on early extinguishment of debt (net
of income tax expense of $0) (66,589) -
------------------------ ------------------------
Net loss $ (457,023) $ (1,151,837)
======================== ========================
BASIC AND DILUTED (LOSS) PER SHARE:
Loss from continuing operations $ (0.95) $ (3.48)
Loss from discontinued operations - (1.12)
Loss from extraordinary item (0.15) -
------------------------ ------------------------
Net loss per share $ (1.10) $ (4.60)
======================== ========================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITY COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS STICKER IS PART OF THE PROSPECTUS AND MUST ACCOMPANY THE
PROSPECTUS TO SATISFY PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.
The Date of this Prospectus Supplement is October 4, 2001