HARRISBURG, Pa. — Rite Aid Corp., facing its shareholders Wednesday after accounting irregularities led to the indictment of former executives, tried to reassure investors that the company was on the right path.
Mary Sammons, president and chief operating officer of the nation's third-largest drugstore chain, said the company had reduced long-term debt by $2.5 billion, improved its cash flow and strengthened its portfolio by closing 168 unprofitable stores and opening, acquiring or improving dozens of others during its fiscal year ended March 2.
"Rite Aid is a stronger company today than it was a year ago," Sammons said.
The company also announced the naming of a new chief financial officer and other senior management changes. Chris Hall, 37, was promoted to CFO from chief accounting officer.
Shareholders showed a mixture of skepticism due to the indictments and hope that the current managers, including Bob Miller, chairman and chief executive since December 1999, are turning the company around.
"Mr. Miller has given me hope. I believe he's an honest man," said Justine Burmeister of Toms River, N.J. But Burmeister and her husband, William, both retirees in their 70s, also echoed other shareholders' anger over an accounting scheme allegedly perpetuated by previous managers, which forced an earnings restatement that increased company losses in the mid-1990s by a record $1.6 billion.
"We don't need Al Qaeda to ruin this country. We've got our own corporate executives doing that," said Edward Ziober, 60, a neighbor of Camp Hill, Pa.-based drugstore chain and the owner of 4,000 shares of Rite Aid stock.
The stock, which peaked at more than $50 in 1999, just as the accounting scandal was coming to light, closed down 13 cents at $2.55 on the New York Stock Exchange.
On Friday, federal prosecutors unveiled a 37-count indictment charging Martin L. Grass, Rite Aid's former CEO and the son of its founder; former Chief Counsel Franklin Brown; and former Chief Financial Officer Franklyn M. Bergonzi with securities fraud, conspiracy and other offenses. Eric Sorkin, the current executive vice president for pharmacy services, also was named in the indictment and was promptly suspended.
Shareholders also demanded explanations for $5.6 million in loans and payments to top executives.