-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jn/KLbhYVkdjFhCrdoPKOCNspXq+F0FjQru+/uiAbS/wIUnwoGyieVeDzQOp98L3 OgpBmf8b3PXGqJJAGb/1fQ== 0000950168-99-003195.txt : 19991224 0000950168-99-003195.hdr.sgml : 19991224 ACCESSION NUMBER: 0000950168-99-003195 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991003 FILED AS OF DATE: 19991223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RUDDICK CORP CENTRAL INDEX KEY: 0000085704 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560905940 STATE OF INCORPORATION: NC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06905 FILM NUMBER: 99779541 BUSINESS ADDRESS: STREET 1: 2000 TWO FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28282 BUSINESS PHONE: 7043725404 MAIL ADDRESS: STREET 1: 2000 TWO FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28282 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark one) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: October 3, 1999 ---------------------- [ ] 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: 1-6905 --------- RUDDICK CORPORATION - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NORTH CAROLINA 56-0905940 ------------------------------- ----------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1800 TWO FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA 28282 ------------------------------------------------------ ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704) 372-5404 ----------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS: NAME OF EXCHANGE ON WHICH REGISTERED: - ----------------------------------- ------------------------------------- COMMON STOCK NEW YORK STOCK EXCHANGE, INC. RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING ADDITIONAL PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC. SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of December 10, 1999, was $488,088,059. As of December 10, 1999, the Registrant had outstanding 46,350,986 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Parts I and II: Certain portions of the Annual Report to Shareholders for the fiscal year ended October 3, 1999. (With the exception of those portions which are specifically incorporated by reference in this Form 10-K and included as Exhibit 13 hereto, the Annual Report to Shareholders for the fiscal year ended October 3, 1999, is not deemed to be filed or incorporated by reference as part of this report). Part III: Definitive Proxy Statement dated December 27, 1999, as filed pursuant to Section 14 of the Securities Exchange Act of 1934 in connection with the 2000 Annual Meeting of Shareholders. (With the exception of those portions which are specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed or incorporated by reference as part of this report.) RUDDICK CORPORATION AND CONSOLIDATED SUBSIDIARIES Form 10-K for the Fiscal Year ended October 3, 1999 TABLE OF CONTENTS PART I Page Item 1. Business ...............................................1 Item 2. Properties .............................................4 Item 3. Legal Proceedings ......................................5 Item 4. Submission of Matters to a Vote of Security Holders.....6 Item 4A. Executive Officers of the Registrant ...................6 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters ....................................7 Item 6. Selected Financial Data ................................7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................7 Item 7A. Quantitative and Qualitative Discussion about Market Risk ............................................7 Item 8. Financial Statements and Supplementary Data ............7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................8 PART III Item 10. Directors and Executive Officers of the Registrant .....8 Item 11. Executive Compensation ................................ 8 Item 12. Security Ownership of Certain Beneficial Owners and Management .............................................8 Item 13. Certain Relationships and Related Transactions .........8 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................................9 PART I ITEM 1. BUSINESS - ---------------- Ruddick Corporation (the "Registrant") is a holding company which, through its wholly-owned subsidiaries, is engaged in two primary businesses: Harris Teeter, Inc. ("Harris Teeter") operates a regional chain of supermarkets in six southeastern states and American & Efird, Inc. ("A&E") manufactures and distributes industrial and consumer sewing thread. At October 3, 1999, the Registrant and its subsidiaries had total consolidated assets of $970,114,000 and had approximately 19,800 employees. The principal executive offices of the Registrant are located at 1800 Two First Union Center, Charlotte, North Carolina 28282. Ruddick Corporation, which is incorporated under North Carolina law, was created in 1968 through the consolidation of the predecessor companies of A&E and Ruddick Investment Company. In 1969, the Registrant acquired Harris Teeter. Also in 1969, the Registrant acquired the predecessor of Jordan Graphics, Inc. ("Jordan Graphics"). On January 23, 1996, certain assets of Jordan Graphics were sold to The Reynolds and Reynolds Company. In addition, as of the beginning of fiscal year 1996, Ruddick Investment Company redefined its business approach. Venture capital investment holdings will continue to be managed but future venture investments will be made primarily in independently managed venture capital investment funds for the foreseeable future. Due to continued growth of the Harris Teeter and A&E businesses, Ruddick Investment's relative size to the consolidated Company has declined and is no longer considered an operating company. For certain other information regarding the Company's venture capital and real estate holdings, see the Note entitled "Investments" of the Notes to Consolidated Financial Statements of Ruddick Corporation and Subsidiaries in the Registrant's 1999 Annual Report to Shareholders (the "1999 Annual Report"), which information is incorporated herein by reference. The two businesses in which the Registrant engages through its principal operating subsidiaries, together with certain financial information and competitive aspects of such businesses, are discussed separately below. For certain other information regarding industry segments, see the Note entitled "Industry Segment Information" of the Notes to Consolidated Financial Statements of Ruddick Corporation and Subsidiaries in the 1999 Annual Report, which information is incorporated herein by reference. The only foreign operations conducted by the Registrant are through A&E. Neither of the two businesses engaged in by the Registrant would be characterized as seasonal. Net revenue received from domestic United States customers was $2,520,502,000 in fiscal 1999, $2,394,821,000 in fiscal 1998 and $2,224,617,000 in fiscal 1997. Net revenue received from customers in foreign countries was $104,272,000 for fiscal 1999, $92,549,000 in fiscal 1998 and $75,472,000 in fiscal 1997. Net long-lived assets located in the domestic United 1 States were $524,200,000 at fiscal year end 1999, $497,700,000 at fiscal year end 1998 and $446,200,000 at fiscal year end 1997. Net long-lived assets located in foreign countries were $20,600,000, $20,300,000 and $21,300,000 at fiscal year end 1999, 1998 and 1997, respectively. The Registrant employs nineteen people, including four executives who formulate and implement overall corporate objectives and policies. The Registrant's employees perform functions in a number of areas including finance, accounting, audit, insurance, reporting, employee benefits and public and shareholder relations. The Registrant assists its subsidiaries in developing long-range goals, in strengthening management personnel and skills and in financing operations. Management of each subsidiary is responsible for implementing operating policies and reports to management of the Registrant. HARRIS TEETER ------------- Harris Teeter operates supermarkets in North Carolina (105), South Carolina (22), Virginia (6), Georgia (9), Tennessee (3) and Florida (2) for sales of groceries, produce, meat and seafood, delicatessen items, bakery items, wines and non-food items such as health and beauty care, floral and other products normally offered for sale in supermarkets. Harris Teeter has a program in place whereby each retail store will undergo remodels on a regular basis. Harris Teeter remodeled 22 stores during fiscal 1999 and expects to remodel 30 stores in fiscal 2000. In addition, 16 new stores were opened, including eight former Kroger stores in the Greensboro and Winston-Salem, North Carolina area and 13 stores were closed, including 11 in western Virginia which were acquired by Kroger, in fiscal 1999. As of fiscal year end, Harris Teeter had 147 stores in operation. Its principal offices and distribution facility containing cold storage perishable products and dry groceries are located near Charlotte, North Carolina. Another dry grocery, cold storage perishable and frozen storage facility is located in Greensboro, North Carolina. Both distribution facilities underwent major expansion during fiscal 1997 and 1998 in order that both could function as full-service facilities by May of 1998. Harris Teeter produces dairy products, but buys most of the products it sells, including its private label brands. Harris Teeter's sales constituted 87% of the Registrant's consolidated sales in fiscal 1999 (86% in 1998 and 84% in 1997). The supermarket industry is highly competitive. Harris Teeter competes with local, regional and national food chains, some of which are larger in terms of assets and sales, as well as with independent merchants. In the past several years, considerable consolidation of competitors has taken place in the supermarket industry and is expected to continue. As a result, Harris Teeter is likely to compete with more, larger food chains in its markets. Principal competitive factors include store location, price, service, convenience, cleanliness, product quality and product variety. No one customer or group of customers has a material effect upon the business of Harris Teeter. At fiscal year end, Harris Teeter employed approximately 9,645 full-time and 6,780 part-time employees. Warehouse employees and drivers at Harris Teeter's warehouse near Charlotte, North Carolina are represented by a union, but Harris Teeter is not party to a collective bargaining agreement covering such employees. Harris Teeter considers its employee relations to be good. 2 A & E ----- A&E is a leading manufacturer and distributor of sewing thread, produced from natural and synthetic fibers, for worldwide industrial and consumer markets. Manufacturers of apparel, automotive materials, home furnishings, medical supplies and footwear rely on A&E industrial sewing thread to manufacture their products. The company's sales are primarily of industrial sewing thread products, which are sold to manufacturers through A&E's employed sales representatives, commissioned agents and distributors. In addition, A&E produces the SIGNATURE line of consumer sewing thread, which is sold through independent retail outlets. A&E also distributes sewing supplies manufactured by other companies. A&E sales constituted 13% of the Registrant's consolidated sales in fiscal 1999 (14% in 1998 and 16% in 1997). Over 70% of A&E's sales are industrial thread for use in apparel products. The apparel market is made up of many categories, servicing both genders and diverse age groups, including jeanswear, underwear, menswear, womenswear, outerwear, intimate apparel, workwear and childrenswear. A&E also manufactures industrial thread for use in a wide variety of non-apparel products including home furnishings, automotive, footwear, upholstered furniture, sporting goods, caps and hats, gloves, leather products, medical products and tea bag strings. Headquartered in Mt. Holly, North Carolina, the company operates 12 modern manufacturing facilities in North Carolina. These facilities have been designed for flexibility and efficiency to accommodate changing customer product demands. In addition to manufacturing, A&E operates 14 distribution centers in the U. S. and one in Puerto Rico. A&E also has wholly-owned operations in Belgium, Canada, Costa Rica, El Salvador, England, Guatemala, Honduras, Hong Kong, Northern Ireland, Mexico and Malaysia, a majority-owned joint venture in China and minority interest in ventures in the Dominican Republic, Mauritius and Italy. The company's value of assets in these operations totals approximately $77 million. Management expects to continue to expand foreign production and distribution operations, through acquisitions, joint ventures or new start-up operations. The domestic order backlog, believed to be firm, as of the end of the 1999 fiscal year was approximately $11,132,000 versus $14,329,000 at the end of the preceding fiscal year. The majority of the order backlog is expected to be filled within three weeks of fiscal year end. The international order backlog is not material. A&E has approximately 9,300 domestic and 4,900 international customer accounts which are active. In fiscal 1999, no single customer accounted for more than 9% of total net sales, and the ten largest accounted for 25% of total net sales. A&E purchases cotton from farmers and domestic cotton merchants. There is presently a sufficient supply of cotton worldwide and in the domestic market. Synthetic fibers are bought primarily from the principal American synthetic fiber producers and are currently available in an adequate supply. 3 A&E has two patents issued and a patent application pending in several jurisdictions. There are no material licenses, franchises or concessions held by A&E. Research and Development expenditures were $432,000, $405,000 and $328,000 in fiscal 1999, 1998 and 1997, respectively, none of which were sponsored by customers. Three employees are engaged in this activity on a full-time basis. The industrial sewing thread industry is highly competitive. A&E is one of the world's largest manufacturers of industrial sewing threads and also manufactures and distributes consumer sewing thread. A&E's principal North American competition includes Coats American, Inc. and imports sold primarily through distributors. Globally, A&E competes with Coats Viyella PLC as well as regional producers and merchants in various foreign markets served by A&E. The key competitive factors are quality, service, and price. In the consumer thread market, A&E competes with a number of large, well-established companies, including Coats American, Inc. A&E employed approximately 3,350 persons worldwide as of the end of fiscal 1999. A&E considers its employee relations to be good. ITEM 2. PROPERTIES - ------------------- The executive offices of the Registrant are located in approximately 8,000 square feet of leased space in a downtown office tower at 1800 Two First Union Center, Charlotte, North Carolina, 28282. Harris Teeter owns its principal offices, which consist of 116,000 square feet of space located on a 10-acre tract of land near Charlotte, North Carolina. Harris Teeter also owns a 104-acre tract east of Charlotte where a cold storage and dry grocery distribution facility is located. This facility includes approximately 338,000 square feet of dry grocery warehouse and approximately 252,000 square feet of storage for refrigerated or perishable goods. Harris Teeter also owns a 49-acre tract in Greensboro, North Carolina, which contains approximately 550,000 square feet of dry grocery warehousing, approximately 138,000 square feet of perishable warehouse and approximately 139,000 square feet of frozen goods storage. Harris Teeter owns an 18,050 square foot milk processing plant located on 8.3 acres of land in Charlotte, North Carolina. During fiscal 1999, a new freezer was added to Harris Teeter's milk processing and ice cream manufacturing facility located on 4.7 acres of land in High Point, North Carolina which now totals 90,500 square feet. Harris Teeter operates its retail stores primarily from leased properties. The base annual rentals on leased store and warehouse properties as of October 3, 1999 aggregated approximately $52,284,000 net of sublease rentals of approximately $1,288,000. In addition to the base rentals, the majority of the lease agreements provide for additional annual rentals based on 1% of the amount by which annual store sales exceed a predetermined amount. During the fiscal year ended October 3, 1999, the additional rental amounted to approximately $1,218,000. Harris Teeter's supermarkets range in size from approximately 12,000 square feet to 66,000 square feet, with an average size of approximately 40,000 square feet. The following table sets forth selected statistics with respect to Harris Teeter stores for each of the last three fiscal years. 4 HARRIS TEETER STORE DATA 1997 1998 1999 ---------- ---------- ---------- Stores Open at End of Period 138 144 147 Average Weekly Net Sales Per Store* $ 272,924 $ 292,124 $ 303,206 Average Square Footage Per Store 38,076 39,155 40,347 Average Square Footage Per New Store Opened During Period 50,191 45,966 47,323 Total Square Footage at End of Period 5,254,457 5,638,261 5,930,991 *Computed on the basis of aggregate sales of stores open for a full year. A&E's principal offices and twelve domestic manufacturing plants are all owned by A&E and are all located in North Carolina. Manufacturing and related warehouse facilities have an aggregate of 2,158,578 square feet of floor space and an insured value of $601,523,000. A&E has the capacity to produce annually approximately 44,250,000 pounds of industrial sewing thread and has a dyeing capacity of approximately 44,550,000 pounds per year. Capacities are based on 168 hours of operations per week. A&E leases fourteen distribution centers scattered throughout its domestic markets with an aggregate of 329,042 square feet of floor space and an approximate annual rent of $1,325,000. Through subsidiaries, A&E also owns four international manufacturing and/or distribution facilities with an aggregate of 289,608 square feet of floor space and an approximate insured value of $21,800,000. A&E leases another 20 international facilities with an aggregate of 375,864 square feet of floor space and an approximate annual rent of $1,400,000. The subsidiaries which are engaged in manufacturing have a sewing thread dyeing capacity of approximately 14,400,000 pounds per year. Capacities are based on 168 hours of operations per week. In addition to its subsidiaries, A&E also has minority interests in various joint ventures. ITEM 3. LEGAL PROCEEDINGS - ------------------------- The Registrant has entered into an Administrative Order on Consent with Region IV of the United States Environmental Protection Agency, together with 14 other parties who have been designated potentially responsible parties, to perform a remedial investigation/feasibility study at the Leonard Chemical Company Superfund site in Rock Hill, South Carolina. The Registrant's potential liability is based on the alleged disposal of waste material at this Superfund site by Pargo, Inc. Pargo, Inc. was a wholly owned subsidiary of the Registrant from 1969 to 1972. The Registrant has agreed to participate in the remedial investigation/feasibility study on the condition that its share of the costs does not exceed 1.8% of the total plus an additional payment of $4,680 for costs previously incurred by other parties. The Registrant estimates that, based on current information, the total cost of the remedial investigation/feasibility study should be approximately 5 $1,500,000. Under the interim allocation of costs agreed to by the parties to the Administrative Order on Consent, the Registrant's share is 1.155% of the total cost. The Registrant does not believe that this proceeding will have a material effect on its business or financial condition. The Registrant and its subsidiaries are involved in various matters from time to time in connection with their operations, including various lawsuits, patent and environmental matters. These matters considered in the aggregate have not had, nor does the Registrant expect them to have, a material effect on the Registrant's business or financial condition. For certain other information regarding potential contingencies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters" in the 1999 Annual Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ----------------------------------------------------------- Not applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT - --------------------------------------------- The following list contains the name, age, positions and offices held, and period served in such positions or offices for each of the executive officers of the Registrant. R. Stuart Dickson, age 70, has been Chairman of the Executive Committee since February 1994. Prior to that time he had been Chairman of the Board of the Registrant since its formation in October 1968. Alan T. Dickson, age 68, has been Chairman of the Board since February 1994. Prior to that time he had been President of the Registrant since its formation in October 1968. Thomas W. Dickson, age 44, has been President of the Registrant since February 1997. Prior to that time, and beginning in February 1996, he served as Executive Vice President of the Registrant. He also served as A&E's President from February 1994 to August 1996 and Executive Vice President from 1991 to 1994. John B. Woodlief, age 49, has been Vice President - Finance of the Registrant since November 1999. Prior to that time, and beginning in 1996, he served as Managing Partner of PricewaterhouseCoopers, Charlotte, North Carolina office. He joined Price Waterhouse in 1972.* Fred J. Morganthall, II, age 48, was elected President of Harris Teeter on October 30, 1997. Prior to that time, and beginning in October 1996, he served as Executive Vice President of Harris Teeter. He was also Harris Teeter's Senior Vice President of Operations from October 1995 to October 1996, Vice President of Operations from April 1994 to October 1995 and Vice President of Sales and Distribution from October 1992 to April 1994. Fred A. Jackson, age 49, has been President of A&E since August 1996. Prior to that time, for more than five years, he served as its Senior Vice President-Industrial Thread Sales. *Richard N. Brigden, age 60, served as Vice President - Finance of the Registrant from December 1983 until November 1999. He will retire in early 2000. 6 The executive officers of the Registrant and its subsidiaries are elected annually by their respective Boards of Directors. R. Stuart Dickson and Alan T. Dickson are brothers. Thomas W. Dickson is the son of R. Stuart Dickson and the nephew of Alan T. Dickson. No other executive officer has a family relationship with any other executive officer or director or nominee for director as close as first cousin. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS - ----------------------------------------------------------------------------- The information required for this item is incorporated herein by reference to the following sections of the Registrant's 1999 Annual Report: information regarding the principal market for Common Stock, number of shareholders of record, market price information per share of Common Stock and dividends declared per share of Common Stock for each quarterly period in the 1999 and 1998 fiscal years is incorporated by reference to the Note headed "Quarterly Information (Unaudited)" to the Notes to Consolidated Financial Statements; and information regarding restrictions on the ability of the Registrant to pay cash dividends is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Capital Resources and Liquidity" and the Note headed "Long-Term Debt" to the Notes to Consolidated Financial Statements. ITEM 6. SELECTED FINANCIAL DATA - ------------------------------- The information required for this item, for each of the last five fiscal years, is incorporated herein by reference to the sections headed "Ruddick Corporation Financial Highlights" and "Eleven-Year Financial and Operating Summary" in the Registrant's 1999 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- The information required for this item is incorporated herein by reference to the section headed "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1999 Annual Report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCUSSION ABOUT MARKET RISK - ------------------------------------------------------------------ The Registrant's market risk sensitive instruments do not subject the Registrant to material market risk exposures. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - --------------------------------------------------- The Consolidated Financial Statements of the Registrant, including the Report of Independent Public Accountants thereon, are incorporated herein by reference from the Registrant's 1999 Annual Report. 7 The required supplementary financial information is incorporated herein by reference from the Note headed "Quarterly Information (Unaudited)" of the Notes to Consolidated Financial Statements in the Registrant's 1999 Annual Report. The financial statement schedules required to be filed herewith, and the Report of Independent Public Accountants thereon, are listed under Item 14(a) of this Report and filed herewith pursuant to Item 14(d) of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ----------------------------------------------------------------------- FINANCIAL DISCLOSURE - -------------------- Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ----------------------------------------------------------- The information required by this item with respect to executive officers is set forth above in Part I, Item 4A. The other information required by this item is incorporated herein by reference to the sections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's Proxy Statement dated December 27, 1999, filed with the Securities and Exchange Commission with respect to the Registrant's 2000 Annual Meeting of Shareholders (the "2000 Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION - ------------------------------- The information required by this item is incorporated herein by reference to the sections entitled "Election of Directors -Directors' Fees and Attendance" and "Executive Compensation" in the Registrant's 2000 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ----------------------------------------------------------------------- The information required by this item is incorporated herein by reference to the sections entitled "Principal Shareholders" and "Election of Directors-Beneficial Ownership of Company Stock" in the Registrant's 2000 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - ------------------------------------------------------- None. 8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------ (a) Documents filed as part of this report: (1) Financial Statements: The following financial statements and report are incorporated herein by reference to the Registrant's 1999 Annual Report: Consolidated Balance Sheets, October 3, 1999 and September 27, 1998 Statements of Consolidated Income and Retained Earnings for the fiscal years ended October 3, 1999, September 27, 1998 and September 28, 1997 Statements of Consolidated Total Non-Owner Changes in Equity for the fiscal years ended October 3, 1999, September 27, 1998 and September 28, 1997 Statements of Consolidated Cash Flows for the fiscal years ended October 3, 1999, September 27, 1998 and September 28, 1997 Notes to Consolidated Financial Statements Report of Independent Public Accountants (2) Financial Statement Schedules: The following report and financial statement schedules are filed herewith: Report of Independent Public Accountants for each of the fiscal years in the three year period ended October 3, 1999 Page S-1 Schedule II - Valuation and Qualifying Accounts and Reserves Page S-2 All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes thereto. (3) Index to Exhibits: The following exhibits are filed with this report or, as noted, incorporated by reference herein. 9 Sequentially Exhibit Numbered Number Description of Exhibit Page - ------ ---------------------- ---- 3.1 Restated Articles of Incorporation of the * Registrant, incorporated herein by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 1992 (Commission File No. 1-6905). 3.2 Amended and Restated Bylaws of the Registrant, * incorporated herein by reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 27, 1998 (Commission File No. 1-6905). 4.1 Revolving Credit Agreements for an aggregate of * $100,000,000, entered into as of February 15, 1995, by and between the Registrant and each of First Union National Bank of North Carolina, NationsBank, National Association (formerly NationsBank, National Association (Carolinas)) and Wachovia Bank of North Carolina, N.A., incorporated herein by reference to Exhibits 4.1, 4.2 and 4.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 2, 1995 (Commission File No. 1-6905). 4.2 $50,000,000 6.48% Series A Senior Notes due March * 1, 2011 and $50,000,000 Private Shelf Facility dated March 1, 1996 between Ruddick Corporation and The Prudential Insurance Company of America, incorporated herein by reference to Exhibit 4.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 (Commission File No. 1-6905). 4.3 $50,000,000 7.55% Senior Series B Notes due July 15, 2017 and $50,000,000 7.72% Series B Senior Notes due April 15, 2017 under the Note Purchase and Private Shelf Agreement dated April 15, 1997 between Ruddick Corporation and The Prudential Insurance Company of America, incorporated herein by reference to Exhibit 4.3 of the Registrant's Annual Report on Form 10-K for the fiscal year period ended September 28, 1997 (Commission File No. 1-6905). The Registrant has certain other long-term debt, but has not filed the instruments evidencing such debt as part of Exhibit 4 as none of such instruments authorize the issuance of debt exceeding 10 percent of the total consolidated assets of the Registrant. The Registrant agrees to furnish a copy of each such agreement to the Commission upon request. 10.1 Description of Incentive Compensation Plans, * incorporated herein by reference to Exhibit 10.1 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 29, 1996 (Commission No. 1-6905).** 10 Sequentially Exhibit Numbered Number Description of Exhibit Page - ------ ---------------------- ---- 10.2 Supplemental Executive Retirement Plan of Ruddick * Corporation, as amended and restated, incorporated herein by reference to Exhibit 10.3 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1990 (Commission File No. 1-6905).** 10.3 Resolutions adopted by the Board of Directors of * the Registrant and the Plan's Administrative Committee with respect to benefits payable under the Registrant's Supplemental Executive Retirement Plan to Alan T. Dickson and R. Stuart Dickson, incorporated herein by reference to Exhibit 10.3 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 29, 1991 (Commission File No. 1-6905).** 10.4 Deferred Compensation Plan for Key Employees of * Ruddick Corporation and subsidiaries, as amended and restated, incorporated herein by reference to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1990 (Commission File No. 1-6905).** 10.5 1982 Incentive Stock Option Plan, as amended and * restated, incorporated herein by reference to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 1994 (Commission File No. 1-6905).** 10.6 1988 Incentive Stock Option Plan, incorporated * herein by reference to Exhibit 10.6 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 1994 (Commission File No. 1-6905).** 10.7 1993 Incentive Stock Option and Stock Appreciation * Rights Plan, incorporated herein by reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 3, 1993 (Commission File No. 1-6905).** 10.8 Description of the Registrant's Long Term Key * Management Incentive Program, incorporated herein by reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 29, 1991 (Commission File No. 1-6905).** 11 Sequentially Exhibit Numbered Number Description of Exhibit Page - ------ ---------------------- ---- 10.9 Ruddick Corporation Irrevocable Trust for the * Benefit of Participants in the Long Term Key Management Incentive Program, incorporated herein by reference to Exhibit 10.9 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1990 (Commission File No. 1-6905).** 10.10 Rights Agreement dated November 15, 1990 by and * between the Registrant and Wachovia Bank of North Carolina, N.A., incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated November 21, 1990 (Commission File No. 1-6905). 10.11 Ruddick Corporation Senior Officers Insurance * Program Plan Document and Summary Plan Description, incorporated herein by reference to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 27, 1992 (Commission File No. 1-6905).** 10.12 Ruddick Corporation Nonstatutory Stock Option * Agreement Between the Registrant and Edwin B. Borden, Jr., incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996 (Commission File No. 1-6905).** 10.13 Ruddick Corporation Nonstatutory Stock Option * Agreement Between the Registrant and Beverly F. Dolan, incorporated herein by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996 (Commission File No. 1-6905).** 10.14 Ruddick Corporation Nonstatutory Stock Option * Agreement Between the Registrant and Roddey Dowd, Sr., incorporated herein by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996 (Commission File No. 1-6905).** 10.15 Ruddick Corporation Nonstatutory Stock Option * Agreement Between the Registrant and James E.S. Hynes, incorporated herein by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996 (Commission File No. 1-6905).** 12 Sequentially Exhibit Numbered Number Description of Exhibit Page - ------ ---------------------- ---- 10.16 Ruddick Corporation Nonstatutory Stock Option * Agreement Between the Registrant and Hugh L. McColl, Jr., incorporated herein by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996 (Commission File No. 1-6905).** 10.17 Ruddick Corporation 1995 Comprehensive Stock Option * Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (Commission File No. 1-6905).** 10.18 Ruddick Corporation 1997 Comprehensive Stock Option * and Award Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 28, 1997 (Commission File No. 1-6905).** 10.19 Ruddick Corporation Director Deferred Plan, * incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 1998 (Commission File No. 1-6905).** 10.20 Ruddick Corporation Senior Officers Insurance * Program, incorporated herein by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 1998 (Commission File No. 1-6905).** 11 Statement Regarding the Computation of Per Share + Earnings. 13 Ruddick Corporation 1999 Annual Report to + Shareholders: Consolidated Financial Statements on pages 22 to 35 and sections headed "Management's Discussion and Analysis of Financial Condition and Results of Operations" (pages 17 to 21), "Ruddick Corporation Financial Highlights" (page 3) and "Eleven-Year Financial and Operating Summary" (pages 36 and 37) only. 21 List of Subsidiaries of the Registrant. + 13 23 Consent of Independent Public Accountants. + 27 Financial Data Schedule. + - ------------------------ * Incorporated by reference. ** Indicates management contract or compensatory plan required to be filed as an Exhibit. + Indicates exhibits filed herewith and follow the signature pages. (b) Reports on Form 8-K. The Registrant did not file any reports on Form 8-K during the three months ended October 3, 1999. (c) Exhibits See (a )(3) above. (d) Financial Statement Schedules See (a) (2) above. 14 SIGNATURES Pursuant to the requirements of Section 13 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. RUDDICK CORPORATION (Registrant) By: /s/ Thomas W. Dickson -------------------------------- Thomas W. Dickson, President Dated: December 22, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: Name Title Date ---- ----- ---- /s/ Thomas W. Dickson President and December 22, 1999 - ------------------------- Director Thomas W. Dickson (Principal Executive Officer) /s/ John B. Woodlief Vice President- December 22, 1999 - ------------------------- Finance (Principal John B. Woodlief Financial Officer) /s/ Douglas A. Stephenson Vice President December 22, 1999 - ------------------------- and Treasurer Douglas A. Stephenson (Principal Accounting Officer) /s/ John R. Belk Director December 22, 1999 - ------------------------- John R. Belk /s/ Edwin B. Borden, Jr. Director December 22, 1999 - ------------------------- Edwin B. Borden, Jr. /s/ John W. Copeland Director December 22, 1999 - ------------------------- John W. Copeland /s/ Alan T. Dickson Chairman of December 22, 1999 - ------------------------- the Board Alan T. Dickson and Director /s/ R. Stuart Dickson Chairman of December 22, 1999 - ------------------------- the Executive R. Stuart Dickson Committee and Director 15 Name Title Date ---- ----- ---- - --------------------------- Director Roddey Dowd, Sr. /s/ James E. S. Hynes Director December 22, 1999 - --------------------------- James E. S. Hynes /s/ Hugh L. McColl, Jr. Director December 22, 1999 - --------------------------- Hugh L. McColl, Jr. /s/ Anna S. Nelson Director December 22, 1999 - --------------------------- Anna S. Nelson /s/ Harold C. Stowe Director December 22, 1999 - --------------------------- Harold C. Stowe - --------------------------- Director Isaiah Tidwell 16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Ruddick Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Ruddick Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated October 28, 1999. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14(a)(2) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Charlotte, North Carolina October 28, 1999 S-1 RUDDICK CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 1997, SEPTEMBER 27, 1998, AND OCTOBER 3, 1999 (in thousands) --------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C --------------------------------------------------------------------------- ADDITIONS BALANCE CHARGED TO AT BEGINNING COSTS AND DESCRIPTION OF FISCAL YEAR EXPENSES - -------------------------------------------------------------------------------- Fiscal Year Ended September 28, 1997: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $1,398 $1,704 ===================================== Fiscal Year Ended September 27, 1998: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $2,005 $2,145 ===================================== Fiscal Year Ended October 3, 1999: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $2,046 $1,920 ===================================== SCHEDULE II ----------------------------------- COLUMN D COLUMN E ----------------------------------- BALANCE AT END DESCRIPTION DEDUCTIONS* OF PERIOD - -------------------------------------------------------------------------------- Fiscal Year Ended September 28, 1997: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $1,097 $2,005 ===================================== Fiscal Year Ended September 27, 1998: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $2,104 $2,046 ===================================== Fiscal Year Ended October 3, 1999: Reserves deducted from assets to which they apply - Allowance For Doubtful Accounts $733 $3,233 ===================================== *Represents accounts receivable balances written off as uncollectible, less recoveries. S-2 EX-11 2 EXHIBIT 11 EXHIBIT 11 RUDDICK CORPORATION STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS FISCAL YEAR ENDED --------------------------- OCTOBER 3, SEPTEMBER 27, 1999 1998 ------------- ------------ NET INCOME PER SHARE COMPUTED AS FOLLOWS: BASIC: 1. Net Income available to common shareholders $ 50,714,128 $ 46,771,696 ============= ============ 2. Weighted Average Common Shares Outstanding - Basic 46,511,523 46,667,416 3. Basic net income per share (Item 1 divided by Item 2) $ 1.09 $ 1.00 ============= ============ DILUTED: 1. Net Income available to common shareholders $ 50,714,128 $ 46,771,696 ============= ============ 2. Weighted Average Common Shares Outstanding - Basic 46,511,523 46,667,416 3. Weighted potential shares under stock options computed for the periods using the Treasury Stock Method. 235,127 297,007 ------------- ------------ 4. Weighted Average Common Shares Outstanding - Diluted Common Equivalent Shares Outstanding 46,746,650 46,964,423 ============= ============ 5. Net Income Per Share (Item 1 divided by Item 4) $ 1.08 $ 1.00 ============= ============ EX-13 3 EXHIBIT 13 EXHIBIT 13 RUDDICK CORPORATION 1999 ANNUAL REPORT TO SHAREHOLDERS: CONSOLIDATED FINANCIAL STATEMENTS Exhibit 13 Ruddick Corporation Financial Highlights (Dollars in thousands, except per share data) 1999 1998 Net Sales $2,624,774 $2,487,370 Total Operating Profit 104,055 94,196 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 166,699 152,851 Net Income 50,714 46,772 Net Income Per Share Basic 1.09 1.00 Diluted 1.08 1.00 Dividend Per Share .33 .32 Total Assets 970,114 931,618 Shareholders' Equity 443,683 410,725 Book Value Per Share 9.55 8.82 (Dollars in thousands, except per share data) 1997 1996 Net Sales $2,300,089 $2,142,501 Total Operating Profit 94,836 83,143 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 144,583 125,390 Net Income 47,731 42,802 Net Income Per Share Basic 1.02 .92 Diluted 1.02 .92 Dividend Per Share .32 .26 Total Assets 885,243 801,702 Shareholders' Equity 380,507 346,856 Book Value Per Share 8.17 7.47 (Dollars in thousands, except per share data) 1995 Net Sales $2,009,776 Total Operating Profit 76,728 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 114,385 Net Income 39,267 Net Income Per Share Basic .84 Diluted .84 Dividend Per Share .25 Total Assets 715,318 Shareholders' Equity 316,236 Book Value Per Share 6.82 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Fiscal 1999 Compared to Fiscal 1998 For the 53-week fiscal year ended October 3, 1999, consolidated sales of $2.6 billion increased 5.5% over the $2.5 billion reported in the 52-week 1998 fiscal year. Consolidated fiscal 1999 net income of $50.7 million increased 8% from the $46.8 million reported last year. Basic and diluted earnings per share were $1.09 and $1.08, respectively, in fiscal 1999 compared to $1.00 for both in fiscal 1998. The adoption during the first quarter of fiscal 1998 of Statement of Financial Accounting Standards No. 128, "Earnings per Share," had no effect on the net income per share for the respective periods. The increase in net income for fiscal 1999 resulted primarily from increased operating profit at both Harris Teeter, the Company's retail grocery subsidiary, and American & Efird (A&E), the industrial thread subsidiary, partially offset by a higher effective income tax rate for the Company. The Company's effective income tax rate rose to 37.7% (33.8% in 1998), driven by reduced tax benefits from Company-owned life insurance (COLI). As a result of 1996 federal tax legislation, certain policy loan interest which had been partially deductible for income taxes during a three-year phaseout period was no longer deductible effective January 1, 1999. Harris Teeter, Inc. Sales grew by 7% for the 53-week fiscal 1999 to $2.3 billion from $2.1 billion in the 52-week fiscal 1998. The sales increase was primarily due to a 5% expansion in store square footage during the fiscal year, as well as the promotional, advertising and customer service activities for new and existing stores in the intensely competitive market environment in the southeastern United States. Further, the rate of food inflation continued to be modest. Harris Teeter sales for stores in operation during both fiscal years increased by .9% in fiscal 1999, compared to 4.8% in fiscal 1998. Overall, chain-wide grocery sales of the current fiscal year grew by 7% and accounted for 51% of the sales increase. Dairy, meat, produce and frozen products had sales increases ranging from 5% to 10% and accounted for 41% of the sales increase. The overall sales growth was achieved despite a disruption of net sales in certain stores during a period of transition associated with the third quarter exchange of 11 western Virginia stores for 10 Kroger stores in the Greensboro and Winston-Salem, North Carolina market areas. This market realignment afforded the potential to achieve enhanced distribution efficiency and better utilization of advertising costs. Harris Teeter closed its 11 Virginia stores in May and opened eight of the newly acquired Kroger stores during June and July of the fiscal year. Sales lost during this transition period were partially offset by an increase in sales at existing Harris Teeter stores in the region. Gross profit increased by 7% to $621.3 million in fiscal 1999 from $581.2 million in fiscal 1998. Operating profit expanded by 6%, to $55.5 million in fiscal 1999 from $52.1 million in fiscal 1998. These results were primarily due to higher net sales and improved expense controls, the benefits of which were partially offset by non-recurring expenses associated with the closings of the western Virginia stores and the opening of the new stores. The pre-tax cost of the exchange of stores was not materially different from the $5.5 million estimate reported by the Company at the time of the transaction. For both fiscal 1999 and 1998, the operating margin on sales remained flat at approximately 2.44%. At the end of fiscal 1999, 147 stores were in operation, compared to 144 a year ago. Sixteen new stores were opened during the year, including eight former Kroger stores in the Greensboro and Winston-Salem, North Carolina area, and 13 stores were closed, including 11 in western Virginia which were acquired by Kroger. Harris Teeter expanded its market boundaries this year by opening its first two stores in the Jacksonville, Florida area. American & Efird, Inc. In the 53-week fiscal 1999, A&E's sales of $351.6 million fell 1% from $355.1 million in 52-week fiscal 1998, reflecting the approximately $3.8 million of prior year sales of A&E's Korean operations, which were closed in June of 1998. In 1999, the sales decline was primarily in industrial sewing thread, although consumer thread and notions sales also decreased slightly. Sales of A&E's industrial thread in the U.S. in both years declined as the result of the shift of its customers' production to Mexico and the Caribbean Basin countries, the growth of low-priced apparel imports and a change in consumer buying trends to more designer apparel, resulting in fewer units sold at retail. In fiscal 1999, weak demand for industrial thread in the U.S. resulted in decreased sales during the first and second quarters, although overall business conditions improved in the second half of the year. In A&E's foreign operations, while business conditions were somewhat soft in Europe, sales increases were achieved in the majority of its international markets. In addition to the anticipated continuation of growth in international markets, A&E expects that its ability to meet the increasing demands of its customers for top quality, high performance industrial thread in the apparel, home furnishings and other markets will provide an opportunity for future growth in sales. Gross profit increased by 5% to $106.1 million in fiscal 1999 from $101.0 million in the prior year, primarily as a result of the additional operating week in the 1999 fiscal year and increased productivity in manufacturing operations. Operating profit improved by 16% to $48.6 million in fiscal 1999 compared to $42.1 million in the prior year, reflecting primarily the negative impact of $5.4 million in operating losses in Korea in fiscal 1998. A&E's productivity improved during fiscal 1999 due to continued modernization and due to the consolidation of a Charlotte, North Carolina distribution center and the company's Salisbury, North Carolina dyehouse into existing facilities in Gastonia, North Carolina. Sales by foreign operations in fiscal 1999 increased by 13% over fiscal 1998. Foreign operations contributed 30% of A&E's total sales and 16% of its operating profits in fiscal 1999. During the fourth quarter of fiscal 1999, A&E withdrew from its attempt to acquire Hicking Pentecost PLC, a United Kingdom-based industrial thread manufacturer. While foreign sales and profits were still not material to the Company's consolidated results of operations, growth in international sales continued during fiscal 1999. With the exception of Europe, all major foreign operations improved profitability in fiscal 1999, with NAFTA continuing to drive strong performances in Canada and Mexico. Export sales also expanded during fiscal 1999. Results of Operations - Fiscal 1998 Compared to Fiscal 1997 For fiscal 1998, consolidated sales of $2.5 billion increased 8% over the $2.3 billion reported in fiscal 1997. Consolidated net income of $46.8 million fell 2% from the $47.7 million reported for fiscal 1997. Basic and diluted earnings per share were $1.00 in fiscal 1998 compared to $1.02 in fiscal 1997. The adoption during the first quarter of fiscal 1998 of Statement of Financial Accounting Standards No. 128, "Earnings per Share," had no effect on the net income per share for the respective periods. The decrease in net income for fiscal 1998 was primarily due to lower operating profits at A&E, which related largely to its Korean operations, not fully offset by the increased operating profit of Harris Teeter. Further, in fiscal 1998, the Company's effective income tax rate rose to 33.8% (33.0% in 1997), driven by reduced tax benefits from Company-owned life insurance (COLI). Federal tax legislation in 1996 restricted the deductibility of certain interest on policy loans to 90% of the total in 1997 and 80% in 1998. Harris Teeter, Inc. Sales advanced by 10% in fiscal 1998 to $2.1 billion. Despite the highly competitive environment for the supermarket industry in general, Harris Teeter sales for stores in operation in both periods increased by 4.8% in fiscal 1998, compared to .1% in fiscal 1997. Sales increases were due to the 7% expansion in store square footage over the course of the year and the favorable comparable store sales growth which was primarily attributable to successful promotional and merchandising activities related to the Very Important Customer (VIC) loyalty card program. Grocery sales grew by 10% and accounted for 49% of the sales increase. Dairy, meat, produce and frozen products had sales increases ranging from 8% to 14% and accounted for 39% of the sales increase. Gross profit increased by 11% to $581.2 million in fiscal 1998 from $525.4 million in the prior year. Operating profit expanded by 14%, to $52.1 million in fiscal 1998 from $45.7 million in fiscal 1997. These results were primarily due to the very specific productivity enhancement and cost management initiatives put in place during 1997 and 1998, and the higher sales level in fiscal 1998. At the end of fiscal 1998, 144 stores were in operation, compared to 138 at the end of fiscal 1997. During fiscal 1998, ten new stores were opened, one of which was a replacement, and four less profitable stores were closed. American & Efird, Inc. For fiscal 1998, sales fell by 4% from fiscal 1997 to $355.2 million. The sales decline was primarily in industrial sewing thread, while consumer thread and notions sales increased. The decrease was due to a relative softness in demand for thread in U.S. markets and a reduction in exports, offset in part by strong growth in A&E's foreign sales. During fiscal 1997, sales growth had been driven by good market conditions in most major industries served by A&E, while in fiscal 1998 U.S. sales were impacted by the shift of business to Mexico and the Caribbean Basin countries, the growth of low-priced Asian imports and a shift in consumer buying trends to more designer apparel, resulting in fewer units sold. In A&E's foreign operations, fiscal 1998 sales increases were achieved in all markets except Korea and Hong Kong, and were especially strong in Mexico and Central America. Gross profit in fiscal 1998 declined by 5% to $101.0 million from $106.8 million in fiscal 1997 as a result of lower sales and the pressure on margins in the very competitive environment. Operating profit fell by 14% to $42.1 million in fiscal 1998 compared to $49.1 million in the prior year and was negatively impacted by the decrease in volume, the deterioration of business conditions in Korea and costs associated with the withdrawal from that country. In total, Korean operations and withdrawal reduced operating profit for the fiscal year 1998 by $5.4 million, or $3.8 million after tax. In addition to the $3.1 million pre-tax charge for the costs of withdrawal, Korean losses were affected by currency translation, bad debt write-offs and inventory adjustments. A&E Korea's sales were $3.8 million in the nine months of operation in 1998 and $5.8 million in 1997. Further, A&E's profitability declined as improved manufacturing productivity from the completion of the integration of Threads USA was more than offset by the unfavorable effects of reduced manufacturing schedules. A new customer support center, which opened in late 1998, consolidated all customer interface functions, including sales support and administration, customer service, credit and marketing, and enhanced efficiency and lowered costs. Excluding Korea, sales by foreign operations made up 25% of A&E's total sales and 8% of its operating profit in fiscal 1998. While foreign sales and profits were still not material to the Company's consolidated results of operations, international sales continued to build significantly. NAFTA continued to drive strong performances in Canada and Mexico, and apparel manufacturing continued to increase in Latin America. The A&E majority-owned joint venture in China also evidenced growth. Capital Resources and Liquidity Ruddick Corporation is a holding company which, through its wholly owned subsidiaries, Harris Teeter, Inc. and American & Efird, Inc., is engaged in the primary businesses of regional supermarket operations and industrial sewing thread manufacture and distribution, respectively. Ruddick has no material independent operations, nor material assets, other than the investments in its operating subsidiaries. Ruddick provides a variety of services to its subsidiaries and is dependent upon income and upstream dividends from its subsidiaries. There exist no restrictions on such dividends, which are determined as a percentage of net income of each subsidiary. The Company strives to achieve a goal of earning at least a 15% return on beginning shareholders' equity. The return on beginning equity was 12.3% in both 1999 and 1998. At the same time, the Company seeks to limit long-term debt such that it constitutes no more than 40% of capital employed, which includes long-term debt, minority interest and shareholders' equity. As of the end of fiscal 1999, this percentage was 30.7%, a decrease from last year's 31.6%. The Company's principal source of liquidity has been revenue from operations. The Company also has the ability to borrow up to an aggregate of $100 million under established revolving lines of credit with three banks. The maximum amount outstanding under these credit facilities during fiscal 1999 was $82.8 million, and $40.8 million was outstanding at year end. The majority of the borrowings under Ruddick's revolving credit facilities were used for capital expenditures. Borrowings and repayments under these revolving credit facilities are of the same nature as short-term credit lines; however, due to the nature and terms of the agreements allowing up to five years for repayment, all borrowings under these facilities are classified as long-term debt. Working capital as of the fiscal years ended 1999, 1998 and 1997 was $120.0 million, $87.3 million and $88.9 million, respectively. The increase of $32.7 million in fiscal 1999 was primarily the result of an increase in inventories and other current assets, and a decrease in accrued liabilities. The current ratio was 1.5 at October 3, 1999 and 1.4 at September 27, 1998. Covenants in certain of the Company's long-term debt agreements limit the total indebtedness that the Company may incur. The Company remains well within such covenants. Management believes that the limit on indebtedness does not significantly restrict the Company's liquidity and that such liquidity is adequate to meet foreseeable requirements. In fiscal 1999, capital expenditures were $96.9 million. In fiscal 2000, capital expenditures are expected to be not more than $130 million. For further modernization and expansion, American & Efird expects to spend about $30 million. In the very competitive southeast U.S. grocery market, Harris Teeter has capital expenditure plans totaling about $100 million. The Harris Teeter estimates include the fiscal year 2000 opening of 12 new stores. New store locations include two in North Carolina, three in Virginia, one in Maryland, five in Georgia and one in Tennessee. Management expects that internally generated funds, supplemented by available borrowing capacity, will be adequate to finance such expenditures. Other Matters Year 2000 Compliance The Company has substantially completed the process of the modification or conversion of all mission-critical Company computer (IT) systems, as well as all mission-critical non-IT systems which have embedded technology such as microcontrollers, to provide for proper functioning beyond calendar year 1999. During the fiscal year ended September 28, 1997, the Company had instituted plans and initiated its Year 2000 remediation programs by which it would complete such remediation by the end of April 1999 in the U.S. and June 1999 in its foreign operations, including final testing in all operations worldwide by September 1999. Such remediation plans have been modified as the project progressed, and routine periodic reports have displayed that the project activities are on schedule with the requirements of the latest Year 2000 remediation and testing plans. At both Harris Teeter and A&E, the assessment, technical plan development and remediation phases have been fully completed. Management believes that, on a worldwide basis, all mission-critical systems and programs have been remediated and are fully compliant. Date simulation testing, which has been ongoing throughout the Year 2000 conversion, is complete on all mission-critical systems and programs. Additional compliance testing will continue throughout calendar year 1999 as an added safeguard and in response to any ongoing code changes or upgrades by software suppliers. The combined companies have spent $2.8 million cumulatively for Year 2000 compliance since project inception and expect to spend $300,000 more during the remainder of calendar year 1999 in order to complete the project. Maintenance and modification costs are expensed as incurred, while the costs of new software are capitalized and amortized over the software's useful life. The Company has formal correspondence programs with its major suppliers and its major thread customers, of which no single customer exceeds 9% of A&E sales, for inquiry, monitoring and assessing their Year 2000 remediation plans and efforts. All costs of their remediation will be borne by the suppliers and customers. Management expects that the costs of the Company's Year 2000 remediation will have no material impact on its results of operations, liquidity and capital resources and further, that resources are available to complete the modification and conversion as planned. It must be recognized, however, that failure to do so could have a material adverse effect on the Company's future results of operations. The Company has developed contingency plans to address the potential worst-case scenarios which could conceivably evolve in mission-critical systems, presumably as a result of the lack of readiness of outside parties. These plans include temporary and manual procedures to follow in the event of a system or subsystem failure. In reference to the supply of goods and services by vendors, the contingency plans will largely take into account the vendors' progress to adequately address the Year 2000 issue. At both A&E and Harris Teeter, the contingency plans were developed to mitigate the potential impacts of system, equipment or supplier disruptions. These plans include temporary, manual procedures for each function in the procurement, production, warehousing, distribution and revenue cycles of the businesses. Further, alternate sources to supply materials and product have been determined, and appropriate levels of increased inventories are expected to be maintained. These plans have been completed and fully documented in worldwide operations. Additionally, at Harris Teeter, contingency plans further encompassed the specific potential adversities that could effect the retail store operations, such as the potential of disruptions in point of sale register systems, retail price management, cash management, debit and credit card operations and store inventory replenishment. To a large extent, the contingency plans engage temporary, manual solutions to each potential random disruption. While the companies will have remediated and tested all mission-critical systems, the possibility still exists for random equipment failures, power outages or system failures of vendors and suppliers. Although the contingency plans of the Company have been thoroughly and prudently developed, it must be recognized that disruptions caused by third parties which may be more than random occurrences or may be catastrophically extensive, could have a material adverse effect on the Company's results of operations. Income Taxes As a result of federal legislation which phased out, effective January 1, 1999, interest deductions on certain insurance policy loans and thereby significantly diminished the favorable tax attributes of COLI, the Company's effective income tax rate, in comparison to the prior fiscal year, has risen to a level slightly below statutory rates domestically. The Company has recorded income tax reductions of approximately $25 million cumulatively as the result of COLI interest deductions from October 1993 through December 27, 1998. The Internal Revenue Service (IRS), on a comprehensive national level, is pursuing an adverse position regarding the deductibility of COLI policy loan interest for years prior to January 1, 1999. The IRS issued Technical Advice Memoranda regarding the COLI deductibility to taxpayers unrelated to the Company. Further, on October 19, 1999, the Tax Court ruled, in a single judge's decision, that Winn-Dixie Stores, Inc., was not entitled to deduct interest on policy loans from its COLI program, finding that the program lacked economic substance. Management understands that the adverse position taken by the IRS will be subjected to extensive further challenges in the courts, not only by Winn-Dixie but also by many other large corporations with similar life insurance programs. On June 17, 1999, the IRS issued a notice of assessment of tax to the Company for the amounts of COLI loan interest deducted in fiscal years 1994 and 1995. If the IRS were to prevail, the income tax payable (including federal and state amounts) would total approximately $7.4 million, for 1994 and 1995, and for all years a total of $29.2 million, including interest thereon. The Company strongly disagrees with the position of the IRS, has begun the appeal of the assessment and intends to vigorously pursue justice through the taxpayer appeals process and, if necessary, the judicial system. In the event that the IRS prevails, this outcome would result in a material impact upon the Company's future income taxes and results of operations. Regarding Forward-Looking Statements The foregoing discussion contains some forward-looking statements about the Company's financial condition and results of operations, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date hereof. Factors that might cause the Company's actual results to differ materially from those anticipated in forward-looking statements include the following: o generally adverse economic and industry conditions, including a decline in consumer demand for apparel products or significant changes in consumer food preferences or eating habits, o changes in the competitive environment, including increased competition in the Company's primary geographic markets, the entry of new competitors and consolidation in the supermarket industry, o economic or political changes in the countries in which the Company operates or adverse trade regulations, o the passage of future tax legislation, or any regulatory or judicial position which prevails, if any, that could have an adverse impact on the tax benefits of COLI, o management's ability to accurately predict the adequacy of the Company's present liquidity to meet future requirements, o changes in the Company's capital expenditures, new store openings and store closings, and o non-availability of resources for the Company, or its suppliers and customers, to complete their respective Year 2000 compliance effectively. Consolidated Balance Sheets October 3 September 27 (Dollars in thousands) 1999 1998 ASSETS Current Assets Cash and Cash Equivalents $ 14,467 $ 16,668 Accounts Receivable, Less Allowance For Doubtful Accounts: 1999, $3,233; 1998, $2,046 76,827 76,948 Inventories 223,694 211,404 Other Current Assets 43,886 27,733 --------- --------- Total Current Assets 358,874 332,753 --------- --------- Property Land and Buildings 179,837 166,334 Machinery and Equipment 613,252 568,078 Leasehold Improvements 176,074 146,926 Assets Under Capital Leases 1,920 1,920 --------- --------- Total, at Cost 971,083 883,258 Accumulated Depreciation and Amortization 431,526 369,470 --------- --------- Property, Net 539,557 513,788 --------- --------- Investments and Other Assets Investments 16,511 17,675 Other Assets 55,172 67,402 --------- --------- Total Assets $ 970,114 $ 931,618 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes Payable $ 177 $ 2,411 Current Portion of Long-term Debt 429 571 Dividends Payable - 3,726 Accounts Payable 143,095 146,149 Federal and State Income Taxes 14,986 5,456 Accrued Compensation 28,179 28,033 Accrued Interest 4,208 19,602 Other Accrued Liabilities 47,794 39,472 -------- -------- Total Current Liabilities 238,868 245,420 -------- -------- Non-Current Liabilities Long-term Debt 198,532 191,360 Deferred Income Taxes 59,774 55,906 Other Liabilities 24,531 23,694 Minority Interest 4,726 4,513 -------- -------- Commitments and Contingencies Shareholders' Equity Common Stock - Shares Outstanding: 1999 - 46,451,240; 1998 - 46,554,591 52,137 54,686 Retained Earnings 393,699 358,328 Cumulative Translation Adjustments (2,153) (2,289) -------- -------- Shareholders' Equity 443,683 410,725 -------- -------- Total Liabilities and Shareholders' Equity $ 970,114 $ 931,618 ======== ======== The accompanying notes to consolidated financial statements are an integral part of these balance sheets. Statements of Consolidated Income and Retained Earnings For the Fiscal Years Ended, October 3 September 27 (Dollars in thousands except per share data) 1999 1998 Net Sales $2,624,774 $ 2,487,370 ---------- ------------ Cost of Sales 1,897,397 1,805,088 Selling, General and Administrative Expenses 623,322 588,086 ---------- ------------ Operating Profit 104,055 94,196 ---------- ------------ Net Interest Expense 14,686 15,973 Other Administrative Expense, Net 7,980 7,529 ---------- ------------ Income Before Taxes 81,389 70,694 Taxes 30,675 23,922 ---------- ------------ Net Income 50,714 46,772 Retained Earnings at Beginning of Fiscal Year 358,328 326,488 For the Fiscal Years Ended, September 28 (Dollars in thousands except per share data) 1997 Net Sales $ 2,300,089 ------------ Cost of Sales 1,667,858 Selling, General and Administrative Expenses 537,395 ------------ Operating Profit 94,836 ------------ Net Interest Expense 14,558 Other Administrative Expense, Net 8,976 ------------ Income Before Taxes 71,302 Taxes 23,571 ------------ Net Income 47,731 Retained Earnings at Beginning of Fiscal Year 293,654 Common Dividend - 1999: $.33 a share; 1998 and 1997: $.32 a share 15,343 14,932 14,897 --------- --------- --------- Retained Earnings at End of Fiscal Year $ 393,699 $ 358,328 $ 326,488 ========= ========= ========= Net Income Per Share - Basic $ 1.09 $ 1.00 $ 1.02 Net Income Per Share - Diluted $ 1.08 $ 1.00 $ 1.02 ========= ========= ========= The accompanying notes to consolidated financial statements are an integral part of these statements. Statements of Consolidated Total Non-Owner Changes in Equity For the Fiscal Years Ended, October 3 September 27 (Dollars in thousands) 1999 1998 Net Income $ 50,714 $ 46,772 Other Non-Owner Changes in Equity, Net of Tax: Foreign Currency Translation Adjustment 136 (917) --------- --------- Total Non-Owner Changes in Equity $ 50,850 $ 45,855 ========= ========= For the Fiscal Years Ended, September 28 (Dollars in thousands) 1997 Net Income $ 47,731 Other Non-Owner Changes in Equity, Net of Tax: Foreign Currency Translation Adjustment (363) --------- Total Non-Owner Changes in Equity $ 47,368 ========= The accompanying notes to consolidated financial statements are an integral part of these statements. Statements of Consolidated Cash Flows For the Fiscal Years Ended, October 3 September 27 September 28 (Dollars in thousands) 1999 1998 1997 Cash Flow from Operating Activities Net Income $ 50,714 $ 46,772 $ 47,731 Non-cash Items Included in Net Income Depreciation and Amortization 70,624 66,184 58,723 Deferred Taxes 1,433 3,064 6,133 Restructuring Charge - (846) (1,298) Other, Net (3,980) 6,668 4,459 Decrease (Increase) in Accounts Receivable 121 904 (7,043) Decrease (Increase) in Inventories (12,290) (15,356) (12,400) Decrease (Increase) in Other Current Assets (13,718) 4,911 (6,965) Increase (Decrease) in Current Liabilities (6,410) 11,018 5,742 ------- ------- ------ Net Cash Provided by Operating Activities 86,494 123,319 95,082 ------- ------- ------ Net Cash Provided by Discontinued Activities - - 413 ------- ------- -------- Investing Activities Capital Expenditures (96,937) (95,473) (115,299) Cash Proceeds from Sale of Property 2,931 1,719 1,038 COLI, Net 11,084 (1,405) (2,883) Other, Net 3,419 (13,860) 5,492 ------- ------- -------- Net Cash Used in Investing Activities (79,503) (109,019) (111,652) ------- ------- -------- Financing Activities Proceeds from Long-term Borrowings 7,837 2,100 87,650 Payments of Principal on Long-term Debt (735) (508) (61,493) Dividends Paid (15,343) (14,932) (14,897) Other, Net (951) (1,442) 1,014 ------- ------- -------- Net Cash Provided by (Used in) Financing Activities (9,192) (14,782) 12,274 ------- ------- -------- Decrease in Cash and Cash Equivalents (2,201) (482) (3,883) Cash and Cash Equivalents at Beginning of Year 16,668 17,150 21,033 ------- ------- -------- Cash and Cash Equivalents at End of Year $ 14,467 $ 16,668 $ 17,150 ======= ======= ======== Supplemental Disclosures of Cash Flow Information Cash Paid During the Year for: Interest $ 15,953 $ 16,516 $ 13,937 Income Taxes $ 26,439 $ 20,201 $ 13,725 ------- ------- -------- The accompanying notes to consolidated financial statements are an integral part of these statements. Notes to Consolidated Financial Statements Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Ruddick Corporation and its wholly owned operating companies, Harris Teeter, Inc. and American & Efird, Inc., collectively referred to herein as the Company. All material intercompany amounts have been eliminated. To the extent that non-affiliated parties held minority equity investments in joint ventures of the Company, such investments are classified as minority interest. Cash Equivalents For purposes of the statements of consolidated cash flows, the Company considers all highly liquid cash investments purchased with a maturity of three Months or less to be cash equivalents. Inventories Inventories are valued at the lower of cost or market with the cost of substantially all domestic U.S. inventories being determined using the last-in, first-out (LIFO) method. The LIFO cost of such inventories was $21,589,000 and $21,036,000 less than the first-in, first-out (FIFO) cost method at October 3, 1999 and September 27, 1998, respectively. Foreign inventories and limited categories of domestic inventories, totaling $36,129,000 for fiscal 1999 and $35,186,000 for fiscal 1998, are valued on the weighted average and on the FIFO cost methods. Property and Depreciation Property is at cost and is depreciated, using principally the straight-line method, over the following useful lives: Land improvements 10-40 years Buildings 10-50 years Machinery and equipment 3-15 years Leasehold improvements are depreciated over the lesser of the estimated useful life or the remaining term of the lease. Assets under capital leases are amortized on a straight-line basis over the lesser of 20 years or the lease term. Maintenance and repairs are charged against income when incurred. Expenditures for major renewals, replacements and betterments are added to property. The cost and the related accumulated depreciation of assets retired are eliminated from the accounts; gains or losses on disposal are added to or deducted from income. Property categories include $12,512,000 and $28,854,000 undepreciated construction in progress at October 3, 1999 and September 27, 1998, respectively. Investments The Company holds a financial position in certain shopping centers in which Harris Teeter, Inc., is an anchor tenant. Additionally it makes loans to and equity investments in a number of emerging growth companies, primarily through investments in certain venture capital funds. Real estate and financial investments are carried at the lower of cost or market. In management's opinion, the net aggregate carrying value of financial instruments of $6,662,000 and $7,924,000 held for investment approximated their aggregate fair values at October 3, 1999 and September 27, 1998, respectively. Other Assets Other assets include cash surrender value of Company-owned life insurance (COLI), investment in unconsolidated foreign subsidiaries and various acquisition costs. The cash surrender value of life insurance is recorded net of policy loans. The net life insurance expense, including interest expense of $9,005,000 in 1999; $16,831,000 in 1998, and $18,490,000 in 1997 is included in other administrative expense in the statements of consolidated income and retained earnings. Acquisition costs allocated to other assets, including favorable lease rights and goodwill, are being amortized over 10-15 years. Fair Value Disclosures The carrying amounts for certain of the Company's financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and other accrued liabilities approximate fair value because of their short maturities. The recorded amount of fixed rate obligations approximates their fair value based on borrowing rates currently available to the Company for loans with similar terms and maturities. The Company reviews the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Measurement of any impairment would include a comparison of estimated future operating cash flows anticipated to be generated during the remaining life to the net carrying value of the asset. At October 3, 1999, the carrying value of the Company's long-lived assets and intangibles, including Goodwill, was recoverable in all material respects. Advertising Costs incurred to produce media advertising are expensed in the period in which the advertising first takes place. All other advertising costs are also expensed when incurred. Cooperative advertising income from vendors is recorded in the period in which the related expense is incurred. Net advertising expenses of $22,696,000, $20,721,000, and $15,555,000 were included in the Company's results of operations for fiscal 1999, 1998 and 1997, respectively. Income Taxes Ruddick and its subsidiaries file a consolidated federal income tax return. Tax credits are recorded as a reduction of federal income taxes in the years in which they are utilized. Deferred tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Accordingly, income tax expense will increase or decrease in the same period in which a change in tax rates is enacted. Per Share Amounts The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," effective with the beginning of its first fiscal quarter of 1998 and, accordingly, basic and diluted net income per share amounts were determined based on the weighted average number of shares of common stock and common stock equivalents (non-cumulative, voting $.56 convertible preference stock and stock options) outstanding. The weighted average basic shares outstanding were 46,511,523 in 1999, 46,667,416 in 1998, and 46,542,505 in 1997. As the result of outstanding stock options, the weighted average diluted shares outstanding were 46,746,650 in 1999, 46,964,423 in 1998 and 46,825,469 in 1997. Common stock equivalents reduced earnings per share by $.01 in 1999, and had no effect on the per share amounts in 1998 and 1997. Stock options As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company continues to record compensation cost for stock option plans in accordance with Accounting Principles Board Opinion No. 25. Accordingly, compensation cost of stock options is measured as the excess, if any, of the market price of the Company's stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits attributable to stock options exercised are credited to capital stock. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Reclassifications To conform with classifications adopted in the current year, the financial statements for prior years reflect certain reclassifications, which have no effect on net income. New Accounting Standards Derivative Instruments and Hedging: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," will be effective for the Company's fiscal year 2001. The Statement established accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The Company has not yet quantified the impacts of adopting SFAS No. 133 on its consolidated financial statements and has not determined the timing of or method of adoption. Management does not expect the impact of adoption of this statement on the Company's financial position and results of operations to be material. Leases The Company leases certain equipment under agreements expiring during the next four years. Harris Teeter leases most of its stores under leases that expire during the next 23 years. It is expected that such leases will be renewed by exercising options or replaced by leases of other properties. Most store leases provide for additional rentals based on sales, and certain store facilities are sublet under leases expiring during the next eight years. Rent expenses were as follows: (In thousands) 1999 1998 1997 Operating Leases: Minimum $ 65,791 $ 59,720 $ 52,327 Contingent 1,218 1,157 941 --------- --------- --------- Total $ 67,009 $ 60,877 $ 53,268 --------- --------- --------- Future minimum lease commitments at October 3, 1999 (excluding leases assigned or expected to be assigned - see below) were as follows: (In thousands) Capital Leases Operating Leases 2000 $ 183 $ 67,854 2001 183 60,957 2002 183 56,640 2003 115 54,507 2004 6 53,342 Later years - 499,768 ------ --------- Total minimum lease payments $ 670 $ 793,068 Less amount representing interest ------ --------- (Store premises, 6.75%-10.25%, store equipment, 8%-15%) 114 ------ Present value of minimum lease obligations 556 Less current portion 136 ------ Long-term capital lease obligations $ 420 ------ Net book value of assets under capital leases $ 249 ------ Total minimum sublease rentals to be received under noncancelable subleases $ 18,809 -------- In connection with the closing of certain store locations, Harris Teeter has assigned leases to other merchants with recourse. These leases expire over the next 19 years and the future minimum lease payments of $42,080,000 over this period have been assumed by these merchants. In addition, Harris Teeter leases certain store locations which are not currently in use but are expected to be assigned to other merchants. These leases expire over the next 18 years and the future minimum lease payments related to these locations total $23,261,000 (approximating $2,047,000 per year for each of the next five years). LONG-TERM DEBT Long-term debt at October 3, 1999 and September 27, 1998 was as follows: (In thousands) 1999 6.48% Senior Note due $7,143 annually March, 2005 through 2011 $ 50,000 7.72% Senior Note due April, 2017 50,000 7.55% Senior Note due July, 2017 50,000 Revolving line of credit, variable rate, due February 2004 40,800 Industrial revenue bond, variable rate, due November 2000 2,500 Obligations under capital leases and other 5,661 ---------- Total 198,961 Less current portion 429 ---------- Total long-term debt $ 198,532 ---------- (In thousands) 1998 6.48% Senior Note due $7,143 annually March, 2005 through 2011 $ 50,000 7.72% Senior Note due April, 2017 50,000 7.55% Senior Note due July, 2017 50,000 Revolving line of credit, variable rate, due February 2004 36,000 Industrial revenue bond, variable rate, due November 2000 2,500 Obligations under capital leases and other 3,431 --------- Total 191,931 Less current portion 571 --------- Total long-term debt $ 191,360 --------- Long-term debt maturities, excluding obligations under capital leases, in each of the next five fiscal years are as follows: 2000 - $293,000; 2001 - $2,810,000; 2002 - $266,000; 2003 - $281,000; 2004 - $299,000. Additionally in fiscal 2004, the revolving line of credit ($40,800,000 as of October 3, 1999) would mature; however, management expects to obtain the one-year extension of term upon receipt of the mutual consent of lenders under the evergreen provisions of the loan agreement. During 1999 and 1998 the maximum outstanding borrowing under the revolving line of credit was $82,800,000 and $86,700,000, respectively, and the average outstanding for the fiscal years was $57,669,000 and $63,272,000, respectively. The daily weighted average interest rate (a variable rate related to the current published CD rate) was 5.6% and a commitment fee of .15% of the unused line was charged during 1999 and 1998. As of October 3, 1999, the Company had available $59,200,000 of committed capacity under its revolving credit facility. Various loan agreements provide, among other things, for maintenance of minimum levels of consolidated shareholders' equity or tangible net worth. At October 3, 1999, consolidated tangible net worth exceeded by $102,847,000 the balance which, under the most restrictive provisions, must be maintained through October 1, 2000. The requirement shall increase annually by 40% of consolidated net income for such year. Total interest expense on long-term debt was $14,997,000, $16,596,000, and $14,615,000 in 1999, 1998 and 1997, respectively. CAPITAL STOCK The capital stock of the Company authorized at October 3, 1999 was 1,000,000 shares of Additional Preferred, 4,000,000 shares of Preference-noncumulative $.56 convertible, voting ($10 liquidation value), and 75,000,000 shares of Common. Changes in shares issued and outstanding and in shareholders' equity accounts other than retained earnings are summarized as follows: Common (In thousands except share amounts) Shares Amount Balance at September 29, 1996 46,461,290 $ 55,599 ---------- ---------- Shares issued under exercised stock options 138,011 1,008 Tax effect of disqualifying option stocks - 106 Other - 66 ---------- ---------- Balance at September 28, 1997 46,599,301 $ 56,779 ---------- ---------- Shares issued under exercised stock options 223,710 2,107 Shares purchased and retired (268,420) (4,676) Tax effect of disqualifying option stocks - 381 Other - 95 ---------- ---------- Balance at September 27, 1998 46,554,591 $ 54,686 ---------- ---------- Shares issued under exercised stock options 135,149 1,359 Shares purchased and retired (238,500) (4,233) Tax effect of disqualifying option stocks - 282 Other - 43 ---------- ---------- Balance at October 3, 1999 46,451,240 $ 52,137 ---------- ---------- One preferred share purchase right is attached to each outstanding share of common stock, which rights expire on November 15, 2000. Each right entitles the holder to purchase one four-hundredth of a share of a new Series A Junior Participating Additional Preferred Stock at $26.25. The rights will become exercisable only under certain circumstances related to a person or group acquiring or offering to acquire a substantial portion of the Company's common stock. If certain additional events then occur, each right would entitle the rightholder to acquire common stock of the Company, or in some cases of an acquiring entity, having a value equal to twice the exercise price. Under certain circumstances the Board of Directors may exchange all or part of the outstanding rights at an exchange ratio per right of one share of common stock, or one four-hundredth of a share of Series A Junior Participating Additional Preferred Stock, or may redeem each right at a price of $.0025. There are 200,000 shares of Series A Junior Participating Additional Preferred Stock reserved for issuance upon exercise of the rights. Stock Options At October 3, 1999, the Company has 1988, 1993, 1995 and 1997 stock option plans which authorized options for 3,100,000 shares of common stock. Under the plans, the Company may grant to officers and management personnel incentive stock options which become exercisable in installments of 20% per year at each of the first through fifth anniversaries from grant date and which expire seven years from grant date. Additionally, under the 1995 plan, the Company grants a single, one-time nonqualified stock option of 10,000 shares, generally vested immediately, to each of its outside directors. Further, under the 1997 plan the Company may grant performance shares, stock awards, restricted stock and nonqualified stock options to employees and outside directors as well as incentive stock options to employees. Under each of the plans, the exercise price of each option shall be no less than the market price of the Company's stock on the date of grant and an option's maximum term is ten years. At the discretion of the Company, under certain plans a stock appreciation right may be granted and exercised in lieu of the exercise of the related option (which is then forfeited). Under the plans, as of October 3, 1999, the Company may grant additional options for the purchase of 695,800 shares. A summary of the status of the Company's stock option plans as of October 3, 1999, September 27, 1998 and September 28, 1997, changes during the years ending on those dates and related weighted average exercise price is presented below: 1999 1998 (Shares in thousands) Shares Price Shares Price Outstanding at beginning of year 1,343 $ 14.85 1,011 $ 10.99 Granted 387 19.85 610 19.29 Exercised (140) 10.36 (235) 9.89 Forfeited (102) 17.79 (43) 14.10 ------ ------- ----- -------- Outstanding at end of year 1,488 16.36 1,343 14.85 ------ ------- ----- -------- Options exercisable at year-end 519 $ 13.59 399 $ 11.50 ------ ------- ----- -------- 1997 (Shares in thousands) Shares Price Outstanding at beginning of year 1,116 $ 10.40 Granted 120 13.45 Exercised (181) 9.05 Forfeited (44) 10.64 ----- ------- Outstanding at end of year 1,011 10.99 ----- ------- Options exercisable at year-end 422 $ 10.29 ----- ------- The following table summarizes options outstanding and options exercisable as of October 3, 1999, and the related weighted average remaining contractual life (years) and weighted average exercise price (shares in thousands): Options Outstanding Options Exercisable Shares Remaining Shares Option Price per Share Outstanding Life Price Exercisable Price $ 9.16 to $ 13.38 578 3.1 $ 11.49 362 $ 11.33 14.38 to 18.47 40 8.4 16.98 40 16.98 19.31 to 20.28 870 5.7 19.57 117 19.39 ------ ------- ----- ----- ------- $ 9.16 to $ 20.28 1,488 4.8 $ 16.36 519 $ 13.59 ------ ------- ----- ----- ------- The weighted average fair value at date of grant for options granted during fiscal 1999, 1998 and 1997 was $5.12, $5.44 and $3.82 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions: 1999 1998 1997 Expected life (years) 4.8 5.1 4.9 Risk-free interest rate 4.67% 5.80% 5.91% Volatility 28.66% 28.44% 28.65% Dividend yield 2.10% 2.20% 2.10% The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock options granted in fiscal 1999, 1998 or 1997. Had compensation cost been determined based on the fair value at the grant date consistent with the provisions of this statement, the Company's pro forma net income and basic and diluted net income per share would have been as follows: (In thousands, except per share data) 1999 1998 1997 Net income - as reported $ 50,714 $ 46,772 $ 47,731 - pro forma 49,727 45,846 47,381 Net income per share: Basic - as reported $ 1.09 $ 1.00 $ 1.02 - pro forma 1.07 .98 1.01 Diluted - as reported $ 1.08 $ 1.00 $ 1.02 - pro forma 1.06 .98 1.01 The pro forma effect on net income for fiscal 1999, 1998 and 1997 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to fiscal year 1996. INCOME TAXES The provision for income taxes consisted of the following: (In thousands) 1999 1998 1997 CURRENT Federal $ 24,320 $ 15,903 $ 12,803 State and other 4,921 4,955 4,687 --------- --------- ---------- 29,241 20,858 17,490 --------- --------- ---------- DEFERRED Federal 1,129 3,004 5,034 State and other 305 60 1,047 --------- --------- ---------- 1,434 3,064 6,081 --------- --------- ---------- Provision for income taxes $ 30,675 $ 23,922 $ 23,571 --------- --------- ---------- Income from foreign operations before income taxes in fiscal 1999, 1998 and 1997 was $1,249,000, $1,402,000 and $4,520,000, respectively. Income tax expense differed from an amount computed by applying the statutory tax rates to pre-tax income as follows: (In thousands) 1999 1998 1997 Income tax on pre-tax income at the statutory federal rate of 35% $ 28,486 $ 24,743 $ 24,956 Increase (decrease) attributable to: State and other income taxes, net of federal income tax benefit 4,331 3,748 3,265 COLI (1,066) (3,528) (3,528) Other items, net (1,076) (1,041) (1,122) --------- --------- ---------- Income tax expense $ 30,675 $ 23,922 $ 23,571 --------- --------- ---------- The tax effects of temporary differences giving rise to the Company's consolidated deferred tax liability at October 3, 1999 and September 27, 1998 are as follows: (In thousands) 1999 1998 Deferred Tax Assets Employee benefits $ 6,963 $ 6,483 Reserves not currently deductible 9,091 7,344 Other 6,081 4,501 -------- -------- Total deferred tax assets $ 22,135 $ 18,328 -------- -------- Deferred Tax Liabilities Property, plant and equipment $(60,479) $(55,607) Other capitalized costs (4,579) (4,337) Undistributed profit on foreign subsidiaries (5,049) (3,479) Other (4,354) (5,797) -------- -------- Total deferred tax liabilities $(74,461) $(69,220) -------- -------- INDUSTRY SEGMENT INFORMATION The Company operates primarily in two businesses: industrial thread (textile primarily) - American & Efird, and retail grocery (including the real estate and store development activities of the Company) - Harris Teeter. American & Efird manufactures sewing thread for the apparel and other markets. Harris Teeter operates a regional chain of supermarkets. Summarized information for fiscal 1999, 1998 and 1997 is as follows: Industrial Retail Corporate (In millions) Thread Grocery (1) Consolidated 1999 Net Sales $ 351.6 $ 2,273.2 $ 2,624.8 -------- ---------- ---------- Gross Profit 106.1 621.3 727.4 -------- ---------- ---------- Operating Profit 48.6 55.5 104.1 -------- ---------- ---------- Assets Employed at Year End $ 284.4 $ 614.3 $ 71.4 $ 970.1 Depreciation and Amortization 17.3 52.2 1.1 70.6 Capital Expenditures 15.6 77.5 3.8 96.9 1998 Net Sales $ 355.2 $ 2,132.2 $ 2,487.4 -------- ---------- ---------- Gross Profit 101.0 581.3 682.3 -------- ---------- ---------- Operating Profit 42.1 52.1 94.2 -------- ---------- ---------- Assets Employed at Year End $ 285.7 $ 578.9 $ 67.0 $ 931.6 Depreciation and Amortization 16.6 48.6 1.0 66.2 Capital Expenditures 20.2 75.1 0.2 95.5 1997 Net Sales $ 368.9 $ 1,931.2 $ 2,300.1 -------- ---------- ---------- Gross Profit 106.8 525.4 632.2 -------- ---------- ---------- Operating Profit 49.1 45.7 94.8 -------- ---------- ---------- Assets Employed at Year End $ 299.7 $ 521.7 $ 63.8 $ 885.2 Depreciation and Amortization 15.4 42.5 0.8 58.7 Capital Expenditures 28.9 86.2 0.2 115.3 (1) Corporate Assets Employed include investment assets and net cash surrender value of Company-owned life insurance. Geographic information as required by SFAS No. 131 is as follows: Net revenue received from domestic United States customers was $2,520,502,000 in fiscal 1999 ($2,394,821,000 in 1998), and net revenue received from customers in foreign countries was $104,272,000 for fiscal 1999 ($92,549,000 in 1998). Net long-lived assets located in the domestic United States were $524,200,000 at fiscal year end 1999 ($497,700,000 in 1998), and net long-lived assets located in other foreign countries were $20,600,000 and $20,300,000 at fiscal year end 1999 and 1998, respectively. COMMITMENTS AND CONTINGENCIES Substantially all domestic full-time employees of the Company and its subsidiaries participate in non-contributory defined benefit pension plans. Employees in foreign subsidiaries participate to varying degrees in local pension plans, which, in the aggregate, are not significant. Employee retirement benefits are a function of both the years of service and compensation for a specified period of time before retirement. The Company's current funding policy is to contribute annually the minimum amount required by regulatory authorities. The following table sets forth the change in benefit obligation and plans' assets, as well as the defined benefit plans' funded status and amounts recognized in the Company's consolidated balance sheets at October 3, 1999 and September 27, 1998: (In thousands) 1999 1998 Change in benefit obligation: Benefit obligation at the beginning of year $ 128,922 $ 110,191 Service cost 6,446 5,592 Interest cost 9,013 8,531 Actuarial loss (gain) (13,221) 9,799 Benefits paid (5,851) (5,191) ---------- ---------- Pension benefit obligation at end of year 125,309 128,922 ========== ========== Change in plan assets: Fair value of assets at the beginning of year 98,412 92,611 Actual return on plan assets 5,610 4,366 Employer contribution 8,387 6,626 Benefits paid (5,850) (5,191) ---------- ---------- Fair value of assets at end of year 106,559 98,412 ========== ========== Funded status (18,750) (30,510) Unrecognized net actuarial loss 13,596 24,701 Unrecognized prior service cost 1,657 2,060 Unrecognized transition asset (753) (1,147) ---------- ---------- Accrued benefit cost $ (4,250) $ (4,896) ========== ========== Amounts recognized in the statement of financial position consist of: Accrued benefit liability $ (4,250) $ (4,896) ========== ========== The plans' assets consist primarily of U. S. government securities, corporate bonds, cash equivalents and domestic equities, managed primarily by two banks. The contribution payable at October 3, 1999 and September 27, 1998, required to be paid by due date of the federal income tax return, was $1,686,000 and $2,501,000, respectively. In 1999 (1998), a 7.5% (6.8%) weighted average discount rate and 4.5% (4.5%) rate of increase in future payroll costs were used in determining the actuarial present value of the projected benefit obligations. The expected long-term rate of return on assets was 8.75% for 1999 and 1998. Net periodic pension expense for defined benefit plans for fiscal 1999, 1998, and 1997 included the following components: (In thousands) 1999 1998 1997 Service cost $ 6,446 $ 5,592 $ 4,464 Interest cost 9,013 8,531 7,789 Expected return on plan assets (8,750) (7,907) (6,213) Amortization of transition asset (394) (394) (394) Amortization of prior service cost 403 403 403 Recognized net actuarial loss 1,024 390 - --------- --------- --------- Net periodic benefit cost $ 7,742 $ 6,615 $ 6,049 --------- --------- --------- The Company also has an Employee Stock Ownership Plan (ESOP), a profit-sharing plan and certain other plans. Expenses under these plans were as follows: (In thousands) 1999 1998 1997 ESOP $ 7,540 $ 8,043 $ 8,733 -------- --------- --------- Profit-sharing 2,292 1,609 3,098 -------- --------- --------- Other 2,717 2,525 2,517 -------- --------- --------- The Company is involved in various lawsuits and environmental and patent matters arising in the normal course of business. Management believes that such matters will not have a material effect on the financial condition or results of operations of the Company. As a result of federal legislation which phased out, effective January 1, 1999, interest deductions on certain insurance policy loans and thereby significantly diminished the favorable tax attributes of COLI, the Company's effective income tax rate, in comparison to the prior fiscal year, has risen to a level slightly below statutory rates domestically. The Company has recorded income tax reductions of approximately $25 million cumulatively as the result of COLI interest deductions from October 1993 through December 27, 1998. The Internal Revenue Service, on a comprehensive national level, is pursuing an adverse position regarding the deductibility of COLI policy loan interest for years prior to January 1, 1999. The IRS issued Technical Advice Memoranda regarding COLI deductibility to taxpayers unrelated to the Company. Further, on October 19, 1999, the Tax Court ruled, in a single judge's decision, that Winn-Dixie Stores, Inc., was not entitled to deduct interest on policy loans from its COLI program, finding that the program lacked economic substance. Management understands that the adverse position taken by the IRS will be subjected to extensive further challenges in the courts, not only by Winn-Dixie but also by many other large corporations with similar life insurance programs. On June 17, 1999, the IRS issued a notice of assessment of tax to the Company for the amounts of COLI loan interest deducted in fiscal years 1994 and 1995. If the IRS were to prevail, the income tax payable (including federal and state amounts) would total approximately $7.4 million, for 1994 and 1995, and for all years a total of $29.2 million, including interest thereon. The Company strongly disagrees with the position of the IRS, has begun the appeal of the assessment and intends to vigorously pursue justice through the taxpayer appeals process and, if necessary, the judicial system. In the event that the IRS prevails, this outcome would result in a material impact upon the Company's future income taxes and results of operations. See Leases for additional commitments and contingencies. Quarterly Information (Unaudited) The following table sets forth certain financial information, the high and low sales prices and dividends declared for the common stock for the periods indicated. The Company's common stock is listed and traded on the New York Stock Exchange. As of October 3, 1999, there were 5,895 holders of record of common stock. First Second (In millions, except per share data) Quarter Quarter 1999 Operating Results Net Sales $ 652.1 $ 645.7 Net Income 12.6 12.7 Net Income Per Share .27 .27 Dividend Per Share .08 .08 Market Price Per Share High 22 23 Low 15 5/8 16 1/2 1998 Operating Results Net Sales $ 617.6 $ 616.3 $ Net Income 12.0 11.4 Net Income Per Share .26 .24 Dividend Per Share .08 .08 Third Fourth (In millions, except per share data) Quarter Quarter 1999 Operating Results Net Sales $ 636.6 $ 690.4 Net Income 12.3 13.1 Net Income Per Share .26 .28 Dividend Per Share .08 .09 Market Price Per Share High 19 5/8 20 Low 16 1/8 15 1/4 1998 Operating Results Net Sales 620.5 $ 633.0 Net Income 10.3 13.1 Net Income Per Share .22 .28 Dividend Per Share .08 .08 Market Price Per Share High 21 3/8 19 7/8 19 1/16 18 5/16 Low 14 5/8 15 7/8 17 15 Report of Independent Public Accountants To the Board of Directors of Ruddick Corporation: We have audited the accompanying consolidated balance sheets of Ruddick Corporation (a North Carolina corporation) and subsidiaries as of October 3, 1999 and September 27, 1998, and the related statements of consolidated income and retained earnings and consolidated cash flows for each of the three years in the period ended October 3, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ruddick Corporation and subsidiaries as of October 3, 1999 and September 27, 1998, and the results of their operations and their cash flows for each of three years in the period ended October 3, 1999 in conformity with generally accepted accounting principles. /s/Arthur Andersen LLP Charlotte, North Carolina October 28, 1999 Eleven-Year Financial and Operating Summary (Dollars in thousands, except per share data) 1999(1) 1998 1997 1996 1995 Net Sales American & Efird $ 351,618 $ 355,147 $ 368,877 $ 309,459 $ 297,963 Harris Teeter 2,273,156 2,132,223 1,931,212 1,833,042 1,711,813 ----------- ---------- ---------- --------- ---------- Total Net Sales $ 2,624,774 $2,487,370 $2,300,089 2,142,501 $2,009,776 ----------- ---------- ---------- --------- ---------- Operating Profit American & Efird $ 48,617 $ 42,070 $ 49,165 $ 34,684 $ 34,614 Harris Teeter 55,438 52,126 45,671 48,459 42,114 ----------- ---------- ---------- --------- ---------- Total Operating Profit $ 104,055 $ 94,196 $ 94,836 $ 83,143 $ 76,728 ----------- ---------- ---------- --------- ---------- Net Income $ 50,714 $ 46,772 $ 47,731 $ 42,802 $ 39,267 Net Income Per Share - Diluted 1.08 1.00 1.02 .92 .84 Common Dividend .33 .32 .32 .26 .25 ----------- ---------- ---------- --------- ---------- Earnings Before Interest, Taxes, Depreciation and Amortization $ 166,699 $ 152,851 $ 144,583 $ 125,390 $ 114,385 ----------- ---------- ---------- --------- ---------- Shareholders' Equity $ 443,683 $ 410,725 $ 380,507 $ 346,856 $ 316,236 Percent Return on Beginning Equity 12.3% 12.3% 13.8% 13.5% 13.5% Book Value Per Share $ 9.55 $ 8.82 $ 8.17 $ 7.47 $ 6.82 ----------- ---------- ---------- --------- ---------- Capital Expenditures American & Efird $ 15,658 $ 20,246 $ 28,878 $ 35,605(2)$ 16,359 Harris Teeter 77,513 75,082 86,237 83,204 81,447 1994 1993(1) 1992 1991 Net Sales American & Efird $ 277,016 $ 264,814 $243,324 $ 208,649 Harris Teeter 1,578,880 1,412,315 1,270,430 1,213,127 ---------- ---------- ---------- ---------- Total Net Sales $1,855,896 $1,677,129 $1,513,754 $1,421,776 ---------- ---------- ---------- ---------- Operating Profit American & Efird $ 26,916 $ 30,551 $ 28,510 $ 22,589 Harris Teeter 37,032 29,845 31,067 34,329 ---------- ---------- ---------- ---------- Total Operating Profit $ 63,948 $ 60,396 $ 59,577 $ 56,918 ---------- ---------- ---------- ---------- Net Income $ 31,811 $ 33,873 $ 30,789 $ 26,786 Net Income Per Share - Diluted .67 .71 .65 .59 Common Dividend .22 .21 .20 .19 ---------- ---------- ---------- ---------- Earnings Before Interest, Taxes, Depreciation and Amortization $ 99,166 $ 97,490 $ 96,047 $ 89,025 ---------- ---------- ---------- ---------- Shareholders' Equity $ 291,209 $274,740 $ 255,403 $ 233,566 Percent Return on Beginning Equity 11.6% 13.3% 13.2% 14.5% Book Value Per Share $ 6.28 $ 5.87 $ 5.44 $ 4.98 ---------- ---------- ---------- ---------- Capital Expenditures American & Efird $ 20,416 $ 19,433 $ 16,399 $ 11,417 Harris Teeter 46,349 33,683 25,910 30,903 1990 1989 Net Sales American & Efird $ 199,115 $ 190,004 Harris Teeter 1,164,445 1,053,467 ----------- ---------- Total Net Sales $ 1,363,560 $1,243,471 ----------- ---------- Operating Profit American & Efird 18,403 $ 17,732 Harris Teeter 32,212 27,444 ----------- ---------- Total Operating Profit $ 50,615 $ 45,176 ----------- ---------- Net Income 24,031 $ 20,190 Net Income Per Share - Diluted .55 .47 Common Dividend .18 .16 ----------- ---------- Earnings Before Interest, Taxes, Depreciation and Amortization $ 80,389 $ 71,927 ----------- ---------- Shareholders' Equity $ 184,371 $ 158,921 Percent Return on Beginning Equity 15.1% 14.0% Book Value Per Share $ 4.54 $ 4.07 ----------- ---------- Capital Expenditures American & Efird $ 15,923 $ 14,742 Harris Teeter 27,376 31,611 1999(1) 1998 1997 1996 Corporate 3,766 145 184 4,471 -------- -------- --------- --------- Total Capital Expenditures $ 96,937 $ 95,473 $ 115,299 $ 123,280 -------- -------- --------- --------- Working Capital $120,006 $ 87,333 $ 88,893 $ 65,134 Total Assets $970,114 $931,618 $ 885,243 $ 801,702 Long-Term Debt - Including Current Portion $198,961 $191,931 $ 190,494 $ 164,435 Long-Term Debt as a Percent of Capital Employed % 30.7% 31.6% 33.1% 32.2 Number of Employees 19,800 20,700 19,700 20,100 Number of Beneficial Shareholders Including Employee/Owners 21,000 21,000 19,100 16,700 Common Shares Outstanding 46,451,240 46,554,591 46,599,301 46,461,290 ========== ========== ========== ========== 1995 1994 1993(1) 1992 Corporate 399 35 27 4,039 --------- --------- --------- --------- Total Capital Expenditures $ 98,205 $ 66,800 $ 53,143 $ 46,348 --------- --------- --------- --------- Working Capital $ 73,741 93,387 $ 103,191 $ 105,527 Total Assets $ 715,318 $ 634,599 $ 580,807 $ 535,407 Long-Term Debt - Including Current Portion $ 128,952 $ 109,567 $ 104,173 $ 97,280 Long-Term Debt as a Percent of Capital Employed 29.0% 27.3% 27.5% 27.6% Number of Employees 19,850 18,610 17,120 13,720 Number of Beneficial Shareholders Including Employee/Owners 14,500 14,100 14,600 12,900 Common Shares Outstanding 46,373,666 46,352,214 46,036,146 46,124,798 ========== ========== ========== ========== 1991 1990 1989 Corporate 60 2,323 2,975 -------- --------- -------- Total Capital Expenditures $ 42,380 $ 45,622 $ 49,328 -------- --------- -------- Working Capital $ 79,640 $ 74,688 $ 60,724 Total Assets $498,458 $ 468,295 $439,104 Long-Term Debt - Including Current Portion $ 83,850 $ 115,266 $115,757 Long-Term Debt as a Percent of Capital Employed 26.4% 38.5% 42.1% Number of Employees 13,500 13,185 13,100 Number of Beneficial Shareholders Including Employee/Owners 11,400 11,100 11,000 Common Shares Outstanding 46,002,708 39,321,300 37,551,972 ========== ========== ========== (1) 53-week year (2) Includes purchase of assets of Threads USA EX-21 4 EXHIBIT 21 EXHIBIT 21 RUDDICK CORPORATION AFFILIATED COMPANIES AS OF DECEMBER 22, 1999 Listed below are the domestic subsidiaries of Ruddick Corporation, (the "Registrant") all of which are wholly owned and are owned directly by the Registrant, unless otherwise indicated. American & Efird, Inc. American & Efird Services, Inc.(1) A&E Export, Inc.(1) A&E Korea, Ltd.(2) Harris Teeter, Inc. Harris Teeter Properties, LLC (3) Harris-Teeter Services, Inc.(3) Harris Teeter Resources, Inc. (3) Ruddick of Delaware, Inc. R. S. Dickson & Company (dba Ruddick Investment Company) Ruddco Management, Inc. (4) ----------------- (1) Owned by American & Efird, Inc. (2) Owned by American & Efird Services, Inc.; domesticated in Delaware (3) Owned by Harris Teeter, Inc. (4) Owned by R. S. Dickson & Company Listed below are the foreign subsidiaries of the Registrant, all of which are wholly owned through American & Efird, Inc., unless otherwise indicated. American & Efird (H.K.) Limited (1) American & Efird (G.B.) Limited (2) American & Efird (UK) Holdings Limited American & Efird Canada, Inc. Cranbots Enterprises B.V. Hilos A&E de Costa Rica, S.A. Hilos A&E de El Salvador, S.A. de C.V. (1) Hilos American & Efird de Honduras, S.A. de C.V. (3) American & Efird International (FE) Limited American & Efird de Mexico, S.A. de C.V (4) American & Efird Mills (S) Pte. Ltd. American & Efird (Malaysia) SDN BHD Hengmei Spinning Company, Ltd. - Joint venture, 60% owned Hilos A&E Dominicana, Ltd. - Joint venture, 49% owned American & Efird Italia S.p.A. - Joint venture, 49% owned A&E Amann India Private Ltd. - Joint venture, 33 1/3% owned (5) A&W Thread Ltd. - Joint venture, 12% owned In addition, in the normal course of business, R. S. Dickson & Company from time to time makes investments in corporations and partnerships that may result in ownership of capital stock or other interests as an investment. (1) In order to comply with local law in Hong Kong and El Salvador, one share of such entity is owned of record by a person designated by American & Efird, Inc. (2) In order to comply with British law, one share each of such entity is owned of record by two persons designated by American & Efird, Inc. (3) In order to comply with Honduran law, one share each of such entity is owned of record by four persons designated by American & Efird, Inc. (4) In order to comply with Mexican law, one share each of such entity is owned of record by three persons designated by American & Efird, Inc. (5) In order to comply with Indian law, 100 shares of such entity is owned of record by a person designated by American & Efird, Inc. EX-23 5 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in and incorporated by reference in this Form 10-K into Ruddick Corporation's previously filed Registration Statements on Form S-8, Registration No. 33-26302, No. 33-56567, No. 333-19085, No. 333-22659 and No. 333-53671. It should be noted that we have not audited any financial statements of the Company subsequent to October 3, 1999, or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen LLP Charlotte, North Carolina, December 22, 1999 EX-27 6 RUDDICK CORPORATION FDS
5 12-MOS OCT-10-1999 OCT-10-1999 14,467,000 0 80,060,000 3,233,000 223,694,000 358,874,000 971,083,000 431,526,000 970,114,000 238,868,000 198,532,000 0 0 52,137,000 391,546,000 970,114,000 2,624,774,000 2,624,774,000 1,897,397,000 2,520,719,000 7,980,000 0 14,686,000 81,389,000 30,675,000 50,714,000 0 0 0 50,714,000 1.09 1.08
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