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UNITED STATES
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 1, 2013

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File Number: 1-6905

HARRIS TEETER SUPERMARKETS, INC.

(Exact name of registrant as specified in its charter)

North Carolina 56-0905940

(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification Number)

701 Crestdale Road, Matthews, North Carolina 28105

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (704) 844-3100

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o

Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant's most recently completed second fiscal quarter, April 2, 2013, was $1,885,137,000. The registrant has no non-voting stock.

As of November 21, 2013, the registrant had outstanding 49,503,036 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III: Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Company's 2014 Annual Meeting of Shareholders are incorporated by reference into Part III, or, in the event the Registrant does not prepare and file such proxy statement, will be provided instead by an amendment to this report containing the applicable disclosures within 120 days after the end of the fiscal year covered by this report. (With the exception of those portions which are specifically incorporated by reference in this report, any such proxy statement is not deemed to be filed or incorporated by reference as part of this report.)

HARRIS TEETER SUPERMARKETS, INC.
AND CONSOLIDATED SUBSIDIARIES

FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 1, 2013

TABLE OF CONTENTS

Page

PART I

Item 1. Business 1

Item 1A. Risk Factors 2

Item 1B. Unresolved Staff Comments 6

Item 2. Properties 6

Item 3. Legal Proceedings 6

Item 4. Mine Safety Disclosures 7

Item 4A. Executive Officers of the Registrant 7

PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer

Purchases of Equity Securities 8

Item 6. Selected Financial Data 10

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 22

Item 8. Financial Statements and Supplementary Data 23

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52

Item 9A. Controls and Procedures 52

Item 9B. Other Information 52

PART III

Item 10. Directors, Executive Officers and Corporate Governance 53

Item 11. Executive Compensation 53

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 53

Item 13. Certain Relationships and Related Transactions, and Director Independence 53

Item 14. Principal Accountant Fees and Services 53

PART IV

Item 15. Exhibits and Financial Statement Schedules 54

PART I

Item 1. Business

Harris Teeter Supermarkets, Inc. (the "Company"), through its primary subsidiary Harris Teeter, Inc. ("Harris Teeter"), operates a regional chain of supermarkets in eight states primarily in the southeastern and mid-Atlantic United States, and the District of Columbia. The Company was also engaged in the manufacturing and distribution of industrial sewing thread through its American & Efird business ("A&E") until it sold A&E on November 7, 2011.

The Company, which is incorporated under North Carolina law, was created in 1968 through the consolidation of the predecessor companies of Ruddick Investment Company (which was subsequently merged into Ruddick Operating Company) and A&E. In 1969, the Company acquired Harris Teeter. Ruddick Operating Company is not classified as a separate operating component of the Company due to its limited operations and relative size to the consolidated group. Ruddick Operating Company historically made investments in various independently managed venture capital investment funds. For information regarding the Company's investments, see the caption entitled "Investments" in Note 1 to the Consolidated Financial Statements in Item 8 hereof.

On July 8, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Kroger Co. ("Kroger") and Hornet Acquisition, Inc. ("Merger Sub"), a wholly owned subsidiary of Kroger. The Merger Agreement provides for the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of Kroger. Under the terms of the Merger Agreement, at the effective time of the merger the Company's shareholders will receive $49.38 in cash for each share of common stock they own. The transaction has been approved by the Company's shareholders; however, it remains subject to regulatory approvals (including under the Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended) and other customary closing conditions, and is expected to close in the fourth quarter of calendar year 2013 or the first quarter of calendar year 2014. Following consummation of the merger, the Company's stock will be delisted from the New York Stock Exchange. The Company is required to continue to operate its business in the ordinary course pending the merger and not take certain specified actions prior to the completion of the proposed merger. As a result, the merger poses certain risks to the Company during the pendency of the transaction. See "Risk Factors." in Item 1A below.

In fiscal 2013, the Company achieved net sales of $4.7 billion, gross profit of $1.4 billion and operating profit of $194 million. At the end of fiscal 2013, the Company and its subsidiaries had consolidated assets totaling $2.0 billion. The Company's consolidated working capital as of October 1, 2013 consisted of $606 million in current assets and $452 million in current liabilities. Normal operating fluctuations in these balances can result in changes to cash flow from operating activities presented in the statements of consolidated cash flows that are not necessarily indicative of long-term operating trends. There are no unusual industry practices or requirements relating to working capital items in the Company's operations.

The Company currently has approximately 25,800 employees, consisting of 11,200 full-time and 14,600 part-time individuals, none of whom are represented by a union. The Company considers its employee relations to be good.

As of the end of fiscal 2013, the Company operated 216 supermarkets located in North Carolina (142), Virginia (39), South Carolina (14), Maryland (8), Tennessee (5), Delaware (3), District of Columbia (3), Florida (1) and Georgia (1). These supermarkets offer a full assortment of groceries, produce, meat and seafood, delicatessen items, bakery items, wines and non-food items such as health and beauty care, general merchandise and floral. In addition, the Company operated pharmacies in 150 of its supermarkets as of the end of fiscal 2013. Retail supermarket operations are supported by two company-owned distribution centers and one company-owned dairy production facility. Other than milk, yogurt and ice cream produced by the company-owned facility, the Company purchases most of the products it sells, including its store brand products, from outside suppliers or directly from the manufacturers.

The supermarket industry is highly competitive. The Company competes with local, regional and national food chains along with independent merchants. In addition to the more traditional food stores, the Company also competes with discount retailers (including supercenters that carry a full line of food items), many of which are larger in terms of assets and sales. Some discount supercenter operators, such as Wal-Mart and Target, continue to expand their offering of items typically found in supermarket formats. As a result, the Company is likely to continue to compete with 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 related customers has a material effect upon the Company's business.

The Company's business is not characterized as seasonal. Following the sale of A&E, all of the Company's operations were domestic.

Available Information

The Company's Internet address is www.harristeeter.com. The Company makes available, free of charge, on or through its website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and beneficial ownership reports on Forms 3, 4, and 5 as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission (the "SEC").

Item 1A. Risk Factors

This report contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "anticipates," "believes," "estimates" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could" are intended to identify such forward-looking statements. Readers of this report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. We face risks that are inherent in the businesses and the markets in which we operate. The following discussion sets forth certain risks and uncertainties that we believe could cause actual future results to differ materially from expected results. In addition to the factors discussed below, other factors that might cause our future financial performance to vary from that described in our forward-looking statements include: (i) changes in federal, state or local laws or regulations; (ii) cost and stability of energy sources; (iii) management's ability to predict accurately the adequacy of the Company's present liquidity to meet future financial requirements; (iv) continued solvency of any third parties on leases the Company has guaranteed; (v) management's ability to predict the required contributions to the pension plans of the Company; (vi) the Company's requirement to impair recorded goodwill or other long-lived assets; (vii) changes in labor and employee benefit costs, such as increased health care and other insurance costs; (viii) ability to recruit, train and retain effective employees and management; (ix) the extent and speed of successful execution of strategic initiatives; (x) volatility of financial and credit markets which would affect access to capital for the Company; (xi) the Company's ability to pass along product cost increases through increased sales prices and, (xii) unexpected outcomes of any legal proceedings arising in the normal course of business of the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and also could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements made in this report, and the reader should not consider any of the above list of factors and the following discussion to be a complete set of all potential risks or uncertainties.

Risk Factors Related to the Merger Agreement

We may not be able to obtain satisfaction of all conditions to complete our merger with a subsidiary of Kroger in the anticipated timeframe.

The consummation of the merger is subject to customary closing conditions. A number of the conditions are not within our control, and may prevent, delay or otherwise materially adversely affect the completion of the transaction. These conditions include, among other things, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. It also is possible that an event, change, circumstance, occurrence, effect or state of facts that could result in a material adverse effect to the Company may occur, which may give Kroger the ability to avoid completing the merger. We cannot predict with certainty whether and when any of the required closing conditions will be satisfied or if another uncertainty may arise. If the merger does not receive, or timely receive, the required regulatory approvals and clearances, or if another event occurs delaying or preventing the merger, such delay or failure to complete the merger may cause uncertainty or other negative consequences that may materially and adversely affect our sales, financial performance and operating results, and the price per share for our common stock and perceived acquisition value.

While the merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the pending merger is completed, the pending merger may disrupt the current plans and operations of the Company, which could have an adverse effect on our business and financial results. The pendency of the merger may also divert management's attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the pending merger and the uncertainties may impact our ability to retain, recruit

and hire key personnel while the merger is pending or if it fails to close. We may incur unexpected costs, charges or expenses resulting from the merger. Furthermore, we cannot predict how our suppliers, customers and other business partners will view or react to the pending merger and some may be hesitant to do business with us in light of uncertainties about our ability to perform due to the pending merger. If we are unable to reassure our customers, suppliers and other business partners to continue transacting business with us, our financial results may be adversely affected.

The pursuit of the merger and preparations for integration have placed and will continue to place a significant burden on many employees and internal resources. If, despite our efforts, key personnel depart because of these uncertainties and burdens, or because they do not wish to remain with a combined company, our business and financial results may be adversely affected. In addition, whether or not the merger is completed, while it is pending we will continue to incur costs, fees, expenses and charges related to the proposed merger, which may materially and adversely affect our business results and financial condition.

In addition, the Merger Agreement generally requires the Company to operate its business in the ordinary course of business pending consummation of the merger and it also restricts the Company from taking certain actions with respect to its business and financial affairs without Kroger's consent, including without limitation a restriction on our ability to pay dividends other than regular quarterly cash dividends in the ordinary course of business consistent with past practice, not exceeding $0.15 per share, and these restrictions could be in place for an extended period of time if the consummation of the merger is delayed. For these and other reasons, the pendency of the merger could adversely affect our business and financial results.

In the event that the pending merger is not completed, the trading price of the Company's common stock and the Company's future business and financial results may be negatively affected.

The conditions to the completion of the merger may not be satisfied as noted above. If the merger is not completed for any reason, we would still remain liable for significant transaction costs and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of a completed merger. For these and other reasons, a failed merger could adversely affect our business and financial results. Furthermore, if we do not complete the merger, the price of our common stock may decline significantly from the current market price which reflects a market assumption that the merger will be completed with shareholders receiving $49.38 for each share of Company common stock held. Certain costs associated with the merger have already been incurred or may be payable even if the merger is not completed. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the announcement and pendency of the merger and from intensifying competition from our competitors, including any adverse changes in our relationships with our customers, vendors and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed transaction.

If the Merger Agreement is terminated, we may, under certain circumstances, be obligated to pay a termination fee or a break-up fee to Kroger. These costs could require us to use available cash that would have otherwise been available for general corporate purposes.

If the merger is not completed, in certain circumstances, we would still be liable for significant transaction costs incurred by us and could also be required to pay a termination fee of $75 million. If the Merger Agreement is terminated, the termination fee we may be required to pay, if any, under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes. For these and other reasons, a failed merger could materially and adversely affect our business, operating results or financial condition, which in turn would materially and adversely affect our business or financial condition, the price per share of our common stock or our perceived acquisition value.

Litigation against the Company and our directors could result in an injunction preventing completion of the merger, and significant litigation costs that could adversely affect our financial condition.

One of the conditions to the closing of the merger is that no order, injunction or decree issued by any court or agency of competent jurisdiction be in effect or statute, rule, regulation, order, injunction or decree be enacted, entered or enforced by any governmental entity that prohibits or makes illegal the consummation of the merger or any other transactions contemplated by the Merger Agreement. Consequently, if any person or entity were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting the ability to complete the merger, then such injunctive or other relief may prevent the merger from becoming effective within the expected time frame or at all. If completion of the merger is prevented or delayed, it could result in substantial costs to us.

Risks Relating to the Industry and our Business

The Supermarket Industry is Highly Competitive.

The supermarket industry is characterized by narrow profit margins and competes on value, variety, location and service. The Company faces competitive pressure in all of its markets from existing competitors and from the threatened entry by one or more major new competitors. The number and type of competitors we face vary by location and include: traditional grocery retailers (both national and regional), discount retailers such as "supercenters" and "club and warehouse stores," specialty supermarkets, drug stores, dollar stores, convenience stores and restaurants. The Company also competes with pharmacies, florists, book stores, local coffee shops and retailers offering their products via the internet. Aggressive supercenter expansion, increasing fragmentation of retail formats, entry of non-traditional competitors and market consolidation have further contributed to an increasingly competitive marketplace.

Additionally, highly competitive markets and economic uncertainty have made it difficult generally for grocery store operators to continue to achieve comparable store sales gains. Because sales growth has been difficult to attain, the Company's competitors have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to achieve consistent sales gains. Some of the Company's competitors have greater financial resources and could use these resources to take measures which could adversely affect the Company's competitive position. Accordingly, the Company's business, financial condition or results of operations could be adversely affected by competitive factors, including product mix and pricing changes which may be made in response to competition from existing or new competitors.

The Company's Expansion Plans Are Subject to Risk.

The Company has spent, and intends to continue to spend, significant capital and management resources on the development and implementation of expansion and renovation plans. The Company's new store opening program can vary depending on the economic conditions of the markets, including the Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. The successful implementation of the Company's renovation and expansion plans are subject to several factors including: the availability of new, suitable locations on reasonable commercial terms, or at all; the success of new stores, including those in less developed markets; management's ability to manage expansion, including the effect on sales at existing stores when a new store is opened nearby; the ability to secure any necessary financing; change in regional and national economic conditions; and increasing competition or changes in the competitive environment in the Company's markets.

The Company's new stores may initially operate at a loss, depending on factors such as prevailing competition and market position in the surrounding communities and the level of sales and profit margins in existing stores may not be duplicated in new stores. Pursuing a strategy of growth, renovation and expansion in light of current highly competitive industry conditions could lead to a near-term decline in earnings as a result of opening and operating a substantial number of new stores, particularly with respect to stores in markets where the Company does not have a significant presence. If the Company's expansion and renovation plans are unsuccessful, it could adversely affect the Company's cash flow, business and financial condition due to the significant amount of capital and management resources invested.

Food Safety Issues Could Result in a Loss of Consumer Confidence and Product Liability Claims.

The Company could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain. These concerns could cause shoppers to avoid purchasing certain products from the Company, or to seek alternative sources of supply for their food needs, even if the basis for the concern is not valid and/or is outside of the Company's control. Adverse publicity about these types of concerns, whether or not valid, could discourage consumers from buying our products and any lost confidence on the part of our customers would be difficult and costly to reestablish. As such, any issue regarding the safety of any food items sold by the Company, regardless of the cause, could have a substantial and adverse effect on the Company's operations.

The Company's Geographic Concentration May Expose it to Regional or Localized Downturns.

The Company operates primarily in the southeastern and mid-Atlantic United States and the District of Columbia, with a strong concentration in North Carolina, Virginia and South Carolina. As a result, the Company's business is more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, changes in the economy, weather conditions, demographics and population. Although these regions have experienced economic and demographic growth in the past, a significant economic downturn in the region could have a material adverse effect on the Company's business, financial condition or results of operations.

The Ownership and Development of Real Estate May Subject the Company to Environmental Liability.

Under applicable environmental laws, as an owner or developer of real estate, the Company may be responsible for remediation of environmental conditions that may be discovered and may be subject to associated liabilities (including liabilities resulting from lawsuits brought by private litigants) relating to the Company's property, whether the properties are leased or owned, and whether such environmental conditions, if in existence, were created by the Company or by a prior owner or tenant. The discovery of contamination from hazardous or toxic substances, or the failure to properly remediate such contaminated property, may adversely affect the Company's ability to sell or rent real property or to borrow using real property as collateral. Liabilities or costs resulting from noncompliance with current or future applicable environmental laws or other claims relating to environmental matters could have a material adverse effect on the Company's business, financial condition or results of operations.

The Company's Information Technology Systems Are Subject to Risk.

The Company's business is increasingly dependent on information technology systems that are complex and vital to continuing operations. If the Company were to experience difficulties maintaining existing systems or implementing new systems, it could incur significant losses due to disruptions in its operations. Additionally, these systems contain valuable proprietary and financial data, as well as debit and credit card cardholder data, and a breach, including cyber security breaches, could have an adverse effect on the Company.

Narrow Profit Margins may Adversely Affect the Company's Business.

Profit margins in the supermarket industry are very narrow. In order to increase or maintain the Company's profit margins, strategies are used to reduce costs, such as productivity improvements, shrink reduction, distribution efficiencies, energy efficiency programs, fuel hedging and other similar strategies. Changes in product mix also may negatively affect certain financial measures. If the Company is unable to achieve forecasted cost reductions there may be an adverse effect on the Company's business.

Our Self-Insurance Accruals are Subject to Variability and Unpredictable External Factors.

As discussed in more detail below in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Self-insurance accruals for Workers' Compensation, Healthcare and General Liability," the Company is primarily self-insured for most U.S. workers' compensation claims, healthcare claims and general liability and automotive liability losses. Accordingly, the Company determines the estimated liability required for claims in each accounting period, which requires that management determine estimates of the costs of claims incurred and accrue for such expenses in the period in which the claims are incurred. The liabilities that have been recorded for these claims represent our best estimate of the ultimate obligations for reported claims plus those incurred but not reported. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, and changes in discount rates could all affect ultimate settlements of claims or the assumptions underlying our liability estimates, which could cause a material change for our self-insurance liability obligations and could adversely impact earnings.

The Company may Incur Increased Pension Expenses.

The Company maintains retirement benefit plans for substantially all full-time employees and a supplemental retirement benefit plan for certain selected officers of the Company and its subsidiaries, including a defined contribution retirement plan, a qualified pension plan which is a funded defined benefit plan and a non-qualified supplemental pension plan for executives, which is an unfunded defined benefit plan. The Company has frozen participation and benefit accruals under the Company-sponsored defined benefit plan effective September 30, 2005 for all participants, with certain transition benefits provided to those participants who had achieved specified age and service levels on December 31, 2005; however, at the end of fiscal 2013, the Company's pension plans had projected benefit obligations in excess of the fair value of plan assets. The amount of any increase or decrease in our required contributions to our pension plans will depend on government regulation, returns on plan assets and actuarial assumptions regarding our future funding obligations. For more information, see Note 15 to the Consolidated Financial Statements in Item 8 hereof.

Adverse Economic Conditions may Negatively Impact the Company's Operating Results.

The increase in unemployment and loss of consumer confidence can alter the consumers' buying habits. In addition, consumers may decrease their purchases of more discretionary items and increase their purchase of lower cost food products. Adverse economic conditions in the financial markets, including the availability of financing, could also adversely affect the Company's operating results by increasing costs related to obtaining financing at acceptable rates. These conditions could also impact the Company's suppliers, who may be unable to fulfill the Company's outstanding orders or could change credit terms that would negatively affect the Company's liquidity. All of these factors could adversely impact the Company's results of operations, financial condition and cash flows.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company owns its principal offices in Matthews, North Carolina, a 517,000 square foot distribution facility east of Charlotte, a 1,438,000 square foot distribution facility in Greensboro, North Carolina, and a 90,500 square foot dairy processing plant in High Point, North Carolina. Both distribution facilities contain dry grocery warehousing space and refrigerated storage for perishable goods. The Greensboro facility also has frozen goods storage and a single pick facility for health and beauty care products and other general merchandise. In addition, the Company utilizes a transfer facility in Fredericksburg, Virginia in support of its distribution operations. The Company operates its retail stores primarily from leased properties. As of the end of fiscal 2013, the Company held title to the land and buildings of five of its operating supermarkets. The remaining supermarkets are either leased in their entirety or the building is owned and situated on leased land. In addition, the Company holds interest in properties that are under development for store sites. The Company's supermarkets range in size from approximately 17,800 square feet to 72,900 square feet, with an average size of approximately 49,300 square feet.

The following table sets forth selected statistics with respect to the Company's stores for each of the last three fiscal years:

2013 2012 2011

Stores Open at Period End 216 208 204

Average Weekly Net Sales Per Store* $ 429,778 $ 425,235 $ 403,107

Average Square Footage Per Store at Period End 49,311 49,126 48,129

Average Square Footage Per New Store Opened During Period 47,131 53,794 52,980

Total Square Footage at Period End 10,651,086 10,218,118 9,818,232

____________

* Computed on the basis of aggregate sales of stores open for a full year.

The Company believes its facilities are adequate for its current operations. However, additional or expanded facilities may be required in strategic regions to support growth in the future.

Item 3. Legal Proceedings

As previously reported, several purported class action complaints relating to the merger have been filed in the General Court of Justice, Superior Court Division, Mecklenburg County, North Carolina on behalf of putative classes of the Company's public shareholders (the "state cases"). The complaints name as defendants the members of the Company's Board of Directors (the "Board"), the Company, Kroger and Merger Sub. The state cases generally allege that members of the Board breached their fiduciary duties to the Company's shareholders with respect to the Merger Agreement and by omitting information material to shareholders from the preliminary proxy statement and that the other defendants aided and abetted that breach. Two of the cases also purport to assert derivative claims on behalf of the Company. The state cases were subsequently consolidated by court order dated August 29, 2013 under the caption In re Harris Teeter Merger Litigation, 13-CVS-12579 (the "consolidated state court action").

Another complaint, which includes both individual and class claims relating to the merger, has been filed in the United States District Court for the Western District of North Carolina naming as defendants the Company and the members of Board (the "federal case"). The federal case, Joel Krieger v. Harris Teeter Supermarkets, Inc. (Case No. 3:13-cv-453), filed August 9, 2013, makes allegations similar to those in the state cases and in addition purports to assert claims for, among other

things, violations of the federal securities laws and fraud related to the preliminary proxy statement. On September 19, 2013, the court entered an order staying all activity in the federal case pending the outcome of the consolidated state court action.

We believe that these lawsuits are without merit, however, to eliminate the burden, expense and uncertainties inherent in such litigation, on September 24, 2013, the defendants entered into a memorandum of understanding (the "Memorandum of Understanding") regarding settlement of the consolidated state court action. The Memorandum of Understanding outlines the terms of the parties' agreement in principle to settle and release all claims which were or could have been asserted in the consolidated state court action. In consideration for such settlement and release, the parties to the consolidated state court action agreed that the Company would make certain supplemental disclosures to the Company's definitive proxy statement, filed with the SEC on August 27, 2013, which supplemental disclosures were also filed with the SEC on September 24, 2013. The Memorandum of Understanding permits the parties to engage in confirmatory discovery, which has been completed.

The Memorandum of Understanding contemplates that the parties will attempt in good faith to agree promptly upon a stipulation of settlement to be submitted to the General Court of Justice, Superior Court Division, Mecklenburg County, North Carolina for approval at the earliest practicable time. The stipulation of settlement will be subject to customary conditions, including approval by the court, which will consider the fairness, reasonableness and adequacy of such settlement. Under the terms of the proposed settlement, following final approval by the court, the action will be dismissed with prejudice. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, or if the merger is not consummated for any reason, the proposed settlement will be null and void and of no force and effect. The settlement will not affect the amount of merger consideration to be paid to the Company's shareholders in connection with the proposed merger. As described above, the federal case remains stayed.

In addition, the Company and its subsidiaries are involved in various legal matters from time to time in connection with their operations, including various lawsuits and environmental matters. These matters considered in the aggregate have not had, nor does the Company expect them to have, a material effect on the Company's results of operations, financial position or cash flows.

Item 4. Mine Safety Disclosures

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.

Thomas W. Dickson, age 58, is the Company's Chairman of the Board and Chief Executive Officer. He has been Chairman of the Board since March 2006 and Chief Executive Officer since February 1997. In addition, he served as President from February 1997 through March 2012. Before his election as President and Chief Executive Officer, he served as Executive Vice President of the Company from February 1996 to February 1997. Prior to that time, from February 1994 to February 1996 he served as President of, and from February 1991 to February 1994 he served as Executive Vice President of, the Company's former A&E subsidiary.

Frederick J. Morganthall, II, age 62, is the Company's President and Chief Operating Officer. He has served as President and Chief Operating Officer since March 2012. Before his election as President and Chief Operating Officer, he served as President of Harris Teeter from October 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.

John B. Woodlief, age 63, is the Company's Executive Vice President and Chief Financial Officer. He has served as Executive Vice President and Chief Financial Officer since March 2012. Before his election as Executive Vice President and Chief Financial Officer he served as the Vice President - Finance and Chief Financial Officer of the Company from November 1999. Prior to that time, he served as a partner in PricewaterhouseCoopers since 1998 and a partner in Price Waterhouse from 1985 to 1998. He served as Managing Partner of the Charlotte, North Carolina office of Price Waterhouse and PricewaterhouseCoopers from January of 1997 to June of 1999. He joined Price Waterhouse in 1972.

Rodney C. Antolock, age 55 is an Executive Vice President of the Company. He has served as Executive Vice President since March 2012. Before his election as Executive Vice President he served as the Executive Vice President - Operations & Merchandising of Harris Teeter from October 2007. Prior to that time, and beginning in July 2000, he served as Senior Vice President - Operations & Merchandising of Harris Teeter. He joined Harris Teeter in January 2000 as Senior Vice President of Operations.

No executive officer has a family relationship as close as first cousin with any other executive officer, director or nominee for director.

PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Information regarding the principal market for the Company's common stock (the "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 fiscal 2013 and 2012 is set forth below.

The Common Stock is listed on the New York Stock Exchange. As of November 21, 2013, there were approximately 3,100 holders of record of Common Stock.

Quarterly Information

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter

Fiscal 2013

Quarterly Dividend Per Share $ 0.15 $ 0.15 $ 0.15 $ 0.15

Special Dividend Per Share $ 0.50 - - -

Market Price Per Share

High $ 39.42 $ 45.03 $ 48.96 $ 49.90

Low $ 35.25 $ 35.31 $ 39.47 $ 47.28

Fiscal 2012

Quarterly Dividend Per Share $ 0.13 $ 0.14 $ 0.14 $ 0.14

Market Price Per Share

High $ 45.45 $ 45.31 $ 41.74 $ 42.99

Low $ 37.78 $ 39.16 $ 36.10 $ 37.27

The Company expects to continue paying dividends on a quarterly basis which is at the discretion of the Board and subject to legal or contractual requirements, including the restriction imposed by the Merger Agreement that the Company may only pay regular quarterly cash dividends in the ordinary course of business consistent with past practice, not exceeding $0.15 per share. For more information regarding the Company's other contractual restrictions on its ability to pay dividends, refer to Note 8 to the Consolidated Financial Statements in Item 8 hereof.

Comparison of Total Cumulative Shareholder Return for Five-Year Period Ending October 1, 2013

The following graph presents a comparison of the yearly percentage change in the Company's cumulative total shareholders' return on Common Stock with the (i) Standard & Poor's 500 Index, (ii) Standard & Poor's Midcap 400 Index, and (iii) Standard & Poor's Food Retail Index for the five-year period ended October 1, 2013.

Cumulative Total Return through September 30

2008 2009 2010 2011 2012 2013

Harris Teeter Supermarkets, Inc. 100.00 83.65 110.70 126.13 127.39 165.73

S & P 500 100.00 93.09 102.55 103.72 135.05 161.17

S & P Midcap 400 100.00 96.89 114.11 112.66 144.81 184.89

S & P Food Retail 100.00 84.38 90.50 97.45 119.72 182.76

* $100 invested on September 30, 2008 in stock or index, including reinvestment of dividends.

Issuer Purchases of Equity Securities

The following table summarizes the Company's purchases of its common stock during the quarter ended October 1, 2013.

Period Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1) Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs

July 3, 2013 to August 6, 2013 - 0 - n.a. - 0 - 2,767,169

August 7, 2013 to September 3, 2013 - 0 - n.a. - 0 - 2,767,169

September 4, 2013 to October 1, 2013 - 0 - n.a. - 0 - 2,767,169

Total - 0 - n.a. - 0 - 2,767,169

______________

(1)
In February 1996, the Company announced the adoption of a stock buyback program, authorizing, at management's discretion, the Company to purchase and retire up to 4,639,989 shares, 10% of the then-outstanding shares of the Company's common stock, for the purpose of preventing dilution as a result of the operation of the Company's comprehensive stock option and awards plans. The stock purchases are effected from time to time pursuant to this authorization. As of October 1, 2013, the Company had purchased and retired 1,872,820 shares under this authorization. No stock purchases were made during the quarter ended October 1, 2013. The stock buyback program has no set expiration or termination date. However, subject to certain exceptions, the Merger Agreement restricts the Company's ability to repurchase shares.

Item 6. Selected Financial Data

As previously reported, the Company sold all of its ownership interest in its thread manufacturing business, A&E, on November 7, 2011. As such, the sales and operating results of A&E are included within (loss) earnings from discontinued operations in the table below. Prior years have been reclassified to conform to the current presentation. For a discussion of certain factors that materially affect the comparability of the selected financial data or cause the data reflected herein not to be indicative of our future results of operations or financial condition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Discontinued Operations" included in Item 7 hereof.

The following table sets forth selected financial data of the Company as of and for each of the fiscal years in the five-year period ended October 1, 2013 and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 hereof and our Consolidated Financial Statements and notes thereto included in Item 8 hereof (dollars in thousands, except per share data).

2013 2012 2011 2010 2009

Net Sales $ 4,709,866 $ 4,535,414 $ 4,285,565 $ 4,009,353 $ 3,827,005

Operating Profit 194,348 170,978 180,706 176,856 168,114

Earnings from Continuing Operations, Net of Taxes 108,980 99,927 111,458 98,652 93,597

(Loss) Earnings from Discontinued Operations, Net of
Taxes
(1,088 ) (17,415 ) (20,211 ) 13,389 (7,633 )

Net Earnings $ 107,892 $ 82,512 $ 91,247 $ 112,041 $ 85,964

Earnings (Loss) Per Share - Basic:

Continuing Operations $ 2.23 $ 2.05 $ 2.30 $ 2.05 $ 1.95

Discontinued Operations (0.02 ) (0. 36 ) (0.42 ) 0.28 (0.16 )

Net Earnings 2.21 1. 69 1.88 2.32 1.79

Earnings (Loss) Per Share - Diluted:

Continuing Operations $ 2.21 $ 2.04 $ 2.28 $ 2.03 $ 1.94

Discontinued Operations (0.02 ) (0. 36 ) (0.41 ) 0.28 (0.16 )

Net Earnings 2.19 1. 68 1.87 2.31 1.78

Dividend per share 1.10 0.55 0.52 0.48 0.48

Total Assets $ 2,013,237 $ 1,952,488 $ 1,984,424 $ 1,893,671 $ 1,844,321

Long-Term Debt - including Current Portion $ 213,479 $ 212,490 $ 287,330 $ 306,096 $ 363,427

Note: In April 2012, the Company's fiscal year end was changed from the Sunday nearest to September 30 to the Tuesday nearest to September 30 to coincide with Harris Teeter's fiscal year. Fiscal 2013, 2012 and 2011 include the 52 weeks ended October 1, 2013, October 2, 2012 and October 2, 2011, respectively. Fiscal 2010 includes the 53 weeks ended October 3, 2010 and Fiscal 2009 includes the 52 weeks ended September 27, 2009.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We have based these forward-looking statements on our current plans, expectations and beliefs about future events. In light of the risks, uncertainties and assumptions discussed under "Risk Factors" in Item 1A of this Annual Report on Form 10-K and other factors discussed in this section, there are risks that our actual experience will differ materially from the expectations and beliefs reflected in the forward-looking statements in this section and throughout this report. For more information regarding what constitutes a forward-looking statement, please refer to "Risk Factors" in Item 1A hereof. We refer to the 52 weeks ended October 1, 2013 as "fiscal 2013," the 52 weeks ended October 2, 2012 as "fiscal 2012" and the 52 weeks ended October 2, 2011 as "fiscal 2011."

Overview

The Company operates one primary business segment, retail grocery (including related real estate and store development activities) through its wholly-owned subsidiary Harris Teeter. Harris Teeter is a regional supermarket chain operating primarily in the southeastern and mid-Atlantic United States, and the District of Columbia.

Historically, the Company was also engaged in industrial sewing thread (textile primarily), including embroidery thread and technical textiles, through its A&E business. In the first quarter of fiscal 2012, the Company sold all of its ownership interest in A&E to two affiliates of KPS Capital Partners, LP. A definitive agreement to sell A&E was entered into on October 27, 2011 and the closing occurred on November 7, 2011. The sale price for A&E was $180 million in cash, subject to adjustments for working capital and certain liabilities including underfunded pension liability and foreign debt. As a result of this disposition, the sales and operating results of A&E are categorized as discontinued operations in the discussion that follows and in the financial statements included in Item 8 hereof for all periods presented. For additional information regarding discontinued operations, see Note 17 to the Consolidated Financial Statements in Item 8 hereof.

On July 8, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Kroger Co. ("Kroger") and Hornet Acquisition, Inc. ("Merger Sub"), a wholly owned subsidiary of Kroger. The Merger Agreement provides for the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of Kroger. Under the terms of the Merger Agreement, at the effective time of the merger the Company's shareholders will receive $49.38 in cash for each share of common stock they own. The transaction has been approved by the Company's shareholders; however, it remains subject to regulatory approvals (including under the Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended) and other customary closing conditions, and is expected to close in the fourth quarter of calendar year 2013 or the first quarter of calendar year 2014. The Company is required to continue to operate its business in the ordinary course pending the merger and not take certain specified actions prior to the completion of the proposed merger. As a result, the merger poses certain risks to the Company during the pendency of the transaction. See "Risk Factors." in Item 1A.

The economic environment over the past few years has motivated changes in the consumption habits of the retail consumer which continues to impact our financial results. Economic uncertainty, tumultuous market conditions and low levels of consumer confidence have created changes in the type of products purchased by our customers and increased the competitive environment in our primary markets. We compete with other traditional grocery retailers, as well as other retail outlets including, but not limited to, discount retailers such as "neighborhood or supercenters" and "club and warehouse stores," specialty supermarkets and drug stores. Generally, our markets continue to experience new store opening activity and increased feature pricing or everyday low prices by competitors. We utilize information gathered from various sources, including our Very Important Customer ("VIC") loyalty card program, and work with suppliers to deliver effective retail pricing and targeted promotional spending programs that drive customer traffic and create value for our customers. In addition, our product selection, assortment and variety, and our focus on customer service differentiate us from our competitors.

In June 2012, the Company completed its purchase and sale agreement with Lowe's Foods, Inc. ("Lowes Foods"). Per the agreement Harris Teeter acquired ten Lowes Foods store locations in the central Carolinas region and Lowes Foods acquired six Harris Teeter store locations in western North Carolina (the "Lowes Foods Transaction"). The majority of the stores acquired were temporarily closed for remodeling, stocking and training of employees. Six of the acquired stores were re-opened during the fourth quarter of fiscal 2012. In fiscal 2013, two of the acquired stores were re-opened under a new format and banner - "201central." The 201central format features a worldwide variety of wine, beer, specialty foods and other selected merchandise.

The Company continued with its planned new store development program and during fiscal 2013, the Company opened nine new stores, two of which were the stores acquired from Lowes Foods in fiscal 2012 that were re-opened under our 201central banner and one of which replaced a store previously closed, and closed one store that will be replaced with a new store expected to be opened in fiscal 2014, for a net addition of eight stores. During fiscal 2012, the Company opened thirteen new stores (which includes six of the stores acquired from Lowes Foods and one replacement) and closed eight stores (comprised of the six stores sold to Lowes Foods, one replacement that opened in fiscal 2012 and one replacement that opened in fiscal 2013) for a net addition of five stores. One store located in the Washington D.C. market that was closed due to flooding during the third quarter of fiscal 2012 was re-opened during the first quarter of fiscal 2014. During fiscal 2011, the Company opened seven new stores and closed two stores for a net addition of five stores. Much of the Company's new store growth is focused on expanding its Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. During fiscal 2011, the Company acquired 350,000 square feet of additional distribution capacity that is contiguous to its existing distribution facility in Greensboro, North Carolina. This represented an approximate 22% increase in the square footage of the Company's existing distribution facilities and was acquired to meet our continued growth. There were 216 stores in operations at the end of fiscal 2013, as compared to 208 at the end of fiscal 2012 and 204 at the end of fiscal 2011.

On September 12, 2013, the Company announced that its operating subsidiary, Harris Teeter, Inc. entered into an agreement with Greenbax Enterprises, Inc. and certain of its subsidiaries ("Piggly Wiggly") to purchase six Piggly Wiggly store locations and one future store location in the Charleston, South Carolina area. The acquisition was completed during the first quarter of fiscal 2014 with five of the locations being re-opened shortly after the acquisition date. The remaining two locations are expected to be opened during fiscal 2014.

Results of Operations

The following table sets forth the components of consolidated net earnings for the Company for fiscal 2013, fiscal 2012 and fiscal 2011, respectively. The table also sets forth the percentage increase or decrease of such components over the prior year (in thousands):

Fiscal 2013 Fiscal 2012 Fiscal 2011 % Inc. (Dec.)

% to
Sales % to
Sales % to
Sales 2013 vs
2012 2012 vs
2011

Net Sales $ 4,709,866 100.00 $ 4,535,414 100.00 $ 4,285,565 100.00 3.8 5.8

Cost of Sales 3,292,903 69.92 3,176,914 70.05 3,015,517 70.36 3.7 5.4

Gross Profit 1,416,963 30.08 1,358,500 29.95 1,270,048 29.64 4.3 7.0

SG&A Expenses:

Expenses without Incremental Merger Related Costs and Lowes Foods Transaction Costs 1,215,211 25.80 1,157,712 25.52 1,089,342 25.42 5.0 6.3

Incremental Merger Related Costs 7,404 0.16 - - - - n.m. n.m.

Incremental Lowes Foods Transaction Costs - - 29,810 0.66 - - n.m. n.m.

Total SG&A Expenses 1,222,615 25.96 1,187,522 26.18 1,089,342 25.42 3.0 9.0

Operating Profit 194,348 4.12 170,978 3.77 180,706 4.22 13.7 (5.4 )

Interest Expense, net 16,162 0.34 16,411 0.36 18,983 0.44 (1.5 ) (13.5 )

Net Investment Gains - - - - 19,392 0.45 n.m. n.m.

Earnings From Continuing Operations Before Income Taxes
178,186 3.78 154,567 3.41 181,115 4.23 15.3 (14.7 )

Income Tax Expense 69,206 1.47 54,640 1.21 69,657 1.63 26.7 (21.6 )

Earnings From Continuing Operations 108,980 2.31 99,927 2.20 111,458 2.60 9.1 (10.3 )

Loss From Discontinued
Operations, Net of Income Taxes (1,088 ) (17,415 ) (20,211 )

Net Earnings $ 107,892 $ 82,512 $ 91,247

_______________

n.m. - not meaningful

Sales

Net sales increased 3.8% in fiscal 2013 and 5.8% in fiscal 2012 when compared to the respective prior years. The increase in sales in fiscal 2013 and fiscal 2012 was attributable to increases in comparable store sales (see definition below) and sales from new stores that were partially offset by store closings. Comparable store sales for fiscal 2013 increased 2.23% ($97.4 million), as compared to increases of 3.97% ($165.5 million) in fiscal 2012 and 3.27% ($129.4 million) in fiscal 2011. Comparable store sales have been negatively impacted, to some extent, by the cannibalization created by strategically opening stores in key major markets that have a close proximity to existing stores. Management believes that the Company's strategy of opening additional stores within close proximity to existing stores, and any similar new additions in the foreseeable future, have a strategic benefit of enabling the Company to capture sales and expand market share as the markets it serves continue to grow. During fiscal 2013, the Company increased the number of stores in operation by eight, as compared to a net increase of five stores in each of fiscal 2012 and fiscal 2011. The increase in sales from new stores exceeded the loss of sales from closed stores by $86.7 million in fiscal 2013, $82.4 million in fiscal 2012 and $122.0 million in fiscal 2011.

The Company has responded to its customers' changing buying habits with increased promotional activity designed to increase the overall value to the customers. During fiscal 2013, on a comparable basis, active VIC customer households and the average number of items sold increased. Store brand penetration has also increased on a year over year basis. Store brand penetration based on units sold increased 34 basis points to 24.60% in fiscal 2013 from 24.26% in fiscal 2012. Store brand penetration based on sales dollars increased by 17 basis points to 25.32% in fiscal 2013 from 25.15% in fiscal 2012.

The Company considers its reporting of comparable store sales growth to be effective in determining core sales growth during periods of fluctuation in the number of stores in operation, their locations and their sizes. While there is no standard industry definition of "comparable store sales," the Company has been consistently applying the following definition. Comparable store sales are computed using corresponding calendar weeks to account for the occasional extra week included in a fiscal year. A new store must be in operation for 14 months before it enters into the calculation of comparable store sales. A closed store is removed from the calculation in the month in which its closure is announced. A new store opening within an approximate two-mile radius of an existing store that is to be closed as a result of the new store opening is included as a replacement store in the comparable store sales measurement as if it were the same store. Sales increases resulting from existing comparable stores that are expanded in size are included in the calculations of comparable store sales, if the store remains open during the construction period. If the location is closed during the construction period, or if the location is completely rebuilt, it is reported as a replacement store and included in the same store sales calculation for the weeks actually open. The comparable store sales increase for fiscal 2011 was computed on a 52-week basis by reducing the 53-week fiscal 2010 sales for the first week of the annual period.

Gross Profit

Gross profit as a percent to sales increased 13 basis points from fiscal 2012 to fiscal 2013 and 31 basis points from fiscal 2011 to fiscal 2012, as a result of improved retail gross profit margins realized through our effective promotional activity. The retail gross profit margin improved by 8 basis points from fiscal 2012 to fiscal 2013 and 10 basis points from fiscal 2011 to 2012. The annual LIFO adjustment for fiscal 2013 was a credit which increased gross profit by $1.7 million (0.04% to sales), as compared to a charge in fiscal 2012 and 2011 which reduced gross profit by $3.0 million (0.07% to sales) and $11.1 million (0.26% to sales), respectively.

Selling, General and Administrative Expenses

Selling, general & administrative ("SG&A") expenses for fiscal 2013 increased from fiscal 2012 by $35.1 million; however, SG&A expense as a percent of sales decreased by 22 basis points between the comparable periods. SG&A expenses increased in fiscal 2013 as a result of incremental store growth and its impact on associated operational costs such as labor, credit and debit card fees, rent and other occupancy costs, and $7.4 million (or 16 basis points on a percent to sales basis) of incremental merger-related and acquisition costs comprised of legal and consulting fees, corporate compliance and advisory fees (including obtaining a fairness opinion on the pending merger and proxy solicitation costs), retention bonus accruals and other costs ("Merger Related Costs"). As discussed below, the operating results for fiscal 2012 included $29.8 million (or 66 basis points on a percent to sales basis) of Lowes Foods Transaction incremental costs ("Lowes Foods Transaction Costs"). The increase in SG&A expenses (excluding advertising and support department costs) from fiscal 2012 to fiscal 2013 for stores opened during fiscal 2012 and fiscal 2013 was $45.9 million, exceeding the $35.1 million increase in total SG&A expenses. Store labor and benefit costs increased from fiscal 2012 to fiscal 2013 by $23.7 million and represented a 4 basis point increase on a percent to sales basis. Advertising and support department costs, excluding the $7.4 million of Merger Related Costs in fiscal 2013, increased by $8.5 million between fiscal 2012 and fiscal 2013 and represented an 8 basis point increase on a percent to sales basis.

SG&A expenses for fiscal 2012 and its percent to sales increased from fiscal 2011 by $98.2 million and 76 basis points, respectively. The increase was driven by incremental store growth and its impact on associated operational costs such as labor, credit and debit card fees, rent and other occupancy costs, and $29.8 million (or 66 basis points on a percent to sales basis) of Lowes Foods Transaction Costs (as described below). SG&A expenses for fiscal 2012 were offset by $3.1 million of gains recorded in connection with proceeds received on company-owned life insurance policies. The increase in SG&A expenses (excluding advertising and support department costs) from fiscal 2011 to fiscal 2012 for stores opened during fiscal 2011 and fiscal 2012 accounted for $42.4 million of the $98.2 million increase in total SG&A expenses. Store labor and benefit costs increased from fiscal 2011 to fiscal 2012 by $33.2 million and represented a 6 basis point increase on a percent to sales basis. Increased costs of $12.0 million in advertising and support departments between fiscal 2011 and fiscal 2012 represented a 13 basis point increase on a percent to sales basis.

The Lowes Foods Transaction incremental costs of $29.8 million incurred in fiscal 2012 consisted of $3.9 million in non-cash impairment charges related to the write-off of a portion of the goodwill that related to stores not integrated into the operations. The costs also included an increase in the Company's closed store liability of $15.5 million, incremental pre-opening costs associated with the stores acquired and other fair market adjustments to fixed assets and intangibles.

The Company continues to focus on its cost control programs in an effort to offset increased fringe benefit costs associated with incentive bonus plans and pension expense, as well as increased remodeling expenses resulting from the Company's store remodeling program. Pre-opening costs are included with SG&A expenses and consist of rent, labor and associated fringe benefits, and recruiting and relocation costs incurred prior to a new store opening and amounted to $6.0 million (0.13% of sales) for fiscal 2013, as compared to $5.8 million (0.13% of sales) for fiscal 2012 (excluding stores acquired from Lowes Foods) and $7.0 million (0.16% of sales) for fiscal 2011. Pre-opening costs fluctuate between reporting periods depending on the new store opening schedule and market location.

Operating Profit

Operating profit increased by $23.4 million, or 35 basis points, between fiscal 2012 and fiscal 2013 as a result of the changes in gross profit and SG&A expenses discussed above.

Interest and Income Taxes

Net interest expense (interest expense less interest income) for fiscal 2013 decreased by $0.2 million from the prior year period. As previously reported, net interest expense for fiscal 2012 included a reversal of accrued interest amounting to $1.3 million that was associated with a reduction of the Company's unrecognized tax positions and approximately $0.3 million of additional interest income associated with income tax refunds. Net interest expense has also been reduced as a result of lower interest on debt borrowings due to lower average outstanding borrowings.

Net investment gains for fiscal 2011 include a pre-tax gain of $19.5 million the Company realized upon the sale of the Company's foreign investment.

The effective consolidated income tax rate on continuing operations for fiscal 2013 was 38.8% as compared to 35.4% for fiscal 2012 and 38.5% for fiscal 2011. Income tax expense for fiscal 2013 was negatively impacted by the non-deductible nature of certain merger-related expenses. As previously reported, income tax expense for fiscal 2012 was favorably impacted by the non-taxable gains on insurance proceeds received in the third quarter of fiscal 2012 and income tax expense for fiscal 2011 included additional foreign taxes paid in connection with the gain realized on the sale of the Company's foreign investment.

Continuing Operations

As a result of the items discussed above, earnings from continuing operations after tax were $109.0 million, or $2.21 per diluted share, in fiscal 2013, as compared to $99.9 million, or $2.04 per diluted share, in fiscal 2012 and $111.5 million, or $2.28 per diluted share, in fiscal 2011. Fiscal 2013 earnings from continuing operations after tax were negatively impacted by the Merger Related Costs. As previously reported, earnings from continuing operations in fiscal 2012 included the following transactions: the Lowes Foods Transaction Costs, life insurance gains and a reversal of interest expense associated with a reduction of the Company's unrecognized tax positions. Fiscal 2011 included a gain on the sale of the Company's foreign investment company. The following table sets forth the impact of these transaction on earnings from continuing operations after tax and the related earnings per diluted share for fiscal 2013, fiscal 2012 and fiscal 2011, respectively (in thousands):

Fiscal 2013 Fiscal 2012 Fiscal 2011

EPS EPS EPS

Earnings from Continuing Operations After Tax without Transactions Discussed Above $ 115,572 $ 2.34 $ 114,111 $ 2.33 $ 101,153 $ 2.07

Merger Related Costs, Net of Tax (6,592 ) (0.13 ) - - - -

Lowes Foods Transaction Costs, Net of Tax - - (18,094 ) (0.37 ) - -

Non-Taxable Life Insurance Gain - - 3,116 0.06 - -

Interest Expense Reversal, Net of Tax - - 794 0.02 - -

Gain on Sale of Foreign Investment Company, Net of Tax - - - - 10,305 0.21

Earnings from Continuing Operations After Tax $ 108, 980 $ 2.21 $ 99,927 $ 2.04 $ 111,458 $ 2.28

Discontinued Operations

The following table sets forth the components of discontinued operations for fiscal 2013, fiscal 2012 and fiscal 2011, respectively (in thousands):

Fiscal 2013 Fiscal 2012 Fiscal 2011

Net Sales $ - $ 30,313 $ 320,876

Cost of Sales - 23,205 241,539

Gross Profit - 7,108 79,337

SG&A Expenses - 22,824 52,351

Operating (Loss) Profit - (15,716 ) 26,986

Interest Expense - 19 380

Interest Income - (17 ) (170 )

Less Net Earnings Attributable to Noncontrolling Interest - 37 698

Loss on Disposition of Discontinued Operations - 3,717 48,750

Loss on Discontinued Operations - (19,472 ) (22,672 )

Income Tax Expense (Benefit) 1,088 (2,057 ) (2.461 )

Loss From Discontinued Operations, Net of Taxes $ (1,088 ) $ (17,415 ) $ (20,211 )

The loss from discontinued operations for fiscal 2013 resulted from adjustments required to true up the tax benefits realized from the loss on the sale of A&E. As previously reported, income tax expense from discontinued operations for fiscal 2012 included deferred tax expense of $3.5 million relating to a valuation allowance for additional capital losses recognized in connection with the sale of A&E.

Outlook

As described previously, the merger with a subsidiary of Kroger is pending. Under the terms of the Merger Agreement, the Company is required to continue to operate its business in the ordinary course pending the merger and not take certain specified actions prior to the completion of the proposed merger. Accordingly the following represents management's current outlook assuming the Company continues to operate in the ordinary course.

The Company's operating performance and strong financial position provide the flexibility to continue with its store development program for new and replacement stores along with the remodeling and expansion of existing stores. During fiscal 2014, the Company plans to open 18 new stores (which includes two replacements and seven acquired Piggly Wiggly store locations). The fiscal 2014 new store openings are currently scheduled for eight in the first quarter, three in the second quarter, two in the third quarter and five in the fourth quarter. During the first quarter of fiscal 2014, the Company re-opened the store in the Washington D.C. market that was closed to repair damage caused by flooding. The 2014 store development program is expected to result in a 7.9% increase in retail square footage as compared to a 4.2% increase realized in fiscal 2013. The Company routinely evaluates its existing store operations in regards to its overall business strategy and from time to time will close or divest older or underperforming stores.

The new store program anticipates the continued expansion of Harris Teeter's existing markets, including the Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal

Delaware. Real estate development by its nature is both unpredictable and subject to external factors including weather, construction schedules and costs. Any change in the amount and timing of new store development can impact the expected capital expenditures, sales and operating results.

Startup costs associated with opening new stores can negatively impact operating margins and net income. In the current competitive environment, promotional costs to maintain market share could also negatively impact operating margins and net income in future periods. The continued execution of productivity initiatives implemented throughout all stores, maintaining controls over waste, implementation of operating efficiencies and effective merchandising strategies will dictate the pace at which the Company's operating results could improve, if at all.

The retail grocery market remains intensely competitive, including the possibility of new competitors coming into the Company's existing markets. As such, the Company will continue to refine its merchandising strategies to respond to the intense competition and changing shopping demands.

Capital Resources and Liquidity

The Company's principal source of liquidity has been cash generated from operating activities of Harris Teeter and borrowings available under the Company's credit facility. During fiscal 2013, the net cash provided by operating activities was $224.1 million, compared to $207.3 million in fiscal 2012 and $272.2 million in fiscal 2011. The increase from fiscal 2012 to fiscal 2013 was driven by higher earnings and the timing of accruals and related payments associated with normal operations. Investing activities in fiscal 2013 required $189.0 million of cash, as compared to $45.1 million utilized in fiscal 2012. Fiscal 2012 investing activities included, among other items, approximately $170 million in cash proceeds from the sale of A&E and $26.3 million of cash paid for the Lowes Foods Transaction. Fiscal 2011 investing activities were $109.0 million and included Harris Teeter's sale of its ownership position in five investment properties along with one owned property which generated $22.6 million of cash and the Company's sale of a foreign investment, which generated $21.6 million of cash. Historically, capital spending has been financed by cash provided by operating activities and supplemented with borrowings under the Company's credit facility. Financing activities in fiscal 2013 utilized $59.7 million of cash, as compared to $114.5 million utilized in fiscal 2012 and $62.0 million utilized in fiscal 2011. Fiscal 2012 financing activities included $80.0 million for the repayment of the term loan under the Company's prior credit facility and fiscal 2011 financing activities included a net reduction of $20.0 million of borrowings under the Company's prior credit facility. Financing activity also included $54.4 million for the payment of dividends in fiscal 2013, compared to $27.1 million in fiscal 2012 and $25.6 million in fiscal 2011.

Fiscal 2013 capital expenditures totaled $190.7 million, as compared to $199.9 million in fiscal 2012 and $148.0 million in fiscal 2011. Capital expenditures for fiscal 2014 are expected to total approximately $240 million. The Company anticipates that its capital investment for new store growth and store remodels will be concentrated in its existing markets for fiscal 2014, as well as in the foreseeable future. The Company has sufficient resources through internally generated funds and borrowings available under the Company's credit facility to complete the planned capital investment. Management believes that the Company's revolving line of credit provides sufficient liquidity for what management expects the Company will require through the expiration of the line of credit on January 30, 2017.

On January 30, 2012, the Company amended and restated its then-existing credit agreement that provided financing under a $100.0 million term loan and a $350.0 million revolving line of credit. The prior credit agreement was due to expire in December of 2012 and the Company had previously repaid $20.0 million of the term loan prior to the closing of the amended credit facility. The amended credit facility contains a revolving line of credit that provides for financing up to $350.0 million through its termination date on January 30, 2017. In connection with the closing of the amended credit agreement, the Company repaid the remaining $80.0 million term loan under the prior credit facility utilizing $40.0 million of cash and $40.0 million of borrowings under the new revolver, which new borrowings were subsequently repaid in the third quarter of fiscal 2012. The amended credit agreement provides for an optional increase of the revolving credit facility by an additional amount of up to $100.0 million (if the existing or new lenders agree to assume the additional commitments) and two one-year maturity extension options, both of which require consent of certain of the lenders. Outstanding borrowings under the amended credit agreement bear interest at a variable rate, at the Company's option at: (a) an alternate base rate, based on a reference to: rates on federal funds transactions with members of the Federal Reserve System, the prime rate, or the LIBOR Market Index Rate in effect on the interest determination date; (b) the LIBOR Market Index Rate; or (c) a LIBOR Rate, each plus an applicable margin as determined by the administrative agent in accordance with the terms of the amended credit agreement. The amount which may be borrowed from time to time and the applicable margin to the referenced interest rate are each dependent on a leverage factor. The leverage factor is based on a ratio of rent-adjusted consolidated funded debt divided by earnings before interest, taxes, depreciation, amortization and operating rents, as set forth in the amended credit agreement. The more significant of the financial covenants that the Company must meet during the term of the amended credit agreement include a maximum leverage ratio and a minimum fixed charge coverage ratio. The amended credit agreement restricts the Company's ability to pay dividends

and make certain other restricted payments, as defined in the amended credit agreement, if after giving effect to such restricted payment an event of default under the amended credit agreement would exist or the Company would not be in compliance with certain specified financial covenants. However, management does not expect these restrictions will affect the Company's ability to pay dividends at the current level in the foreseeable future.

As of October 1, 2013, the Company was in compliance with all financial covenants of the amended credit facility. Issued letters of credit reduced the amount available for borrowings under the amended credit facility and amounted to $29 million as of October 1, 2013. In addition to the $321 million of borrowings available under the Company's amended credit facility, the Company has the capacity to borrow up to an aggregate amount of $33.8 million from two major U.S. life insurance companies utilizing certain insurance assets as collateral. In the normal course of business, the Company will continue to evaluate other financing opportunities based on the Company's needs and market conditions.

Covenants in certain of the Company's long-term debt agreements limit the total indebtedness that the Company may incur. As of October 1, 2013, the amount of additional debt that could be incurred within the limitations of the most restrictive debt covenants exceeded the borrowings available under the amended credit facility. As such, management believes that the limit on indebtedness does not restrict the Company's ability to meet future liquidity requirements through borrowings available under the Company's amended credit facility, including any liquidity requirements expected in connection with the Company's expansion plans for the foreseeable future.

Contractual Obligations and Commercial Commitments

The Company has assumed various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements, such as debt and lease agreements. Management expects that cash provided by operations and other sources of liquidity, such as the Company's amended credit facility and new sources of financing available to the Company, will be sufficient to meet these obligations on a short and long-term basis. The following table represents the scheduled maturities of the Company's contractual obligations as of October 1, 2013 (in thousands):

Total Less than
1 Year 1-3 Years 3-5 Years More than
5 Years

Long-Term Debt ⁽¹⁾ $ 130,585 $ 8,645 $ 15,270 $ 106,670 $ -

Operating Leases ^{(1) (2)} 1,637,771 109,345 224,916 219,650 1,083,860

Capital Lease Obligations ^{(1) (2)} 200,971 13,171 26,402 26,798 134,600

Purchase Obligations - Fixed Assets 103,421 103,421 - - -

Purchase Obligations - Service Contracts/Other 80,189 38,210 31,159 9,679 1,141

Unrecognized Tax Liability ⁽³⁾ 806 5 801 - -

Other Long-Term Liabilities ⁽⁴⁾ 9,084 1,433 2,301 1,539 3,811

Total Contractual Cash Obligations $ 2,162,827 $ 274,230 $ 300,849 $ 364,336 $ 1,223,412

_______________

(1) For a more detailed description of the obligations see Notes 7 and 8 to the Consolidated Financial Statements in Item 8 hereof. Amounts represent total expected payments of principal and interest.

(2) Represents the minimum rents payable and includes leases associated with closed stores. The obligations related to the closed store leases are discussed below. Amounts are not offset by expected sublease income and do not include various contingent liabilities associated with assigned leases as discussed below.

(3) For a more detailed description of the obligation refer to Note 14 to the Consolidated Financial Statements in Item 8 hereof. The timing of payment, if any, for the unrecognized tax liability is not certain. However, we believe that we could possibly be assessed on the tax issues within the next three years.

(4) Represents the projected cash payments associated with certain deferred compensation contracts. The net present value of these obligations is recorded by the Company and included with other long-term liabilities in the Company's consolidated balance sheets.

The table above excludes funding of the Harris Teeter Supermarkets, Inc. Employees' Pension Plan (the "Pension Plan"), payments pursuant to the Supplemental Executive Retirement Plan (the "SERP") and payments pursuant to the Company's flexible deferred compensation and survivor benefit plans. The Company's funding policy in regards to the Pension Plan is to

contribute annually the amount required by regulatory authorities to meet minimum funding requirements and an amount to increase the funding ratios over future years to a level determined by the Company's actuaries to be effective in reducing the volatility of contributions. However, the timing and amount of such contributions or payments may be impacted by a number of factors, including government regulation, returns on plan assets and actuarial assumptions regarding our future funding obligations. The Company was not required to make a contribution to the Pension Plan in fiscal 2013. Payments made pursuant to the SERP, flexible deferred compensation and survivor benefit plans are not required to be funded in advance, and are equal to the benefit payments made during the year. Actual payments will be based on various external factors such as retirement dates and mortality. Annual payments pursuant to the SERP are expected to range between $1.2 million and $3.7 million over the next five years. Benefit payments for the flexible deferred compensation plan or survivor benefit plan cannot be reasonably estimated due to the various external factors noted above. For a more detailed description of our pension obligations see Note 15 to the Consolidated Financial Statements in Item 8 hereof.

In connection with the closing of certain store locations, the Company has assigned leases to several sub-tenants with recourse. These leases expire over the next 8 years, and the future minimum lease payments of approximately $27.3 million, in the aggregate, over that future period have been assumed by these sub-tenants. In the unlikely event, in management's opinion based on the current operations and credit worthiness of the assignees, that all such contingent obligations would be payable by the Company, the approximate aggregate amounts due by year would be as follows: $7.4 million in fiscal 2014 (22 stores), $6.1 million in fiscal 2015 (17 stores), $5.0 million in fiscal 2016 (11 stores), $3.6 million in fiscal 2017 (8 stores), $2.4 million in fiscal 2018 (6 stores) and $2.8 million in aggregate during all remaining years thereafter.

The Company utilizes various standby letters of credit and bonds as required from time to time by certain programs, most significantly for self-insured programs such as workers compensation and various casualty insurance. These letters of credit and bonds do not represent additional obligations of the Company since the underlying liabilities are recorded as insurance accruals and included with other current liabilities on the Company's consolidated balance sheets. In addition, the Company occasionally utilizes documentary letters of credit for the purchase of merchandise in the normal course of business. Issued and outstanding letters of credit totaled $29 million as of October 1, 2013.

As previously discussed, during the first quarter of fiscal 2014 the Company closed on the acquisition of certain Piggly Wiggly store locations. The Company's cash commitments for the acquisition and assumed leases are as follows: $41.0 million for less than one year; $6.5 million in years 2-3; $6.5 million in years 3-5; and, $21.5 million in more than 5 years.

The Company expects to pay certain merger related costs (including investment banker fees, change in control payments and retention bonuses) upon or after the close of the pending merger with Kroger. The Company's current estimate of the cash commitments for these merger related costs are as follows: $48.8 million for less than one year; $4.4 million in years 2-3; and, $2.9 million in years 3-5.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Updated 2013-02 "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"). ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The ASU is effective for annual periods and interim periods within those periods beginning after December 15, 2012. The ASU will be effective for the Company beginning in the first quarter of fiscal 2014 and is not expected to have a material impact on the Company's Consolidated Financial Statements.

Off Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial condition, results of operations or cash flows.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty. Therefore, management's determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. Actual results could differ from those estimates. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate.

Management has identified the following accounting policies as the most critical in the preparation of the Company's financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain.

Vendor Rebates, Credits and Promotional Allowances

Consistent with standard practices in the retail industry, the Company receives allowances from vendors through a variety of programs and arrangements. Given the highly promotional nature of the retail supermarket industry, the allowances are generally intended to defray the costs of promotion, advertising and selling the vendor's products. Examples of such arrangements include, but are not limited to, promotional, markdown and rebate allowances; cooperative advertising funds; volume allowances; store opening discounts and support; and slotting, stocking and display allowances. The amount of such allowances may be determined on the basis of (1) a fixed dollar amount negotiated with the vendor, (2) an amount per unit purchased or as a percentage of total purchases from the vendor, or (3) amounts based on sales to the customer, number of stores, in-store displays or advertising. The proper recognition and timing of accounting for these items are significant to the reporting of the results of operations of the Company. The Company applies the authoritative guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104 ("SAB No. 104") - Revenue Recognition, Subtopic 605-50 of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), and other authoritative guidance as appropriate. Under SAB No. 104, revenue recognition requires, as a prerequisite, the completion of the earnings process and its realization or assurance of realizability. Vendor rebates, credits and other promotional allowances that relate to Harris Teeter's buying and merchandising activities, including lump-sum payments associated with long-term contracts, are recorded as a component of cost of sales as they are earned, the recognition of which is determined in accordance with the underlying agreement with the vendor, the authoritative guidance and completion of the earning process. Portions of vendor allowances that are refundable to the vendor, in whole or in part, by the nature of the provisions of the contract are deferred from recognition until realization is reasonably assured.

The Company's practices are in accordance with ASC Subtopic 605-50 and are based on the premise that the accounting for these vendor allowances should follow the economic substance of the underlying transactions, which is evidenced by the agreement with the vendor as long as the allowance is distinguishable from the merchandise purchase. Consistent with this premise, the Company recognizes allowances when the purpose for which the vendor funds were intended and committed to be used has been fulfilled and a cost has been incurred by the retailer. Thus, it is the Company's policy to recognize the vendor allowance consistent with the timing of the recognition of the expense that the allowance is intended to reimburse and to determine the accounting classification consistent with the economic substance of the underlying transaction. Where the Company provides an identifiable benefit or service to the vendor apart from the purchase of merchandise, that transaction is recorded separately. For example, co-operative advertising allowances are accounted for as a reduction of advertising expense in the period in which the advertising cost is incurred. If the advertising allowance exceeds the cost of advertising, then the excess is recorded against the cost of sales in the period in which the related expense is recognized.

There are numerous types of rebates and allowances in the retail industry. The Company's accounting practices with regard to some of the more typical arrangements are discussed as follows. Vendor allowances for price markdowns are credited to the cost of sales during the period in which the related markdown was taken and charged to the cost of sales. Slotting and stocking allowances received from a vendor to ensure that its products are carried or to introduce a new product at the Company's stores are recorded as a reduction of cost of sales over the period covered by the agreement with the vendor based on the estimated inventory turns of the merchandise to which the allowance applies. Display allowances are recognized as a reduction of cost of sales in the period earned in accordance with the vendor agreement based on the estimated inventory turns of the merchandise to which the allowance applies. Volume rebates by the vendor in the form of a reduction of the purchase price of the merchandise reduce the cost of sales when the related merchandise is sold. Generally, volume rebates under a structured purchase program with allowances awarded based on the level of purchases are recognized, when realization is assured, as a reduction in the cost of sales in the appropriate monthly period based on the actual level of purchases in the period relative to the total purchase commitment and adjusted for the estimated inventory turns of the merchandise. Some of these typical vendor rebate, credit and promotional allowance arrangements require that the Company make assumptions and judgments regarding, for example, the likelihood of attaining specified levels of purchases or selling specified volumes of products, the duration of carrying a specified product and the estimation of inventory turns. Vendor allowances that have not been earned are recorded as either unearned revenue or as an offset to the carrying value of inventory and totaled $23.0 million and $16.9 million as of October 1, 2013, and October 2, 2012, respectively. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate. Historically, the Company's assumptions and judgments regarding vendor rebates, credits and promotional allowances have been reasonably accurate. Management believes that future changes in these assumptions and judgments are not reasonably likely to have a material effect on the Company's financial condition and results of operation.

Inventory Valuation

Merchandise inventory is valued at the lower of cost or market with the cost of a substantial portion of inventories being determined using the last-in, first-out (LIFO) method. Limited categories of inventories are valued on the first-in, first-out (FIFO) cost methods. In total, approximately 85% and 84% of inventories were valued using the LIFO method as of the end of fiscals 2013 and 2012, respectively. Cost for the balance of the inventories was determined using the FIFO method. The excess of estimated current costs over the LIFO carrying value, or LIFO reserve, was approximately $40.7 million and $42.4 million as of October 1, 2013 and October 2, 2012, respectively. LIFO assumes that the last costs in are the ones that should be used to measure the cost of goods sold, leaving the earlier costs residing in the ending inventory valuation. The Company uses the "link chain" method of computing dollar value LIFO whereby the base year values of beginning and ending inventories are determined using a cumulative price index. The Company generates an estimated internal index to "link" current costs to the original costs of the base years in which the Company adopted LIFO. The Company's determination of the LIFO index is driven by the change in current year costs, as well as the change in inventory quantities on hand. Under the LIFO valuation method, all retail store inventories are initially stated at estimated cost as calculated by the Retail Inventory Method (RIM). Under RIM, the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality. Inherent in the RIM calculation are certain significant management judgments and estimates, including markups, markdowns, lost inventory (shrinkage) percentages and the purity and similarity of inventory sub-categories as to their relative inventory turns, gross margins and on hand quantities. These judgments and estimates can significantly impact the ending inventory valuation at cost, as well as gross margin. Management believes that the Company's RIM provides an inventory valuation which reasonably approximates cost and results in carrying the inventory at the lower of cost or market. Historically, the Company's assumptions and judgments regarding the Company's RIM have been reasonably accurate. Management does not believe that the likelihood is significant that materially higher LIFO reserves are required given its current expectations of on-hand inventory quantities and costs.

The proper valuation of inventory also requires management to estimate the net realizable value of the Company's obsolete and slow-moving inventory at the end of each period. Management bases its net realizable values upon many factors including historical recovery rates, the aging of inventories on hand, the inventory movement of specific products and the current economic conditions. When management has determined inventory to be obsolete or slow moving, the inventory is reduced to its net realizable value by recording an obsolescence valuation allowance. Given the Company's experiences in selling obsolete and slow-moving inventory, management believes that the historical estimates used to value obsolete and slow-moving inventory have been reasonably accurate.

With regard to the proper valuations of inventories, management reviews its judgments, assumptions and other relevant, significant factors on a routine basis and makes adjustments where the facts and circumstances dictate.

Self-insurance Accruals for Workers' Compensation, Healthcare and General Liability

The Company is primarily self-insured for workers' compensation claims, healthcare claims and general liability and automotive liability losses. The Company has purchased insurance coverage in order to establish certain limits to its exposure on a per claim basis. The Company's self-insurance accruals for workers' compensation insurance and general liability insurance totaled $34.0 million and $32.6 million as of October 1, 2013 and October 2, 2012, respectively.

Actual workers' compensation claims, and general liability and automotive liability losses, are reported to the Company by third party administrators. The third party administrators also report initial estimates of related loss. The open claims and initial loss estimates are subjected to examination by the Company's risk management and accounting management utilizing a consistent methodology which involves various assumptions, judgment and other factors. Such factors include but are not limited to the probability of settlement, the amount at which settlement can be achieved, the probable duration of the claim, the cost development pattern of the claim and the applicable cost development factor. The Company determines the estimated accruals required for worker compensation claims in each accounting period. This requires that management determine estimates of the costs of claims incurred and accrue for such expenses in the period in which the claims are incurred. The Company measures the liabilities associated with claims for workers' compensation, general liability and automotive liability through the use of actuarial methods to project an estimate of ultimate cost for claims incurred. The estimated cost for claims incurred are discounted to present values using a discount rate representing a return on high-quality fixed income securities with an average maturity equal to the average payout of the related liability. A 25 basis point decrease in the discount rate would not significantly increase the estimated liabilities. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate.

The variety of healthcare plans available to employees are primarily self-insured. The Company records an accrual for the estimated amount of self-insured healthcare claims incurred by all participants but not yet reported (IBNR) using an actuarial method of applying a development factor to the reported claims amount. The most significant factors which impact on the determination of the required accrual are the historical pattern of the timeliness of claims processing, changes in the nature or types of benefit plans, changes in the plan benefit designs, employer-employee cost sharing factors, and medical trends and inflation. The Company's total accrual for self-insured healthcare claims totaled $4.5 million and $5.1 million as of October 1, 2013 and October 2, 2012, respectively. Historical experience is continually monitored, and accruals are adjusted when warranted by changes in facts and circumstances.

Management believes that the use of actuarial studies to determine self-insurance accruals represents a consistent method of measuring these subjective estimates.

Impairment of Goodwill and Other Long-lived Assets and Closed Store Obligations

The Company assesses its goodwill and other long-lived assets for possible impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net non-discounted cash flows expected to be generated by the asset. An impairment loss is recognized for any excess of net book value over the estimated fair value of the asset impaired. The fair value is estimated based on expected future cash flows.

The value of property and equipment associated with closed stores and facilities is adjusted to reflect recoverable values based on the Company's prior history of disposing of similar assets and current economic conditions. Management continually reviews its fair value estimates and records impairment charges for assets held for sale when management determines, based on new information which it believes to be reliable, that such charges are appropriate.

The results of impairment tests are subject to management's estimates and assumptions of projected cash flows and operating results. The Company believes that, based on current estimates and assumptions of projected cash flows, materially different reported results are not likely to result from the impairment of goodwill or other long-lived assets. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of materially different reported results.

The Company records liabilities for closed stores that are under long-term lease agreements. The liability represents an estimate of the present value of the remaining non-cancelable lease payments after the anticipated closing date, net of estimated subtenant income. The closed store liabilities usually are paid over the lease terms associated with the closed stores, unless settled earlier. Management estimates the subtenant income and future cash flows based on its historical experience and knowledge of (1) the market in which the store is located, (2) the results of its previous efforts to dispose of similar assets and (3) the current economic conditions. The actual cost of disposition for these leases is affected by specific real estate markets, inflation rates and general economic conditions and may differ significantly from those assumed and estimated.

Store closings generally are completed within one year after the decision to close. Adjustments to closed store liabilities primarily relate to changes in subtenants and actual costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. The Company periodically reviews the relevant, significant factors used in its estimates and makes adjustments where the facts and circumstances dictate. The Company's closed store liability amounted to $21.0 million and $23.7 million as of October 1, 2013 and October 2, 2012, respectively. Individual closed store liabilities are likely to be adjusted up or down in the future to reflect changes in assumptions. However, the Company's historical assumptions and judgments regarding closed store liabilities have been reasonably accurate.

Retirement Plans and Post-Retirement Benefit Plans

The Company maintains certain retirement benefit plans for substantially all full-time employees and supplemental retirement benefit plans for certain selected directors and officers of the Company and its subsidiaries. The qualified pension plan is a non-contributory, funded defined benefit plan, while the non-qualified supplemental retirement benefit plans are unfunded, defined benefit plans. The Company's current funding policy for its qualified pension plan is to contribute annually an amount in excess of the contributions required by regulatory authorities to meet minimum funding requirements, as determined by its actuaries to be effective in increasing the funding ratios and reducing the volatility of future contributions.

The Company has certain deferred compensation arrangements which allow or allowed in prior years its directors, officers and selected key management personnel to forego the receipt of earned compensation for specified periods of time. The Company may also, from time to time, make discretionary annual contributions into the Director Deferral Plan on behalf of its outside directors. These plans are unfunded. The Company utilizes a rabbi trust to hold assets set aside to pay the respective liabilities of these plans. For further disclosures regarding the Company's pension and deferred compensation plans, see Note 15 to the Consolidated Financial Statements in Item 8 hereof.

The Company maintains a post-retirement healthcare plan for retirees whose sum of age and years of service equal at least 75 at retirement. The plan continues coverage from early retirement date until the earlier date of eligibility for Medicare or any other employer's medical plan. The Company requires that the retiree pay the estimated full cost of the coverage. The Company also provides a $5,000 post-retirement mortality benefit to a small number of retirees under a prior plan. The obligations and expenses associated with each of these benefit plans are not material.

The determination of the Company's obligation and expense for pension, deferred compensation and other post-retirement benefits is dependent on certain assumptions selected by management and used by the Company and its actuaries in calculating such amounts. The more significant of those assumptions applicable to the qualified pension plan include the discount rate, the expected long-term rate of return on plan assets, the rates of increase in future compensation and the rates of future employee turnover. Those assumptions also apply to determinations of the obligations and expense of the following plans, except as noted: (1) supplemental pension - no funded assets to be measured, and (2) deferred compensation arrangement and post-retirement mortality benefit - no funded assets to be measured and no dependency on future rates of compensation or turnover. In accordance with generally accepted accounting principles, actual results that differ from management's assumptions are accumulated and amortized over future periods and, therefore, generally affect the Company's recognized expense and recorded obligation in such future periods. While management believes that its selections of values for the various assumptions are appropriate, significant differences in actual experience or significant changes in the assumptions may materially affect pension and other post-retirement obligations and future expense. Sensitivity to changes in the major assumptions used in the calculation of the Harris Teeter Supermarkets, Inc. Employees' Pension Plan (the "Pension Plan") and the Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement Plan (the "SERP") liabilities is illustrated below (in millions):

Percentage Point Change Projected Benefit Obligation Decrease (increase) Expense Decrease (increase)

Pension Plan Discount Rate +/- 1.0 % $36.9 / (45.8) $ 3.0 / (3.6 )

Pension Plan Return on Assets +/- 1.0 % - $ 2.7 / (2.7 )

SERP Discount Rate +/- 1.0 % $ 5.7 / (6.9) $ 1.2 / (2.1 )

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. The Company's exposure to market risks results primarily from changes in interest rates. Generally, the fair value of debt with a fixed interest rate will increase as interest rates fall, and the fair value will decrease as interest rates rise.

The table below presents principal cash flows and related weighted average interest rates by expected maturity dates for the Company's Senior Notes due at various dates through 2018 (which accounts for 99% of the Company's fixed interest debt obligations) (dollars in thousands):

2014 2015 2016 2017 2018 Thereafter Total Fair Value

Senior Notes $ - $ - $ - $ 100,000 $ - $ - $ 100,000 $ 121,900

Weighted average interest rate - - - 7.64 % - - 7.64 %

For a more detailed description of fair value of the Senior Notes, see Note 11 to the Consolidated Financial Statements in Item 8 hereof.

Item 8. Financial Statements and Supplementary Data

HARRIS TEETER SUPERMARKETS, INC.
AND CONSOLIDATED SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Page

Reports of Independent Registered Public Accounting Firm 24

Consolidated Balance Sheets, October 1, 2013 and October 2, 2012 26

Statements of Consolidated Operations for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 27

Statements of Consolidated Comprehensive Income for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 28

Statements of Consolidated Shareholders' Equity for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 29

Statements of Consolidated Cash Flows for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 30

Notes to Consolidated Financial Statements 31

Schedule I- Valuation and Qualifying Accounts for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 S-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Harris Teeter Supermarkets, Inc.:

We have audited the accompanying consolidated balance sheets of Harris Teeter Supermarkets, Inc. and subsidiaries (the Company) as of October 1, 2013 and October 2, 2012, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended October 1, 2013. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule "Valuation and Qualifying Accounts." These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of October 1, 2013 and October 2, 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended October 1, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of October 1, 2013, based on criteria established in "Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)," and our report dated December 2, 2013 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

Charlotte, North Carolina

December 2, 2013

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Harris Teeter Supermarkets, Inc.:

We have audited Harris Teeter Supermarkets, Inc. and subsidiaries (the Company) internal control over financial reporting as of October 1, 2013, based on criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Controls over Financial Reporting in Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 1, 2013, based on criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Harris Teeter Supermarkets, Inc. and subsidiaries as of October 1, 2013 and October 2, 2012, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended October 1, 2013, and our report dated December 2, 2013 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Charlotte, North Carolina

December 2, 2013

CONSOLIDATED BALANCE SHEETS
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
(dollars in thousands)

October 1, October 2,

2013 2012

ASSETS

Current Assets

Cash and Cash Equivalents $ 187,612 $ 212,211

Accounts Receivable, Net of Allowance For Doubtful Accounts of $1,661 and $1,648 62,165 59,267

Refundable Income Taxes 1,722 27,583

Inventories 316,809 305,106

Deferred Income Taxes 7,696 6,044

Prepaid Expenses and Other Current Assets 30,026 24,182

Total Current Assets 606,030 634,393

Property, Net of Accumulated Depreciation and Amortization 1,142,245 1,102,703

Investments 103,365 107,424

Goodwill 19,301 19,301

Intangible Assets 13,759 15,039

Other Long-Term Assets 128,537 73,628

Total Assets $ 2,013,237 $ 1,952,488

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Current Portion of Long-Term Debt and Capital Lease Obligations $ 4,788 $ 4,219

Accounts Payable 275,909 281,142

Accrued Compensation 71,371 69,390

Other Current Liabilities 100,261 96,887

Total Current Liabilities 452,329 451,638

Long-Term Debt and Capital Lease Obligations 208,691 208,271

Deferred Income Taxes 8,096 10,941

Pension Liabilities 88,740 119,883

Other Long-Term Liabilities 126,509 124,136

Commitments and Contingencies - -

Equity

Common Stock, no par value - Shares Outstanding: 49,458,968 and 49,292,585, respectively 117,927 111,347

Retained Earnings 1,093,414 1,039,935

Accumulated Other Comprehensive Loss (82,469 ) (113,663 )

Total Equity 1,128,872 1,037,619

Total Liabilities and Equity $ 2,013,237 $ 1,952,488

See Notes to Consolidated Financial Statements

STATEMENTS OF CONSOLIDATED OPERATIONS
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)

52 Weeks Ended
October 1,
2013 52 Weeks Ended
October 2,
2012 52 Weeks Ended
October 2,
2011

Net Sales $ 4,709,866 $ 4,535,414 $ 4,285,565

Cost of Sales 3,292,903 3,176,914 3,015,517

Selling, General and Administrative Expenses 1,222,615 1,187,522 1,089,342

Operating Profit 194,348 170,978 180,706

Interest Expense 16,425 16,998 19,116

Interest Income (263 ) (587 ) (133 )

Net Investment Gain - - (19,392 )

Earnings From Continuing Operations Before Income Taxes 178,186 154,567 181,115

Income Tax Expense 69,206 54,640 69,657

Earnings From Continuing Operations, Net of Income Taxes 108,980 99,927 111,458

(Loss) Earnings From Operations of Discontinued Operations - (15,755 ) 26,078

Loss on Disposition of Discontinued Operations - (3,717 ) (48,750 )

Income Tax Expense (Benefit) 1,088 (2,057 ) (2,461 )

Loss From Discontinued Operations, Net of Income Taxes (1,088 ) (17,415 ) (20,211 )

Net Earnings $ 107,892 $ 82,512 $ 91,247

Earnings (Loss) Per Share - Basic:

Continuing Operations $ 2.23 $ 2.05 $ 2.30

Discontinued Operations (0.02 ) (0.36 ) (0.42 )

Net Earnings 2.21 1.69 1.88

Earnings (Loss) Per Share - Diluted:

Continuing Operations $ 2.21 $ 2.04 $ 2.28

Discontinued Operations (0.02 ) (0.36 ) (0.41 )

Net Earnings 2.19 1.68 1.87

Weighted Average Number of Shares of Common Stock Outstanding:

Basic 48,916 48,751 48,469

Diluted 49,212 49,053 48,852

Regular Dividends Declared Per Common Stock $ 0.60 $ 0.55 $ 0. 52

Special Dividend Declared Per Common Stock 0.50 - -

See Notes to Consolidated Financial Statements

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
(dollars in thousands)

52 Weeks Ended
October 1,
2013 52 Weeks Ended
October 2,
2012 52 Weeks Ended
October 2,
2011

Net Earnings $ 107,892 $ 82,512 $ 91,247

Other Comprehensive Income (Loss):

Unrealized (Loss) Gain on Cash Flow Hedge (124 ) 1,036 758

Change in Pension and Other Postemployment Defined Benefit Plans 51,597 14,516 8,334

Foreign Currency Translation Adjustment - 830 (232 )

Other Comprehensive Income 51,473 16,382 8,860

Income Tax Expense 20,279 5,779 3,652

Other Comprehensive Income, Net of Income Tax 31,194 10,603 5,208

Comprehensive Income $ 139,086 $ 93,115 $ 96,455

See Notes to Consolidated Financial Statements

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
HARRIS TEETER SUPERMARKETS INC. AND SUBSIDIARIES
(dollars in thousands, except share and per share amounts)

Common
Stock
Shares
(no par value) Common
Stock Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss)
Total
Equity of
HTSI Non-
controlling
Interest Total
Equity

Balance as of October 3, 2010 48,901,482 $ 98,285 $ 918,843 $ (124,679 ) $ 892,449 $ 6,474 $ 898,923

Net earnings - - 91,247 - 91,247 698 91,945

Other comprehensive income, net of tax - - - 5,208 5,208 236 5,444

Dividends ($0.52 a share) - - (25,555 ) - (25,555 ) - (25,555 )

Exercise of stock options, including tax benefits of $1,157 38,256 1,779 - - 1,779 - 1,779

Share-based compensation 273,844 8,073 - - 8,073 - 8,073

Shares effectively purchased and retired for withholding taxes (65,765 ) (2,485 ) - - (2,485 ) - (2,485 )

Directors stock plan - 3 - - 3 - 3

Acquisition from noncontrolling interest - (1,444 ) (1,444 ) (806 ) (2,250 )

Distributions to noncontrolling interest - - - - - (795 ) (795 )

Balance as of October 2, 2011 49,147,817 104,211 984,535 (119,471 ) 969,275 5,807 975,082

Net earnings - - 82,512 - 82,512 - 82,512

Other comprehensive income, net of tax - - - 10,603 10,603 56 10,659

Dividends ($0.55 a share) - - (27,112 ) - (27,112 ) - (27,112 )

Exercise of stock options, including tax benefits of $1,760 30,506 2,245 - - 2,245 - 2,245

Share-based compensation 236,554 10,016 - - 10,016 - 10,016

Shares effectively purchased and retired for withholding taxes (122,292 ) (5,129 ) - - (5,129 ) - (5,129 )

Directors stock plan - 4 - - 4 - 4

Distributions to noncontrolling interest - - - - - (176 ) (176 )

Disposition of subsidiary - - - (4,795 ) (4,795 ) (5,687 ) (10,482 )

Balance as of October 2, 2012 49,292,585 111,347 1,039,935 (113,663 ) 1,037,619 - 1,037,619

Net earnings - - 107,892 - 107,892 - 107,892

Other comprehensive income, net of tax - - - 31,194 31,194 - 31,194

Dividends ($1.10 a share) - - (54,413 ) - (54,413 ) - (54,413 )

Exercise of stock options, including tax benefits of $636 24,000 1,010 - - 1,010 - 1,010

Share-based compensation 202,113 7,720 - - 7,720 - 7,720

Shares effectively purchased and retired for withholding taxes (59,730 ) (2,155 ) - - (2,155 ) - (2,155 )

Directors stock plan - 5 - - 5 - 5

Balance as of October 1, 2013 49,458,968 $ 117,927 $ 1,093,414 $ (82,469 ) $ 1,128,872 $ - $ 1,128,872

See Notes to Consolidated Financial Statements

STATEMENTS OF CONSOLIDATED CASH FLOWS
HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
(dollars in thousands)

52 Weeks Ended 52 Weeks Ended 52 Weeks Ended

October 1, October 2, October 2,

2013 2012 2011

CASH FLOW FROM OPERATING ACTIVITIES:

Net Earnings $ 107,892 $ 82,512 $ 91,247

Loss from Discontinued Operations 1,088 17,415 20,211

Non-Cash Items Included in Net Income:

Depreciation and Amortization 149,098 135,542 128,717

Deferred Income Taxes (23,003 ) 1,814 13,684

Net Loss (Gain) on Sale of Property and Investments 120 (132 ) (20,162 )

Share-Based Compensation 7,720 7,121 8,073

Other, Net 3,300 (1,863 ) (1,496 )

Changes in Operating Accounts Providing (Utilizing) Cash:

Accounts Receivable (2,898 ) (12,179 ) 785

Inventories (11,703 ) (17,969 ) (15,112 )

Prepaid Expenses and Other Current Assets 17,010 864 3,308

Accounts Payable (5,211 ) 24,665 37,528

Other Current Liabilities 5,513 (4,513 ) 18,449

Other Long-Term Operating Accounts (24,876 ) (25,980 ) (41,312 )

Net Cash Provided by Operating Activities of Discontinued Ops. - - 28,326

Net Cash Provided by Operating Activities 224,050 207,297 272,246

INVESTING ACTIVITIES:

Capital Expenditures (190,717 ) (199,946 ) (147,993 )

Purchase of Other Investments (7,760 ) (3,448 ) (19,436 )

Business Acquisition - (26,296 ) -

Proceeds from Sale of Property and Investments 15,283 172,143 65,697

Net (Investments in) Proceeds From Company-owned Life Insurance (5,788 ) 12,486 (1,073 )

Other, Net - (28 ) (627 )

Net Cash Used in Investing Activities of Discontinued Operations - - (5,538 )

Net Cash Used in Investing Activities (188,982 ) (45,089 ) (108,970 )

FINANCING ACTIVITIES:

Payments on Long-Term Debt and Capital Lease Obligations (4,325 ) (83,706 ) (30,910 )

Dividends Paid (54,413 ) (27,112 ) (25,555 )

Proceeds from Stock Issued 374 485 622

Share-Based Compensation Tax Benefits 636 1,760 908

Shares Effectively Purchased and Retired for Withholding Taxes (2,155 ) (5,129 ) (2,485 )

Other, Net 216 (774 ) 139

Net Cash Used by Financing Activities of Discontinued Operations - - (4,698 )

Net Cash Used in Financing Activities (59,667 ) (114,476 ) (61,979 )

(Decrease) Increase in Cash and Cash Equivalents (24,599 ) 47,732 101,297

Cash Effect of Foreign Currency Fluctuations of Discontinued Ops. - - (107 )

Cash and Cash Equivalents at Beginning of Year 212,211 164,479 73,612

Cash and Cash Equivalents at End of Year $ 187,612 $ 212,211 $ 174,802

Cash and Cash Equivalents of Continuing Operations $ 187,612 $ 212,211 $ 164,479

Cash and Cash Equivalents of Discontinued Operations - - 10,323

Cash Paid During the Year For:

Interest, Net of Amounts Capitalized 16,365 18,141 19,194

Income Taxes 81,157 75,059 41,753

Non-Cash Activity - Assets Acquired under Capital Leases 5,315 8,866 12,144

See Notes to Consolidated Financial Statements

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Harris Teeter Supermarkets, Inc. and subsidiaries, including its wholly-owned operating company, Harris Teeter, Inc. ("Harris Teeter"), 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 noncontrolling interest.

The Company reviews its investments in entities to determine if such entities are deemed to be variable interest entities ("VIE's") as defined by ASC paragraph 810-10-05-8. The Company will consolidate those VIE's in which the Company is the primary beneficiary of the entity. The Company concluded that it did not have any VIE's that required consolidation in the reported fiscal years.

On November 7, 2011, the Company completed the sale of all of its ownership interest in its thread manufacturing subsidiary, American & Efird ("A&E") to two affiliates of KPS Capital Partners, LP. The purchase price was $180.0 million in cash consideration, subject to adjustments for working capital and certain liabilities, including under-funded pension liabilities and foreign debt. A&E's results of operations and financial position are reported as discontinued operations in these financial statements.

Operations

Fiscal Year

Effective April 2, 2012, the Company's fiscal year end was changed from the Sunday nearest to September 30 to the Tuesday nearest to September 30 to coincide with Harris Teeter's fiscal year end. Fiscal 2013 includes the 52 weeks ended October 1, 2013, fiscal 2012 includes the 52 weeks ended October 2, 2012, and fiscal 2011 includes the 52 weeks ended October 2, 2011 (October 4, 2011 for Harris Teeter).

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.

Cash and Cash Equivalents

For purposes of the statements of consolidated cash flows, the Company considers all highly liquid and unrestricted cash investments purchased with a maturity of three months or less to be cash equivalents.

Inventories

The Company's inventories are valued at the lower of cost or market with the cost of substantially all inventories being determined using the last-in, first-out (LIFO) method. Limited categories of inventories are valued on the weighted average and on the first-in, first-out (FIFO) cost methods. Under the LIFO valuation method, all retail store inventories are initially stated at estimated cost as calculated by the Retail Inventory Method (RIM). Under RIM, the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. LIFO indices are developed approximately one month prior to year end except for inventory held at the Company's distribution facilities which are developed at year end. The annual LIFO measurement is achieved by applying the indices to the actual inventory on hand as of year end.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Vendor Rebates, Credits and Promotional Allowances

Consistent with standard practices in the retail industry, the Company receives allowances from vendors through a variety of programs and arrangements. These allowances are generally intended to defray the costs of promotion, advertising and selling the vendor's products. Vendor rebates, credits and other promotional allowances that relate to buying and merchandising activities, including lump-sum payments associated with long-term contracts, are recorded as a component of cost of sales as they are earned, the recognition of which is determined in accordance with the underlying agreement with the vendor, the authoritative guidance and completion of the earning process. Portions of vendor allowances that are refundable to the vendor, in whole or in part, by the nature of the provisions of the contract are deferred from recognition until realization is reasonably assured.

The Company recognizes allowances when it fulfills the purpose for which the vendor funds were intended and the Company incurs a cost. Thus, it is the Company's policy to recognize the vendor allowance consistent with the timing of the recognition of the expense that the allowance is intended to reimburse and to determine the accounting classification consistent with the economic substance of the underlying transaction. Where the Company provides an identifiable benefit or service to the vendor apart from the purchase of merchandise, that transaction is recorded separately. For example, co-operative advertising allowances are accounted for as a reduction of advertising expense in the period in which the advertising cost is incurred. If the advertising allowance exceeds the cost of advertising, then the excess is recorded against the cost of sales in the period in which the related expense is recognized.

Vendor allowances for price markdowns are credited to the cost of sales during the period in which the related markdown was taken and charged to the cost of sales. Slotting and stocking allowances received from a vendor to ensure that its products are carried or to introduce a new product are recorded as a reduction of cost of sales over the period covered by the agreement with the vendor based on the estimated inventory turns of the merchandise to which the allowance applies. Display allowances are recognized as a reduction of cost of sales in the period earned in accordance with the vendor agreement. Volume rebates by the vendor in the form of a reduction of the purchase price of the merchandise reduce the cost of sales when the related merchandise is sold. Generally, volume rebates under a structured purchase program with allowances awarded based on the level of purchases are recognized, when realization is assured, as a reduction in the cost of sales in the appropriate monthly period based on the actual level of purchases in the period relative to the total purchase commitment and adjusted for the estimated inventory turns of the merchandise.

Property and Depreciation

Property is recorded at cost and is depreciated, using principally the straight-line method, over the following useful lives:

Land improvements 10-40 years

Buildings 15-40 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 the estimated useful life or the lease term. Refer to Note 3 below for the amount of depreciation and amortization expense recorded in the reporting periods. 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 with gains or losses on disposal being added to or deducted from earnings.

Impairment of Other Long-lived Assets and Closed Store Obligations

The Company assesses its other long-lived assets for possible impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net non-discounted cash flows expected to be generated by the asset. An impairment loss is recognized for any excess of net book value over the estimated fair value of the asset impaired, and recorded as an offset to the asset value. The fair value is estimated based on expected future cash flows or third party valuations, if available.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reviews its fair value estimates and records impairment charges for assets held for sale when management determines, based on new information which it believes to be reliable, that such charges are appropriate.

Investments

The Company invests in certain real estate development projects, with a managing partner or partners and members of the project, in which the Company either operates or plans to operate a supermarket. Generally, all major decisions regarding investments in real estate development projects are shared between all members. In particular, the use and sale of investments, business plans and budgets are generally required to be approved by all members. Generally, the managing partner receives fees for services that are believed to be at market. These investments, depending on the state of development, are accounted for either under the equity method of accounting or at cost.

The Company evaluates its investments using specific criteria to determine whether the Company will absorb the majority of the expected losses or receive a majority of the residual returns, and is the primary beneficiary. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, guarantees by members, fees paid to a partner and voting rights.

In addition, the Company continues to hold certain equity interests in a few emerging growth companies as a result of investments made in certain venture capital funds during prior years. As stated below, these investments are carried at the lower of cost or market. As a result of distributions, market write-downs and disposals over the past several years, the recorded aggregate value of these investments have been effectively reduced to zero.

Real estate and other investments are carried at the lower of cost or market and are periodically reviewed for potential impairment as discussed above. Investments accounted for under the equity method totaled $72,822,000 and $59,599,000 as of October 1, 2013 and October 2, 2012, respectively. Investments accounted for under the cost method totaled $30,543,000 and $47,825,000 as of October 1, 2013 and October 2, 2012, respectively.

Goodwill and Other Intangibles

Goodwill and other intangibles with indefinite lives are tested for impairment at least annually, or more frequently, if circumstances indicate a potential impairment. Intangible assets with finite, measurable lives are amortized over their respective useful lives until they reach their estimated residual values, and are reviewed for impairment along with other long-lived assets as discussed above.

Insurance

The Company utilizes a combination of self-insured retention and high-deductible programs for workers' compensation claims, healthcare claims, and general liability and automotive liability losses. The Company has purchased insurance coverage in order to establish certain limits to its exposure on a per claim basis. The Company determines the estimated liability required for worker compensation claims, general liability and automotive liability by first analyzing the costs of claims incurred and then adjusts such estimates through actuarial methods to project the ultimate cost for claims incurred. The estimated total expected costs of claims includes an estimate for claims incurred but not reported (IBNR) and is discounted to present values using a discount rate representing a return on high-quality fixed income securities with an average maturity equal to the average payout of the related liability.

The Company records an accrual for the estimated amount of self-insured healthcare IBNR claims. These liabilities are recorded based on historical experience, which is monitored, and accruals are adjusted when warranted by changes in facts and circumstances.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Rent

The Company recognizes rent holidays, including the period of time the Company has access prior to the store opening, which typically includes construction and fixturing activity, and rent escalations on a straight-line basis over the term of the lease. The deferred rent amount is included in Other Long-Term Liabilities on the Company's Consolidated Balance Sheets. The Company expenses construction period rent as incurred.

Derivatives

The Company has historically utilized derivative financial instruments to hedge its exposure to changes in interest rates. As of the end of fiscal 2013, there were no outstanding interest rate hedge agreements. All derivative financial instruments are recorded on the balance sheet at their respective fair value. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.

Derivatives are required to be carried at fair value on the balance sheet and receive hedge accounting treatment when certain conditions are met. In accordance with this standard, the Company's derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as "cash flow" hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction affects earnings.

The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the cash flow of the hedge items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company will discontinue hedge accounting prospectively.

The Company enters into purchase commitments for a portion of the fuel utilized in its distribution operations. The Company expects to take delivery of and to utilize these resources in a reasonable period of time and in the conduct of normal business. Accordingly, these fuel purchase commitments qualify as normal purchases. The Company also utilizes derivative financial instruments to hedge its exposure in the price variations of fuel. In addition, from time to time the Company will enter into commodity forward contracts related to the purchase of ingredients used in production processes. These contracts generally qualify for the normal purchase exception under guidance for derivative instruments and hedging activity.

By entering into derivative instrument contracts, the Company exposes itself, from time to time, to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to the Company, which creates credit risk for the Company. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting its exposure to any single counterparty and regularly monitoring its market position with each counterparty.

The Company's derivative instruments do not contain any credit-risk related contingent features.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market, or if none exists, the most advantageous market, for the specific asset or liability at the measurement date (the exit price). The fair value should be based on assumptions that market participants would use when pricing the asset or liability. The fair value hierarchy that prioritizes the information used in measuring fair value is as follows:

•Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

•Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly

•Level 3 - Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

Revenue Recognition

Revenue is recognized at the point of sale to the customers, net of returns and sales taxes.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost of Sales

The major components of cost of sales are (a) the cost of products sold determined under the Retail Inventory Method (see "Inventories" above) reduced by purchase cash discounts and vendor purchase allowances and rebates, (b) the cost of various sales promotional activities reduced by vendor promotional allowances, and reduced by cooperative advertising allowances to the extent an advertising allowance exceeds the cost of the advertising, (c) the cost of product waste, including, but not limited to, physical waste and theft, (d) the cost of product distribution, including warehousing, freight and delivery, and (e) any charges, or credits, associated with LIFO reserves and valuation allowances for obsolete and slow moving inventories. Additionally, the costs of production of product sold by the dairy operation to outsiders are included in cost of sales in the period in which the sales are recognized in revenues.

Selling, General and Administrative Expenses

The major components of selling, general and administrative expenses are (a) the costs associated with store operations, including store labor and training, fringe benefits and incentive compensation, supplies and maintenance, regional and district management and store support, store rent and other occupancy costs, property management and similar costs, (b) advertising costs, (c) shipping and handling costs, excluding freight, warehousing and distribution costs, (d) merchandising and purchasing department staffing, supplies and associated costs, (e) customer service and support, and (f) the costs of maintaining general and administrative support functions, including, but not limited to, personnel administration, finance and accounting, treasury, credit, information systems, marketing, and environmental, health and safety, based on appropriate classification under generally accepted accounting principles.

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 and amounted to $408,000, $320,000 and $624,000 in fiscal 2013, 2012 and 2011, respectively. Net advertising expenses of $19,575,000, $19,807,000 and $20,071,000 were included in the Company's results of operations for fiscal 2013, 2012 and 2011, respectively.

Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. Tax credits are recorded as a reduction of income taxes in the years in which they are generated. 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 settled or realized. Accordingly, income tax expense will increase or decrease in the same period in which a change in tax rates is enacted. A valuation allowance is established for deferred tax assets for which realization is not more likely than not.

Accounting for uncertainty in income taxes requires that a minimum recognition threshold be met for a tax position taken or expected to be taken in a tax return before being recognized in the financial statements. The Company has elected to record interest expense related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recorded as a component of income tax expense.

Earnings Per Share ("EPS")

Basic EPS is based on the weighted average outstanding common shares. Diluted EPS is based on the weighted average outstanding common shares adjusted by the dilutive effect of potential common stock equivalents resulting from the operation of the Company's comprehensive stock option and awards plans.

Stock Options and Stock Awards

The Company uses fair-value accounting for all share-based payments to employees. Compensation expense for stock awards are based on the grant date fair value and are expensed ratably over their vesting period, resulting in more expense in the early years. Income tax benefits attributable to stock options exercised are credited to capital stock.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Comprehensive Income

Other comprehensive income refers to revenues, expenses, gains and losses that are not included in net earnings but rather are recorded directly in shareholders' equity. The components of accumulated other comprehensive loss, net of taxes as of October 1, 2013, October 2, 2012 and October 2, 2011 consisted of the following (in thousands):

2013 2012 2011

Accumulated unrecognized losses for minimum pension liabilities $ 82,375 $ 113,584 $ 122,736

Accumulated unrecognized losses for postemployment liabilities 98 158 111

Accumulated unrecognized (gains) losses on cash flow hedges (4 ) (79 ) 523

Total accumulated other comprehensive loss, net of taxes $ 82,469 $ 113,663 $ 123,370

Cash Flows

A portion of the discontinued operations were denominated in currencies other than the U.S. dollar. This created an exposure to foreign currency exchange rates. The impact of changes in the relationship of other currencies to the U.S. dollar was historically not significant.

Reclassifications

To conform to classifications used in the current year, the financial statements for the prior year reflect certain reclassifications.

2. INVENTORIES

Inventories are valued at the lower of cost or market with the cost of a substantial portion of inventories being determined using the last-in, first-out (LIFO) method. The LIFO cost of such inventories was $40,740,000 and $42,440,000 less than the first-in, first-out (FIFO) cost method as of October 1, 2013 and October 2, 2012, respectively. Limited categories of inventories that are valued on the FIFO cost method totaled $46,857,000 and $49,302,000 at the end of fiscal 2013 and fiscal 2012, respectively.

The following table summarizes the components of inventories as of October 1, 2013 and October 2, 2012 (in thousands):

2013 2012

Finished goods $ 314,003 $ 301,102

Raw materials 2,806 4,004

Total inventories $ 316,809 $ 305,106

3. PROPERTY

The following table summarizes the components of property as of October 1, 2013 and October 2, 2012 (in thousands):

2013 2012

Land $ 30,167 $ 30,167

Buildings and improvements 250,283 233,538

Machinery and equipment 968,597 890,500

Leasehold improvements 915,278 838,792

Construction in progress 80,078 77,707

Total, at cost 2,244,403 2,070,704

Accumulated depreciation and amortization (1,102,158 ) (968,001 )

Property, net $ 1,142,245 $ 1,102,703

Depreciation and amortization expense for property was $147,977,000, $134,455,000 and $127,779,000 for fiscal 2013, 2012 and 2011, respectively.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. COMPANY OWNED LIFE INSURANCE (COLI)

The Company has purchased life insurance policies to fund its obligations under certain benefit plans for officers, key employees and directors. The cash surrender value of these policies is recorded net of policy loans and included with other long-term assets in the Company's consolidated balance sheets. The cash value of the Company's life insurance policies were $61,846,000 as of October 1, 2013 and $58,390,000 as of October 2, 2012, and no policy loans were outstanding at either date.

5. GOODWILL

In June 2012, the Company completed a purchase and sale agreement between Harris Teeter and Lowe's Food Stores, Inc. ("Lowes Foods") whereby Harris Teeter acquired ten Lowes Foods store locations and Lowes Foods acquired six Harris Teeter store locations and received cash consideration of $26.3 million. The transaction was accounted for as a business acquisition and assets and liabilities were valued at the current fair market value. During fiscal 2012, the Company recorded impairment losses and other incremental costs of approximately $29.8 million in connection with this transaction. Such costs are included with Selling, General & Administrative expenses on the Company's Consolidated Statements of Operations. In connection with the Lowes Foods transaction, during the third quarter of fiscal 2012 the Company recorded goodwill of $23.2 million and made an assessment for goodwill impairment on those stores that would not be integrated into the operations, resulting in the Company recording goodwill impairment of $3.9 million. On an annual basis during the fourth fiscal quarter, the Company performs a fair value-based impairment test on the net book value of goodwill and will perform the same procedures on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.

6. INTANGIBLE ASSETS

The carrying amount of intangible assets as of October 1, 2013 and October 2, 2012 was as follows (in thousands):

2013 2012

Acquired favorable operating leases $ 20,740 $ 20,740

Pharmacy scripts 602 602

Total amortizing intangibles 21,342 21,342

Accumulated amortization (7,583 ) (6,303 )

Total intangible assets, net of accumulated amortization $ 13,759 $ 15,039

The Company has no non-amortizing intangible assets. Amortization expense for intangible assets was $1,280,000, $1,139,000 and $937,000 in fiscal 2013, 2012, and 2011, respectively. Amortizing intangible assets have remaining useful lives from one to 17 years. Projected amortization expense for intangible assets existing as of October 1, 2013 is: $1,220,000 for fiscal 2014 and $1,075,000 per year for fiscal 2015 through 2018.

7. LEASES

The Company leases certain equipment under agreements expiring during the next five years and leases most of its stores under agreements that expire during the next 26 years. It is expected that certain store 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 four years. Certain leases also contain rent escalation clauses (step rents) that require additional rental amounts in the later years of the term. Rent expense for the last three fiscal years was as follows (in thousands):

2013 2012 2011

Minimum, net of sublease income $ 105,257 $ 99,289 $ 94,901

Contingent 1,645 1,378 1,252

Total $ 106,902 $ 100,667 $ 96,153

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease commitments (excluding leases assigned - see below) and total minimum sublease rental income to be received under non-cancelable subleases as of October 1, 2013 were as follows (in thousands):

Operating Capital

Fiscal Year Leases Subleases Leases

2014 $ 109,345 $ (1,251 ) $ 13,171

2015 112,814 (893 ) 13,176

2016 112,102 (595 ) 13,226

2017 111,066 (389 ) 13,271

2018 108,584 (31 ) 13,527

Later years 1,083,860 - 134,600

Total minimum lease obligations (receivables) $ 1,637,771 $ (3,159 ) 200,971

Amount representing interest (88,493 )

Present value of net minimum obligation (included with long-term debt) $ 112,478

In connection with the closing of certain store locations, the Company has assigned leases to several sub-tenants with recourse. These leases expire over the next 8 years and the future minimum lease payments totaling $27.3 million over this period have been assumed by these sub-tenants.

8. LONG-TERM DEBT

On January 30, 2012, the Company amended and restated its then-existing credit agreement that provided financing under a $100 million term loan and a $350 million revolving line of credit. The prior credit agreement was due to expire in December of 2012. The amended credit facility contains a revolving line of credit that provides for financing up to $350 million through its termination date on January 30, 2017. The amended credit agreement also provides for an optional increase of the revolving credit facility by an additional amount of up to $100 million (if the existing or new lenders agree to assume the additional commitments) and two one-year maturity extension options, both of which require consent of certain of the lenders. Outstanding borrowings under the amended credit agreement bear interest at a variable rate, at the Company's option at: (a) an alternate base rate, based on a reference to: rates on federal funds transactions with members of the Federal Reserve System, the prime rate, or the LIBOR Market Index Rate in effect on the interest determination date; (b) the LIBOR Market Index Rate; or (c) a LIBOR Rate, each plus an applicable margin as determined by the administrative agent in accordance with the terms of the amended credit agreement. The amount which may be borrowed from time to time and the applicable margin to the referenced interest rate are each dependent on a leverage factor. The leverage factor is based on a ratio of rent-adjusted consolidated funded debt divided by earnings before interest, taxes, depreciation, amortization and operating rents, as set forth in the amended credit agreement. The more significant of the financial covenants that the Company must meet during the term of the amended credit agreement include a maximum leverage ratio and a minimum fixed charge coverage ratio. The amended credit agreement restricts the Company's ability to pay dividends and make certain other restricted payments, as defined in the amended credit agreement, if after giving effect to such restricted payment an event of default under the amended credit agreement would exist or the Company would not be in compliance with certain specified financial covenants. However, management does not expect these restrictions will affect the Company's ability to pay dividends at the current level in the foreseeable future.

Covenants in certain of the Company's long-term debt agreements limit the total indebtedness that the Company may incur. The most restrictive of these covenants is a consolidated maximum leverage ratio and a minimum fixed charge coverage ratio as defined in the Company's amended credit agreement. As of October 1, 2013, the amount of additional debt that could be incurred within the limitations of the debt covenants exceeded the borrowings available under the amended credit facility. As such, management believes that the limit on indebtedness does not restrict the Company's ability to meet future liquidity requirements through borrowings available under the Company's amended credit facility, including any liquidity requirements expected in connection with the Company's expansion plans for the foreseeable future.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt as of October 1, 2013 and October 2, 2012 was as follows (in thousands):

2013 2012

7.72% Senior Note due April, 2017 $ 50,000 $ 50,000

7.55% Senior Note due July, 2017 50,000 50,000

Capital Lease Obligations 112,478 110,487

Other Obligations 1,001 2,003

Total 213,479 212,490

Less Current Portion 4,788 4,219

Total Long-Term Debt $ 208,691 $ 208,271

Long-term debt maturities (including capital lease obligations) in each of the next five fiscal years are as follows: 2014 - $4,788,000; 2015 - $4,077,000; 2016 - $4,438,000; 2017 - $104,851,000; 2018 - $5,345,000.

Total interest expense, net of amounts capitalized, on debt and capital lease obligations was $16,425,000, $18,269,000 and $19,140,000 for fiscal 2013, 2012 and 2011, respectively. Capitalized interest totaled $1,582,000, $560,000 and $632,000 for fiscal 2013, 2012 and 2011, respectively.

9. INTANGIBLE LIABILITIES

In connection with the Lowes Foods transaction, the Company recorded intangible liabilities associated with unfavorable operating lease contracts which are included with other long-term liabilities in the Company's Consolidated Balance Sheets. The carrying amount of intangible liabilities as of October 1, 2013 and October 2, 2012 was as follows (in thousands):

2013 2012

Acquired Unfavorable Operating Leases $ 2,199 $ 2,199

Accumulated amortization (211 ) (52 )

Total Intangible Liabilities, Net of Accumulated Amortization $ 1,988 $ 2,147

Amortization expense for intangible liabilities was $159,000 and $52,000 in fiscal 2013 and 2012, respectively. Intangible liabilities are amortized over the primary term of the underlying lease contracts which have remaining terms from 11 to 15 years. Projected amortization for intangible liabilities existing as of October 1, 2013 is $159,000 per year for fiscal 2014 through 2018.

10. DERIVATIVE FINANCIAL INSTRUMENTS

During fiscal 2009, the Company entered into two separate three-year interest rate swap agreements with an aggregate notional amount of $80.0 million. The swap agreements effectively fixed the interest rate on $80.0 million of the Company's term loan, of which $40.0 million was at 1.81% and $40.0 million was at 1.80%, excluding the applicable margin and associated fees. Both interest rate swaps were designated as cash flow hedges. The swap agreements expired according to their terms on January 30, 2012 and May 12, 2012.

In order to limit the price variability in fuel purchases associated with its distribution operations, the Company has entered into a series of purchased call options and written put options. The options effectively establish a low and high purchase price, excluding shipping, handling and taxes, for a set amount of gallons. All of the options are deemed to be net purchase options which are designated as a cash flow hedge. The following table summarizes the primary terms for options that have been entered into or were in effect during the reporting periods:

Option Period Price Per Gallon

Contract Date Gallons Under Options Begin End Low High

05-04-10 168,000 08-01-10 10-31-10 $2.09 $2.60

05-04-10 588,000 07-01-10 10-31-10 $2.12 $2.60

11-16-10 1,092,000 12-01-10 04-30-11 $1.95 $2.56

01-05-11 1,344,000 05-01-11 11-30-11 $2.43 $2.80

08-05-11 1,218,000 12-01-11 05-31-12 $2.77 $3.13

10-04-11 1,260,000 06-01-12 11-30-12 $2.50 $2.88

05-08-12 1,260,000 12-01-12 11-30-13 $2.84 $3.20

06-07-12 1,260,000 12-01-12 11-30-13 $2.59 $2.96

05-01-13 1,008,000 12-01-13 11-30-14 $2.66 $2.87

06-05-13 1,050,000 12-01-13 11-30-14 $2.71 $2.92

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the required fair value quantitative disclosures, on a combined basis, for the Company's financial instruments, designated as cash flow hedges (in thousands):

Carrying Value Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

Fair Value Measurement as of October 1, 2013:

Net purchase options (included with Prepaid Expenses and Other Current Assets on the balance sheet) $ 133 $ - $ 133 $ -

Net purchase options (included with Accounts Payable on the balance sheet) 3 - 3 -

Fair Value Measurement as of October 2, 2012:

Net purchase options (included with Prepaid Expenses and Other Current Assets on the balance sheet) 302 - 302 -

Net purchase options (included with Accounts Payable on the balance sheet) 25 - 25 -

There were no transfers into or out of Level 1 and Level 2 fair value measurements during the years ended October 1, 2013 or October 2, 2012.

The pre-tax unrealized gains (losses) associated with the cash flow hedges for the fiscal years were as follows (in thousands):

2013 2012 2011

Unrealized (losses) gains recorded in other comprehensive income $ (124 ) $ 1,036 $ 758

11. FINANCIAL INSTRUMENTS

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash equivalents and notes receivables. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables are limited due to their dispersion across various companies and geographies.

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 fair value of variable interest debt approximates its carrying amount. The estimated fair value of the Company's Senior Notes due at various dates through 2017 (which accounts for 99% of the Company's fixed interest debt obligations) is computed based on borrowing rates currently available to the Company for loans with similar terms and maturities. The estimated fair value of the Company's Senior Notes and its carrying amount outstanding as of October 1, 2013 and October 2, 2012 is as follows (in thousands):

2013 2012

Senior Notes - estimated fair value $ 121,900 $ 127,730

Senior Notes - carrying amount 100,000 100,000

12. CAPITAL STOCK

The capital stock of the Company authorized as of September 28, 2008 was 75,000,000 shares of no par value Common Stock, 4,000,000 shares of Preference Stock (non-cumulative voting $0.56 convertible, $10 liquidation value), and 1,000,000 shares of Additional Preferred Stock. No shares of Preference Stock or Additional Preferred Stock were issued or outstanding as of October 1, 2013 or October 2, 2012.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors adopted a stock buyback program in 1996, authorizing, at management's discretion, the Company to purchase and retire up to 10% of the then outstanding shares of the Company's common stock for the purpose of preventing dilution as a result of the operation of the Company's comprehensive stock option and awards plans. There were no stock purchases in fiscal 2013, fiscal 2012 or fiscal 2011.

13. STOCK OPTIONS AND STOCK AWARDS

As of October 1, 2013, the Company had various equity incentive plans, which were approved by the Company's shareholders, that authorized the issuance of 6.5 million shares of common stock pursuant thereto. Currently the Company grants equity awards under the Harris Teeter Supermarkets, Inc. 2011 Incentive Compensation Plan, which was approved by the Company's shareholders in February 2011. After such time, no awards were granted under the Company's prior equity incentive plans, including without limitation the Harris Teeter Supermarkets, Inc. 2002 Comprehensive Stock Option and Award Plan (and the Addendum thereto) and the Harris Teeter Supermarkets, Inc. 2000 Comprehensive Stock Option and Award Plan Prior Plans, although outstanding awards previously granted under such prior plans will continue in effect in accordance with the terms and conditions of those plans. As of October 1, 2013, the Company may grant additional options or stock awards and performance shares in the amount of 2,164,000 shares.

The Board of Directors began approving equity awards in lieu of stock options in 2004. These awards have historically been apportioned 50% as a fixed award of restricted stock (restricted from sale or transfer until vesting ratably over a five-year period of continued employment) and 50% as performance share awards, based on the attainment of certain performance targets for the ensuing fiscal year. If the fiscal year performance targets are met, the performance shares are subsequently issued as restricted stock and vest over four years of continued employment.

Stock awards are being expensed ratably over the employees' five-year requisite service period in accordance with the graded vesting schedule, resulting in more expense being recognized in the early years. Compensation expense related to restricted awards totaled $7,597,000, $7,121,000 and $8,073,000 for fiscal 2013, 2012 and 2011, respectively. The remaining unamortized expense as of October 1, 2013 is $9,621,000, with a weighted average recognition period of 1.60 years.

A summary of the status of the Company's restricted stock awards as of October 1, 2013, October 2, 2012 and October 2, 2011, changes during the periods ending on those dates and weighted average grant-date fair value (WAGFV) is presented below (shares in thousands):

Stock Awards 2013 2012 2011

Shares WAGFV Shares WAGFV Shares WAGFV

Non-vested at beginning of period 600 35.94 797 32.25 706 28.52

Granted 230 35.63 212 42.44 298 38.44

Vested (178 ) 33.50 (389 ) 31.71 (191 ) 28.29

Forfeited (20 ) 35.79 (20 ) 35.30 (16 ) 30.34

Non-vested at end of period 632 36.03 600 35.94 797 32.25

The total fair value of stock awards that vested during fiscal years 2013, 2012 and 2011 was $5,978,000, $12,359,000, and $5,388,000, respectively.

The fair value of stock options is estimated at the date of grant using the Black-Scholes-Merton option pricing model. The Company uses historical data to estimate the expected life, volatility and expected forfeitures in valuing the options. The risk-free rate is based on the U.S. Treasury rate in effect at the time of grant. The weighted average fair value for stock options granted in fiscal 2013 was $12.34 per option and was based on the following weighted average assumptions: An expected life of 7.33 years; a risk-free interest rate of 1.43%; volatility of 31.88%; and a dividend yield of 1.59%. Compensation expense is recognized over the vesting period (which is immediately in the case of the fiscal 2013 grants) and amounted to $123,000 for fiscal 2013. There was no compensation expense related to stock options in fiscal 2012 or 2011.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the Company's stock option plans as of October 1, 2013, October 2, 2012, and October 2, 2011, changes during the years ending on those dates and related weighted average exercise price is presented below (shares in thousands):

2013 2012 2011

Stock Options Shares Price Shares Price Shares Price

Outstanding at beginning of year 36 $ 21.17 67 $ 18.77 104 $ 17.86

Granted 10 42.02 - - - -

Exercised (24 ) 15.64 (31 ) 15.94 (37 ) 16.25

Outstanding and exercisable at end of year 22 $ 36.68 36 $ 21.17 67 $ 18.77

As of October 1, 2013, all outstanding stock options were exercisable and the price per share ranged from $17.24 to $42.02. The total cash received from stock options exercised for the exercise price and related tax deductions are included in the Consolidated Statements of Shareholders' Equity. The Company has historically issued new shares to satisfy the stock options exercised. The aggregate intrinsic value of stock options outstanding and exercisable as of October 1, 2013 and October 2, 2012 was $275,000 and $602,000, respectively. The aggregate intrinsic value of stock options exercised during fiscal 2013, 2012 and 2011 was $595,000, $780,000, and $876,000, respectively.

14. INCOME TAXES

The Company and its subsidiaries file a consolidated U.S. federal income tax return. The U.S. federal statute of limitations remains open for fiscal 2010 and forward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years.

The provision for income taxes from continuing operations consisted of the following (in thousands):

2013 2012 2011

Current:

Federal $ 74,627 $ 37,696 $ 38,211

State and other 15,042 12,469 12,949

89,669 50,165 51,160

Deferred:

Federal (18,646 ) 7,038 17,834

State and other (1,817 ) (2,563 ) 663

(20,463 ) 4,475 18,497

Provision for income taxes from continuing operations $ 69,206 $ 54,640 $ 69,657

Income tax expense from continuing operations differed from an amount computed by applying the statutory tax rates to pre-tax income as follows (in thousands):

2013 2012 2011

Income tax on pre-tax income at the statutory federal rate of 35% $ 62,365 $ 54,098 $ 63,390

Increase (decrease) attributable to:

State and other income taxes, net of federal income tax benefit 7,436 6,120 8,604

Tax credits (1,845 ) (2,494 ) (1,081 )

Employee Stock Ownership Plan (ESOP) (1,031 ) (556 ) (583 )

COLI (1,393 ) (2,420 ) (803 )

Non-deductible transaction costs 1,872 - -

Tax law changes 840 - -

Other items, net 962 (108 ) 130

Income tax expense $ 69,206 $ 54,640 $ 69,657

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of temporary differences giving rise to the Company's consolidated deferred tax assets and liabilities as of October 1, 2013 and October 2, 2012 are as follows (in thousands):

2013 2012

Deferred Tax Assets:

Employee benefits $ 52,457 $ 57,880

Rent obligations 28,795 28,960

Liabilities not currently deductible 18,719 18,053

Vendor allowances 9,022 6,626

Other 16,756 14,886

Total deferred tax assets $ 125,749 $ 126,405

Deferred Tax Liabilities:

Property, plant and equipment $ (104,454 ) $ (114,144 )

Inventories (19,089 ) (14,537 )

Other (2,606 ) (2,621 )

Total deferred tax liabilities $ (126,149 ) $ (131,302 )

As of October 1, 2013, the Company had approximately $25.0 million of cumulative federal capital loss carryforwards, and approximately $36.4 million of state net operating loss carryforwards which will begin to expire in fiscal 2017. A valuation allowance of $5.6 million and $3.7 million is included with deferred income taxes as of October 1, 2013 and October 2, 2012, respectively. The valuation allowance increased by $1.9 million from fiscal 2012 to fiscal 2013, increased by $3.6 million from fiscal 2011 to fiscal 2012 and increased by $13,000 from fiscal 2010 to fiscal 2011. The allowance was developed based upon the uncertainty of the realization of certain federal or state deferred tax assets related to the federal capital loss carryforward and state net operating loss carryforwards. Although realization is not assured for the remaining deferred tax assets, the Company believes it is more likely than not that the deferred tax assets will be realized through the expected generation of future taxable income.

The following table provides a reconciliation of the unrecognized tax liability for fiscal 2013, 2012 and 2011 (in thousands):

2013 2012 2011

Gross taxes at beginning of year $ 450 $ 4,338 $ 4,104

Additions based on tax positions related to the current year 246 - -

Additions for tax positions of prior years 211 185 1,396

Reductions for tax positions of prior years (120 ) (4,073 ) (1,162 )

Reductions for settlements - - -

Reductions for deposits made - - -

Gross taxes at end of year 787 450 4,338

Accumulated interest 66 59 1,322

Federal tax benefit of state income tax deduction (47 ) (28 ) (242 )

Balance included in the Consolidated Balance Sheets at end of year $ 806 $ 481 $ 5,418

As of October 1, 2013, unrecognized tax benefits of $632,000 (including interest and penalties) would reduce the Company's tax rate if recognized. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the remainder of the unrecognized tax benefits would not affect the annual effective tax rate but would accelerate the payment of cash to the tax authority to an earlier period.

15. EMPLOYEE BENEFIT PLANS

The Company maintains various retirement benefit plans for substantially all full-time employees of the Company and its subsidiaries. These plans include the Harris Teeter Supermarkets, Inc. Retirement and Savings Plan ("Savings Plan") which is a defined contribution retirement plan, the Harris Teeter Supermarkets, Inc. Employees' Pension Plan ("Pension Plan") which is a qualified non-contributory defined benefit plan and the Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan ("SERP") which is a non-qualified supplemental defined benefit pension plan for certain executive officers. Effective September 30, 2005, participation in the Pension Plan was closed to new entrants and frozen for all participants, with certain transition benefits provided to those participants that have achieved specified age and service levels on December 31, 2005.

Substantially all full-time employees of the Company participate in one of the Company sponsored retirement plans. Employee retirement benefits or Company contribution amounts under the various plans 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 for the Pension Plan is to contribute annually the amount required by regulatory authorities to meet minimum funding requirements and an amount to increase the funding ratios over future years to a level determined by its actuaries to be effective in reducing the volatility of contributions.

The Company's fiscal year end is used as the measurement date for Company-sponsored defined benefit plans. The following table sets forth the change in the benefit obligation and plan assets, as well as the funded status and amounts recognized in the Company's consolidated balance sheets as of October 1, 2013 and October 2, 2012 for the Pension Plan and SERP (in thousands):

Pension Plan SERP

2013 2012 2013 2012

Change in benefit obligation:

Benefit obligation at the beginning of year $ 350,025 $ 370,514 $ 56,372 $ 47,212

Service cost 3,835 2,957 776 787

Interest cost 15,314 16,129 2,341 2,412

Actuarial (gain) loss (34,781 ) 50,984 (5,633 ) 9,357

Gain due to curtailment - - - (3,475 )

Loss due to special termination benefits - - - 1,300

Benefits paid (12,948 ) (16,710 ) (1,199 ) (1,221 )

Spin-off of liability to A&E plan - (73,849 ) - -

Pension benefit obligation at end of year 321,445 350,025 52,657 56,372

Change in plan assets:

Fair value of assets at the beginning of year 286,514 276,374 - -

Actual return on plan assets 12,351 40,549 - -

Employer contribution 368 50,221 1,199 1,221

Benefits paid (12,948 ) (16,710 ) (1,199 ) (1,221 )

Non-investment expenses (923 ) (830 ) - -

Spin-off of assets to A&E plan - (63,090 ) - -

Fair value of assets at end of year 285,362 286,514 - -

Funded status (36,083 ) (63,511 ) (52,657 ) (56,372 )

Unrecognized net actuarial loss 125,874 167,924 8,963 18,209

Unrecognized prior service cost 59 87 743 917

Prepaid (accrued) benefit cost $ 89,850 $ 104,500 $ (42,951 ) $ (37,246 )

Amounts recognized in the Consolidated Balance Sheets consist of:

(Prepaid) Accrued benefit liability $ (89,850 ) $ (104,500 ) $ 42,951 $ 37,246

Accumulated other comprehensive income 125,933 168,011 9,706 19,126

Net amount recognized $ 36,083 $ 63,511 $ 52,657 $ 56,372

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's defined benefit pension plans had projected and accumulated benefit obligations in excess of the fair value of plan assets as follows (in thousands):


		Pension Plan				SERP
		October 1, 2013		October 2, 2012		October 1, 2013		October 2, 2012
Projected benefit obligation	$	321,445	$	350,025	$	52,657	$	56,372
Accumulated benefit obligation		291,580		317,303		46,769		48,639
Fair value of plan assets		285,362		286,514		-		-

A minimum pension liability adjustment is required when the projected benefit obligation exceeds the fair value of plan assets and accrued pension liabilities. This adjustment also requires the elimination of any previously recorded pension assets. The minimum liability adjustment, net of tax benefit, is reported as a component of other comprehensive income and included in the Statements of Consolidated Comprehensive Income.

Net periodic pension expense for the Company's defined benefit pension plans for fiscal 2013, 2012 and 2011 included the following components (in thousands):

Pension Plan 2013 2012 2011

Service cost $ 3,835 $ 2,957 $ 2,645

Interest cost 15,314 16,129 18,163

Expected return on plan assets (17,907 ) (19,195 ) (22,636 )

Amortization of prior service cost 29 29 85

Recognized net actuarial loss 13,748 10,526 12,627

Net periodic pension expense 15,019 10,446 10,884

Settlement / Curtailment expense - 27,739 -

Total Expense $ 15,019 $ 38,185 $ 10,884

SERP 2013 2012 2011

Service cost $ 776 $ 787 $ 814

Interest cost 2,341 2,412 1,955

Amortization of prior service cost 174 179 247

Recognized net actuarial loss 3,613 1,212 1,521

Net periodic pension expense 6,904 4,590 4,537

Curtailment cost - 453 -

Special termination benefit cost - 1,300 -

Total expense $ 6,904 $ 6,343 $ 4,537

Net periodic pension expense for the Company's defined benefit pension plans is determined using assumptions as of the beginning of each year and the market-related value of plan assets that recognizes changes in fair value in a systematic and rational manner over five years. The projected benefit obligation and related funded status are determined using assumptions as of the end of each year. The following table summarizes the assumptions utilized:

2013 2012 2011

Weighted Average Discount Rate - Pension Plan 5.20 % 4.45 % 5.50 %

Weighted Average Discount Rate - SERP 5.00 % 4.20 % 5.40 %

Rate of Increase in Future Payroll Costs:

Pension Plan 3.0% - 8.0%* 3.0% - 8.0%* 3.0% - 8.0%*

SERP 6.0 % 6.0 % 6.0 %

Assumed Long-Term Rate of Return on Assets (Pension Plan only) 6.75 % 7.40 % 8.00 %

* Rate varies by age, with higher rates associated with lower aged participants.

Discount rates are based on the expected timing and amounts of the expected employer paid benefits and are established by reference to a representative yield curve of non-callable bonds with a credit rating of Aa and above with durations similar to the pension liabilities.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected long-term return on plan assets is estimated by asset class and is generally based on historical returns, volatilities and risk premiums. Based upon the plan's asset allocation, composite return percentiles are developed upon which the plan's expected long-term rate of return is based.

The SERP is unfunded, with benefit payments being made from the Company's general assets. Assets of the Pension Plan are invested in a directed trust. The following table sets forth by level, within the fair value hierarch, the Pension Plan's assets at fair value as of the fiscal year end (in thousands):

Fair Value Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

Fair Value Measurement as of October 1, 2013:

Cash and Cash Equivalents $ 3,676 $ 3,676 $ - $ -

Common Collective Trust Funds 88,906 - 88,906 -

Common Collective Loan Funds 28,381 - - 28,381

Corporate Bonds 39,667 39,667 - -

Municipal Bonds 311 311 - -

Other Fixed Income Securities 7,494 7,494 - -

Asset-Backed Securities 70 - 70 -

Equities 27,081 27,081 - -

Hedge Funds 45,413 - - 45,413

Mutual Funds 41,925 41,925 - -

Group Annuity Contract 2,438 - 2,438 -

Total Assets $ 285,362 $ 120,154 $ 91,414 $ 73,794

Fair Value Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)

Fair Value Measurement as of October 2, 2012:

Cash and Cash Equivalents $ 3,043 $ 3,043 $ - $ -

Common Collective Trust Funds 81,422 - 81,422 -

Corporate Bonds 55,275 55,275 - -

Municipal Bonds 11,579 11,579 - -

U.S. Government Securities 1,540 1,540 - -

Other Fixed Income Securities 5,354 5,354 - -

Asset-Backed Securities 11,486 - 11,486 -

Equities 21,588 21,588 - -

Hedge Funds 15,568 - - 15,568

Mutual Funds 77,344 77,344 - -

Group Annuity Contract 2,315 - 2,315 -

Total Assets $ 286,514 $ 175,723 $ 95,223 $ 15,568

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Following is a reconciliation of the beginning and ending balances for investments with measurements using significant unobservable inputs (Level 3) during fiscal 2013 and fiscal 2012 (in thousands):


		Common Collective Loan Funds		Hedge Funds
Ending Balance, October 2, 2011	$	-	$	37,319
Contributions		-		-
Net Realized and Unrealized Gains (Losses)		-		814
Sales and Settlements		-		(22,565	)
Ending Balance, October 2, 2012		-		15,568
Contributions		28,000		28,000
Net Realized and Unrealized Gains (Losses)		381		2,200
Sales and Settlements		-		(355	)
Ending Balance, October 1, 2013	$	28,381	$	45,413

Following is a description of the valuation methodologies used for pension assets measured at fair value.

Cash and Cash Equivalents - Fair values of cash equivalents are largely provided by independent pricing services.

Common Collective Trust Funds - These investments are public investment vehicles valued using the Net Asset Value ("NAV") provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The investment is classified within Level 2 of the valuation hierarchy because the NAV's unit price is quoted on a private market that is not active; however, the unit price is based on underlying investments which are traded on an active market.

Common Collective Loan Funds - These investments are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The investment is classified within Level 3 of the valuation hierarchy because the NAV's unit price is quoted on a private market that is not active.

Bonds, U.S. Government Securities, Other Fixed Income Securities and Equities - These investments are valued at the closing price reported on the active market on which the individual securities are traded.

Asset-Backed Securities - Prices are based on a compilation of primarily observable market information or a broker quote in a non-active market.

Hedge Funds - These investments are in a private investment fund that uses proprietary trading methods to seek returns. It is valued using the NAV provided by the manager of the fund. The investment is classified within Level 3 of the valuation hierarchy because the NAV's unit price is quoted on a private market that is not active.

Mutual Funds - These investments are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in an active market.

Group Annuity Contract - Fair value is calculated by discounting the related cash flow based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issues.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets in the directed trusts by investment classification as of the fiscal year end were as follows:

Asset Class October 1, 2013 October 2, 2012

Fixed income 35.3 % 66.3 %

Domestic equities 18.9 15.3

International equities 12.7 8.8

Alternative Investments - Hedge Funds 15.9 5.4

Alternative Investments - Loan Funds 10.0 -

Alternative Investments - Real Estate 3.1 2.3

Balanced Mutual Funds 2.0 -

Guaranteed investment contracts 0.8 0.8

Cash equivalents 1.3 1.1

100 % 100 %

Investments in the pension trust are overseen by the Retirement Plan Committee which is made up of officers and directors of the Company. The Company has developed an Investment Policy Statement based on the need to satisfy the long-term liabilities of the Pension Plan. The Company seeks to maximize return with reasonable and prudent levels of risk. Risk management is accomplished through diversification across asset classes, multiple investment manager portfolios and both general and portfolio-specific investment guidelines. The general asset guidelines by segment are as follows:

Asset Class Minimum Exposure Target Maximum Exposure

Investment grade fixed income and cash equivalents 30.0% 50.0% 100.0%

Domestic equities: 0.0 19.0 40.0

Large cap core 0.0 9.0 20.0

Small cap value 0.0 5.0 10.0

Small cap growth 0.0 5.0 10.0

International equities: 0.0 13.0 20.0

International value 0.0 4.5 7.0

International growth 0.0 4.5 7.0

Emerging markets 0.0 4.0 6.0

Alternative Investments: 0.0 18.0 30.0

Real Estate 0.0 6.0 10.0

Hedge Funds 0.0 12.0 20.0

Managers are expected to generate a total return consistent with their philosophy, offer protection in down markets and achieve a rate of return which ranks in the top 40% of a universe of similarly managed portfolios and outperform a target index, net of expenses, over rolling three year periods.

The Investment Policy Statement contains the following guidelines:

- Categorical restrictions such as limiting the average weighted duration of fixed income investments, limiting the aggregate amount of American Depository Receipts (ADRs), no direct foreign currency speculation, limited foreign exchange contracts, and limiting the use of derivatives;

- Portfolio restrictions that address such things as investment restrictions, proxy voting, and brokerage arrangements; and

- Asset class restrictions that address such things as single security or sector concentration, capitalization limits and minimum quality standards.

The Company plans to contribute approximately $1.2 million to the SERP during fiscal 2014. The Company's contribution to the SERP represents the benefit payments made during the fiscal year.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the Company's defined benefit pension plans (in thousands):

Pension Plan SERP

2014 $ 26,425 $ 1,199

2015 26,167 2,428

2016 13,427 2,531

2017 14,208 2,724

2018 15,024 3,668

Years 2019-2023 87,743 20,318

The Savings Plan is a defined contribution retirement plan pursuant to Section 401(k) of the Internal Revenue Code, and was authorized for the purpose of providing retirement benefits for employees of the Company. The Company provides a matching contribution based on the amount of eligible compensation contributed by the associate and an automatic retirement contribution based on age and years of service.

The Company has certain deferred compensation arrangements which allow, or allowed in prior years, its directors, officers and selected key management personnel to forego the receipt of earned compensation for specified periods of time. These arrangements include (1) a directors' compensation deferral plan, funded in a rabbi trust, the benefit and payment under such plan being made in the Company's common stock that has historically been purchased on the open market, (2) a key management deferral plan, unfunded, the benefit liability under such plan determined on the basis of the performance of selected market investment indices, and (3) other compensation deferral arrangements, unfunded and only available to directors and select key management in prior years, the benefit liability for which is determined based on fixed rates of interest.

Expense associated with the Savings Plan, deferred compensation arrangements and other plans for fiscal 2013, 2012 and 2011 were as follows (in thousands):

2013 2012 2011

Savings Plan $ 19,384 $ 21,778 $ 20,584

Deferred Compensation and other 1,321 1,256 945

16. COMPUTATION OF EARNINGS PER SHARE (EPS)

The following table details the computation of EPS for fiscal 2013, 2012 and 2011 (in thousands except per share data):

2013 2012 2011

Basic EPS:

Earnings From Continuing Operations $ 108,980 $ 99,927 $ 111,458

Weighted average common shares outstanding 48,916 48,751 48,469

Basic EPS $ 2.23 $ 2.05 $ 2.30

Diluted EPS:

Earnings From Continuing Operations $ 108,980 $ 99,927 $ 111,458

Weighted average common shares outstanding 48,916 48,751 48,469

Net potential common share equivalents - stock options 5 17 27

Net potential common share equivalents - stock awards 291 285 356

Weighted average common shares outstanding 49,212 49,053 48,852

Diluted EPS $ 2.21 $ 2.04 $ 2.28

Excluded from the calculation of common share equivalents:

Anti-dilutive common share equivalents - stock options - - -

Anti-dilutive common share equivalents - stock awards - - -

Stock awards that are based on performance are excluded from the calculation of potential common share equivalents until the performance criteria are met. As such, the impact of 112,000, 103,000 and 147,000 performance shares for the fiscal 2013, 2012 and 2011, respectively, were excluded from the computation of diluted shares.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

To calculate the EPS on the Loss From Discontinued Operations and on Net Earnings, the denominator for both basic and diluted earnings per share is the same as used in the table above. The basic and diluted EPS for the Loss From Discontinued Operations and for Net Earnings were as follows (in thousands except per share data):

2013 2012 2011

Loss From Discontinued Operations $ (1,088 ) $ (17,415 ) $ (20,211 )

Loss Per Share:

Basic $ (0.02 ) $ (0. 36 ) $ (0.42 )

Diluted (0.02 ) (0. 36 ) (0.41 )

Net Earnings $ 107,892 $ 82,512 $ 91,247

Earnings Per Share:

Basic $ 2.21 $ 1. 69 $ 1.88

Diluted 2.19 1. 68 1.87

17. DISCONTINUED OPERATIONS

On November 7, 2011, the Company completed the sale of all of its ownership interest in A&E to two affiliates of KPS Capital Partners, LP. The purchase price was $180 million in cash consideration, adjusted for working capital and certain liabilities, including under-funded pension liabilities and foreign debt.

The following table sets forth the historical operating results of A&E and the loss on disposition of discontinued operations for fiscal 2013, 2012 and 2011, which have been reclassified as discontinued operations (in thousands):

2013 2012 2011

Net Sales $ - $ 30,313 $ 320,876

Cost of Sales - 23,205 241,539

Gross Profit - 7,108 79,337

SG&A Expenses - 22,824 52,351

Operating (Loss) Profit - (15,716 ) 26,986

Interest Expense - 19 380

Interest Income - (17 ) (170 )

Less Net Earnings Attributable to Noncontrolling Interest - 37 698

Loss on Disposition of Discontinued Operations - 3,717 48,750

Loss on Discontinued Operations - (19,472 ) (22,672 )

Income Tax Expense (Benefit) 1,088 (2,057 ) (2,461 )

(Loss) From Discontinued Operations, Net of Taxes $ (1,088 ) $ (17,415 ) $ (20,211 )

18. COMMITMENTS AND CONTINGENCIES

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.

Refer to Note 7 above for additional commitments and contingencies.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. QUARTERLY INFORMATION (UNAUDITED)

The Company's stock is listed and traded on the New York Stock Exchange. The following table sets forth certain financial information, the high and low sales prices and dividends declared per share of common stock for the periods indicated (in millions, except per share data):

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter Fiscal
Year

2013 Operating Results

Net Sales $ 1,161.1 $ 1,169.1 $ 1,185.8 $ 1,193.9 $ 4,709.9

Gross Profit 334.7 359.6 362.2 360.5 1,417.0

Earnings From Continuing Operations 22.8 32.9 32.1 21.2 109.0

Loss From Discontinued Operations - - (1.1 ) - (1.1 )

Earnings (Loss) Per Share - Basic:

Continuing Operations 0.47 0.67 0.66 0.43 2.23

Discontinued Operations - - (0.02 ) - (0.02 )

Net Earnings 0.47 0.67 0.63 0.43 2.21

Earnings (Loss) Per Share - Diluted:

Continuing Operations 0.46 0.67 0.65 0.43 2.21

Discontinued Operations - - (0.02 ) - (0.02 )

Net Earnings 0.46 0.67 0.63 0.43 2.19

Dividend Per Share 0.65 0.15 0.15 0.15 1.10

Market Price Per Share:

High 39.42 45.03 48.96 49.90 49.90

Low 35.25 35.31 39.47 47.28 35.25

2012 Operating Results

Net Sales $ 1,119.5 $ 1,120.4 $ 1,152.7 $ 1,142.8 $ 4,535.4

Gross Profit 326.8 343.6 348.3 339.8 1,358.5

Earnings From Continuing Operations 25.8 30.4 20.0 23.7 99.9

Loss From Discontinued Operations (12.1 ) (0.2 ) (4.2 ) (0.9 ) (17.4 )

Earnings (Loss) Per Share - Basic:

Continuing Operations 0.53 0.62 0.41 0.49 2.05

Discontinued Operations (0.25 ) - (0.09 ) (0.02 ) (0.36 )

Net Earnings 0.28 0.62 0.32 0.47 1.69

Earnings (Loss) Per Share - Diluted:

Continuing Operations 0.53 0.62 0.41 0.48 2.04

Discontinued Operations (0.25 ) - (0.09 ) (0.02 ) (0.36 )

Net Earnings 0.28 0.62 0.32 0.46 1.68

Dividend Per Share 0.13 0.14 0.14 0.14 0.55

Market Price Per Share:

High 45.45 45.31 41.74 42.99 45.45

Low 37.78 39.16 36.10 37.27 36.10

20. SUBSEQUENT EVENT

On October 3, 2013, the Company's shareholders voted to approve the Agreement and Plan of Merger (the "Merger Agreement") with The Kroger Co. ("Kroger") and Hornet Acquisition, Inc. ("Merger Sub"), a wholly owned subsidiary of Kroger. The Merger Agreement provides for the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of Kroger. Under the terms of the Merger Agreement, at the effective time of the merger the Company's shareholders will receive $49.38 in cash for each share of common stock they own. The transaction remains subject to regulatory approvals (including under the Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended) and other customary closing conditions, and is expected to close in the fourth quarter of calendar year 2013 or the first quarter of calendar year 2014.

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. As of October 1, 2013, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management's annual report on internal control over financial reporting. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company's internal control over financial reporting as of October 1, 2013, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that, as of October 1, 2013, the Company's internal control over financial reporting is effective based on the criteria established in Internal Control-Integrated Framework.

(c) Attestation report of the registered public accounting firm. The effectiveness of the Company's internal control over financial reporting as of October 1, 2013 has been audited by KPMG LLP, an independent registered public accounting firm. Their report, which appears in Item 8, Financial Statement and Supplementary Data included herein, expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of October 1, 2013.

(d) Changes in internal control over financial reporting. During the Company's fourth fiscal quarter of 2013, there has been no change in the Company's internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

For information required by this item regarding executive officers, refer to "Executive Officers of the Registrant" in Item 4A hereof. Other information required by this item including regarding directors will be filed with the SEC within 120 days of the end of the fiscal year covered by this report in an amendment to this Annual Report on Form 10-K or will be incorporated herein by reference to the sections entitled "Proposal 1: Election of Directors," "Nominees for Election as Directors," "Committees of the Board of Directors," "Corporate Governance Matters - Audit Committee Financial Expert," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement to be filed with the Securities and Exchange Commission with respect to the Company's 2014 Annual Meeting of Shareholders (the "2014 Proxy Statement").

Code of Ethics and Code of Business Conduct and Ethics

The Company has adopted a written Code of Ethics (the "Code of Ethics") that applies to our Chairman of the Board and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and our Vice President and Treasurer. The Company has also adopted a Code of Business Conduct and Ethics (the "Code of Conduct") that applies to all employees, officers and directors of the Company. The Code of Ethics and Code of Conduct are available on the Company's website, www.harristeeter.com, in the "Investor Relations" section under the "Corporate Governance" caption. Any amendments to the Code of Ethics or Code of Conduct, or any waivers of the Code of Ethics, or any waiver of the Code of Conduct for directors or executive officers, will be disclosed on the Company's website promptly following the date of such amendment or waiver. Information on the Company's website, however, does not form a part of this Annual Report on Form 10-K.

Corporate Governance Guidelines and Committee Charters

In furtherance of its longstanding goal of providing effective governance of the Company's business and affairs for the benefit of shareholders, the Board of Directors of the Company has approved Corporate Governance Guidelines. The Guidelines contain general principles regarding the functions of the Company's Board of Directors. The Guidelines are available on the Company's website referenced above. In addition, committee charters for the Company's Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are also included on the Company's website.

Item 11. Executive Compensation

The information required by this item will be filed with the SEC within 120 days of the end of the fiscal year covered by this report in an amendment to this Annual Report on Form 10-K or will be incorporated herein by reference to the sections entitled "Proposal 1: Election of Directors—Directors' Fees and Attendance," "Compensation Committee Interlocks and Insider Participation in Compensation Decisions," "Report of the Compensation Committee," "Compensation Discussion and Analysis," "Compensation Policies and Practices as they Related to Risk Management," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the 2014 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report: Page

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm 24

Consolidated Balance Sheets, October 1, 2013 and October 2, 2012 26

Statements of Consolidated Operations for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 27

Statements of Consolidated Comprehensive Income for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 28

Statements of Consolidated Shareholders' Equity for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 29

Statements of Consolidated Cash Flows for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011 30

Notes to Consolidated Financial Statements 31

(2) Financial Statement Schedules: The following report and financial statement schedules are filed herewith:

Schedule I - Valuation and Qualifying Accounts S-1

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.

Exhibit
Number Description of Exhibit

2.1* Unit Purchase Agreement, dated October 27, 2011, by and among Ruddick Operating Company, the Registrant, American & Efird Coöperatieve U.A. and American & Efird U.S. Holdings, Inc., incorporated herein by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated October 27, 2011 (Commission File No. 1-6905). Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC, certain schedules to this agreement have been omitted. The Company hereby agrees to furnish supplementally to the SEC, upon its request, any or all of such omitted schedules

2.2* Agreement and Plan of Merger, dated as of July 8, 2013, by and among The Kroger Co., Hornet Acquisition, Inc. and the Registrant, incorporated herein by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated July 8, 2013 (Commission File No. 1-6905). Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC, certain exhibits and schedules to this agreement have been omitted. The Company hereby agrees to furnish supplementally to the SEC, upon its request, any or all of such omitted exhibits or schedules.

3.1* Restated Articles of Incorporation of the Registrant as in effect as of the date hereof, incorporated herein by reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 2012 (Commission File No. 1-6905).

3.2* Amended and Restated Bylaws of the Registrant, incorporated herein by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K dated August 16, 2012 (Commission File No. 1-6905).

4.1* $50,000,000 7.55% Senior Series B Notes due July 15, 2017 under the Note Purchase and Private Shelf Agreement dated April 15, 1997 between the Registrant 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 ended September 28, 1997 (Commission File No. 1-6905).

4.2* $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 the Registrant 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 June 29, 1997 (Commission File No. 1-6905).

The Registrant has 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 Securities and Exchange Commission upon request.

10.1* Amended and Restated Credit Agreement, dated January 30, 2012, by and among the Registrant, as borrower, Wells Fargo Bank, National Association, Branch Banking & Trust Company, JP Morgan Chase Bank, N.A., Farm Credit Bank of Texas, Fifth Third Bank, TD Bank N.A., Regions Bank, AgFirst Farm Credit Bank, CoBank, ACB, RBC Bank (USA), GreenStone Farm Credit Services, ACA/FLCA, AgStar Financial Services, PCA (collectively with any other lenders party thereto from time to time, the "Lenders") and Wells Fargo Bank, National Association, as administrative agent for the Lenders, incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated January 30, 2012 (Commission File No. 1-6905).

10.2* Harris Teeter Supermarkets, Inc. 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).**

Exhibit
Number Description of Exhibit

10.3* Harris Teeter Supermarkets, Inc. 1995 Comprehensive Stock Option Plan (the "1995 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).**

10.4* Harris Teeter Supermarkets, Inc. 1997 Comprehensive Stock Option and Award Plan (the "1997 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).**

10.5* Harris Teeter Supermarkets, Inc. 2000 Comprehensive Stock Option and Award Plan (the "2000 Plan"), incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2001 (Commission File No. 1-6905).**

10.6* Harris Teeter Supermarkets, Inc. 2002 Comprehensive Stock Option and Award Plan (the "2002 Plan"), incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2003 (Commission File No. 1-6905).**

10.7* Addendum to the Harris Teeter Supermarkets, Inc. 2002 Comprehensive Stock Option and Award Plan, incorporated herein by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K dated February 15, 2007 (Commission File No. 1-6905).**

10.8* Harris Teeter Supermarkets, Inc. 2011 Incentive Compensation Plan (the "2011 Plan"), incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated February 17, 2011 (Commission File No. 1-6905)**

10.9* First Amendment to the Harris Teeter Supermarkets, Inc. 2011 Incentive Compensation Plan, effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

10.10* Form of Restricted Stock Award Agreement for use in connection with the 2011 Plan, incorporated herein by reference to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 2012 (Commission File No. 1-6905)**

10.11* Form of Performance Share Award Agreement - Executive Officers for use in connection with the 2011 Plan, incorporated herein by reference to Exhibit 10.11 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 2012 (Commission File No. 1-6905).**

10.12* Harris Teeter Supermarkets, Inc. Cash Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated February 15, 2007 (Commission File No. 1-6905).**

10.13* Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement Plan, as amended and restated, effective January 1, 2005, incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated December 9, 2008 (Commission File No. 1-6905).**

10.14* Amendment No. 1 to the Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement Plan (Amended and Restated January 1, 2005), effective as of November 7, 2011, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.15* Amendment No. 2 to the Harris Teeter Supermarkets, Inc. Supplemental Executive Retirement Plan (Amended and Restated January 1, 2005), effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

Exhibit
Number Description of Exhibit

10.16* Description of the Harris Teeter Supermarkets, Inc. 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).**

10.17* Harris Teeter Supermarkets, Inc. 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).**

10.18* Harris Teeter Supermarkets, Inc. 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).**

10.19* Harris Teeter Supermarkets, Inc. 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).**

10.20* Harris Teeter Supermarkets, Inc. Director Deferral Plan, as amended and restated, incorporated herein by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K dated December 9, 2008 (Commission File No. 1-6905).**

10.21* First Amendment to the Harris Teeter Supermarkets, Inc. Director Deferral Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2009 (Commission File No. 1-6905).**

10.22* Second Amendment to the Harris Teeter Supermarkets, Inc. Director Deferral 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 28, 2009 (Commission File No. 1-6905).**

10.23* Third Amendment to the Harris Teeter Supermarkets, Inc. Director Deferral Plan (January 1, 2008 Restatement), effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

10.24* Harris Teeter Supermarkets, Inc. Flexible Deferral Plan - Amendment and Restatement Effective July 1, 2009, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2009 (Commission File No. 1-6905).**

10.25* Amendment No. 1 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2010 (Commission File No. 1-6905).**

10.26* Amendment No. 2 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), effective as of January 1, 2011, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 2, 2011 (Commission File No. 1-6905).**

10.27* Amendment No. 3 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), effective as of January 1, 2012, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

Exhibit
Number Description of Exhibit

10.28* Amendment No. 4 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), effective as of January 1, 2012, incorporated herein by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.29* Amendment No. 5 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

10.30* Harris Teeter Supermarkets, Inc. Key Employee Life Insurance Plan, effective as of March 1, 2004, incorporated herein by reference to Exhibit 10.16 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 2011.**

10.31* First Amendment to the Harris Teeter Supermarkets, Inc. Key Employee Life Insurance Plan, effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.7 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

10.32* Second Amendment to the Harris Teeter Supermarkets, Inc. Key Employee Life Insurance Plan, effective as of May 17, 2012, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2012.**

10.33* Harris Teeter Supermarkets, Inc. Executive Bonus Insurance Plan, effective as of August 19, 2010, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 2, 2011 (Commission File No. 1-6905).**

10.34* First Amendment to the Harris Teeter Supermarkets, Inc. Executive Bonus Insurance Plan, effective as of April 2, 2012, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2012.**

10.35* Second Amendment to the Harris Teeter Supermarkets, Inc. Executive Bonus Insurance Plan, effective as of May 17, 2012, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2012.**

10.36* Change-in-Control and Severance Agreement dated September 19, 2007 between the Registrant and Mr. Thomas W. Dickson, incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated September 19, 2007 (Commission File No. 1-6905).**

10.37* First Amendment to the Change in Control and Severance Agreement dated September 19, 2007 between the Registrant and Thomas W. Dickson, effective as of February 9, 2012, incorporated herein by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.38* Change-in-Control and Severance Agreement dated September 19, 2007 between the Registrant and Mr. Frederick J. Morganthall, II, incorporated herein by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K dated September 19, 2007 (Commission File No. 1-6905).**

10.39* First Amendment to the Change in Control and Severance Agreement dated September 19, 2007 between the Registrant and Frederick J. Morganthall, II, effective as of February 9, 2012, incorporated herein by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.40* Change-in-Control and Severance Agreement dated September 19, 2007 between the Registrant and Mr. John B. Woodlief, incorporated herein by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K dated September 19, 2007 (Commission File No. 1-6905).**

Exhibit
Number Description of Exhibit

10.41* First Amendment to the Change in Control and Severance Agreement dated September 19, 2007 between the Registrant and John B. Woodlief, effective as of February 9, 2012, incorporated herein by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.42* Change-in-Control and Severance Agreement dated September 19, 2007 between the Registrant and Mr. Rodney C. Antolock, incorporated herein by reference to Exhibit 10.22 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 2011 (Commission File No. 1-6905).**

10.43* First Amendment to the Change in Control and Severance Agreement dated September 19, 2007 between the Registrant and Rodney C. Antolock, effective as of February 9, 2012, incorporated herein by reference to Exhibit 10.7 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2012.**

10.44* Second Amendment to the Change in Control and Severance Agreement between the Registrant and Thomas W. Dickson, effective as of January 2, 2013, incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2013.**

10.45* Second Amendment to the Change in Control and Severance Agreement between the Registrant and Frederick J. Morganthall, II, effective as of December 31, 2012, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2013.**

10.46* Second Amendment to the Change in Control and Severance Agreement between the Registrant and John B. Woodlief, effective as of January 2, 2013, incorporated herein by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2013.**

10.47* Second Amendment to the Change in Control and Severance Agreement between the Registrant and Rodney C. Antolock, effective as of December 31, 2012, incorporated herein by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 1, 2013.**

10.48* Harris Teeter Supermarkets, Inc. 2013 Cash Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated February 21, 2013 (Commission File No. 1-6905).**

10.49* Form of Outside Director Nonstatutory Stock Option Agreement for use in connection with the Harris Teeter Supermarkets, Inc. 2011 Incentive Compensation Plan, incorporated herein by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2013.**

10.50* Amendment No. 6 to the Harris Teeter Supermarkets, Inc. Flexible Deferral Plan (Amended and Restated July 1, 2009), effective as of May 10, 2013, incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2013.**

10.51* Summary of Harris Teeter Supermarkets, Inc. Executive Officer Incentive Bonus Plan, effective as of July 8, 2013, incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2013.**

10.52+ Summary of Non-Employee Director Compensation.

21+ List of Subsidiaries of the Registrant.

Exhibit
Number Description of Exhibit

23+ Consent of Independent Registered Public Accounting Firm.

31.1+ Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+ Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2+ Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 The following materials from Harris Teeter Supermarkets, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 1, 2013, formatted in extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Statements of Consolidated Operations, (iii) the Statements of Consolidated Comprehensive Income, (iv) the Statements of Consolidated Shareholders' Equity, (v) the Statements of Consolidated Cash Flows and (vi) the Notes to Consolidated Financial Statements.

__________________

* 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) Exhibits

See (a )(3) above.

(c) Financial Statement Schedules

See (a) (2) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

HARRIS TEETER SUPERMARKETS, INC.

(Registrant)

Dated: December 2, 2013 By: /s/ THOMAS W. DICKSON

Thomas W. Dickson,

Chairman of the Board and

Chief Executive Officer

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 dates indicated:

Signature Title Date

/s/ THOMAS W. DICKSON Chairman of the Board and Chief Executive December 2, 2013

Thomas W. Dickson Officer and Director (Principal Executive

Officer)

/s/ JOHN B. WOODLIEF Executive Vice President and Chief Financial December 2, 2013

John B. Woodlief Officer (Principal Financial Officer)

/s/ RONALD H. VOLGER Vice President and Treasurer (Principal December 2, 2013

Ronald H. Volger Accounting Officer)

/s/ JOHN R. BELK Director December 2, 2013

John R. Belk

/s/ JOHN P. DERHAM CATO Director December 2, 2013

John P. Derham Cato

/s/ JAMES E. S. HYNES Director December 2, 2013

James E. S. Hynes

/s/ MARK S. ORDAN Director December 2, 2013

Mark S. Ordan

/s/ ANNA S. NELSON Director December 2, 2013

Anna S. Nelson

/s/ BAILEY W. PATRICK Director December 2, 2013

Bailey W. Patrick

/s/ ROBERT H. SPILMAN, JR. Director December 2, 2013

Robert H. Spilman, Jr.

/s/ HAROLD C. STOWE Director December 2, 2013

Harold C. Stowe

/s/ ISAIAH TIDWELL Director December 2, 2013

Isaiah Tidwell

/s/ WILLIAM C. WARDEN, JR. Director December 2, 2013

William C. Warden, Jr.

SCHEDULE I

HARRIS TEETER SUPERMARKETS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal Years Ended
October 1, 2013, October 2, 2012
and October 2, 2011 (in thousands)

COLUMN A COLUMN B COLUMN C COLUMN D    COLUMN E

DESCRIPTION BALANCE
AT BEGINNING
OF FISCAL YEAR ADDITIONS
CHARGED TO
COSTS AND
EXPENSES DEDUCTIONS BALANCE
AT END
OF FISCAL YEAR

Fiscal Year Ended October 2, 2011:

  Amounts deducted from assets

    to which they apply -

      Allowance For Doubtful Accounts $2,390 $164 $1,083* $1,471

Fiscal Year Ended October 2, 2012:

  Amounts deducted from assets

    to which they apply -

      Allowance For Doubtful Accounts $1,471 $556 $379* $1,648

Fiscal Year Ended October 1, 2013:

  Amounts deducted from assets

    to which they apply -

      Allowance For Doubtful Accounts $1,648 $337 $324* $1,661



*  Represents accounts receivable balances written off as uncollectible, less recoveries.

S-1


(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 1, 2013

OR

	[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________


	HARRIS TEETER SUPERMARKETS, INC.
	(Exact name of registrant as specified in its charter)
	North Carolina						56-0905940
	(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


	701 Crestdale Road, Matthews, North Carolina						28105
	(Address of principal executive offices)						(Zip Code)


	Title of each class:						Name of exchange on which registered:
	Common Stock						New York Stock Exchange


				Large accelerated filer x			Accelerated filer o
				Non-accelerated filer o			Smaller reporting company o
				(Do not check if a smaller reporting company)


		Page
PART I

Item 1.	Business	1
Item 1A.	Risk Factors	2
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Mine Safety Disclosures	7
Item 4A.	Executive Officers of the Registrant	7

PART II

Item 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
	Purchases of Equity Securities	8
Item 6.	Selected Financial Data	10
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	52

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	53
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	53
Item 13.	Certain Relationships and Related Transactions, and Director Independence	53
Item 14.	Principal Accountant Fees and Services	53

PART IV

Item 15.	Exhibits and Financial Statement Schedules	54


		2013		2012		2011
Stores Open at Period End		216		208		204
Average Weekly Net Sales Per Store*	$	429,778	$	425,235	$	403,107
Average Square Footage Per Store at Period End		49,311		49,126		48,129
Average Square Footage Per New Store Opened During Period		47,131		53,794		52,980
Total Square Footage at Period End		10,651,086		10,218,118		9,818,232


		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Fiscal 2013
Quarterly Dividend Per Share	$	0.15	$	0.15	$	0.15	$	0.15
Special Dividend Per Share	$	0.50		-		-		-
Market Price Per Share
High	$	39.42	$	45.03	$	48.96	$	49.90
Low	$	35.25	$	35.31	$	39.47	$	47.28

Fiscal 2012
Quarterly Dividend Per Share	$	0.13	$	0.14	$	0.14	$	0.14
Market Price Per Share
High	$	45.45	$	45.31	$	41.74	$	42.99
Low	$	37.78	$	39.16	$	36.10	$	37.27


	Cumulative Total Return through September 30
	2008	2009	2010	2011	2012	2013
Harris Teeter Supermarkets, Inc.	100.00	83.65	110.70	126.13	127.39	165.73
S & P 500	100.00	93.09	102.55	103.72	135.05	161.17
S & P Midcap 400	100.00	96.89	114.11	112.66	144.81	184.89
S & P Food Retail	100.00	84.38	90.50	97.45	119.72	182.76


	*			$100 invested on September 30, 2008 in stock or index, including reinvestment of dividends.


Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 3, 2013 to August 6, 2013	- 0 -	n.a.	- 0 -	2,767,169
August 7, 2013 to September 3, 2013	- 0 -	n.a.	- 0 -	2,767,169
September 4, 2013 to October 1, 2013	- 0 -	n.a.	- 0 -	2,767,169
Total	- 0 -	n.a.	- 0 -	2,767,169


		Fiscal 2013				Fiscal 2012				Fiscal 2011			% Inc. (Dec.)
				% to Sales				% to Sales				% to Sales	2013 vs 2012		2012 vs 2011
Net Sales	$	4,709,866		100.00	$	4,535,414		100.00	$	4,285,565		100.00	3.8		5.8
Cost of Sales		3,292,903		69.92		3,176,914		70.05		3,015,517		70.36	3.7		5.4
Gross Profit		1,416,963		30.08		1,358,500		29.95		1,270,048		29.64	4.3		7.0

SG&A Expenses:
Expenses without Incremental Merger Related Costs and Lowes Foods Transaction Costs		1,215,211		25.80		1,157,712		25.52		1,089,342		25.42	5.0		6.3
Incremental Merger Related Costs		7,404		0.16		-		-		-		-	n.m.		n.m.
Incremental Lowes Foods Transaction Costs		-		-		29,810		0.66		-		-	n.m.		n.m.
Total SG&A Expenses		1,222,615		25.96		1,187,522		26.18		1,089,342		25.42	3.0		9.0
Operating Profit		194,348		4.12		170,978		3.77		180,706		4.22	13.7		(5.4	)
Interest Expense, net		16,162		0.34		16,411		0.36		18,983		0.44	(1.5	)	(13.5	)
Net Investment Gains		-		-		-		-		19,392		0.45	n.m.		n.m.
Earnings From Continuing Operations Before Income Taxes		178,186		3.78		154,567		3.41		181,115		4.23	15.3		(14.7	)
Income Tax Expense		69,206		1.47		54,640		1.21		69,657		1.63	26.7		(21.6	)
Earnings From Continuing Operations		108,980		2.31		99,927		2.20		111,458		2.60	9.1		(10.3	)
Loss From Discontinued Operations, Net of Income Taxes		(1,088	)			(17,415	)			(20,211	)
Net Earnings	$	107,892			$	82,512			$	91,247


		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Long-Term Debt ⁽¹⁾	$	130,585	$	8,645	$	15,270	$	106,670	$	-
Operating Leases ^{(1) (2)}		1,637,771		109,345		224,916		219,650		1,083,860
Capital Lease Obligations ^{(1) (2)}		200,971		13,171		26,402		26,798		134,600
Purchase Obligations - Fixed Assets		103,421		103,421		-		-		-
Purchase Obligations - Service Contracts/Other		80,189		38,210		31,159		9,679		1,141
Unrecognized Tax Liability ⁽³⁾		806		5		801		-		-
Other Long-Term Liabilities ⁽⁴⁾		9,084		1,433		2,301		1,539		3,811
Total Contractual Cash Obligations	$	2,162,827	$	274,230	$	300,849	$	364,336	$	1,223,412


	(1)			For a more detailed description of the obligations see Notes 7 and 8 to the Consolidated Financial Statements in Item 8 hereof. Amounts represent total expected payments of principal and interest.

	(2)			Represents the minimum rents payable and includes leases associated with closed stores. The obligations related to the closed store leases are discussed below. Amounts are not offset by expected sublease income and do not include various contingent liabilities associated with assigned leases as discussed below.

	(3)			For a more detailed description of the obligation refer to Note 14 to the Consolidated Financial Statements in Item 8 hereof. The timing of payment, if any, for the unrecognized tax liability is not certain. However, we believe that we could possibly be assessed on the tax issues within the next three years.

	(4)			Represents the projected cash payments associated with certain deferred compensation contracts. The net present value of these obligations is recorded by the Company and included with other long-term liabilities in the Company's consolidated balance sheets.


	Percentage Point Change		Projected Benefit Obligation Decrease (increase)		Expense Decrease (increase)
Pension Plan Discount Rate	+/- 1.0	%	$36.9 / (45.8)	$	3.0 / (3.6	)
Pension Plan Return on Assets	+/- 1.0	%	-	$	2.7 / (2.7	)
SERP Discount Rate	+/- 1.0	%	$ 5.7 / (6.9)	$	1.2 / (2.1	)


		2014		2015		2016		2017			2018		Thereafter		Total			Fair Value
Senior Notes	$	-	$	-	$	-	$	100,000		$	-	$	-	$	100,000		$	121,900
Weighted average interest rate		-		-		-		7.64	%		-		-		7.64	%


				Page

	Reports of Independent Registered Public Accounting Firm			24

	Consolidated Balance Sheets, October 1, 2013 and October 2, 2012			26

	Statements of Consolidated Operations for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011			27

	Statements of Consolidated Comprehensive Income for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011			28

	Statements of Consolidated Shareholders' Equity for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011			29

	Statements of Consolidated Cash Flows for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011			30

	Notes to Consolidated Financial Statements			31

	Schedule I- Valuation and Qualifying Accounts for the fiscal years ended October 1, 2013, October 2, 2012 and October 2, 2011			S-1


		October 1,			October 2,
		2013			2012
ASSETS
Current Assets
Cash and Cash Equivalents	$	187,612		$	212,211
Accounts Receivable, Net of Allowance For Doubtful Accounts of $1,661 and $1,648		62,165			59,267
Refundable Income Taxes		1,722			27,583
Inventories		316,809			305,106
Deferred Income Taxes		7,696			6,044
Prepaid Expenses and Other Current Assets		30,026			24,182
Total Current Assets		606,030			634,393
Property, Net of Accumulated Depreciation and Amortization		1,142,245			1,102,703
Investments		103,365			107,424
Goodwill		19,301			19,301
Intangible Assets		13,759			15,039
Other Long-Term Assets		128,537			73,628
Total Assets	$	2,013,237		$	1,952,488

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt and Capital Lease Obligations	$	4,788		$	4,219
Accounts Payable		275,909			281,142
Accrued Compensation		71,371			69,390
Other Current Liabilities		100,261			96,887
Total Current Liabilities		452,329			451,638
Long-Term Debt and Capital Lease Obligations		208,691			208,271
Deferred Income Taxes		8,096			10,941
Pension Liabilities		88,740			119,883
Other Long-Term Liabilities		126,509			124,136
Commitments and Contingencies		-			-
Equity
Common Stock, no par value - Shares Outstanding: 49,458,968 and 49,292,585, respectively		117,927			111,347
Retained Earnings		1,093,414			1,039,935
Accumulated Other Comprehensive Loss		(82,469	)		(113,663	)
Total Equity		1,128,872			1,037,619
Total Liabilities and Equity	$	2,013,237		$	1,952,488

See Notes to Consolidated Financial Statements


		52 Weeks Ended October 1, 2013			52 Weeks Ended October 2, 2012			52 Weeks Ended October 2, 2011
Net Sales	$	4,709,866		$	4,535,414		$	4,285,565
Cost of Sales		3,292,903			3,176,914			3,015,517
Selling, General and Administrative Expenses		1,222,615			1,187,522			1,089,342
Operating Profit		194,348			170,978			180,706
Interest Expense		16,425			16,998			19,116
Interest Income		(263	)		(587	)		(133	)
Net Investment Gain		-			-			(19,392	)
Earnings From Continuing Operations Before Income Taxes		178,186			154,567			181,115
Income Tax Expense		69,206			54,640			69,657
Earnings From Continuing Operations, Net of Income Taxes		108,980			99,927			111,458
(Loss) Earnings From Operations of Discontinued Operations		-			(15,755	)		26,078
Loss on Disposition of Discontinued Operations		-			(3,717	)		(48,750	)
Income Tax Expense (Benefit)		1,088			(2,057	)		(2,461	)
Loss From Discontinued Operations, Net of Income Taxes		(1,088	)		(17,415	)		(20,211	)
Net Earnings	$	107,892		$	82,512		$	91,247

Earnings (Loss) Per Share - Basic:
Continuing Operations	$	2.23		$	2.05		$	2.30
Discontinued Operations		(0.02	)		(0.36	)		(0.42	)
Net Earnings		2.21			1.69			1.88

Earnings (Loss) Per Share - Diluted:
Continuing Operations	$	2.21		$	2.04		$	2.28
Discontinued Operations		(0.02	)		(0.36	)		(0.41	)
Net Earnings		2.19			1.68			1.87

Weighted Average Number of Shares of Common Stock Outstanding:
Basic		48,916			48,751			48,469
Diluted		49,212			49,053			48,852

Regular Dividends Declared Per Common Stock	$	0.60		$	0.55		$	0. 52
Special Dividend Declared Per Common Stock		0.50			-			-

See Notes to Consolidated Financial Statements


	Common Stock Shares (no par value)			Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Equity of HTSI			Non- controlling Interest			Total Equity
Balance as of October 3, 2010	48,901,482		$	98,285		$	918,843		$	(124,679	)	$	892,449		$	6,474		$	898,923
Net earnings	-			-			91,247			-			91,247			698			91,945
Other comprehensive income, net of tax	-			-			-			5,208			5,208			236			5,444
Dividends ($0.52 a share)	-			-			(25,555	)		-			(25,555	)		-			(25,555	)
Exercise of stock options, including tax benefits of $1,157	38,256			1,779			-			-			1,779			-			1,779
Share-based compensation	273,844			8,073			-			-			8,073			-			8,073
Shares effectively purchased and retired for withholding taxes	(65,765	)		(2,485	)		-			-			(2,485	)		-			(2,485	)
Directors stock plan	-			3			-			-			3			-			3
Acquisition from noncontrolling interest	-			(1,444	)								(1,444	)		(806	)		(2,250	)
Distributions to noncontrolling interest	-			-			-			-			-			(795	)		(795	)
Balance as of October 2, 2011	49,147,817			104,211			984,535			(119,471	)		969,275			5,807			975,082
Net earnings	-			-			82,512			-			82,512			-			82,512
Other comprehensive income, net of tax	-			-			-			10,603			10,603			56			10,659
Dividends ($0.55 a share)	-			-			(27,112	)		-			(27,112	)		-			(27,112	)
Exercise of stock options, including tax benefits of $1,760	30,506			2,245			-			-			2,245			-			2,245
Share-based compensation	236,554			10,016			-			-			10,016			-			10,016
Shares effectively purchased and retired for withholding taxes	(122,292	)		(5,129	)		-			-			(5,129	)		-			(5,129	)
Directors stock plan	-			4			-			-			4			-			4
Distributions to noncontrolling interest	-			-			-			-			-			(176	)		(176	)
Disposition of subsidiary	-			-			-			(4,795	)		(4,795	)		(5,687	)		(10,482	)
Balance as of October 2, 2012	49,292,585			111,347			1,039,935			(113,663	)		1,037,619			-			1,037,619
Net earnings	-			-			107,892			-			107,892			-			107,892
Other comprehensive income, net of tax	-			-			-			31,194			31,194			-			31,194
Dividends ($1.10 a share)	-			-			(54,413	)		-			(54,413	)		-			(54,413	)
Exercise of stock options, including tax benefits of $636	24,000			1,010			-			-			1,010			-			1,010
Share-based compensation	202,113			7,720			-			-			7,720			-			7,720
Shares effectively purchased and retired for withholding taxes	(59,730	)		(2,155	)		-			-			(2,155	)		-			(2,155	)
Directors stock plan	-			5			-			-			5			-			5
Balance as of October 1, 2013	49,458,968		$	117,927		$	1,093,414		$	(82,469	)	$	1,128,872		$	-		$	1,128,872

See Notes to Consolidated Financial Statements


		52 Weeks Ended			52 Weeks Ended			52 Weeks Ended
		October 1,			October 2,			October 2,
		2013			2012			2011
CASH FLOW FROM OPERATING ACTIVITIES:
Net Earnings	$	107,892		$	82,512		$	91,247
Loss from Discontinued Operations		1,088			17,415			20,211
Non-Cash Items Included in Net Income:
Depreciation and Amortization		149,098			135,542			128,717
Deferred Income Taxes		(23,003	)		1,814			13,684
Net Loss (Gain) on Sale of Property and Investments		120			(132	)		(20,162	)
Share-Based Compensation		7,720			7,121			8,073
Other, Net		3,300			(1,863	)		(1,496	)
Changes in Operating Accounts Providing (Utilizing) Cash:
Accounts Receivable		(2,898	)		(12,179	)		785
Inventories		(11,703	)		(17,969	)		(15,112	)
Prepaid Expenses and Other Current Assets		17,010			864			3,308
Accounts Payable		(5,211	)		24,665			37,528
Other Current Liabilities		5,513			(4,513	)		18,449
Other Long-Term Operating Accounts		(24,876	)		(25,980	)		(41,312	)
Net Cash Provided by Operating Activities of Discontinued Ops.		-			-			28,326
Net Cash Provided by Operating Activities		224,050			207,297			272,246
INVESTING ACTIVITIES:
Capital Expenditures		(190,717	)		(199,946	)		(147,993	)
Purchase of Other Investments		(7,760	)		(3,448	)		(19,436	)
Business Acquisition		-			(26,296	)		-
Proceeds from Sale of Property and Investments		15,283			172,143			65,697
Net (Investments in) Proceeds From Company-owned Life Insurance		(5,788	)		12,486			(1,073	)
Other, Net		-			(28	)		(627	)
Net Cash Used in Investing Activities of Discontinued Operations		-			-			(5,538	)
Net Cash Used in Investing Activities		(188,982	)		(45,089	)		(108,970	)
FINANCING ACTIVITIES:
Payments on Long-Term Debt and Capital Lease Obligations		(4,325	)		(83,706	)		(30,910	)
Dividends Paid		(54,413	)		(27,112	)		(25,555	)
Proceeds from Stock Issued		374			485			622
Share-Based Compensation Tax Benefits		636			1,760			908
Shares Effectively Purchased and Retired for Withholding Taxes		(2,155	)		(5,129	)		(2,485	)
Other, Net		216			(774	)		139
Net Cash Used by Financing Activities of Discontinued Operations		-			-			(4,698	)
Net Cash Used in Financing Activities		(59,667	)		(114,476	)		(61,979	)
(Decrease) Increase in Cash and Cash Equivalents		(24,599	)		47,732			101,297
Cash Effect of Foreign Currency Fluctuations of Discontinued Ops.		-			-			(107	)
Cash and Cash Equivalents at Beginning of Year		212,211			164,479			73,612
Cash and Cash Equivalents at End of Year	$	187,612		$	212,211		$	174,802

Cash and Cash Equivalents of Continuing Operations	$	187,612		$	212,211		$	164,479
Cash and Cash Equivalents of Discontinued Operations		-			-			10,323
Cash Paid During the Year For:
Interest, Net of Amounts Capitalized		16,365			18,141			19,194
Income Taxes		81,157			75,059			41,753
Non-Cash Activity - Assets Acquired under Capital Leases		5,315			8,866			12,144

See Notes to Consolidated Financial Statements


	Land improvements			10-40 years
	Buildings			15-40 years
	Machinery and equipment			3-15 years


		2013		2012
Finished goods	$	314,003	$	301,102
Raw materials		2,806		4,004
Total inventories	$	316,809	$	305,106


		2013			2012
Land	$	30,167		$	30,167
Buildings and improvements		250,283			233,538
Machinery and equipment		968,597			890,500
Leasehold improvements		915,278			838,792
Construction in progress		80,078			77,707
Total, at cost		2,244,403			2,070,704
Accumulated depreciation and amortization		(1,102,158	)		(968,001	)
Property, net	$	1,142,245		$	1,102,703


		2013			2012
Acquired favorable operating leases	$	20,740		$	20,740
Pharmacy scripts		602			602
Total amortizing intangibles		21,342			21,342
Accumulated amortization		(7,583	)		(6,303	)
Total intangible assets, net of accumulated amortization	$	13,759		$	15,039


		Operating					Capital
Fiscal Year		Leases		Subleases			Leases
2014	$	109,345	$	(1,251	)	$	13,171
2015		112,814		(893	)		13,176
2016		112,102		(595	)		13,226
2017		111,066		(389	)		13,271
2018		108,584		(31	)		13,527
Later years		1,083,860		-			134,600
Total minimum lease obligations (receivables)	$	1,637,771	$	(3,159	)		200,971
Amount representing interest							(88,493	)
Present value of net minimum obligation (included with long-term debt)						$	112,478


		2013		2012
7.72% Senior Note due April, 2017	$	50,000	$	50,000
7.55% Senior Note due July, 2017		50,000		50,000
Capital Lease Obligations		112,478		110,487
Other Obligations		1,001		2,003
Total		213,479		212,490
Less Current Portion		4,788		4,219
Total Long-Term Debt	$	208,691	$	208,271


		2013			2012
Acquired Unfavorable Operating Leases	$	2,199		$	2,199
Accumulated amortization		(211	)		(52	)
Total Intangible Liabilities, Net of Accumulated Amortization	$	1,988		$	2,147


		Option Period		Price Per Gallon
Contract Date	Gallons Under Options	Begin	End	Low	High
05-04-10	168,000	08-01-10	10-31-10	$2.09	$2.60
05-04-10	588,000	07-01-10	10-31-10	$2.12	$2.60
11-16-10	1,092,000	12-01-10	04-30-11	$1.95	$2.56
01-05-11	1,344,000	05-01-11	11-30-11	$2.43	$2.80
08-05-11	1,218,000	12-01-11	05-31-12	$2.77	$3.13
10-04-11	1,260,000	06-01-12	11-30-12	$2.50	$2.88
05-08-12	1,260,000	12-01-12	11-30-13	$2.84	$3.20
06-07-12	1,260,000	12-01-12	11-30-13	$2.59	$2.96
05-01-13	1,008,000	12-01-13	11-30-14	$2.66	$2.87
06-05-13	1,050,000	12-01-13	11-30-14	$2.71	$2.92


		Carrying Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value Measurement as of October 1, 2013:
Net purchase options (included with Prepaid Expenses and Other Current Assets on the balance sheet)	$	133	$	-	$	133	$	-
Net purchase options (included with Accounts Payable on the balance sheet)		3		-		3		-

Fair Value Measurement as of October 2, 2012:
Net purchase options (included with Prepaid Expenses and Other Current Assets on the balance sheet)		302		-		302		-
Net purchase options (included with Accounts Payable on the balance sheet)		25		-		25		-