Harris Teeter 1998 Annual Report Download - page 10

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Ruddick Corporation
and Subsidiaries
8
Operating Profit by Subsidiary
In Millions of Dollars
■Harris Teeter ■American & Efird
Operating profit margins expanded
at Harris Teeter while A&E’s margins
in fiscal 1998 reflected the impact of
losses in and the withdrawal from
its Korean operations.
94 95 96 97 98
37.0
42.1
48.5
52.1
26.9
34.6 34.7
49.2
42.1
Capital Expenditures by Subsidiary
In Millions of Dollars
■Harris Teeter ■American & Efird
94 95 96 97 98
46.4
81.4 83.2 86.2
75.1
20.4 16.4
35.6
28.9
20.2
Some investors believe that separat-
ing its two subsidiaries could enhance
Ruddick’s value. What is your view of
this opportunity?
Management and our Board of Directors
regularly evaluate this option and all others
that might increase shareholder value. In
the past, we have felt strongly that there are
overriding benefits associated with our cur-
rent two-company structure, but we certainly
recognize that future changes in circum-
stances could cause the option of separating
our subsidiaries to become more attractive.
Both companies have unique market
positions and strong competitive advan-
tages. Each provides a separate revenue
stream and helps cushion the impact of
economic changes in either industry on the
Corporation as a whole. Diversity of prod-
uct line and geography also helps to reduce
business risk. We also believe we have been
able to negotiate lower cost financing than
either subsidiary could obtain alone, and,
because the headquarters staff manages
insurance, financing, SEC reporting, the
401(k) plan and other employee benefits,
subsidiary management is left free to focus
strictly on operations. Over the years, A&E
has contributed a significant share of
Ruddick’s operating profit and supplied
excess cash flow to support the aggressive
growth of Harris Teeter. We believe that
the initiatives in place at both companies
should result in earnings growth that would
enhance shareholder value in the future.
We hope that Ruddick’s heightened visibility
through more investor communication and
sell-side analyst coverage will improve our
market multiple over time as well.
A&E generates low-cost funding for
expansion-oriented Harris Teeter.
EBITDA by Subsidiary
In Millions of Dollars
■Harris Teeter ■American & Efird
94 95 96 97 98
65.9 73.8
86.0 88.2
100.7
37.2
45.9 47.1
64.1 58.4
Q
A