Harris Teeter 2008 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... 46,554,591 Harris Teeter American & Efird Corporate Total Capital Expenditures Working Capital $ 187,971 Total Assets Long-Term Debt - Including Current Portion Long-Term Debt as a Percent of Capital Employed Number of Employees Common Shares Outstanding 1 Operating Profit, Net Income...

  • Page 3
    ... its charter) North Carolina (State or other jurisdiction of incorporation or organization) 56-0905940 (I.R.S. Employer Identification Number) 301 S. Tryon St., Suite 1800, Charlotte, North Carolina (Address of principal executive offices) Registrant's telephone number, including area code: (704...

  • Page 4
    ... and Director Independence ...Principal Accountant Fees and Services ...58 58 58 59 59 Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of...

  • Page 5
    ...and implement overall corporate objectives and policies. The Company's employees perform functions in a number of areas including finance, accounting, internal audit, risk management, financial reporting, employee benefits and public and shareholder relations. The Company assists its subsidiaries in...

  • Page 6
    ...policies and reports directly to management of the Company. Harris Teeter As of September 28, 2008, Harris Teeter operated 176 supermarkets located in North Carolina (127), Virginia (28), South Carolina (9), Maryland (3), Tennessee (3), Delaware (2), District of Columbia (2), Florida (1) and Georgia...

  • Page 7
    ... insignificant number of employees of foreign operations are represented by a union. A&E considers its employee relations to be good. Available Information The Company's Internet address is www.ruddickcorp.com. The Company makes available, free of charge, on or through its website, our annual report...

  • Page 8
    ...), discount retailers such as "supercenters" and "club and warehouse stores," specialty supermarkets, drug stores, dollar stores, convenience stores and restaurants. In addition, certain Harris Teeter supermarkets also compete with local video stores, florists, book stores and pharmacies. Aggressive...

  • Page 9
    ... 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 Harris Teeter does...

  • Page 10
    ... a material adverse effect on Harris Teeter's business, financial condition or results of operations. Risks Related to A&E A&E Operates in a Competitive Global Industry A&E competes on a global basis with a large number of manufacturers in the highly competitive sewing thread, embroidery thread and...

  • Page 11
    ... the Company's results of operations, financial condition and cash flows. Item 1B. None. Item 2. Properties Unresolved Staff Comments The executive office of the Company is located in a leased space of a downtown office tower at 301 S. Tryon Street, Suite 1800, Charlotte, North Carolina, 28202...

  • Page 12
    ... Computed on the basis of aggregate sales of stores open for a full year. A&E's principal offices, six domestic manufacturing plants and one distribution center are all owned by A&E and are all located in North Carolina. Domestic manufacturing and related warehouse facilities have an aggregate of...

  • Page 13
    ... 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. Frederick J. Morganthall, II, age 57, was elected President of Harris Teeter on October 30, 1997. Prior to that time...

  • Page 14
    ... in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" in Item 7 hereof. Equity Compensation Plan Information The following table provides information as of September 28, 2008 regarding the number of shares of Common Stock that...

  • Page 15
    ... to Consolidated Financial Statements in Item 8 hereof. (2) The weighted average exercise price does not take into account performance share awards or restricted stock units outstanding as of September 28, 2008. Comparison of Total Cumulative Shareholder Return for Five-Year Period Ending September...

  • Page 16
    ...Financial Data (dollars in thousands, except per share data) 2008 2007 2006 2005 2004 Item 6. Net sales ...Operating profit ...Net income...Net income per share Basic ...Diluted ...Dividend per share...Total assets...Long-term debt -- including current portion ...Shareholders' equity ...Book value...

  • Page 17
    ... States continue to experience new store opening activity and aggressive feature pricing or everyday low prices by competitors. In response, Harris Teeter utilizes information gathered from various sources, including its Very Important Customer ("VIC") loyalty card program, and works with suppliers...

  • Page 18
    ... issued Staff Position ("FSP") FAS 13-1, "Accounting for Rental Costs Incurred during a Construction Period." The FSP generally applies to leases of land or pad leases, including "cold dark shells" where the Company assumes responsibility for store and site construction. Harris Teeter's construction...

  • Page 19
    ... of the segment operating results. Consolidated selling, general & administrative ("SG&A") expenses, as a percent to consolidated net sales, decreased in fiscal 2008 as a result of the leverage created through sales gains that apply against fixed costs at Harris Teeter and lower SG&A expenses...

  • Page 20
    ... strategy of opening additional stores in its core markets that have a close proximity to existing stores. However, management expects these stores, and any similar new additions in the foreseeable future, to have a strategic benefit of enabling Harris Teeter to capture sales and expand market share...

  • Page 21
    ...time of expansion, have provided the savings that offset the increased costs associated with Harris Teeter's new store program (pre-opening costs and incremental startup costs), increased petroleum-based supply costs, associate benefit costs, credit and debit card fees, and new store occupancy costs...

  • Page 22
    ...improvement in operating performance and financial position provides the flexibility to support its store development program that includes new and replacement stores along with the remodeling and expansion of existing stores. During fiscal 2009, Harris Teeter plans to open 17 new stores (2 of which...

  • Page 23
    ... capital expenditures, sales and operating results. Startup costs associated with opening new stores under Harris Teeter's store development program can negatively impact operating margins and net income. In the current competitive environment, promotional costs to maintain market share could also...

  • Page 24
    ... first quarter of fiscal 2009 in connection with its increased investment in Vardhman. Harris Teeter anticipates that its capital for new store growth and store remodels will be applied in its existing markets in fiscal 2009 as well as the foreseeable future. A&E expects to invest in the expansion...

  • Page 25
    ... long-term liabilities in the Company's consolidated balance sheets. (2) (3) In connection with the closing of certain store locations, Harris Teeter has assigned leases to several other merchants with recourse. These leases expire over the next 13 years, and the future minimum lease payments...

  • Page 26
    ...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...

  • Page 27
    ... 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...

  • Page 28
    ... 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. Harris Teeter liabilities represent approximately 96% of the total Company self-insurance reserves for workers compensation, general liability...

  • Page 29
    ... 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...

  • Page 30
    ... No. 159 permits companies to measure many financial instruments and certain other items at fair value at specified election dates. Unrealized gains and losses on these items will be reported in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument...

  • Page 31
    ... cash flows and related weighted average interest rates by expected maturity dates for the Company's significant fixed interest rate debt obligations ($121.4 million of Senior Notes due at various dates through 2017): 2009 2010 2011 2012 2013 Thereafter Total Fair Value Fixed rate debt obligations...

  • Page 32
    Item 8. Financial Statements and Supplementary Data RUDDICK CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE Page Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets, September 28, 2008 and September 30, 2007 ......

  • Page 33
    ... of the Company's internal control over financial reporting. As discussed in the Summary of Significant Accounting Policies, the Company adopted Financial Accounting Standards Board Staff Position 13-1, "Accounting for Rental Costs Incurred During a Construction Period" effective January...

  • Page 34
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ruddick Corporation and subsidiaries as of September 28, 2008 and September 30, 2007, and the related consolidated statements of operations, shareholders' equity and comprehensive income...

  • Page 35
    ... Liabilities ...Total Current Liabilities ...Long-Term Debt and Capital Lease Obligations ...Deferred Income Taxes ...Pension Liabilities ...Other Long-Term Liabilities ...Minority Interest ...Commitments and Contingencies ...Shareholders' Equity ...Common Stock, no par value - Shares Outstanding...

  • Page 36
    ... INCOME RUDDICK CORPORATION AND SUBSIDIARIES (dollars in thousands, except per share data) 52 Weeks Ended September 28, 2008 52 Weeks Ended September 30, 2007 52 Weeks Ended October 1, 2006 Net Sales ...Cost of Sales ...Selling, General and Administrative Expenses ...Operating Profit...Interest...

  • Page 37
    ... INCOME RUDDICK CORPORATION AND SUBSIDIARIES (dollars in thousands, except share and per share amounts) Common Stock Shares (No Par Value) Accumulated Other Comprehensive Income (Loss) $(44,569 1,301 8,634 (34,634 3,617 16,881 (24,923) (39,059 1,079 10,855 146 $(26,979) Total Shareholders' Equity...

  • Page 38
    ...Proceeds from Long-Term Debt Borrowings ...Payments on Long-Term Debt and Capital Lease Obligations ...Dividends Paid...Proceeds from Stock Issued ...Share-Based Compensation Tax Benefits ...Purchase and Retirement of Common Stock ...Other, Net...Net Cash Provided by (Used in) Financing Activities...

  • Page 39
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of Ruddick Corporation and subsidiaries, including its wholly owned operating companies, Harris Teeter, Inc. and...

  • Page 40
    ... the costs of promotion, advertising and selling the vendor's products. 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...

  • Page 41
    ... 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. Investments The Company's Harris Teeter subsidiary invests in certain real estate development projects, with a managing partner or partners...

  • Page 42
    ... liability losses at Harris Teeter based upon a projection of 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...

  • Page 43
    ... of selling, general and administrative expenses in the corporate segment are (a) the costs associated with a portion of compensation and benefits of holding company employees, and (b) certain other costs that are not related to the operating companies. Advertising Costs incurred to produce media...

  • Page 44
    ...Company's comprehensive stock option and awards plans. Stock Options and Stock Awards The Company adopted SFAS 123R as of the beginning of the first quarter of fiscal 2006 utilizing the modified prospective method which requires fair-value accounting for all share-based payments to employees for new...

  • Page 45
    RUDDICK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) 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 ...

  • Page 46
    ... of net minimum obligation (included with long-term debt) ...$ 66,558 In connection with the closing of certain store locations, Harris Teeter has assigned leases to other merchants with recourse. These leases expire over the next 13 years and the future minimum lease payments totaling $57,745,000...

  • Page 47
    ...carrying amount of $121,428,000. This estimated fair value is computed based on borrowing rates currently available to the Company for loans with similar terms and maturities. CAPITAL STOCK The capital stock of the Company authorized at September 28, 2008 was 75,000,000 shares of no par value Common...

  • Page 48
    ... APB No. 25, "Accounting for Stock Issued to Employees" and related interpretations, which allowed companies to use the intrinsic method of valuing share-based payment transactions. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized...

  • Page 49
    ... fair-value accounting for all share-based payments to employees for new awards and previously granted awards that were not vested as of the adoption date. Stock awards are being expensed ratably over the employees' five-year requisite service period in accordance with the graded vesting schedule...

  • Page 50
    ...price and related tax deductions are included in the Consolidated Condensed Statements of Shareholders' Equity and Comprehensive Income. The Company has historically issued new shares to satisfy the stock options exercised. The aggregate intrinsic value of stock options as of the balance sheet dates...

  • Page 51
    ... with the Appeals Division, the timing of any resolution is currently uncertain. The Company and some of its subsidiaries file separate tax returns with the state of North Carolina. The North Carolina statute of limitations for several entities remains open for the fiscal years 2004 to 2006. Foreign...

  • Page 52
    ... Tax Assets: Employee benefits ...Rent obligations ...Reserves not currently deductible ...Vendor allowances ...Other...Total deferred tax assets ...Deferred Tax Liabilities: Property, plant and equipment ...Inventories ...Undistributed earnings on foreign subsidiaries ...Other...Total deferred tax...

  • Page 53
    RUDDICK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) INDUSTRY SEGMENT INFORMATION The Company operates primarily in two businesses: retail grocery (including the real estate and store development activities of the Company) - Harris Teeter and industrial ...

  • Page 54
    RUDDICK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) Geographic information for the Company's fiscal years is based on the operating locations where the items were produced or distributed as follows (in thousands): 2008 2007 2006 Net Revenues - Domestic ...

  • Page 55
    RUDDICK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued) 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...

  • Page 56
    ... Shareholders' Equity and Comprehensive Income. Net periodic pension expense for the Company's defined benefit pension plans for fiscal years 2008, 2007 and 2006 included the following components (in thousands): Pension Plan 2008 2007 2006 Service cost ...Interest cost ...Expected return on plan...

  • Page 57
    ... composite return percentiles are developed upon which the plan's expected long-term 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 directed trusts. Assets in the directed trusts as of the fiscal year end...

  • Page 58
    ... 2007, the assets of the ESOP were transferred to the Savings Plan. Historically, the Company provided cash contributions, as determined by the Board of Directors, to a trust for the purpose of purchasing shares of the Company's common stock on the open market. Such contributions were based on the...

  • Page 59
    ... 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...

  • Page 60
    ...common stock for the periods indicated (in millions, except per share data): First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year 2008 Operating Results Net Sales ...Gross Profit ...Net Income ...Net Income Per Share: Basic ...Diluted ...Dividend Per Share ...Market Price Per Share...

  • Page 61
    ... the Securities 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...

  • Page 62
    ... and Chief Executive Officer, Vice President-Finance 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 as well as any...

  • Page 63
    ... and Director Independence The information required by this item is incorporated herein by reference to the section entitled "Transactions with Related Persons and Certain Control Person" and "Corporate Governance Matters" in the 2009 Proxy Statement. Item 14. Principal Accountant Fees and Services...

  • Page 64
    ... 1, 2011 and $50,000,000 Private Shelf Facility dated March 1, 1996 between Ruddick Corporation and The Prudential Insurance Company of America, incorporated herein by reference to Exhibit 4.1 of the registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 (Commission...

  • Page 65
    ...Ruddick Corporation, as Borrower, Wachovia Bank, National Association, Branch Banking and Trust Company, Regions Bank, Bank of America, N.A., JPMorgan Chase Bank, N.A., RBC Centura, CoBank, ACB, AgFirst Farm Credit Bank, U.S. AgBank, FCB, Farm Credit Bank of Texas and GreenStone Farm Credit Services...

  • Page 66
    ...File No. 1-6905).** Form of Ruddick Corporation Non-Employee Director Nonqualified Stock Option Agreement for use in connection with the 1995 Plan, 1997 Plan, 2000 Plan and 2002 Plan, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 17, 2004...

  • Page 67
    ... File No. 1-6905).** Summary of Non-Employee Director Compensation. List of Subsidiaries of the Company. Consent of Independent Registered Public Accounting Firm. Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant...

  • Page 68
    * ** + (b) 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. Exhibits See (a )(3) above. (c) Financial Statement Schedules See (a) (2) above. 64

  • Page 69
    ... duly authorized. RUDDICK CORPORATION (Registrant) Dated: November 21, 2008 By: /s/ THOMAS W. DICKSON Thomas W. Dickson, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 70
    SCHEDULE I RUDDICK CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Fiscal Years Ended September 28, 2008, September 30, 2007 and October 1, 2006 (in thousands) COLUMN A COLUMN B BALANCE AT BEGINNING OF FISCAL YEAR COLUMN C ADDITIONS CHARGED TO COSTS AND EXPENSES ...

  • Page 71
    ... and Chief Financial Officer Frederick J. Morganthall, II President, Harris Teeter Fred A. Jackson President, American & Efird Shareholder Information Corporate Address 301 S. Tryon Street Suite 1800 Charlotte, NC 28202 704-372-5404 New York Stock Exchange (NYSE) Listing Common stock symbol: RDK...

  • Page 72