Harris Teeter 2010 Annual Report Download - page 46

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.
The major components of selling, general and administrative expenses in the textile manufacturing and
distribution segment are (a) the costs of maintaining a sales force, including compensation, incentive compensation,
benefits, office and occupancy costs, travel and all other costs of the sales force, (b) shipping and handling costs,
excluding freight, (c) the costs of advertising, customer service, sales support and other similar costs, and (d) the
costs of maintaining general and administrative support functions, including, but not limited to, personnel
administration, finance and accounting, treasury, credit, information systems, training, marketing, and
environmental, health and safety, to the extent that such overhead activities are not allocable to indirect
manufacturing costs in cost of sales under generally accepted accounting principles. The Company also includes
the net profit of unconsolidated subsidiaries within selling, general and administrative expenses. The net profit from
non-consolidated subsidiaries included in selling, general and administrative expenses amounted to $6,871,000 in
fiscal 2010, $4,435,000 in fiscal 2009 and $3,445,000 in fiscal 2008.
The major components 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 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 $1,845,000, $1,972,000 and
$1,717,000 in fiscal 2010, 2009 and 2008, respectively. Net advertising expenses of $22,068,000, $24,312,000, and
$25,818,000 were included in the Company’s results of operations for fiscal 2010, 2009 and 2008, respectively.
Foreign Currency
Assets and liabilities of foreign operations (if applicable) are translated at the current exchange rates as of
the end of the accounting period, and revenues and expenses are translated using average exchange rates. The
resulting translation adjustments are net of income taxes and accumulated as a component of other comprehensive
income in shareholders’ equity.
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.
RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
41